Teledyne
Annual Report 2000

Plain-text annual report

ON THE COVER: THE COLOR SPECTRUM DEPICTED ON THE COVER REPRESENTS THE ESSENCE OF THE FIBER OPTICS INDUSTRY. THIS YEAR’S TELEDYNE TECHNOLOGIES ANNUAL REPORT FEATURES A STORY ON TELEDYNE OPTOELECTRONICS, A NEWLY FORMED OPERATING UNIT WITHIN THE TELEDYNE ELECTRONIC TECHNOLOGIES DIVISION. THE PHOTO ABOVE SHOWS A COMPONENT THAT IS USED IN THE F-22 JET FIGHTER. 2000 Highlights Year 2000 Stock Price Performance T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 1 2 0 0 0 A N N U A L R E P O R T $30 20 10 0 Dec. 99 March 00 June 00 Sept. 00 Dec. 00 Financial Information (1) For the 2000, 1999 and 1998 fiscal years (Amounts in millions, except per-share amounts) Sales Net income from continuing operations before opto/wireless costs (2) Opto/wireless costs, net of tax Net income from continuing operations (2) Diluted earnings per-share from continuing operations before opto/wireless costs (2) Diluted earnings per-share from continuing operations (2) Weighted average diluted common shares outstanding 2 0 0 0 1 9 9 9 1 9 9 8 $ 795.1 $ 761.4 $ 733.0 $ $ $ $ $ 46.1 5.6 40.5 $ $ 40.9 — 40.9 $ 37.5 — $ 37.5 1.56 $ 1.50 $ 1.33 1.37 $ 1.50 $ 1.33 29.5 (3) 27.3 28.1 (1) On a proforma basis and restated to reflect Teledyne Cast Parts as a discontinued operation (2) Excludes after tax charges of $8.6 million and $1.8 million in 2000 and 1999, respectively, for product recall reserves taken in 2000 and 1999 and other charges taken in 2000 (3) Reflects the impact of 4.6 million shares of common stock issued in the third quarter in connection with a required public offering Electronics and Communications Segment 2000 vs. 1999 Revenue Growth Sales by Segment (Dollars in millions) 12% 8% 4% Q1 Q2 Q3 Q4 45% 25% 30% Electronics and Communications Systems Engineering Solutions Aerospace Engines and Components $360 $235 $200 T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D To our stockholders 2 T R O P E R L A U N N A 0 0 0 2 Robert J. Naglieri Senior Vice President and Chief Financial Officer Robert Mehrabian Chairman, President and Chief Executive Officer John T. Kuelbs Senior Vice President, General Counsel and Secretary T he year 2000, our first full year of operation as an independent company, has been an exciting and eventful one. Teledyne Technologies has continued directions begun in 1999, at the same time developing strategies for enhanced shareholder value. We made significant progress in our strategy of investing in our high-growth communications businesses, while continuing to expand and improve the performance of our profitable niche market businesses. In the third quarter, we successfully completed our public offering and fulfilled the company’s equity issuance requirement related to our spin-off. We ended the year strategically and financially well positioned to take advantage of the opportunities in our high-growth communications markets. Following our spin-off in November 1999, we began implementing a number of strategies designed to increase revenue growth across our businesses. Besides making substantial investments in certain growth platforms, we also changed management incentives to emphasize revenue growth, in addition to profitability, in order to boost our company’s profitable growth. These programs have already begun to have a positive impact. After a few years of flat revenue, our Electronics and Communications businesses, as a whole, achieved organic revenue growth of 5.8% for the year. Compared to prior year periods, quarterly revenue growth in our Electronics and Communications segment increased in each successive quarter, ending fiscal 2000 with an increase of 10.5% in the fourth quarter. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 3 2 0 0 0 A N N U A L R E P O R T Creating A New Growth Platform: Teledyne OptoElectronics During the year, we began a number of initiatives designed to increase our growth and broaden our commercial market base. After identifying certain growth platforms, we made a strategic decision to significantly invest in these areas in order to expand our product offerings, recognizing there would be a near-term impact on earnings. Specifically, we decided to pursue a strategy of supporting optoelectronic component OEM customers with their design and manufacturing needs for both current and next generation products. The size of the commercial optoelectronics market is growing, and we believe our existing capabilities are well suited to position us as a leader in this market. Our capabilities include: Decades worth of experience in high-reliability microelectronics packaging and high-speed electronics design and manufacturing. Highly automated, high-reliability microelectronics manufacturing/packaging, gained from years of producing microelectronic modules for medical applications. Over ten years of experience in manufacturing complex optoelectronic modules for aerospace and military applications. To achieve our goal of serving this growing market, in early March we established a new operating unit, Teledyne OptoElectronics. To enhance our existing capabilities for higher-volume production of optoelectronic modules for the commercial telecommunications market, we made substantial capital investments in state-of- the-art automatic production and test equipment, and have dedicated a team of highly talented engineers and technicians to expand our microelectronics expertise. This initiative has already begun to pay off with the award of contracts for the production and design of optoelectronic modules from three major component OEMs. As we further develop our business relationships with our customers, we look forward to increasing our participation in the commercial optoelectronics markets. Expanding Opportunities In Existing Markets We continue to emphasize our goal of becoming the best possible operating company across our niche market businesses. We are working diligently to expand these businesses by offering innovative new products and services, while continuously improving our manufacturing and cost control programs. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 4 T R O P E R L A U N N A 0 0 0 2 One of our strategies for achieving this is to reposition our wireless communication businesses to include subsystems in addition to the component-level electronics we currently supply. By adding capital resources and key engineering talent in this area, we recently received our first order for wireless transceivers for commercial telecommunications applications. In 2000, we also extended our position in airborne communication and data acquisition systems through the initial rollout of our Wireless Groundlink™ service, which we plan to test aboard two major commercial airlines in 2001. The Wireless Groundlink™ service allows airlines to transfer large amounts of flight data over wireless networks in real time improving maintenance scheduling and limiting downtime for their commercial aircraft. Our Systems Engineering Solutions segment, Teledyne Brown Engineering, Inc., has long been recognized as a leader in developing engineering solutions for highly complex defense applications. In 2000, we established a separate and wholly owned subsidiary, Teledyne Solutions, Inc., so that we could serve as a subcontractor to the Boeing Company on work being performed for the Ballistic Missile Defense Organization, while continuing to provide technical assistance to the Army’s Space and Missile Command in the same general area. Through Teledyne Brown Engineering, we also extended our 20-year involvement with NASA. As astronauts completed work on the various construction stages of the International Space Station, we began providing continuous support for the astronauts and scientists living and working on board. Our Energy Systems unit, also part of our Systems Engineering Solutions segment, launched five new products during the year, including a Polymer Electrolyte Membrane (PEM) fuel cell stack. We believe that our historical presence in both the on-site hydrogen and power micro generation markets, along with our new product development efforts, provides an attractive opportunity to create significant value. Our Aerospace Engines and Components segment made major progress in creating a consolidated manufacturing excellence center for the production of both piston engines and turbine engines. In the piston engine market we made strides in new product development. Our innovative Powerlink™ FADEC (Full Authority Digital Engine Control) was awarded a landmark FAA certification for our four-cylinder Continental IOF240-B engine. As other certifications occur this system can be deployed on new engines, as well as to retrofit existing engines. This was an achievement for our Piston Engine unit because of the significant business disruption they experienced associated with the piston engine recall (for which we took a pretax charge of $12 million). Fortunately, this recall effort is substantially complete. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 5 2 0 0 0 A N N U A L R E P O R T Maintaining Focus Through Selective Divestitures To best maintain a focus on strategic growth initiatives, and to expand and improve our profitable niche market businesses, we plan to exit those businesses or product lines in markets that are unrelated and/or do not have a strong position within their niche markets. To this end, we sold Teledyne Cast Parts (our sand and investment casting business), which had been part of our Aerospace Engines and Components segment, in the fourth quarter of last year. We are also currently in the process of exiting certain product lines within our Systems Engineering Solutions segment that are not related to the core government services businesses within this segment. Our Course For The Future Our ultimate goal in all our efforts is to create and maintain a disciplined operating company with an emphasis on technological excellence and lean manufacturing. We also intend to remain financially strong in order to pursue high growth market opportunities, both organically and through acquisitions. With that said, 2001 will be a challenge for Teledyne. A weaker-than-expected economy will affect our commercial markets and pose operational challenges. Last, but certainly not least, we would like to acknowledge the people who make our success possible. We welcome Robert J. Naglieri, who joined Teledyne Technologies in October as senior vice president and chief financial officer. Mr. Naglieri brings to Teledyne a strong background in financial and operational management. His experience includes 24 years with General Electric and five years with Case Corporation, where he was vice president and controller. In late 2000, Michael T. Smith, chairman and chief executive officer of Hughes Electronics Corporation, was elected to Teledyne Technologies’ Board. His insights and background will help to further our strategy of expanding beyond our existing markets. All of our employees deserve recognition for their extraordinary efforts over the past year. They have met the challenges of transitioning into an independent company and delivering strong results. With their dedication and expertise, we are repositioning our company and building a new history around the proud heritage associated with the Teledyne name. Sincerely, Robert Mehrabian Chairman, President and Chief Executive Officer February 20, 2001 6 T R O P E R L A U N N A 0 0 0 2 T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D REVIEW 2000 S I G N I F I C A N T E V E N T S A N D A C C O M P L I S H M E N T S O F T H E P A S T Y E A R Marvin H. Fink President New Developments In Our Microelectronics Business We have long been a highly respected supplier of premier microelectronic hybrid products, with over three decades of experience in this field. During the past year, we continued to expand our markets for these products by successfully concluding strategic alliances with two major test and instrumentation original equipment manufacturers. Under these Magnastar® Air Telephone System marketed by Teledyne Controls agreements, TET will supply these companies with a broad range of products and services, including substrates, test boards, amplifier modules, multichip modules and other components. These agreements also anticipate that, in addition to our current contract manufacturing services, we will co-develop future microelectronic modules for use in the next generation of test and instrumentation equipment. TELEDYNE ELECTRONIC TECHNOLOGIES O U R T E L E D Y N E E L E C T R O N I C T E C H N O L O G I E S ( T E T ) D I V I S I O N C L O S E D T H E Y E A R 2 0 0 0 W I T H R E C O R D S A L E S A N D O R D E R S . I N C O M E W A S A F F E C T E D B Y O U R S U B S T A N T I A L I N V E S T M E N T S I N G R O W T H I N I T I A T I V E S F O R O U R W I R E L E S S A N D O P T O E L E C T R O N I C A C T I V I T I E S . Perhaps our most significant development in the microelectronics area has been our expansion into the field of commercial optoelectronic products used in the worldwide fiber optic networks of the telecom- munications industry. Our rapidly expanding activities in this area are detailed in the feature article later in this report. Advanced Techniques For Producing Implantable Medical Electronic Devices Our hybrid technology, originally developed for military and aerospace applications, allows us to package increasingly complex electronic circuits in a very tiny space with extremely low power requirements. These advantages have increased the demand for our products in the medical implant market. We currently supply hybrid circuits to manufacturers of such devices as implantable cardiac pacemakers, defibrillators, and drug infusion pumps. To meet the demand for ever smaller more efficient devices of this nature we have recently successfully implemented a new production method known as flip- chip processing. This newly emerging technique greatly simplifies the process of interconnecting semiconductor chips with other elements on the hybrid substrate and permits tighter packaging densities, and hence more compact devices. These advantages are particularly important for such applications as cochlear implants for profoundly deaf children. Expanding Markets For Our Secure Hybrid Coatings A third technology in which we are a leader and which we have continued to develop has been the production of secure coatings for hybrid multichip modules. These modules, which are often used in highly sensitive applications, or which contain highly sensitive proprietary technology, can be encapsulated in unique coatings we have developed that discourage tampering or reverse engineering. With the growing requirements for secure transmissions and the need for the protection of intellectual property, this technology, which was originally developed for government applications, is now finding broader applications in the commercial electronics area. New Multi-Year Agreement With GTE Airfone And Raytheon GTE Airfone and the Raytheon Company have renewed their multi-year agreement with our Teledyne Controls business unit for continued sales and support of the MagnaStar® Air Telephone Systems through mid-2006. MagnaStar ® is a digital cellular air telephone system designed specifically for corporate and regional jet aircraft. Operating exclusively over GTE Airfone’s digital network, the system transfers calls from one ground station site to another, providing customers with seamless connectivity across the continental United States, Mexico and southern Canada. The system also handles facsimile and data transmissions and can work with our TeleLink TM system when standard VHF and SATCOM service is not available. The renewal of this relationship permits customers to continue to receive high quality airborne telephone service with enhanced avionics equipment. The year 2000 also marked the installation of the 2000th MagnaStar ® system. Teledyne Controls provides marketing, sales, maintenance and product enhancement definition services. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 7 2 0 0 0 A N N U A L R E P O R T Teledyne’s TeleLinkTM Data System Selected By Atlantic Coast Airlines (ACA) Teledyne Controls TeleLink TM two-way data system for aircraft has been chosen by Atlantic Coast Airlines for their fleet of 66 CRJ and 80 D0328/428 aircraft. The system will link the aircrafts’ onboard systems with air-to- ground communications networks, and allow connection via service providers for a variety of air traffic management and flight operations conveniences. These conveniences include pre- departure clearances, real-time weather (including graphics options), digital Automatic Terminal Information Systems (ATIS), Terminal Weather Information for Pilots (TWIP) and messaging. We are now working with various weather service providers to develop the next generation in Weather Information Services, which is intended to fully utilize the capability and flexibility of the TeleLink TM system. FAA certification has been received for the ACA CRJ system. In other airline activity, we have received a Supplemental-Type Certificate (STC) for our Communications Management Unit (CMU) for the MD90 aircraft and we are partnering with Air Tahiti NUI for Flight Operations Quality Assurance data analysis. New Customers For Our Mini Flight Data Acquisition System Teledyne Controls’ newly developed Mini Flight Data Acquisition System is an intermediary device designed to acquire and process mandatory FAA aircraft and engine data for storage in an aircraft’s