1 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 June 30, 1999 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 of Organization) Identification Number) 1000 Six PPG Place Pittsburgh, Pennsylvania 15222-5479 ------------------------- ---------- (Address of Principal (Zip Code) Executive Offices) (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 August 6, 1999, the Registrant had outstanding 190,519,637 shares of its Common Stock.
2 ALLEGHENY TELEDYNE INCORPORATED SEC FORM 10-Q QUARTER ENDED JUNE 30, 1999 INDEX <TABLE> <CAPTION> Page No. PART I. - FINANCIAL INFORMATION <S> <C> Item 1. Financial Statements 3 Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 PART II. - OTHER INFORMATION Item 4. Submission of Matters to Vote of 23 Security Holders Item 6. Exhibits and Reports on Form 8-K 23 Signatures 24 </TABLE> 2
3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions except share and per share amounts) <TABLE> <CAPTION> (Unaudited) (Audited) June 30, December 31, 1999 1998 ---- ---- <S> <C> <C> ASSETS Cash and cash equivalents $ 60.0 $ 74.8 Accounts receivable 549.5 534.7 Inventories 653.4 659.9 Deferred income taxes 58.7 59.3 Tax refund 3.5 5.9 Prepaid expenses and other current assets 27.8 29.9 ---------- ---------- Total Current Assets 1,352.9 1,364.5 Property, plant and equipment 1,023.1 1,003.6 Prepaid pension cost 474.2 418.6 Cost in excess of net assets acquired 250.1 256.0 Other assets 105.8 132.8 ---------- ---------- Total Assets $ 3,206.1 $ 3,175.5 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $ 238.5 $ 227.0 Accrued liabilities 297.0 327.1 Short-term debt and current portion of long-term debt 128.1 68.2 ---------- ---------- Total Current Liabilities 663.6 622.3 Long-term debt 439.1 446.8 Accrued postretirement benefits 582.0 582.6 Other 216.8 183.9 ---------- ---------- Total Liabilities 1,901.5 1,835.6 ---------- ---------- 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-197,937,664 shares at June 30, 1999 and December 31, 1998; outstanding-190,706,077 shares at June 30, 1999 and 194,873,151 shares at December 31, 1998 19.8 19.8 Additional paid-in capital 469.0 467.3 Retained earnings 974.6 923.9 Treasury stock: 7,231,587 shares at June 30, 1999 and 3,064,513 shares at December 31, 1998 (154.8) (67.6) Foreign currency translation losses (11.0) (5.9) Unrealized gains on securities 7.0 2.4 ---------- ---------- Total Stockholders' Equity 1,304.6 1,339.9 ---------- ---------- Total Liabilities and Stockholders' Equity $ 3,206.1 $ 3,175.5 ========== ========== </TABLE> The accompanying notes are an integral part of these statements. 3
4 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In millions except per share amounts) (Unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, -------------------------- ---------------------------- 1999 1998 1999 1998 --------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Sales $ 917.9 $ 1,019.1 $ 1,852.5 $ 2,021.3 Costs and expenses: Cost of sales 701.9 767.7 1,418.8 1,541.0 Selling and administrative expenses 116.1 122.5 231.0 244.0 Transformation, merger and restructuring costs 3.4 7.2 4.3 67.8 Interest expense, net 8.4 4.8 17.3 8.7 --------- ----------- ----------- ----------- 829.8 902.2 1,671.4 1,861.5 Earnings before other income 88.1 116.9 181.1 159.8 Other income 2.9 1.9 3.1 4.7 --------- ----------- ----------- ----------- Income before income taxes 91.0 118.8 184.2 164.5 Provision for income taxes 33.7 43.3 66.3 62.1 --------- ----------- ----------- ----------- Net income $ 57.3 $ 75.5 $ 117.9 $ 102.4 ========= =========== =========== =========== Basic net income per common share $ 0.30 $ 0.38 $ 0.61 $ 0.52 ========= =========== =========== =========== Diluted net income per common share $ 0.30 $ 0.38 $ 0.61 $ 0.52 ========= =========== =========== =========== Dividends declared per common share $ 0.16 $ 0.16 $ 0.32 $ 0.32 ========= =========== =========== =========== </TABLE> The accompanying notes are an integral part of these statements. 4
5 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) <TABLE> <CAPTION> Six Months Ended June 30, ------------------------ 1999 1998 --------- --------- <S> <C> <C> Operating Activities: Net income $ 117.9 $ 102.4 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 62.3 55.2 Deferred income taxes 3.8 5.2 Non-cash restructuring costs -- 51.7 Gains on sales of businesses and investments -- (0.2) Change in operating assets and liabilities: Prepaid pension cost (55.1) (45.0) Accrued liabilities (13.9) (9.3) Accrued income taxes 11.8 (38.7) Accounts payable 11.4 (38.3) Accounts receivable (9.0) 16.9 Inventories 7.5 6.6 Other 9.3 14.1 -------- -------- Cash provided by operating activities 146.0 120.6 Investing Activities: Purchases of property, plant and equipment (52.8) (76.9) Disposals of property, plant and equipment 7.6 3.1 Proceeds from the sale of businesses and investments 6.0 16.4 Purchases of businesses and investment in ventures (1.7) (118.3) Sale of short-term investments -- 34.4 Other -- (4.5) -------- -------- Cash used by investing activities (40.9) (145.8) Financing Activities: Net borrowings under credit agreements 48.2 119.6 Payments on long-term debt and capital leases (1.2) (4.4) -------- -------- Net increase in debt 47.0 115.2 Purchases of treasury stock (108.6) -- Cash dividends (61.8) (59.4) Exercises of stock options 3.5 5.5 -------- -------- Cash provided (used) by financing activities (119.9) 61.3 Increase (decrease) in cash and cash equivalents (14.8) 36.1 Cash and cash equivalents at beginning of the year 74.8 53.7 -------- -------- Cash and cash equivalents at end of period $ 60.0 $ 89.8 ======== ======== Non-cash transactions: Assets sold under promissory note $ 1.3 $ -- ======== ======== </TABLE> The accompanying notes are an integral part of these statements. 5
