-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GebH7WN7Th+7st8VPt4TQPdzx1vFvpuIG0y1XgGYV7tFMc+4LgzAtcBKYKiAQVJN HiDCvo0R/TwNDfI1yS0MLw== 0001018963-97-000013.txt : 19971117 0001018963-97-000013.hdr.sgml : 19971117 ACCESSION NUMBER: 0001018963-97-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEGHENY TELEDYNE INC CENTRAL INDEX KEY: 0001018963 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 251792394 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12001 FILM NUMBER: 97720944 BUSINESS ADDRESS: STREET 1: 1000 SIX PPG PLACE CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4123942800 MAIL ADDRESS: STREET 1: 100 SIX PPG PLACE CITY: PITTSBURGH STATE: PA ZIP: 15222 10-Q 1 10-Q TEXT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1997 OR ( ) 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) (412) 394-2800 --------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- At November 5, 1997, Registrant had outstanding 174,265,645 shares of its Common Stock. ALLEGHENY TELEDYNE INCORPORATED SEC FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1997 INDEX Page No. PART I. - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. - OTHER INFORMATION Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions except share and per share amounts) September 30, December 31, 1997 1996 ---- ---- (Unaudited) ASSETS Cash and cash equivalents $ 32.9 $ 62.5 Accounts receivables 533.4 525.3 Inventories 550.4 518.4 Deferred income taxes 47.7 70.1 Tax refund 51.5 - Prepaid expenses and other current assets 27.8 23.5 ---------- ----------- Total Current Assets 1,243.7 1,199.8 Property, plant and equipment 701.6 731.4 Prepaid pension cost 395.3 352.5 Cost in excess of net assets acquired 174.0 177.1 Other assets 124.7 145.6 ---------- ----------- Total Assets $ 2,639.3 $ 2,606.4 ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 210.5 $ 241.7 Accrued liabilities 334.5 339.6 Current portion of long-term debt 3.4 4.5 ---------- ----------- Total Current Liabilities 548.4 585.8 Long-term debt 409.6 443.4 Accrued postretirement benefits 577.0 567.5 Other 140.3 138.2 ---------- ----------- Total Liabilities 1,675.3 1,734.9 ---------- ----------- Stockholders' Equity: Preferred stock, par value $0.10: authorized- 50,000,000 shares; issued-None - - Common stock, par value $0.10, authorized-600,000,000 shares; issued and outstanding-174,967,635 shares at September 30, 1997 and 174,389,377 shares at December 31, 1996 17.6 17.4 Additional paid-in capital 288.4 246.6 Retained earnings 699.4 596.7 Treasury stock (42.1) - Other 0.7 10.8 ---------- ----------- Total Stockholders' Equity 964.0 871.5 ---------- ----------- Total Liabilities and Stockholders' Equity $ 2,639.3 $ 2,606.4 ========== =========== The accompanying notes are an integral part of these statements. 3 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In millions except per share amounts) (Unaudited)
Nine Months Ended Three Months Ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Sales $2,824.2 $2,895.3 $909.2 $879.7 Costs and expenses: Cost of sales 2,147.2 2,219.8 698.6 664.0 Selling and administrative expenses 351.8 383.1 112.8 132.3 Merger and restructuring costs 10.4 38.6 - 31.9 Interest expense, net 15.9 29.1 5.7 9.4 ------- ------- ------- ------- 2,525.3 2,670.6 817.1 837.6 ------- ------- ------- ------- Earnings before Other Income 298.9 224.7 92.1 42.1 Other Income 47.6 52.5 9.5 1.4 ------- ------- ------- ------- Income before Income Taxes 346.5 277.2 101.6 43.5 Provision for Income Taxes 131.8 115.6 37.3 23.9 ------- ------- ------- ------- Net Income 214.7 161.6 64.3 19.6 Dividends on Preferred Stock - 2.0 - - ------- ------- ------- ------- Net Income Available to $214.7 $159.6 $64.3 19.6 Common Stockholders ======= ======= ======= ======= Net Income Per Common Share $1.22 $0.91 $0.37 $0.11 ======= ======= ======= ======= Cash Dividends Per Equivalent Common Share $0.48 $0.43 $0.16 $0.16 ======= ======= ======= =======
The accompanying notes are an integral part of these statements. 4 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
Nine Months Ended September 30, 1997 1996 ---- ---- Operating Activities: Net income $ 214.7 $ 161.6 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 76.5 82.8 Gains on sales of businesses and investments (53.7) (44.3) Deferred income taxes (3.2) 19.2 Change in operating assets and liabilities: Prepaid pension cost (41.3) (56.2) Inventories (33.3) (11.8) Accounts payables (30.6) (18.6) Accrued postretirement benefits 9.5 9.3 Accounts receivables (5.0) 17.9 Accrued liabilities 2.4 15.5 Other 5.0 (8.7) ---------- ---------- Cash provided by operating activities 141.0 166.7 ---------- ---------- Investing Activities: Purchases of property, plant and equipment (65.6) (54.9) Proceeds from the sales of businesses and investments 58.4 106.0 Disposals of property, plant and equipment 13.4 8.0 Investment in ventures and purchases of businesses (12.4) (22.0) Other (4.7) (5.2) ---------- ---------- Cash (used) provided by investing activities (10.9) 31.9 ---------- ---------- Financing Activities: Payments on long-term debt (25.8) (10.4) Increase in long-term debt 2.5 34.6 ---------- ---------- Net (decrease) increase in long-term debt (23.3) 24.2 Purchases of treasury stock (86.7) (23.7) Cash dividends (84.3) (78.2) Exercises of stock options 34.6 12.7 Redemption of preferred stock - (41.4) ---------- ---------- Cash used in financing activities (159.7) (106.4) ---------- ---------- Increase (decrease) in cash and cash equivalents (29.6) 92.2 ---------- ---------- Cash and cash equivalents at beginning of the year 62.5 112.6 ---------- ---------- Cash and cash equivalents at end of period $ 32.9 $ 204.8 ========== ========== The accompanying notes are an integral part of these statements.
