Teledyne Technologies Incorporated (NYSE:TDY) today reported fourth quarter 2001 sales of $185.0 million, compared with sales of $196.3 million for the same period in 2000.  Net income for the fourth quarter of 2001 was $6.5 million ($0.20 per diluted share), compared with net income from continuing operations of $9.1 million ($0.28 per diluted share) for the fourth quarter of 2000.

“Despite the weak market environment facing many of our businesses, our multiple cost reduction actions resulted in improved financial performance throughout the year,” said Robert Mehrabian, chairman, president and chief executive officer.  “Excluding charges taken in the second quarter of 2001, earnings per share, operating margins and cash from operations improved in each of the last three quarters.  During 2001, we met our previously announced workforce reduction target of approximately 14%, sold or closed five underperforming product lines, consolidated several manufacturing operations and delayered management in our largest segment.  In addition, during the fourth quarter, we also acquired Advanced Pollution Instrumentation, Inc., and we expect this acquisition to be accretive to earnings in 2002.  Teledyne Technologies enters 2002 as a more focused company with a significantly improved cost structure, and the company is better positioned to achieve sustainable earnings growth, both organically and through acquisitions.”

Full Year 2001

Sales for 2001 were $744.3 million, compared with $795.1 million for 2000.  Net income for 2001 including special charges was $6.6 million ($0.20 per share), compared with $32.3 million ($1.09 per diluted share) for 2000.  Net income from continuing operations, before special charges, was $22.5 million ($0.69 per diluted share) for 2001, compared with net income from continuing operations, before product recall reserves and special charges, of $40.5 million ($1.37 per diluted share) for 2000.  The second quarters of 2001 and 2000 included pretax charges of $26.4 million and $12 million, respectively, and the fourth quarter of 2000 included special charges totaling $2.2 million for receivables and cost adjustments within the Systems Engineering Solutions and Energy Systems segments. 

Review of Operations

Following a realignment of the company’s business units, which included a change in the business units reporting structure, Teledyne Technologies has restated its previously reported segment data to reflect the new reporting structure.  As a result of this change, two business units (Test Services and Geophysical Instruments) that were previously reported as part of the Systems Engineering Solutions segment are now reported as part of the Electronics and Communications segment.  These two business units, along with three other instrument businesses from the Electronics and Communications segment, have been combined into an instruments group within this segment.  In addition, the realignment resulted in a new segment, the Energy Systems segment, whose results were also previously reported under the Systems Engineering Solutions segment.  The Energy Systems segment, which provides on-site gas and power generation systems based on proprietary fuel cell, electrolysis and thermoelectric technologies, currently includes the majority-owned entity that was formed in the third quarter of 2001.  Total sales and operating profit were not affected by these segment reporting changes.

Electronics and Communications

The Electronics and Communications segment’s fourth quarter 2001 sales were $92.3 million, compared with fourth quarter 2000 sales of $93.5 million.  Fourth quarter 2001 operating profit was $8.9 million, compared with operating profit of $9.3 million in the fourth quarter of 2000. 

Fourth quarter 2001 sales, compared with the same period in 2000, reflected revenue growth in electronic instruments, military and medical microelectronics, avionics systems and military communication products.  However, sales and operating profit were negatively impacted by continued weakness in demand for relays used in semiconductor test equipment and communications applications, electronic manufacturing services and other commercial electronic products.  Fourth quarter 2001 sales and operating profit include the results of Teledyne Advanced Pollution Instrumentation, Inc., which was acquired in November 2001.

Systems Engineering Solutions

The Systems Engineering Solutions segment’s fourth quarter 2001 sales were $43.8 million, compared with fourth quarter 2000 sales of $52.9 million.  Fourth quarter 2001 operating profit was $3.7 million, compared with operating profit of $3.7 million in the fourth quarter of 2000. Operating profit for the fourth quarter of 2000 was $5.1 million, excluding special charges totaling $1.4 million for cost adjustments.

Fourth quarter 2001 sales, compared with the same period in 2000, reflected flat revenue in core defense programs and were negatively impacted by reduced work for environmental and information technology programs.  Sales also reflected the disposition of the process control software and certain environmental product lines.  Operating profit reflects lower sales, partially offset by reduced operating losses in the non-core product lines.

Aerospace Engines and Components

The Aerospace Engines and Components segment’s fourth quarter 2001 sales were $44.5 million, compared with fourth quarter 2000 sales of $49.2 million.  Fourth quarter 2001 operating profit was $1.5 million, compared with operating profit of $7.1 million in the fourth quarter of 2000.

Fourth quarter 2001 sales, compared with the same period in 2000, reflected reduced volume of piston engine products due to general weakness in the economy.  Additionally, flight restrictions resulting from the September 11 terrorist attacks affected sales of aftermarket piston engines and components.  Turbine engine sales were higher due to increased sales of cruise missile engines.  Operating profit reflects the lower level of sales and an increase of $3.2 million in aircraft product liability reserves, partially offset by cost reductions implemented in the first quarter of 2001.

