Back to GetFilings.com
1
1996
===============================================================================
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, 1996
[ ] 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 (I.R.S. Employer
incorporation 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:
================================================================================================
Title of each class Name of each exchange on which registered
- ------------------------------------------------------------------------------------------------
Common Stock, $0.10 Par Value New York Stock Exchange
Teledyne, Inc. 7% Subordinated Debentures due 1999 New York Stock Exchange
================================================================================================
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. [ ]
At March 14, 1997, the Registrant had outstanding 176,093,974 shares of
its Common Stock. The aggregate market value of the Registrant's voting stock
held by non-affiliates at this date was approximately $3.9 billion, based on
the closing price of $28.625 as reported on the New York Stock Exchange. Shares
of common stock known by the Registrant to be beneficially owned by executive
officers or directors of the Registrant 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 1996 Annual Report to Stockholders - Part I, Part II
and Part IV of this Report.
Selected portions of the 1997 Proxy Statement - Part III of this Report.
===============================================================================
2
ALLEGHENY TELEDYNE INCORPORATED
SEC FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1996
INDEX
PART I PAGE NO.
Item 1. Business 3
Item 2. Properties 17
Item 3. Legal Proceedings 20
Item 4. Submission of Matters to a Vote of Security Holders 21
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters 22
Item 6. Selected Financial Data 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
Item 8. Financial Statements and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of the Registrant 22
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management 23
Item 13. Certain Relationships and Related Transactions 23
PART IV
Item 14. Exhibits and Financial Statement Schedules 23
SIGNATURES 24
EXHIBIT INDEX 26
2
3
PART I
ITEM 1. BUSINESS
THE COMPANY
Allegheny Teledyne Incorporated is a Delaware corporation with its
principal executive offices located at 1000 Six PPG Place, Pittsburgh,
Pennsylvania 15222-5479, telephone (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. In the combination, Allegheny Ludlum
shareholders received one share of Allegheny Teledyne common stock for each one
of their Allegheny Ludlum common shares, and Teledyne stockholders received
1.925 shares of Allegheny Teledyne common stock for each of their Teledyne
common shares. The combination was accounted for under the pooling of interests
method of accounting. References to "Allegheny Teledyne," the "Company" or the
"Registrant" mean Allegheny Teledyne Incorporated and its subsidiaries, unless
the context otherwise requires.
The Company is a group of technology-based manufacturing businesses
with significant concentration in specialty metals, complemented by aerospace
and electronics, industrial, and consumer products. The Company operates in
four business segments - specialty metals, aerospace and electronics,
industrial, and consumer - which accounted for 54.3%, 26.2%, 11.9%, and 7.6%,
respectively, of the Company's total operating revenues of $3.8 billion for the
year ended December 31, 1996. Additional financial information with respect to
the Company's business segments, including their contributions to operating
earnings and their identifiable assets, for the three years ended December 31,
1996 is presented under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations" on pages
23 to 29 of the 1996 Annual Report to Stockholders (the "1996 Annual Report")
and in Note 11 of Notes to Consolidated Financial Statements beginning on page
35 of the 1996 Annual Report and is incorporated herein by reference.
SPECIALTY METALS SEGMENT
The products of this business 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 Allegheny
Ludlum, Allvac, Rodney Metals, Wah Chang, Casting Service, and Portland Forge.
These companies offer a number of products including:
Specialty Steels, Super Alloys and Other Alloys. The term "specialty
steel" refers to stainless steels, high speed and tool steels, high temperature
alloys (super alloys), 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
3
4
thermostatic alloys are not steel by definition and are more properly referred
to as specialty metals.
Unlike high-volume carbon steel producers, specialty steelmakers
produce smaller quantities with special equipment. Because of the need to meet
more exacting technical and metallurgical requirements, stainless and other
specialty steels are made with special processing techniques and generally
utilize different alloying elements such as nickel, ferrochromium, molybdenum,
niobium, titanium and cobalt.
Specialty steel is produced in a variety of forms (sheet, strip, foil,
plate, wire, ingot, billet, rod, bar, tubing, and shapes) and is 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 steel 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, and
aircraft and defense equipment.
High-purity and high-performance superalloys, other alloys, and
specialty steels are refined, partially finished, 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.
Allegheny Teledyne is able to produce a wide range of premium grade,
nickel-based, cobalt-based, and titanium alloys that are designed to meet the
high performance requirements of the aircraft, aerospace, gas turbine, nuclear
energy, 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.
Allegheny Teledyne high-speed steels provide the high temperature
hardness required for lathe bits, drills, milling cutters, taps and dies, and
other cutting tools. Related alloy steels, including a cobalt-free maraging
grade, are produced for bearings, gears, special aerospace hardware, and
high-strength applications.
Thin-rolled metals are fabricated in a broad range of gauges, widths,
and coatings to meet the specialized needs of a diverse international customer
base. These customers then use the metal to fabricate a variety of different
products ranging from automobile components to photographic, personal computer,
and consumer products. A significant portion of these metals are distributed
through a network of Company service centers, some located in foreign
countries.
Refractory and Reactive Metals. High-purity metals that exhibit unique
properties (primarily zirconium, but including hafnium, vanadium, niobium, and
titanium) are melted, refined, partially finished, then sold to domestic and
foreign customers primarily in the nuclear energy, chemical processing,
medical, and aerospace industries.
Allegheny Teledyne is 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
4
5
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.
Niobium, also known as columbium, is a high-technology metal produced
by Allegheny Teledyne in various forms and alloys. It is used as an alloying
element in the manufacture of many steels. The higher quality grades produced
by Allegheny Teledyne 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.
Tantalum, one of the most corrosion-resistant metals, is produced by
Allegheny Teledyne for medical implants, chemical process equipment, and
aerospace engine components.
