corresp
September 17, 2010
Securities and Exchange Commission
Division of Corporation Finance
10 F Street NE
Washington, D.C. 20549-7010
Attention: John Cash, Accounting Branch Chief
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Re: |
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Teledyne Technologies Incorporated
Form 10-K for the fiscal year ended January 3, 2010
Filed March 2, 2010
File No. 1-15295 |
Dear Mr. Cash:
Teledyne Technologies Incorporated (the Company) hereby responds to the comment letter
dated September 2, 2010, related to the above-referenced filing, as follows. The
SEC staff comment is repeated for reference, followed by the Companys response.
Form 10-K for the fiscal year ended January 3, 2010
Note 13. Business Segments, page 99
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We note your response to our prior comment one. Please help us better
understand how you determined that your operating segments did not exist at your
lower level. In this regard, please further explain how you determined that
your CODM is your chief executive officer and tell us what consideration you
gave to whether your CODM is a group of individuals that may include your
segment managers. In addition, given that your chief executive officer receives
the financial information of your business units and product lines, it is
unclear to us how you concluded that this information is not used to allocate
resources and assess performance. Please explain further. |
RESPONSE:
In determining our operating segments, we followed the guidance noted in ASC 280-10-50-1
which includes as one of the characteristics of an operating segment that its operating results
are regularly reviewed by the public entitys chief operating decision maker (CODM) to make
decisions about resources to be allocated to the
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September 17, 2010
segment and to assess its performance. We have identified our chief executive officer as
our CODM as further explained below.
The function of the CODM (as noted in ASC 280-10-50-5) is to allocate resources and assess
the performance of the segments of an enterprise. Our business is managed as four reportable
segments: Electronics and Communications (E&C); Engineered Systems; Aerospace Engines and
Components; and Energy and Power Systems. Each segment has one product line with the exception
of the E&C segment which has three product lines. The product lines identified in the E&C
segment represent the three main end-markets where we sell our products; namely, defense
electronics, electronic instrumentation and other commercial electronics.
We believe that the Companys chief executive officer is the CODM (as noted in ASC
280-10-50-5) because he has control and decision making authority over allocating resources and
assessing the performance of these segments. Consistent with the Companys relatively flat
organizational structure, each of the Companys segment managers (also referred to as segment
presidents) reports directly to the chief executive officer; and is charged with developing and
discussing their respective segments plans with the CODM; who ensures the plans are consistent
with the overall business strategy for the Company. The segment presidents (managers) have the
authority to make the strategic, operational and resource allocation decisions within their
segment but not for the other segments or for the Company as a whole. The Company does not
have a chief operating officer or a management committee that directs company activities,
assigns resources or assess performance.
We considered whether other members of management and the Board of Directors were part of
the CODM function as noted in ASC 280-10-50-7. Although the chief executive officer receives
input from the segment presidents (managers) and meets with our Board of Directors, he is
responsible for making the strategic, operational and resource allocation decisions of the
Company.
At the direction of the CODM, each segment president (manager) together with their
business unit personnel executes each segments business strategy. The segment presidents
(managers) cannot approve or direct company resources or capital expenditures for the other
segments. The Companys CODM interacts with the segment president (manager) for the purpose of
making operational or resource allocation decisions concerning the segments.
The CODM reviews the monthly operating results by the four reportable segments and also
holds regular meetings with the segment presidents (managers) to discuss the performance of
their respective segments. The CODM also conducts quarterly business review meetings with each
segment president (manager) and their business unit personnel where performance versus the
operating plan and risks and
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September 17, 2010
opportunities are discussed. The segment president (manager) with assistance from the
various business unit personnel provides an explanation of the segments results. It is the
segment president (manager) that regularly reviews the operating results of each business unit
that comprise the respective reportable segment.
In conclusion, the chief executive officer controls and has decision making authority over
allocation of resources and the performance of the segments, thus is considered the Companys
CODM.