5 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Accounting Policies - Basis of Presentation The interim consolidated financial statements include the accounts of Allegheny Teledyne Incorporated and its subsidiaries. These unaudited statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, all adjustments (which include only recurring normal adjustments) considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1996 Annual Report. The results of operations for these interim periods are not necessarily indicative of the operating results for any future period or for a full year. Certain amounts for 1996 have been reclassified to conform with the 1997 presentation. Accounting Pronouncements Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income," and Financial Accounting Standards Board Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," were issued in 1997. These statements will be adopted by the Company in 1998, and are not expected to have a material effect on the consolidated financial statements. Note 2. Inventories - Inventories were as follows (in millions): September 30, December 31, 1997 1996 ---- ---- Raw materials and supplies $ 144.7 $ 153.8 Work-in-process 543.1 515.1 Finished goods 110.6 104.8 --------- --------- Total inventories at current cost 798.4 773.7 Less allowances to reduce current cost values to LIFO basis (226.8) (229.6) Progress payments (21.2) (25.7) --------- --------- Total Inventories $ 550.4 $ 518.4 ========= ========= Note 3. Business Segments - Following is certain financial information with respect to the Company's business segments for the periods presented (in millions): 6 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
Nine Months Ended Three Months Ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Sales Specialty metals $1,584.2 $1,562.4 $510.0 $486.4 Aerospace and electronics 654.0 698.9 208.8 211.5 Industrial 327.6 343.2 104.3 100.2 Consumer 226.5 207.2 75.0 68.2 ------- -------- ------- ------- Total continuing operations 2,792.3 2,811.7 898.1 866.3 Operations sold or held for sale 31.9 83.6 11.1 13.4 ------- -------- ------- ------- Total Sales $2,824.2 $2,895.3 $909.2 $879.7 ======== ========= ======= ======= Operating Profit Specialty metals $ 215.7 $ 208.3 $ 62.3 $ 59.2 Aerospace and electronics 61.2 63.3 17.7 18.4 Industrial 40.0 32.9 12.1 8.7 Consumer 25.9 12.5 9.3 3.2 ------- ------- ------- ------- Total operating profit 342.8 317.0 101.4 89.5 ------- ------- ------- ------- Merger and restructuring costs (10.4) (38.6) - (31.9) Corporate expenses (22.8) (32.3) (6.6) (12.2) Interest expense, net (15.9) (29.1) (5.7) (9.4) Investments and operations sold or held for sale 40.8 48.2 8.5 1.5 Excess pension income 12.0 12.0 4.0 6.0 ------- ------- ------- ------- Income before income taxes $ 346.5 $277.2 $101.6 $43.5 ======= ======== ======= =======
7 Investments and operations sold or held for sale in the 1997 third quarter included an $8.4 million gain on the sale of Teledyne Economic Development. In addition, the nine months ended September 1997 included a $27.6 million gain on the sale of the Company's investment in Semtech Corporation common stock, a gain of $15.3 million on the sale of the Company's investment in Nitinol Development Corporation, and a $3.1 million gain on other investments. These gains were partially offset by a charge of $6.8 million for a settlement of a U.S. government contract dispute related to a unit divested in 1995 and by a charge of $5.3 million to write-off the Company's investment in a research and development venture. In the nine months ended September 1996, investments and operations sold or held for sale included a gain of $41.0 million on the sale of the Company's defense vehicle business. Pension income in excess of amounts allocated to business segments to offset pension and other postretirement benefit expenses is presented separately. Note 4. Net Income Per Share - The weighted average number of shares of common stock used in the computation of net income per share for the three and nine months ended September 30, 1997 was 175,508,743 and 175,479,511, respectively, and 174,068,161 and 174,010,470 for the same periods in 1996. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of this change on earnings per share for the three and nine months ended September 30, 1997 and for the same periods in 1996 was not material. Note 5. Redemption of 7% Subordinated Debentures - The Company redeemed the Teledyne, Inc. 7% subordinated debentures on September 23, 1997. Payment was made in an amount equal to 100% of the principal amount of the debentures, in the aggregate amount of $19.5 million, plus accrued interest to the redemption date. Note 6. Redemption of Preferred Stock - On August 14, 1996, all of the outstanding shares of Teledyne Series E Cumulative Preferred Stock were redeemed at $15.00 per share, together with an additional $0.60 per share, representing an amount equal to the dividend payment that would have otherwise been due September 1, 1996. Note 7. Commitments and Contingencies - The Company is subject to federal, state and local environmental laws and regulations which require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party under the federal Superfund laws and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under these laws. 8 Environmental liabilities are recorded 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 proceed, 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, however, management does not believe 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. At September 30, 1997, the Company's reserves for environmental remediation obligations totaled approximately $36 million, of which approximately $11 million was included in other current liabilities. The reserve includes estimated probable future costs of $13 million for federal Superfund and comparable state-managed sites; $4 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $7 million for owned or controlled sites at which Company operations have been discontinued; and $12 million for sites utilized by the Company in its ongoing operations. The Company is evaluating whether it may be able to recover a portion of future costs for environmental liabilities from its insurance carriers and from third parties other than participating potentially responsible parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years, and will complete remediation of all sites with which it has been identified in up to thirty years. In 1996, Statement of Position 96-1, "Environmental Remediation Liabilities," which was issued by the American Institute of Certified Public Accountants, establishes accounting standards for recognition of environmental costs. This statement, which became effective in 1997, did not have a material effect on the consolidated financial statements. 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. Although such 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 9 or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. 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. The Company learns from time to time that it has been named as a defendant in civil actions filed under seal pursuant to the False Claims Act. Generally, since such cases are under seal, the Company does not in all cases possess sufficient information to determine whether the Company will sustain a material loss in connection with such cases, or to reasonably estimate the amount of any loss attributable to such cases. A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its business, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, and stockholder matters. While the outcome of litigation 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. Note 8. Proposed Acquisition Of Oregon Metallurgical Corporation - As previously announced, on October 31, 1997, the Company and Oregon Metallurgical Corporation (OREMET) entered into an Agreement and Plan of Merger. Pursuant to this Agreement, the Company agreed to acquire OREMET as a wholly owned subsidiary and each outstanding share of OREMET common stock will be converted into 1.296 shares of Company common stock. Upon the closing of the transaction, former OREMET shareholders would own approximately 11 percent pro-forma ownership of Company Common Stock. The following table sets forth pro-forma combined sales for the two companies for the twelve months ended September 30, 1997: Business Segment Sales ($ millions) Percent of total Specialty Metals - Stainless steel $1,000 25% - Titanium 426 11 - Nickel-based super alloys 274 7 - Other specialty metals 643 16 ----- -- Subtotal 2,343 59 Aerospace and Electronics 895 22 Industrial 432 11 Consumer 307 8 ====== === TOTAL $3,977 100% Combined net income of the two companies, based on pro-forma financial results for the twelve month period ending September 30, 1997, was $298 million. Combined assets totaled $2.9 billion. The merger is expected to be tax free to OREMET shareholders and will be accounted for under the pooling of interests method. The transaction is subject to the approval of the shareholders of OREMET as well as regulatory approval and other customary closing conditions. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Allegheny Teledyne Incorporated is a group of technology-based manufacturing companies with significant concentration in specialty metals complemented by aerospace and electronics, industrial, and consumer products. On October 31, 1997, the Company and OREMET announced that they had entered into an Agreement and Plan of Merger. See Note 8 of the Notes to Condensed Consolidated Financial Statements (Unaudited). Sales and operating profit for the Company's four business segments are discussed below. This discussion should be read in conjunction with the information in the Consolidated Financial Statements and Notes to the Consolidated Financial Statements. SPECIALTY METALS Operating profit increased 5 percent to $62.3 million in the third quarter 1997 compared to $59.2 million for the same quarter last year despite an increasingly difficult pricing environment for stainless steel commodity grades. Sales for the 1997 third quarter increased 5 percent to $510.0 million. For the 1997 nine months, operating profit increased 4 percent to $215.7 million while sales increased 1 percent to $1,584.2 million. Tight operating cost controls remained in effect throughout the specialty metals segment. Operating profit and sales from businesses other than flat-rolled products increased 41 percent and 15 percent, respectively, compared to the third quarter 1996 and increased 63 percent and 19 percent, respectively, over the 1996 nine months. These results reflected strong demand from commercial aerospace and chemical processing industries for specialized metals such as nickel-based superalloys, titanium, niobium, and zirconium. Combined operating profits and sales from Allegheny Ludlum and Rodney Metals fell 17 percent and 1 percent, respectively, for the third quarter and 22 percent and 7 percent, respectively, for the nine months from the stronger 1996 periods. Tons shipped from Allegheny Ludlum and Rodney Metals increased 3 percent and 1 percent in the 1997 third quarter and nine months compared to the same periods in 1996, but sales dropped due to depressed prices. Tons of flat-rolled specialty metals shipped in the third quarter and nine months of 1997 were 130,000 and 414,000, respectively, compared to 126,000 and 409,000 for the same periods of 1996. The average price per ton shipped in the third quarter was $2,417 compared to $2,554 in the 1996 third quarter. AEROSPACE AND ELECTRONICS SEGMENT Third quarter 1997 operating profit decreased 4 percent to $17.7 million compared to the same period in 1996, and sales decreased 1 percent to $208.8 million. For the 1997 nine months, operating profit decreased 3 percent to $61.2 million and sales decreased 6 percent to $654.0 million compared to the same period in 1996. For the 1997 third quarter and nine months, Teledyne Ryan Aeronautical experienced declines in sales and operating profit primarily due to the scheduled wind-downs of certain phases of the Apache helicopter and Global Hawk unmanned aerial vehicle programs. In September, 1997, Ryan received authorization from the Pentagon to build two additional Global Hawk vehicles and to begin procuring certain items for a fifth vehicle. For the nine months ended September 30, 1997, nonrecurring write-offs, primarily research and development-related expenses for avionics, resulted in declines in operating 11 profit at Teledyne Controls. New process manufacturing difficulties reduced both sales and operating profit at Teledyne Continental Motors. Teledyne Electronic Technologies continued to be the largest contributor to the segment's sales and profit for the quarter and nine months ended September 30, 1997. Demand for electromechanical relays, circuit board contract manufacturing, and microelectronic hybrid products paced these results. INDUSTRIAL SEGMENT Operating profit in the third quarter 1997 increased 39 percent to $12.1 million compared to the third quarter of 1996, and sales rose 4 percent to $104.3 million. For the 1997 nine months, operating profit increased 22 percent to $40.0 million while sales decreased 5 percent to $327.6 million. Operating profit improved for Teledyne Metalworking Products, formerly called Teledyne Advanced Materials. This business unit is the largest revenue and profit producer in this segment. It manufactures tungsten and tungsten carbide products, including cutting tools and inserts, for the global metalforming market. Also, sales and operating profit improved for Teledyne Specialty Equipment's mining and construction equipment and material handler businesses. Shipments of Fluid Systems' metal stamping dies and plastic compression molds declined for the 1997 nine months as the Company phases down this business. CONSUMER SEGMENT Operating profit in the 1997 third quarter almost tripled to $9.3 million compared to the third quarter 1996, and sales grew 10 percent to $75.0 million. For the 1997 nine months, operating profit more than doubled to $25.9 million and sales increased 9 percent to $226.5 million from the comparable 1996 period. Profit improved at all of the segment's operating companies. Teledyne Water Pik's improvement was particularly strong due to the favorable performance of new products and cost reductions. Sales improved at Teledyne Laars due to the successful introduction of a new pool heater product and increased seasonal demand for commercial water heating systems. SPECIAL ITEMS Special items resulted in a net after-tax gain of $3.9 million, or $0.02 per share, in the 1997 third quarter. This after-tax gain included a gain on sale of Teledyne Economic Development which was partially offset by a charge relating to legal matters. Third quarter 1996 special items reduced after-tax income by $26.3 million, or $0.15 per share, primarily due to charges related to merger and restructuring. In addition, the nine months ended September 1997 included after-tax gains of $17.0 million on the sale of the Company's investment in Semtech Corporation common stock, $9.2 million on the sale of the Company's investment in Nitinol Development Corporation, and $1.9 million on other investments. These gains were partially offset by after-tax charges of $4.1 million for a settlement of a U.S. government contract dispute related to a unit divested in 1995, $3.5 million to write-off a research and development venture and $6.3 million from merger and restructuring costs. In addition to the merger and restructuring costs discussed above, the nine months ended September 30, 1996 also included an after-tax gain of $24.8 million on the sale of the Company's defense vehicle business partially offset by a charge of $3.6 million for costs related to a Teledyne, Inc. proxy contest. Net gains from special items are expected to continue as Allegheny Teledyne proceeds with previously announced non-strategic divestitures and the sale of surplus real estate holdings. 12 NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of this change on earnings per share for the three and nine months ended September 30, 1997 and for the same periods in 1996 was not material. Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income," and Financial Accounting Standards Board Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," were also issued in 1997. These statements will be adopted by the Company in 1998, and are not expected to have a material effect on the consolidated financial statements. INCOME TAXES The Company's effective tax rate declined to 36.7 percent and 38.0 percent, respectively, for the 1997 third quarter and nine months from 54.9 percent and 41.7 percent, respectively, for the same periods in 1996 primarily due to non-deductible business combination costs incurred in 1996. FINANCIAL CONDITION AND LIQUIDITY Working capital increased to $695.3 million at September 30, 1997, compared to $614.0 million at December 31, 1996. The current ratio increased to 2.3 from 2.0 in this same period. The increase in working capital was primarily due to a reclassification to current assets of a tax refund formerly carried in other assets, higher inventories and lower accounts payable balances. In the first nine months of 1997, cash generated from operations of $141.0 million, proceeds from the sales of businesses and investments of $58.4 million and proceeds from the exercise of stock options of $34.6 million were used to purchase treasury stock of $86.7 million, pay dividends of $84.3 million, invest $69.3 million in capital equipment and business expansion and reduce long-term debt by $23.3 million. These transactions plus cash on hand at the beginning of the year resulted in a cash position of $32.9 million at September 30, 1997. Capital expenditures for 1997 are expected to approximate $100 million. In mid-March 1997, the Company's Board of Directors authorized a 12 million share repurchase program. As of October 31, 1997, the company had repurchased 3.7 million shares on the open market for a cost of $106.8 million at per-share prices ranging from $25 1/8 to $32 3/4. However, the average common shares outstanding is slightly higher than in the third quarter of 1996 because of stock option exercises net of share repurchases. On October 31, 1997, the Company announced that it had terminated its stock repurchase program. The Company redeemed the Teledyne, Inc. 7% subordinated debentures on September 23, 1997. Payment was made in an amount equal to 100% of the principal amount of the debentures, in the aggregate amount of $19.5 million, plus accrued interest to the redemption date. On October 3, 1997, the Company announced that the sale of Teledyne Economic Development had been completed. On October 31, 1997, the Company sold the assets of Teledyne Packaging for approximately $31 million. These are two of eight non-strategic businesses identified by the Company for divestiture earlier in the year. The Company believes that internally generated funds, current cash on hand and borrowing from existing credit lines will be adequate to meet foreseeable needs. 13 On October 23, 1997, the Board of Directors declared a regular quarterly dividend of $0.16 per share of common stock. The dividend is payable November 28, 1997 to shareholders of record at the close of business November 14, 1997. OTHER MATTERS ENVIRONMENTAL The Company is subject to federal, state and local environmental laws and regulations which require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including 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, and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under these laws. The Company's reserves for environmental investigation and remediation totaled approximately $36 million at September 30, 1997. Based on currently available information, management does not believe future environmental costs at sites with which the Company has been identified in excess of those accrued are 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. With respect to proceedings brought under the federal Superfund laws, or similar state statutes, the Company has been identified as a potentially responsible party at approximately 35 such sites, excluding those at which it believes it has no future liability. The Company's involvement is very limited or de minimus at approximately 20 of these sites, and the potential loss exposure with respect to any individual site is not considered to be material. In 1996, Statement of Position 96-1, "Environmental Remediation Liabilities," which was issued by the American Institute of Certified Public Accountants, establishes accounting standards for recognition of environmental costs. This statement, which became effective in 1997, did not have a material effect on the consolidated financial statements. For additional discussion of environmental matters, see Note 7 of the Notes to Condensed Consolidated Financial Statements (Unaudited). 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-price 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. 14 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. Government for payment. If it chooses, the U.S. Government may intervene and assume control of the case. Although government contracting claims may be 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 the future operating results and 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. For additional discussion of government contract matters, see Note 7 of the Notes to Condensed Consolidated Financial Statements (Unaudited). FORWARD-LOOKING STATEMENTS Certain forward-looking statements are contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 7 of the Notes to Condensed Consolidated Financial Statements (Unaudited), including statements concerning the expected adequacy of available funds to meet foreseeable needs, proposed acquisitions and divestitures, the outcome of any government inquiries, litigation or other future proceedings related to government contract or other matters, and environmental costs. These statements are based on current expectations that involve a number of risks and uncertainties, including those described above under the captions "Other Matters - - Environmental" and "Other Matters - Government Contracts." In addition, realization of the anticipated benefits of the combination of Allegheny Ludlum and Teledyne could take longer than expected and implementation difficulties and market factors could alter the anticipated benefits. Actual results may differ materially from the results anticipated in the forward-looking statements. Additional risk factors are described from time to time in the Company's filings with the Securities and Exchange Commission, including its Report on Form 10-K for the year ended December 31, 1996. 15 PART II. OTHER INFORMATION Item 1. 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. While the outcome of litigation 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 matter is likely to have a material adverse effect on the Company's results of operations for that period. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - 4 Assignment and Assumption Agreements dated as of August 22, 1997 and First Amendment to Credit Agreement dated as of August 31, 1997 relating to Credit Agreement dated as of August 30, 1996 27 Financial data schedule (b) Registrant did not file any Form 8-K reports during the quarter for which this report is filed. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALLEGHENY TELEDYNE INCORPORATED (Registrant) Date: November 14, 1997 By /s/ James L. Murdy --------------------------------------- James L. Murdy Executive Vice President, Finance and Administration and Chief Financial Officer (Duly Authorized Officer) Date: November 14, 1997 By /s/ Dale G. Reid --------------------------------------- Dale G. Reid Vice President - Controller (Principal Accounting Officer) 17 EXHIBIT INDEX Exhibit Number Description Page No. - -------------- ----------- -------- 4 Assignment and Assumption Agreements 19 dated as of August 22, 1997 and First Amendment to Credit Agreement dated as of August 31, 1997 relating to Credit Agreement dated as of August 30, 1996 27 Financial data schedule 37 18 EX-4 2 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of August 22, 1997 by and among ABN AMRO BANK N.V., as agent (the "Transferor Lender"), THE TORONTO-DOMINION BANK (the "Purchasing Lender"), and PNC BANK, NATIONAL ASSOCIATION, as the Documentation and Administrative Agent for the Lenders under the Credit Agreement described below (in such capacity the "Agent"). WITNESSETH: WHEREAS, this Assignment and Assumption Agreement is being executed and delivered in accordance with Subsection 9.6a of that certain Credit Agreement dated as of August 30, 1996 by and among the Borrower, the Lenders party thereto, the Managing Agents party thereto and the Agent (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, substitutions and replacements thereto and thereof is hereinafter referred to as the "Agreement"); WHEREAS, the Purchasing Lender wishes to become a party to the Agreement and assume the rights, obligations and commitments of a Lender thereunder; and WHEREAS, the Transferor Lender wishes to sell and assign to the Purchasing Lender all of the Transferor Lender's rights, obligations, commitments and Loans under the Agreement. NOW, THEREFORE, in consideration of mutual promises contained herein and other valuable consideration and with the intent to be legally bound hereby, the parties hereto agree as follows: 1. All capitalized terms used herein as defined terms which are not defined herein but which are defined in the Agreement shall have the same meanings herein as given to them in the Agreement unless the context clearly indicates otherwise. 