Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Allegheny Teledyne Incorporated 35 192K
2: EX-3.2 Amended and Restated Bylaws 15 65K
6: EX-10.21 Executive Deferred Compensation Plan 16 64K
7: EX-10.22 Performance Share Program 12 31K
8: EX-10.23 The Annual Incentive Plan 10 32K
3: EX-10.3 Stock Acquisition and Retention Program 9 42K
4: EX-10.4 Non-Employee Director Stock Compensation Plan 6 29K
5: EX-10.8 Benefit Restoration Plan 13 31K
9: EX-13.1 Excerpt From 1998 Annual Report 57± 278K
10: EX-21.1 Subsidiaries of Registrant 1 7K
11: EX-23.1 Consent of Independent Auditors 1 8K
12: EX-23.2 Consent of Pwc 1 8K
13: EX-27.1 Financial Data Schedule 1 11K
14: EX-99.1 Report of Independent Accountants 1 9K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] 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 1-12001
ALLEGHENY TELEDYNE INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 25-1792394
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 394-2800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class Name of each exchange on which
registered
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Common Stock, $0.10 Par Value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
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. [X]
At March 15, 1999, the Registrant had outstanding 193,696,608 shares of
its Common Stock. The aggregate market value of the Registrant's voting stock
held by non-affiliates at this date was approximately $3.4 billion, based on the
closing price per share of Common Stock on this date of $20.00 as reported on
the New York Stock Exchange. Shares of Common Stock known by the Registrant to
be beneficially owned by directors of the Registrant and officers of the
Registrant subject to the reporting and other requirements of Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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.
Documents Incorporated By Reference
Selected portions of the 1998 Annual Report to Stockholders - Part I, Part II
and Part IV of this Report.
Selected portions of the Proxy Statement for 1999 Annual Meeting of Stockholders
- Part III of this Report. The information included in the Proxy Statement as
required by paragraphs (k) and (l) of Item 402 of Regulation S-K is not
incorporated by reference in this Form 10-K.
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INDEX
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PAGE
NUMBER
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PART I 3
Item 1. Business 3
Item 2. Properties 25
Item 3. Legal Proceedings 29
Item 4. Submission of Matters to a Vote of Security Holders 29
PART II 30
Item 5. Market for Registrant's Common Equity and Related 30
Stockholder Matters
Item 6. Selected Financial Data 30
Item 7. Management's Discussion and Analysis of Financial 30
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures 30
about Market Risk
Item 8. Financial Statements and Supplementary Data 30
Item 9. Changes in and Disagreements with Accountants on 30
Accounting and Financial Disclosure
PART III 30
Item 10. Directors and Executive Officers of the Registrant 30
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and 31
Management
Item 13. Certain Relationships and Related Transactions 31
PART IV 31
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 31
SIGNATURES 32
EXHIBIT INDEX 33
PART I
ITEM 1. BUSINESS
THE COMPANY
Allegheny Teledyne Incorporated is a diversified manufacturing company
serving global markets with specialty metals, aerospace, electronic, industrial
and consumer products. The Company operates in the following four business
segments, which accounted for the following percentages of total revenues from
continuing operations of $3.8 billion for each of the three years ended
December 31, 1998:
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1998 1997 1996
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Specialty Metals 53.7% 56.0% 55.2%
Aerospace and Electronics 26.3% 24.1% 25.6%
Industrial 13.5% 13.3% 13.2%
Consumer 6.5% 6.6% 6.0%
Certain business segment information presented for 1997 and 1996 has been
reclassified to conform with the 1998 presentation. Additional financial
information with respect to the Company's business segments, including their
contributions to operating profit and their identifiable assets, for the three
years ended December 31, 1998, is presented under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations" on pages 21 through 23 of the 1998 Annual Report to
Stockholders (the "1998 Annual Report") and in Note 12 of Notes to Consolidated
Financial Statements on pages 45 through 46 of the 1998 Annual Report and is
incorporated herein by reference.
Allegheny Teledyne Incorporated is a Delaware corporation with its
principal executive offices located at 1000 Six PPG Place, Pittsburgh,
Pennsylvania 15222-5479, telephone number (412) 394-2800. Allegheny Teledyne was
formed on August 15, 1996 by the combination of Allegheny Ludlum Corporation
("Allegheny Ludlum") and Teledyne, Inc. ("Teledyne"), which became wholly owned
subsidiaries of Allegheny Teledyne. References to "Allegheny Teledyne," the
"Company" or the "Registrant" mean Allegheny Teledyne Incorporated and its
subsidiaries, unless the context otherwise requires.
STRATEGIC TRANSFORMATION
Following extensive studies and strategic analyses initiated in the
summer of 1998, the Company announced in January 1999 that it intends to pursue
a course of action that would result in a significant transformation and
reconfiguration of the Company during 1999. Assuming legal, tax, financial and
other considerations can be resolved successfully, the anticipated
transformation would include a tax-free spin-off of a new public company and a
public offering of the new company's stock. The new company would be comprised
of four former Teledyne companies in the Aerospace and Electronics Segment. The
four businesses are:
o Electronic Technologies headquartered in Los Angeles,
California;
o Brown Engineering headquartered in Huntsville, Alabama;
o Continental Motors headquartered in Mobile, Alabama; and
o Cast Parts located in southern California.
Combined 1998 revenues of the businesses of the proposed new company were
approximately $800 million. The new company is expected to be headquartered in
Los Angeles, California.
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The Company is proceeding simultaneously with the consideration of a
spin-off and public offering of the Consumer Segment into a free-standing public
company, as announced in the 1998 second quarter. The new company is expected to
be headquartered in the Los Angeles area. Annual revenues of the Consumer
Segment were approximately $250 million in 1998.
The Company plans to submit a request for a private letter ruling to
the Internal Revenue Service with respect to the tax-free nature of the proposed
spin-offs by the end of the 1999 first quarter.
Names for the new companies have not yet been selected.
After the spin-offs, Allegheny Teledyne, headquartered in Pittsburgh,
Pennsylvania, will be focused as one of the largest and most diversified
specialty metals companies in the world with annual revenues of approximately
$2.5 billion in 1998. It would consist of:
o Allegheny Ludlum/Rodney - a major flat-rolled producer of
stainless steel, specialty metals and titanium;
o Allvac and Allvac-SMP - major producers of nickel-based
superalloys, titanium alloys and specialty steels in ingot,
billet, bar, rod, wire and coil forms;
o Oremet-Wah Chang - a diversified producer of zirconium,
titanium and other specialty metals including niobium,
tantalum and hafnium;
o Titanium Industries - a titanium distribution company;
o Rome Metals - a processor of titanium and other specialty
metals;
o Metalworking Products - a major producer of tungsten mill
products, tungsten carbide materials and tungsten carbide
cutting tools;
o Casting Service - a foundry specializing in large grey and
ductile iron castings; and o Portland Forge - a custom
impression die forging company.
In addition, the Company is exploring the sale of Ryan Aeronautical, a
producer of unmanned aerial vehicles and target drones, which is located in San
Diego, California. The Company intends to sell two additional businesses:
o Fluid Systems - a manufacturer of nitrogen gas springs,
pressure relief valves and vehicle control valves
headquartered in Brecksville, Ohio; and
o Specialty Equipment - consisting of two divisions, one of
which is located in Canada and is an assembler of hydraulic
attachments for mining and construction equipment and the
other of which is a manufacturer of transportable forklifts in
the United States and the Netherlands.
Combined revenues of the three businesses were nearly $400 million in 1998.
ACQUISITIONS
Aerospace Division of Sheffield Forgemasters Limited. In February 1998,
the Company acquired the assets of the aerospace division of Sheffield
Forgemasters Limited, a private company in the United Kingdom, for approximately
$110 million in an all-cash transaction.
The acquisition of Sheffield Forgemasters' aerospace division, now
known as Allvac-SMP, provides significant support to the Company's high
performance metals businesses, primarily Allvac, and has enhanced service to
customers by improving the sales and distribution network for the Company's
nickel-based and titanium alloys and specialty steels in Europe. The acquisition
provides additional vacuum melting, vacuum consumable remelting, electroslag
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remelting and forging capacity, which complements Allvac's facilities.
Allvac-SMP's rotary forging machine is one of the largest in the world.
Oregon Metallurgical Corporation. In October 1997, the Company
announced that it had entered into a definitive merger agreement to acquire the
stock of Oregon Metallurgical Corporation ("OREMET"). Under the terms of the
merger, which was completed in March 1998, OREMET shareholders received 1.296
shares of Allegheny Teledyne common stock in a tax-free exchange for each share
of OREMET common stock. A total of 21.6 million shares of Allegheny Teledyne
stock was issued in connection with the merger. The merger was accounted for
under the pooling of interests accounting method.
OREMET is an integrated producer and distributor of titanium sponge,
ingot, mill products and castings for use in the aerospace, industrial,
recreational and military markets. It operates manufacturing and finishing
facilities in Oregon, Washington and Pennsylvania and has nine service centers
in the United States with additional service centers in the United Kingdom,
Germany, Singapore and Canada.
Agreements with Bethlehem Steel Corporation. In January 1998, Bethlehem
Steel Corporation ("Bethlehem") and the Company jointly announced that they had
entered into three agreements that would become effective after Bethlehem
completed its previously announced acquisition of Lukens Inc. ("Lukens").
Bethlehem completed its acquisition of Lukens on May 29, 1998. On November 20,
1998, the asset sale agreement previously signed by both companies was closed
and the related conversion services and hot band supply agreements began to be
implemented.
Under the asset sale agreement, Allegheny Ludlum acquired certain
assets that Bethlehem had acquired from Lukens. These assets include the melting
and hot rolling facilities located at the Houston, Pennsylvania plant and the
wide anneal and pickle line at the Massillon, Ohio plant.
Under the conversion services agreement, Bethlehem agreed, for a
20-year period, to provide Allegheny Ludlum exclusive access to the Lukens'
Coatesville, Pennsylvania melt shop and caster for the production of stainless
steel slabs, and to the Lukens' Conshohocken, Pennsylvania, 110-inch Steckel
mill for the rolling of stainless steel slabs and stainless precipitation
hardening grades, maraging grades, and nickel and nickel-based alloys.
After jointly conducting due diligence, Allegheny Ludlum and Bethlehem
agreed that improvements to the 110-inch Steckel mill would enhance performance
for the benefit of both parties, and they would share in the cost of certain of
these improvements. Using independent consultants, Allegheny Ludlum and
Bethlehem concluded that improvements to the computer control system, increasing
the power of the roughing mill and undertaking other projects to improve the
mill's capability will enhance performance of the mill for carbon, alloy and
stainless steel. Two 8,000 horsepower roughing mill motors will be installed,
and Allegheny Ludlum will share in the ownership of the motors up to a maximum
investment of $9 million. The total cost of all improvements to the 110-inch
Steckel mill is currently estimated to be about $25 million.