6 ALLEGHENY TELEDYNE INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Accounting Policies Basis of Presentation - --------------------- These interim consolidated financial statements include the accounts of Allegheny Teledyne Incorporated and its subsidiaries ("Allegheny Teledyne" or the "Company"). These unaudited consolidated financial 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 normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1998 Annual Report. The results of operations for these interim periods are not necessarily indicative of the operating results for a full year. Accounting Pronouncements - ------------------------- Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998. This statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, Financial Accounting Standards Board Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities: Deferral of the Effective Date of FASB Statement No. 133" was issued. This statement delays the effective date of Statement No. 133 to all fiscal quarters beginning after June 15, 2000. The Company is presently evaluating the effect of adopting these statements. Note 2. Inventories Inventories were as follows (in millions): <TABLE> <CAPTION> June 30, December 31, 1999 1998 -------- ------------ <S> <C> <C> Raw materials and supplies $ 150.4 $ 196.1 Work-in-process 492.3 471.6 Finished goods 143.3 133.4 -------- -------- Total inventories at current cost 786.0 801.1 Less allowances to reduce current cost values to LIFO basis (115.4) (128.7) Progress payments (17.2) (12.5) -------- -------- Total inventories $ 653.4 $ 659.9 ======== ======== </TABLE> 6
7 Note 3. Business Segments Information on the Company's business segments was as follows (in millions): <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, ------------------------- --------------------------- 1999 1998 1999 1998 -------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Sales: Specialty metals $ 504.0 $ 527.7 $ 1,011.2 $ 1,072.5 Aerospace and electronics 195.3 203.6 400.3 404.1 Industrial 115.3 138.4 237.4 270.3 Consumer 64.9 56.8 118.5 105.5 -------- ---------- ---------- ---------- Total continuing Operations 879.5 926.5 1,767.4 1,852.4 Operations sold or held for sale 38.4 92.6 85.1 168.9 -------- ---------- ---------- ---------- Total sales $ 917.9 $ 1,019.1 $ 1,852.5 $ 2,021.3 ======== ========== ========== ========== Operating Profit: Specialty metals $ 51.8 $ 78.8 $ 111.1 $ 149.2 Aerospace and electronics 18.5 23.4 37.9 42.9 Industrial 8.3 18.3 20.9 32.6 Consumer 5.8 5.5 8.1 7.4 -------- ---------- ---------- ---------- Total operating profit 84.4 126.0 178.0 232.1 Transformation, merger and restructuring costs (3.4) (7.2) (4.3) (67.8) Corporate expenses (7.8) (8.1) (17.0) (18.4) Interest expense, net (8.4) (4.8) (17.3) (8.7) Investments and operations sold or held for sale 10.5 2.3 13.0 6.1 Excess pension income 15.7 10.6 31.8 21.2 -------- ---------- ---------- ---------- Income before income Taxes $ 91.0 $ 118.8 $ 184.2 $ 164.5 ======== ========== ========== ========== </TABLE> In the 1999 second quarter, transformation, merger and restructuring costs included pre-tax costs of $3.4 million related to the previously announced proposed spin-offs of the Aerospace and Electronics and the Consumer segments into two freestanding public companies. In the 1999 first quarter, transformation, merger and restructuring costs included pre-tax costs of $0.9 million related to the proposed transformation of the Company. In the 1998 second quarter, transformation, merger and restructuring costs included a $7.2 million pre-tax charge, primarily attributable to the salaried workforce reduction at Allegheny Ludlum. 7
8 In the 1998 first quarter, transformation, merger and restructuring costs included deal costs of $10.3 million related to the acquisition of OREMET, along with pre-tax charges of $5.8 million for a salaried workforce reduction related to integrating the operations of OREMET and Wah Chang. Allegheny Ludlum also recorded a $12.1 million pre-tax charge due to a planned salaried workforce reduction. In addition, pre-tax charges of $32.4 million were recorded for costs associated with exiting certain product lines and asset impairments resulting from capital expenditure programs completed in 1998. 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 following table sets forth the computation of basic and diluted net income per common share (in millions, except per share amounts): <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, ------------------------ ------------------------ 1999 1998 1999 1998 --------- --------- --------- --------- <S> <C> <C> <C> <C> Numerator: Numerator for basic and diluted net income per common share - net income available to common stockholders $ 57.3 $ 75.5 $ 117.9 $ 102.4 ========= ========= ========= ========= Denominator: Weighted average shares 192.1 196.7 193.2 196.4 Contingent issuable stock 0.1 0.1 0.1 0.1 --------- --------- --------- --------- Denominator for basic net income per common share 192.2 196.8 193.3 196.5 Effect of dilutive securities: Employee stock options 1.0 1.6 1.0 1.9 --------- --------- --------- --------- Dilutive potential common shares 1.0 1.6 1.0 1.9 Denominator for diluted net income per common share - adjusted weighted average shares 193.2 198.4 194.3 198.4 ========= ========= ========= ========= Basic net income per common share $ 0.30 $ 0.38 $ 0.61 $ 0.52 ========= ========= ========= ========= Diluted net income per common share $ 0.30 $ 0.38 $ 0.61 $ 0.52 ========= ========= ========= ========= </TABLE> 8