flight data recorder or so-called “black box.” When installed with our Aircraft Monitoring System (ACMS) option and our TeleLink TM data link system, the Mini Flight Data Acquisition System can transmit real time critical aircraft Teledyne Wireless MMIC condition information to ground stations for analysis. Recent customers for this system include Gulfstream, Bombardier, Dassault and Continental Express (for their Embraer 135/145 fleet). Significant Growth In Broadband Traveling Wave Tube Production During the year, increased demand for our traveling wave tube (TWT) products manufactured at our Rancho Cordova plant required the addition of 20,000 square feet of production space to that facility. This growth has been primarily driven by increased demand from the U.S. Department of Defense for sustainment of presently fielded electronic defense systems. Our traveling wave tube products are widely used in radar countermeasures equipment aboard the F-14, F-15, F-16, F-18 and B-1B aircraft. These products have also been chosen for use on new countermeasure systems for the U.S. Navy’s EA-6B stand-off jamming aircraft and on F-16s being produced for Korea. In addition, because of their exceptionally broadband high power capability, our multiband TWTs are also used in up-link transmitters for satellite communications applications such as remote television news coverage. Strong Growth For Teledyne Wireless Products Our Teledyne Wireless manufacturing unit experienced strong growth requiring a significant increase in engineering staff at our Mountain View facility. We received a multi-year contract for our Monolithic Microwave Integrated Circuits (MMICs) from Hughes Network Systems for their Very Small Aperture Satellite Terminal (VSAT) systems. MMICs provide small, low-power amplification at microwave frequencies for a number of emerging high data rate commercial Teledyne Lewisburg’s contract manufacturing services applications. We have made a significant effort to broaden our MMIC product offerings and to reduce their manufacturing costs. By implementing lean manufacturing principles we have more than doubled the production throughput of these devices without adding production staff. We have also made an increased investment in integrated filter technology, resulting in Metawave Communications Corporation adopting our integrated filter assembly for both digital and analog versions of its Spotlight ® smart antenna systems, which expand wireless networks capacity. A reduction in costs was achieved during the year by moving the manufacture of certain electromechanical switches for microwave radio and test equipment applications to Asia. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D REVIEW 2000 S I G N I F I C A N T E V E N T S A N D A C C O M P L I S H M E N T S O F T H E P A S T Y E A R 8 T R O P E R L A U N N A 0 0 0 2 Traveling Wave Tube (MEC) printed circuit producers worldwide. Halco has also signed a distribution agreement with Sigma-Mecer of Sweden to provide etchant recovery systems for North American printed circuit board manufacturers. At Hastings Instruments we have introduced the new OBE-2002 vacuum measurement gauge. This dual sensor gauge provides wide-range measurement in a compact, low-cost electronics package. In addition, by increasing the performance of its products and widening product offerings, Teledyne Hastings Instruments has become a major supplier of mass flow controllers to leading fuel cell development companies throughout the world. Successes In Other Component Products Our Printed Circuit Technology business unit has had continued success in its rigid-flex circuit business growth initiatives. Our Quick-Turn Prototype business grew by 40 percent during the year 2000, and new value-added assembly orders from our avionics customers have increased our per unit revenue. In a major effort to reduce design and development costs for rigid- flex circuit customers we introduced VME-Flex TM. This innovative product offers all the performance advantages of custom rigid-flex, while conforming to the design rules for VME, a form factor standard that is widely used in the defense and industrial markets. During the year, our Interconnect Devices unit introduced its latest high- density connector, the MicroConn® socket connector for microprocessors and application-specific integrated circuits. This connector is being Hastings Instruments Model OBE-2002 evaluated by several semiconductor and computer companies and is currently in pilot production. The Teledyne Electronic Safety Product business unit, which provides ejection seat sequencers for high performance military aircraft, had another successful year in which its products enabled 13 pilots to eject safely from disabled aircraft. A new sequencer is now in qualification testing by Martin Baker and the U.S. Navy. It is also planned that our sequencer will be on both versions of the military’s Joint Strike Fighter. Teledyne Relays experienced significant growth in the year 2000. In order to meet the demand for these products, we have added manufacturing capacity at our facilities in Mexico. In addition, we have signed a private label agreement with a safety relay manufacturer to further expand our product line for this market. Contract Manufacturing Services Continue To Expand Teledyne Lewisburg has both expanded and upgraded its operations in the past year. New surface mount lines were set up to enable the automatic assembly of both Ball Grid Arrays and Micro Ball Grid Arrays which are used in fabrication of the latest models of insertion and test equipment. New surface mount lines were also established at our facility in Scotland to provide European contract manufacturing capability. This service will allow our customers to meet their foreign offset requirements. In La Mesa, Mexico, we opened a second facility that will specialize in contract manufacturing capabilities for our test equipment and medical products customers. A new initiative was undertaken during the year to increase our presence in the broadband wireless radio market. Key management and engineering personnel have been recruited and development contracts have been received from three manufacturers of wireless infrastructure equipment. We have also formed alliances with Asian manufacturing partners to allow the rapid buildup of this business as our new products enter production in 2001. Advances In Our Manufacturing and Measurement Equipment Products During the year 2000 our Halco production equipment facility introduced and began shipping its new E3 (Efficient Electron Exchange) printed circuit board plating system. This all new patent pending system offers the printed circuit board industry a fourfold increase in copper plating rates while improving deposition uniformity. The horizontal conveyorized design also significantly reduces floor space requirements as well as chemistry consumption. Because of strong customer demand, the E3 plater will be offered in various configurations to meet the needs of 9 2 0 0 0 A N N U A L R E P O R T T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D TELEDYNE BROWN ENGINEERING O U R S Y S T E M S E N G I N E E R I N G S O L U T I O N S S E G M E N T, T E L E D Y N E B R O W N E N G I N E E R I N G , I N C . , C O N T I N U E D I T S 4 7 - Y E A R H I S T O R Y O F P R O V I D I N G A D V A N C E D T E C H N O L O G I C A L S O L U T I O N S F O R M A N Y O F O U R C O U N T R Y ’ S M O S T S I G N I F I C A N T D E F E N S E , S P A C E , I N F O R M AT I O N , E N V I R O N M E N TA L A N D E N E R G Y P R O G R A M S I N T H E Y E A R 2 0 0 0 . Richard A. Holloway President New Embedded Learning Business Line For Commercial Markets To further expand our information technology expertise into commercial markets, Teledyne Brown Engineering launched its Embedded Learning Applications Solutions business unit in 2000. This unit integrates the company’s technical and professional services experience, creating a hybrid professional services business. This will provide e-learning and other knowledge- based applications directly to a user’s workspace to create a more intelligent and efficient work environment. These custom applications will address the needs of product training and branding, maintenance, customer support, and repair activities, and will focus initially on the financial, automotive and health-care industries in 2001. EADSIM Selected For Continued Development By U.S. Army Space And Missile Defense Command Software-based high-fidelity simulations are one of Teledyne Brown’s strongest capabilities. Extended Air Defense Simulation (EADSIM) is the country’s premier air-defense modeling and simulation program, and was selected for continued development and sustainment by the Army’s Space and Missile