Forgings and Castings. Allegheny Teledyne also processes metals by
casting, forging, rolling, drawing, and extruding the metals into finished
forms that are used in a diverse number of industries. With the latest
screw-type forging presses, the Company 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, the Company has the ability to forge the more difficult alloys,
which are used in aerospace, medical implants, and other critical applications.
Allegheny Teledyne also casts a variety of metals into forms ranging
from diesel locomotive engine blocks to lightweight aluminum and magnesium
aircraft parts. Housings and parts are also made for power generation
equipment, tools, and automobiles. Cold-drawn stainless steel and
custom-fabricated tubing is also produced.
AEROSPACE AND ELECTRONICS SEGMENT
Companies in the aerospace and electronics segment include Teledyne
Ryan Aeronautical, Teledyne Brown Engineering, Teledyne Electronic
Technologies, Teledyne Continental Motors, Teledyne Controls and Teledyne
Economic Development. These companies offer a variety of products and services
including:
Unmanned Aerial Vehicles and Targets. Unmanned aerial vehicles and
targets are designed, manufactured, and sold for defense-related purposes to
the U. S. Government and to the international market. Allegheny Teledyne's
background in airframe manufacture goes back to Charles Lindbergh's Spirit of
St. Louis, which was built by Ryan Airlines, Inc., the predecessor to today's
Teledyne Ryan Aeronautical. More than 25 types of remotely piloted aircraft,
usually called Unmanned Aerial Vehicles ("UAVs"), have been built by Ryan, in
both supersonic and subsonic versions. These recoverable and reusable vehicles
are used for sophisticated military missions, such as reconnaissance, with the
pilots safely flying them from remote control centers. Ryan heads the team
developing the Global Hawk UAV for the U.S. Government. Through the production
of sophisticated UAVs, Allegheny Teledyne has also developed broad experience
in the use of advanced materials, such as graphite composites, and has
facilities for the numerically controlled machining of airfoils from honey-comb
materials.
5
6
Allegheny Teledyne has built the airframe for the U. S. Army's Apache
attack helicopter and, during 1997, expects to begin building this airframe for
attack helicopters used by the United Kingdom and The Netherlands.
Aviation Propulsion Systems. Aviation propulsion systems, including
small gas turbine engines and piston engines, are designed, manufactured and
sold domestically and internationally for general aviation and defense-related
purposes. Small gas turbine engines are used primarily in aerial targets and
missiles. The piston engine products, sold under the Teledyne Continental
Motors name, are used by several general aviation aircraft original equipment
manufacturers ("OEMs") and after-market suppliers. Continental Motors' piston
engines have been powering airplanes for 60 years, and today about half of the
general aviation piston engines produced in the U.S. are built by Allegheny
Teledyne.
Engineering Services. A wide range of engineering services is offered
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, computer software has
been developed for simulations and hardware performance evaluations.
Sensing, Analysis and Instrumentation Systems and Instruments. A
diverse range of sensing, analysis, and instrumentation systems and instruments
are designed, manufactured and sold to a number of customers, including the
U.S. Federal Aviation Administration, domestic and foreign airlines,
commercial aircraft OEMs, and a broad base of companies in different industrial
sectors.
Allegheny Teledyne currently produces equipment for telemetering data
from remote sources, which is used by major airlines and helicopter fleets to
record in-flight performance and maintenance data on their aircraft.
Sensors, analyzers (on-line and portable), and custom-engineered
systems incorporate a broad range of principles of measurement, including
electrochemical, electrolytic diffusion, chemiluminescence, absorption
photometry, thermal conductivity, flame ionization, and catalytic oxidation.
Oxygen sensors are designed to be accurate, sensitive, reliable, and
versatile in their applications. Photometric detectors for specific chemicals
cover the complete spectrum of absorption analysis, from ultraviolet to visible
to infrared wave-lengths. Polarographic sensors for carbon monoxide and
hydrogen sulfide gas analysis also monitor chlorine, fluorine, and reducing
gases.
Allegheny Teledyne produces equipment for geophysical exploration and
analysis for oil and gas exploration surveys and the measurement of seismic
earth motion. It is a leader in the production of a family of hydrophones based
on piezoelectric ceramics. For over a half century, precise seismometers
developed and manufactured by Allegheny Teledyne have been used for detecting
natural and man-made earth motion. Today, smaller, more sensitive instruments
and microprocessor-based, portable systems are designed to quickly extract and
analyze seismic information.
6
7
Controlled Explosive Devices. Controlled explosive devices are
designed, manufactured, and sold for defense-related, aerospace and commercial
purposes. These devices are used in a wide range of pilot ejection systems,
airframe separation, and other similar aerospace-related systems. Commercially,
the devices are used in vehicle airbags and petroleum industry drilling
systems, among other uses.
Electronic Components and Subsystems. A wide range of electronic
chips, components and subsystems are designed, manufactured, and sold worldwide
for a variety of aerospace, defense-related, medical, industrial, and consumer
applications.
Allegheny Teledyne's hybrid microcircuits are used in a variety of
military, space, industrial, and medical applications. These compact and
complex electronic building blocks combine multiple transistors and integrated
circuits in multi-chip modules where small packaging sizes, reliability, and
light weight are of paramount importance. Thousands of these microcircuits, the
size of postage stamps, have been produced, and are being used for heart
pacemakers and interplanetary missions, as well as many other uses.
Using microcircuit technology and encryption algorithms, Allegheny
Teledyne is developing equipment to provide cryptographic security for
commercial wideband telecommunications applications.
Allegheny Teledyne's high power traveling wave tubes are used to
transmit thousands of telephone conversations or a dozen television channels
around the world simultaneously via satellite networks. Similar types of
traveling wave tubes are used in airborne and ground-based electronic
countermeasure equipment.
