teledyne technologies incorporated reports/tdyar03.pdfteledyne technologies incorporated annual...

TELEDYNE TECHNOLOGIES INCORPORATEDA

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Selected Consolidated Financial Data(In millions, except per-share data)

Summary Financial Information

2 0 0 3 2 0 0 2 2 0 0 1

Sales $ 840.7 $ 772.7 $ 744.3Net income $ 29.7 $ 25.4 $ 6.6Diluted earnings per-share $ 0.91 $ 0.77 $ 0.20Weighted average diluted common

shares outstanding 32.7 32.9 32.4

Summary Balance Sheet Data

2 0 0 3 2 0 0 2 2 0 0 1

Cash and cash equivalents $ 37.8 $ 19.0 $ 11.9Working capital 129.5 102.6 115.3Total assets 428.1 391.1 349.3Long-term debt — — 30.0Stockholders’ equity $ 221.0 $ 176.8 $ 173.0

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Notes toConsolidated Financial Statements” in this 2003 Annual Report on Form 10-K for additional information regardingTeledyne Technologies Incorporated financial data.

2 0 0 3 H I G H L I G H T S

(1) Free Cash Flow defined as Cash Flowfrom Operating Activities less purchasesof property, plant and equipment.

Electronics and Communications

Systems Engineering Solutions

Aerospace Engines and Components

Energy Systems

Sales by Segment

$744 $773 $841

2001 2002 2003

Sales(In millions)

$0.20

$0.77$0.91

2001 2002 2003

Earnings per Share

$(7.4)

$58.8

$36.6

2001 2002 2003

Free Cash Flow (1)

(In millions; continuing operations data)

53%

25% 20%

2%

TELEDYNE TECHNOLOGIES INCORPORATED

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T O O U R S T O C K H O L D E R S

Our StrategyTeledyne Technologies is a leader in several niche marketsthat are regulated and have significant barriers to entry.Going forward, our strategy is to create largertransformational growth platforms, primarily throughacquisitions, focused on related businesses with defensibleleadership positions. We are building these growthplatforms around three core markets: aerospace and defenseelectronics, electronic instrumentation and governmentsystems engineering.

In the last three years, we have completed a number ofsequential steps to transform the company into an agileand efficient organization. We made several keymanagement changes, restructured our workforce andintroduced more aggressive operational excellenceinitiatives across our businesses. In fact, our operationalexcellence programs affect incentive compensation awardsof most operating and senior management. Our persistentemphasis on operational excellence in every aspect of ourbusiness, from finance to manufacturing, helped drive ourimproved performance in 2003.

In addition to managing costs, we continued to growthrough bolt-on acquisitions. After completing just oneacquisition in each of 2001 and 2002, we announced threebolt-on acquisitions in 2003. We utilize a disciplinedapproach when screening for acquisitions, focusing onrelated businesses within our core markets. For example, wehave doubled the size of our instrumentation businessthrough acquisitions, and each acquired business has beenin the environmental instrumentation market.Furthermore, our operational excellence initiatives includethe rapid integration of the businesses we acquire.Following the acquisition of the Aviation InformationSolutions businesses in 2003, for example, we consolidatedits manufacturing operations from Wichita, Kansas to ourLos Angeles facility within five months.

Robert MehrabianChairman, President andChief Executive Officer


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Since our spin-off, we have been conservative in our allocation of capital. Infact, our free cash flow over the last three years was greater than the total cashwe spent on acquisitions, and we ended 2003 with approximately $38 millionof cash on the balance sheet. Given our strong balance sheet and our ability tosuccessfully integrate previous acquisitions, our goal is to increase both thenumber and size of acquisitions.

As a result of organic growth, acquisitions and operational excellence, revenuesin each business segment increased from the prior year, and earnings for thecorporation increased substantially, for the second year in a row. Sales grew by8.8% in 2003 and GAAP earnings per share increased 18.2%. Excluding theone-time tax benefit in the third quarter of 2003 and pension income andexpense, full year 2003 earnings increased 32.9% over 2002.

Aerospace and Defense ElectronicsIncreases in defense spending helped our defense electronics businesses groworganically by over 20% in 2003. We experienced strong sales ofmicroelectronic products used in military aircraft and communication productsused in variety of applications. We estimate that each F-22 production unitcontains approximately $500,000 of Teledyne content, and we believe that theF-35 Joint Strike Fighter will offer similar opportunities. In 2003, we begandevelopment of a family of fiber optic transmitters and receivers, deliveredinitial evaluation units of a new ejection seat sequencer and received orders forprototype rigid-flex printed circuits, all for the F-35 program.

In 2003, Teledyne extended its leadership in the market for tamper-resistantmilitary communications modules and military traveling wave tubes used forradar, satellite communications and electronic warfare applications. Pursuant to anew Air Force contract, Teledyne began designing cryptographic modules, inaddition to the company’s continued role as manufacturer of tamper-resistantcommunication components. Even though military satellite communicationsystems typically operate at X band, there are occasions when the military maywish to utilize commercial communication satellites that operate at C band or Kuband. Teledyne pioneered the development of triband traveling wave tubes thatcan operate at all three bands and sales of triband tubes surged during 2003, asthe U.S. military added additional capacity for various, primarily mobile, satellitecommunication systems.

At the end of the fourth quarter, Teledyne announced the acquisition of theU.S. assets of Filtronic Solid State from Filtronic plc, and the transaction wascompleted in the first week of fiscal 2004. The Solid State business, whichdesigns and manufactures customized microwave subassemblies for electronicwarfare, radar and other military applications, is highly complementary withour existing defense electronics businesses. In addition, we are currentlyconsolidating the Santa Clara, California operations of Solid State with existingmicrowave subassembly operations in Mountain View, California.


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In another difficult year in commercial aviation, Teledyne responded with marketshare gains in existing product lines, an acquisition of a complementary business,and further expansion into new military aviation markets. Teledyne’s forward fitmarket share for data acquisition systems on new Airbus A320 and A330/340family aircraft increased from under 10% in the year 2000 to approximately 50%at the end of 2003. In the second quarter of 2003, Teledyne acquired the Avionics

Information Solutions businesses (or AIS)from Spirent plc. In addition tomanufacturing consolidation synergies, AIShas a number of complementary productlines which are now marketed by our existingdirect sales force. Other product lines, such asAIS’ new Electronic Flight Bags and airbornefile servers, increased the addressable marketfor our Teledyne Controls business. Inaddition, AIS expanded our capability inflight data analysis with unique softwaresystems for military training applications.These Computer Aided Debrief Systems areto be installed at 10 Navy Flight Simulatorfacilities throughout the U.S.

Government Systems EngineeringAs described later in this report, while muchhas changed over the last 50 years, TeledyneBrown Engineering, Inc., our governmentsystems engineering business, continues toparticipate in some of our country’s mostsignificant defense and space programs.Furthermore, financial performance in 2003was very impressive, as both operating profitand operating margin reached record levels.While profitability will likely decline in2004, as certain awards fees will not recur,sales in our systems engineering segmentshould benefit from strong orders in 2003,which increased 9.5% compared to 2002,and were 13.7% greater than 2003 sales.

Throughout 2003, we continued our support of ballistic missile defense,including the Ground-based Midcourse Defense (GMD) program, our nation’slargest missile defense program. Programs such as GMD, utilize Teledyne Brown’score competencies in software-based test and evaluation, data analysis andmodeling and simulation. Further confirming our software capabilities, TeledyneBrown Engineering’s Technologies Group achieved the Software EngineeringInstitute’s Capability Maturity Model (or “CMM”) Level 4 rating in 2003.

The internal control environment at publicly heldcompanies has become a topic of intense interest toinvestors, regulators and employees of these companies.With the passage of the Sarbanes-Oxley Act of 2002, thatinterest has transcended into a legislative mandate.

Teledyne Technologies takes pride in its history of andcommitment to strong internal controls.

For the past two years, Ivars Blukis, Chief BusinessRisk Assurance Officer, has headed Teledyne Technologies’internal audit function. He reports directly and separatelyto the Chairman of the Audit Committee of the Board ofDirectors and to the Chairman, President and ChiefExecutive Officer of Teledyne. He is a member of theDisclosure Committee and the project leader for theimplementation of the Sarbanes-Oxley Section 404requirements.

Mr. Blukis has been with Teledyne for 28 years, andprior to his current assignment he was CFO for theElectronics and Communications Segment. He holdsdegrees from Stanford University and Santa ClaraUniversity, as well as CMA certification.