2. Upon receipt by the Agent of four (4) counterparts of this Assignment and Assumption Agreement which have been executed by the Transferor Lender, the Purchasing Lender and the Agent and to each of which is attached a fully completed Schedule I, the Agent will complete, execute and deliver to the Borrower, the Transferor Lender, the Purchasing Lender and the remaining Lenders, a Transfer Effective Notice substantially in the form of Schedule II to this Assignment and Assumption Agreement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall set forth, inter alia, the date on which the transfer affected by this Assignment and Assumption Agreement shall become effective (the "Transfer Effective Date"). 3. Effective upon the opening of business of the Agent on the Transfer Effective Date, the Transferor Lender hereby sells, assigns, delegates and transfers to the Purchasing Lender, without recourse and without any representations or warranties except as set forth in paragraph 9 hereof, and the Purchasing Lender hereby buys, assumes and accepts, all of the Transferor Lender' s rights, as set forth in item 2 of Schedule I hereto in (i) the Transferor Lender's Revolving Credit Commitment, (ii) the principal of, and all accrued and unpaid interest on, all outstanding Loans of the Transferor Lender, (iii) all accrued but unpaid Fees owing to the Transferor Lender under the Agreement and the other Loan Documents and (iv) all of the Transferor Lender's other rights (including voting rights), interests, duties, liabilities and obligations under the Agreement and the other Loan Documents. 4. On the Transfer Effective Date, the Purchasing Lender shall pay to the Agent at or before 12:00 Noon (Eastern time), in immediately available funds, an amount equal to the principal of all outstanding Loans being sold by the Transferor Lender to the Purchasing Lender. The Agent shall pay such amount to the Transferor Lender, in immediately available funds, on the Transfer Effective Date. The principal amount paid by the Purchasing Lender to the Agent is referred to hereinafter as the "Purchase Price". On and after the Transfer Effective Date, the Agent shall begin to calculate interest on the outstanding Loans and all Fees under the Agreement and the other Loan Documents which are owed to the Transferor Lender and the Purchasing Lender, based on the Transferor Lender's and the Purchasing Lender's Commitment Percentages set forth in items 3 and 4 of Schedule I hereto. 5. From and after the Transfer Effective Date, (i) the Purchasing Lender (A) shall be a Lender party to the Agreement, (B) subject to the terms thereof, and to the extent provided in this Assignment and Assumption Agreement, shall have the rights, interests, liabilities, duties and obligations of the Transferor Lender thereunder and under the Loan Documents and (C) shall have a Revolving Credit Commitment and Commitment Percentage as set forth opposite the Purchasing Lender's name in item 3 of Schedule I hereto and (ii) the Transferor Lender (A) shall, to the extent provided in this Assignment and Assumption Agreement, relinquish such rights and interests and be released from such liabilities, duties and obligations under the Agreement and the other Loan Documents as shall have been assigned to the Purchasing Lender hereunder and (B) shall have the reduced Revolving Credit Commitment and Commitment Percentage as set forth opposite the Transferor Lender's name in item 4 of Schedule I hereto. 6. The Transferor Lender has made arrangements with the Purchasing Lender with respect to (i) the amount, if any, to be paid, and the date or dates for payment, by the Transferor Lender to such Purchasing Lender of any Fees heretofore received by the Transferor Lender pursuant to the Agreement or any other Loan Document prior to the Transfer Effective Date and (ii) the amount, if any, to be paid, and the date or dates for payment, by such Purchasing Lender to the Transferor Lender of Fees or interest received by such Purchasing Lender pursuant to the Agreement or any other Loan Document from and after the Transfer Effective Date. Any such amount is in addition to the Purchase Price. 7. (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Lender pursuant to the Agreement and the Notes payable to the Transferor Lender shall instead be payable to or for the account of the Transferor Lender and the Purchasing Lender in accordance with their respective interests as reflected in this Assignment and Assumption Agreement and on Schedule I hereto. (ii) All interest, Fees and other amounts that would otherwise accrue for the account of the Transferor Lender from and after the Transfer Effective Date pursuant to the Agreement, the Notes payable to the Transferor Lender or the other Loan Documents shall instead accrue for the account of, and be payable to, the Transferor Lender and the Purchasing Lender in accordance with their respective interests as reflected in this Assignment and Assumption Agreement and on Schedule I hereto. 8. As soon as possible after the Agent has received from the Transferor Lender the existing Notes payable to the Transferor Lender and after the Borrower has executed and delivered to the Agent new Notes, the Agent shall deliver to the Purchasing Lender a Revolving Credit Note payable to the order of the Purchasing Lender in a principal amount equal to the Revolving Credit Commitment of the Purchasing Lender set forth in item 3 of Schedule I hereto and a Bid Rate Note. 9. Each of the Transferor Lender and the Purchasing Lender represents and warrants to the other that (i) it has full power and legal right to execute and deliver this Assignment and Assumption Agreement and to perform the provisions of this Assignment and Assumption Agreement, (ii) the execution, delivery and performance of this Assignment and Assumption Agreement have been authorized by all necessary corporate action and (iii) this Assignment and Assumption Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. 10. By executing and delivering this Assignment and Assumption Agreement, the Transferor Lender and the Purchasing Lender confirm to and agree with each other, the Agent and the other Lenders as follows: (i) except as set forth in paragraph 9 immediately above, the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; (ii) the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of the Lenders or the performance or observance by the Borrower or any of the Lenders of any of their respective obligations under the Agreement, the other Loan Documents or any other instrument or document furnished pursuant thereto; (iii) the Purchasing Lender confirms that it has received a copy of the Agreement, together with copies of the financial statements delivered to the Agent pursuant to Section 3.5 and Section 4.2 of the Agreement, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (iv) the Purchasing Lender has not relied upon and will continue independently and without reliance upon the Agent, the Transferor Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, make its own credit decision in taking or not taking action under the Agreement and the other Loan Documents; (v) the Purchasing Lender appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under the Agreement and the other Loan Documents as are delegated to the Agent by the terms of the Agreement and the other Loan Documents, together with such powers as are reasonably incidental thereto, all in accordance with Article VIII of the Agreement and in certain other Loan Documents; and (vi) the Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Agreement and the other Loan Documents are required to be performed by it as a Lender. 11. Each of the parties to this Assignment and Assumption Agreement agrees that, at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment and Assumption Agreement. 12. As of the Transfer Effective Date, the Agreement shall be deemed to be amended (i) to make the Purchasing Lender a Lender for all purposes of the Agreement and the other Loan Documents and (ii) to adjust the Revolving Credit Commitment and Commitment Percentage of the Transferor Lender to zero at which point the Transferor Lender shall cease to be a Lender, and (iii) to provide for a Revolving Credit Commitment and Commitment Percentage for the Purchasing Lender, all as set forth on Schedule I hereto. 13. Schedule I hereto sets forth in items 3 and 4 thereof the Revolving Credit Commitment and Commitment Percentage of the Purchasing Lender and the revised Revolving Credit Commitment and Commitment Percentage of the Transferor Lender, and sets forth in item 2 certain administrative information with respect to the Purchasing Lender. 