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FORM 10-K

(Mark One)

	þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 29, 2002

OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 .

Commission file number: 1-15295

Teledyne Technologies Incorporated

12333 West Olympic Boulevard

Registrant’s telephone number, including area code: (310) 893-1600

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

     At February 28, 2003, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $396.1 million, based on the closing price of $12.75 per share as reported on the New York Stock Exchange on that date. Shares of Common Stock known by the registrant to be beneficially owned by the registrant’s directors and the registrant’s executive officers subject to Section 16 of the Securities Exchange Act of 1934 are not included in the computation. The registrant, however, has made no determination that such persons are “affiliates” within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes þ  No o

     The aggregate market value of the registrant’s Common Stock held by non-affiliates (as defined above) was $644.6 million, based on the closing price of a share of Common Stock on June 28, 2002, which is the last business day of the registrants most recently completed fiscal second quarter.

     At February 28, 2003, there were 32,175,575 shares of the registrant’s Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Selected portions of the registrant’s proxy statement for its 2003 Annual Meeting of Stockholders (the “2003 Proxy Statement”) are incorporated by reference in Part III of this Report. Information required by paragraphs (a) and (b) of Item 306 of Regulations S-K and by paragraphs (k) and (l) of Item 402 of Regulation S-K is not incorporated by reference in this Form 10-K or in any other filing of the registrant. Such information shall not be deemed “soliciting material” or to be filed with the Commission as permitted by paragraph (c) of Item 306 and Instruction (9) to Item 402 of Regulation S-K.

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INDEX

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PART I

Item 1. Business.

Who We Are

      Teledyne Technologies Incorporated is a leading provider of sophisticated electronic components, instruments and communications products, including data acquisition and communications equipment for airlines and business aircraft, monitoring and control instruments for industrial and environmental applications and components, and subsystems for wireless and satellite communications. We also provide systems engineering solutions and information technology services for space, defense and industrial applications, and manufacture general aviation and missile engines and components, as well as on-site gas and power generation systems.

      We serve niche market segments where performance, precision and reliability are critical. Our customers include major industrial and communications companies, government agencies, aerospace prime contractors and general aviation companies. We have developed strong core competencies in engineering, software development and manufacturing that we can leverage both to sustain and grow our current niche businesses, and to become an innovator in related higher-growth markets.

      We seek to grow in niche market segments where we have a strong competitive position, both by development of new products and services and by acquiring businesses that are highly complementary to our current product lines.

      Total sales in 2002 were $772.7 million, compared with $744.3 million and $795.1 million in 2001 and 2000, respectively. Our aggregate segment operating profits were $57.3 million, $24.2 million and $72.4 million in 2002, 2001 and 2000, respectively. Approximately 54% of our total sales in 2002 was to commercial customers and the balance was to the U.S. Government, as a prime contractor or subcontractor. Approximately 41% of these U.S. Government sales was attributable to fixed price-type contracts and the balance to cost plus fee-type contracts. International sales accounted for approximately 16% of total sales in 2002.

      In 2001, we realigned and changed the reporting structure of some of our business units. Our Test Services and Geophysical Instruments business units that were previously part of our Systems Engineering Solutions segment are now part of an instruments group under our Electronics and Communications segment. This realignment also resulted in a new segment, the Energy Systems segment, the results of which had previously been reported under our Systems Engineering Solutions segment.

      In November 2001, we acquired Advanced Pollution Instrumentation, Inc., a designer and manufacturer of advanced air quality monitoring instruments based in San Diego, California, for $25 million. In September 2002, we acquired Monitor Labs Incorporated for $24 million. Monitor Labs is a supplier of environmental monitoring instrumentation for the detection, measurement and reporting of air pollutants with locations in Englewood, Colorado and Gibsonia, Pennsylvania. Both acquired companies are part of the instruments group under the Electronics and Communications segment. Their results are included in our consolidated financial statements since their respective dates of acquisition.

      Our four business segments and their respective contributions to our total sales in 2002, 2001 and 2000 are summarized in the following table:

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      Teledyne Technologies was organized as a Delaware corporation on August 23, 1999. Teledyne Technologies is comprised of certain businesses of the former Aerospace and Electronics segment of Allegheny Technologies Incorporated. On November 29, 1999, we spun off from ATI after a strategic review concluded that our businesses would be able to grow faster and that we would be a stronger competitor as a separate company. Our origin can be traced to Teledyne, Inc., founded in 1960 by Dr. Henry Singleton.

      Our principal executive offices are located at 12333 West Olympic Boulevard, Los Angeles, California 90064-1021. Our telephone number is (310) 893-1600.

Available Information

      Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K, and any amendments to these reports, are available on our Internet website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. Our website address is www.teledyne.com. You will be responsible for any costs normally associated with electronic access, such as usage and telephone charges. You will also be responsible for any costs associated with the printing of such materials off the Internet. Alternatively, if you would like a paper copy of any such report (without exhibits), please write to John T. Kuelbs, Senior Vice President, General Counsel and Secretary, Teledyne Technologies Incorporated, 12333 West Olympic Blvd., Los Angeles, California 90064, and a copy of such requested report will be provided to you, free of charge.

Strategy

      Our strategy is to primarily focus on our electronics, instruments and government systems engineering businesses. We continually evaluate our product lines to ensure that they are aligned with our strategy. We also continue to explore strategic alternatives for our Aerospace and Engines Components segment, including possible divestiture of one or more product lines. These actions help us to direct capital and management focus to opportunities that best utilize our engineering resources and technical expertise.

      Specific elements of our strategy include:

      Leverage Niche Market Leadership. We have developed strong, proprietary technical capabilities that have enabled us to achieve leading market positions in many of our niche markets, including those for trace gas analyzers, data acquisition avionics, high frequency electromechanical relays, traveling wave tubes, medical microelectronics, unique government systems engineering and testing services, piston engines for general aviation and small military turbine engines. We intend to continue to leverage our leadership position by accelerating the introduction of new products in our core niche markets, expanding into related markets and increasing our value-added service offerings. For example, our military microelectronic modules are used for optical communications on the F-22 Raptor aircraft and we have been selected to provide similar products for the new Joint Strike Fighter aircraft. In addition, we have expanded our commercial avionics business into new military markets. We were recently awarded a contract for our Communications Management Unit software for use on the U.S. Air Force’s C-130 Avionics Modernization Program, as well as for potential new Boeing 767 Tanker Transport aircraft. Within our Systems Engineering Solutions segment, we enhanced our position in a number of our long-term government programs in 2002, while also expanding into new markets. For example, in 2002, we entered our 41st year of uninterrupted service to the nation’s space and missile defense agencies, while increasing our customer base with new contract awards from the U.S. Air Force, the Federal Aviation Administration and the U.S. Coast Guard.

      Enhance Manufacturing Efficiency. We intend to continue to enhance our manufacturing capability to both reduce the cost of our products and enable us to react quickly to changes in market demand. We have further expanded our manufacturing operations in Mexico to reduce the cost of our products and to expand our capabilities in contract manufacturing of sophisticated electronic modules that are typically produced in low to moderate volumes. We improved our lean work cells in several Electronics and Communications product lines, such as military and medical microelectronics and electromechanical

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      Acquire Complementary Businesses. We intend to grow in market segments where we have a strong competitive position, both by developing new products and services and by acquiring highly complementary businesses. We are focused on acquiring companies or product lines that might add new products to existing markets, expand sales into related growth markets, increase service revenues or enhance manufacturing or distribution capabilities. Our goal is to leverage both operational and market synergies so that acquisitions result in improvements in earnings. For example, during the third quarter of 2002 we acquired Monitor Labs Incorporated, a supplier of environmental monitoring instrumentation for the detection, measurement and reporting of air pollutants. The acquisition of Monitor Labs Incorporated, coupled with our earlier 2001 acquisition of Advanced Pollution Instrumentation, Inc., greatly expanded our presence in the air quality monitoring segment of the environmental instrumentation market.

Our Business Segments

     Electronics and Communications

      Our Electronics and Communications segment, sometimes referred to as Teledyne Electronic Technologies, provides a wide range of specialized electronic systems, instruments, components and services that address niche market applications in commercial aerospace, communications, defense, industrial and medical markets.

          Instrumentation Products

      During 2001, we formed Teledyne Instruments, a group of business units drawn from our Electronics and Communications segment and our Systems Engineering Solutions segment, to focus on monitoring and process control instrumentation. In the fourth quarter of 2001, we acquired Advanced Pollution Instrumentation, Inc., a manufacturer of a broad line of instruments for monitoring low levels of gases such as sulfur dioxide, carbon monoxide and ozone. In September 2002, we acquired Monitor Labs Incorporated, a supplier of environmental monitoring instrumentation for the detection, measurement and reporting of air pollutants.

      Gas Analysis. Teledyne Analytical Instruments was a pioneer in the development of precision oxygen analyzers and now offers a broad range of products with various sensitivities for petrochemical, semiconductor manufacturing and other industrial applications. We also manufacture analyzers for a variety of other gases for such market applications and, with the additions of Teledyne Advanced Pollution Instrumentation, Inc., and Teledyne Monitor Labs, Inc., offer a wider range of products for environmental monitoring.

      Vacuum and Flow Measurement. Teledyne Hastings Instruments manufactures a broad line of instruments for precise measurement and control of vacuum and gas flows. Our instruments are used in such varied applications as semiconductor manufacturing, refrigeration, metallurgy and food processing.