Ivars R. Blukis Chief Business Risk Assurance Officer


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For decades, Teledyne Solutions, Inc., has provided Systems Engineering andTechnical Assistance support to the U.S. Army Space and Missile DefenseCommand, and in 2003 Teledyne was awarded a contract to extend this workinto 2007. In addition to the U.S. Army, Teledyne Solutions is now working forother major Department of Defense customers, including the Missile DefenseAgency and the Program Executive Office for Air, Space, and Missile Defense.

Teledyne has been the prime contractor for the Propellants, Pressurants andCalibration Services Contract at Marshall Space Flight Center since 1971; andin 2003, we extended our role for another five years. Furthermore, as asubcontractor to Lockheed Martin, Teledyne was awarded the InternationalSpace Station Cargo Mission Contract at the Johnson Space Center. Coupledwith our existing Payload Integration Contract, we are well positioned tobenefit from the future development of the International Space Station.

Sales in our environmental solutions business, which includes several contractsprimarily related to the destruction of hazardous materials, increased over 30%in 2003, and we expect that this business will continue to grow in 2004. Forexample, in 2003, Teledyne won a $20 million U.S. Army contract to supportthe destruction of binary chemical warfare materiel stored at the Pine BluffArsenal in Arkansas, and Teledyne Brown and its teammate ScienceApplications International Corporation were awarded a contract by the DefenseThreat Reduction Agency to provide Systems Engineering and TechnicalSupport for storage, security, elimination and nonproliferation of weapons inthe former Soviet Union.

Electronic InstrumentationOver the last few years, we committed to build a larger, transformationalgrowth platform in our instrumentation business. The acquisition of AdvancedPollution Instrumentation, Inc. (API) in 2001 expanded our traditionalindustrial gas analysis business into the environmental air quality market andwas the first step in this transformation. In 2002, we acquired Monitor Labs,Inc., which, like API, is focused on the environmental gas analysis market. Aneasy synergy was obtained between these two acquisitions when API gasanalyzers were incorporated as standard equipment in all of Monitor Labs’ airquality monitoring systems. Besides air quality monitoring systems, MonitorLabs is the country’s largest supplier of ultrasonic gas flow opacity monitoringsystems, which are used to measure the amount of particulate matter emitted byindustrial smoke stacks. Gas flow technology is not a new market to Teledyne,however, as Teledyne has manufactured Hastings Instruments’ mass flowcontrollers for many years.

During the second quarter of 2003, we acquired Tekmar-Dohrmann, nowknown as Teledyne Tekmar Company, from Emerson Electric. Teledyne Tekmarexpanded Teledyne Instruments’ line of environmental monitoring and analysisproducts to include water quality in addition to API’s gas analysis instruments


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and Monitor Labs’ air quality systems. Teledyne Tekmar’s laboratoryinstruments have leading positions in the market for the detection and analysisof organic compounds in drinking water and wastewater. Through the recentacquisition of assets of Leeman Labs, Inc., which shares the laboratory waterquality market with Teledyne Tekmar, we are now able to market equipment forthe detection of inorganic compounds, such as mercury and lead, in addition toorganic compounds, such as benzene and trichloroethylene. Furthermore, webelieve that the technology in our acquired laboratory instrumentationbusinesses may be utilized over time to develop new products for our traditionalonline industrial process instrumentation markets.

Aerospace EnginesFaced with weak demand in the general aviation aftermarket and significantincreases in product liability insurance, we relied on operational excellence,coupled with our growing OEM market share to help offset these challenges.Due to strong demand for new composite OEM piston aircraft, for which weare the sole source engine supplier, we continued to increase OEM marketshare. In fact, sales of Teledyne Continental Motors’ engines for OEM aircrafthave increased 20%, on average, in each of the last seven years. In addition togaining share in our traditional high-power certified piston engine market, wecontinue to evaluate a new engine primarily targeted at segments of the marketadjacent to our base business. Furthermore, despite relatively low profitabilityduring the year, our piston engine business continued to generate strong cashflow, due to significant reductions in inventory made possible by our leanmanufacturing efforts.

In our military turbine engine business, the Joint Air-to-Surface StandoffMissile (JASSM) was certified in 2003 and is now ready for operational use.JASSM Lot 3 Production will start in the middle of 2004, and we expect todeliver approximately 150 engines for this next generation cruise missile in thecoming year.

Energy TechnologiesIn our Energy Systems segment, we were able to focus on commercialalternative energy products while capitalizing on our strong legacy of highlyreliable power systems for government programs. In 2003, we sold our 50thfuel cell test station, introduced fuel cell testing services and won approximately$65 million in long-term contracts for next generation power systems formanned and unmanned space exploration.

In the energy technologies marketplace, we continue to believe that Teledynepossesses a unique business; one which encompasses both tangible commercialenergy technology products, such as fuel cell test stations and hydrogenrefueling systems, in combination with a growing base of long-term governmentcontracts. Equally unique in the alternative energy marketplace is that, inaddition to anticipating 50% revenue growth in 2004, we expect this business


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to be profitable. Considering the current valuation of energy technology peercompanies, we believe that future opportunities exist to create value for ourstockholders through a strategic alliance or perhaps a spin-off of Teledyne’sEnergy Systems, Inc.

OutlookWe believe the 2004 and long-term outlook for our government businesses isquite attractive. We expect that support for defense priorities will remain strong,especially in some of our key markets such as defense electronics andengineering services. We are optimistic that the commercial avionics industrywill begin recovering in late 2004. Furthermore, orders for other commercialelectronics, such as electronic relays used for semiconductor test equipment,wireless applications and networking equipment, and broadband wireless radioswere noticeably stronger in the latter part of 2003. As the worldwide economycontinues to improve, we see a fortuitous concurrence of a strong defensemarket coupled with a recovery in some of our key commercial businesses. Wewill strive to position the company, through both our operational excellenceinitiatives as well as opportunistic acquisitions, to capitalize on these markettrends and increase return to our shareholders.

Finally, I want to thank our Board of Directors and each employee of Teledyne.Without the Board’s guidance and the efforts of our employees, the success weachieve would not be possible.

Robert MehrabianChairman, President and Chief Executive OfficerFebruary 27, 2004


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DefenseOrders for electronic assemblies by militaryand defense customers remained strongthroughout the year, primarily driven byaccelerated delivery demand and additionaloption orders supporting the country’sincreased military operations. Repair depotservices, spare parts, and replenishmentorders for electronic modules andsubassemblies were primary contributors tothis increased demand. Productssupporting secure communications, missileand missile launch systems, and aircraftdisplays all experienced increasedrequirements during 2003.

Sales of military traveling wave tubes(TWTs) increased substantially during theyear, and demand for our TriBand TWTs,used by U.S. and European armed forcesfor satellite communications, reached anall-time high. The first substantial sales ofour high frequency Ka band TWTs forboth satellite communications and

instrumentation uses were made as well,and sales of spare electroniccountermeasures TWTs for legacy systemsused on the EA-6B, F-14, F-15 and B-52aircraft remained at a high level.

The company is currently developingnew ejection seat sequencers in support ofthe F-35 Joint Strike Fighter SystemDevelopment Design phase. This design isa modification of Teledyne’s fourth-generation electronic ejection seatsequencer now flying on the F/A-18E/Faircraft.

Strong demand was also experiencedduring 2003 for the company’smicroelectronic products used on the F-22Raptor and the EPLRS (EnhancedPrecision Location Reporting System).These programs require a spectrum oftechnologies that range from fiber optictransmitters and receivers to solid-staterelays and power controllers, as well assecure communications modules equipped

2003 was a successful year for our Electronics and

Communications segment with sales of $447 million, compared to

$388 million in 2002. While demand in some of the company’s market

areas continued to be soft during this period, this was more than

compensated for by strong demand in others. The company’s diverse

product lines and the multiple markets served—defense, commercial

aerospace, medical and industrial electronics, telecommunications,

electronic test and measurement, and environmental and industrial

instrumentation—helped make these results possible.

Electronics a

nd

Communications S

egment

Aldo Pichelli

Senior Vice President

and Chief Operating Officer

Al Pichelli has been the Senior Vice President and ChiefOperating Officer of the Electronics and Communications

Segment since August 2003. In his prior role as VicePresident and General Manager of Teledyne Instruments,

he doubled the size of that group through a focusedacquisitions program in the environmental monitoring

market. Mr. Pichelli has held various finance,manufacturing, operations and general management

positions during his 23 years with Teledyne.

Traveling wave tubesprovide high powermicrowave signals formodern battlefield radarand communication.


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Far left:Custom hybrids and multichipmodules for military, aerospace,test, instrumentation andmedical applications.

with anti-tampering capabilities. Thedevelopment of fiber optic devices andmicroelectronic modules for the F-35 JointStrike Fighter began during the year.