Defense Command. The air, space, and missile combat modeling and simulation capabilities of EADSIM were combat-proven during Operation Desert Storm in 1991, and the software is now used by more than 390 agencies in 10 foreign countries. EADSIM is recognized as the world standard for air-defense simulation and training. New Information Technology Initiatives For The Department Of Defense We have applied our information technology solutions and engineering expertise to a number of programs for the Department of Defense. New initiatives include a contract to assist in the analysis of the Air War Over Serbia program, and cost-benefit analysis and program management support for the Tactical Unmanned Aerial Vehicle Program Office. We are also involved in a number of other programs ranging from modeling and analysis, to the development of next-generation hardware. The U.S. Air Force has also accepted our Sensor Platform Allocation Analysis tool for inclusion in its standard tool kit. Two new modeling and simulation and analysis products, ASESS (Advanced Subsystem Element and System Simulation), and JFAS (Joint Forces Analysis Simulation) were also introduced in 2000. ASESS and JFAS provide modern distributed interactive simulation capability for the military system-analysis market and are being marketed as proprietary products in 2001. Other Information Technology Products And Programs We provide support for work done on a long-term wide-area network and data center used for seismic treaty monitoring, and are now working on the development of an Omniview camera for security monitoring that uses sophisticated techniques for sensor queuing and data transformation. New Subsidiary Formed: Teledyne Solutions, Inc. Teledyne Brown has long been recognized as a leader in developing engineering solutions for highly complex defense applications. In 2000, while serving as a subcontractor to the Boeing Company on work being performed for the Ballistic Missile Defense Organization (BMDO), we wanted to continue providing technical assistance to the Army’s Space and Missile Defense Command (SMDC) in the same general area. Proactively addressing potential conflict-of-interest issues, and working with the government, we established a separate and wholly owned subsidiary, Teledyne Solutions, Inc. This subsidiary continues to provide systems engineering and technical assistance on the Ground Based Interceptor and X-Band Radar segments of the National Missile Defense Program, the Theater Targets Program, and to the Advanced Technology, Weapons, Battle Lab, and Acquisition Center Directorates of SMDC. Other Systems Engineering Activities In 2000 The U.S. Navy, recognizing our expertise in distributed systems, purchased our Shipboard Theater Air and Missile Defense Exercise Controller, known as STEC. This software, in combination with the Navy’s Battleforce Tactical Trainer, provides the Navy with on-board or in- port theater ballistic missile training, using scenario generation and real ballistic missile threat data. A future focus in systems engineering will include continued pursuit of domestic and international opportunities for the company’s Total Readiness Information Management Systems (TRIMS). This software program has been tested and evaluated at the Army Sergeants Major Academy at Fort Bliss, Texas, and was used by students attending the Battle Staff Course at the academy. The results will enable us to evaluate and improve TRIMS as a tool for units in the field or garrison. The Extended Air Defense Simulation (EADSIM) developed for the U.S. Army, assists in operational planning, personnel training, and predicting the outcome of military conflicts. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D REVIEW 2000 S I G N I F I C A N T E V E N T S A N D A C C O M P L I S H M E N T S O F T H E P A S T Y E A R 1 0 T R O P E R L A U N N A 0 0 0 2 subcontracts on two projects managed by the Westinghouse Savannah River Corporation. The first of these, the Americium/Curium Vitrification Project, involves the environmentally safe disposal of these two elements, from design and engineering of the disposal system to the fabrication of hardware, system testing, qualification and training for this first-of-a-kind system. The program will establish a production process for transforming a solution of these radiological materials, currently located at the Savannah River site, into a suitable form for transfer to another Department of Energy facility. The second program requires Teledyne Brown to fabricate and test 1,200 canisters for the Defense Waste Processing Facility at Savannah River. These canisters will be used to safely capture and contain the high-level nuclear waste glass as it is poured from the glass melter. In a related move, we relocated our Radiological Analytical Laboratory from Westwood, New Jersey, to Knoxville, Tennessee. This move will enable the company to capture a larger share of the analytical work being done for commercial nuclear electric utilities. Teledyne Brown already has a strong position in the analytical market in the northeastern U.S., and this move should enhance our growth in the southeast, as well as throughout the Department of Energy. Deactivation And Disposal Of Chemical Munitions The U.S. is a signatory country to the International Chemical Weapons Convention Treaty and, as such, must destroy its chemical weapons and materiel by 2007. Teledyne Brown is the prime contractor for the Army on its Continued Participation In NASA’s International Space Station Project And Other Space Programs NASA’s International Space Station (ISS) is one of the largest and most complex international scientific endeavors ever undertaken. It is now providing a manned laboratory in earth orbit that will enable research that may be carried out only in a micro-gravity environment. The Space Station will provide important knowledge for earthbound applications as well as future space exploration solutions. Teledyne Brown supports NASA with design, development and operations solutions. As astronauts completed work on the various construction stages of ISS, we began providing continuous support for the astronauts and scientists living and working on board. We also provide many other services to NASA and its prime contractor, Boeing, including mission planning, payload integration, launch and flight operations, data collection and distribution, ground control center operations, and flight crew and ground system operations training. This work is a result of more than 20-years of involvement in payload integration for virtually every Space Shuttle Mission to date. Our NASA programs expertise has also resulted in new business on a number of Department of Defense space initiatives. We became a subcontractor on the Technical Acquisition Support Services (TASS), and the Engineering, Analysis, Design and Development (EADD II) projects at the Air Force Space and Missile Center at Los Angeles Air Force Base. Further Growth In Environmental Program Activities We continued to expand our operations in environmental programs in 2000 with new activities involving the Department of Energy and the Department of Defense. We were awarded 1 1 2 0 0 0 A N N U A L R E P O R T T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D PEGASUS Teledyne Energy Systems, a unit of Teledyne Brown Engineering, has begun shipment of its Pegasus Polymer Electrolyte Membrane (PEM) fuel cell stacks, widely regarded as one of the most advanced emerging technologies in the power-generation arena. The fuel cells combine hydrogen and oxygen to produce 50 to 2,000 watts of electrical power without combustion, and with only pure water as exhaust. Key strategic technology agreements were put into place in 2000 in the areas of PEM fuel cells, and PEM electrolysis gas generators and reformers, which will be the basis of our developmental activities in 2001. These activities are further enhanced by an agreement with a major corporation to provide a comprehensive catalog of solutions for on-site micro generation in 2001, using our global direct sales network to reach end users. STEC (Shipboard Theater Air and Missile Defense Exercise Controller) built by Teledyne Brown Engineering will be installed on the U.S. Navy’s AEGIS cruisers and destroyers, enabling sailors to train in a real-world environment. Non-Stockpile Chemical Materiel Demilitarization program. Non-stockpile refers to those caches of deteriorated chemical weapons that must be recovered from Department of Defense burial sites, located in more than 30 states, for destruction and disposal. Our Munitions Management Device, Version 1 (MMD-1) is designed to safely treat and dispose of toxic chemical agents in weapons where the chemical and explosive components have been removed. Testing on