      Geophysical Instruments. We manufacture geophysical streamer cables, hydrophones and specialty products used in offshore drilling applications to locate oil reserves beneath the ocean floor. We have been adapting this technology for the military market, where these products can be used to detect submarines and torpedoes.

      Test Services. We manufacture torque sensors and provide technical services for such critical applications as monitoring valves in nuclear power plants.

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          Data Acquisition and Communication Products

      Our aircraft information management solutions are designed to increase the safety and efficiency of airline transportation. With over 200 commercial airline customers, Teledyne Controls is a leading supplier of digital flight data acquisition systems for the commercial airline industry. These systems acquire data for use by the aircraft’s flight data recorder, and record additional data for the airline’s operation, such as performance and engine condition monitoring. We have provided these systems to our airline customers for over one-half of Boeing aircraft currently in production. We have been increasingly providing our systems to Airbus aircraft, including the single-aisle A319/320/321 and long-range A340/500-600. With many U.S. commercial airlines experiencing significant losses, including bankruptcy, we have increased our focus on providing our systems to non-U.S. airlines, such as Ryan Air in Europe.

      Our newest digital flight data acquisition units have some of the most advanced features in the industry. These systems conform to the required expansion of data recording capabilities, which were mandated by the FAA in 1997. At that time, the FAA increased the number of mandatory parameters to be monitored from the 17 then required to 88 by 2002.

      Our Wireless GroundLink^TM product, used on Boeing 737 series and other aircraft, automates the transfer of in-flight data recorded by our data acquisition systems to an airline’s operations center. As soon as an aircraft lands, recorded flight data is transmitted to the airline’s operations center over the cellular telephone network and through the Internet. Our Flight Data Replay and Analysis System can process the data into useful formats that can be used by the airline to schedule maintenance services and implement proper crew training and safety procedures.

      The market for data acquisition systems has been extended to business and commuter aircraft as these aircraft have begun to mirror air transport aircraft in terms of data gathering and aircraft monitoring. We have obtained FAA certification for our mini flight data acquisition unit on multiple platforms. We are also one of the largest suppliers of air-to-ground telephony and data transmission products to the business and commuter aircraft market. Our SmartCabin Office^TM system employs satellite links to provide integrated voice and high-speed data communications for business aircraft passengers.

      Although our data acquisition, recording and communications products are primarily used on commercial aircraft, we have been pursuing military applications. The U. S. Air Force selected our Optical Quick Access Recorder for use on its C-17 Globemaster III military transport aircraft. Teledyne Controls was also awarded a subcontract under a U. S. Air Force program to embed its communications software into aircraft flight management systems for the C-130 Transport and B-767 Tanker aircraft.

          Electronic Components

      Traveling Wave Tubes. Our helix traveling wave tubes are used to provide broadband power amplification of microwave signals. Military applications include radar, electronic warfare and satellite communication. Our traveling wave tubes have enabled the U. S. Army to modularize the transmitters used in the Firefinder and Sentinel battlefield radars to improve performance and reliability. Commercial applications include electromagnetic compatibility test equipment and satellite communication terminals for mobile newsgathering. Teledyne Technologies was the first company to offer multi-band tubes that permit a satellite communication earth station to quickly switch from one satellite system to another without the need for transmitter replacement.

      Microwave Amplifiers and Subsystems. We supply solid-state microwave power amplifiers used in satellite uplink terminals for corporate networking and to provide two-way Internet access via satellite for both consumer and commercial customers. Our line of integrated transceiver modules provides point-to-point connectivity in cellular telephone infrastructure. We have introduced transceivers covering new frequency bands to broaden our market opportunities.

      Relays. Teledyne Relays supplies electromechanical relays, solid-state power relays and other switching devices to industrial, commercial, aerospace and military markets. Applications include microwave and wireless communication infrastructure, RF and general broad band test equipment, test

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      Connectors. We manufacture custom surface mount connectors for applications in computer disk drives and consumer medical electronic devices. Teledyne Interconnect Devices now manufactures a high-density microprocessor connector for high-end workstations and network servers.

      Rigid-Flex Printed Circuit Boards. Our patented rigid-flex printed circuit boards permit our customers to assemble reliable high-density electronic modules that are used in a variety of military and commercial aerospace applications. Our new VME-Flex^TM products have been designed into two major defense programs.

      Sequencers. Teledyne Electronic Safety Products continues to provide microprocessor controlled aircraft ejection seat sequencers and related support elements to military aircraft programs, including the F/A-18 E-F and F/A-22. A newer generation sequencer is under development for the F-35 Joint Strike Fighter aircraft.

          Advanced Manufacturing Services

      Electronics Equipment and Printed Circuit Card Assembly. We serve the market for high-mix, low-volume manufacturing of electronic products principally through facilities in Tennessee and Mexico. The products we manufacture include sophisticated military electronics equipment. We also manufacture, principally for one customer, key subsystems in medical equipment such as magnetic resonance imaging (MRI) and x-ray systems.

      Microelectronic Modules. We develop and manufacture custom microelectronic modules that provide both high reliability and extremely dense packaging for military, implantable medical device and wireless communication products. Our microelectronic modules are used for optical communications on the F-22 Raptor aircraft and we have been selected to provide similar products for the new Joint Strike Fighter aircraft. Examples of applications in the medical field include cardiac pacemakers, defibrillators and cochlear implant hearing aids.

      Optoelectronic Modules. We provide turnkey manufacturing services for custom optoelectronic modules used in high data rate communications. Our capabilities include submicron alignment of single mode fiber, environmental and life certification, and test of transmitter and receiver capabilities at data rates up to 40 gigabits per second.

     Systems Engineering Solutions

      Our Systems Engineering Solutions segment, principally through Teledyne Brown Engineering, Inc., applies the skills of its extensive staff of engineers and scientists to solve the increasingly complex problems of our government defense and aerospace customers.

          Defense

      Teledyne Brown Engineering is a well-recognized full-service missile defense contractor with over 40 years’ experience in missile defense systems integration. Our diverse customer base in this field includes the U.S. Army Aviation and Missile Command (“AMCOM”), the U.S. Army’s Space and Missile Defense Command (“SMDC”), the Missile Defense Agency (“MDA”) and major prime defense contractors.

      Our Technologies Group plays significant roles in diverse national missile defense areas, which range from targets and countermeasures, systems engineering, modeling and simulation, to test and evaluation, as well as other related areas.

      Our engineering and technological services include systems design, development, integration and testing, with specialization in real-time distributed systems. Our expertise is evidenced by wide customer usage of our capabilities in systems such as our Missile Defense System Exerciser and our ground-based

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      We have developed and maintain a variety of world-class modeling and simulation tools, ranging from architecture/ force structure to components-requirement-focused tools. In 2002, we introduced the 43rd version of our Extended Air Defense Simulation program (“EADSIM”). The EADSIM software provides complex multi-force simulations of air, missile and space warfare. It is used by almost 400 agencies in 10 foreign countries for defense analysis training and operational planning.

      We continue to diversify our customer base. The U.S. Air Force awarded us a contract in its Task Force Enduring Look program, designed to shape the way the U.S. Air Force equips its forces and accomplishes its strategic and tactical tasks. During 2002, the Federal Aviation Administration included us on its nationally qualified vendor list for engineering, production, installation and maintenance services, and awarded us a basic ordering agreement. Subsequently, the FAA awarded us an order in support of its Automated Surface Observation Systems, which provides real-time weather and other data for pilots and traffic air controllers. We also became a subcontractor on the U.S. Coast Guard’s upgrading Deepwater program and will provide verification, validation and accreditation services for the simulation software used in test and evaluation.

          Aerospace

      We have been active in U.S. space programs for almost 50 years and continue to be a significant contributor to NASA programs. Our Systems Group plays a key role in the International Space Station (ISS), one of the most complex scientific endeavors ever undertaken, and has had roles in the Space Shuttle program. We have provided 24-hour-per-day service for the payload operation cadre for the ISS Payload Operations and Integration Center, located at NASA’s Marshall Space Flight Center. We have also manufactured more than 50 flight-qualified hardware items for use on cargo integration on the ISS.

      In June 2002, NASA selected us as the prime contractor for its Microgravity Systems Development and Operations Support Contract. Our work includes microgravity science, hardware and software development, integration, operation and maintenance of science facilities and payloads on the ISS. We provide technical and engineering support to microgravity science investigators, and provide management and administrative support to the Material Science and Applications Department of the Marshall Center’s Science Directorate.

      In July 2002, we received a one-year contract extension from NASA’s Marshall Space Flight Center for work performed under its Propellants, Pressurants, and Calibration contract, pending the next competitive award period in 2003. Under this contract, we furnish management, personnel, equipment and materials to operate and maintain the propellant and pressurant generating systems, storage and distribution systems, including work on the Space Shuttle and ISS, as well as management and operation of the calibration facilities at the Marshall Space Flight Center.

          Environmental Systems

      We support the U.S. Government’s efforts to clean up dangerous materials and waste. We operate the Rapid Response System, a mobile chemical waste treatment system developed by the U.S. Army. This system is used to process chemical agents for disposal. These chemical agents had been used in the past to

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      We operate a Department of Energy-certified radiological analysis services laboratory in Knoxville, Tennessee. This laboratory has received certification from the National Environmental Laboratory Accreditation Program in 13 states, including Utah where the Department of Energy maintains its primary waste depository. With its Nuclear Utilities Procurement Issues Certification, the laboratory can serve commercial utilities.