9 Note 5. Comprehensive Income The components of comprehensive income, net of tax, were as follows (in millions): <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, --------------------- ----------------------- 1999 1998 1999 1998 ------- ------- -------- -------- <S> <C> <C> <C> <C> Net income $ 57.3 $ 75.5 $ 117.9 $ 102.4 Foreign currency translation losses (4.9) (2.3) (5.1) (3.6) Unrealized holding gains (losses) arising during period 3.8 (1.1) 4.6 (0.4) ------- ------- -------- -------- Comprehensive income $ 56.2 $ 72.1 $ 117.4 $ 98.4 ======= ======= ======== ======== </TABLE> Note 6. Stockholders' Equity Allegheny Teledyne paid a cash dividend of $0.16 per common share in each of the 1999 and 1998 first and second quarters. On August 12, 1999, the Company's Board of Directors declared a regular quarterly dividend of $0.16 per share of common stock. The dividend is payable on September 14, 1999 to stockholders of record at the close of business on August 30, 1999. On October 1, 1998, the Company's Board of Directors authorized a stock repurchase program to acquire up to 20 million shares of Allegheny Teledyne's common stock. The shares may be purchased from time-to-time in the open market or in negotiated transactions. In the first six months of 1999, the Company had purchased 5.2 million shares for $108.6 million under this program. In the 1999 second quarter, the Company had purchased 2.6 million shares for $56.4 million under this program. From the inception of the share repurchase program through August 6, 1999, the Company has repurchased approximately 8.1 million shares at an aggregate cost of $168.2 million. 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. 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 9
10 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 the amounts, and the possible range of loss in excess of amounts accrued, 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 June 30, 1999, the Company's reserves for environmental remediation obligations totaled approximately $33.2 million, of which approximately $8.0 million was included in other current liabilities. The reserve includes estimated probable future costs of $12.9 million for federal Superfund and comparable state-managed sites; $4.3 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $7.2 million for owned or controlled sites at which Company operations have been discontinued; and $8.8 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 for which it has identified remediation obligations in up to thirty years. 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 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 10
11 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, tax, 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. Subsequent Events In July 1999, the Company completed the previously announced sales of Ryan Aeronautical, the McCormick Selph Ordnance business unit and the Drinkware business unit of Water Pik. Also in July 1999, the Company announced definitive agreements for the sale of Fluid Systems. In August 1999, the Company completed the sale of Teledyne Specialty Equipment's Construction and Mining business unit. 11
12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Allegheny Teledyne Incorporated is a diversified manufacturing company serving global markets with specialty metals, aerospace, electronic, industrial, and consumer products. The Company is one of the largest and most diversified specialty metals producers in the world. The Company's Specialty Metals business segment accounted for 57 percent of the Company's total sales from continuing operations of $1,767.4 million for the six months ended June 30, 1999. Its Aerospace and Electronics, Industrial and Consumer business segments accounted for 23 percent, 13 percent and 7 percent, respectively, of total sales from continuing operations. Such percentages were approximately the same for the first six months of 1998, where total sales from continuing operations were $1,852.4 million. For the 1999 six months, operating profit was $178.0 million compared to $232.1 million for the same 1998 period. Sales from continuing operations declined 4.6 percent to $1,767.4 million for the 1999 six months compared to $1,852.4 million for the 1998 period. The lower results were due mainly to continuing difficult pricing conditions in stainless steel, titanium and tungsten carbide markets, reduced demand for high performance metals in the commercial aerospace and oil and gas markets and reduced demand for tungsten, tungsten carbide and tungsten carbide-cutting tools due to weak global market conditions. Strong cost controls, lower raw material costs, and the diversification of the Company's businesses partially offset the negative economic impacts experienced in some businesses. Net income was $117.9 million, or $0.61 per diluted share, for the 1999 six months, compared to $102.4 million, or $0.52 per diluted share, for the same 1998 period. Net income was $57.3 million, or $0.30 per diluted share, for the 1999 second quarter, compared to $75.5 million, or $0.38 per diluted share, for the same 1998 period. Net income in the second quarter 1999 was impacted by $6.4 million, or $0.03 per diluted share, relating to costs associated with the previously announced proposed spin-offs of the Aerospace and Electronics and Consumer segments, and facility consolidations, workforce reductions and start-up costs. Net income in the second quarter of 1998 was reduced by $4.9 million, or $0.02 per diluted share, primarily relating to a salaried workforce reduction at Allegheny Ludlum. Sales and operating profit for the Company's four business segments are discussed below. Specialty Metals Second quarter 1999 operating profit decreased to $51.8 million from $78.8 million in the same year-ago period. Sales decreased 4 percent to $504.0 million compared to the prior year period due to lower prices for commodity stainless steel and titanium, and reduced demand in aerospace and oil and gas markets. Operating profit in the 1999 second quarter included $1.8 million in start-up costs relating to Oremet-Wah Chang's new electron beam furnace and Allegheny Ludlum's joint venture in China, as well as costs related to a workforce reduction at Allvac's operations in the United Kingdom. For the 1998 six months, operating profit declined 26 percent to $111.1 million and sales declined 6 percent to $1,011.2 million. 12