this system began in June at Dugway Proving Ground, Utah. The Teledyne Brown team has successfully completed the first round of testing on cylinders filled with phosgene, an industrial chemical once used as a chemical warfare agent. We are also manufacturing large chemical processing equipment for the Army’s planned facility at Pine Bluff, Arkansas, which will be used to dispose of a large quantity of chemical materiel stored there. The Teledyne Brown–developed Rapid Response System (RRS) is a group of mobile units designed for neutralizing chemical materials on site. The system began disposal operations in September at the Deseret Chemical Depot in Tooele, Utah, and has been certified for transition to operational status by the U.S. Army. The RRS will be used to process the remaining quantities of Chemical Agent Identification Sets stored at that location. These efforts represent significant advances in the nation’s programs to safely dispose of these materials. Teledyne Brown is recognized as a leader in the use of a technology known as Solvated Electron Technology (SET), which converts these toxic materials into environmentally safe salts without the need for incineration. We anticipate continued growth in our environmental activities in 2001 with significant opportunities from the Departments of Defense and Energy. Five Energy Systems Products Launched In 2000 Our Energy Systems unit continues to be a global leader in on-site electric power micro generation and high-purity hydrogen and oxygen gas generation. New products include the Pegasus 2000-watt PEM fuel cell generator, the Minotaur natural gas and propane- fueled 2,500 watt generator, and the Telan 3-watt generator. All are designed for remote power applications where access to the power grid is not available, such as providing power for instrumentation along gas pipelines. They are an acceptable alternative to batteries and solar panels, and the larger units can provide an unattended, low-maintenance power source for small villages and other remote installations. The new Titan HP series hydrogen-gas generators and the Pure-T series high- purity hydrogen and oxygen gas products provide these gases for various industrial purposes in volumes as high as 150 cubic meters per hour. These new power-generation and gas- generation products have increased our backlog for energy systems to record levels. We have also been awarded a Phase One contract from the Department of Energy to propose a Stirling Engine- based power system for deep space missions, and a contract from the Gas Technology Institute to develop a new 5000-watt Minotaur engine generator. 1 2 T R O P E R L A U N N A 0 0 0 2 T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D REVIEW 2000 S I G N I F I C A N T E V E N T S A N D A C C O M P L I S H M E N T S O F T H E P A S T Y E A R Bryan L. Lewis President New Manufacturing Excellence Program During 2000 our Teledyne Continental Motors business unit made significant progress in creating a consolidated manufacturing excellence center for the production of small aircraft piston and turbine engines and components. Lean manufacturing cells employing the latest in CNC machining centers were brought on line for the production of piston engine camshafts and crankshafts. The installation of an automated engine test facility was also completed at our piston aircraft engine plant. We have also introduced low cost production cells for piston engine connecting rods and rocker arms, to supplement those previously completed for the production of engine crankcases and cylinders. We The TCM turbojet engine for the Lockheed Martin JASSM vehicle is a derivative of the highly reliable J402 engine used in the U.S. Navy Harpoon missile. The engine successfully completed qualification testing in early 2001. project that our modernization program for the production of aircraft piston engines will be completed during the coming year. The completion of these activities will reinforce Continental Motors’ strong position as a global supplier of high quality, low cost piston aircraft engines and engine components and create new opportunities for manufacturing business development. TELEDYNE CONTINENTAL MOTORS D U R I N G T H E Y E A R 2 0 0 0 T E L E D Y N E C O N T I N E N T A L M O T O R S C O N T I N U E D T O M A K E M A J O R A D V A N C E M E N T S I N P R O D U C T Q U A L I T Y, M A N U F A C T U R I N G E X C E L L E N C E , A N D C U S T O M E R S E R V I C E P E R F O R M A N C E U N D E R C H A L L E N G I N G B U S I N E S S C O N D I T I O N S . Continental Engines Chosen For Important New Aircraft Our Aircraft Piston Engine business unit continues to be the supplier of choice for many new OEM piston-powered aircraft, as well as for upgrades to existing aircraft. In 2000, the Continental Motors IO550 engine was selected to power the Cirrus SR22, an increased performance version of the revolutionary SR20 which began deliveries in 2000. Continental was also selected to power the turbo-charged version of the Lancair Columbia aircraft as well as an updated model of the popular Mooney Ovation. For the next generation of light aircraft, we have continued prototype testing on an advanced piston engine, being co-funded by the National Aeronautics and Space Administration, that will burn the same widely available Jet-A fuel used by turbine powered aircraft. It will provide better performance with lower emissions for the piston aircraft of the future, and better access to fuel in remote areas. Aerosance, Inc., Develops Innovative Digital Electronic Engine Controls For The Light Aircraft Market Aerosance, Inc., has continued the development of its innovative digital electronic controls for light aircraft engines. This unique system, known as the PowerLinkTM FADEC (Full Authority Digital Electronic Control), underwent additional development tests during the year and a landmark Federal Aviation Administration (FAA) certification was made on December 6, 2000, with the award of the new type certificate for our four-cylinder Continental IOF240-B engine. We have also continued the development of other FADEC-equipped engines targeted at the most popular models of four and six cylinder piston aircraft engines in use throughout the world. By year end 2000, five flight test aircraft were operating in a program to introduce this revolutionary technology to the piston aircraft engine fleet. Widely regarded as the most promising propulsion development for this segment of general aviation in over 50 years, the Aerosance FADEC has demonstrated fuel efficiency improvements of over 15% in most applications. It also provides numerous indirect benefits, including revolutionary service levels, by using downloaded electronic data for maintenance monitoring of light aircraft engines. The company’s unique approach to low cost controls also makes possible applications outside of the aviation field. We will be evaluating these possibilities in the coming year. Continental Turbine Engine For U.S. Air Force/Navy Joint Air-To-Surface Standoff Missile Our small turbine operations completed the year conducting the final tests leading to qualification of our 370-2 engine for the Lockheed Martin Joint Air-to-Surface Standoff Missile (JASSM). A successful flight test occurred on November 17, 2000, during which the engine performed flawlessly. We also signed an agreement with Lockheed Martin in March of 2000 to produce the first 1,165 units of the JASSM engine through the year 2007. The JASSM program is expected to become the standoff missile of choice over the next decade, with production potential that may ultimately far exceed the initial planned production. Continental’s turbine engine unit also received special acknowledgment from the Air Force San Antonio Air Logistics Center training command for its efforts to achieve readiness targets for the Air Force’s primary training system. The company was able to accelerate engine spares delivery for the T37 training aircraft, and T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 1 3 2 0 0 0 A N N U A L R E P O R T The new Sealed Recombinant Technology (SRT) Aircraft Battery designed for Business and Regional jets was launched in 2000. Dealing With Two Significant Business Challenges During 2000, these substantial steps towards operating excellence were made as we were overcoming two significant business challenges. In March, the piston engine unit announced a program to inspect up to 3,000 engines for the possibility of a crankshaft metallurgical condition that could result in failure of these components. This recall effort is essentially complete. Second, The TCM/NASA advanced jet fuel burning piston engine is shown undergoing propeller system integration testing at our Mobile, Alabama facility. The innovative low