      In the Homeland Security arena, we offer to police departments and other first responders our WaterSabre^TM mobile disaster response system to investigate and neutralize suspected explosive devices. This system is a remotely operated, ultra-high-pressure waterjet cutting system, mounted on a hazardous duty robot, and integrated with an emergency response vehicle. Cameras mounted on the robot provide a view of the cutting process and suspected devices to the operator in the vehicle, which can be located up to approximately 1,300 feet away.

          Teledyne Solutions, Inc.

      Through Teledyne Solutions, Inc., we are the primary Ballistic Missile Defense (BMD) systems engineering and technical assistance contractor for the U.S. Army. Teledyne Solutions has responsibility for the Systems Engineering and Technical Assistance Contract (SETAC) in support of the U.S. Army Space and Missile Defense Command. Through the SETAC, Teledyne Solutions also directly supports the Program Executive Office for Air and Missile Defense and the Ground-Based Midcourse Defense Joint Program Office.

     Aerospace Engines and Components

      Our Aerospace Engines and Components segment focuses on the design, development and manufacture of piston engines, turbine engines, electronic engine controls and aviation batteries.

          Piston Engines

      Principally through Teledyne Continental Motors, Inc., we design, develop and manufacture piston engines and ignition systems for major general aviation airframe manufacturers and provide spare parts and engine rebuilding services. We are one of two primary worldwide original equipment producers of piston engines for the general aviation marketplace.

      Our product lines include engines powering the Raytheon Beech Bonanza and Baron aircraft, the Mooney Aircraft line of advanced single engine aircraft, and the popular New Piper Seneca V twin-engine aircraft. In addition to these long-standing products, our engines power new high-speed composite aircraft that recently entered production, including the Cirrus SR-20 and SR-22 and the Diamond C1. Our engines will power the Lancair Columbia 300, the all-electric Columbia 350 and the turbocharged Columbia 400. In 2002, the U.S. Air Force Academy selected the Continental-powered Diamond C1 aircraft as its primary flight trainer aircraft. On March 3, 2003, we announced that Teledyne Continental Motors, Inc. and Honda Motor Co., Ltd. are beginning a joint feasibility study for a next-generation piston aviation engine currently in development by Honda.

      In addition to the sales of new aircraft engines to aircraft producers, we actively support the aircraft engine aftermarket. Piston aircraft engines are produced with a finite utilization life generally expressed as time between overhauls. Our after-market support includes the building and rebuilding of nearly 3,000 of these units annually with our Gold Medallion® Rebuilt Engine. We provide a full complement of spare parts such as cylinders, crankcases, fuel systems, crankshafts, camshafts and ignition products. In addition, through Teledyne Mattituck Services, Inc., located in Long Island, New York, we serve as an aftermarket supplier and piston engine overhauler to the general aviation marketplace. We continue to believe that

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      Through Aerosance, Inc., we developed the first production full authority digital electronic controls for piston aircraft engines. These controls, known as PowerLink^TM FADEC (Full Authority Digital Electronic Control), are designed to automate many functions that currently require manual control, such as fuel flow and power management. This system also saves fuel as a result of improved engine management. We continue the development of FADEC-equipped engines targeted at the most popular models of four and six cylinder piston aircraft engines in use throughout the world. When general economic conditions improve, we believe that these control systems will become standard equipment on new aircraft and will be retrofitted on higher-end, piston engine general aviation aircraft.

      In addition, our Gill^TM line of lead acid batteries is widely recognized as the premier power source for general aviation. We are now working to have our batteries included in business jet applications. Teledyne Battery Products, in conjunction with Teledyne Controls, jointly developed an onboard charging and cockpit display kit that permits existing NiCad battery systems to be replaced with Gill^TM valve-regulated lead acid batteries.

          Turbine Engines

      We design, develop and manufacture small turbine engines for missiles and unmanned aerial vehicles. We also produce engines that power military trainer aircraft.

      Our J402 engine powers the HARPOON missile system. Derivatives of this engine power the Standoff Land Attack Missile and the Standoff Land Attack Missile-Expanded Response. Lockheed Martin Corporation selected a derivative of the J402 engine to power the Joint Air-to-Surface Standoff Missile (JASSM). We are the sole source provider of engines for the JASSM system. The JASSM production requirement is currently estimated at 3,700 units.

      Another of our engines provides the turbine power for the Improved Tactical Air Launched Decoy (ITALD) being built for the U.S. Navy. The ITALD system enhances combat aircraft survivability by both serving as a decoy and identifying enemy radar sources. This low-cost turbine engine is the first of a family of lower-thrust engines to enter production.

      We are the sole source for major spare parts for the engine for the T-37 aircraft, the primary jet trainer for the U.S. Air Force. This engine has been in service for over 40 years and is expected to continue to power the T-37 well into this decade.

     Energy Systems

      Our Energy Systems segment, through Teledyne Energy Systems, Inc., provides hydrogen gas generators and thermoelectric and fuel-cell-based power sources. Teledyne Energy Systems, Inc., a majority owned subsidiary of TDY, was formed in 2001 by combining Teledyne Brown Engineering’s Energy Systems business unit with assets and intellectual properties of Florida-based Energy Partners, Inc.

      Our energy systems activities include a 50-year history of supplying high reliability energy conversion devices and gas generation products based on thermoelectric and electrochemical processes. We provided power systems for several successful deep-space missions such as the Viking 1 and Viking 2 Mars Landers and the Pioneer 10 and 11 missions to Jupiter and Saturn. The Pioneer 10 power system is still operating 30 years after its launch and is now more than 7.5 billion miles from earth. Earthbound applications have included systems for high reliability unattended power generation in remote installations such as gas pipeline control stations and electrolytic high-purity hydrogen and oxygen gas generation used in many industrial processes.

      The transaction with Energy Partners, Inc. added its capabilities in Proton Exchange Membrane (PEM) fuel cell technology to our existing capabilities in electrochemical conversion processes. Fuel cells produce electrical energy by direct electrochemical conversion of hydrogen and oxygen, without moving

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      We also manufacture hydrogen/oxygen gas generators that utilize the principle of electrolysis to convert water into high purity hydrogen gas at useable pressures. Our Teledyne Titan^TM gas generators are used worldwide in electrical power generation plants, semiconductor manufacture, optical fiber production, chemical processing and other industrial processes. In 2002, we delivered our first completely pre-assembled, enclosed hydrogen generation/compression system known as the Teledyne H₂Oasis^TM. This turnkey plant, provided in a fully equipped transportable building, is designed to meet the near-term needs of industrial customers and provides a basis for responding to the gradually increasing demand for hydrogen refueling equipment.

      We have a line of fuel cell test stations designed to provide a completely integrated system for fuel cell testing for the PEM fuel cell development market. At present they are used for testing fuel cell components and single cells, but we have expanded this product line to provide systems capable of testing multi-cell stacks rated from watts to kilowatts.

      We continue to seek applications for high reliability, long endurance power systems for extreme environment applications. We have developed an advanced PEM fuel cell power plant for NASA’s Second Generation Reusable Launch Vehicle that is expected to replace the existing Space Shuttle fleet.

Customers

      We have hundreds of customers in the electronics, communications, aerospace and defense industries. No commercial customer accounted for more than 10% of our total sales during 2002, 2001 or 2000.

      Approximately 46%, 45% and 44% of our total sales for 2002, 2001 and 2000, respectively, were derived from contracts with agencies of, and prime contractors to, the U.S. Government. Our principal U.S. Government customer is the U.S. Department of Defense. In 2002, 2001 and 2000, our largest program with the U.S. Government, The Boeing Company — Ground-based Midcourse Defense contract, represented 7.5%, 7.4% and 6.6% of total sales, respectively. Set forth below are sales by our segments to agencies and prime contractors to the U.S. Government for the periods presented:

U.S. Government Sales

      Our total backlog of confirmed orders was approximately $324.1 million at December 29, 2002, $300.8 million at December 30, 2001 and $339.2 million at December 31, 2000.

Sales and Marketing

      Our sales and marketing approach varies by segment and products within our segments. A shared fundamental tenet is the commitment to work closely with our customers to understand their needs, with an aim to secure preferred supplier and longer-term relationships.

      Our business segments use a combination of internal sales forces, distributors and commissioned sales representatives to market and sell our products and services. Products are also advertised in appropriate trade journals and by means of various Internet web sites. To promote our products and other capabilities,

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      Principally through Teledyne Technologies International Corp., the Company has established branch offices in foreign countries to facilitate international sales for various businesses.

Competition

      We believe that technological capabilities and innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we compete generally. Although we have certain advantages that we believe help us compete in our markets effectively, each of our markets is highly competitive. Our businesses vigorously compete on the basis of quality, product performance and reliability, technical expertise, price and service. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources than we do.

Research and Development

      Our research and development efforts primarily involve engineering and design relating to improving product lines and developing new products and technologies in the same or related fields. We spent a total of $196.8 million, $210.7 million and $247.4 million on research and development and bid and proposal costs for 2002, 2001 and 2000, respectively. Customer-funded research and development, most of which was attributable to work under contracts with the U.S. Government, represented approximately 87%, 85% and 87% of total research and development costs for 2002, 2001 and 2000, respectively.