In the microwave industry, Allegheny Teledyne is a leading supplier of
ferrite components and switching devices, as well as filters, oscillators, and
integrated subsystems. Monolithic microwave integrated circuits are provided
for both commercial and military applications.
Other components include operational amplifiers, digital-analog
converters, miniature relays, hybrid switching devices, radar augmenters, lower
power microwave tubes, flexible printed-circuit interconnections, switches,
terminals, and a line of aircraft, tank and truck batteries.
INDUSTRIAL SEGMENT
Companies in Allegheny Teledyne's industrial segment include Teledyne
Advanced Materials, Teledyne Fluid Systems, and Teledyne Specialty Equipment.
These companies offer a variety of products including:
Cutting Tools and Tungsten Products. For the metalworking, mining and
other industries requiring tools with extra hardness, Allegheny Teledyne
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
7
8
Stellram Group, manufacturers of high precision threading, milling, boring, and
drilling systems for the European market.
Allegheny Teledyne 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 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 Allegheny Teledyne 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.
Nitrogen Gas Systems. Nitrogen gas springs are designed, manufactured
and sold worldwide to industries that, as part of their manufacturing
processes, must form metal. Major industries served include automobile,
appliance, and can-making. Nitrogen gas systems overcome manufacturing
difficulties encountered in high speed metal forming operations.
Valves, Pumps and Boosters. Many different types of pressure relief
valves, pumps, and boosters are designed, manufactured and sold domestically
and internationally to a variety of industries, including transportation,
hydrocarbon and petrochemical processing, pharmaceutical, and industrial
components.
Transportable Material Handlers. Allegheny Teledyne designs and
manufactures, through domestic and foreign operations, a series of specialty
forklifts that ride as outriggers on delivery trucks. They are designed to save
valuable cargo space, and their design and stability make them an asset at
rough construction sites where positioning of the delivered product is
extremely important.
Mining and Construction Equipment. Rugged, high-performance mining and
construction equipment such as breakers, boom systems and scalers, are designed
and manufactured for the construction, quarry, and mining industries.
Dies and Molds. Metal stamping dies and plastic compression molds are
designed, manufactured and sold primarily to the domestic automotive and truck
parts industries.
CONSUMER SEGMENT
Companies in Allegheny Teledyne's consumer segment include Teledyne
Water Pik, Teledyne Laars, and Teledyne Packaging. These companies manufacture
a number of specialty 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. These products include a
high-speed sonic plaque control toothbrush, a mechanical
8
9
toothbrush model, and oral irrigation devices that are sold under the brand
name of Teledyne Water Pik. Allegheny Teledyne also produces apparatus and
products used in professional dental practices.
Shower Heads. Also marketed under the Teledyne Water Pik brand name
are pulsating shower heads in a wide range of models. Allegheny Teledyne
designs, manufactures and sells the shower heads 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 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. The
Waterfresh(R) pour through water filter for home water filtration is designed to
remove up to 99% of the chlorine, sediment, bad taste, and odor from
residential water, employing a filter which is made up of 100% natural
ingredients and is biodegradable. Allegheny Teledyne's water filtration product
line can be adapted for many water delivery systems throughout the world.
Pool Equipment and Heating Systems. The Company manufactures under the
Teledyne Laars brand name a variety of heating systems and a water treatment
system for residential and commercial swimming pools and spas. The Hi-E(R)
line of swimming pool heaters is designed to be up to 97% efficient and to
produce low emissions. The pool sanitizing system uses highly effective ozone
technology. The Company also produces a broad line of water heating equipment
that provides hot water and heating for commercial, residential, and industrial
applications. Also included in this group are heating elements produced for
OEMs of consumer kitchen equipment. In 1996 the Company acquired Jandy
Industries, Inc., a United States producer of water flow control valves and
electronic control systems for the swimming pool industry.
Collapsible Tubes. Metal, laminate, and plastic collapsible tubes are
designed, manufactured and sold to domestic and foreign companies that sell
pharmaceutical, dentifrice, cosmetic, food, household, and industrial products.
COMPETITION
Markets for most of 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 effect 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.
Through its specialty metals segment, the Company is a leading
producer of specialty steel. Companies in this segment face active competition
from domestic competitors and from foreign competitors, a number of which are
government subsidized. Sales for Allegheny Ludlum and Rodney Metals, which
consisted primarily of flat rolled products, declined 14% in 1996. The decline
was caused by lower shipments coupled with significant pricing pressure in
commodity stainless steel products. Allegheny Ludlum has announced price
increases of
9
10
approximately 5% for its stainless steel sheet, strip and plate shipments
effective March 3, 1997 and price increases of approximately 4% for all tool
steel plates and bars cut from plate effective with shipments March 31, 1997.
Allegheny Ludlum has also announced price increases of approximately 5% for its
stainless steel sheet, strip, and plate shipments effective May 5, 1997. The
ability to effect and maintain these price increases will depend in part on
market pricing pressures, including pricing by foreign competitors.
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, in the
Company's opinion, 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 steel are scrap (including nickel-, chromium-, and molybdenum-bearing
scrap), nickel and nickel alloys, ferrochromium, ferrosilicon, molybdenum and
molybdenum alloys, manganese and manganese alloys, and other alloying materials.
Certain of these raw materials, such as ferrochromium and nickel, can be
acquired by the Company and its specialty steel 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. 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. The Company's specialty metals businesses
also use large amounts of electricity and natural gas in the manufacture of
their products. See "Forward Looking and Other Statements."
GOVERNMENT CONTRACTS
For the year ended December 31, 1996, approximately 18% of the
Company's revenues were attributable to sales under contracts with the U.S.