At the closing of the asset sale and conversion services agreement,
Allegheny Ludlum paid Bethlehem $105 million in cash of the previously announced
$175 million asset purchase price, and issued a non-interest bearing promissory
note for the remaining $70 million. The note
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will be paid after the improvements to the 110-inch Steckel mill are completed
and the mill returns to a regularly scheduled operating basis.
In addition, under the hot band supply agreement, Allegheny Ludlum
agreed to supply Bethlehem with up to 150,000 tons annually of stainless steel
bands for further processing at Lukens' cold finishing facilities at its
Washington, Pennsylvania and Massillon, Ohio plants until Bethlehem sells these
facilities. Bethlehem has announced that it plans to cease operations at these
two facilities, but that it continues to pursue the sale of the facilities.
Additional Information. Additional information about recent
acquisitions is included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Acquisitions and Divestitures" on page 20
of the 1998 Annual Report and in Notes 3 and 11 to the Notes to Consolidated
Financial Statements on pages 36, 44 and 45 of the 1998 Annual Report, which
information is incorporated herein by reference. Also see "Forward Looking and
Other Statements - Uncertainties Relating to Synergies" herein.
SPECIALTY METALS SEGMENT
Through the Specialty Metals Segment, the Company is one of the largest
and most diversified specialty metals companies in the world. The products of
the Specialty Metals Segment are representative of the practical application of
metallurgical science and technology as it is known and practiced throughout the
world. Their unique characteristics are derived from the nature of the metals
produced, the particular properties of the alloys melted, and the various
processes, methods, forms, shapes and end products manufactured.
Companies in the Specialty Metals Segment include:
o Allegheny Ludlum
o Rodney Metals
o Allvac
o Allvac-SMP
o Oremet-Wah Chang
o Titanium Industries
o Rome Metals
o ALstrip
Specialty Metals. The term "specialty steel" refers to stainless
steels, high speed and tool steels, high temperature alloys (superalloys),
electronic and thermostatic alloys, and electrical steels. As compared with
carbon steel, stainless steel alloys contain elements such as chromium, nickel
and molybdenum to make them corrosion- and heat-resistant; tool steel alloys,
which contain more carbon than stainless steel, include tungsten, molybdenum and
other metals to make them both hard and malleable; and electrical steel contains
silicon to minimize energy loss. Most high temperature alloys, electronic alloys
and thermostatic alloys are not steel by definition and are more properly
referred to as specialty metals.
Unlike high-volume carbon steel producers, makers of specialty metals
produce smaller quantities with special equipment. Because of the need to meet
more exacting technical and metallurgical requirements, stainless and other
specialty metals are made with special processing techniques and generally
utilize different alloying elements such as nickel, chromium, molybdenum,
niobium, titanium and cobalt.
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Specialty metals are produced in a variety of forms (sheet, strip,
foil, plate, wire, ingot, billet, rod, bar, tubing, and shapes) and are selected
for use in environments that demand materials having exceptional hardness,
toughness, strength, resistance to heat, corrosion or abrasion or a combination
of these characteristics. Common end uses of specialty metals include
automobiles, appliances, communications and electronics equipment, marine
equipment, electric power generating and distribution equipment, environmental
equipment, home utensils and cutlery, construction products, tools and dies,
food and chemical processing equipment, medical and health equipment, aircraft
structures, jet engines and defense equipment.
High-purity and high-performance superalloys, other alloys, and
specialty steels are refined, partially finished, and then sold to a wide
variety of customers worldwide for many different applications in diverse
industries, including aerospace, biomedical, marine, oil and gas, chemical
processing, nuclear, and transportation industries.
Flat-Rolled Products. Allegheny Ludlum is a world leader in the
production of sheet, strip and plate specialty materials including stainless
steel, nickel-based alloys and titanium. The company also produces
grain-oriented silicon electrical steel and tool steel plate. It produces a
broad selection of grades, sizes and finishes designed to meet international
specifications.
Stainless steel sheet is used in a wide variety of consumer and
industrial applications that require cleaning, fabricability and corrosion
resistance. Approximately 60% of the company's stainless steel sheet is sold to
service centers, which have slitting, cutting or other processing facilities.
Stainless steel strip is used in a variety of consumer products and a
wide range of automotive components. Allegheny Ludlum/Rodney's Precision Rolled
Strip(R) products range in thinness from 0.015 inch to less than 0.0015 inch.
Precision Rolled Strip product materials include stainless steel, nickel-based
alloys and titanium alloys. Customers use this thin-rolled metal to fabricate a
variety of different products ranging from automobile components to
photographic, personal computer, and consumer products. Approximately 50% of the
Company's stainless steel strip is sold directly to end-use customers, with the
remainder sold to service centers, including the Company's own distributors for
stainless steel strip, which are known as the Allegheny Rodney Strip Service
Center Division of Allegheny Ludlum.
Allegheny Ludlum processes and distributes stainless steel and nickel
alloy plate (at least 0.1875 inch thick and 10 inches wide) products in a wide
variety of grades and gauges. Finishing capabilities include plasma arc cutting,
shearing, abrasive cutting, sawing and machining. Stainless steel heads, rolled
and welded rings, formed channels and angles are available. Stainless steel
plate is primarily used in industrial equipment that requires cleanliness or
corrosion-resistant capabilities such as pollution control scrubbers, food
processing equipment, pulp and paper equipment, chemical processing equipment
and power generation equipment. Approximately 80% of Allegheny Ludlum's plate
products is sold to service centers.
With the acquisition of OREMET, Allegheny Ludlum also produces
flat-rolled titanium sheet and plate.
Allegheny Ludlum's grain-oriented silicon electrical steel products are
used generally in applications in which electrical conductivity and magnetic
properties are important. These products are sold directly to end-use customers,
including manufacturers of transformers and communications equipment.
High Performance Metals. The Company's High Performance Metals Group
consists of Allvac, Allvac-SMP and Oremet-Wah Chang. The companies in this group
are able to produce a
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wide range of premium grade, nickel-based, cobalt-based, and titanium alloys and
superalloys that are designed to meet the high performance requirements of the
airframe, jet engine, gas turbine, nuclear energy, oil and gas, and chemical
processing industries. These products, in various forms, are engineered to
retain exceptional strength and corrosion resistance at temperatures through
2,000 degrees Fahrenheit and are used in critical, high-stress applications.
High-purity metals that exhibit unique properties (including titanium,
zirconium, hafnium, vanadium, and niobium) are melted, refined, partially
finished, then sold to domestic and foreign customers primarily in the nuclear
energy, chemical processing, biomedical, and aerospace industries.
Allvac and Allvac-SMP manufacture nickel-, iron-, cobalt- and
titanium-based alloys for use in critical environments in the aerospace, oil and
gas, chemical processing, transportation, power generation, biomedical, marine
and nuclear industries. Product forms include ingot, billet, bar, rod, wire and
coil.
Oremet-Wah Chang is one of two fully integrated U.S. producers of
titanium. Titanium and titanium alloys are high performance metals with a
variety of uses, including commercial and military aerospace,
corrosion-resistant and industrial applications and recreational uses.
Oremet-Wah Chang is also a leading U.S. producer of zirconium, a highly
corrosion-resistant metal that is transparent to neutrons. It is used for fuel
tubes and structural parts in nuclear power reactors and for corrosion-resistant
chemical industry applications. Other users of zirconium include the jewelry and
personal hygiene industries. Hafnium, derived as a by-product of zirconium, is
used for control rods in nuclear reactors due to its ability to absorb neutrons.
Oremet-Wah Chang produces niobium, also known as columbium, in various
forms and alloys. Niobium, a high-technology metal, is used as an alloying
element in the manufacture of many steels. The higher quality grades produced by
Oremet-Wah Chang are used in superalloys for jet engines and special alloys for
aerospace applications such as rocket nozzles. When alloyed with titanium,
niobium is used in applications requiring superconducting characteristics for
high-strength magnets. This area includes medical devices for body-scanning,
accelerators for high-energy physics, and fusion energy projects for future
generation of electricity.
Oremet-Wah Chang produces tantalum, one of the most corrosion-resistant
metals, for medical implants, chemical process equipment, and aerospace engine
components.
Titanium Industries distributes titanium and zirconium products for
industrial, aerospace, orthopedic and specialty markets. Products include sheet,
plate, billet, bar, rod, wire, pipe, tubing, fittings and fasteners.
Rome Metals provides finishing services to titanium, zirconium,
nickel-based alloys and other high-end specialty metals producers.
Expanding Capabilities. See "Acquisitions" for a description of the
1998 acquisitions made to enhance the capabilities and products offered by the
Specialty Metals Segment.
The acquisitions of OREMET and the assets of the aerospace division of
Sheffield Forgemasters Limited, now known as Allvac-SMP, have enhanced the
Company's titanium production capabilities and high performance metals
businesses. In addition, two major capital investments were completed in the
1998 fourth quarter to increase the production capabilities of
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the Company's high performance metals businesses. At Allvac, a new vacuum
induction furnace capable of producing 50,000 pound heats began production. This
state-of-the-art furnace is intended to provide capacity to meet the growing
demands for nickel-based superalloys from several markets, including large
land-based turbines for power generation. At Oremet-Wah Chang, a new electron
beam melt facility began producing titanium slabs. This new facility contains
one of the largest and most advanced electron beam melt furnaces in the world
and is expected to enhance the Company's position as a low cost producer of high
quality titanium ingots and slabs.
The agreements with Bethlehem are geared toward increasing the
Company's melting and hot-rolling capacity and enabling the Company to roll
wider stainless steel and alloy plate. As 1998 concluded, Allegheny Ludlum began
initial operation of a new 60-inch Sendzimir mill. This mill, together with a
modified anneal line and temper mill scheduled to be completed in the second
quarter of 1999, will enable Allegheny Ludlum to participate in a growing market
for wide stainless steel sheet. A strategic goal of Allegheny Ludlum's Chinese
joint venture, described under "Export Sales and Foreign Operations," is to
expand the Company's Precision Rolled Strip product offerings in the Asian
market and globally.