Energy Systems

The Energy Systems segment’s fourth quarter 2001 sales were $4.4 million, compared with fourth quarter 2000 sales of $0.7 million.  Fourth quarter 2001 operating profit was $0.2 million, compared with an operating loss of $1.3 million in the fourth quarter of 2000.  Operating loss for the fourth quarter of 2000 was $0.5 million, excluding special charges totaling $0.8 million for receivables adjustments.  The improvement in fourth quarter 2001 operating profit, compared with the same period in 2000, was driven by the increase in sales.

Additional Financial Information

Fourth quarter 2001 earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $16.4 million, compared with EBITDA from continuing operations of $20.9 million for the same period of 2000.  Net pension income for the fourth quarter of 2001 was $2.3 million, compared with net pension income of $2.3 million for the same period of 2000.  Fourth quarter 2001 cash from operating activities from continuing operations was $36.5 million, compared with $20.0 million for the same period of 2000.  Free cash flow (cash from operating activities from continuing operations less capital expenditures) was $30.8 million for the fourth quarter of 2001, compared with $6.5 million for the same period of 2000.  Capital expenditures for the 2001 fiscal year were $26.4 million (including $7.4 million committed in 2000), compared with $30.7 million for the 2000 fiscal year.

2002 Outlook

Teledyne maintains a balanced portfolio of approximately 45% government and 55% commercial businesses.  In its government and defense businesses as a whole, the company expects modest revenue growth in 2002, primarily driven by demand for defense electronics products.  Given the current state of the commercial aviation market, Teledyne expects sales of avionics equipment to decline in 2002; however, the company expects revenue growth in its instrumentation businesses to offset the sales decline in avionics.

Orders for the company’s short cycle electronics product lines serving the semiconductor and communications markets continued to deteriorate in the fourth quarter of 2001.  Teledyne currently expects orders in these businesses to be flat in first two quarters of 2002, relative to fourth quarter 2001, and orders and revenues to improve in the second half of 2002.  In addition, the divestiture or closure of several non-core product lines will negatively impact reported 2002 revenues for the Electronics and Communications and Systems Engineering Solutions segments relative to 2001.

Although government restrictions on general aviation airspace impacted the fourth quarter 2001 performance of the company’s Continental Motors aircraft piston engine business, the majority of these restrictions have been lifted.  Nonetheless, given the current state of the economy and the company’s dependence on aftermarket aviation sales, the company expects 2002 sales for the Aerospace Engines and Components segment to be flat relative to 2001.

Full year 2001 earnings included $9.5 million or $0.18 per share in non-cash net pension income.  The company currently expects approximately $1.0 million of net pension income in 2002.  The reduction in net pension income reflects the completion of income associated with FAS 87 transition asset amortization as well as the decline in the value of the company’s pension assets during 2000 and 2001.

In connection with the company’s restructuring and realignment actions, the company previously announced that it expected to achieve annualized savings of approximately $25 million, of which approximately $15 million were expected to be realized in 2001.  The company continues to anticipate approximately $10 million of additional cost savings in 2002, which should offset the reduction in non-cash net pension income.

Based on its current outlook, the company estimates that first quarter and full year 2002 earnings per share will be in the range of approximately $0.14 to $0.17 and $0.65 to $0.80, respectively.  Excluding $0.18 per share in non-cash net pension income, full year 2001 earnings per share from continuing operations were $0.51 (excluding asset impairment, restructuring and other charges).

Forward-Looking Statements Cautionary Notice

This press release contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, relating to earnings, cost-savings, growth opportunities, capital expenditures and strategic plans.  Actual results could differ materially from these forward-looking statements.  Many factors, including changes in demand for products sold to the semiconductor and communications markets, timely development of acceptable and competitive fuel cell products and systems, funding, continuation and award of government programs, the outcome of the crankshaft litigation, and economic and political conditions, could change the anticipated results. 

The September 11 terrorist attacks and resulting subsequent events increase uncertainties associated with forward-looking statements about the company’s business.  For example, flight restrictions negatively impact the market for general aviation aircraft piston engine and components.  In addition, reduced shipments of commercial aviation aircraft, as well as the liquidity of major airlines, could negatively affect the company’s Electronics and Communications segment. 

While Teledyne Technologies’ growth strategy includes possible acquisitions, the company cannot provide any assurance as to when, if or on what terms any acquisitions will be made.   Acquisitions involve various inherent risks, such as, among others, the company’s ability to integrate acquired businesses and to achieve identified financial and operating synergies.  Also, the company may not be able to sell or exit timely or on acceptable terms its remaining non-core or under-performing product lines, particularly given the current economic environment.

Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained in Teledyne Technologies’ periodic filings with the Securities and Exchange Commission, including its 2000 Annual Report on Form 10-K and its Forms 10-Q.

Teledyne Technologies is a leading provider of sophisticated electronic components, instruments and communication products, systems engineering solutions, aerospace engines and components and on-site gas and power generation systems.  Teledyne Technologies has operations in the United States, the United Kingdom and Mexico.  For more information, visit Teledyne Technologies’ website at www.teledyne.com.

A live webcast of Teledyne Technologies’ fourth quarter earnings conference call will be held at 11:00 a.m. (Eastern) on Thursday, January 24.  To access the call, go to www.companyboardroom.com or www.teledyne.com approximately ten minutes before the scheduled start time.  A replay will also be available for one month at these same sites starting at 1:00 p.m. (Eastern) on Thursday, January 24.

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