parts count, high performance design will move to flight testing in 2001. Continental Motors received a stop work order on its development contract for the expendable turbine engine for the U.S. Navy Tactical Tomahawk missile. Despite this setback, we have independently continued with the development of the engine configuration, and are confident that the engine’s performance levels will be fully competitive in future applicable military procurements. completed the year ahead of contract schedules for 92% of its contractual commitments. operation in the first quarter of 2001, supplying parts for the Model 370-2 engine used in the JASSM. Joint Agreement With Pratt & Whitney Aircraft For Unmanned Military System Turbine Engines During fiscal year 2000 our turbine engine unit also announced an agreement with Pratt & Whitney Aircraft to jointly market small turbine aircraft engines for future unmanned military systems. Our low cost manufacturing capabilities and small turbine engine expertise, coupled with the industry- leading technical capabilities of Pratt & Whitney, offer potential synergies which we will each evaluate during the coming year. New Advanced Manufacturing Cell For Small Turbine Engine Components To improve our manufacturing capabilities for small turbine product lines, we began construction of an advanced manufacturing cell for turbine components at our Mobile, Alabama manufacturing excellence center. This new cell couples the best lean manufacturing methods developed in our piston engine product lines with advanced machine tools for small turbine products. Using these advanced methodologies, we expect to reduce the manufacturing footprint of our turbine product manufacturing activities by over 75%. As with the lean manufacturing cells for our piston engine components, the new turbine components cell is designed not only to insure competitive manufacturing for the next generation of small turbine engines for military stand-off weapons, but also to position the company for potential subcontract production of small turbine components. The new turbine components cell will begin Gill Battery TM Product Line Continues To Be Undisputed Choice For Aircraft Battery Power During this year, our Battery Products business unit celebrated its 80th year as the undisputed leader in the field of aircraft battery power through its Gill product line. The company’s dedication to continuous improvement of internal processes has resulted in an improvement of nearly 20% in the facility’s “cost of quality” in 2000. Also in 2000, we completed the development of an advanced line of sealed recombinant technology (SRT) batteries to secure our position as the leader in battery power for the expanding business jet and regional airline markets. Working with potential customers, the new Gill SRT battery includes several unique safety and maintenance features, while reducing weight, and improving capacity and battery life. Engineering development of the new Gill SRT battery for business and regional airline markets has resulted in improvements of over 30% in both battery life and capacity for this line. We are also extending our niche design capabilities into the market for broadband backup power systems, and are currently testing a prototype battery aimed at this market. As with all Teledyne Continental Motors business units, our Battery Products facility has begun to implement lean and demand flow manufacturing. The facility has achieved same day order service capability and a reduction in manufacturing space of over 40%. Operator aligns laser diode submounts prior to reflow soldering to a thermo- electric cooler (right) Laser diode eutectic attached and wirebonded to submount (far right) Thermo-electric coolers/submounts in packages ready for test T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D BROADENING TELEDYNE’S PARTICIPATION IN THE EXPANDING COMMERCIAL TELECOMMUNICATIONS MARKET. 1 5 2 0 0 0 A N N U A L R E P O R T O ne of our basic corporate strategies for growth is to focus our management’s attention and our capital resources on those opportunities that will best utilize our strength in engineering and our technical expertise. With this in mind we have established a new operating unit, Teledyne OptoElectronics, to take advantage of the growing demand for the optoelectronic components used in commercial fiber optic telecommunications networks. Fiber optic technology provides the exceptionally broad bandwidth required to meet the explosively growing worldwide demand for higher speed data communications capacity. This demand is being driven by several factors, the most significant of which is the Internet. The number of private and business users of the Internet continues to increase exponentially worldwide. Not only are those users spending more time on the Internet, they are using it in more sophisticated ways, such as transmitting complex color graphics and streaming video, all of which require higher speed and higher volume data throughput. The major telephone trunk lines and telecommunications systems that span continents and oceans are already highly dependent on fiber optics to handle their traffic, and these networks are being expanded daily. Emerging applications such as high definition television, interactive television, telemedicine, educational use of the Internet and other high data rate applications all contribute to the growing need for broader bandwidth communications channels. RHK, Inc., a leading telecommunications market research firm, estimates that North American Internet traffic will continue its aggressive growth, increasing 200 percent annually through 2004. The transport backbone that carries this traffic is optical fiber, connecting the Wave Division Multiplexing (WDM) systems used to increase the efficiency and capacity of each fiber. Given the importance of WDM in handling Internet traffic, RHK forecasts that the worldwide telecommunications market for optical components needed to support WDM applications will grow from $5 billion in 2000 to $24 billion in 2004. In every year since the early 1980s, when fiber optics were first applied in telecommunications systems in a significant way, industry projections of the demand for increased bandwidth have underestimated actual demand by substantial amounts. Why Optical Fiber? The bandwidth advantage that can be achieved with fiber optic technology is truly amazing. Using a technique known as Dense Wavelength Division Multiplexing (DWDM), a single optical fiber not much larger than a human hair can transmit over 300 gigabits of information per second, roughly equivalent to the traffic generated simultaneously by over five million Internet users with 56k modems. Each channel of information transmitted through the optical fiber is carried on a specific wavelength selected from an optimum band of infrared frequencies. DWDM permits this infrared band to be divided into 64 or more individual frequencies–and hence information channels–that can be transmitted simultaneously through the same fiber. Though this occurs in the invisible infrared spectrum, it is analogous to assigning each channel to a different visible frequency or color. The different frequencies are then divided and sorted out at the final destination by the DWDM system and directed to the final recipient. The enormous size of the component market for fiber optic systems is easily revealed by the fact that an individual laser transmitter and laser receiver is required for each of these channels for every leg of a telecommunications network system. 