AEROSPACE AND ELECTRONICS SEGMENT
Companies in the Aerospace and Electronics Segment include:
o Teledyne Electronic Technologies
o Teledyne Brown Engineering
o Teledyne Continental Motors
o Teledyne Cast Parts
o Ryan Aeronautical
The companies in the Aerospace and Electronics Segment offer a variety
of products and services including:
Data Acquisition and Communications Systems. Teledyne Electronic
Technologies is a leading supplier of total aircraft information management
solutions designed to increase the safety and efficiency of airline
transportation throughout the world. The company's data acquisition and
communications systems perform aircraft performance monitoring, engine condition
monitoring and flight operations quality assurance functions. Teledyne
Electronic Technologies has broadened its product line to extend information
services to business and commuter aircraft with air to ground telephony,
facsimile and data transmission. Customers include the U.S. Federal Aviation
Administration, domestic and foreign airlines, commercial aircraft original
equipment manufacturers ("OEMs"), and a broad base of companies in different
industrial sectors.
Teledyne Electronic Technologies also produces power amplifiers used in
the L, C and Ku band satellite uplink transmitters. These products encompass
both solid state monolithic microwave integrated circuits and high power helix
traveling wave tubes. The company provides similar power amplifiers for
transmitters for radar, electronic countermeasure systems and electromagnetic
compatibility test equipment. Other components of the company used in both
wireless and satellite infrastructure equipment include coaxial microwave
switches and light weight, low cost cavity filters produced with a patented
injection molding technique.
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Precision Electronic Devices. Teledyne Electronic Technologies' hybrid
microcircuits are used in applications such as aerospace, medical and
instrumentation systems where small size, high performance and reliability are
of paramount importance. These compact and complex electronic building blocks
combine multiple transistors and integrated circuits in multi-chip modules
("MCMs"). MCMs, including fiber optic, power management and digital signal
processors, provide dense packaging for satellites, the multinational Space
Station, and various military and instrumentation systems. The company's
miniature electromechanical relays are used where maintenance of signal fidelity
is essential. Examples of applications include switching of high-speed digital
and microwave signals in semiconductor and microwave test equipment, wireless
systems and communications satellites.
Teledyne Electronic Technologies has applied its MCM technology to the
manufacture of life sustaining and life enhancing implanted medical devices,
including cardiac pacemakers and defibrillators, neural stimulators and cochlear
implant hearing aids.
The company's sensor and instrumentation technology also extends to
process applications in semiconductor and petrochemical manufacturing with a
broad line of analyzers for oxygen and other gases, vacuum gauges, and mass flow
meters and controllers.
Teledyne Electronic Technologies' products are distributed principally
through an internal sales force.
Electronic Contract Manufacturing Services. Teledyne Electronic
Technologies operates turnkey manufacturing facilities in Tennessee, Mexico and
Scotland for low-to-moderate volume high technology products used in the
aerospace, medical and communications industries. Products manufactured range
from individual printed circuit board assemblies to complete electronic systems.
The company's REGAL(R) rigid-flex technology combines rigid and flexible printed
circuits into one assembly that eliminates board-to-board connectors. These
boards are used in military and commercial aerospace and medical applications.
Software and Engineering Services. Teledyne Brown Engineering offers a
wide range of engineering services to government defense and aerospace customers
as well as commercial customers. These services include payload integration for
the space shuttle and systems engineering for ballistic missile defense. In
addition, comprehensive computer software has been developed by Teledyne Brown
Engineering for simulations and hardware performance evaluations. Teledyne Brown
Engineering also serves the environmental market. As the prime contractor for
the U.S. Army's Stockpile Chemical Materiel Demilitarization program, the
company has been designing, fabricating and operating equipment to destroy
chemical munitions.
Aviation Propulsion Systems. Teledyne Continental Motors designs,
manufactures and sells aviation propulsion systems, including piston engines and
small gas turbine engines, domestically and internationally, for general
aviation and defense-related purposes. The piston engine products are used by
several general aviation aircraft OEMs and in the after-market. Continental
Motors' piston engines have been powering airplanes for over 70 years, and today
about half of the general aviation piston engines in use in the U.S. were built
by Continental Motors. In 1998, four new composite aircraft, ranging from a
training aircraft to a six-seat business aircraft, received certification for
production. Each of these aircraft was certified with a Teledyne Continental
Motors engine. Small gas turbine engines are used primarily in aerial targets
and missiles.
Teledyne Continental Motors also produces deep-cycle lead acid
batteries for the general aviation industry.
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Aerosance, Inc., a majority owned start-up company acquired in 1997, is
engaged in the design and development for production of advanced electronic
engine controls and engine management systems for piston aircraft engines,
including Teledyne Continental Motors' piston engines.
Cast Parts. Teledyne Cast Parts produces a wide range of aluminum and
magnesium castings and nickel-based superalloy and stainless steel investment
castings for the aerospace and defense industries.
Unmanned Aerial Vehicles and Targets. Ryan Aeronautical designs,
manufactures and sells unmanned aerial vehicles ("UAVs") and targets for
defense-related purposes to the U. S. Government and to international military
customers. Ryan Aeronautical's UAVs are generally recoverable and reusable
vehicles used for sophisticated military missions, such as reconnaissance, with
the operators safely flying them from remote control centers. Ryan Aeronautical
heads the team developing the Global Hawk UAV for the U.S. Air Force. As
mentioned under "Strategic Transformation", the Company is exploring the
possible sale of Ryan Aeronautical.
Controlled Explosive Devices. Controlled explosive devices are
designed, manufactured, and sold by Ryan Aeronautical's McCormick Selph Ordnance
Unit for defense-related, aerospace and commercial purposes. These devices are
used in a wide range of pilot ejection systems, aircraft separation, and other
similar aerospace-related systems. Commercially, the devices are used in vehicle
airbags and petroleum industry drilling systems, among other uses. The Company
continues to pursue the sale of the McCormick Selph Ordnance Unit.
INDUSTRIAL SEGMENT
Companies in Allegheny Teledyne's Industrial Segment include:
o Metalworking Products
o Casting Service
o Portland Forge
o Fluid Systems
o Specialty Equipment
The Industrial Segment's companies offer a variety of products
including the following:
Cutting Tools and Tungsten Products. For the metalworking, mining and
other industries requiring tools with extra hardness, Metalworking Products
produces a line of sintered tungsten carbide products, made under heat, to
produce a material that approaches diamond hardness. Cemented carbide products,
which may be coated or uncoated, are used as super-hard cutters in the
high-speed machining and cutting of steel and other applications where hardness
and wear resistance are important. Technical developments related to ceramics,
coatings, and other disciplines are incorporated in these products. In December
1995, the Company acquired the Stellram Group, manufacturers of high precision
threading, milling, boring, and drilling systems for the European market.
Metalworking Products is a producer of tungsten for the worldwide
market, starting with numerous and varied tungsten-bearing raw materials and
resulting in tungsten and tungsten carbide powders and mill products. Previously
used cemented carbide parts are also recycled into tungsten carbide powder.
Wrought or ductile tungsten products are used in diverse
11
applications including light bulb filaments, inert gas welding electrodes,
electrical contacts, x-ray shielding, and aircraft counterweights.
Molybdenum, a sister metal to tungsten, which also has a very high
melting point, is produced by Metalworking Products in powder form and then
shaped into solid forms through powder metallurgy techniques. It is an important
alloying element for steels and is used for plasma arc spraying of piston rings,
for electrodes in glass melting, and for structural parts in high temperature
furnaces.
Forgings and Castings. Portland Forge processes metals by forging
metals into finished forms that are used in a diverse number of industries. With
the latest screw-type forging presses, Portland Forge is a major U.S. producer
of carbon and alloy steel forgings in sizes ranging from one pound to more than
200 pounds. In addition to supplying the transportation, construction, and other
basic industries, Portland Forge has the ability to forge the more difficult
alloys, which are used in aerospace, medical implants, and other critical
applications.
Casting Service casts a variety of metals in sizes ranging from 1,000
pounds to 160,000 pounds and forms ranging from diesel locomotive engine blocks
to housings and parts for power generation equipment, tools, and automobiles.
Nitrogen Gas Systems, Valves, Pumps and Boosters. The Company's Fluid
Systems business designs, manufactures and sells worldwide nitrogen gas springs
and manifold systems for the automotive, appliance and other metal forming
industries. Nitrogen gas springs and manifold systems are designed to overcome
manufacturing difficulties encountered in high-speed metal forming operations.
Fluid Systems also designs, manufactures and sells spring loaded and pilot
operated pressure relief valves domestically and internationally for use in
processing industries such as refineries, petrochemical/chemical industries and
pharmaceutical manufacturing. In addition, Fluid Systems provides specialty
hydraulic and pneumatic valves and air-driven pumps and gas boosters that are
used in general industrial applications. As mentioned under "Strategic
Transformation", the Company intends to sell its Fluid Systems business.
Transportable Material Handlers; and Mining and Construction Equipment.
The domestic and foreign operations of Specialty Equipment design and
manufacture a series of specialty forklifts that ride as outriggers on delivery
trucks. Specialty Equipment also designs and manufactures rugged,
high-performance mining and construction equipment such as hydraulic breakers,
boom systems and underground mobile equipment for the construction, quarry, and
mining industries. As mentioned under "Strategic Transformation", the Company
intends to sell its Specialty Equipment business.
CONSUMER SEGMENT
Companies in Allegheny Teledyne's Consumer Segment include:
o Water Pik
o Laars
These companies manufacture a number of products including:
Oral Health Products. A wide range of consumer and professional oral
health products and devices are designed, manufactured, and sold primarily
through retail and professional dental networks. Oral health products include a
high-speed sonic plaque control toothbrush, a mechanical toothbrush model, and
oral irrigation devices that are sold under the brand name of
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Teledyne Water Pik. Water Pik also produces products used in professional dental
practices, which are marketed under the DENAR(R) brand, Getz(R) brand and
HANAU(TM) brand.
Professional dental products and select consumer products may now also
be purchased on-line at www.waterpik.com.
Shower Heads. Also marketed under the Teledyne Water Pik brand name are
pulsating shower heads in a wide range of models including the Flexible Shower
Massage(TM) product. Water Pik designs, manufactures and sells these products
through domestic and foreign mass merchandise and specialty retail outlets.
Residential Water Filtration. A wide range of residential water
filtration devices are designed, manufactured and sold by Water Pik to domestic
and foreign consumers primarily through mass merchandise and specialty retail
outlets. The Instapure(R) line includes faucet-mounted, under-the-counter, and
whole-house water filters for improving the quality of water used in the home.
Water Pik's water filtration product line can be adapted for many water delivery
systems throughout the world.
Pool Equipment. Laars manufactures an extensive line of swimming pool
and spa heaters. Laars offers oil, natural gas and propane fired residential and
commercial pool heaters in both standard efficiency (82%) and high efficiency
(95%) models. In 1996, Laars acquired Jandy Industries, Inc., a United States
producer of electronic control systems, automatic valves, automatic cleaners and
water features for the swimming pool and spa industries. In 1998, the company
first offered fiber optic lighting to the pool and spa industries under an
exclusive agreement with Lumenyte International Corporation.