      In 2002, approximately 64% of the $26.2 million in Company-funded research and development and bid and proposal costs were incurred in our electronics and communications businesses. We expect the level of Company-funded research and development and bid and proposal costs to be approximately $29.2 million in 2003.

Intellectual Property

      While we own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights, which, in the aggregate, are of material importance to our business, our management believes that our business as a whole is not materially dependent upon any one intellectual property or related group of such properties. We own several hundred active patents and are licensed to use certain patents, technology and other intellectual property rights owned and controlled by others. Similarly, other companies are licensed to use certain patents, technology and other intellectual property rights owned and controlled by us.

      Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the expiration or termination of these patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition.

      In connection with our spin-off in 1999, an affiliate of ATI granted us an exclusive license to use the “Teledyne” name and related logos, symbols and marks in connection with our operations. The annual fee is $100,000 for this license and on November 24, 2004, we have an option to purchase all rights and interests in the Teledyne marks for $412,000.

Employees

      Our total current workforce consists of approximately 5,300 employees. The International Union of United Automobile, Aerospace and Agricultural Implement Workers of America represents approximately 20 of our employees in Toledo, Ohio under a collective bargaining agreement that expired by its terms on

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Executive Management

      TDY’s executive management includes:

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      Dr. Mehrabian has an Amended and Restated Employment Agreement with Teledyne Technologies, which provides that we will employ him as the Chairman, President and Chief Executive Officer. The agreement terminates on December 31 of each year, but will be extended annually unless either party gives the other written notice prior to October 31 of the year of such term that it will not be extended. Dr. Mehrabian has a base salary of $590,000 for 2003. The agreement provides that Dr. Mehrabian is entitled to participate in TDY’s annual incentive bonus plan and other executive compensation and benefit programs. The agreement provides Dr. Mehrabian with a non-qualified pension arrangement, under which Teledyne Technologies will pay him following his retirement, as payments supplemental to any accrued pension under our qualified pension plan, an amount equal to 50% of his base compensation as in effect at retirement. The number of years for which such annual amount shall be paid will be equal to the number of years of his service to TDY (including service to ATI), but not more than 10 years.

      Fourteen current members of management have entered into Change in Control Severance Agreements with Teledyne Technologies. The agreements have a three-year, automatically renewing term. Under the agreements, the executive is entitled to severance benefits if (1) there is a change in control of TDY and (2) within three months before or 24 months after the change in control, either we terminate the executive’s employment for reasons other than for cause or the executive terminates employment for good reason. “Severance benefits” consist of:

	•	A cash payment equal to three times (in the case of Dr. Mehrabian and Messrs. Naglieri, Kuelbs and Link and one other executive) or two times (in the case of Mr. Schnittjer and eight other executives) the sum of (i) the executive’s highest annual base salary within the year preceding the change in control and (ii) the Annual Incentive Plan (“AIP”) bonus target for the year in which the change in control occurs or the year immediately preceding the change in control, whichever is higher.

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	•	A cash payment for the current Annual Incentive Plan bonus based on the fraction of the year worked times the Annual Incentive Plan target objectives at 120 percent (with payment of the prior year bonus if not yet paid).
	•	Payment in cash for unpaid Performance Share Plan awards, assuming applicable goals are met at 120 percent of performance.
	•	Continued equivalent health and welfare (e.g., medical, dental, vision, life insurance and disability) benefits for a period of up to 36 months after termination (with the executive bearing any portion of the cost the executive bore prior to the change in control); provided, however, such benefits would be discontinued to the extent the executive receives similar benefits from a subsequent employer.
	•	Immediate vesting of all stock options, with options being exercisable for the full remaining term.
	•	Removal of restrictions on restricted stock issued by us under ATI’s Stock Acquisition and Retention Program and our Restricted Stock Award Programs.
	•	Full vesting under our pension plans (within legal parameters).
	•	Up to $25,000 reimbursement for actual professional outplacement services.

Risk Factors; Cautionary Statement as to Forward-Looking Statements

      The following text highlights various risks and uncertainties associated with Teledyne Technologies. These factors could materially affect “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that we may from time to time make, including forward-looking statements contained in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K and in TDY’s 2002 Annual Report to Stockholders.

United States’ and global responses to the Middle East conflict, terrorism and perceived nuclear threats increase uncertainties with respect to many of our businesses and may adversely affect the Company’s business and results of operations.

      United States’ and global responses to the Middle East conflict, terrorism and perceived nuclear threats increase uncertainties with respect to U.S. and other business and financial markets. Several factors associated, directly or indirectly, with the Middle East conflict, terrorism and perceived nuclear threats and responses, may adversely affect the Company.

      While some of our businesses that provide products or services to the U.S. Government experienced greater demand for their products and services as a result of increased U.S. Government defense spending, various responses could realign government programs and affect the composition, funding or timing of our government programs. Government spending could shift to defense programs, including Homeland Security, in which we do not participate or do not have current capabilities and curtail less pressing non-defense programs in which we do participate, including Department of Energy or NASA programs.

      The effect of the decline in air travel on the financial condition of many of our commercial airline and aircraft manufacturer customers could adversely affect our Electronics and Communications segment. A war in the Middle East could adversely affect our non-U.S. commercial airline and aircraft manufacturer customers who have not suffered deteriorating financial performance to the same extent as our U.S. commercial airline and aircraft manufacturer customers. Deterioration of financial performance of airlines could result in a further reduction of discretionary spending for upgrades of avionics and in-flight communications equipment, which would adversely affect our Electronics and Communications segment.

      As happened after the September 11th terrorist attacks, reinstatement of flight restrictions would negatively impact the market for general aviation aircraft piston engines and components and would adversely affect our Aerospace Engines and Components segment. Potential reductions in the need for

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      The Company is increasingly experiencing adverse effects of September 11th, which could increase in the event of additional terrorist attacks or a Middle East war. For example, the September 11th tragedy has had significant impacts on the insurance markets greatly increasing insurance costs. The Company’s existing aircraft product liability insurance policy expires in May 2003, and the Company is currently evaluating options relating to this insurance coverage. In addition, the resulting downturn in the stock market, exacerbated by various public company issues, has negatively affected the value of the Company’s pension assets. Absent improved market conditions, the Company will be required to make cash contributions to its pension plan in 2004. Worsening market conditions could increase the required contribution.

We may be unsuccessful in our efforts to increase our participation in certain new markets.

      We intend to both adapt our existing technology and develop new products to expand into new market segments. For example, we are developing new fuel cell related technologies. The market for fuel cell technologies is not well established and there are a number of companies that have announced intentions to develop and market fuel cell products. Some of these companies have greater financial and/or technological resources than we do.

      We are also developing new electronic products, including high-density microprocessor connectors and microwave modules for radios used in cellular communications infrastructure, which are intended to access markets in which Teledyne does not currently participate. We may be unsuccessful in accessing these markets if our products do not meet our customers’ requirements, due to either changes in technology and industry standards or because of actions taken by our competitors.

      In 2000, we announced our intention to capitalize on our existing technology and experience to penetrate communications markets, particularly fiber optic communications components and wireless and satellite communications equipment. The downturn in the semiconductor, telecommunications and electronic manufacturing services markets, coupled with deteriorating general economic conditions, negatively impacted our optoelectronics growth initiative and our short-cycle electronics businesses, such as electronic relays used in semiconductor test equipment and communications applications.

Our dependence on revenue from government contracts subjects us to many risks, including the risk that we may not be successful in bidding for future contracts and the risk that U.S. Government funding for these contracts may be diverted to other uses or delayed.

      We perform work on a number of contracts with the Department of Defense and other agencies and departments of the U.S. Government. Sales under contracts with the U.S. Government as a whole, including sales under contracts with the Department of Defense, as prime contract or subcontractor, represented approximately 46% of our total revenue for 2002. Performance under government contracts has certain inherent risks that could have a material effect on our business, results of operations and financial condition.

      Government contracts are conditioned upon the continuing availability of Congressional appropriations. Congress typically appropriates funds for a given program on a fiscal-year basis even though contract performance may take more than one year. As a result, at the beginning of a major program, a contract is typically only partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years.

      While the overall U.S. military budget declined in real dollars from the mid-1980s through the early 1990s, as a result of the September 11th terrorist attacks and given the current Middle East situation, U.S. defense spending has increased and is expected to increase over the next several years. Increased defense spending does not necessarily correlate to increased business for the Company, because not all the programs in which TDY participates or has current capabilities may be earmarked for increased funding.

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      The Company, principally and traditionally through its Systems Engineering Solutions segment, has been a significant contributor to NASA programs. While the centerpiece of our current NASA activities is the International Space Station, as the payload integrator for NASA’s Marshall Space Flight Center, we have had major responsibilities in numerous scientific missions of the Space Shuttle. As a result of the Columbia Space Shuttle tragedy, NASA’s space shuttle programs could be negatively impacted, depending on the duration of the U.S. Government investigation and grounding of shuttle flights.

      Most of our U.S. Government contracts are subject to termination by the U.S. Government either at its convenience or upon the default of the contractor. Termination-for-convenience provisions provide only for the recovery of costs incurred or committed, settlement expenses, and profit on work completed prior to termination. Termination-for-default imposes liability on the contractor for excess costs incurred by the U.S. Government in reprocuring undelivered items from another source.