Government. Sales to the Department of Defense accounted for approximately 12%
of total sales in 1996. Sales by the Company to the U.S. Government included
sales by the specialty metals segment of $77.1 million in 1996, $44.3 million
in 1995, and $50.5 million in 1994, the aerospace and electronics segment of
$581.8 million in 1996, $518.0 million in 1995, and $485.0 million in 1994, and
the industrial and consumer segments of $1.4 million in 1996, $2.8 million in
1995, and $3.5 million in 1994. 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 herein under the caption
"Forward Looking and Other Statements" 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
10
11
Operations--Other Matters--Government Contracts" on page 28 of the 1996 Annual
Report and in Note 13 of Notes to Consolidated Financial Statements beginning
on page 35 of the 1996 Annual Report.
EXPORT SALES AND FOREIGN OPERATIONS
Foreign sales represented approximately 17%, 15%, and 17% of the
Company's total sales in 1996, 1995, and 1994, respectively. These figures
include export sales by U.S. operations to customers in foreign countries,
which accounted for approximately 12% in 1996 and 13% in 1995 and 1994 of the
Company's total sales. See "Forward Looking and Other Statements." The
Company's overseas sales, marketing and distribution efforts are aided by 12
international marketing offices in Europe, Asia, South America, and the Middle
East.
During the fiscal years ended December 31, 1996, 1995, and 1994, the
Company and its subsidiaries did not engage in material manufacturing
operations in foreign countries. However, recent initiatives by the Company,
including those discussed below, have expanded the Company's presence
internationally.
In February 1996 Allegheny Teledyne 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 Company, which owns 60% of the joint venture company, will provide
technology and engineering, technical, and management services. The joint
venture will be known as Shanghai STAL Precision Stainless Steel Limited
Company. The new plant will be located in Shanghai to produce and sell up to
15,000 metric tonnes of the Company's Precision Rolled Strip( products.
Completion of the plant is anticipated in 1998. This venture should enable both
Allegheny Ludlum and Rodney Metals to participate more effectively in the Asian
market.
In January 1995 the Company acquired the material handling business of
Kooi B.V., a Netherlands company that is one of Europe's largest suppliers of
portable material handlers. In December 1995 the Company completed the
acquisitions of the Stellram Group, based in Europe, and Envases Comerciales,
S.A. in Costa Rica. With facilities in Great Britain, Germany, France and
Switzerland, the Stellram Group is a leader in highly engineered tooling for
milling, boring, threading, and drilling, and is expected to enhance the
position of Teledyne Advanced Materials in the global cutting tools market.
Envases Comerciales, S.A. is a Costa Rican manufacturer of specialty packaging
for pharmaceutical and food companies throughout Central America and Mexico.
The acquisition of Envases Comerciales should open new markets for Teledyne
Packaging's metal, laminate, and plastic collapsible tubes used for consumer
products.
BACKLOG, SEASONALITY AND CYCLICALITY
The Company's backlog of confirmed orders was approximately $1.2
billion at December 31, 1996 and $1.2 billion at December 31, 1995. During the
year ending December 31, 1997, it is anticipated that approximately 98% of
confirmed orders on hand at December 31, 1996 will be filled. Backlog of
confirmed orders of the specialty metals segment was $658.8 million at December
31, 1996 and $564.9 million at December 31, 1995. During the
11
12
year ending December 31, 1997, it is anticipated that approximately 99% of the
confirmed orders on hand at December 31, 1996 for this segment will be filled.
Backlog of confirmed orders of the aerospace and electronics segment was $439.2
million at December 31, 1996 and $493.5 million at December 31, 1995. During
the year ending December 31, 1997, it is anticipated that approximately 96% of
the confirmed orders on hand at December 31, 1996 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
businesses is cyclical over longer periods because the industries in which
customers in such businesses operate are cyclical and are subject to changes in
general economic conditions. See "Forward Looking and Other Statements."
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, although these projects may
not have immediate impact on profitability. Research and development is
conducted by the Company 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, 1996, 1995, and 1994 included the following:
(In millions) 1996 1995 1994
---- ---- ----
Customer-Sponsored:
Specialty metals segment $ 3.8 $ 3.7 $ 5.2
Aerospace and electronics segment 295.4 204.2 166.7
Other 3.9 26.0 58.3
------- ------- -------
303.1 233.9 230.2
------- ------- -------
Company-Sponsored:
Specialty metals segment 16.8 20.4 17.1
Aerospace and electronics segment 35.4 30.0 31.0
Other 14.0 16.1 26.0
------- ------- -------
66.2 66.5 74.1
------- ------- -------
Total Research and Development $ 369.3 $ 300.4 $ 304.3
======= ======= =======
Ongoing research and development efforts in the aerospace and
electronics segment include the following: Teledyne Ryan Aeronautical's
development of the Global Hawk for the U.S. Department of Defense; Ryan's
development of a new low-cost miniature air launched decoy UAV for the
Department of Defense; and Teledyne Brown Engineering's work, in a joint
venture, to determine the commercial feasibility of a new technology for safely
destroying old chemical weapons without incineration. In addition, NASA has
announced that Teledyne Continental Motors has been selected to lead an
industry team developing a new piston-driven engine for small aircraft.
12
13
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 where a proprietary
position is possible.
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, in the opinion of the Company, 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) is 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 60
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 50 of
these sites, and the potential loss exposure with respect to any individual
site is not considered to be material.
During 1997, the Company expects to spend approximately $13.3 million
for additional or upgraded environmental control equipment and facilities. The
Company, like many manufacturers, would be required to expend significant
additional funds to meet stringent air emission limits if the U.S.
Environmental Protection Agency's proposed revisions to the National Ambient
Air Quality Standards for Ozone and Particulate Matter are adopted. The
proposed standards could increase the cost and the difficulty of obtaining
operating permits for new operations or major modifications to existing
operations.