Boilers; Water Heaters. Laars also produces a comprehensive line of
water heating equipment that provides hot water and hydronic heating for
commercial, residential, and industrial applications. In August 1998, the
company acquired Trianco Heatmaker, Inc., a manufacturer of high efficiency gas-
and oil-fired boiler and water heating products based in Randolph,
Massachusetts.
COMPETITION
Markets for the Company's products and services in each of its
principal business segments are highly competitive. The Company competes with
many manufacturers which, depending on the product involved, range from large
diversified enterprises to smaller companies specializing in particular
products. Factors that affect the Company's competitive posture are the quality
of its products, services and delivery capabilities, its research and
development efforts, its marketing strategies, and price. Technological
capabilities are an increasingly important competitive factor for companies in
the Aerospace and Electronics Segment.
Through its Specialty Metals Segment, the Company is a leading producer
of specialty metals. Companies in this Segment face competition from domestic
and foreign competitors, a number of which are government subsidized. Sales and
operating profit for Allegheny Ludlum/Rodney Metals, which consist primarily of
flat-rolled products, declined 8% and 10%, respectively, in 1998. Sales declined
primarily due to the impact on pricing of imports of commodity stainless steel
products into the U.S. market from Europe and Asia. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Results of
Operations Specialty Metals - 1998 Compared to 1997" on page 21 of the 1998
Annual Report, which section includes a discussion of antidumping and
countervailing duty
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cases filed by Allegheny Ludlum and other domestic producers of flat-rolled
stainless steel sheet and strip products and several unions.
Companies in Allegheny Teledyne's Aerospace and Electronics Segment
obtain many U.S. Government contracts through the process of competitive
bidding. There can be no assurance that the Company will continue to be
successful in having its bids accepted.
RAW MATERIALS AND SUPPLIES
Substantially all parts and materials required in the manufacture of
the Company's products are available from more than one supplier and the sources
and availability of raw materials essential to its businesses are adequate.
The principal materials used by the Company in the production of its
specialty metals are scrap (including nickel-, chromium-, titanium- and
molybdenum-bearing scrap), nickel and titanium sponge, zirconium, ferrochromium,
ferrosilicon, molybdenum and molybdenum alloys, manganese and manganese alloys,
cobalt, niobium and other alloying materials. Certain of these raw materials,
such as nickel, cobalt and ferrochromium, can be acquired by the Company and its
specialty metals industry competitors, in large part, only from foreign sources.
The Company purchases its nickel requirements principally from producers in
Australia, Canada, Norway, the Commonwealth of Independent States, the Dominican
Republic and the U.S. Zirconium sponge is purchased from a source in France,
while zircon sand is purchased from both U.S. and Australian sources. Cobalt is
purchased primarily from producers in Canada. Ferrochromium is purchased
primarily from producers in South Africa, Zimbabwe, Turkey, and the Commonwealth
of Independent States. Some of these foreign sources are located in countries
that may be subject to unstable political and economic conditions, which might
disrupt supplies or affect the price of these materials. More than 80% of the
world's reserves of ferrochromium are located in South Africa, Zimbabwe,
Albania, and Kazakhstan. Titanium tetrachloride, the principal raw material
required for the production of titanium sponge, is supplied to the Company under
a long-term contract with an U.S. source. The Specialty Metals Segment also uses
large amounts of electricity and natural gas in the manufacture of its products.
See "Forward Looking and Other Statements--Unavailability of Raw Materials for
Specialty Metals."
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GOVERNMENT CONTRACTS
For the year ended December 31, 1998, approximately 13% of the
Company's continuing revenues were attributable to continuing sales under
contracts with the U.S. Government. Continuing sales to the Department of
Defense accounted for approximately 10% of total continuing sales in 1998. Sales
by the Company's business segments to the U.S. Government for each of the three
years ended December 31, 1998 were:
[Download Table]
(In millions)
1998 1997 1996
------ ------ ------
Specialty Metals $ 46.1 $ 50.1 $ 69.5
Aerospace and Electronics 458.5 428.1 543.1
Industrial and Consumer 1.5 2.1 2.3
Many of the Company's contracts with the U.S. Government include price
redetermination clauses, and most are terminable at the convenience of the
government.
See the discussion of related matters under the caption "Forward
Looking and Other Statements - Risks Associated with Government Contracts" and
in Item 3. Legal Proceedings. Additional related information is presented under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Other Matters - Government Contracts" on pages 26 to 27
of the 1998 Annual Report and in Notes 12 and 15 of Notes to Consolidated
Financial Statements on pages 45 and 49 to 50 of the 1998 Annual Report.
EXPORT SALES AND FOREIGN OPERATIONS
Continuing foreign sales represented approximately 20% of the Company's
total continuing sales in 1998 and 18% of the Company's total continuing sales
in each of 1997 and 1996. These figures include continuing export sales by U.S.
operations to customers in foreign countries, which accounted for approximately
13% of the Company's total continuing sales in each of 1998 and 1997 and 12%
of the Company's total continuing sales in 1996. See "Forward Looking and Other
Statements - Risks of Export Sales." The Company's overseas sales, marketing and
distribution efforts are aided by international marketing offices in Europe,
Asia, South America, and the Middle East.
During 1997 and 1996, the Company did not engage in material
manufacturing operations in foreign countries. In 1998, the Company expanded its
presence internationally and expects to continue such expansion. In February
1998, Allegheny Teledyne acquired United Kingdom manufacturing capability
through its acquisition of the aerospace division of Sheffield Forgemasters
Limited. This acquisition has enhanced service to customers by improving the
sales and distribution network for the Company's nickel-based alloys and
titanium in Europe.
In February 1996, Allegheny Ludlum established a joint venture company
in the People's Republic of China with Shanghai No. 10 Steel Limited Company for
the production and sale of precision rolled stainless steel strip. The joint
venture, 60% of which is owned by Allegheny Ludlum, is known as Shanghai STAL
Precision Stainless Steel Limited Company. In early 1999, the joint venture's
facility located in Shanghai began limited production. The new plant is a fully
integrated finishing facility equipped with two Sendzimir mills, a bright anneal
line, slitters, a
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tension leveler and roll grinders. It is expected to produce and sell up to
15,000 metric tonnes of Precision Rolled Strip(R) products. This venture should
enable both Allegheny Ludlum and Rodney Metals to participate more effectively
in the Asian market and other highly competitive global markets.
BACKLOG, SEASONALITY AND CYCLICALITY
The Company's backlog of confirmed orders was approximately $1.2
billion at December 31, 1998 and $1.4 billion at December 31, 1997. During the
year ending December 31, 1999, it is anticipated that approximately 95% of
confirmed orders on hand at December 31, 1998 will be filled. Backlog of
confirmed orders of the Specialty Metals Segment was $618.7 million at December
31, 1998 and $760.4 million at December 31, 1997. During the year ending
December 31, 1999, it is anticipated that approximately 92% of the confirmed
orders on hand at December 31, 1998 for this Segment will be filled. Backlog of
confirmed orders of the Aerospace and Electronics Segment was $504.4 million at
December 31, 1998 and $523.8 million at December 31, 1997. During the year
ending December 31, 1999, it is anticipated that approximately 97% of the
confirmed orders on hand at December 31, 1998 for this Segment will be filled.
Generally, sales and operations of the Company's business segments are
not seasonal. However, demand for products of the Company's Specialty Metals
Segment is cyclical over longer periods because specialty metals customers
operate in cyclical industries and are subject to changes in general economic
conditions. See "Forward Looking and Other Statements--Cyclical Demand for
Specialty Metals."
RESEARCH, DEVELOPMENT AND TECHNICAL SERVICES
Management of the Company believes that the Company's research and
development capabilities give it an edge in developing new products with
profitable growth potential on a long-term basis. The Company conducts research
and development at its various operating locations both for its own account and
for customers on a contract basis. Estimates of the components of research and
development, including bid and proposal costs, for the years ended December 31,
1998, 1997, and 1996 included the following:
[Download Table]
(In millions) 1998 1997 1996
---- ---- ----
Customer-Sponsored:
Specialty Metals Segment $ 0.7 $ 2.5 $ 3.8
Aerospace and Electronics Segment 185.9 183.9 295.4
Other -- -- 3.9
------ ------ ------
186.6 186.4 303.1
------ ------ ------
Company-Sponsored:
Specialty Metals Segment 15.7 17.5 18.7
Aerospace and Electronics Segment 28.6 31.0 35.4
Other 13.2 14.6 14.0
------ ------ ------
57.5 63.1 68.1
------ ------ ------
Total Research and Development $244.1 $249.5 $371.2
====== ====== ======
Ongoing research and development efforts in the Aerospace and
Electronics Segment include the following: Teledyne Electronic Technologies'
pursuit of the development of
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advanced electronic components for the next generation broad band, high-speed
satellite and communication systems; Teledyne Continental Motors' development of
an advanced Jet-A fuel engine design (which is co-sponsored by NASA); and
Aerosance, Inc.'s. development of digital electronic controls for piston
engines. Ryan Aeronautical continues to develop for the U.S. Air Force the
Global Hawk UAV and a low-cost miniature air launched decoy.
With respect to the Specialty Metals Segment, the Company's research,
development and technical service activities are closely interrelated and are
directed toward cost reduction, process improvement, process control, quality
assurance and control, system development, the development of new manufacturing
methods, the improvement of existing manufacturing methods, the improvement of
existing products, and the development of new products.
The Company owns over 500 United States patents, many of which are also
filed under the patent laws of other nations. Although these patents, as well as
the Company's numerous trademarks, technical information license agreements, and
other intellectual property, have been and are expected to be of value,
management believes that the loss of any single such item or technically related
group of such items would not materially affect the conduct of its business.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company and the industries in which it competes are subject to
environmental laws and regulations concerning emissions to the air, discharges
to waterways, and the generation, handling, storage, transportation, treatment
and disposal of waste materials, and is also subject to other federal and state
laws and regulations regarding health and safety matters. Each of the Company's
production facilities has permits and licenses allowing and regulating air
emissions and water discharges. The Company believes its businesses are being
operated in compliance in all material respects with applicable environmental
laws and regulations.
The Company is currently involved in the investigation and remediation
of a number of sites under the environmental laws, including approximately 37
sites at which the Company has been identified as a potentially responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act, commonly known as Superfund, or similar state statutes. The Company's
involvement is very limited or de minimis at approximately 17 of these sites,
and the potential loss exposure with respect to the remaining 20 individual
sites is not considered to be material.
During 1999, the Company expects to spend approximately $11 million for
additional or upgraded environmental control equipment and facilities. The
Company, like other manufacturers, may be required to expend significant
additional funds to meet stringent air emission limits as a result of the U.S.