1 6 T R O P E R L A U N N A 0 0 0 2 T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D Copper coaxial cable providing the same data throughput would require a multiconductor cable bundle several inches in diameter. AT&T, in an educational Internet website for students, points out that a single 4.5 pound spool of optical fiber can carry the same amount of messages as 200 reels of copper conductors that weigh over 1600 pounds. Fiber cables can also transmit signals over longer distances than copper cables before the signals need to be amplified. Single mode fibers can transmit signals for distances of more than 200 kilometers without amplification, while an equivalent copper coaxial cable may require as many as 30 amplifiers to cover that distance. When amplification is required, this can now be done by purely photonic means, with a device known as an Erbium Doped Fiber Amplifier, which uses an ancillary laser to pump new energy into the signal. This is a more efficient method than converting the signal back to electrical form, amplifying it and then converting it back to photonic form, as was formerly required. How Satellite And Wireless Communications Fit In While it may seem that wireless and satellite communications are competitive with fiber optics, in fact they are complementary to it. They fill the gap where direct connection to terrestrial networks cannot be made. Most long-distance transmissions through those channels, however, are ultimately funneled through the global fiber optic networks before they reach their destinations, and thus add to the increasing demand for land line capacity. Neither microwave nor satellite systems can match the high data throughput, or the price per megabit, of optical fiber at present. Consequently, where fiber is available, it is the medium of choice. Installation of new fiber optic cables is expensive, but the ultimate economic advantage for both service providers and users is so great that fiber optic communication networks are being widely extended. Telephone companies and cable television operators that already have substantial long-distance fiber optic backbones in place are adding to those systems and are beginning to complete the loop in some areas by installing fiber directly for the home and business user. New and existing office buildings and other commercial facilities are also incorporating fiber optic local area networks as part of their basic infrastructure. An Industry Need For Additional Capacity The technological advantages of fiber optics will continue to make it the medium of choice for terrestrial data communications in the foreseeable future, and it is a very attractive market. The use of fiber optic systems has been growing so rapidly that there is also a shortage of production capacity throughout the industry. Original equipment manufacturers who produce these systems, even those with in-house component manufacturing capability, often find it difficult to meet the demand for optoelectronic components, and consequently are beginning to seek outsourcing partners. There is, however, a high entry price for new or inexperienced companies that wish to establish production in this field. The need for highly automated robotic manufacturing equipment and clean room manufacturing facilities are factors, but more important are the expertise and proprietary knowledge of the process engineers who design and implement the production process systems, and the highly trained professional operators who perform the often esoteric processes with the high precision necessary. The optical fiber that exits from an optoelectronic transmitter, for example, must be aligned with the internal laser of the component with an accuracy of significantly less than one micron in order to couple the maximum optical energy into the fiber. A micron is one millionth of a meter, or approximately one twenty-five-thousandths of an inch. The robotic equipment that accomplishes this is capable of moving the fiber in 50 nanometer increments (billionths of a meter) to achieve this alignment. So, while there is a large degree of hard science involved in producing these products, it also takes a considerable amount of art and process knowledge to achieve the high quality and production yields needed to make this business profitable. Not only do these stringent physical requirements contribute to high startup costs for new entries to this industry, but companies entering this market must also have a track record of being able to produce components with precision and reliability for systems that carry large volumes of vital information on a national and global scale. New Name, New Market, But Well-Established Technology While Teledyne OptoElectronics is a newly established operating unit, the production of optoelectronic components is not a new technology for us. The optoelectronic devices required for fiber optic systems are essentially microelectronic hybrids that convert electrical data signals into optical form for transmission through optical fibers, then convert those optical signals back into electrical form at their destination. Many other ancillary optoelectronic components, including modulators, multiplexers, amplifiers, signal conditioners, switches and distribution devices, are also used at various points in these networks and employ similar technology. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D Hybrid Manufacturing Flow PACKAGE SUBSTRATE 1 7 2 0 0 0 A N N U A L R E P O R T Optoelectronics Flow START MOUNTED LED & PIN DIODES COMPONENT ATTACH & WIRE BOND ASSEMBLY ATTACHED SUBSTRATE TO PACKAGE COMPLETED PIGTAIL & FIBER ALIGNMENT FIBER OPTIC TRANSMITTERS AND RECEIVERS ARE ESSENTIALLY MICROELECTRONIC HYBRIDS THAT HAVE AN OPTICAL CONVERSION STAGE ADDED TO THE BASIC ELECTRONICS. THE PRODUCTION FLOW AT THE RIGHT PRODUCES A BASIC ELECTRICAL MICROCIRCUIT. ADDING THE OPTICAL COMPONENTS, WITH THE ADDITIONAL STEPS ABOVE, CREATES AN OPTOELECTRONIC DEVICE. WE’VE HAD OVER 30 YEARS EXPERIENCE IN PRODUCING MICROELECTRONIC HYBRIDS, AND OVER 10 YEARS EXPERIENCE PRODUCING OPTOELECTRONIC COMPONENTS. PRE COVER ELECTRICAL TEST PRE COVER INSPECTION COVER SEALED UNIT MECHANICAL SCREENS TEMP CYCLE CENTRIFUGE BURN-IN FINAL ELECTRICAL TEST FINISH PACKAGE & SHIP HERMETICITY FINE & GROSS LEAK T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 1 8 T R O P E R L A U N N A 0 0 0 2 Automatic dual head epoxy dispensers prepare devices for precise die attach (right) Packets of semiconductor dice being staged for automatic pick and place machines 1 9 2 0 0 0 A N N U A L R E P O R T T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D Approximately 90 percent of the production processes used in manufacturing these optoelectronic components involves precisely the same process technologies Teledyne has developed and refined over the last 30 years for producing precision, high reliability microelectronic hybrids for applications where long life and consistent performance are needed. These include satellite systems, medical implants and other precision instruments, as well as applications for military and aerospace programs. Our engineering depth in this field encompasses the full range of processes from the classic thick film and thin film techniques to the more recent fine line thick film, co-fired ceramics and flip-chip processes. We already have in place robotic machinery for the efficient production and testing of microelectronic hybrids, as well as three decades of proprietary process engineering know-how that supports high yields and high reliability in our products. In all of these areas we have developed valuable proprietary methodology designed to produce these precision products in high volume at affordable prices. Optoelectronic devices are essentially microelectronic hybrids that incorporate such components as semiconductor lasers, light emitting diodes, photo diodes and optical modulators that process the optical signals and couple the light energy into and out of the optical fibers. We have been providing high reliability optoelectronic components for the military and aerospace markets for over a decade, and our capabilites in producing these devices are well established. Current programs include providing fiber optic transmitters and receivers for the high speed data bus on the new F-22 fighter aircraft, and optoelectronic systems for the International Space Station, such as the internal and external video systems, the audio system links, the high speed data bus and the mobile servicing center video/data link equipment. (left) Dual channel digital receiver/transmitter for 1773 data bus applications indicate the high levels of integration required for future transmitter/receiver modules Ramping Up For Higher Volume Production Military and aerospace optoelectronic components are more complex and incorporate more functions on a single substrate than commercial fiber optic devices, but are usually produced at a lower volume than commercial products. The manufacturing processes, however, are similar. Many of the processes we have developed for producing microelectronic hybrids for high volume commercial markets, such as medical electronics, are already engineered for automated production and test processes and are directly applicable to optoelectronic components. We are also well-versed in the techniques of high volume automated production in many of our other product lines. In the second half of 2000 we began ramping up our commercial optoelectronic production capacity at Teledyne OptoElectronics with substantial purchases of additional automated equipment unique to optoelectronic component production. These include robotic fiber alignment machines, laser welders and automated test equipment. We are also automating processes that have previously been done manually, and in many cases we are developing our own proprietary software for these processes. Testing and qualifying components often represents as much value added as the manufacturing process itself. Military products are qualified to stringent Mil Spec requirements, and commercial telecommunications products must meet Telcordia (previously known as Bellcore) requirements, a set of telecommunications industry quality and performance standards that all fiber optic components and other telecommunications products must meet. We are among the small number of producers who are qualified to perform Telcordia testing in-house. Others must submit their products to outside testing organizations at additional time and cost. Technology in this field is progressing rapidly and, because this industry will become increasingly competitive as time passes, we are putting in place yield enhancement and cost reduction programs and methods that will be needed for future generations of product. 