13 Allegheny Ludlum - ---------------- Combined sales and operating profits for Allegheny Ludlum, whose products consist primarily of flat-rolled products, increased 7 percent and declined 18 percent, respectively, for the 1999 second quarter from the 1998 second quarter and increased 3 percent and declined 1 percent, respectively, for the 1999 six-month period from the 1998 six-month period. Sales increased due to higher shipments compared to 1998, as a result of strong demand and the utilization and capability of new strategic assets, which include the Houston, PA melt shop, the Massillon, OH wide anneal and pickle line and the 60-inch wide Sendzimir mill in Vandergrift, PA. Operating profit declined due to lower prices for commodity stainless steel products and product mix, as well as start-up costs relating to Allegheny Ludlum's joint venture in China. With rising raw material costs, principally nickel, increased demand and lower imports reflecting the impact of favorable trade cases, Allegheny Ludlum put into effect a price increase of approximately 7 percent for most stainless steel sheet, strip and coiled plate products effective July 19, 1999. On August 12, 1999, Allegheny Ludlum further announced that it is increasing prices for stainless steel hot rolled and cold rolled sheet and strip and coiled plate by approximately 6 to 7 percent, effective with shipments August 23, 1999. It also announced that it is increasing prices for all nickel alloy hot rolled and cold rolled sheet and strip, mill plate and coiled plate by 10 percent, effective with shipments August 12, 1999. In addition, Allegheny Ludlum announced that, effective October 4, 1999, it will change the raw material surcharge base levels for both nickel and chromium for all stainless steel sheet, strip, continuous mill plate, plate mill plate, and tool steels. The ability to maintain price increases and surcharges will depend on market conditions, including pricing by foreign producers. Tons of flat-rolled specialty materials shipped in the second quarter and six months of 1999 were 158,700 tons and 312,100 tons, respectively, compared to 132,700 tons and 272,000 tons for the same periods of 1998. The average prices of flat-rolled specialty materials in the second quarter and six months of 1999 were $2,019 and $2,022 per ton, respectively, compared to $2,255 and $2,254 per ton in the same 1998 periods. The declines were due primarily to lower prices for commodity stainless steel sheet and strip and the effect of product mix. High Performance Metals - ----------------------- Operating profit and sales for high performance metals declined 48 percent and 20 percent, respectively, over the 1998 second quarter and declined 44 percent and 17 percent, respectively, in the 1999 six months over the 1998 six months. The decline in operating results in 1999 occurred due to lower prices and volume for nickel alloy and titanium products resulting from continuing weak demand in aerospace and oil and gas markets. This weakness was partially offset by strong demand for nickel-based superalloys for large land-based power generation turbines. Results for the 1999 second quarter reflect start-up costs associated with Oremet-Wah Chang's new electron beam melt facility and costs related to a workforce reduction at Allvac's operations in the United Kingdom. The results for the 1999 six months also reflect start-up costs associated with Allvac's new vacuum induction furnace. Aerospace and Electronics Segment Operating profit decreased 21 percent to $18.5 million for the 1999 13
14 second quarter from $23.4 million in the same 1998 period, and sales decreased 4 percent to $195.3 million. For the 1999 six months, operating profit decreased 12 percent to $37.9 million and sales decreased 1 percent to $400.3 million. Product recall costs at Teledyne Continental Motors and a continuing slow economic recovery in Asian markets negatively impacted the segment's performance. Results have been restated to exclude Ryan Aeronautical and the McCormick Selph Ordnance business unit, which are now reported in investments and operations sold or held for sale. While sales at Teledyne Continental Motors improved in the 1999 second quarter and six months compared to the same periods in 1998, sales and operating profit were negatively impacted by a recall of piston engines. Efforts associated with the recall resulted in a $3.0 million charge and impacted sales during the 1999 second quarter. Sales and operating results for Teledyne Continental Motors' turbine engines increased in both the 1999 second quarter and the 1999 six-month period. At Teledyne Electronic Technologies, increased demand for business and commuter aircraft systems and medical devices partially offset lower sales for microelectronics, relays, and lighting and display products for both the 1999 second quarter and six months. These results were also impacted by costs related to a workforce reduction at Teledyne Electronic Technologies. At Teledyne Brown Engineering, increased 1999 second quarter and 1999 six months sales in defense and environmental programs partially offset lower sales for instrumentation products for offshore oil and gas exploration. Industrial Segment Operating profit for the 1999 second quarter was $8.3 million compared to $18.3 million for the same quarter of 1998, and sales decreased 17 percent to $115.3 million. For the 1999 six months, operating profit decreased 36 percent to $20.9 million while sales decreased 12 percent to $237.4 million. The decline in sales and operating profit in both 1999 periods resulted primarily from reduced demand for tungsten, tungsten