Environmental Protection Agency's revisions to the National Ambient Air Quality
Standards for Ozone and Particulate Matter adopted in July 1997. The Company
believes that the revised standards could increase the cost and the difficulty
of obtaining operating permits for new operations and major modifications to
existing operations.
See the discussion of related matters herein under the caption "Forward
Looking and Other Statements--Risks Associated with Environmental Matters" and
in Item 3. Legal Proceedings. Additional related information is presented under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Other Matters--Environmental" on page 26 of the 1998
Annual Report and in Notes 1 and 15 of Notes to Consolidated Financial
Statements on pages 35 and 49 of the 1998 Annual Report.
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EMPLOYEES
The Company and its subsidiaries employ approximately 21,500 persons,
9,400 of whom are employed at companies in the Specialty Metals Segment.
Approximately 32% of the Company's workforce is covered by various collective
bargaining agreements, principally with the United Steel Workers of America
("USWA"), certain of which are listed below.
o Approximately 400 OREMET employees are covered by a collective
bargaining agreement with the USWA, which is effective through
July 31, 2000.
o Approximately 700 Wah Chang employees are covered by a
collective bargaining agreement with the USWA, which is
effective through October 1, 2000.
o Approximately 400 employees of Teledyne Continental Motors are
covered by a collective bargaining agreement with the United
Automobile, Aerospace and Agricultural Implement Workers of
America, which is effective through December 16, 2000.
o Approximately 400 employees at Allegheny Ludlum's Washington,
Pennsylvania plant are covered by a collective bargaining
agreement with the USWA, which is effective through September
30, 1999.
o Substantially all of Allegheny Ludlum's 3,600 other production
and maintenance employees are covered by collective bargaining
agreements between Allegheny Ludlum and the USWA, which are
effective through June 30, 2001.
In 1994, following the expiration of a prior collective bargaining
agreement between Allegheny Ludlum and the USWA, the USWA authorized a strike by
its members that lasted 10 weeks and materially adversely affected Allegheny
Ludlum's operating results. There can be no assurance that the Company will
succeed in concluding collective bargaining agreements with the USWA or other
unions to replace those that expire.
PRINCIPAL OFFICERS OF THE REGISTRANT
Principal officers of the Company as of March 15, 1999 are as follows:
[Download Table]
NAME AGE TITLE
---- --- -----
Richard P. Simmons 67 Chairman, President and Chief Executive Officer*
Robert Mehrabian 57 Executive Vice President and Segment Executive,
Aerospace and Electronics and Industrial*
James L. Murdy 60 Executive Vice President, Finance and Administration and
Chief Financial Officer*
Judd R. Cool 63 Senior Vice President, Human Relations
Jon D. Walton 56 Senior Vice President, General Counsel & Secretary*
Richard J. Harshman 42 Vice President, Investor Relations and Corporate
Communications
Robert S. Park 54 Vice President, Treasurer
Dale G. Reid 43 Vice President, Controller and Chief Accounting Officer*
Set forth below are descriptions of the business background for the
past five years of the principal officers of the Company.
Richard P. Simmons has been Chairman of the Board of the Company since
August 1996 and President and Chief Executive Officer since February 1997.
Previously, he was Chairman of
--------
*Such officers are subject to the reporting and other requirements of Section 16
of the Securities Exchange Act of 1934, as amended.
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the Board of Allegheny Ludlum, having begun his service on that Board in 1980.
He also served as Chief Executive Officer of Allegheny Ludlum until 1990.
Robert Mehrabian was Senior Vice President of the Company from August
1997 until his appointment as Executive Vice President of the Company in May
1998. Dr. Mehrabian has been the Segment Executive for the Company's Aerospace
and Electronics Segment since August 1997 and for the Company's Industrial
Segment since April 1998. From April 1998 to October 1998, he also had
responsibility for the Consumer Segment. Dr. Mehrabian serves as a director of
the Company. Prior to joining the Company, Dr. Mehrabian served as the President
of Carnegie Mellon University from 1990 to July 1997.
James L. Murdy has been Chief Financial Officer and a Senior Vice
President of the Company since August 1996 and Executive Vice President, Finance
and Administration since December 1996. Mr. Murdy previously served as the
Senior Vice President-Finance and Chief Financial Officer of Allegheny Ludlum.
Mr. Murdy also serves as a director of the Company.
Judd R. Cool has been Senior Vice President, Human Resources since
September 1997. Prior to joining the Company, Mr. Cool served as Vice President
for Human Resources for Inland Steel Industries.
Jon D. Walton has been Senior Vice President, General Counsel and
Secretary of the Company since August 1997 and served as Vice President, General
Counsel and Secretary of the Company from August 1996 to August 1997, having
previously served in the same capacity as an officer of Allegheny Ludlum.
Richard J. Harshman has served as Vice President, Investor Relations
and Corporate Communications since July 1998. He had been Senior Vice President,
Finance and Administration, at Allvac since 1995. Prior thereto, he served in a
number of financial and management corporate and operating positions with
Teledyne.
Robert S. Park has served as Vice President, Treasurer of the Company
since August 1996. From May 1994 to August 1996, Mr. Park served as Vice
President, Treasurer of Allegheny Ludlum. Previously, he served as Treasurer of
Allegheny Ludlum.
Dale G. Reid has served as a Vice President of the Company since May
1997 and Controller since August 1996. Mr. Reid previously served as Chief
Accounting Officer and Controller of Teledyne.
Messrs. Murdy and Walton have employment agreements with the Company
which were entered into in connection with the combination of Allegheny Ludlum
and Teledyne in 1996. Copies of the employment agreements are filed as Exhibits
10.19 and 10.20 to this Form 10-K.
FORWARD LOOKING AND OTHER STATEMENTS
From time to time, the Company has made and may continue to make
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. This Report on Form 10-K and the 1998 Annual
Report contain many forward-looking statements. These statements, which
represent the Company's expectations or beliefs concerning various future
events, include but are not limited to statements concerning the following:
o anticipated effects of the proposed strategic transformation
and dispositions by the Company;
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o anticipated effects of the acquisitions of OREMET and
Allvac-SMP and the agreements with Bethlehem on earnings, cost
savings and operations of the Company; cash flow;
o aviation and aerospace industry trends;
o cost reductions;
o certain expected capital expenditures;
o computer software modification or replacement;
o anticipated expenditures to address the impact of Year 2000
issues;
o anticipated effects of the euro currency conversion;
o the outcome of any government inquiries, litigation or other
proceedings related to government contracts or other matters;
and
o future environmental costs.
Actual results may differ materially from results anticipated in forward looking
statements. The Company assumes no obligation to update its forward looking
statements.
Forwardlooking statements are based on current expectations that
involve a number of risks and uncertainties, including the following:
Uncertainties Relating to Proposed Strategic Transformation. The
Company has identified anticipated benefits expected to result from the
transformation and dispositions described under the caption "Strategic
Transformation" above. Completing the transactions and achieving the anticipated
results involves inherent uncertainties, including those relating to:
o whether legal, tax, financial and other considerations
applicable to the spin-offs and the public offerings can be
successfully resolved;
o whether the contemplated dispositions can be accomplished on
terms acceptable to the Company; and
o business and other risks affecting the business of the
Company, the two new companies expected to result from the
transformation and the businesses the Company intends to sell.
Consummation of the transactions and realization of the anticipated results
could take longer than expected and implementation difficulties and market
factors could change the anticipated results. Accordingly, there can be no
assurance that the Company will be able to realize, or do so within any
particular time frame, the expected benefits anticipated to be achieved as a
result of the proposed transformation and dispositions.
Cyclical Demand for Specialty Metals. The Company's Specialty Metals
Segment accounted for a significant portion of the Company's 1998 total sales
and its 1998 total income. Demand for products of these businesses is cyclical
because the industries in which customers of such businesses operate are
cyclical. Various changes in general economic conditions affect these
industries, including decreases in the rate of consumption or use of their
products due to economic recessions.
Significant downturns in the domestic economy are believed to have
adversely affected the results of operations of Allegheny Ludlum, Teledyne and
OREMET from time to time during their respective histories. Other factors
causing fluctuation in market demand and volatile
20
pricing include national and international overcapacity, currency fluctuations,
lower-priced imports and increase in use or decrease in prices of substitute
materials.
The current trend of price deflation for many commodity products may
also adversely affect prices for commodity grades of specialty metals. As a
result of these factors, the Company's operating results could be subject to
significant fluctuation. For example, an adverse pricing environment for
commodity grades of stainless steel in 1998 and 1997 and an adverse pricing
environment for titanium products in 1998 negatively affected sales and
operating profit of the Company's specialty metals businesses.
Unavailability of Raw Materials for Specialty Metals. Certain important
raw materials used to produce specialty metals must be acquired in large part
only from foreign sources. Some of these sources operate in countries that may
be subject to unstable political and economic conditions. These conditions may
disrupt supplies or affect the prices of these materials. Purchase prices of
certain critical raw materials are volatile. As a result, the Company's
operating results could be subject to significant fluctuation. The Company
enters into raw material futures contracts from time to time to hedge its
exposure to price fluctuations. The Company believes that adequate controls are
in place to monitor such activities, which are not financially material.
Risks Associated with Environmental Matters. The Company is subject to
various domestic and international environmental laws and regulations. These
laws have changed in recent years, and the Company expects to face increasingly
stringent environmental standards in the future.
The Company believes that it operates its businesses in compliance in
all material respects with applicable environmental laws and regulations.
However, the Company is a party to lawsuits and other proceedings involving
alleged violations of environmental laws. When the Company's liability is
probable and it can reasonably estimate its costs, the Company records
environmental liabilities on its financial statements. However, some of these
environmental investigations are not at a stage where the Company has been able
to determine liability, or if liability is probable, to reasonably estimate the
loss or range of loss. Estimates of the Company's liability remain subject to
additional uncertainties regarding:
o the nature and extent of site contamination;
o the range of remediation alternatives available;
o evolving remediation standards;
o imprecise engineering evaluations and estimates of appropriate
cleanup technology, methodology and cost;
o the extent of corrective actions that may be required; and
o the number and financial condition of other potentially
responsible parties, as well as the extent of their
responsibility for the remediation.
Accordingly, as investigation and remediation of these sites proceed and the
Company receives new information, the Company expects that it will adjust its
accruals to reflect new information. Future adjustments could have a material
adverse effect on the Company's results of operations in a given period, but the
Company cannot reliably predict the amounts of such future adjustments.
21
Based on currently available information, the Company's management does
not believe that future environmental costs, in excess of those already accrued,
will materially adversely affect the Company's financial condition or results of
operations. However, the Company cannot provide any assurance that additional
future developments, administrative actions or liabilities relating to
environmental matters will not have a material adverse effect on the Company's
financial condition or results of operations.