In addition, the U.S. Air Forceawarded Teledyne a contract to develop acustom tamper-resistant microcircuitwhich, when embedded in host electronics,is designed to provide enhancedcommunication security. This module willincorporate the latestencryption/decryption algorithms andprovide users with multi-algorithmselectability.

In other product areas, defense ordersfor rigid-flex printed circuits andassemblies continued to be strong,outpacing 2002 results by approximately20 percent. The year also saw an increasein prototype orders driven in part bysignificant sub-system design activity for F-35 programs. Several of these prototypeorders are expected to develop into initialproduction awards in 2004.

Commercial AerospaceThe commercial air transport marketremained relatively flat in 2003 for obviousreasons, and current forecasts do notproject a significant upturn until 2005.However, our strategic investments indeveloping new products for Airbus aircrafthave helped offset the effects of this weakmarket. The company’s market share ofData Acquisition products at Airbusreached approximately 50 percent at theend of the year and is expected to continuegrowing. Airbus, for the first time inhistory, has overtaken Boeing as the leading

producer of commercial aircraft. Our jointdevelopment agreements with Airbus inthe area of Data Analysis Software areexpected to further enhance thiscooperative effort.

The business jet market showed asignificant downturn in 2003. However,the Magnastar phone system for businessjets continues to enjoy a substantial marketshare and is the system of choice for mostaircraft manufacturers.

Another player in the commercialaerospace market joined Teledyne at theend of June with the acquisition of theAviation Information Solutions (AIS)businesses of Spirent plc. AIS designs andmanufactures aerospace data acquisitiondevices, networking products, and flightdeck and cabin displays. Their productsinclude Airborne File Servers for onboard

Left:Electronic components andsubsystems for modern tacticalaircraft such as the F-35 JointStrike Fighter.

networking and hosting of softwareapplications, Wireless Gate Link fortransferring information and data to andfrom the aircraft at the gate, and anElectronic Flight Bag that provides digitalaccess to information, such as approachand navigational charts, without the addedweight of paper documentation.

In addition, AIS develops softwareapplications and ground-based analysissystems focused on improving aircraftoperational performance, safety and pilottraining. AIS’ products and services areused in air transport, business aircraft andmilitary applications, and are highlycomplementary to Teledyne’s existing linesof data acquisition and communicationsproducts.

The Electronic Flight Bag provides pilots with paperless information access.


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Medical ElectronicsSales for medical electronic assemblies andsubassemblies were steady for 2003, withsomewhat lower orders for MRI imagingproduct applications offset by increasedrequirements for X-ray, CT and PETimaging assemblies. Growth within thePET imaging products sector was paced bynew product introductions which havebenefited from recent changes in medicalinsurance benefits that extend coverage toPET diagnostic imaging. Orders for ourmicroelectronic modules used inimplantable medical devices remainedsteady during the year.

In addition, a new line of medicaloxygen monitors based on electrochemicalsensors was introduced. These monitors aretailored to the specific needs of a customerand provide a significantly higher level ofmobility than previous models.

Industrial ElectronicsHigher sales and orders for the company’sline of high-reliability industrial electronicassemblies were achieved throughout 2003.Increases in the sales of our transportationand automotive electronic assemblies werepartially offset by slightly reduced activityin instrumentation and industrialautomation programs. The year includedexpanded offerings for low-costmanufacturing in other countries,including mainland China, in conjunctionwith a strategic partner. Manufacturingcapacity was also expanded in Mexico.

The year saw continued expansion ofthe company’s portfolio of Industrial SolidState Relay products, making it one of themost comprehensive in the industry.Increased demand was also seen for ourenergy efficient line of diode-based lightemitting modules that are beingincreasingly used by electronic signmanufacturers to replace neon lightingsystems.

Telecommunications and Electronic Test and Measurement ProductsA significant increase in demand forbroadband transceivers, used in point-to-point radios that are part of the cellulartelephone infrastructure, was seen duringthe year. The company’s wirelesscommunications group continued toexpand its product offerings with thedevelopment of transceivers for newfrequency bands, as well as theintroduction of a unique low-noise, lowcost frequency synthesizer for this market.

The company’s RF and microwavecoaxial switch and its relay product lines

were consolidated during the year. Theseare now being sold under the TeledyneRelays label. Although thetelecommunications, semiconductor test,and general test measurement marketscontinued to be soft, Teledyne Relays hadan excellent year with new designs, partlydriven by its expanded portfolio ofproducts.

Environmental InstrumentsDemand for environmental monitoringinstruments was strong in overseas marketsduring the year. In March 2003, TeledyneAPI won an order for the largest singleproject in its history to establish a majorambient air monitoring network in the cityof Naples, Italy. By year’s end,approximately 300 monitoring instrumentshad been successfully delivered.

Teledyne Monitor Labs had greatsuccess and gained additional market sharein 2003 as well, with its latest LightHawk®

opacity/dust monitoring systems. Thecompany had already been the country’slargest supplier of opacity monitoringsystems. The LightHawk® system preciselymeasures the amount of particulate matteremitted by industrial smoke stacks. Itoperates with high reliability under veryhostile conditions, assuring customers yearsof EPA compliant performance.

Hazardous air pollutant regulationsfor the pulp and paper industry haverequired this industry to operate opacitymonitors in conjunction with refined dataacquisition systems. Monitor Labs focusedon this industry in 2003 and was successfulin winning a significant portion of thisbusiness. One of the world’s largest pulp

Continuousemissions monitoringsystems for pollutioncontrol in the powergeneration industry.

Surface mount microwave relaysused in applications ranging fromtest equipment to cellulartelephone base stations.


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and paper producers rated the company’sRegPerfect® system “the preferred system,which performed best in all tests, installedin the shortest time, and had the mostmodern architecture compared to thecompetition.”

In May 2003, Teledyne acquired theTekmar-Dohrmann division of EmersonElectric Company in its continuingstrategic expansion of its instrumentationbusiness. Renamed Teledyne TekmarCompany, this well-regarded laboratoryinstrument company has leading marketpositions in key measurement areas, suchas drinking water, waste water andpharmaceutical quality assurance.

Growth in this area in 2004 will bedriven in part by customer acceptance ofTeledyne Tekmar’s newest product, theVelocity XPTTM Purge and TrapConcentrator. This instrument can doublethe sample throughput of environmentaltesting laboratories for certain types ofanalyses, a feature of interest to bothcommercial and governmental testinglaboratories. Six leading manufacturers ofgas chromatographs have elected to sell the

Velocity XPTTM as an accessory to theirown products.

Business conditions in Asia—particularly Japan—are beginning toincrease sales of Teledyne Tekmar’s Purgeand Trap products. In addition, newJapanese regulations for the first timemandate the use of Total Organic Carbon(TOC) measurements to assure the qualityof their drinking water. This shouldcompel customers to buy TOC analyzersover the next few years, creating a uniquenew market opportunity for TeledyneTekmar.

Industrial InstrumentsDuring the year, Teledyne received asignificant order for trace gas analyzers,total sulphide analyzers, and totalhydrocarbon analyzers from a leadingsupplier of carbon dioxide to the food andbeverage market. Carbon dioxide, typicallyrefined from industrial sources, must bepurified for use in soft drinks, beer andsparkling water. Beverage producers, toensure compliance with industry standardsas well as to protect the quality of theirown brands, require CO2 suppliers toprovide computer printouts verifying theanalysis of undesirable impurities. Benzeneas well as acetaldehyde, in minutequantities, can adversely affect the taste ofthese beverages. Standards of theInternational Society of BeverageTechnologists call for measuring benzene atthe parts-per-billion level. Teledynerecently introduced a line of FlameIonization Detector (FID) analyzers forthis work.

Measurement of precise vacuum levelsis another important requirement in manyindustrial processes. With its latest vacuuminstrument, the IGE-3000 Ion Gauge,Teledyne Hastings has become a fullservice vacuum measurement company,covering pressure ranges from atmospherethrough the high vacuum ranges requiredby many manufacturing processes. Thisnew instrument offers the user accurate,repeatable pressure measurements startingin the medium vacuum range,continuously through into the ultrahighvacuum range.

In the arena of offshore oil and gasexploration, Teledyne recorded its firstorder for its latest generation towed seismicarray in 2003. The value of this orderexceeds $10 million, with deliveryscheduled in 2004.

LightHawk® for dust monitoring in hostile industrial and utility environments.

Phoenix 8000 ® total organic carbonanalyzer monitors water purity fordrinking water, wastewater, industrialand pharmaceutical applications.


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Teledyne Brown Engineering alsosupported Lockheed Martin on itsStrategic War Planning SystemModernization effort and ScienceApplications International Corporation atthe U.S. Strategic Command, providingsupport for Space Operations, GlobalMissile Defense, Information Operations,and Global Strike.