      There is no guarantee that U.S. Government contracts will be profitable. A number of our U.S. Government prime contracts and subcontracts are fixed price-type contracts (41% in 2002). Under these types of contracts, we bear the inherent risk that actual performance cost may exceed the fixed contract price. This is particularly true where the contract was awarded and the price finalized in advance of final completion of design. We believe that the U.S. Government is increasingly requesting proposals for fixed-price-type contracts.

      Certain fees under some of our U.S. Government contracts are linked to meeting development or testing deadlines. In 2002, certain fees were also dependent on the collective efforts and success of other defense contractors over which we had no control. In any event, if a test is delayed or a target is missed, we may not receive any award or incentive fee related to that particular test or target. In our Systems Engineering Solutions segment, there is no assurance that the level of government award and incentive fees received in 2002 will continue in 2003.

      We, like other government contractors, are subject to various audits, reviews and investigations (including private party “whistleblower” lawsuits) relating to our compliance with federal and state laws. In addition, we have a compliance program designed to surface issues that may lead to voluntary disclosures to the U.S. Government. Generally, claims arising out of these U.S. Government inquiries and voluntary disclosures can be resolved without resorting to litigation. However, should the business unit or division involved be charged with wrongdoing, or should the U.S. Government determine that the unit or division is not a “presently responsible contractor,” that unit or division, and conceivably our company as a whole, could be temporarily suspended or, in the event of a conviction, could be debarred for up to three years from receiving new government contracts or government-approved subcontracts. In addition, we could expend substantial amounts in defending against such charges and in damages, fines and penalties if such charges are proven or result in negotiated settlements. In October 2002, the Company was informed that the U.S. Government had declined to intervene in a lawsuit filed more than four years ago under seal pursuant to the False Claims Act. The Company intends to vigorously defend this continuing civil action against its Electronic Safety Products unit, which continues notwithstanding the U.S. Government’s non-intervention.

A declining stock market and lower interests rates negatively affect the value of our pension assets and could have a material adverse financial effect on us.

      We have a defined benefit pension plan covering substantially all of our employees. At year-end 2002, because of significant declines in the stock market and low interest rates, the value of the pension assets was less than our accumulated pension benefit obligation. The accounting rules applicable to our pension

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      Since the spin-off, we have recorded non-cash pension income, which has significantly declined due to the completion, in 2001, of income amortization associated with the transition assets recorded pursuant to Statement of Financial Accounting Standards No. 87 — “Employers’ Accounting for Pensions”, as well as the continued decline in the value of our pension assets, coupled with reductions in our expected rate of return and discount rate assumptions used for pension plan calculations as described above. We currently expect approximately $7.0 million non-cash pension expense in 2003, compared to non-cash pension income of $2.3 million, $9.5 million and $9.0 million for 2002, 2001 and 2000, respectively. Given our pension plan’s current underfunded status, absent improved market conditions, we will be required to make cash contributions to our pension plan in 2004. Further declines in the stock market and lower rates of return could increase our required contribution. Also, under one of our spin-off agreements, the earliest we will be able to charge pension costs to the U.S. Government under our various government contracts will be November 29, 2004.

      Since the value of our pension assets at year-end 2002 was less than the accumulated pension benefit obligation, the Company recorded a $23.2 million non-cash charge to stockholders’ equity, a long-term intangible asset of $10.4 million and an additional long-term pension liability of $48.8 million. This charge to equity did not affect net income and is recorded net of deferred taxes. The charge will be reversed should the value of the pension assets exceed the accumulated pension benefit obligation as of a future measurement date.

We may be unable to successfully introduce new and enhanced products in a timely and cost-effective manner.

      Our operating results depend in part on our ability to introduce new and enhanced products on a timely basis. Successful product development and introduction depend on numerous factors, including our ability to anticipate customer and market requirements, changes in technology and industry standards, our ability to differentiate our offerings from offerings of our competitors, and market acceptance.

      We may not be able to develop and introduce new or enhanced products in a timely and cost-effective manner or to develop and introduce products that satisfy customer requirements. Our new products also may not achieve market acceptance or correctly anticipate new industry standards and technological changes.

Technological change could cause certain of our products or services to become obsolete or non-competitive.

      The markets for a number of our products and services are generally characterized by rapid technological development, evolving industry standards, changes in customer requirements and new product introductions and enhancements. A faster than anticipated change in one or more of the technologies related to our products or services or in market demand for products or services based on a particular technology could result in faster than anticipated obsolescence of certain of our products or services and could have a material adverse effect on our business, results of operation and financial condition. Currently accepted industry standards are also subject to change, which may contribute to the obsolescence of our products or services.

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We may not have sufficient resources to fund all future research and development and capital expenditures or possible acquisitions.

      In order to remain competitive, we must make substantial investments in research and development to develop new and enhanced products and continuously upgrade our process technology and manufacturing capabilities.

      Although we believe that anticipated cash flows from operations and available borrowings under our $200 million credit facility will be sufficient to satisfy our anticipated working capital, research and development and capital investment needs, we may be unable to fund all of these needs or possible acquisitions. Our ability to raise additional capital will depend on a variety of factors, some of which will not be within our control, including resurgence of the public offering market, investor perceptions of us, our businesses and the industries in which we operate, and general economic conditions. We may be unable to successfully raise additional capital, if needed. Failure to successfully raise needed capital on a timely or cost-effective basis could have a material adverse effect on our business, results of operations and financial condition.

Product liability claims or recalls could have a material adverse effect on our reputation, business, results of operations and financial condition.

      As a manufacturer and distributor of various products, our results of operations are susceptible to adverse publicity regarding the quality or safety of our products. In part, product liability claims challenging the safety of our products may result in a decline in sales for a particular product, which could adversely affect our results of operations. This could be true even if the claims themselves are proven to not be truthful or settled for immaterial amounts.

      While we have general liability and other insurance policies concerning product liabilities, we have self-insured retentions or deductibles under such policies with respect to a portion of these liabilities. For example, our annual self-insured retention for general aviation aircraft liabilities incurred in connection with products manufactured by Teledyne Continental Motors, Inc. is $10.0 million. The September 11th tragedy has significantly impacted the insurance markets, greatly increasing insurance costs. Since our existing aircraft product liability insurance policy expires in May 2003, the Company is currently evaluating options relating to its aircraft product liability insurance coverage, including a greater annual self-insured retention.

      Product recalls and field service actions could also have a material adverse effect on our business, results of operations and financial condition. For example, Teledyne Continental Motors had been engaged in a product recall of piston engine crankshafts whereby the Company recorded a $12 million pretax charge in the second quarter of 2000. In the second quarter of 1999, Teledyne Continental Motors had an unrelated recall of piston engines for which the Company recorded a $3 million pretax charge. Product recalls have the potential for tarnishing a company’s reputation and could have a material adverse effect on the sales of our products. In 2002, we reached a monetary settlement related to the 2000 recall with two of three companies that manufactured and processed allegedly defective steel subsequently made into aircraft engine crankshafts. We failed to win a jury verdict against a third company involved in making the steel. The Company continues to pursue cost recovery through litigation against one other materials supplier as a result of the 2000 product recall program. There is no assurance that the Company will recover any costs or the negative impact on its reputation.

      The gas generators manufactured by Teledyne Energy Systems, Inc. currently contain an asbestos component. While the company is currently examining replacement materials, has placed warning labels on its products and takes care in its handling with employees, there is no assurance that the Company will not face asbestos-related liability claims.

      There has been an insurgence of asbestos-related product liability lawsuits against multiple defendant companies that historically may have manufactured or sold products that had asbestos-containing components. The Company has been named in a few such lawsuits where purported ties, if any, to its

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      Our Teledyne Brown Engineering’s laboratory in Knoxville, Tennessee performs radiological analyses. While the laboratory is certified by the Department of Energy, has other nuclear-related certifications, and has internal quality controls in place, errors and omissions in analyses may occur. We currently have nuclear liability insurance coverage that might apply depending on the circumstances. We also are evaluating the costs-benefits of purchasing errors and omissions insurance coverage, and have sought indemnities from some of our customers. Our insurance coverage or indemnities, however, may not be adequate to cover potential problems associated with faulty radiological analyses.

      Our WaterSabre^TM Fluid Jet Cutting System is expected to be used in anti-terrorism operations. A mishap involving the use of such system in anti-terrorism operations could result in various damages which could exceed available insurance coverages. As a result, we have been seeking indemnification from potential purchasers of this system. These indemnities may be insufficient to offset liabilities that we may incur in connection with this system. Also, since September 11th, many insurers have been revising their insurance coverages to include terrorism exclusions. Several legislative developments, such as the Terrorism Risk Insurance Act of 2002 and the Support Anti-Terrorism by Fostering Effective Technologies Act of 2002, could mitigate these exclusions. The latter Act provides a path for qualification of certain anti-terrorism technologies by the Secretary of Homeland Security and a resulting shield against some product liability suits. We cannot, however, provide any assurance that we will not experience any problems in the future.

      We cannot assure that we will not have additional product liability claims or that we will not recall any additional products.

We may have difficulty obtaining product liability and other insurance coverages, or be subject to increased costs for such coverage.

      The tragic events of September 11th have had a significant impact on the insurance industry, greatly increasing insurance costs. As a manufacturer of a variety of products including aircraft engines used in general aviation aircraft, we have general liability and other insurance policies that provide coverage beyond self-insured retentions or deductibles. We cannot assure that, for 2003 and in future years, insurance carriers will be willing to renew coverage or provide new coverage for product liability, especially as it relates to general aviation. If such insurance is available, we may be required to pay substantially higher prices for coverage and/or increase our levels of self-insured retentions or reserves. The Company is currently evaluating options with respect to its aircraft product liability insurance policy, which expires in May 2003.