See the discussion of related matters herein under the caption
"Forward Looking and Other Statements" 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 28 of the 1996 Annual Report and in Notes 1 and
13 of Notes to Consolidated Financial Statements beginning on page 35 of the
1996 Annual Report.
13
14
EMPLOYEES
The Company and its subsidiaries employ approximately 24,000 persons,
10,000 of whom are employed at companies in the specialty metals segment.
Approximately 26% of the Company's workforce is covered by various union
contracts, certain of which are described below.
Approximately 400 employees at Allegheny Ludlum's Washington Plant are
covered by a labor contract with the United Steelworkers of America ("USWA")
which is effective through September 30, 1999. Substantially all of Allegheny
Ludlum's 3,600 other production and maintenance employees are covered by a
four-year labor contract between the Company and the USWA, which is effective
though July 1, 1998. In addition, approximately 600 Wah Chang employees are
covered by a labor contract with the USWA which is effective through October
10, 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Company as of March 15, 1997 are as follows:
NAME AGE TITLE
- ---- --- -----
Richard P. Simmons 65 Chairman, President and Chief Executive Officer
Robert P. Bozzone 63 Vice Chairman
Arthur H. Aronson 61 Executive Vice President
James L. Murdy 58 Executive Vice President, Finance and
Administration and Chief Financial Officer
Jon D. Walton 54 Vice President, General Counsel and Secretary
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 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 P. Bozzone has been Vice Chairman of the Company since August
1996. He has served as Vice Chairman of Allegheny Ludlum beginning in August
1994, and previously was President and Chief Executive Officer of Allegheny
Ludlum.
Arthur H. Aronson has been Executive Vice President of the Company
since August 1996 and is responsible for the Company's specialty metals
businesses. He has been President of Allegheny Ludlum since August 1994 and has
served as a director of Allegheny Ludlum since 1990. Mr. Aronson was the Chief
Executive Officer of Allegheny Ludlum from August 1994 to August 1996.
Previously, he served as Executive Vice President and Chief Operating Officer
of Allegheny Ludlum.
James L. Murdy has been Chief Financial Officer and a 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.
14
15
Jon D. Walton has been Vice President, General Counsel and Secretary
of the Company since August 1996, having previously served in the same capacity
as an officer of Allegheny Ludlum.
FORWARD LOOKING AND OTHER STATEMENTS
This Report on Form 10-K and the 1996 Annual Report contain various
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements, which represent the Company's
expectations or beliefs concerning various future events, include the
following: statements concerning anticipated effects of the combination of the
businesses of Allegheny Ludlum and Teledyne on future earnings, cost savings
and operations of the Company; announced price increases for stainless steel
sheet, strip and plate and tool steel; net cash flow; aviation industry trends;
certain expected capital expenditures; the outcome of any government inquiries,
litigation or other proceedings related to government contracts or other
matters; and future environmental costs. These statements are based on current
expectations that involve a number of risks and uncertainties, including the
following:
Demand for Specialty Metals. Demand for products of the Company's
specialty metals businesses, which accounted for a significant portion of the
Company's 1996 total sales and its 1996 total income, is cyclical because the
industries in which customers of such businesses operate are cyclical and are
subject to changes in general economic conditions, including decreases in the
rate of consumption or use of their products due to economic recessions or due
to increases in use or decreases in price of other materials which may be used
in lieu of the materials they produce, national and international overcapacity,
fluctuations in the value of the U.S. dollar against other currencies, and
levels of lower priced imports, which affect market demand for specialty
materials. From time to time, these industries have experienced significant
downturns. Significant downturns in the domestic economy are believed to have
adversely affected the results of operations of each of Allegheny Ludlum and
Teledyne from time to time during their respective histories. As a result, the
Company's operating results could be subject to significant fluctuation.
Raw Materials for Specialty Metals. Certain of the principal raw
materials used to produce specialty metals can be acquired in large part only
from foreign sources, some of which are located in countries that may be
subject to unstable political and economic conditions which might 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 these activities, which are not financially material.
Environmental Matters. The Company is subject to various federal,
state, local and foreign environmental laws and regulations. Environmental laws
and regulations have changed rapidly in recent years, and it is likely that the
Company will be subject to increasingly stringent environmental standards in
the future. The Company believes that its businesses are being operated in
compliance in all material respects with applicable environmental laws and
15
16
regulations. The Company is a party to lawsuits and other proceedings involving
alleged violations of environmental laws. The Company records environmental
liabilities when the Company's liability is probable and the costs are
reasonably estimable. In many cases, however, investigations are not yet at a
stage where the Company has been able to determine whether it is liable or, if
liability is probable, to reasonably estimate the loss or range of loss, or
certain components thereof. Estimates of the Company's liability are further
subject to uncertainties regarding the nature and extent of site contamination,
the range of remediation alternatives available, evolving remediation
standards, imprecise engineering evaluations and estimates of appropriate
cleanup technology, methodology and cost, the extent of corrective actions that
may be required, and 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
proceeds, it is likely that adjustments in the Company's accruals will be
necessary to reflect new information. The amounts of any such adjustments could
have a material adverse effect on the Company's results of operations in a
given period, but are not reasonably estimable. Based on currently available
information, management does not believe that future environmental costs in
excess of those accrued with respect to sites with which the Company has been
identified are likely to have a material adverse effect on the Company's
financial condition or liquidity. However, there can be no 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.
Government Contracts. A number of the Company's subsidiaries perform
work on contracts with the U.S. Government. Many of these contracts include
price redetermination clauses, and most are terminable at the convenience of
the government. Certain of these contracts are fixed-priced or fixed-price
incentive development contracts which involve a risk that costs may exceed
those expected when the contracts were negotiated. Absent modification of these
contracts, any costs incurred in excess of the fixed or ceiling prices must be
borne by the Company. In addition, virtually all defense programs are subject
to curtailment or cancellation due to the year-to-year nature of the government
appropriations and allocations process. A material reduction in U.S. Government
appropriations may have an adverse effect on the Company's business, depending
upon the specific programs affected by any such reduction. Since certain
contracts extend over a long period of time, all revisions in cost and funding
estimates during the progress of work have the effect of adjusting the current
period earnings on a cumulative catch-up basis. When the current contract
estimate indicates a loss, provision is made for the total anticipated loss.