During 2003, the company continuedits long-standing support of the Ground-based Midcourse Defense program inresponse to the Government’s directive offielding an operational missile defensesystem by September 2004. Programmodifications have required extensivechanges in test activities. Teledyne Browndevelops and implements evaluationcapabilities, test data reduction software,and evaluation algorithms, as well as

collecting, archiving, and distributing rawand reduced test and analysis results.

As a first-tier subcontractor to theRaytheon Company, Teledyne Browncontinued its participation on the LoiteringAttack Missile-Aviation team, completingphase II of the vulnerability assessment.The company received additional fundingfor a propulsion study in which TeledyneContinental Motors-Turbine Engines willparticipate. Its goal is to demonstrate that aturbofan motor will meet the LoiteringAttack Missile-Aviation requirements.

Teledyne Brown also participated withLockheed Martin on the proposal team forthe Future Combat System’s UnmannedGround Vehicle programs, which shouldprovide the company with additionalcredentials that can be leveraged for futuregrowth.

Systems E

ngineering

Solutions S

egment

James M. LinkPresident

DEFENSETechnologies Group

Diversifying its customer base and broadening partnerships with

small businesses were key focuses of Teledyne Brown Engineering’s

Technologies Group in 2003. The company broke new ground in

the arena of Space Control by expanding its products and services

to the U.S. Strategic Command, which plans to replace one of its

existing software models with Teledyne Brown’s Extended Air

Defense Simulation (EADSIM). Developed by the company and

first deployed in 1989, EADSIM is the world’s most mature and

widely used force-on-force model. It provides the Warfighter with

analysis, training, and operational planning in one package. The

company continues to grow and maintain this system.

Missile Defense SystemExerciser (MDSE)personnel conduct adevelopment test in TBE'sdedicated MDSE lab.After these tests arecompleted, the softwarewill be used to testinteroperability among the distributed militaryservices components and integrated systemperformance.


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The company’s support for the FederalAviation Administration was expanded in2003 with a proof of concept contract forthe Automated Airborne Flight AlertSystem. This work is to demonstrate a datasystem that will provide selected aircraftflight data and situational awareness datato ground agencies for homeland securitypurposes. Teledyne Controls will providethe airborne equipment for this system.

Working with Teledyne BrownEngineering, Sytronics of Dayton, Ohiohas won a Small Business InnovativeResearch contract for specialized technicalresearch on an Ultra High ResolutionSynthetic Micro Satellite Array, whichapplies optical techniques to radar imagingfor tracking air and ground targets. Phase Iwas completed in 2003. The company willbe pursuing a Phase II award in 2004 tocontinue research and possibly build amicro satellite array.

In December 2003, the MissileDefense Agency awarded Teledyne BrownEngineering a role in its Targets andCountermeasures program, as part of theLockheed Martin team. This programinvolves providing countermeasuressoftware to develop, test and verify ballisticmissile defense system performance. Thesetargets allow testing of the missile defensetechnologies, now in development, to

intercept and destroy incoming ballisticmissiles at various times in flight, includingthe Airborne Laser, the Kinetic EnergyInterceptor, the Ground-based MidcourseDefense, the Aegis Ballistic MissileDefense, the Patriot Advanced Capability3, and the Theater High Altitude AreaDefense (THAAD). Targets andcountermeasures will be developed torepresent capabilities of ballistic missilethreats of the type that could be used in anattack on the United States, our deployedforces and our friends and allies.

AEROSPACE

Systems GroupTeledyne Brown Engineering has been akey resource for NASA for more than 45years. (See Brown Anniversary story.) Thisyear the company won two major NASAcontracts: the Propellants, Pressurants andCalibration Services Contract at theMarshall Space Flight Center, and theSpace Station Cargo Mission Contract atthe Johnson Space Center.

The first of these, awarded in October,has a potential value in excess of $35million over five years. Teledyne Brown hasbeen the prime contractor for this programsince 1971 and is a key leader on thesemost safety critical contracts. Company

In 2003, TeledyneBrown Engineering,Inc., won a potential$40 million subcontractfrom Lockheed MartinSpace Operations ofHouston in support ofthe International SpaceStation (ISS) CargoMission Contract.Teledyne Brown will beintegrating pressurizedand unpressurizedcargo items for theSpace Station.

Teledyne Brown'sHardware-in-the-Looptest tools help the U.S.Government's MissileDefense programsresolve interoperabilityproblems beforefielding the systems.


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employees have worked more than 1.7million man hours over the last 12 yearswithout a lost-time accident.

The International Space Station (ISS)Cargo Mission Contract, on whichTeledyne Brown is subcontractor toLockheed Martin, was awarded inNovember as part of a restructuring of theInternational Space Station Contract. Thisbase contract, in excess of six years withoptions for further growth, involvesproviding services related to planning,preparation, and execution of cargomissions to the ISS. This contract, withTeledyne Brown’s existing $74.4 millionISS Payload Integration Contract, positionsthe company well for the next phase of theISS program.

In May 2003, Teledyne Brown wasawarded a $2.9 million subcontract by theU.S. Army for the design and manufactureof 26 Missile Round Trainers, which willbe used in the Patriot Advanced CapabilityProgram for training purposes. The first ofthese systems was rolled out on October23, and the company was praised for itsefficiency in delivering a high-qualityproduct two months ahead of schedule andat an affordable cost. Expected follow-onscould lead to significant additionalengineering and manufacturing tasks.

Teledyne Brown has also continued toprovide engineering and manufacturingsupport to the Marshall Space FlightCenter under the Systems Developmentand Operations Support contract. Thiscontract has the potential to be a 10-year

contract (5-year base with 5 one-yearoptions). Awarded in June 2002, it has a$568 million ceiling.

Environmental SystemsTeledyne Brown’s Environmental SystemsGroup has expanded its technical base toserve a broad variety of customers as aprovider of engineered solutions formanaging and operating governmentfacilities, handling and disposing ofhazardous wastes, and removing potentialhazards to the population and theenvironment. These services involveengineering, manufacturing and laboratoryanalyses.

The main focus of this activity is ontwo large ongoing programs: the Non-Stockpile II contract, and radiologicalenvironmental monitoring and analyticalservices at Teledyne Brown’s Knoxville,Tennessee laboratory.

Since 1996, Teledyne Brown hassupported the U.S. Army’s Non-StockpileChemical Materiel Program and continueswork on various tasks, including operationof the Army’s Rapid Response System andmanagement of its Integrated Logisticssupport. The company completeddestruction operations at Fort Richardson,Alaska ahead of schedule, and has receiveda contract extension through March 2004,to maintain the Rapid Response System ina state of readiness. The integratedLogistics Support contract option year wasexercised to provide centralized logisticsand maintenance in support of the Army’s

Teledyne BrownEngineering's expertisein modeling threatoptical signaturesleads the industry.

Teledyne Brown supportsthe U.S. Army’s NonStockpile Chemical

Demilitarization program.

REVIEW 2003


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Explosive Destruction System throughSeptember 2004.

In June 2003, Teledyne Brown won aU.S. Army contract with a potential valueof $20.4 million over 3 years to build afacility for the destruction of binarychemical warfare materiel stored at thePine Bluff Arsenal in Arkansas. Thecompany provides expertise in the design,installation, and operation of systems tosafely treat and dispose of chemical warfaremateriel.

In September, Teledyne Brown and itsteammate, Science ApplicationsInternational Corporation, were awarded athree-year, $3.7 million contract by theDefense Threat Reduction Agency toprovide Systems Engineering and TechnicalSupport for elimination, storage, security,and nonproliferation of weapons in theformer Soviet Union.

By building on previousaccomplishments with the Army and theDefense Threat Reduction Agency, ourEnvironmental Systems Group has hadcontinued success in 2003 in weaponsdemilitarization and nonproliferationsupport, and looks forward to broadeningthis base in 2004, while maintaining ourreputation of excellent service to existingcustomers. The company anticipatesgrowth in business with governmentalsectors such as Homeland Security, theDepartment of Defense, and theDepartment of Energy, as well as growth indesign of specialty devices for hazardousmaterials transport and storage for

commercial customers that operate ingovernment-regulated environments.Specific opportunities exist in the area ofnuclear waste storage and transport, as wellas remote handling systems for use inradioactive or other hazardousenvironments.

Teledyne Solutions, Inc.Teledyne Solutions, Inc., was formed fouryears ago as a wholly owned subsidiary ofTeledyne Brown Engineering, specificallyto work on the company’s SystemsEngineering and Technical AssistanceContract (SETAC) with the U.S. ArmySpace and Missile Defense Command.Teledyne Solutions was recently awarded atwo-year extension to this multi-milliondollar contract, extending the performanceperiod through April 2007.