Risks Associated with Government Contracts. A number of the Company's
subsidiaries perform work on contracts with the U.S. Government. For the year
ended December 31, 1998, the Company's total continuing sales under government
contracts were approximately 13% of the Company's total continuing sales, of
which about 10% of total continuing sales were under contracts with the
Department of Defense. The government may terminate most of these contracts at
its convenience. Many of these contracts also include clauses which allow the
price to be redetermined at the request of the government.
Some of the Company's government contracts have fixed prices, which
involve a risk that current costs may exceed the costs that were expected when
the contract was negotiated. In such a situation, the Company must bear the
excess costs, unless the contract is modified.
Revisions in the cost and funding estimates for some of the Company's
long-term government contracts require the Company to adjust current earnings on
a cumulative basis. If the current contract estimates indicate a loss, the
Company makes a provision for the total anticipated loss.
Additionally, virtually all defense programs are subject to curtailment
or cancellation due to the annual government appropriations and allocations
process. A material reduction in U.S. Government appropriations may adversely
affect the Company's business, depending upon the specific programs affected by
the reduction.
Various claims have been or may be asserted against the Company related
to government contracts, including claims based on business practices and cost
classifications and actions under the False Claims Act. Under the False Claims
Act, a person may assert the rights of the U.S. Government by initiating a suit
under seal against a contractor. For the claim to be successful, that person
must have information that the contractor falsely submitted a claim to the U.S.
Government for payment. The U.S. Government may choose to intervene and assume
control of the case.
Detailed fact-finding and negotiation generally resolve government
contracting claims. When they are not resolved in this way, civil or criminal
legal or administrative proceedings may be brought. Depending on the
circumstances and the outcome, these proceedings could result in fines,
penalties, compensatory and punitive damages or the cancellation or suspension
of payments under one or more government contracts. Under government
regulations, a company or one or more of its operating divisions or units can
also be suspended or debarred from government contracts based on the results of
investigations.
Suspension or inability to enter into government contracts could
materially adversely affect the Company's future operating results and
consolidated financial condition. However, although the Company cannot predict
the outcome of these matters with certainty, the
22
Company's management is not aware of any pending matter that is likely to result
in such action, or that is otherwise likely to have a material adverse effect on
the Company's financial condition or liquidity. The resolution in any reporting
period of one or more of these matters could have a material adverse effect on
the Company's results of operations for that period.
Risks of Export Sales. The Company anticipates that export sales will
continue to account for a significant percentage of the Company's sales. Risks
associated with export sales include:
o political and economic instability, including the current
prevailing weak condition in several of the world's economies;
o accounts receivable collection;
o export controls;
o changes in legal and regulatory requirements;
o policy changes affecting the markets for the Company's
products;
o changes in tax laws and tariffs;
o euro currency conversion; and
o exchange rate fluctuations (which may affect sales to
international customers and the value of and profits earned on
exports sales when converted into U.S. dollars).
Any of these factors could materially adverse affect the Company's results of
operations.
Risks Associated with Acquisition and Disposition Strategy. The Company
intends to continue to strategically position its businesses in order to improve
its ability to compete. The Company plans to do this by seeking specialty
niches, expanding its global presence, acquiring businesses complementary to
existing strengths and continually evaluating the performance and strategic fit
of existing businesses. The Company regularly considers acquisition and business
combination opportunities as well as possible business dispositions. Its
management from time to time holds discussions with management of other
companies to explore such opportunities and possible dispositions. As a result,
the relative makeup of the businesses comprising the Company are subject to
change.
Acquisitions involve various inherent risks, such as:
o assessing accurately the value, strengths, weaknesses,
contingent and other liabilities and potential profitability
of acquisition candidates;
o the potential loss of key personnel of an acquired business;
o the Company's ability to achieve identified financial and
operating synergies anticipated to result from an acquisition;
and
o unanticipated changes in business and economic conditions
affecting an acquired business.
International acquisitions could be affected by:
o export controls;
o exchange rate fluctuations;
o the euro currency conversion;
o domestic and foreign political conditions; and
23
o further deterioration in domestic and foreign economic
conditions.
Uncertainties Relating to Synergies. There can be no assurance that the
Company will be able to realize, or do so within any particular time frame, the
cost reductions, cash flow increases or other synergies expected to result from
the acquisitions and other transactions the Company has made or may make or
generate additional revenue to offset any unanticipated inability to realize
such expected synergies. Realization of the anticipated benefits of acquisitions
and other transactions, including the OREMET and Allvac-SMP acquisitions and the
agreements with Bethlehem, could take longer than expected and implementation
difficulties, market factors and further deterioration in domestic or global
economic conditions could alter the anticipated benefits.
YEAR 2000 READINESS DISCLOSURE
Year 2000 Task Forces. Over the past several years, the Company has put
in place management task forces at its operating companies to identify whether
its computer systems, which include business computers, mill equipment and
process control computers and other devices using a microprocessor, as well as
telecommunication and payroll and employee benefit processing systems, would
function properly with respect to dates in the Year 2000 and thereafter. These
task forces report to the Executive Resource Information Committee, a senior
management committee charged with reviewing and establishing priorities for
information technology-related matters, including Year 2000 issues, and which
reports to the Audit and Finance Committee of the Company's Board of Directors.
Through these efforts, Year 2000 identification, solution development, testing
and implementation initiatives, and contingency planning initiatives, are in
process at Allegheny Teledyne and each of the operating companies and are
included in the Company's integration plans for OREMET and Allvac-SMP.
Targeted Completion of Internal Solutions. In part as a result of its
Year 2000 initiatives, but mostly due to evolving business needs and continuing
technological advancements, the Company has been modifying and replacing
portions of its computer software and hardware systems. The Company estimates,
based on dollars expended, that installation of solutions to identified Year
2000 issues relating to its information technology systems is approximately 90%
complete. While the Company estimates that based on dollars expended, about 95%
of solutions have been implemented for its non-information technology systems,
the Company continues to work to resolve various manufacturing-related Year 2000
issues. The Company continues to target having substantially all internal
solutions relating to Year 2000 functionality of its computer systems developed
and implemented by June 1999. This targeted completion date depends, however, on
numerous assumptions, including continued availability of trained personnel in
this area.
Other Year 2000 Areas of Focus. Efforts continue to be made to identify
and resolve customer- and supplier-based Year 2000 issues that could affect the
Company and its operating and support systems. The Company believes that it has
identified substantially all material customer- and supplier-based Year 2000
issues. Efforts also continue to be made to identify whether products produced
and sold by Allegheny Teledyne's operating companies have Year 2000 issues. The
Company believes that it has identified substantially all products that have
Year 2000 issues and is working to resolve such issues. The Company believes
that there are no significant product-related Year 2000 issues. The Company has
not conducted any review of products manufactured and sold by discontinued
businesses or businesses that it has sold.
24
Year 2000 Expenditures. Excluding expenditures necessitated by ordinary
business needs and continuing technological advancements in the computer
industry, the Company spent approximately $11 million in 1998 and anticipates
spending another estimated $7 million in 1999 to address Year 2000 issues. These
expenditures do not include expenditures that may be required to address Year
2000 issues associated with some products. Substantially all costs related to
the Company's Year 2000 initiatives are expensed as incurred and funded through
operating cash flows. Additional amounts may be spent in subsequent years.
Overall Assessment; Worst Case Scenario. Based upon internal
assessments, formal communications with suppliers and customers with which the
Company exchanges electronic data, and work completed to date, the Company
believes that Year 2000 issues should not pose significant operational problems
or have a material impact on the Company's consolidated financial position,
results of operations or cash flow. A failure of third party vendors or
customers to be Year 2000 ready, however, could adversely affect these beliefs
and is not quantifiable. Such failure could have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flow in a given period, but probably not over the long-term. The most reasonably
likely worst case scenario of failure by the Company or its suppliers or
customers to resolve Year 2000 problems would be a temporary slowdown or
cessation of manufacturing operations at one or more of the Company's facilities
and a temporary inability on the part of the Company to timely process orders
and to deliver finished products to customers. Delays in meeting customers'
orders would affect the timing of billings to and payments received from
customers with respect to orders and could result in other liabilities.
Customers' Year 2000 problems could also delay the timing of payments to the
Company for orders. Efforts are underway to identify contingency plans should
unplanned situations arise on January 1, 2000.
Factors that May Affect Year 2000 Estimates. While the Company has been
conducting a comprehensive Year 2000 review of its computer systems and
products, there may be Year 2000-related matters that have not been identified.
Actual dollar amounts spent by the Company to address Year 2000 issues could
materially differ from the estimates for a number of reasons, including:
o changes in the availability or costs of personnel trained in
this area;
o changes made to the Company's remediation plans;
o the ability of the Company's significant suppliers, customers
and others with which it conducts business, including
governmental agencies, to identify and resolve their own Year
2000 issues; or
o identification of other Year 2000-related matters.
ITEM 2. PROPERTIES
The Company's principal domestic facilities as of December 31, 1998 are
listed below by segment. Of those facilities listed below which are owned, three
are subject to mortgages or similar encumbrances securing borrowings under
certain industrial development authority financings. See Note 5 of the Notes to
Consolidated Financial Statements beginning on page 37 of the 1998 Annual
Report. Although the facilities vary in terms of age and condition, the
Company's management believes that these facilities have generally been
well-maintained.
25
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APPROXIMATE
SQUARE FOOTAGE
FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED)
----------------- ------------- --------------
SPECIALTY METALS
Allegheny Ludlum
Brackenridge Works Manufacturing of stainless steel and specialty 2,443,000 (owned)
Brackenridge and Natrona, PA metals strip, sheet, and plate, silicon electrical
steel strip and sheet, and other specialty steel
strip and sheet.
West Leechburg Works Manufacturing of stainless steel and specialty 1,415,000 (owned)
West Leechburg and metals strip and sheet, silicon electrical steel
Bagdad, PA strip and sheet, and other specialty steel strip
and sheet.
Vandergrift Plant Manufacturing of stainless steel strip and sheet. 966,000 (owned)
Vandergrift, PA
Washington Plant Manufacturing of stainless steel and tool steel 615,000 (owned)
Washington, PA plate products.
Wallingford Plant Manufacturing of stainless steel and specialty 591,000 (owned)
Wallingford and metals strip and sheet and other specialty strip
Waterbury, CT and sheet.
Houston Plant Manufacturing of stainless steel and other 298,000 (owned)
Houston, PA specialty metals products.
Lockport Plant Manufacturing of stainless steel and other 282,000 (owned)
Lockport, NY specialty metals products.