The Company obtains 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.
Various claims (whether based on U.S. Government or Company audits and
investigations or otherwise) have been or may be asserted against the Company
related to its U.S. Government contract work, including claims based on
business practices and cost classifications and actions under the False Claims
Act. The False Claims Act permits a person to assert the rights of the U.S.
Government by initiating a suit under seal against a contractor if such person
purports to have information that the contractor falsely submitted a claim to
the U.S.
16
17
Government for payment. If it chooses, the U.S. Government may intervene and
assume control of the case.
Although government contracting claims are generally resolved by
detailed fact-finding and negotiation, on those occasions when they are not so
resolved, civil or criminal legal or administrative proceedings may ensue.
Depending on the circumstances and the outcome, such proceedings could result
in fines, penalties, compensatory and treble damages or the cancellation or
suspension of payments under one or more U.S. 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. Given the extent of the Company's business with the
U.S. Government, a suspension or debarment of the Company could have a material
adverse effect on future operating results and the consolidated financial
condition of the Company. However, although the outcome of these matters cannot
be predicted with certainty, management does not believe there is any audit,
review or investigation currently pending against the Company of which
management is aware that is likely to result in suspension or debarment of the
Company, or that is otherwise 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.
Export Sales. It is anticipated that export sales will continue to
account for a significant percentage of the Company's sales. Among the risks
associated with export sales are export controls, changes in legal and
regulatory requirements, policy changes affecting the markets for the Company's
products, changes in tax laws and tariffs, exchange rate fluctuations (which
may affect sales to foreign customers and the value of, and profits earned on,
such sales when translated into U.S. dollars), political and economic
instability, accounts receivable collection, and the seasonality of foreign
sales. Any of these factors could have a material adverse effect on the
Company's results of operations.
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 combination or generate additional revenue to offset any unanticipated
inability to realize such expected synergies. Realization of the anticipated
benefits of the combination could take longer than expected and implementation
difficulties and market factors could alter the anticipated benefits.
ITEM 2. PROPERTIES
The Company's principal domestic facilities as of December 31, 1996
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 4 of the
Notes to Consolidated Financial Statements beginning on page 35 of the 1996
Annual Report. Although the facilities vary in terms of age and condition,
management believes that these facilities have generally been well-maintained.
17
18
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 strip
Bagdad, PA 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.
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
Allvac
Monroe, NC Production of nickel and titanium products, tool 587,000 (owned)
and high speed steel, and 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 214,000 (leased)
and high speed steel, and other specialty steel long
products.
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.
Pomona, CA Manufacturing of aluminum and magnesium 231,000 (owned)
castings for air frames, turbine engines and
missiles.
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)
18
19
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.
Koppel, PA Manufacturing of specialty welded, seamless, and 151,000 (owned)
fabricated tubing.
Wah Chang
Albany, OR Production of zirconium, halfnium, niobium, 1,125,000 (owned)
titanium, and tantalum.
AEROSPACE & ELECTRONICS
Teledyne 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, 28,000 (leased)
and instrumentation technology. 25,000 (leased)
Teledyne Continental Motors
Mobile, AL Design, development, and production of new and 1,141,000 (leased)
rebuilt piston engines, ignition systems, and spare 536,000 (leased)
parts for general aviation market.
Redlands, CA Manufacturing of batteries for the general aviation 91,000 (owned)
market.
Teledyne Controls Production of digital data acquisition systems for 154,000 (leased)
Los Angeles, CA monitoring commercial aircraft and engines.
Teledyne Electronic
Technologies
Los Angeles, CA Development and production of electronic 141,000 (leased)
components and subsystems. 83,000 (owned)
Lewisburg, TN Development and production of electronic 153,000 (leased)
components and subsystems.
Mt. View, CA Production of ferrite components, switching 100,000 (owned)
devices, filters, and monolithic microwave integrated
circuits.
Teledyne Ryan Aeronautical
San Diego, CA Production of unmanned aerial vehicles, airframes, 1,100,000 (leased)
and high-performance aerial target systems.
Toledo, OH Design, development, and production of small 351,000 (leased)
turbine engines for aerospace and automotive
markets.
Hollister, CA Manufacturing of controlled explosive devices. 221,000 (owned)
INDUSTRIAL
Teledyne Advanced Materials
Waynesboro, PA Production of thread-cutting and roll forming 386,000 (owned)
equipment and perishable tools.
Huntsville, AL Production of molybdenum, tungsten, and 244,000 (owned)
tungsten carbide powders and milled products.
Nashville, TN Production of tungsten carbide and cutting tools. 134,000 (owned)
19
20
Teledyne Fluid Systems
Brecksville, OH Manufacturing of nitrogen cylinder systems and 125,000 (owned)
industrial and pressure release valves.
Independence, OH Manufacturing of sheet metal stamping dies 121,000 (owned)
and plastic compression molds.
Teledyne Specialty Equipment Manufacturing of transportable material handlers. 41,000 (owned)
Canal Winchester, OH
CONSUMER
Teledyne Packaging
Carrollton, KY Manufacturing of aluminum, tin, foil, and non-foil 74,000 (owned)
laminate collapsible tubes.
Chester, PA Production of aluminum, tin, foil and non-foil 130,000 (owned)
laminate collapsible tubes.
Teledyne Laars
Moorpark, CA Manufacturing of pool heaters, pool filtration, and 200,000 (owned)
spa control equipment.