2 0 T R O P E R L A U N N A 0 0 0 2 T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D Teledyne’s Position In The Commercial Fiber Optics Market The commercial telecommunications market is served by a multi-tiered industry with telecommunications service providers at the top, who are supported by major OEM equipment and systems manufacturers, who, in turn, are supported by major brand name module suppliers, supported by semiconductor component suppliers. Our strategy is to position ourselves in this market as an outsourcing supplier of contract manufacturing and engineering services to the major module producers without competing with them in their marketplace. Outsourcing is common in the general electronics business, but is not yet common in the photonics area because of the precision and specialized equipment needed, and especially because of the high standards of reliability and quality that must be met. As an outsourcing supplier we offer major component producers the turnkey manufacturing of complete optical modules and subassemblies, engineering and co-development of next generation parts, and contract test and qualification of their in- house manufactured components. In some cases we will be doing automation design and development–taking a customer’s component design and engineering a production and process system for building it in an efficient and high volume manner. Our primary strategy is not to compete with our customers by directly designing and marketing these items ourselves but, rather, to be a leading provider to module suppliers who desire outsourcing of product development, manufacturing, process engineering and Telcordia product qualification. Beyond these services, however, we believe that we can offer our customers a great deal more by partnering with them in the development of the rapidly evolving next generation of optoelectronic products. In addition to our expertise in high volume automated production processes, we are highly skilled in the design and engineering of the far more complex, more highly integrated devices that will be needed in future commercial optoelectronic products, because of our aerospace and military experience. Another valuable skill set we can offer our customers is our experience in the engineering and production of high frequency devices that we have acquired in our extensive microwave product lines. This is becoming increasingly important as the data rates required in telecommunications systems continue to rise. The industry quickly moved from the early hundreds of megabits per second data rate to the mainstream 2.5 gigabits per second devices of today, with 10 gigabit per second (right) The F-22 raptor aircraft will contain Teledyne- fiber optic transmitter and receiver devices (far right) An F-22 transmitter with Teledyne designed low profile detachable fiber optic connector devices already overtaking those. Speed enhancement continues with 40 gigabit per second equipment now under early trials and development. These advances all require increasingly specialized knowledge of the unique properties of electrical signals at these elevated frequencies. Regardless of what the short term fluctuations in demand may be, the exceptional bandwidth and other advantages of fiber optics technology make it the obvious choice for a large part of the worldwide communications infrastructure as it continues to expand to meet world demand. We are well positioned to take advantage of this opportunity. Teledyne’s Other Established Communications Equipment Markets This new venture into the commercial fiber optics market is an addition to our other communications technologies and marketing efforts and not a replacement of them. Aerospace and military optoelectronics will continue to be an important part of our business, as will wireless and satellite technologies utilizing our broadband traveling wave tube amplifiers, our Monolithic Microwave Integrated Circuits (MMICs), high frequency relays, air-to-ground telephony equipment and our many other sophisticated electronic products. (See Review 2000.) All these technologies are ultimately complementary in serving the growing needs of our information hungry society, and the continued growth of our company. T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D 2 1 2 0 0 0 A N N U A L R E P O R T (upper) An automatic fiber aligner and laser-weld positioner capable of alignments to sub-micron accuracies are needed for single mode fiber devices (lower) Test head of an HP 82000 D200 digital test station T E L E D Y N E T E C H N O L O G I E S I N C O R P O R A T E D Corporate Information 2 2 T R O P E R L A U N N A 0 0 0 2 E X E C U T I V E M A N A G E M E N T S T O C K H O L D E R I N F O R M A T I O N C o r p o r a t e O f f i c e s Teledyne Technologies Incorporated 2049 Century Park East, Suite 1500 Los Angeles, CA 90067-3101 Telephone: (310) 277-3311 Fax: (310) 551-4369 www.teledyne.com T r a n s f e r A g e n t a n d R e g i s t r a r Mellon Investor Services LLC P.O. Box 3315 South Hackensack, NJ 07606 (800) 356-2017 www.mellon-investor.com S t o c k h o l d e r P u b l i c a t i o n s Annual reports and proxy statements are mailed to all stockholders of record. For additional information, contact Investor Relations at corporate headquarters. S t o c k E x c h a n g e L i s t i n g The common stock of Teledyne Technologies Incorporated is traded on the New York Stock Exchange (symbol TDY). A n n u a l M e e t i n g The annual meeting of stockholders will be held on Wednesday, April 25, 2001, at 9:00 a.m., at the Century Plaza Hotel, 2025 Avenue of the Stars, Los Angeles, CA 90067-4696. I n d e p e n d e n t A u d i t o r s Ernst & Young LLP Los Angeles, California C u r r e n t N e w s a n d G e n e r a l I n f o r m a t i o n Information about Teledyne Technologies is available at www.teledyne.com. Robert Mehrabian* Chairman, President and Chief Executive Officer Robert J. Naglieri* Senior Vice President, Chief Financial Officer John T. Kuelbs* Senior Vice President, General Counsel and Secretary Dale A. Schnittjer* Controller Marvin H. Fink President, Teledyne Electronic Technologies Richard A. Holloway President, Teledyne Brown Engineering Bryan L. Lewis President, Teledyne Continental Motors Robert W. Steenberge Chief Technology Officer Robyn E. Choi Vice President of Administration and Assistant Secretary Melanie S. Cibik Vice President, Associate General Counsel and Assistant Secretary Shelley D. Green Treasurer B O A R D O F D I R E C T O R S Robert P. Bozzone (1) Chairman, President and Chief Executive Officer, Allegheny Technologies Incorporated Paul S. Brentlinger (1) Partner, Morgenthaler Ventures Frank V. Cahouet (1) (2) Retired Chairman and Chief Executive Officer, Mellon Financial Corporation Diane C. Creel (2) (3) Chief Executive Officer and President, Earth Tech C. Fred Fetterolf (2) (3) Retired President and Chief Operating Officer, Alcoa Inc. Robert Mehrabian Chairman, President and Chief Executive Officer, Teledyne Technologies Incorporated Charles J. Queenan, Jr. (3) Senior Counsel, Kirkpatrick & Lockhart LLP Michael T. Smith (2) (3) Chairman and Chief Executive Officer, Hughes Electronics Corporation (1) Audit Committee (2) Governance Committee (3) Personnel and Compensation Committee * Section 16 Officer CREDITS: Design: James Robie Design Associates Writing: Robert McVicker International Space Station image courtesy of NASA F-22 photo courtesy of Lockheed Martin The Teledyne logo and marks are licensed from TDY Holdings, LLC. CAUTIONARY STATEMENT This 2000 Annual Report contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, relating to growth opportunities and strategic plans, among other things. Teledyne Technologies’ Form 10-K identifies factors that could materially affect these statements. 2049 Century Park East, Suite 1500 • Los Angeles, California 90067-3101 • 310.277.3311 • Fax: 310.551.4369 • www.teledyne.com 

Continue reading text version or see original annual report in PDF format above