Today, Teledyne Solutions alsoprovides Systems Engineering andTechnical Assistance support to othermajor Department of Defense customers.It provides engineering services to theMissile Defense Agency, the U.S. ArmySpace and Missile Defense Command, andto various Army weapons systems assignedto the Program Executive Office for Air,Space, and Missile Defense.

In addition, Teledyne Solutions is amajor subcontractor to Photon ResearchAssociates for the development of theBattlespace Environments and SignaturesToolkit. This program involves thedevelopment of an optical signature modelfor predicting the infrared signatures of

ballistic missiles. The company’soutstanding performance has beenrecognized, in part, through an award feeexceeding 90% for the last period.

The Office of the Secretary of Defenserecently selected Teledyne Solutions, Inc.to participate in the Targets ManagementInitiative program. This highly competitiveprogram selects innovative concepts for theinvestment of development funds forfuture test programs. The company wasnominated for the program by the MissileDefense Agency for a concept to providelow-cost, reusable ballistic missile targetsfor the Agency.

The Observable ProteinCrystal Growth Apparatusis a device for theInternational SpaceStation that is used todelineate the relevantvariables between Earth-grown crystals andSpace-grown crystals.


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Piston Aircraft EnginesThe growing sales for OEM pistonaircraft engines enjoyed by TeledyneContinental Motors in 2002 continuedthrough 2003 despite challenging businessconditions in global aviation markets. Thiswas due in large part to the strong salesachieved by manufacturers of moderncertified composite aircraft that use ourengines. Continued strong sales of theContinental-powered Cirrus SR20 andSR22 single engine aircraft allowed CirrusDesign to become one of the world’slargest producers of piston powered aircraftduring 2003. In addition to Cirrus,Continental aircraft engine sales toDiamond Aircraft and Lancair alsocontinued to grow in 2003. WithContinental now powering many of today’snew light aircraft, the company’s OEMmarket share has risen from approximately20 percent to approximately 50 percent ofthe domestic market during the past fiveyears. The company expects that two newaircraft powered by Continental engineswill begin rate production in 2004.

The company’s replacement aircraftengine and spare parts markets, however,continued to be severely impacted by anumber of conditions throughout 2003.The highly cost sensitive and competitivereplacement engine market has seenoperating costs rise resulting fromcontinued increases in insurance costs. The market response to these conditionsin 2003 resulted in the lowest after marketengine order rate in twenty years forContinental after market engines.

Small Turbine EnginesTeledyne Continental Motors’ smallturbine operations continued to facesignificant restructuring challenges intransitioning from its historical productmix to one dedicated almost entirely tothe production of low cost tactical missileengines for military markets.

To meet these challenges, thecompany’s turbine manufacturingoperations have been consolidated at the

Although Teledyne Continental Motors, Inc.

experienced continued weakness in segments of its general

aviation product lines throughout 2003, a continued focus on

operational excellence combined with the company’s growing

OEM product mix resulted in a profitable year of operations.

Aerospace Engines

and Components Segment

Bryan L. LewisPresident

The Twin Engine Adam A500 is one oftwo new aircraftpowered by Continentalexpected to beginproduction in 2004.


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Mobile, Alabama manufacturing facility,with final assembly and test operationsperformed at the Toledo, Ohio facility.The new manufacturing cell for turbineoperations continued to perform ahead ofschedule in many areas. Along with theproduction of components for theHarpoon and Joint Air-to-SurfaceStandoff Missile (JASSM) engines, thecell began production of J700 enginecomponents for the U.S. Navy ImprovedTactical Air Launched Decoy (ITALD) in2003. Both ITALD and JASSMcomponents met or exceeded productioncost targets in 2003.

Battery ProductsIn 2003, Teledyne Battery Productscontinued to expand the number ofaircraft installations for its well-knownGillTM brand aircraft batteries. Validationsof several of its Supplemental TypeCertificates for foreign-operated aircraft,requiring both sealed and dry-chargedbatteries, have been obtained.Development of FAA Supplemental TypeCertificates and Parts ManufacturerApprovals for sealed recombinant batteriesin business jet and helicopter applications,where lower maintenance batteries arerequired, continues. Further approvals forthis advanced line of batteries were madefor various aircraft models, including thoseof Bell Helicopter, Bombardier, Cessna,Eurocopter, Pilatus, Sikorsky, Socata, andRaytheon.

During the year, Teledyne met withkey aviation fleet operators to reviewoverall replacement costs for thecompany’s newly developed onboardcharging and display kit. A final

Supplemental Type Certificate for the kitand batteries is expected in 2004. The newkit is expected to replace the existing Ni-Cad battery and charger system withTeledyne sealed batteries and a “smart”charger. This technology is designed toprovide overall life-cycle cost savings forfleet operators.

Providing improved aircraft batterieswith reliable performance characteristics isa continuing company goal. A brand newversion of its sealed flagship battery isscheduled for release in 2004. It will bedesigned to provide significantly improvedinternal construction and a new ruggedexterior. The designs of all the company’sbatteries, dry-charged and sealed, arecurrently being evaluated to maximizepower and energy densities within a given envelope.

Service and Manufacturing Excellence InitiativesTeledyne Continental Motors madeimportant achievements in 2003 in itsefforts to provide operational excellence inits service and manufacturing areas.

Continued development of thecompany’s electronic Virtual Purchasingsystem has been integral in more thandoubling inventory turns for our pistonaircraft engine operations. In addition toachieving these outstanding inventorymanagement results, the companycontinued to mature its build-to-demandlean manufacturing system to provide fast,reliable customer service on over 1,400engine model specifications and 6,000aftermarket service parts. Similar resultshave been achieved in the company’sbattery product operations, whereinventory turns of 10 have been achieved.

The company’s TCMLink electronic-based service support network madeimpressive strides in 2003, as well. Theyear ended with over 600 subscribers to thecompany’s Fixed Base Operation ServicesNetwork, and 20,000 subscribers to theAviator Services pilot support system.These innovative programs provide ourgeneral aviation customers with modern e-communications links to our service,maintenance, and product technical data.

In 2003, the company also madesignificant strides in expanding the use of aSCADA control system for process controlmonitoring and automation at its Mobilemanufacturing center. This system hasreceived favorable reviews for its creativeapproach to integrating modern qualitymethodologies, in a cost-effective manner,into engine component manufacturing.

Engine components forthe U.S. Navy ImprovedTactical Air LaunchedDecoy (ITALD) wereproduced for the firsttime in the small turbinemanufacturing cell inMobile, Alabama.

The premium ContinentalPlatinum Engine continues

to gain favor with new OEMaircraft manufacturers.

Our battery products operation is workingwith Teledyne Controls to develop an on-board charging system for use with ouraircraft lead acid batteries.


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As the record setting Pioneer 10 spacecraft,powered by a Teledyne Energy Systems’thermoelectric power system, sent its lastcommunication on January 22, 2003,Teledyne Energy Systems entered a newspace flight era with the addition of morethan $65 million in multi-yeardevelopment and production contracts.Today, Teledyne Energy Systems providesthermoelectric materials research,thermoelectric generator production, fuelcell system prototyping, and fuel celltesting services to various departmentswithin the U.S. Department of Energy,NASA and others.

Teledyne Energy Systems’ commercialproduct line expanded in 2003, as well.The 50th Medusa RD test station was soldin 2003 and fuel cell testing services wereadded to the portfolio. There was growinginterest in the Teledyne TitanTM hydrogengenerator line in both the traditionalindustrial markets as well as those relatedto alternative energy and hydrogen vehiclerefueling. The company also expanded its

Teledyne Energy Systems, Inc. returned to its roots in

2003 with major government contract wins to develop next-

generation power systems for manned and unmanned space

exploration. The company’s commercial product lines added

fuel cell stack testing services and advanced electrolysis system

research contracts to its multi-year business base. The

company continues to improve annual results while investing

strongly in new business and product development.

commitment to developing advancedhydrogen generation technologies inpartnership with the U.S. Department ofEnergy under a program to improve systemefficiency and manufacturability.

The success experienced to date byTeledyne Energy Systems is a directreflection of the skills of the dedicatedengineering, operations and administrativestaff employed by the company, who bringexpertise in materials, thermal analysis,safety analysis, specialty welding and otherfields. This team will be responsible for thedesign of power systems for next-generation space exploration, as well as foradvanced hydrogen generators to meet thedemand of hydrogen-fueled vehicles. Thecompany enters 2004 with contracts in allmajor product areas, an enhanced productportfolio, and a strong focus on continuousimprovement.