carbide, and carbide-cutting tools due to continued weak global market conditions. Metalworking Products' 1999 second quarter results also reflect $1.5 million in costs related to a workforce reduction. Consumer Segment Operating profit increased to $5.8 million in the 1999 second quarter from $5.5 million in the same 1998 period and sales increased 14 percent to $64.9 million. For the 1999 six-month period, operating profit increased to $8.1 million from $7.4 million and sales increased 12 percent to $118.5 million from the comparable 1998 period. Operating profit in the 1999 second quarter includes a $1.0 million charge for the consolidation of manufacturing facilities. In August 1999, the Company completed the purchase of substantially all of the assets of Les Agences Claude Marchand, Inc., a pool accessories manufacturer and distributor, based in Montreal, Quebec, and doing business in Canada as Olympic Pool Accessories. Corporate Items Corporate expenses decreased by 4 percent to $7.8 million for the 1999 second quarter and decreased 8 percent to $17.0 million for the 1999 six months, compared to the respective 1998 periods. Net interest expense increased $3.6 million and $8.6 million in the 1999 second quarter and 1999 six-month period from the 1998 second quarter and 1998 six-month period, 14
15 respectively, due to higher levels of debt resulting from the expenditure of more than $400 million to purchase businesses and complete capital investments in 1998. Excess pension income increased to $15.7 million in the 1999 second quarter and $31.8 million in the 1999 six-month period compared to $10.6 million in the 1998 second quarter and $21.2 million in the 1998 six-month period due to higher pension assets as a result of strong investment performance during 1998. Investments and operations sold or held for sale, which includes Ryan Aeronautical and the McCormick Selph Ordnance business unit, realized income before taxes of $10.5 million in the 1999 second quarter and $13.0 million in the 1999 six-month period, compared to $2.3 million in the 1998 second quarter and $6.1 million in the 1998 six-month period. Special Items In the 1999 second quarter special items reduced net income by $6.4 million, or $0.03 per diluted share. These after-tax items include costs related to the previously announced proposed transformation of Allegheny Teledyne, facility consolidations or workforce reductions at Metalworking Products, Water Pik, Laars, Teledyne Electronic Technologies and Allvac's United Kingdom operations, as well as start-up costs at Oremet-Wah Chang and Allegheny Ludlum's joint venture in China. In the 1999 first quarter, special items reduced net income by $4.4 million, or $0.02 per diluted share. These items, net of taxes, included start-up costs of $2.2 million, or $0.01 per share, in the Specialty Metals segment associated with recently completed strategic capital investments, operating losses on businesses sold during the quarter of $1.6 million, or $0.01 per share, and costs of $0.6 million related to the proposed transformation of Allegheny Teledyne. In the 1998 second quarter special items resulted in an after-tax charge of $4.9 million, or $0.02 per diluted share, primarily due to a salaried workforce reduction at Allegheny Ludlum. Non-recurring events resulted in an after-tax charge of $40.9 million, or $0.21 per diluted share, in the 1998 first quarter. These events included deal costs of $10.3 million, or $0.05 per share, related to the acquisition of OREMET, along with charges of $3.5 million, or $0.02 per share, for a salaried workforce reduction related to integrating the operations of OREMET and Wah Chang. Also, Allegheny Ludlum recorded a $7.4 million charge, or $0.04 per share, due to a salaried workforce reduction. In addition, charges of $19.7 million, or $0.10 per share, relating to the Specialty Metals segment were recorded associated with exiting certain product lines and asset impairments resulting from capital expenditure programs completed in 1998. 15
16 Transformation Initiatives In July 1999, as the Company proceeds toward implementing its transformation initiatives, the Company announced three executive appointments in the Consumer segment and one in the Aerospace and Electronics segment as follows: Consumer: Robert A. Shortt Executive Vice President Sales, Marketing & Business Development Victor C. Streufert Vice President-Finance and Chief Financial Officer Richard P. Bisson Vice President-Operations Aerospace and Electronics: Stefan C. Riesenfeld Executive Vice President and Chief Financial Officer Allegheny Teledyne's management believes that it should be able to complete the proposed spin-offs in the 1999 fourth quarter, subject to legal, tax, financial and other considerations being resolved successfully. In July 1999, the Company completed the previously announced sales of Ryan Aeronautical, the McCormick Selph Ordnance business unit and the Drinkware business unit of Water Pik. Also in July 1999, the Company announced definitive agreements for the sale of Fluid Systems. In August 1999, the Company completed the sale of Teledyne Specialty Equipment's Construction and Mining business unit. Total proceeds from these transactions, plus two smaller asset sales completed in the first quarter of 1999, are expected to be over $340 million. Discussions with potential buyers are ongoing concerning the sale of Teledyne Specialty Equipment's Material Handling business unit. New Accounting Pronouncements Financial Accounting Standards Board Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998. This statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 1999, Financial Accounting Standards Board Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities: Deferral of the Effective Date of FASB Statement No. 133" was issued. This statement delays the effective