      For certain medical electronic components that we manufacture, such as those that go into cochlear implants, we have asked for indemnities from our customers and/or to be included under their insurance policies. We cannot, however, provide any assurance that such indemnities or insurance will offset potential liabilities that we may incur as a result of our manufacture of such components.

      Aside from the uncertainties created by the events of September 11th and subsequent activities, our ability to obtain product liability insurance and the cost for such insurance are affected by our historical claims experience. We cannot assure that, for 2003 and in future years, our ability to obtain insurance, or the cost for such insurance, or the amount of self-insured retentions or reserves will not be negatively impacted by our experience in prior years. Over the last few years, our aircraft product liability claims experience has worsened, due in part to an increasingly litigious environment.

      Additionally, our current directors and officers insurance coverage expires in November 2003.

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Increasing competition could reduce the demand for our products and services.

      Although we believe that we have certain advantages that help us compete in our markets, each of our markets is highly competitive. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources than we do. New or existing competitors may also develop new technologies that could adversely affect the demand for our products and services. Industry consolidation trends, particularly among aerospace and defense contractors, could adversely affect demand for our products and services if prime contractors seek to control more aspects of vertically integrated projects.

We sell products and services to customers in industries that are cyclical and sensitive to changes in general economic activity.

      We derive significant revenues from the commercial aerospace industry. Domestic and international commercial aerospace markets are cyclical in nature. Historic demand for new commercial aircraft has been related to the stability and health of domestic and international economies. Delays or changes in aircraft and component orders could impact the future demand for our products and have a material adverse effect on our business, results of operations and financial condition. The tragic events of September 11th resulted in an accelerated downturn in the market for commercial aircraft and have increased the level of uncertainty regarding future orders for aircraft. A potential Middle East war further increases this uncertainty relating to aircraft orders.

      In addition, we sell products and services to customers in industries that are sensitive to the level of general economic activity and in mature industries that are sensitive to capacity. Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce our profits, or our production levels, or both.

We sell products to customers in industries that may undergo rapid and unpredictable changes.

      We develop and manufacture products for customers in industries that have undergone rapid changes in the past. For example, we manufacture products and provide manufacturing services to companies that serve telecommunications markets. During 2001, many segments of the telecommunications market experienced a dramatic and rapid downturn that resulted in cancellations or deferrals of orders for our products and services. This market segment, or others that we serve, may exhibit rapid changes in the future and may adversely affect our operating results, or our production levels, or both.

We are subject to the risks associated with international sales.

      During 2002, international sales accounted for approximately 16% of our total revenues. We anticipate that future international sales will continue to account for a significant percentage of our revenues. Risks associated with these sales include:

	•	political and economic instability;
	•	export controls;
	•	changes in legal and regulatory requirements;
	•	U.S. and foreign government policy changes affecting the markets for our products;
	•	changes in tax laws and tariffs;
	•	convertibility and transferability of international currencies; and
	•	exchange rate fluctuations

      Any of these factors could have a material adverse effect on our business, results of operations and financial condition. Exchange rate fluctuations may negatively affect the cost of our products to

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Compliance with increasing environmental regulations and the effects of potential environmental liabilities could have a material adverse financial effect on us.

      We, like other industry participants, are subject to various federal, state, local and international environmental laws and regulations. We may be subject to increasingly stringent environmental standards in the future. Future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on our business, results of operations or financial condition.

      In December 2002, we published an updated and streamlined Environmental Management Systems Manual, which is based on the Compliance Focused Environmental Management System developed by the Environmental Protection Agency’s National Enforcement Investigation Center in the late 1990s. During 2003, our facilities will be assessing, developing and implementing their own environmental regulatory compliance and management plans based on this updated Manual. We have also instituted a “review and audit” program to monitor environmental risk and compliance, where each facility will be reviewed and audited by an internal environmental team every three years. While these internal controls are designed to reduce environmental risks, and may be viewed favorably by environmental regulators when evaluating a situation, they do not eliminate potential environmental liabilities.

      Some of our businesses work with highly dangerous substances that require heightened standards of care. For example, as a systems contractor for the U.S. Army’s Program Manager for Non-Stockpile Chemical Materiel, we conduct research, development, manufacturing, test and evaluation and site operations related to the safe and environmentally protective disposal of small caches of chemical munitions and materiel located in over 30 states and territories. The destruction of chemical weapons is an inherently dangerous activity. Except for a contained fire during a demonstration testing of a process designed to access rockets in a former program, we have not experienced any accidents or other adverse consequences as a result of our participation in weapon destruction programs. We cannot, however, assure that we will not experience any problems in the future. Although the federal government provides certain indemnities to contractors in these programs, these indemnities may be insufficient to offset liabilities that we may incur in connection with our participation in these programs.

      For additional discussion of environmental matters, see the discussion under the caption “Other Matters — Environmental” of “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” and Notes 2 and 15 to Notes to Consolidated Financial Statements.

Our inability to attract and retain key personnel could have a material adverse effect on our future success.

      Our future success depends to a significant extent upon the continued service of our executive officers and other key management and technical personnel and on our ability to continue to attract, retain and motivate qualified personnel. Recruiting and retaining skilled technical personnel is highly competitive. The loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

Acquisitions involve inherent risks that may adversely affect our operating results and financial condition.

      Our growth strategy includes possible acquisitions. Acquisitions involve various inherent risks, such as:

	•	our ability to assess accurately the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates;

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	•	the potential loss of key personnel of an acquired business;
	•	our ability to integrate acquired businesses and to achieve identified financial, operating and other synergies anticipated to result from an acquisition; and
	•	unanticipated changes in business and economic conditions affecting an acquired business.

      In the third quarter of 2002, we acquired Monitor Labs Incorporated. While this company’s products and customer base are complementary to TDY’s existing monitoring and control instruments, there is no assurance that we will achieve all identified financial, operating and distribution synergies.

We may not be able to sell, or exit on acceptable terms, product lines that we determine no longer meet with our growth strategy.

      Consistent with our growth strategy to focus on markets to expand our profitable niche businesses, we continually evaluate our product lines to ensure that they are aligned with our strategy. Our ability to dispose of product lines that may no longer be aligned with our strategy will depend on many factors, including the terms and conditions of any asset purchase and sale agreement, as well as industry, business and economic conditions. We cannot provide any assurance as to when, if or on what terms any non-strategic product lines will be sold. Also, we cannot provide any assurance as to the availability, timing, terms or conditions of alternative courses of action, including closure, if any sale of any non-strategic product line cannot be consummated.

Failure of representations and assumptions underlying the IRS tax ruling could cause the spin-off not to be tax-free to ATI or to ATI’s stockholders and may require us to indemnify ATI.

      While the tax ruling relating to the qualification of the spin-off as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code generally is binding on the IRS, the continuing validity of the tax ruling is subject to certain factual representations and assumptions. While we believe that we have satisfied our principal spin-off requirements by successfully and timely completing our required public offering and using the proceeds of such offering as required and through the passage of time, among other things, if the spin-off were not to qualify as a tax-free distribution within the meaning of Section 355 of the Code, ATI would recognize taxable gain generally equal to the amount by which the fair market value of the TDY Common Stock distributed to ATI’s stockholders exceeded the tax basis in our assets. In addition, the distribution of our Common Stock to each ATI stockholder would generally be treated as taxable in an amount equal to the fair market value of the TDY Common Stock such stockholder receives.

      The Tax Sharing and Indemnification Agreement between ATI and TDY provides that we will be responsible for any taxes imposed on, or other amounts paid by, ATI, its agents and representatives and its stockholders as a result of the failure of the spin-off to qualify as a tax-free distribution within the meaning of Section 355 of the Code if the failure or disqualification is caused by certain post-spin-off actions by or with respect to us (including our subsidiaries) or our stockholders. If any of the taxes or other amounts described above were to become payable by us, the payment could have a material adverse effect on our financial condition, results of operations and cash flow and could exceed our net worth by a substantial amount.

Provisions of our governing documents, applicable law, and our Change in Control Severance Agreements could make an acquisition of Teledyne Technologies more difficult.

      Our Restated Certificate of Incorporation, Amended and Restated Bylaws and Rights Agreement and the General Corporation Law of the State of Delaware contain several provisions that could make the acquisition of control of Teledyne Technologies in a transaction not approved by our board of directors more difficult. We have also entered into Change in Control Severance Agreements with 14 members of our management, which could have an anti-takeover effect.

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The market price of our Common Stock has fluctuated significantly since our spin-off from ATI, and could continue to do so.

      Since the spin-off on November 29, 1999, the market price of our Common Stock has ranged from a low of $7.6875 to a high of $30.5625 per share. At February 28, 2003, our closing stock price was $12.75. Fluctuations in our stock price could continue. Among the factors that could affect our stock price are:

	•	quarterly variations in our operating results;
	•	strategic actions by us or our competitors, such as acquisitions;
	•	adverse business developments, such as the engine recall by Teledyne Continental Motors in 2000;
	•	war in the Middle East or elsewhere;
	•	additional terrorist activities;
	•	increased military or homeland defense activities;
	•	improvements in the semiconductor, telecommunications, commercial aviation and electronic manufacturing services markets;
	•	general market conditions; and
	•	general economic factors unrelated to our performance.