New Castle Plant Manufacturing of stainless steel sheet. 178,000 (owned)
New Castle, IN
Massillon Plant 96-inch wide anneal and pickle line for 165,000 (owned)
Massillon, OH manufacture of stainless steel and other specialty
metals plate.
Allvac
Monroe Plant Production of nickel and titanium products and 640,000 (owned)
Monroe, NC other specialty steel long products.
Latrobe, PA Production of nickel and titanium products, tool 468,000 (owned)
and high speed steel, and other specialty steel
long products.
Richburg, SC Production of nickel and titanium products, tool 221,000 (leased)
and high speed steel, and other specialty steel
long products.
Bakers Plant Production of titanium ingot. 60,000 (owned)
Monroe, NC
Rodney Metals
New Bedford, MA Manufacturing of stainless steel precision rolled 250,000 (leased)
and coated thin sheet strip and foil, custom
roll-formed and stretch-formed shapes.
Oremet-Wah Chang
Albany, OR Production of zirconium, halfnium, niobium, 1,215,000 (owned)
titanium, and tantalum.
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Albany, OR Production of titanium sponge, ingot, mill 461,000 (owned)
products and castings.
Richland, WA Production of titanium ingots, slabs and 103,000 (owned)
electrodes.
AEROSPACE & ELECTRONICS
Brown Engineering
Huntsville, AL Provision of engineered services and products, 475,000 (owned)
including systems engineering, optical 123,000 (leased)
engineering, software and hardware engineering,
and instrumentation technology.
Grove Hill, AL Provision of engineered services and products, 208,000 (owned)
including systems engineering, optical
engineering, software and hardware engineering,
and instrumentation technology.
Continental Motors
Mobile, AL Design, development, and production of new and 993,000 (leased)
rebuilt piston engines, ignition systems, and 536,000 (leased)
spare parts for general aviation market.
Redlands, CA Manufacturing of batteries for the general 91,000 (owned)
aviation market.
Toledo, OH Design, development and production of small 351,000 (leased)
turbine engines for aerospace and automotive
markets.
Electronic Technologies
Los Angeles, CA Development and production of electronic 141,000 (leased)
components and subsystems. 83,000 (owned)
Los Angeles, CA Production of digital data acquisition systems for 154,000 (leased)
monitoring commercial aircraft and engines.
Lewisburg, TN Development and production of electronic 153,000 (owned)
components and subsystems.
Mt. View, CA Production of ferrite components, switching 100,000 (owned)
devices, filters, and monolithic microwave
integrated circuits.
Ryan Aeronautical
San Diego, CA Production of unmanned aerial vehicles and aerial 1,100,000 (leased)
target systems.
Hollister, CA Manufacturing of controlled explosive devices. 221,000 (owned)
Cast Parts
Pomona, CA Manufacturing of aluminum and magnesium castings 231,000 (owned)
for air frames, turbine engines and missiles.
INDUSTRIAL
Metalworking Products
Waynesboro, PA Production of thread-cutting and roll forming 386,000 (owned)
equipment and perishable tools.
Huntsville, AL Production of molybdenum, tungsten, and tungsten 293,000 (owned)
carbide powders and milled products.
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Huntsville, AL Production of tungsten and molybdenum products. 183,000 (leased)
Grant, AL Production of primary tungsten sintered parts. 88,000 (leased)
Nashville, TN Production of tungsten carbide and cutting tools. 134,000 (owned)
Teledyne Fluid Systems
Brecksville, OH Manufacturing of nitrogen cylinder systems and 125,000 (owned)
industrial and pressure release valves.
Teledyne Specialty Equipment
Canal Winchester, OH Manufacturing of transportable material handlers. 41,000 (owned)
Casting Service
La Porte, IN Manufacturing of large ductile and grey iron 453,000 (owned)
castings for diesel engines, automotive dies,
machine tools and power generation.
Portland Forge
Portland, IN Manufacturing of carbon and alloy steel forgings 215,000 (owned)
as transmissions, pistons, and other power train
components.
Lebanon, KY Manufacturing of carbon and alloy steel forgings. 100,000 (owned)
CONSUMER
Laars
Moorpark, CA Manufacturing of pool heaters, pool filtration, 200,000 (owned)
and spa control equipment.
Rochester, NH Manufacturing of heating elements. 80,000 (owned)
Randolph, MA Manufacturing of boiler and water heating products. 63,600 (leased)
Water Pik
Fort Collins, CO Manufacturing of shower heads, water filtration 243,000 (owned)
products, and oral health products.
Loveland, CO Manufacturing of showerheads, water filtration 134,000 (owned)
products, and oral health products.
The Company also owns or leases facilities in a number of foreign
countries, including Canada, the United Kingdom, Germany, France, The
Netherlands, Switzerland, Sweden, Costa Rica, Mexico and Taiwan. In connection
with the Company's February 1998 acquisition of the aerospace division of
Sheffield Forgemasters, the Company acquired 625,000 square foot facilities for
melt and remelt, machining and bar mill operations, laboratories and offices
located on a 25-acre site in Sheffield, England. The related acquisition of
Jessop Saville Limited includes a 40,000 square foot leased facility for
computer numerically controlled milling and machine operations.
The Company's executive offices, located at PPG Place in Pittsburgh,
Pennsylvania, and its West Coast Regional offices, located at Century Park in
Los Angeles, California, are leased from third parties. These facilities are
modern and sufficient for the Company to carry on its current activities.
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ITEM 3. LEGAL PROCEEDINGS
The Company becomes involved from time to time in various lawsuits,
claims and proceedings relating to the conduct of its business, including those
pertaining to environmental, government contracting, product liability, patent
infringement, commercial, employment, employee benefits, and stockholder
matters.
In June 1995, the U.S. Department of Justice commenced an action
against Allegheny Ludlum in the United States District Court for the Western
District of Pennsylvania, alleging multiple violations of the federal Clean
Water Act. The complaint seeks injunctive relief and assessment of penalties of
up to $25,000 per day of violation. In this proceeding, the Company is currently
participating in Court-ordered non-binding mediation and, if unsuccessful,
discovery will resume.
In January 1997, the U.S. EPA filed suit in the United States District
Court for the Western District of Pennsylvania against Allegheny Ludlum alleging
failure to comply with a unilateral administrative order ("UAO") issued in May
1996. The complaint seeks an assessment of penalties of up to $25,000 per day of
violation. The UAO seeks physical control of a portion of Allegheny Ludlum's
Natrona plant for at least 30 years for a treatment facility to be built by
another company in conjunction with that company's remediation of a nearby
Superfund site. The Company has been challenging the UAO and has filed a
declaratory judgment action to protect its rights. The District Court ordered a
trial date of March 22, 1999. While continuing to deny liability, but in an
effort to avoid protracted litigation, the Company agreed to settle this matter
with the EPA with payment by the Company of $150,000.
While the outcome of litigation, including the matters specified above,
cannot be predicted with certainty, and some lawsuits, claims or proceedings may
be determined adversely to the Company, management does not believe that the
disposition of any such pending matters is likely to have a material adverse
effect on the Company's financial condition or liquidity, although the
resolution in any reporting period of one or more of these matters could have a
material adverse effect on the Company's results of operations for that period.
See the discussion of related matters in Item 1 of Part I of this Form
10-K under the captions "Environmental, Health and Safety Matters" and
"Government Contracts."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders in
the fourth quarter of 1999.
29
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required by this item is incorporated by reference to Note
8 of the Notes to Consolidated Financial Statements on pages 39 to 40 of the
1998 Annual Report and to "Common Stock Price" on page 52 of the 1998 Annual
Report.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference to
"Selected Financial Data" on pages 54 and 55 of the 1998 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Information required by this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 19 through 29 of the 1998 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Other Matters - Impact of the Introduction of the Eurodollar" and
"-- Hedging" on pages 25 to 26 of the 1998 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to Consolidated
Financial Statements listed in Item 14(a)(1) are incorporated by reference to
pages 30 through 51 of the 1998 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the information set forth under the caption "Principal
Officers of the Registrant" in Part I of this report, the information concerning
the directors of the Company required by this item is incorporated by reference
to "Election of Directors" as set forth in the 1999 Proxy Statement filed by the
Registrant pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference to
"Directors Compensation", "Executive Compensation" and "Compensation Committee
Interlocks and Insider Participation" as set forth in the 1999 Proxy Statement
filed by the Registrant pursuant to
30
Regulation 14A. The Registrant does not incorporate by reference in this Form
10-K either the "Report on Executive Compensation" or the "Cumulative Total
Stockholder Return" section of the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference to
"Stock Ownership Information" as set forth in the 1999 Proxy Statement filed by
the Registrant pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference to
"Certain Transactions" as set forth in the 1999 Proxy Statement filed by the
Registrant pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements included on pages 30
through 51 of the 1998 Annual Report are incorporated by reference:
Consolidated Statements of Income - Years Ended December 31, 1998, 1997
and 1996
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years Ended December 31, 1998,
1997 and 1996
Consolidated Statements of Stockholders' Equity - Years Ended December
31, 1998, 1997 and 1996
Report of Ernst & Young LLP, Independent Auditors
Notes to Consolidated Financial Statements
The report of Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP)
relating to its audits of the consolidated financial statements of OREMET as of
December 31, 1997 and 1996 and for the years then ended is filed herewith as
Exhibit 99.1.
(2) FINANCIAL STATEMENT SCHEDULES
All schedules set forth in the applicable accounting regulations of the
Commission either are not required under the related instructions or are not
applicable and, therefore, have been omitted.
(3) EXHIBITS
A list of exhibits included in this Report or incorporated by reference
is found in the Exhibit Index beginning on page 33 of this Report and
incorporated by reference.
(b) REPORTS ON FORM 8-K FILED IN THE FOURTH QUARTER OF 1998:
None.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALLEGHENY TELEDYNE INCORPORATED
Date: March 18, 1999 By /s/ Richard P. Simmons
-------------------------------------
Richard P. Simmons
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and as of the 18th day of March 1999.
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/s/ Richard P. Simmons /s/ James L. Murdy
-------------------------------------------------- ------------------------------------------------------
Richard P. Simmons James L. Murdy
Chairman of the Board, President and Chief Executive Vice President, Finance and Administration
Executive Officer and Director (Principal and Chief Financial Officer and Director (Principal
Executive Officer) Financial Officer)
/s/ Robert P. Bozzone /s/ Dale G. Reid
-------------------------------------------------- ------------------------------------------------------
Robert P. Bozzone Dale G. Reid
Vice Chairman of the Board and Director Vice President-Controller and
Chief Accounting Officer
(Principal Accounting Officer)
/s/ Paul S. Brentlinger /s/ Frank V. Cahouet
-------------------------------------------------- ------------------------------------------------------
Paul S. Brentlinger Frank V. Cahouet
Director Director
/s/ Diane C. Creel /s/ C. Fred Fetterolf
-------------------------------------------------- ------------------------------------------------------
Diane C. Creel C. Fred Fetterolf
Director Director
/s/ Ray J. Groves /s/ Frank J. Lucchino
-------------------------------------------------- ------------------------------------------------------
Ray J. Groves Frank J. Lucchino
Director Director
/s/ W. Craig McClelland /s/ Robert Mehrabian
-------------------------------------------------- ------------------------------------------------------
W. Craig McClelland Robert Mehrabian
Director Director
/s/ William G. Ouchi /s/ Charles J. Queenan, Jr.