14. The Agent hereby waives the service fee referred to in item (iv) of Subsection 9.6 of the Agreement. 15. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. 16. This Assignment and Assumption Agreement may be executed in as many counterparts as shall be convenient, each of which, when executed by the Transferor Lender, the Purchasing Lender or the Agent shall be regarded as an original. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed as of the date first above written. ABN AMRO BANK N.V. By /s/ J. M. Janovsky Name J. M. Janovsky Title Group Vice President By /s/ Gregory Amoroso Name Gregory Amoroso Title Vice President THE TORONTO-DOMINION BANK By /s/ David G. Parker Name David G. Parker Title Mgr. Cr. Admin. PNC BANK, NATIONAL ASSOCIATION, as Agent for the Lenders By /s/ Lawrence D. Jacobs Name Lawrence D. Jacobs Title Vice President Consented to this 22nd day of August, 1997 ALLEGHENY TELEDYNE INCORPORATED By /s/ R. S. Park Name R. S. Park Title Vice President, Treasurer SCHEDULE I TO ASSIGNMENT AND ASSUMPTION AGREEMENT 1. TRANSFEROR BANK Existing Revolving Credit Commitment: $25,000,000 Existing Pro Rata Share: 5% 2. PURCHASING BANK Amount of Revolving Credit Commitment being purchased: $25,000,000 Address of Purchasing Bank for notice purposes: The Toronto-Dominion Bank _________________________ _________________________ Address for Euro-Rate funding, if different from above: ___________________________ ___________________________ ___________________________ Attention: ________________ Telephone: (___) ___-____ Telecopier: (___) ___-____ Telex: # __________ 3. PURCHASING BANK Revolving Credit Commitment: $25,000,000 New Pro Rata Share: 5% 4. TRANSFEROR BANK Revised Revolving Credit Commitment: $ 0 Revised Pro Rata Share: 0% SCHEDULE II TO ASSIGNMENT AND ASSUMPTION AGREEMENT Transfer Effective Notice TO: The Borrowers, the Transferor Bank, the Purchasing Bank and each other Bank The undersigned, the Agent pursuant to the Credit Agreement dated as of August 30, 1996, as amended by and among Allegheny Teledyne Incorporated, as the Borrower, the Lenders, the Managing Agents thereunder, and PNC Bank, National Association, as the Documentation and Administrative Agent, acknowledges receipt of fully executed counterparts of an Assignment and Assumption Agreement, as described in Schedule I attached hereto. Pursuant to such Assignment and Assumption Agreement, you are advised that the Transfer Effective Date will be [August 14, 1997]. Capitalized terms used in this Transfer Effective Notice as defined terms shall have the meanings given them in the above-referenced Assignment and Assumption Agreement. Dated as of ______________. PNC BANK, NATIONAL ASSOCIATION, as Agent for the Lenders and the Managing Agents By Name: Title: ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of August 22, 1997 by and among FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the "Transferor Lender"), CORESTATES BANK, N.A. (the "Purchasing Lender"), and PNC BANK, NATIONAL ASSOCIATION, as the Documentation and Administrative Agent for the Lenders under the Credit Agreement described below (in such capacity the "Agent"). WITNESSETH: WHEREAS, this Assignment and Assumption Agreement is being executed and delivered in accordance with Subsection 9.6a of that certain Credit Agreement dated as of August 30, 1996 by and among the Borrower, the Lenders party thereto, the Managing Agents party thereto and the Agent (the Credit Agreement together with the exhibits and schedules thereto and all amendments, modifications, extensions, renewals, substitutions and replacements thereto and thereof is hereinafter referred to as the "Agreement"); WHEREAS, the Purchasing Lender wishes to become a party to the Agreement and assume the rights, obligations and commitments of a Lender thereunder; and WHEREAS, the Transferor Lender wishes to sell and assign to the Purchasing Lender all of the Transferor Lender's rights, obligations, commitments and Loans under the Agreement. NOW, THEREFORE, in consideration of mutual promises contained herein and other valuable consideration and with the intent to be legally bound hereby, the parties hereto agree as follows: 1. All capitalized terms used herein as defined terms which are not defined herein but which are defined in the Agreement shall have the same meanings herein as given to them in the Agreement unless the context clearly indicates otherwise. 2. Upon receipt by the Agent of four (4) counterparts of this Assignment and Assumption Agreement which have been executed by the Transferor Lender, the Purchasing Lender and the Agent and to each of which is attached a fully completed Schedule I, the Agent will complete, execute and deliver to the Borrower, the Transferor Lender, the Purchasing Lender and the remaining Lenders, a Transfer Effective Notice substantially in the form of Schedule II to this Assignment and Assumption Agreement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall set forth, inter alia, the date on which the transfer affected by this Assignment and Assumption Agreement shall become effective (the "Transfer Effective Date"). 3. Effective upon the opening of business of the Agent on the Transfer Effective Date, the Transferor Lender hereby sells, assigns, delegates and transfers to the Purchasing Lender, without recourse and without any representations or warranties except as set forth in paragraph 9 hereof, and the Purchasing Lender hereby buys, assumes and accepts, all of the Transferor Lender' s rights, as set forth in item 2 of Schedule I hereto in (i) the Transferor Lender's Revolving Credit Commitment, (ii) the principal of, and all accrued and unpaid interest on, all outstanding Loans of the Transferor Lender, (iii) all accrued but unpaid Fees owing to the Transferor Lender under the Agreement and the other Loan Documents and (iv) all of the Transferor Lender's other rights (including voting rights), interests, duties, liabilities and obligations under the Agreement and the other Loan Documents. 4. On the Transfer Effective Date, the Purchasing Lender shall pay to the Agent at or before 12:00 Noon (Eastern time), in immediately available funds, an amount equal to the principal of all outstanding Loans being sold by the Transferor Lender to the Purchasing Lender. The Agent shall pay such amount to the Transferor Lender, in immediately available funds, on the Transfer Effective Date. The principal amount paid by the Purchasing Lender to the Agent is referred to hereinafter as the "Purchase Price". On and after the Transfer Effective Date, the Agent shall begin to calculate interest on the outstanding Loans and all Fees under the Agreement and the other Loan Documents which are owed to the Transferor Lender and the Purchasing Lender, based on the Transferor Lender's and the Purchasing Lender's Commitment Percentages set forth in items 3 and 4 of Schedule I hereto. 5. From and after the Transfer Effective Date, (i) the Purchasing Lender (A) shall be a Lender party to the Agreement, (B) subject to the terms thereof, and to the extent provided in this Assignment and Assumption Agreement, shall have the rights, interests, liabilities, duties and obligations of the Transferor Lender thereunder and under the Loan Documents and (C) shall have a Revolving Credit Commitment and Commitment Percentage as set forth opposite the Purchasing Lender's name in item 3 of Schedule I hereto and (ii) the Transferor Lender (A) shall, to the extent provided in this Assignment and Assumption Agreement, relinquish such rights and interests and be released from such liabilities, duties and obligations under the Agreement and the other Loan Documents as shall have been assigned to the Purchasing Lender hereunder and (B) shall have the reduced Revolving Credit Commitment and Commitment Percentage as set forth opposite the Transferor Lender's name in item 4 of Schedule I hereto. 6. The Transferor Lender has made arrangements with the Purchasing Lender with respect to (i) the amount, if any, to be paid, and the date or dates for payment, by the Transferor Lender to such Purchasing Lender of any Fees heretofore received by the Transferor Lender pursuant to the Agreement or any other Loan Document prior to the Transfer Effective Date and (ii) the amount, if any, to be paid, and the date or dates for payment, by such Purchasing Lender to the Transferor Lender of Fees or interest received by such Purchasing Lender pursuant to the Agreement or any other Loan Document from and after the Transfer Effective Date. Any such amount is in addition to the Purchase Price. 