The CODM receives segment financial information on a monthly and quarterly basis. This
segment information includes revenue, income before taxes, cash flow data and operating
metrics. The CODM is focused on assessing performance of the segments and the total company by
comparing revenue, operating income, earnings per share and free cash flow performance versus
the prior period and the operating plan. These comparisons help the CODM assess performance
and assign resources at the segment level. The investment community as well as the Board of
Directors is focused on these metrics and that is why the segment and total company data is
regularly reviewed, analyzed and presented by the CODM. This segment and total company
information becomes the primary data used by our Companys CODM when making internal
presentations about the Companys performance, and is used for investor relations presentations
as well as presentations to our Board of Directors.
Our business units prepare limited monthly financial information. This information
consists of non-GAAP internal financial information for the purposes of comparison to prior
period actual results and to the current business plan as well as to consolidate the Companys
financial results. The Monthly Financial Reports by Business Unit1 package is
prepared by and primarily used by the Finance department as part of the monthly consolidation
of financial results process. The Monthly Financial Reports by Business Unit package contains
from 250 to 300 pages of financial data which includes business unit information as well as
consolidated information by segment used to support our external financial statements for the
Form 10-Q and Form 10-K. While this Monthly Financial Reports by Business Unit package is not
prepared specifically for the CODM, he is on the distribution list. As the Monthly Financial
Reports by Business Unit package is the primary source for historical financial information
related to the consolidation of the Company, it is available to the CODM, as well as other
internal departments within the company, as a reference tool. The CODM uses information
prepared from the top-level worksheets which summarize the segment and total company results as
described in the paragraph above.
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The Monthly Financial Reports by Business
Unit package, which contains the lowest level of actual results detail that is
made available to our CODM, was provided to you in our August 16, 2010
response, pursuant to your request. |
Securities and Exchange Commission
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September 17, 2010
The CODM receives limited, quarterly product line information for the three product lines
identified in the E&C segment which is focused on revenue and related comparisons to disclose
trends within this segment to the investment and analyst community. The product line revenue
disclosed is a compilation of revenue from multiple business units or partial business units.
While this information may assist in understanding the drivers of the Companys performance,
given its limited nature it does not provide the basis upon which to assess performance and
allocate resources. Rather, this limited financial information may identify areas that provide
background data for the quarterly earnings call. The chief executive officer is the primary
speaker on the quarterly earnings call with regard to discussing operational performance.
Segment presidents (managers) do not participate in the call. This monthly financial
information is used by the segment managers at the segment level as a basis for resource
allocation and to compare performance to the operating plan among the four operating segments.
In conclusion, the primary financial information that the CODM uses to allocate resources
and to assess performance is summarized at the segment level; product line or business unit
financial results are not summarized in the same format as the segment information provided to
the CODM. Our segment disclosures in our Form 10-Q and Form 10-Ks are consistent with the
primary financial information that the CODM uses to allocate resources and to assess
performance. While the CODM receives E&C product line data and the Monthly Financial Reports
by Business Unit package, which includes business unit data as well as consolidated segment
data, he is does not use the detailed business unit data or product line data to allocate
resources at the business unit level or to assess performance of individual business units.
In light of the foregoing discussion and after careful review of the relevant accounting
literature, we believe that our segment determinations are appropriate.
If you have any questions regarding this response letter, please contact the undersigned
at (805) 373-4720. Additionally, we are available to discuss our response in a telephone
conversation, at your convenience, if you believe it would be beneficial to discuss further the
contents of our response.
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Sincerely,
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/s/ Susan L. Main
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Susan L. Main |
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Vice President and Controller |
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Securities and Exchange Commission
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September 17, 2010
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cc: |
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F.V. Cahouet Director and Chairman of the Audit Committee, Teledyne Technologies
Incorporated
R. Mehrabian, Chairman, President and Chief Executive Officer Teledyne Technologies
Incorporated
Dale A. Schnittjer, Senior Vice President and Chief Financial Officer
J. T. Kuelbs Executive Vice President, General Counsel and Secretary Teledyne
Technologies Incorporated
Gary Birkenbeuel, Ernst & Young LLP |