-------------------------------------------------- ------------------------------------------------------
William G. Ouchi Charles J. Queenan, Jr.
Director Director
/s/ James E. Rohr
--------------------------------------------------
James E. Rohr
Director
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation of Allegheny Teledyne
Incorporated (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-4 (No. 333-8235),
appears as Annex A to Appendix A of the Joint Proxy
Statement/Prospectus forming part of the Registration
Statement).
3.2 Amended and Restated Bylaws of Allegheny Teledyne Incorporated
(filed herewith).
4.1 Credit Agreement dated as of August 30, 1996 (incorporated by
reference to Exhibit 10 to the Registrant's Form 10-Q for the
quarter ended September 30, 1996 (File No. 1-12001)),
Assignment and Assumption Agreements dated as of August 22,
1997 and First Amendment to Credit Agreement dated as of
August 31, 1996 (incorporated by reference to Exhibit 4 to
Registrant's Form 10-Q for the quarter ended September 30,
1997 (File No. 1-12001)), and Second Amendment to Credit
Agreement dated as of March 24, 1998 to certain Credit
Agreement dated as of August 30, 1996, as amended by First
Amendment to Credit Agreement dated as of August 31, 1997
(incorporated by reference to Exhibit 4 to the Registrant's
Form 10-K for the quarter ended March 31, 1998 (File No.
1-12001)).
4.2 Indenture dated as of December 15, 1995 between Allegheny
Ludlum Corporation and The Chase Manhattan Bank (National
Association), as trustee (relating to Allegheny Ludlum
Corporation's 6.95% Debentures due 2025) (incorporated by
reference to Exhibit 4(a) to Allegheny Ludlum Corporation's
Form 10-K for the year ended December 31, 1995 (File No.
1-9498)), and First Supplemental Indenture by and among
Allegheny Teledyne Incorporated, Allegheny Ludlum Corporation
and The Chase Manhattan Bank (National Association), as
Trustee, dated as of August 15, 1996 (incorporated by
reference to Exhibit 4.1 to Registrant's Current Report on
Form 8-K dated August 15, 1996 (File No. 1-12001)).
4.3 Rights Agreement dated March 12, 1998, including Certificate
of Designation for Series A Junior Participating Preferred
Stock as filed with the State of Delaware on March 13, 1998
(incorporated by reference to Exhibit 1 to the Registrant's
Current Report on Form 8-K dated March 12, 1998 (File No.
1-12001)).
10.1 Allegheny Teledyne Incorporated 1996 Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Registrant's
Form 10-K for the year ended December 31, 1997 (File No.
1-12001)).*
10.2 Allegheny Teledyne Incorporated Stock Acquisition and
Retention Plan effective January 1, 1997 (incorporated by
reference to Exhibit 10.2 to the Registrant's Form 10-K for
the year ended December 31, 1996 (File No. 1-12001)).*
10.3 Allegheny Teledyne Incorporated Stock Acquisition and
Retention Program effective January 1, 1998, as amended and
restated (filed herewith).*
33
10.4 Allegheny Teledyne Incorporated 1996 Non-Employee Director
Stock Compensation Plan, as amended December 17, 1998
(filed herewith).*
10.5 Allegheny Teledyne Incorporated Fee Continuation Plan for
Non-Employee Directors (incorporated by reference to Exhibit
10.4 to the Company's Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-12001)).*
10.6 Supplemental Pension Plan for Certain Key Employees of
Allegheny Teledyne Incorporated and its subsidiaries (formerly
known as the Allegheny Ludlum Corporation Key Man Salary
Continuation Plan) (incorporated by reference to Exhibit 10.7
to the Company's Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-12001)).*
10.7 Allegheny Ludlum Corporation Additional Compensation Plan
(presently known as the Performance Management System Plan)
(incorporated by reference to Exhibit 10(c) to Allegheny
Ludlum Corporation's Registration Statement on Form S-1 (No.
33-12940)).*
10.8 Allegheny Teledyne Incorporated Benefit Restoration Plan
(filed herewith).*
10.9 Allegheny Ludlum Corporation 1987 Stock Option Incentive Plan
(as amended and restated) (incorporated by reference to
Exhibit 10(f) to Allegheny Ludlum Corporation's Form 10-K for
the year ended December 31, 1995 (File No. 1-9498)).*
10.10 Allegheny Ludlum Corporation Performance Share Plan (as
amended and restated) (incorporated by reference to the
Registration Statement on Form S-4 (No. 333-8235) of Allegheny
Teledyne Incorporated, appears as Appendix F to the Joint
Proxy Statement/Prospectus forming part of the Registration
Statement).*
10.11 Allegheny Ludlum Corporation Stock Acquisition and Retention
Plan, as restated effective as of August 15, 1996
(incorporated by reference to Exhibit 10.10 to the Company's
Report on Form 10-K for the year ended December 31, 1997 (File
No. 1-12001)).*
10.12 Teledyne, Inc. 1990 Stock Option Plan (incorporated by
reference to Exhibit 10 to Teledyne, Inc.'s Form 10-K for the
year ended December 31, 1990 (File No. 1-5212)).*
10.13 Teledyne, Inc. 1994 Long-Term Incentive Plan (incorporated by
reference to Exhibit A to Teledyne, Inc.'s 1994 proxy
statement (File No. 1-5212)).*
10.14 Teledyne, Inc. 1995 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit A to Teledyne, Inc.'s
1995 proxy statement (File No. 1-5212)).*
10.15 Teledyne, Inc. Senior Executive Performance Plan (incorporated
by reference to the Registration Statement on Form S-4 (No.
333-8235) of Allegheny Teledyne Incorporated, appears as
Appendix G to the Joint Proxy Statement/Prospectus forming
part of the Registration Statement).*
34
10.16 Summary of Teledyne, Inc. Executive Deferred Compensation
Plan, as restated effective September 1, 1994 (incorporated by
reference to Exhibit 10.2 to Teledyne, Inc.'s Form 10-K for
the year ended December 31, 1994 (File No. 1-5212)).*
10.17 First Amendment dated as of August 14, 1995 and Second
Amendment dated as of December 4, 1995 to the Summary of
Teledyne, Inc. Executive Deferred Compensation Plan
(incorporated by reference to Exhibit 10.2 to Teledyne, Inc.'s
Form 10-K for the year ended December 31, 1995 (File No.
1-5212)).*
10.18 Employment Agreement dated July 15, 1996 between Allegheny
Teledyne Incorporated and Arthur H. Aronson (incorporated by
reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-4 (No. 333-8235)).*
10.19 Employment Agreement dated July 15, 1996 between Allegheny
Teledyne Incorporated and James L. Murdy (incorporated by
reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-4 (No. 333-8235)).*
10.20 Employment Agreement dated July 15, 1996 between Allegheny
Teledyne Incorporated and Jon D. Walton (incorporated by
reference to Exhibit 10.5 to the Company's Registration
Statement on Form S-4 (No. 333-8235)).*
10.21 Allegheny Teledyne Incorporated Executive Deferred
Compensation Plan (filed herewith).*
10.22 Allegheny Teledyne Incorporated Performance Share Program
(filed herewith).*
10.23 Allegheny Teledyne Incorporated Annual Incentive Plan (filed
herewith).*
13.1 Pages 19 through 55 inclusive of the Annual Report of
Allegheny Teledyne Incorporated for the year ended December
31, 1998 (filed herewith).
21.1 Subsidiaries of the Registrant (filed herewith).
23.1 Consent of Ernst & Young LLP (filed herewith).
23.2 Consent of PricewaterhouseCoopers LLP (filed herewith).
27.1 Financial Data Schedule (filed herewith).
99.1 Report of Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers
LLP)(filed herewith).
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Report.
Certain instruments defining the rights of holders of long-term debt of the
Company and its subsidiaries have been omitted from the Exhibits in accordance
with Item 601(b)(4)(iii) of Regulation S-K. A copy of any omitted document will
be furnished to the Commission upon request.
35
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘10-K405’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 6/30/01 | | 18 | | | | | 10-Q |
| | 12/16/00 | | 18 |
| | 10/1/00 | | 18 |
| | 7/31/00 | | 18 |
| | 1/1/00 | | 25 |
| | 12/31/99 | | 16 | | | | | 10-K/A, 10-K405, DEF 14A |
| | 9/30/99 | | 18 | | | | | 10-Q |
| | 3/22/99 | | 29 |
| Filed on: | | 3/19/99 |
| | 3/18/99 | | 32 | | | | | DEF 14A |
| | 3/15/99 | | 1 | | 18 |
| For Period End: | | 12/31/98 | | 1 | | 35 | | | 10-K/A |
| | 12/17/98 | | 34 |
| | 11/20/98 | | 5 |
| | 5/29/98 | | 5 | | | | | 8-K |
| | 3/31/98 | | 33 | | | | | 10-Q |
| | 3/24/98 | | 33 | | | | | 8-K |
| | 3/13/98 | | 33 | | | | | 8-A12B, 8-K |
| | 3/12/98 | | 33 | | | | | 8-K |
| | 1/1/98 | | 33 |
| | 12/31/97 | | 16 | | 34 | | | 10-K405, 10-K405/A, DEF 14A |
| | 9/30/97 | | 33 | | | | | 10-Q |
| | 8/31/97 | | 33 |
| | 8/22/97 | | 33 |
| | 1/1/97 | | 33 |
| | 12/31/96 | | 16 | | 33 | | | 10-K, 11-K, 8-K, DEF 14A |
| | 9/30/96 | | 33 | | | | | 10-Q |
| | 8/31/96 | | 33 |
| | 8/30/96 | | 33 | | | | | 8-K |
| | 8/15/96 | | 3 | | 34 | | | 8-K, S-4 POS, S-8 |
| | 7/15/96 | | 35 |
| | 12/31/95 | | 33 | | 35 |
| | 12/15/95 | | 33 |
| | 12/4/95 | | 35 |
| | 8/14/95 | | 35 |
| | 12/31/94 | | 35 |
| | 9/1/94 | | 35 |
| List all Filings |
4 Subsequent Filings that Reference this Filing
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