Rhett C. RossPresident

Energy

Systems S

egment

Mars Science Landerthat may use the Multi MissionRadioisotopeThermoelectricGenerator shown in the foreground.

Artist rendering courtesyof Rocketdyne Propulsionand Power business unitof Integrated DefenseSystems unit of Boeing.


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Advanced Power SystemsTeledyne Energy Systems’ contract wins in2003 open the door for its hardware topotentially fly on some of the most excitingspace exploration missions of the nextdecade. Contemplated missions include areturn to Mars as the power system for theMars Science Lander, power systems forthe deep space probes to the outer planets,and manned missions as the onboardpower system for the Second GenerationReusable Launch Vehicle. NASA’soverriding objective in each of these cases isto go farther, faster, using less fuel, withmaximized safety and reliability.

Teledyne Energy Systems’ first win ofthe year was for two contracts in thethermoelectric material development arena,which, if fully optioned, are worthapproximately $10 million in a multi-yeareffort to achieve a 2X improvement in theefficiency of thermoelectric materials. Thefirst contract, Segmented Thermoelectrics,focuses on the use of differentthermoelectric formulations staged or“segmented” together in a combined unitto optimize thermal energy utilization astemperature varies from the source of heatinput to heat rejection. The secondcontract, “Superlattice ThermoelectricStructures,” attempts to accomplish thesame result by using specialized productiontechniques to align materials for optimumthermal energy utilization.

Teledyne Energy Systems, inpartnership with the RocketdynePropulsion and Power business unit ofIntegrated Defense Systems of Boeing, wasawarded a substantial contract by the U.S.Department of Energy and NASA todevelop a “Multi-Mission RadioisotopeThermoelectric Generator (MMRTG)”capable of supporting planetary landing ordeep space probe missions in one package.The contract is valued at $57 million over10 years if all development and productionphases are optioned. Teledyne Energy

Systems began work in 2003 on aprototype unit design with a rated powerof 110 watts. If selected for flight, the firsttwo production units could be used topower the Mars Science Lander scheduledto launch in 2009.

In addition, Teledyne Energy Systemswas awarded a Phase II contract option todeliver a Proton Exchange Membrane(PEM) fuel cell power system prototype foruse in the Second Generation ReusableLaunch Vehicle. The option was exercisedfollowing the successful delivery in early2003 of a PEM fuel cell power systembreadboard rated at five kilowatts thatexceeded all performance expectations.Teledyne Energy Systems is now workingclosely with NASA to provide a PEM fuelcell power system package in the 10kilowatt range that is backward compatiblefor possible use in the current SpaceShuttle fleet while incorporating advancedfeatures that will suit it for next generationapplications.

The balance of Teledyne EnergySystems’ Advanced Power efforts in 2003

focused on delivering exceptional serviceand products to existing contracts, whileadvancing all of its technologies to meetthe needs of tomorrow. The company hasdeveloped a number of design conceptsthat meet critical United States needsincluding advanced thermoelectric materialconcepts for programs such as the JupiterIcy Moon Orbiter program, regenerativeelectrolysis/fuel cell system hybrids for usein powering high altitude balloons andunmanned aerial vehicles to increase on-station time, and hybrid fuelcell/thermoelectric concepts forcommunication applications.

Fuel Cell Test StationsThe 50th Medusa RD unit was sold in2003 and the company received its firstmajor contract that uses the Medusa LStest station. The Medusa line of fuel celltest systems provides high quality, simpleto use automated test stations that supportfuel cell and fuel cell stack testing up to 10kilowatts.

Exploded view ofthe Multi MissionRadioisotopeThermoelectricGenerator.


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In 2003, Teledyne Energy Systemsintroduced Fuel Cell Testing Services. Itsfirst customer, NASA, has reserved 4 teststations for the analysis of life, durabilityand performance of key PEM fuel cellcomponents. The first round of testingachieved more than 10,000 hours ofcontinuous operation among the four teststations. A second round of testing hasbeen started with a goal of 10,000 hoursper station.

Teledyne Energy Systems expanded itsfuel cell testing customer base in mid-2003with the receipt of a contract to performlife testing of multi-kilowatt stacks for amajor fuel cell developer. The tests use aMedusa LS test station and hydrogen gasproduced by a Titan hydrogen generator.Performance under the initial contract ledto the receipt of a multi-year testingservices contract valued in excess of $1million. This contract will use two MedusaLS stations running 24 hours a daycollecting performance and durability data.

PEM Fuel CellsTeledyne Energy Systems continues tofocus its PEM fuel cell efforts ontechnology innovations to meet immediateneeds in the military and aerospace sectors.The common thread has been to enhancefuel cell power while reducing weight andvolume. The culmination of the 2003effort is the Teledyne Perry NGX fuel cell stack, which incorporatesadvanced flow and thermal managementfeatures that allow it to produce the samepower as an NG2000 stack inapproximately half the volume and weight.Although Teledyne Energy Systems willcontinue to offer its successful and provenNG2000 and NG3000 series stacks, theNGX stack will begin to supplant theseolder technologies initially in the aerospacesector where weight and volume are ofpremium value.

Teledyne Energy Systems has alsocontinued its efforts to develop systemsthat operate with both gaseous and liquidhydrocarbon fuels. The company

Advanced TeledynePerry NGX PEM Fuel

Cell Stack developed for Use in the SecondGeneration Reusable

Launch VehicleConcept.

Second GenerationReusable Launch VehicleConcept Design courtesy

of the NationalAeronautics and Space

Administration.

completed its FTU-2 fuel processor/fuelcell prototype which is being used toanalyze start up and transient response,control strategies and general performance.Results from these analyses will be used inthe next stage of development aimed atenhancing life and the flexibility to operateon more complex hydrocarbon fuels suchas diesel.

Hydrogen/Oxygen GeneratorsTeledyne Energy Systems TitanTM

Hydrogen/Oxygen generator businessprovides a full line of systems that producehigh purity hydrogen and oxygen gas forthe power generation, semiconductorfabrication, fiber optic production, metalsprocessing, and food processing industries.Although 2003 saw softness in thecommodity production segments, such assemiconductor and fiber optic fabricationthat fueled Titan generator product sales inthe late 1990s, growth accelerated in thepower generation segment as China, Indiaand other developing regions met increaseddemand for electricity with new powerplant construction. This market shiftprovided a stable platform for generatorsales throughout the year.

Continued interest in hydrogen as afuel has also provided growthopportunities. The company was awardeda U.S. Department of Energy grant toresearch technologies that would increasealkaline electrolysis efficiency and reduceproduction costs. The contract, which willbegin in 2004, will look both atfundamental improvements to theunderlying chemistry, as well as applying“Design for Manufacture” and “LeanManufacturing” techniques to lowerproduction costs. The company expectsproject results to provide new designs forthe future, and contribute to its near termcompetitiveness goals.

With roots going back to 1953, Teledyne Brown Engineering reviews fifty years

of technological accomplishments in support of a wide array of our country’s

most important aerospace, defense, environmental and homeland security programs.

953 was a momentous year. In that year, U.S. Air Force testpilot Chuck Yeager set a then world speed record of 1,650

mph in the X-1 rocket plane, James Watson andFrancis Crick announced the double-helix structure

of DNA, Sir Edmund Hillary reached the summit ofMount Everest, and Wernher von Braun had

already been working with the U.S. Army foreight years developing missile and rockettechnology.

Josef Stalin died in 1953, the Soviet Uniontested its first prototype hydrogen bomb, anarmistice was signed to end the Korean warand the World Series was won by the NewYork Yankees over Brooklyn, their fifth

consecutive win. The United States was alreadywell into its “cold war” with the Soviet Union,

and the “space race” was about to begin.Against this background, a new company was

formed in Huntsville, Alabama that has played animportant role in this country’s space, defense,

environmental and national security programs ever since. Itis known today as Teledyne Brown Engineering, Inc.


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On the Cutting Edge of Technology for Over Half a Century

T E L E D Y N E B R O W N E N G I N E E R I N G

19531953


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Huntsville had become the home of the Army’s RedstoneArsenal in 1941, and in 1950, a German rocketdevelopment team, led by Wernher von Braun, transferredthere from Fort Bliss and was assigned the task ofdeveloping a midrange missile for the U.S. Army. It becameknown as the Redstone Rocket.

In developing this rocket, von Braun’s team neededadditional engineering and manufacturing support andTeledyne Brown Engineering’s predecessor company,Alabama Engineering and Tool Company, was formed tomeet those needs. This company later merged with anotherand became known as Brown Engineering. In 1967, it wasacquired by Teledyne, Inc. and became one of the mostprominent members of that high technology corporation. Itcontinues to play an important role today as part ofTeledyne Technologies Incorporated.