date of Statement No. 133 to all fiscal quarters beginning after June 15, 2000. The Company is presently evaluating the effect of adopting these statements. Income Taxes The Company's effective tax rate was 37.0 percent and 36.0 percent, respectively, for the 1999 second quarter and six months, compared to 36.4 percent and 37.8 percent, respectively, for the same periods in 1998. The second quarter 1999 effective tax rate reflects the effect of certain non-deductible costs recorded in the second quarter of 1999. The 1998 six month effective tax rate reflects the effect of non-deductible business combination costs associated with the merger with OREMET recorded in the 1998 first quarter. Financial Condition and Liquidity - --------------------------------- Working capital decreased to $689.3 million at June 30, 1999, compared to $742.2 million at December 31, 1998. The current ratio decreased to 2.0 from 16
17 2.2 in this same period. The decrease in working capital was primarily due to higher short-term debt and current portion of long-term debt and accounts payable balances and lower cash balances offset by higher accounts receivable and lower accrued liabilities balances. In the first six months of 1999, cash generated from operations of $146.0 million, proceeds from the net increase in debt of $47.0 million, proceeds from the sale of businesses and investments and disposals of property, plant and equipment of $13.6 million and proceeds from the exercise of stock options of $3.5 million were used to repurchase common stock for $108.6 million, pay dividends of $61.8 million and to invest $54.5 million in capital equipment and business expansion. Cash transactions plus cash on hand at the beginning of the year resulted in a cash position of $60.0 million at June 30, 1999. Capital expenditures for 1999 are expected to approximate $128 million, of which $52.8 million were spent during the first six months. On October 1, 1998, the Company's Board of Directors authorized a stock repurchase program to acquire up to 20 million shares of Allegheny Teledyne's common stock. The shares may be repurchased from time-to-time in the open market. During the second quarter of 1999, the Company repurchased 2.6 million shares at a cost of $56.4 million. During the 1999 six months, the Company repurchased 5.2 million shares at a cost of $108.6 million. From the inception of the share repurchase program through August 6, 1999, the Company has repurchased a total of approximately 8.1 million shares at a cost of $168.2 million. On August 12, 1999, the Board of Directors declared a regular quarterly dividend of $0.16 per share of common stock. The dividend is payable on September 14, 1999 to stockholders of record at the close of business on August 30, 1999. The Company believes that internally generated funds, current cash on hand and borrowing from existing credit lines will be adequate to meet foreseeable needs. The Company may choose, however, to issue additional debt depending on market conditions. 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 $33.2 million at June 30, 1999. 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 17
18 responsible party at approximately 36 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 14 of these sites, and the potential loss exposure with respect to any of these 36 sites is not considered to be material. For additional discussion of environmental matters, see Note 7 to the consolidated financial statements of the Company. 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. 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 18
19 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 to the consolidated financial statements of the Company. Impact of the Introduction of the Euro - -------------------------------------- The Company has continued to evaluate effects of the January 1, 1999 conversion and related transition by 11 member states of the European Union to a common currency, the "Euro". The United Kingdom, where a significant portion of the Company's European operations is located, is not currently a participating country. Based on its evaluation, the Company currently does not expect the Euro conversion to have a material impact on the Company's results of operation or financial condition. Like other companies with European sales and operations, the Company anticipates that it will face wage and product pricing transparency issues in participating countries; however, the Company does not expect the resolution of these issues to have a material adverse effect on the Company. Additionally, while the Company expects to encounter some technical challenges to adapt information technology and other systems to accommodate euro-denominated transactions, associated costs to date have not been material. Mostly due to evolving business needs and continuing technological advances, the Company has been modifying and replacing its computer software and hardware at its European operations. The Company believes that the Euro conversion will not have a material adverse effect on its foreign currency activities described below. Year 2000 Readiness Disclosure - ------------------------------ Over the past several years, the Company has put in place management task forces at its operating companies to identify whether its computer systems, which include business computers, mill equipment and process control computers and other devices using a microprocessor, as well as telecommunication and payroll and employee benefit processing systems, would function properly with respect to dates in the Year 2000 and thereafter. These task forces report to the Executive Resource Information Committee, a senior management committee charged with reviewing and establishing priorities for information technology-related matters, including Year 2000 issues, which reports to the Audit and