7. (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Lender pursuant to the Agreement and the Notes payable to the Transferor Lender shall instead be payable to or for the account of the Transferor Lender and the Purchasing Lender in accordance with their respective interests as reflected in this Assignment and Assumption Agreement and on Schedule I hereto. (ii) All interest, Fees and other amounts that would otherwise accrue for the account of the Transferor Lender from and after the Transfer Effective Date pursuant to the Agreement, the Notes payable to the Transferor Lender or the other Loan Documents shall instead accrue for the account of, and be payable to, the Transferor Lender and the Purchasing Lender in accordance with their respective interests as reflected in this Assignment and Assumption Agreement and on Schedule I hereto. 8. As soon as possible after the Agent has received from the Transferor Lender the existing Notes payable to the Transferor Lender and after the Borrower has executed and delivered to the Agent new Notes, the Agent shall deliver to the Purchasing Lender a Revolving Credit Note payable to the order of the Purchasing Lender in a principal amount equal to the Revolving Credit Commitment of the Purchasing Lender set forth in item 3 of Schedule I hereto and a Bid Rate Note. 9. Each of the Transferor Lender and the Purchasing Lender represents and warrants to the other that (i) it has full power and legal right to execute and deliver this Assignment and Assumption Agreement and to perform the provisions of this Assignment and Assumption Agreement, (ii) the execution, delivery and performance of this Assignment and Assumption Agreement have been authorized by all necessary corporate action and (iii) this Assignment and Assumption Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. 10. By executing and delivering this Assignment and Assumption Agreement, the Transferor Lender and the Purchasing Lender confirm to and agree with each other, the Agent and the other Lenders as follows: (i) except as set forth in paragraph 9 immediately above, the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; (ii) the Transferor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of the Lenders or the performance or observance by the Borrower or any of the Lenders of any of their respective obligations under the Agreement, the other Loan Documents or any other instrument or document furnished pursuant thereto; (iii) the Purchasing Lender confirms that it has received a copy of the Agreement, together with copies of the financial statements delivered to the Agent pursuant to Section 3.5 and Section 4.2 of the Agreement, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (iv) the Purchasing Lender has not relied upon and will continue independently and without reliance upon the Agent, the Transferor Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, make its own credit decision in taking or not taking action under the Agreement and the other Loan Documents; (v) the Purchasing Lender appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under the Agreement and the other Loan Documents as are delegated to the Agent by the terms of the Agreement and the other Loan Documents, together with such powers as are reasonably incidental thereto, all in accordance with Article VIII of the Agreement and in certain other Loan Documents; and (vi) the Purchasing Lender agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Agreement and the other Loan Documents are required to be performed by it as a Lender. 11. Each of the parties to this Assignment and Assumption Agreement agrees that, at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment and Assumption Agreement. 12. As of the Transfer Effective Date, the Agreement shall be deemed to be amended (i) to make the Purchasing Lender a Lender for all purposes of the Agreement and the other Loan Documents and (ii) to adjust the Revolving Credit Commitment and Commitment Percentage of the Transferor Lender to zero at which point the Transferor Lender shall cease to be a Lender, and to provide for a Revolving Credit Commitment and Commitment Percentage for the Purchasing Lender, all as set forth on Schedule I hereto. 13. Schedule I hereto sets forth in items 3 and 4 thereof the Revolving Credit Commitment and Commitment Percentage of the Purchasing Lender and the revised Revolving Credit Commitment and Commitment Percentage of the Transferor Lender, and sets forth in item 2 certain administrative information with respect to the Purchasing Lender. 14. The Agent hereby waives the service fee referred to in item (iv) of Subsection 9.6a of the Agreement. 15. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. 16. This Assignment and Assumption Agreement may be executed in as many counterparts as shall be convenient, each of which, when executed by the Transferor Lender, the Purchasing Lender or the Agent shall be regarded as an original. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed as of the date first above written. FIRST UNION NATIONAL BANK (f/k/a FIRST UNION NATIONAL BANK OF NORTH CAROLINA) By /s/ Jane W. Workman Name Jane W. Workman Title Senior Vice President CORESTATES BANK, N.A. By /s/ Farina Rashid Name Farina Rashid Title Commercial Officer PNC BANK, NATIONAL ASSOCIATION, as Agent for the Lenders By /s/ Lawrence D. Jacobs Name Lawrence D. Jacobs Title Vice President Consented to this 22nd day of August, 1997 ALLEGHENY TELEDYNE INCORPORATED By /s/ R. S. Park Name R. S. Park Title Vice President, Treasurer SCHEDULE I TO ASSIGNMENT AND ASSUMPTION AGREEMENT 1. TRANSFEROR BANK Existing Revolving Credit Commitment: $25,000,000 Existing Pro Rata Share: 5% 2. PURCHASING BANK Amount of Revolving Credit Commitment being purchased: $25,000,000 Address of Purchasing Bank for notice purposes: ___________________________ ___________________________ ___________________________ ___________________________ Address for Euro-Rate funding, if different from above: ___________________________ ___________________________ ___________________________ Attention:_________________ Telephone: (___) ___-____ Telecopier: (___) ___-____ Telex: # __________ 3. PURCHASING BANK Revolving Credit Commitment: $25,000,000 New Pro Rata Share: 5% 4. TRANSFEROR BANK Revised Revolving Credit Commitment: $ 0 Revised Pro Rata Share: 0% SCHEDULE II TO ASSIGNMENT AND ASSUMPTION AGREEMENT Transfer Effective Notice TO: The Borrowers, the Transferor Bank, the Purchasing Bank and each other Bank The undersigned, the Agent pursuant to the Credit Agreement dated as of August 30, 1996, as amended by and among Allegheny Teledyne Incorporated, as the Borrower, the Lenders, the Managing Agents thereunder, and PNC Bank, National Association, as the Documentation and Administrative Agent, acknowledges receipt of fully executed counterparts of an Assignment and Assumption Agreement, as described in Schedule I attached hereto. Pursuant to such Assignment and Assumption Agreement, you are advised that the Transfer Effective Date will be August 26, 1997. Capitalized terms used in this Transfer Effective Notice as defined terms shall have the meanings given them in the above-referenced Assignment and Assumption Agreement. Dated as of ______________. PNC BANK, NATIONAL ASSOCIATION, as Agent for the Lenders and the Managing Agents By Name: Title: FIRST AMENDMENT TO CREDIT AGREEMENT Among ALLEGHENY TELEDYNE INCORPORATED as the Borrower THE FINANCIAL INSTITUTIONS PARTY THERETO as the Lenders BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (formerly Bank of America - Illinois) THE CHASE MANHATTAN BANK MELLON BANK, N.A. and PNC BANK, NATIONAL ASSOCIATION as Managing Agents and PNC BANK, NATIONAL ASSOCIATION as the Documentation and Administrative Agent Dated as of August 31, 1997 FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the "First Amendment") made as of August 31, 1997 to that certain Credit Agreement dated as of August 30, 1996 (the Credit Agreement together with the exhibits and schedules thereto and all modifications, amendments, extensions, renewals, substitutions or replacements prior to the date hereof, the "Existing Agreement") among the FINANCIAL INSTITUTIONS listed on the signature pages hereto and each other financial institution which from time to time becomes a party hereto in accordance with Section 9.6a (individually a "Lender" and collectively the "Lenders"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (formerly Bank of America-Illinois), THE CHASE MANHATTAN BANK, MELLON BANK, N.A. and PNC BANK, NATIONAL ASSOCIATION as Managing Agents (individually a "Managing Agent" and collectively the "Managing Agents") and PNC BANK, NATIONAL ASSOCIATION, a