The 50 years that have led from that modest beginningto today are marked by some of the most significantmilestones in our country’s space exploration and defenseefforts. In 1956, the Army Ballistic Missile Agency wasformed and von Braun’s team was given the mission ofdeveloping the country’s first long-range missile, known asthe Jupiter.

Then, on October 4, 1957, the nation was shocked whenthe Soviet Union successfully launched the world’s firstman-made earth-orbiting satellite, Sputnik. As this tinysatellite circled the earth, sending out its series of radiosignal beeps, a crash program was initiated and a modifiedJupiter rocket was able to launch this country’s first satellite,Explorer I, just three months later on January 1, 1958.Brown Engineering played a significant role in thedevelopment of both the Jupiter rocket and its satellitepayload.

In 1958, Congress created the National Aeronauticsand Space Administration (NASA) with the specific missionof developing manned space flight, and Brown Engineeringbegan a close association with that agency that continuestoday. In 1960, the Army’s space activities were thentransferred to NASA. The Marshall Space Flight Center wasformed and, with 4000 personnel, became the largest andbest known of the NASA centers.

In NASA’s Saturn-Apollo program, which extendedfrom 1961 to the first moon landing in 1969, BrownEngineering provided some 20,000,000 man-hours ofsupport in a wide variety of efforts.


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Since those early years, Brown Engineering has had a role invirtually every major Marshall Space Flight Center program,including the Skylab and Apollo-Soyuz programs of the1970s, continuing into the Space Shuttle and InternationalSpace Station programs of today. Teledyne BrownEngineering became the payload integration contractor forSpace Shuttle scientific missions, and was responsible forthat mission on 24 highly successful flights during the1980s and 90s.

Skylab was only a temporary space station, and in 1987Boeing was selected to design and build Marshall SpaceFlight Center-managed modules for the new permanentversion, the International Space Station. Teledyne BrownEngineering became a member of that team and still istoday.

Based on its extensive experience during those years indeveloping crystal-growth furnaces, glove boxes and otherscientific space experiment hardware, Teledyne BrownEngineering was selected by the Marshall Space FlightCenter as the prime support contractor on the presentmicrogravity research and development programs.

When NASA was created, the U.S. Army no longerparticipated in space projects, but continued rocket andmissile development as head of the Army Ballistic MissileAgency and the Army Rocket and Guided Missile Agency.The Redstone Arsenal thus became the center for missile-related weapons development, as well as for emergingmissile defense programs. Teledyne Brown Engineering hasparticipated in and supported these activities ever since,becoming one of the Army’s major Missile Defense systemsengineering and technical assistance contractors.

In 1971, Teledyne Brown Engineering was awarded theArmy’s Systems Engineering and Technical AssistanceContract (SETAC). The company has remained on thiscontract continuously since its inception through many re-bids. Their first major effort under SETAC was in supportof the development of Safeguard, America’s only functionalBallistic Missile Defense system that operated briefly in the1970s.

During the 80s and 90s, Teledyne Brown Engineeringwas involved in essentially every Ballistic Missile Defensesystem effort. During the development of President Reagan’sStrategic Defense Initiative (SDI), commonly called


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engineering for the development and acquisition of complexweapons systems. The company is involved in a wide rangeof other defense systems as well, including space-basedweapons; land, sea, and air combat systems; and equipmentfor individual warfighters.

One prime example is the company’s present role as amajor subcontractor to Boeing on the highly importantGround-based Midcourse Defense program. These activitiesinvolve integration planning, design, evaluation, andmanagement support for missile defense systems, includingthe development of high-fidelity threat signatures for use intarget identification and countermeasures systems, as well asa variety of systems engineering, integration and testingservices.

One of Teledyne Brown Engineering’s great strengthslies in its extensive experience and capability in developingworld-class computer software systems for the modeling,simulation and analysis of complex situations. Thecompany’s Extended Air Defense Simulation (EADSIM)product, for example, is the most pervasive and successfulmodeling and simulation product in use in the defensefield, and has been the standard for air defense mission

“Star Wars,” the company was selected as one of 10 Centersof Excellence responsible for defining that system’sarchitecture.

To prevent conflicts of interest with other activities,SETAC is now handled by Teledyne Solutions, Inc., awholly owned subsidiary of Teledyne Brown Engineering,Inc., created explicitly for this purpose.

Other Ballistic Missile Defense activities includesupport of the U.S. Army Space and Missile Defense Centerand subcontracting assistance to Boeing.

Today, Teledyne Brown Engineering’s activities can becategorized in five major areas: Defense, Space,Environmental, Homeland Security, and Manufacturing. Asignificant portion of Brown’s business is still in programsfor Department of Defense missile defense agencies andNASA’s Marshall Space Flight Center.

DefenseAfter 50 years, Teledyne Brown Engineering continues itsoriginal mission in support of U.S. Army ballistic missiledefense programs with its strong and diverse engineeringand scientific talent, providing state-of-the-art systems


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planning for over a decade. It is used by almost 400agencies in the U.S. and ten foreign countries for defenseanalysis, training and operational planning.

Other Teledyne Brown simulation-based products areused by the U.S. Army for testing, training and operationsanalysis, including force-on-force, mission planning, andbattle scenarios. The company has also developed real-timedistributed software systems for such applications ascommand and control systems development andinteroperability and integrations assessment.

SpaceFrom its inception, Teledyne Brown Engineering hassupported every key space program from the first U.S.satellite to its present-day role as a major subcontractor toBoeing on the development and operation of NASA’sInternational Space Station. Support services range fromconcept development and design to systems integration andparticipation in the operation of mission control centersduring live on-orbit missions. The company also designs,develops and fabricates space-qualified hardware, and

operates test facilities needed in developing and qualifyingspace hardware and systems for various programs.

With its extensive background as a payload integrationcontractor on 24 highly successful Space Shuttle scientificmissions, and its performance in the development andproduction of hardware for the in-flight growth of crystalsunder microgravity conditions, Teledyne Brown Engineeringwas selected as prime support contractor on microgravityresearch and development programs by the Marshall SpaceFlight Center, and is currently fulfilling that role.

The company also produces integrated training systemsusing computer technology and interactive, multimediatechniques to prepare scientists, astronauts, and groundsupport personnel for the operation of complex spacesystems such as the International Space Station. Thesetraining system techniques have also been applied in avariety of commercial training applications by companiessuch as Mercedes Benz.

Teledyne Brown Engineering’s space products andservices have been successfully marketed to variousinternational customers including the European, Russian,and Japanese space agencies.


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EnvironmentalModern technologies have brought with them a wide arrayof hazardous materials that can pose both short-term andlong-term threats to the environment. Specialized techniquesare needed for the handling, storage and disposal of suchmaterials. The problems with nuclear materials are wellknown, but chemical and biological materials, as well asobsolete weapons, are also of great environmental concern.

Teledyne Brown Engineering’s Environmental Systemsgroup specializes in this field. This group received a three-year extension of its Certificate of Authorization in 2002from the American Society of Mechanical Engineers, knownas an N-stamp, which is required in performing work forthe nuclear power industry. It has permitted TeledyneBrown Engineering to win major contracts, and qualifies itfor future work on spent nuclear fuel and other nuclearindustry projects.

An important current project is the manufacture ofcustomer-designed containers for vitrified nuclear waste forthe Department of Energy’s Savannah River site near Aiken,South Carolina. The company also designs specialtyhazardous materials handling and storage devices forgovernment-regulated environments.

In support of these programs, Teledyne BrownEngineering operates a well-equipped, state-of-the-artlaboratory in Knoxville, that offers complete high- and low-level radiological monitoring and analytical services. Theseservices are used by the nuclear power industry forradiological environmental monitoring; for the signaturedetection of nuclear, chemical and biological devices; andfor the analysis of debris produced in the disassembly ofnuclear facilities. The Knoxville lab serves nearly everycommercial nuclear facility in the United States, as well asthe U.S. Air Force, the Department of Defense and theDepartment of Energy.

Weapons disposal and recovery solutions for the U.S.Army is another major area of environmental activity.Teledyne Brown Engineering is now carrying out a six-yearcontract for the design and fabrication of chemicalprocessing systems to safely treat and dispose of chemicalwarfare materiel under the U.S. Army Non-StockpileChemical Demilitarization program.

Other Environmental services include threat reductionsolutions involving the safety and security of nuclear,biological and chemical materials; cost-effective approachesto providing survivability of military personnel in nuclear,


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particles, designed to cut through the metal structure of avehicle or explosive device without generating heat orsparks. It also has alternative uses in helping free accidentvictims at crash sites. A related product is a MobileDetonation Chamber system designed to permit the safe,on-site detonation of certain explosive devices.