Finance Committee of the Company's Board of Directors. Through these efforts, Year 2000 identification, solution development, testing and implementation initiatives and contingency planning initiatives have proceeded at Allegheny Teledyne and each of the operating companies. In part as a result of its Year 2000 initiatives, but mostly due to evolving business needs and continuing technological advancements, the Company has been modifying and replacing portions of its computer software and hardware systems. The Company estimates, based on dollars expended, that installation of solutions to identified Year 2000 issues relating to its information technology systems is over 95 percent complete. While the Company estimates that based on dollars expended, approximately 90 percent of the solutions have been implemented for its non-information technology systems, the Company continues to work to resolve various manufacturing-related Year 2000 issues. The Company believes that a substantial portion of its internal solutions relating to Year 2000 functionality of its computer systems have been completed, and currently targets having substantially all such internal solutions developed and implemented by September 30, 1999. This targeted completion date depends, however, on numerous assumptions, including continued availability of trained personnel in this function. 19
20 Efforts have continued to identify and resolve customer- and supplier-based Year 2000 issues that could affect the Company and its operating and support systems. The Company believes that it has identified substantially all material customer- and supplier-based Year 2000 issues. Efforts also continue to identify whether products produced and sold by Allegheny Teledyne's operating companies have Year 2000 issues. The Company believes that it has identified substantially all products that have Year 2000 issues, primarily a limited number of products of Teledyne Electronic Technologies and Teledyne Brown Engineering, and is working to resolve such issues. The Company believes that there are no significant product-related Year 2000 issues. The Company has not conducted any review of products manufactured and sold by discontinued businesses or businesses that it has sold. Excluding expenditures necessitated by ordinary business needs and continuing technological advancements in the computer industry, the Company spent approximately $11 million in 1998 and anticipates spending another estimated $7 million in 1999 to address Year 2000 issues, of which approximately $5 million were spent during the first half of 1999. These expenditures do not include expenditures relating to Year 2000 issues associated with the products identified above. Substantially all costs related to the Company's Year 2000 initiatives are expensed as incurred and funded through operating cash flows. Additional amounts may be spent in subsequent years. Based upon internal assessments, formal communications with suppliers and customers with which the Company exchanges electronic data, and work completed to date, the Company believes that Year 2000 issues should not pose significant operational problems or have a material impact on the Company's consolidated financial position, results of operations or cash flow. A failure of third party vendors or customers to be Year 2000 ready, however, could adversely affect these beliefs and is not quantifiable. Such failure could have a material adverse effect on the Company's consolidated financial position, results of operations or cash flow in a given period, but probably not over the long-term. The most reasonably likely worse case scenario of failure by the Company or its suppliers or customers to resolve Year 2000 problems would be a temporary slowdown or cessation of manufacturing operations at one or more of the Company's facilities and a temporary inability on the part of the Company to timely process orders and to deliver finished products to customers. Delays in meeting customers' orders would affect the timing of billings to and payments received from customers in respect to orders and could result in other liabilities. Customers' Year 2000 problems could also delay the timing of payments to the Company for orders. Efforts continue to be underway to identify contingency plans should unplanned situations arise as a result of January 1, 2000. While the Company has been conducting a comprehensive Year 2000 review of its computer systems, there may be Year 2000-related matters that have not been identified. Actual dollar amounts spent by the Company to address Year 2000 issues could materially differ from the estimates for a number of reasons, including changes in the availability or costs of personnel trained in this area, changes made to the Company's remediation plans, the ability of the Company's significant suppliers, customers and others with which it conducts business, including governmental agencies, to identify and resolve their own Year 2000 issues or identification of other Year 2000-related matters. 20
21 Forward-Looking Statements From time to time the Company has made and may continue to make 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 to the consolidated financial statements of the Company, including statements concerning cost savings, raw material costs, capital spending plans, the adequacy of available funds to meet foreseeable needs, anticipated effects of the euro conversion, anticipated expenditures to address Year 2000-computer-systems issues, the impact of Year 2000-computer-systems issues, the Company's use of derivative instruments, 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" and elsewhere herein. Completion of the proposed spin-offs and public offerings and achieving anticipated results involve inherent uncertainties, including those related to whether legal, tax, financial and other considerations can be successfully resolved. Realization of the anticipated benefits of the proposed transformation could take longer than expected and implementation difficulties, market factors and further deterioration in domestic or global economic conditions 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, 1998. The Company assumes no duty to update its forward-looking statements. 21