      The stock markets in general, and the markets for high technology companies in particular, have experienced a high degree of volatility not necessarily related to the operating performance of particular companies. We cannot provide assurances as to our stock price.

While the Company believes its control systems are effective, there are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.

      The Company continues to take action to assure compliance with the internal controls, disclosure controls and other requirements of the Sarbanes-Oxley Act of 2002. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls and disclosure controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 2. Properties.

      Our principal facilities as of December 29, 2002 are listed below. Although the facilities vary in terms of age and condition, our management believes that these facilities have generally been well maintained and, except for our Rancho Cordova, California facility, are adequate for current operations. In 2003, the

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      We also own or lease facilities elsewhere in the United States and outside the United States, including Tijuana, Mexico, Gloucester, England and Cumbernauld, Scotland. Our executive offices are currently located at 12333 West Olympic Boulevard, Los Angeles, California 90064-1021.

Item 3. Legal Proceedings.

      From time to time, we become involved in various lawsuits, claims and proceedings related to the conduct of our business. While we cannot predict the outcome of any lawsuits, claims or proceedings, our management does not believe that the disposition of any pending matters is likely to have a material adverse effect on our financial condition or liquidity. The resolution in any reporting period of one or more of these matters, however, could have a material adverse effect on our results of operations for that period.

Item 4. Submission of Matters to a Vote of Security Holders.

      No matters were submitted to a vote of TDY’s stockholders during the fourth quarter of 2002.

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PART II

Price Range of Common Stock and Dividend Policy

      Our Common Stock is listed on the New York Stock Exchange and traded under the symbol “TDY.” The following table sets forth, for the periods indicated, the high and low sale prices for the Common Stock as reported by the New York Stock Exchange.

      On February 28, 2003, the closing sale price of our Common Stock as reported by the New York Stock Exchange was $12.75 per share. As of February 28, 2003, there were approximately 7,830 holders of record of the Common Stock.

      We currently intend to retain any future earnings to fund the development and growth of our business. Therefore, we do not anticipate paying any cash dividends in the foreseeable future. Provisions of our credit agreement limit our ability to pay dividends to amounts exceeding 25% of cumulative net income subsequent to the effective date of the credit agreement. As of December 29, 2002, approximately $17.5 million was available for the payment of dividends under these provisions.

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      The following table presents our summary consolidated financial data. Effective November 29, 1999, Teledyne Technologies was spun off from ATI. Our fiscal year is determined based on a 53/52-week convention and ends on or about December 31. The historical financial information for 1999 and 1998 is not necessarily indicative of the results of operations or financial position that would have occurred if we had been a separate, independent company during the periods presented prior to 2000, nor is it indicative of future performance. This historical financial information does not include pro forma adjustments that reflect estimates of the expenses that we would have incurred had we been operated as an independent company and as capitalized at the time of its spin-off from ATI for each period presented. The historical financial information should be read in conjunction with the discussion under “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Teledyne Technologies Incorporated

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      Teledyne Technologies is a leading provider of sophisticated electronic components, instruments and communications products, including data acquisition and communications equipment for airlines and business aircraft, monitoring and control instruments for industrial and environmental applications and components, and subsystems for wireless and satellite communications. We also provide systems engineering solutions and information technology services for space, defense and industrial applications, and manufacture general aviation and missile engines and components, as well as on-site gas and power generation systems.

      We serve niche market segments where performance, precision and reliability are critical. Our customers include major industrial and communications companies, government agencies, aerospace prime contractors and general aviation companies. We have developed strong core competencies in engineering, software development and manufacturing that we can leverage both to sustain and grow our current niche businesses, and to become an innovator in related higher-growth markets.

      We seek to grow in niche market segments where we have a strong competitive position, both by development of new products and services and by acquiring businesses that are highly complementary to our current product lines. We continually evaluate our product lines to ensure that they are aligned with our strategy. We also continue to explore strategic alternatives for our Aerospace and Engines Components segment, including possible divestiture of one or more product lines. These actions help us to direct capital and management focus to opportunities that best utilize our engineering resources and technical expertise.

      Following a comprehensive review of the Company’s operations, Teledyne Technologies recorded a $26.4 million pretax charge in the second quarter of 2001 for asset impairments, restructuring and other charges and inventory write-downs. As a result Teledyne Technologies exited manufacturing for the following non-core product lines from its Electronics and Communications segment: industrial solid state relays and certain microwave switches and filters. The Company’s process control software and sodium iodide crystals product lines within its Systems Engineering Solutions segment were sold in the second quarter of 2001. Teledyne Technologies also exited certain environmental programs within this same segment.

      In addition, in 2001, we realigned and changed the reporting structure of some of our business units. Our Test Services and Geophysical Instruments business units that were previously part of our Systems Engineering Solutions segment are now part of an expanded instruments group under our Electronics and Communications segment. This realignment also resulted in a new segment, the Energy Systems segment, the results of which had previously been reported under our Systems Engineering Solutions segment. The Energy Systems segment, which provides on-site gas and power generation systems based on proprietary fuel cell, electrolysis and thermoelectric technologies, currently includes the majority-owned entity that was formed in the third quarter of 2001. Accordingly, we have restated our previously reported segment data to reflect this realignment and structure. Total sales and operating profit were not affected by these segment reporting changes.

      In November 2001, we acquired Advanced Pollution Instrumentation, Inc. (API), a designer and manufacturer of advanced air quality monitoring instruments based in San Diego, California. In September 2002, we acquired Monitor Labs Incorporated (Monitor Labs). Monitor Labs is a supplier of environmental monitoring instrumentations for the detection, measurement and reporting of air pollutants with locations in Englewood, Colorado and Gibsonia, Pennsylvania. Both acquired companies are part of the instruments group under the Electronics and Communications segment.

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      Our fiscal year is determined based on a 53/52-week convention and ends on or about December 31. The following is our financial information for 2002, 2001 and 2000 (in millions, except per-share amounts):

      We operate in four business segments: Electronics and Communications; Systems Engineering Solutions; Aerospace Engines and Components; and Energy Systems. The segments’ respective contributions as a percentage of total sales from continuing operations for 2002, 2001 and 2000 are summarized in the following table:

Results of Operations

      We reported 2002 net sales from continuing operations of $772.7 million, compared with net sales from continuing operations of $744.3 million for 2001 and $795.1 million for 2000. Net income was $25.4 million ($0.77 per diluted share) for 2002, compared with $6.6 million ($0.20 per diluted share) for 2001 and $32.3 million ($1.09 per diluted share) for 2000. Net income from continuing operations was $25.4 million ($0.77 per diluted share) for 2002, compared with $6.8 million ($0.21 per diluted share) for 2001 and $31.9 million ($1.08 per diluted share) for 2000.

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      The increase in sales in 2002, compared with 2001, reflected improvement in all four reporting segments. The largest sales growth was in the Electronic and Communications segment which included the sales contributions from Monitor Labs and API, which were acquired in September 2002 and November 2001, respectively.

      The decrease in sales in 2001, compared with 2000, reflected significantly lower sales in the Aerospace Engines and Components segment, as well as slightly lower sales in the Electronics and Communications segment and the Systems Engineering Solutions segment, offset in part by higher sales in the Energy Systems segment.

      As noted above, the Company recorded a $26.4 million pretax charge in the second quarter of 2001. The 2001 charge included plans to exit, within 12 months, manufacturing for the following non-core product lines from its Electronics and Communications segment: industrial solid state relays and certain microwave switches and filters. The Company’s process control software and sodium iodide crystals product lines within its Systems Engineering Solutions segment were sold in the second quarter of 2001. We also exited certain environmental programs within this same segment. Annual sales for these non-core product lines were approximately $10.0 million in 2000. At December 29, 2002, Teledyne Technologies recorded income of $0.1 million following the final resolution of the second quarter 2001 charge.

      Cost of sales as a percentage of net sales for 2002 was lower, compared with 2001, due to the benefit of cost reductions implemented in 2001 and 2002 and not having the inventory write-down in 2002 that was experienced in 2001, recorded in connection with the 2001 second quarter charge. This favorability was partially offset by product mix differences, a less favorable LIFO adjustment and reduced non-cash pension income.

      Cost of sales as a percentage of net sales for 2001 was higher, compared with 2000, due to the effect of lower volume on fixed costs, product mix differences, the impact of a $9.8 million inventory write-down in 2001 and higher investment in growth initiatives of $2.8 million for 2001.

      Selling, general and administrative expenses for 2002 were higher in total dollars than 2001 but lower as a percent of net sales. The increase in expense was driven by higher charges related to aircraft product liability reserves and higher aircraft liability insurance premiums, additional selling, general and administrative expenses for the API acquisition and the Monitor Labs acquisition, partially offset by cost reductions and lower research and development expenditures.

      Selling, general and administrative expenses for 2001 were lower, compared with 2000 both in total dollars and as a percentage of net sales. Selling, general and administrative expenses for 2001 included greater investment in growth initiatives of $2.7 million, compared with 2000. Selling, general and administrative expenses for 2000 include the $12.0 million piston engine product recall reserve, as well as a gain of $1.4 million in our chemical weapons demilitarization business related to additional program funding.