Security of computer systems and networks is anothervital field of Teledyne Brown Engineering’s activity. Thisincludes defensive software design and access control,intrusion detection, hacker profiling and safeguards,vulnerability assessments, and a variety of other securitydisciplines for computer and communications systems.

Teledyne Brown Engineering has also developedautomated consequence management software that helpsplanners and emergency response managers to rapidlyevaluate response alternatives in the event of terroristattacks. The company is also a principal developer ofadvanced planning and operations control, undercongressionally mandated FEMA/DHS-sponsored programsfor disaster management and agency interoperabilityservices.

biological and chemical environments; rapid responsetechnologies for meeting emergency situations; and themanufacture of hardware and equipment needed to dealwith these threats on a local, national or international basis.Teledyne Brown Engineering’s extensive engineering andmanufacturing capability provides the hardware andequipment needed to support these activities.

Homeland SecurityTeledyne Brown Engineering’s experience in space anddefense projects has given it several capabilities that are nowbeing applied in the field of Homeland Defense, inpreparing for, responding to, mitigating and recoveringfrom nuclear, biological and chemical threats.

The company’s products range from threat definitionand susceptibility analysis services, sensors, alarms andprotection systems to emergency response vehicles and toolsfor dealing with hazardous materials and critical situations.One of its unique products is the WaterSabretm Fluid JetCutting System. This mobile, remotely operated machinecan be quickly deployed at the scene of a hazardous threat.It uses an ultra-high-pressure water jet containing abrasive


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Capability-3 (PAC-3) Missile Round Trainer, and it is alsoused in fabricating large, stainless steel nuclear waste storagecontainers for the Savannah River nuclear facility, under along-term contract.

With its great half-century record of achievement, andits large cadre of dedicated professional engineering,scientific and technical manufacturing personnel, TeledyneBrown Engineering looks forward to many more years ofexceptional service to its customers in finding creative andcost-effective solutions to the problems and programs thatwill be forthcoming.

ManufacturingA key element in Teledyne Brown Engineering’s support ofmany of the aerospace, defense and environmental programsdescribed has been the company’s capability in the area ofclose tolerance prototyping and low-rate manufacturing ofneeded hardware. The company operates a complete,modern machine shop with the latest automated CNCmachining centers, as well as facilities for sheet metalforming, welding, and test and evaluation of complexmechanical systems. Teledyne Brown Engineering maintainsa complete facility for electrical and electronic systemsfabrication and a large clean room for the final assemblyand testing of flight-qualified hardware.

Teledyne Brown Engineering has experience inengineering and building large structures such as the huge,highly accurate Element Rotation Stand used in the SpaceStation development, as well as smaller complex devicessuch as the crystal growth furnaces used in on-orbitmicrogravity scientific experiments aboard both the Shuttleand the International Space Station.

The company’s assembly and integration capability isnow being used in the fabrication of the Patriot Advanced


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DIRECTORS

Robert P. Bozzone (1)(3)

Chairman,Allegheny TechnologiesIncorporated

Frank V. Cahouet (1)(2)

Retired Chairman and Chief Executive Officer,Mellon Financial Corporation

Diane C. Creel (2)(3)

Chairwoman and Chief Executive Officer, Ecovation, Inc.

Charles Crocker (2)(3)

Chairman and Chief Executive Officer, BEI Technologies, Inc.

Robert Mehrabian Chairman, President and Chief Executive Officer,Teledyne Technologies Incorporated

Paul D. Miller (1)(2)

Chairman,Alliant Techsystems, Inc.

Charles H. Noski (1)(2) * *

Corporate Vice President andChief Financial Officer,Northrop Grumman Corporation

Charles J. Queenan, Jr.(1)(3)

Senior Counsel,Kirkpatrick & Lockhart LLP

Michael T. Smith (2)(3)

Retired Chairman and Chief Executive Officer,Hughes Electronics Corporation

(1) Audit Committee(2) Nominating and Governance Committee(3) Personnel and Compensation Committee

STOCKHOLDER INFORMATION

Corporate OfficesTeledyne Technologies Incorporated12333 West Olympic BoulevardLos Angeles, CA 90064-1021Telephone: (310) 893-1600Fax: (310) 893-1669www.teledyne.com

Transfer Agent and RegistrarMellon Investor Services LLCP.O. Box 3315South Hackensack, NJ 07606(800) 356-2017

Stockholder Publications - Form 10-KAnnual reports (including Form 10-K)and proxy statements are mailed to allstockholders of record. Copies of our SECperiodic reports, corporate governanceguidelines, code of ethics and committeecharters are also available on our web siteat www.teledyne.com. For additionalinformation, contact CorporateCommunications or Investor Relations.

Stock Exchange ListingThe common stock of TeledyneTechnologies Incorporated is traded on the New York Stock Exchange (symbol TDY).

Annual MeetingThe annual meeting of stockholders willbe held on Wednesday, April 28, 2004, at 9:00 a.m., at Teledyne TechnologiesIncorporated, 12333 West OlympicBoulevard, Los Angeles, CA 90064-1021.

Independent AuditorsErnst & Young LLPLos Angeles, California

Current News and General Information Information about Teledyne is available atwww.teledyne.com.

EXECUTIVE MANAGEMENT

Robert Mehrabian*Chairman, President and Chief Executive Officer

John T. Kuelbs*Senior Vice President,General Counsel and Secretary

Dale A. Schnittjer*Vice President and Chief Financial Officer

Aldo Pichelli*Senior Vice President and Chief Operating Officer, Electronics and Communications Segment

James M. Link*President, Teledyne Brown Engineering, Inc.

Bryan L. LewisPresident, Teledyne Continental Motors, Inc.

Rhett C. RossPresident, Teledyne Energy Systems, Inc.

Robert W. SteenbergeChief Technology Officer

Ivars R. BlukisChief Business Risk Assurance Officer

Robyn E. ChoiVice President of Administration, Human Resources and Assistant Secretary

Melanie S. CibikVice President,Associate General Counsel and Assistant Secretary

Shelley D. GreenTreasurer

* Section 16 Officer

** Charles H. Noski resigned as a director effective February 27, 2004, due to thedemands of his position as Corporate Vice President and Chief Financial Officer ofNorthrop Grumman Corporation, a position he assumed in December 2003.

Credits:

Design: James Robie Design Associates

Writing: Robert McVicker

International Space Station, Redstone I,Saturn-Apollo, Skylab, Space Shuttle photoscourtesy of NASA

The Teledyne logo and marks are licensedfrom TDY Holdings, LLC.

FORWARD-LOOKING STATEMENTS CAUTIONARY NOTICE

This annual report contains forward-looking statements as defined in the PrivateSecurities Litigation Reform Act of 1995, relating to earnings, growth opportunities,capital expenditures, pension matters and strategic plans. Actual results could differmaterially from these forward-looking statements. Many factors, including changes indemand for products sold to the semiconductor, communications and commercialaviation markets, timely development of acceptable and competitive fuel cell productsand systems, funding, continuation and award of government programs, changes ininsurance costs, customers’ acceptance of piston engine insurance-related priceincreases, continued liquidity of our customers (including commercial airlinecustomers) and economic and political conditions, could change the anticipatedresults. In addition, stock market fluctuations affect the value of the Company’spension assets.

Global responses to terrorism and other perceived threats increase uncertaintiesassociated with forward-looking statements about our businesses. Various responsescould realign government programs, and affect the composition, funding or timing ofour programs. Reinstatement of flight restrictions would negatively impact the marketfor general aviation aircraft piston engines and components.

The Company continues to take action to assure compliance with the internalcontrols, disclosure controls and other requirements of the Sarbanes-Oxley Act of2002. While the Company believes its control systems are effective, there are inherentlimitations in all control systems, and misstatements due to error or fraud may occurand not be detected.

While Teledyne Technologies’ growth strategy includes possible acquisitions, theCompany cannot provide any assurance as to when, if, or on what terms, anyacquisitions will be made. Acquisitions, including the recent asset acquisitions of theFiltronic Solid State business and of Leeman Labs, Inc., involve various inherent risks,such as, among others, our ability to integrate acquired businesses and to achieveidentified financial and operating synergies.

Additional information concerning factors that could cause actual results to differmaterially from those projected in the forward-looking statements is contained inTeledyne Technologies’ periodic filings with the Securities and Exchange Commission,including its 2003 Annual Report on Form 10-K. The Company assumes noobligation to publicly update or revise any forward-looking statements, whether as aresult of new information or otherwise.

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