22 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company uses derivative financial instruments from time to time to hedge ordinary business risks regarding foreign currencies on product sales and to partially hedge against volatile raw material cost fluctuations in the Specialty Metals segment. Foreign currency exchange contracts are used to limit transactional exposure to changes in currency exchange rates. The Company sometimes purchases foreign currency forward contracts that effectively permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts, which are not financially material, are designated as hedges of export sales transactions in which settlement will occur in future periods, which otherwise would expose the Company, on the basis of its aggregate net cash flows in respective currencies, to foreign currency risk. A portion of the Company's operations consists of investments in foreign subsidiaries. As a result, the Company's financial results could be affected by changes in foreign currency exchange rates. To mitigate this foreign currency translation risk, the Company has a practice of recapitalizing operations using local foreign currency debt to replace direct equity investment. The average interest rate to service this foreign debt is favorable to current U.S. interest rates. As part of its risk management strategy, the Company purchases exchange-traded futures contracts to manage exposure to changes in nickel prices, a component of raw material cost for some of the Specialty Metals companies. The nickel futures contracts obligate the Company to make or receive a payment equal to the net change in value of the contract at its maturity. These contracts can also be designated as hedges of the Company' firm sales commitments, are short-term in nature to correspond to the commitment period, and are effective in hedging the Company's exposure to changes in nickel prices during the cycle. The gains and losses on these contracts are deferred and recognized in earnings when realized as an adjustment to cost of goods sold. Historically, the Company has not closed any significant contracts prior to the execution of the underlying sale transaction, nor have any of the underlying sales transactions failed to occur which resulted in a material adverse effect on the Company. The Company guarantees the outstanding Allegheny Ludlum fixed rate 6.95% debentures due in 2025. In a period of declining interest rates, the Company faces the risk of required interest payments exceeding those based on the current market rate. To mitigate interest rate risk, the Company attempts to maintain a reasonable balance between fixed and variable rate debt to keep financing costs as low as possible. The Company believes that adequate controls are in place to monitor these activities, which are not financially material. However, many factors, including those beyond the control of the Company such as changes in domestic and foreign political and economic conditions, as well as the magnitude and timing of interest rate changes, could adversely affect these activities. 22
23 PART II. OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders The Company's 1999 annual meeting of stockholders was held on May 13, 1999. At that meeting, the five nominees for directors named in the proxy statement for the meeting were elected, having received the following number of votes: Number of Votes Number of Votes Name For Withheld - -------------------- --------------- ---------------- Robert P. Bozzone 169,311,197 1,369,585 Frank V. Cahouet 169,296,729 1,389,053 Frank J. Lucchino 169,303,077 1,382,705 W. Craig McClelland 169,355,218 1,330,564 Charles J. Queenan, Jr. 169,291,603 1,394,179 In addition, the stockholders voted on and approved the ratification of the selection of Ernst & Young LLP as independent auditors of the Company for the 1999 fiscal year. The number of votes casts for approval was 169,937,335, against approval was 302,589 and to abstain was 445,858. There were no broker non-votes in connection with the ratification of the selection of Ernst & Young LLP. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - 4 Fourth Amendment to Credit Agreement and Waiver dated as of August 6, 1999, to certain Credit Agreement dated as of August 30, 1996, as amended by the First Amendment dated as of August 31, 1997, the Second Amendment dated as of March 24, 1998, and the Third Amendment dated as of March 30, 1999. 27 Financial Data Schedule for Six Months Ended June 30, 1999. (b) The Registrant did not file any Current Reports on Form 8-K during the quarter for which this report is filed. 23
24 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: August 13, 1999 By /s/ James L. Murdy --------------------------------- James L. Murdy Executive Vice President, Finance and Administration and Chief Financial Officer (Duly Authorized Officer) Date: August 13, 1999 By /s/ Dale G. Reid --------------------------------- Dale G. Reid Vice President - Controller and Chief Accounting Officer (Principal Accounting Officer) 24
25 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 4 Fourth Amendment to Credit Agreement and Waiver dated as of August 6, 1999, to certain Credit Agreement dated as of August 30, 1996, as amended by the First Amendment dated as of August 31, 1997, the Second Amendment dated as of March 24, 1998, and the Third Amendment dated as of March 30, 1999. 27 Financial Data Schedule for Six Months Ended June 30, 1999. 25