Restructuring, Asset Impairment and Other Charge Information

      As noted above, in the second quarter of 2001, the Company recorded a $26.4 million charge of which $7.4 million was for asset impairments, $8.7 million was for restructuring and other charges, $10.0 million was for inventory write-downs and a $0.3 million pretax charge for discontinued operations.

      The charge also included: restructuring charges for employee termination benefits; the consolidation and downsizing of manufacturing operations; non-cancelable lease expenses; and transaction costs associated with the formation of Teledyne Energy Systems, Inc. Teledyne Technologies reduced its total workforce by approximately 14% during 2001. The Company recorded asset impairment charges for equipment, net of expected sale proceeds, and goodwill related to product lines to be discontinued and the loss on the sale of non-core product lines. A charge was also recorded in cost of sales for the write-off of inventory from discontinued product lines and the write-down of excess inventory resulting from reduced

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      During 2002, the Company completed the efforts related to the 2001 second quarter charge of $26.4 million, recording actual charges of $26.3 million. At year-end 2002, the cumulative restructuring charges were $8.1 million, $0.7 million lower than the 2001 year-end estimate. At year-end 2002, the cumulative charges to cost of sales related to excess and obsolete inventory were $10.4 million, $0.6 million higher than the 2001 year end-estimate, with no change to either the asset impairment charge or the charge for discontinued operations. This resulted in $0.2 million of income in the Electronics and Communications segment in 2002 and an additional cost impact of $0.1 million in the Systems Engineering segment during 2002. In addition there were some changes in income statement classification. Final charges by segment were as follows: $15.4 million in the Electronics and Communication segment; $5.6 million in the Energy Systems segment; $4.5 million in the Systems Engineering Solutions segment; and $0.3 million in the Aerospace Engines and Components segment. The $26.3 million charge also included a $0.2 million restructuring charge for the corporate office and a charge of $0.3 million for discontinued operations. The following table details the components of the 2001 second quarter charge and the final resolution of the changes in estimate at December 29, 2002 and December 30, 2001 (amounts in millions):

      The following table details the original 2001 second quarter charge by segment and the final resolution of the changes in estimate at December 29, 2002 and December 30, 2001 (amounts in millions):

      The 2000 results include a pretax charge of $12.0 million for product recall reserves in the Aerospace Engines and Components segment. The 2000 results also include $1.4 million of pretax charges for cost adjustments in selected product lines in the Systems Engineering Solutions segment and $0.8 million of pretax charges for receivables adjustments in the Energy Systems segment.

      International sales represented approximately 16% of net sales in 2002 and 17% of net sales for 2001 and 2000. Sales under contracts with the U.S. Government were approximately 46% of net sales in 2002, 45% of net sales for 2001 and 44% of net sales for 2000.

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      In 2002, aggregate segment operating profit was $57.3 million, compared with $24.2 million in 2001 and $72.4 million in 2000 and reflects the pretax charges noted above. Included in operating profit was pension income of $2.3 million in 2002, $9.5 million in 2001 and $9.0 million in 2000. Pension expense for 2003 is expected to be approximately $7.0 million. The reduction in net pension income reflects the completion, in 2001, of income amortization associated with the transition assets recorded pursuant to Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 87 — “Employers’ Accounting for Pensions,” as well as the decline in the market value of the Company’s pension assets during 2002, 2001 and 2000.

      Total interest expense on debt was $0.9 million in 2002, $2.1 million in 2001 and $5.4 million in 2000. The decrease in interest expense in 2002, compared with 2001, primarily reflected lower average outstanding debt levels in 2002 as well as lower average interest rates. The decrease in interest expense in 2001, compared with 2000, primarily reflected lower average outstanding debt levels in 2001. Interest income was $0.3 million in 2002, $0.2 million in 2001 and $0.1 million in 2000.

      In 2002, we recorded a $0.5 million charge, in other expense, related to the partial write-down of the Company’s $2.8 million cost-based investment in a private company engaged in manufacturing and development of micro optics and microelectromechanical devices. In 2001, other income reflects a gain of $1.7 million related to sale of the Company’s share of an optical components company. All three fiscal years include sublease rental income and royalty income.

Segments

      The following discussion of our four segments should be read in conjunction with Note 14 to the Notes to Consolidated Financial Statements.

Electronics and Communications

      Our Electronics and Communications segment provides a wide range of specialized electronic systems, instruments, components and services that address niche market applications in commercial aerospace, communications, defense, industrial and medical markets.

     2002 Compared with 2001

      Our Electronics and Communications segment sales were $388.0 million in 2002, compared with sales of $369.7 million in 2001. Operating profit was $35.9 million in 2002, compared with $9.9 million in 2001. Operating profit for 2002 included $0.2 million of income resulting from the final resolution of the previously cited second quarter 2001 charges. Operating profit for 2001 included pretax charges of $15.6 million described below.

      Sales in 2002, compared with 2001, grew in electronic manufacturing services, electronic instruments and defense electronic products. The sales growth in electronic manufacturing services was primarily driven by increased sales from medical and military markets. The sales growth in electronic instruments resulted from the acquisitions of Monitor Labs in September 2002 and API in November 2001, as well as stronger demand for geophysical sensors for the petroleum exploration market. These sales increases were partially offset by continued weakness in the commercial aviation market and the continued weakness in the

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     2001 Compared with 2000

      Our Electronics and Communications segment sales were $369.7 million in 2001, compared with sales of $373.4 million in 2000. Operating profit was $9.9 million in 2001, compared with $39.3 million in 2000. Operating profit for 2001 included pretax charges of $15.6 million described below.

      Sales in 2001, compared with 2000, grew in military and commercial microwave products, microelectronic products (including optoelectronics), business and commuter aircraft communications equipment and geophysical sensors for the petroleum exploration market. This growth was more than offset by weakness in demand for relays used in semiconductor test equipment and communications applications, electronic manufacturing services and other commercial electronic products. Operating profit reflected the impact of sales differences. Operating profit for 2001 reflected $14.8 million of costs associated with optoelectronics and wireless growth initiatives, compared with $9.3 million in 2000. Additionally, 2001 included pretax charges of $15.6 million related to the following actions: $6.7 million of restructuring costs; $3.7 million of asset impairment charges; and $5.2 million to write-off inventory for products to be discontinued and excess inventory.

Systems Engineering Solutions

      Our Systems Engineering Solutions segment, principally through Teledyne Brown Engineering, Inc., offers a wide range of engineering solutions and information services to government defense and aerospace customers.

     2002 Compared with 2001

      Our Systems Engineering Solutions segment sales were $206.7 million in 2002, compared with sales of $200.8 million in 2001. Operating profit was $20.6 million in 2002, compared with $12.1 million in 2001. Operating profit in 2002 included $0.1 million of expense resulting from the final resolution of the previously cited second quarter 2001 charges. Operating profit in 2001 included pretax charges of $4.4 million described below.

      Sales in 2002, compared with 2001, reflected revenue growth in core defense and aerospace programs. This growth was partially offset by reduced work for environmental programs. Operating profit reflects the impact of the sales differences, the receipt of government award and incentive fees based upon collective performance achievements, improved performance on environmental programs and reduced administrative expenses. These operating profit improvements were partially offset by reduced non-cash pension income of $0.7 million.

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     2001 Compared with 2000

      Sales for our Systems Engineering Solutions segment in 2001 were $200.8 million, compared with $212.3 million in 2000. For 2001, operating profit was $12.1 million, compared with $18.2 million for 2000. Operating profit for 2001 included pretax charges of $4.4 million described below.

      The 2001 results, compared with 2000, reflected growth in core defense and aerospace programs. This growth was more than offset by reduced work for environmental programs and sales reductions resulting from the disposition of the process control software and certain environmental product lines. Additionally, results for 2001 included pretax charges of $4.4 million related to the following actions: asset impairment charges of $3.7 million; $0.3 million to write-off inventory for discontinued products and excess inventory; and $0.4 million of restructuring costs. The 2000 results included a gain of approximately $1.4 million in the Company’s chemical weapons demilitarization business related to additional program funding and were negatively impacted by $1.4 million for cost adjustments and a write-down of approximately $0.9 million in the our process control software business.

Aerospace Engines and Components

      Our Aerospace Engines and Components segment, principally through Teledyne Continental Motors, Inc., focuses on the design, development and manufacture of piston engines, turbine engines, electronic engine controls and batteries.

     2002 Compared with 2001

      Our Aerospace Engines and Components segment sales were $162.9 million in 2002, compared with sales of $159.2 million in 2001. Operating profit was $2.7 million in 2002, compared with $8.2 million in 2001.

      Sales in 2002, compared with 2001, reflected revenue growth in OEM piston engines and aftermarket parts and services, partially offset by reduced sales of military turbine engines. Operating profit in 2002 was negatively impacted by the requirement for higher aircraft liability reserves, increased insurance premiums and crankshaft litigation costs (net of settlement awards). Operating profit was also negatively impacted by a less favorable LIFO adjustment due to the fact that the 2002 inventory reduction was not as significant as the 2001 inventory reduction. Furthermore, operating profit was negatively impacted in 2002 by a $1.4 million reduction in non-cash pension income. Operating profit in 2001 included restructuring charges of $0.3 million.

      In 2002, we reached a monetary settlement with two of the three companies that manufactured and processed allegedly defective steel, subsequently made into aircraft engine crankshafts. We failed to win a jury verdict against the third company involved in making the steel. The Company continues to pursue cost recovery through litigation against another materials supplier as a result of the 2000 product recall program.