Cookeville, TN Manufacturing of heating elements. 91,000 (owned)
Rochester, NH Manufacturing of heating elements. 80,000 (owned)
Teledyne Water Pik Manufacturing of shower heads, water filtration 243,000 (owned)
Fort Collins, CO products, and oral health products. 46,000 (leased)
The Company also owns or leases facilities in a number of foreign
countries, including the United Kingdom, Germany, France, The Netherlands,
Switzerland, Sweden, and Costa Rica.
Many of the Company's manufacturing facilities operated at or near
their productive capacities during 1996. With respect to the specialty metals
segment, Allegheny Ludlum's Brackenridge primary melting and continuous slab
casting facilities have operated at high levels for the past five years.
Allegheny Ludlum's stainless steel finishing plants have operated at
approximately 85% to 95% of capacity for the past five years. The Company's
plants that primarily produce silicon electrical steels have operated at
approximately 50% to 90% of capacity since 1980 and are currently operating at
a rate of approximately 70%.
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 activities.
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,
20
21
government contracting, product liability, patent infringement, commercial,
employment, employee benefits, and stockholder matters.
As reported by Teledyne prior to the combination, in January 1996,
Teledyne entered into a global settlement of several stockholder derivative
suits against certain of Teledyne's directors, executive officers and employees
and against Teledyne as a "nominal" defendant. These suits alleged, among other
things, breaches of fiduciary duty and gross mismanagement in connection with
the management and administration of certain Teledyne business units and with
respect to foreign military sales efforts. In March 1996 an objecting
stockholder in one of these cases appealed to the California Court of Appeal,
challenging the global settlement. The Company will take action to uphold the
validity of the settlement. In addition, prior to the combination, Teledyne
reported that in March 1995 a putative class of its stockholders had filed suit
against Teledyne and certain of its directors for breach of fiduciary duty
based on the Teledyne board's rejection of an unsolicited acquisition proposal
from WHX Corporation. Additional similar suits were consolidated with this suit
in March 1996. If this action is pursued by the plaintiffs, the Company will
seek its dismissal.
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. Also, 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 asks
for injunctive relief and 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 is challenging the UAO and has filed a declaratory
judgment action to protect its rights.
While the outcome of litigation, including the matters specified
above, cannot be predicted with certainty, and some of these 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
Not applicable.
21
22
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information required by this item is incorporated by reference from
Note 14 of the Notes to Consolidated Financial Statements beginning on page 35
of the 1996 Annual Report and from "Common Stock Price" on page 50 of the 1996
Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference from
"Selected Financial Data" on pages 52 and 53 of the 1996 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 from
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 23 to 29 of the 1996 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 from
pages 30 to 49 of the 1996 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 "Executive
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 from "Election of Directors" as set forth in the 1997 Proxy
Statement filed by the Registrant pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from
"Information About the Board of Directors - Compensation of Directors,"
"Executive Compensation," and
22
23
"Cumulative Total Stockholder Return," as set forth in the 1997 Proxy Statement
filed by the Registrant pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from
"Security Ownership" as set forth in the 1997 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 from
"Certain Transactions" as set forth in the 1997 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 49 of the 1996 Annual Report are incorporated by reference:
Consolidated Statements of Income - Years Ended December 31, 1996, 1995 and
1994
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended December 31, 1996, 1995 and
1994
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The report of Arthur Andersen LLP relating to the consolidated balance
sheet of Teledyne, Inc. as of December 31, 1995 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years ended December 31, 1995 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 26 of this Report and
incorporated by reference.
(b) REPORTS ON FORM 8-K FILED IN THE FOURTH QUARTER OF 1996:
None.
23
24
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 27, 1997 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 27th day of March 1997.
/s/ RICHARD P. SIMMONS /s/ JAMES L. MURDY
- ------------------------------------------------ ------------------------------------------------
Richard P. Simmons James L. Murdy
Chairman of the Board, President and Executive Vice President, Finance and
Chief Executive Officer and Director Administration and Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer and Principal
Accounting Officer)
/s/ ARTHUR H. ARONSON /s/ ROBERT P. BOZZONE
- ------------------------------------------------ ------------------------------------------------
Arthur H. Aronson Robert P. Bozzone
Executive Vice President and Director Vice Chairman of the Board and Director
/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/ THOMAS MARSHALL /s/ W. CRAIG McCLELLAND
- ------------------------------------------------ ------------------------------------------------
Thomas Marshall W. Craig McClelland
Director Director
/s/ ROBERT MEHRABIAN /s/ WILLIAM G. OUCHI
- ------------------------------------------------ ------------------------------------------------
Robert Mehrabian William G. Ouchi
Director Director
24
25
/s/ CHARLES J. QUEENAN, JR. /s/ GEORGE A. ROBERTS
- ------------------------------------------------ ------------------------------------------------
Charles J. Queenan, Jr. George A. Roberts
Director Director
/s/ JAMES E. ROHR /s/ FAYEZ SAROFIM
- ------------------------------------------------ ------------------------------------------------
James E. Rohr Fayez Sarofim
Director Director
/s/ HENRY E. SINGLETON
- ------------------------------------------------
Henry E. Singleton
Director
25
26
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
3.1 Restated Certificate of Incorporation of Allegheny Teledyne
Incorporated (incorporated by reference from 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
(incorporated by reference from Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (No. 333-8235), appears as Annex
B to Appendix A of the Joint Proxy Statement/Prospectus forming
part of the Registration Statement).
4.1 Credit Agreement dated as of August 30, 1996 (incorporated by
reference from Exhibit 10 to Form 10-Q for the quarter ended
September 30, 1996 (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 from Exhibit 4(a)
to Allegheny Ludlum Corporation's Form 10-K for the year ended
December 31, 1995 (File No. 1-9498)).