national banking association, Documentation and Administrative Agent for the Lenders (in such capacity the "Agent"). WITNESSETH: WHEREAS, the Borrower and the initial Lenders, the Managing Agent and the Agent entered into the Existing Agreement pursuant to which the Lenders made certain financial accommodations available to the Borrower including a Revolving Credit Commitment; WHEREAS, the Borrower has requested that the Lenders, and the Lenders are willing upon the following terms and conditions, to extend the Termination Date to August 31, 2002; and WHEREAS, the Borrower and the Lenders, the Managing Agents and the Agent desire to amend the Existing Agreement as set forth herein. NOW THEREFORE, in consideration of the mutual premises contained herein and other good and valuable consideration, the Borrower and the Bank with the intent to be legally bound hereby, agree that the Existing Agreement shall be amended as follows: ARTICLE I AMENDMENTS TO EXISTING AGREEMENT Section 1.01. Additional Definition. Section 1.1 of the Existing Agreement is hereby amended such that the following definition shall be added thereto in the appropriate alphabetical order: "First Amendment Effective Date" shall mean August 31, 1997. Section 1.02. Amended Definitions. Section 1.1 of the Existing Agreement is hereby amended such that each of the following definition is amended and restated in its entirety to read as follows: "Termination Date" shall mean August 31, 2002 or such later date as is ultimately determined in accordance with Section 2.8 hereof. Section 1.03. Amendment to Section 5.5. Section 5.5 is hereby amended by replacing Schedule 5.5 attached to the Existing Agreement with restated Schedule 5.5 attached to the First Amendment. Section 1.04. No Other Amendments or Waivers. The amendments to the Existing Agreement set forth in Sections 1.01 through 1.03 inclusive above do not either implicitly or explicitly alter, waive or amend, except as expressly provided in this First Amendment, the provisions of the Existing Agreement. The amendments set forth in Sections 1.01 through 1.03 hereof do not waive, now or in the future, compliance with any other covenant, term or condition to be performed or complied with nor do they impair any rights or remedies of the Lenders or the Agent under the Existing Agreement with respect to any such violation. Nothing in this First Amendment shall be deemed or construed to be a waiver or release of, or a limitation upon, the Lenders' or the Agents' exercise of any of their respective rights and remedies under the Existing Agreement and the other Loan Documents, whether arising as a consequence of any Events of Default which may now exist or otherwise, and all such rights and remedies are hereby expressly reserved. ARTICLE II BORROWER'S SUPPLEMENTAL REPRESENTATIONS Section 2.01 Incorporation by Reference. As an inducement to the Lenders to enter into this First Amendment, the Borrower hereby repeats herein, for the benefit of the Lenders, the representations and warranties made by the Borrower in Sections 3.1 through 3.15, inclusive, of the Existing Agreement, as amended hereby, except that for purposes hereof such representations and warranties shall be deemed to extend to and cover this First Amendment. ARTICLE III CONDITIONS PRECEDENT Section 3.01. Conditions Precedent. Each of the following shall be a condition precedent to the effectiveness of this First Amendment: (i) The Lenders shall have received, on or before the First Amendment Effective Date, duly executed counterpart originals of this First Amendment. (ii) The following statements shall be true and correct on the First Amendment Effective Date: (A) except to the extent modified in writing by the Borrower heretofore delivered to the Lenders, the representations and warranties made pursuant to Section 2.01 of this First Amendment and in the other Loan Documents are true and correct on and as of the First Amendment Effective Date as though made on and as of such date in all material respects; (B) no Event of Default or event which with the giving of notice or passage of time or both would become an Event of Default has occurred and is continuing, or would result from the execution of or performance under this First Amendment; (C) the Borrower has in all material respects performed all agreements, covenants and conditions required to be performed on or prior to the date hereof under the Existing Agreement and the other Loan Documents. ARTICLE IV GENERAL PROVISIONS Section 4.01. Ratification of Terms. Except as expressly amended by this First Amendment, the Existing Agreement and each and every representation, warranty, covenant, term and condition contained therein is specifically ratified and confirmed in all material respects. Section 4.02. References. All notices, communications, agreements, certificates, documents or other instruments executed and delivered after the execution and delivery of this First Amendment in connection with the Agreement, any of the other Loan Documents or the transactions contemplated thereby may refer to the Existing Agreement without making specific reference to this First Amendment, but nevertheless all such references shall include this First Amendment unless the context requires otherwise. From and after the First Amendment Effective Date, all references in the Existing Agreement and each of the other Loan Documents to the "Agreement" shall be deemed to be references to the Existing Agreement as amended hereby. Section 4.03. Counterparts. This First Amendment may be executed in different counterparts, each of which when executed by the Borrower and the Bank shall be regarded as an original, and all such counterparts shall constitute one First Amendment. Section 4.04. Capitalized Terms. Except for proper nouns and as otherwise defined herein, capitalized terms used herein as defined terms shall have the meanings ascribed to them in the Existing Agreement, as amended hereby. Section 4.05. Governing Law. THIS FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS THEREOF REGARDING CONFLICTS OF LAW. Section 4.06. Headings. The headings of the sections in this First Amendment are for purposes of reference only and shall not be deemed to be a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this First Amendment to be duly executed by their proper and duly authorized officers the day first above written. ALLEGHENY TELEDYNE INCORPORATED By /s/ R. S. Park Name R. S. Park Title Vice President, Treasurer PNC BANK, NATIONAL ASSOCIATION, BANK OF AMERICA NATIONAL TRUST AND as Lender, Managing Agent and Agent SAVINGS ASSOCIATION as Lender and Managing Agent By /s/ Lawrence W. Jacobs By /s/ M. A. Detrick Name Lawrence W. Jacobs Name M. A. Detrick Title Vice President Title Vice President THE CHASE MANHATTAN BANK, MELLON BANK, N.A., as Lender and Managing Agent as Lender and Managing Agent By /s/ James H. Ramage By /s/ David Jardini Name James H. Ramage Name David Jardini Title Vice President Title Vice President THE BANK OF NEW YORK MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Robert J. Joyce By /s/ Laura E. Loffredo Name Robert J. Joyce Name Laura E. Loffredo Title Vice President Title Vice President [SIGNATURES CONTINUED ON NEXT PAGE] [CONTINUATION OF SIGNATURE PAGE] NATIONSBANK, N.A. THE TORONTO-DOMINION BANK By /s/ Rajesh Sood By /s/ David G. Parker Name Rajesh Sood Name David G. Parker Title Vice President Title Mgr. Cr. Admin. BANK OF TOKYO-MITSUBISHI TRUST CORESTATES BANK, N.A. COMPANY By /s/ Donna J. Emhart By /s/ M. R. Marron Name Donna J. Emhart Name M. R. Marron Title Vice President Title Vice President THE FIRST NATIONAL BANK OF NATIONAL CITY BANK OF CHICAGO PENNSYLVANIA By /s/ Christine Davis By /s/ William S. Harris Name Christine Davis Name William S. Harris Title Authorized Agent Title Vice President THE FUJI BANK LIMITED, NEW YORK UNION BANK OF SWITZERLAND, BRANCH NEW YORK BRANCH By /s/ Raymond Ventura By /s/ Philippe R. Sandmeier Name Raymond Ventura Name Philippe R. Sandmeier Title Vice President and Manager Title Director By /s/ Hamilton W. Bullard Name Hamilton W. Bullard Title Assistant Treasurer EX-27 3 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the registrant's consolidated statement of income for the fiscal nine months ended September 30, 1997 and consolidated balance sheet as of September 30, 1997 and is qualified in its entirety by reference to such financial statements. 1,000,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 33 0 598 (13) 550 1244 1597 895 2639 548 410 0 0 18 946 2639 2824 2824 2147 2147 0 0 16 347 132 215 0 0 0 215 1.22 1.22
-----END PRIVACY-ENHANCED MESSAGE-----