4.3 Indenture dated as of June 1, 1969 between Continental Motors
Corporation and Bank of America National Trust and Savings
Association, as supplemented by First Supplemental Indenture dated
as of October 31, 1969 between Continental Motors Corporation and
Bank of America National Trust and Savings Association and Second
Supplemental Indenture dated as of December 16, 1969 among
Teledyne, Inc., Continental Motors Corporation, and Security
Pacific National Bank (relating to Teledyne, Inc.'s 7% Subordinated
Debentures due 1999) (incorporated by reference from Exhibit 4.1 to
Teledyne Inc.'s Form 10-K/A for the year ended December 31, 1992
(File No. 1-5212)).
4.4 Third Supplemental Indenture dated as of July 12, 1994 among
Teledyne, Inc., Bank of America National Trust and Savings
Association, and Harris Trust Company of California (relating to
Teledyne, Inc.'s 7% Subordinated Debentures due 1999) (incorporated
by reference from Exhibit 4.1 to Teledyne, Inc.'s Form 10-K for the
year ended December 31, 1994 (File No. 1-5212)).
26
27
4.5 Fourth Supplemental Indenture dated as of August 15, 1996 among
Allegheny Teledyne Incorporated, Teledyne, Inc., and Harris Trust
Company of California, as trustee (relating to Teledyne, Inc.'s 7%
Subordinated Debentures due 1999) (incorporated by reference from
Exhibit 4.2 to the Company's Form 8-K filed August 21, 1996 (File
No. 1-12001)).
10.1 Allegheny Teledyne Incorporated 1996 Incentive Plan (incorporated
by reference from Exhibit 10.1 to the Company's Registration
Statement on Form S-4 (No. 333-8235), appears as Annex E to
Appendix A of the Joint Proxy Statement/Prospectus forming part of
the Registration Statement).*
10.2 Allegheny Teledyne Incorporated Stock Acquisition and Retention
Program.*
10.3 Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock
Compensation Plan, as amended and restated effective as of December
12, 1996.*
10.4 Allegheny Teledyne Incorporated Fee Continuation Plan for
Non-Employee Directors.*
10.5 Allegheny Ludlum Corporation Additional Compensation Plan
(presently known as the Performance Management System Plan)
(incorporated by reference from Exhibit 10(c) to Allegheny Ludlum
Corporation's Registration Statement on Form S-1 (No. 33-12940)).*
10.6 Allegheny Ludlum Corporation Key Man Salary Continuation Plan
(presently known as the Supplemental Pension Plan for certain key
employees of Allegheny Ludlum Corporation) (incorporated by
reference from Exhibit 10(e) to Allegheny Ludlum Corporation's
Registration Statement on Form S-1 (No. 33-12940)).*
10.7 Allegheny Ludlum Corporation Benefit Restoration Plan (incorporated
by reference from Exhibit 10(e) to Allegheny Ludlum Corporation's
Form 10-K for the year ended December 30, 1990 (File No. 1-9498)).
10.8 Allegheny Ludlum Corporation 1987 Stock Option Incentive Plan (as
amended and restated) (incorporated by reference from Exhibit 10(f)
to Allegheny Ludlum Corporation's Form 10-K for the year ended
December 31, 1995 (File No. 1-9498)).*
10.9 Allegheny Ludlum Corporation Performance Share Plan (as amended and
restated) (incorporated by reference from 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).*
10.10 Allegheny Ludlum Corporation Stock Acquisition and Retention Plan,
as restated effective as of August 15, 1996.*
10.11 Teledyne, Inc. 1990 Stock Option Plan (incorporated by reference
from Exhibit 10 to Teledyne, Inc.'s Form 10-K for the year ended
December 31, 1990 (File No. 1-5212)).*
27
28
10.12 Teledyne, Inc. 1994 Long-Term Incentive Plan (incorporated by
reference from Exhibit A to Teledyne, Inc.'s 1994 proxy statement
(File No. 1-5212)).*
10.13 Teledyne, Inc. 1995 Non-Employee Director Stock Option Plan
(incorporated by reference from Exhibit A to Teledyne, Inc.'s 1995
proxy statement (File No. 1-5212)).*
10.14 Teledyne, Inc. Senior Executive Performance Plan (incorporated by
reference form 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).*
10.15 Summary of Teledyne, Inc. Executive Deferred Compensation Plan, as
restated effective September 1, 1994 (incorporated by reference
from Exhibit 10.2 to Teledyne, Inc.'s Form 10-K for the year ended
December 31, 1994 (File No. 1-5212)).*
10.16 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
from Exhibit 10.2 to Teledyne, Inc.'s Form 10-K for the year ended
December 31, 1995 (File No. 1-5212)).*
10.17 Employment Agreement dated July 15, 1996 between Allegheny Teledyne
Incorporated and Arthur H. Aronson (incorporated by reference from
Exhibit 10.3 to the Company's Registration Statement on Form S-4
(No. 333-8235)).*
10.18 Employment Agreement dated July 15, 1996 between Allegheny Teledyne
Incorporated and James L. Murdy (incorporated by reference from
Exhibit 10.4 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 Jon D. Walton (incorporated by reference from
Exhibit 10.5 to the Company's Registration Statement on Form S-4
(No. 333-8235)).*
10.20 Separation Agreement dated March 6, 1997 between Allegheny Teledyne
Incorporated and William P. Rutledge.*
10.21 Form of severance agreement dated as of March 5, 1995 between
Teledyne, Inc. and Douglas J. Grant (severance compensation
multiple of 2.25) (incorporated by reference from Exhibit 10 to
Teledyne, Inc.'s Form 10-Q for the quarter ended June 30, 1995
(File No. 1-5212)).*
13.1 Pages 23 through 53 inclusive of the Annual Report of Allegheny
Teledyne Incorporated for the year ended December 31, 1996.
21.1 Subsidiaries of the Registrant.
28
29
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
99.1 Report of Arthur Andersen LLP.
* 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.
29