SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Amendment No. 1) (Mark One) [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 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 (IRS Employer incorporation or organization) Identification No.) 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (412) 394-8400 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: - -------------------- ------------------------------------------ Common Stock, $0.10 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _X_ At March 20, 1998, the Registrant had outstanding 174,934,668 shares of its Common Stock. The aggregate market value of the Registrant's voting stock held by non-affiliates at this date was approximately $4.2 billion, based on the closing price of $28.25 as reported on the New York Stock Exchange. Shares of Common Stock known by the Registrant to be owned beneficially by directors of the Registrant and officers of the Registrant subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are not included in the computation. The Registrant, however, has made no determination that such persons are "affiliates" within the meaning of Rule 12b-2 under the Exchange Act. 1 DOCUMENTS INCORPORATED BY REFERENCE Selected portions of the 1997 Annual Report to Shareholders ("1997 Annual Report") - Part I, Part II and Part IV of this Report. Selected portions of the 1998 Proxy Statement - Part III of this Report. 2 EXPLANATORY NOTE: Pursuant to this Form 10-K/A (Amendment No. 1) ("Amendment No. 1"), Allegheny Teledyne Incorporated (the "Company") amends and restates in its entirety "Item 8. Financial Statements and Supplementary Data" of Part II and "Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K" of Part IV of its Annual Report on Form 10-K for the year ended December 31, 1997 ("1997 Form 10-K"), in order to file in accordance with Rule 15d-21 under the Exchange Act, financial statements required by Form 11-K for the following plans: (1) Allegheny Ludlum Retirement Savings Plan; (2) 401(k) Savings Account Plan for Employees of the Washington Plant; (3) Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation; (4) Savings and Security Plan of the Lockport and Waterbury Facilities of Allegheny Ludlum Corporation; (5) Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan; (6) Teledyne, Inc. 401(k) Plan; and (7) Oregon Metallurgical Corporation Savings Plan. As of January 1, 1998, the Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation was terminated as the remaining plan assets were merged into the Allegheny Ludlum Retirement Savings Plan. "Item 8. Financial Statements and Supplementary Data" of Part II of the 1997 Form 10-K is hereby amended and restated in its entirety to read as follows: ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and Notes to Consolidated Financial Statements listed in Item 14(a)(1)(A) are incorporated by reference from pages 30 to 53 of the 1997 Annual Report. The following financial statements are filed by the Company with respect to the following plans in accordance with Rule 15d-21 under the Exchange Act: Plan Page No. ---- -------- Allegheny Ludlum Retirement Savings Plan................................. 4 401(k) Savings Account Plan for Employees of the Washington Plant........ 24 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation....................... 43 Savings and Security Plan of the Lockport and Waterbury Facilities of Allegheny Ludlum Corporation............................... 65 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan.............................................. 85 Teledyne, Inc. 401(k) Plan............................................... 105 Oregon Metallurgical Corporation Savings Plan............................ 117 3 Audited Financial Statements ALLEGHENY LUDLUM RETIREMENT SAVINGS PLAN Years ended December 31, 1997 and 1996 with Report of Independent Auditors 4 Allegheny Ludlum Retirement Savings Plan Audited Financial Statements Years ended December 31, 1997 and 1996 CONTENTS Report of Independent Auditors ................................................... 6 Audited Financial Statements Statements of Net Assets Available for Benefits with Fund Information............. 7 Statements of Changes in Net Assets Available for Benefits with Fund Information.. 10 Notes to Financial Statements .................................................... 11 Schedules Item 27a--Schedule of Assets Held for Investment Purposes ........................ 22 Item 27d--Schedule of Reportable Transactions..................................... 23 5 REPORT OF INDEPENDENT AUDITORS Personnel and Compensation Committee Allegheny Ludlum Corporation We have audited the accompanying statements of net assets available for benefits of the Allegheny Ludlum Retirement Savings Plan (the Plan) as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Allegheny Ludlum Retirement Savings Plan at December 31, 1997 and 1996, and the changes in its net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1997 and reportable transactions for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The Fund Information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ ERNST & YOUNG LLP June 5, 1998 6 Allegheny Ludlum Retirement Savings Plan Statement of Net Assets Available for Benefits with Fund Information December 31, 1997 LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS GROWTH AND GROWTH INCOME EQUITY INCOME DISCIPLINED INCOME FUND FUND FUND FUND FUND STOCK FUND ---------------------------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $18,995,349 $4,156,514 $1,492,055 $49,094,068 $99,746,033 $ -- Interest in registered investment company -- -- -- -- -- 27,858,603 Participant notes receivable -- -- -- -- -- -- Other -- -- -- -- -- -- ---------------------------------------------------------------------------------------------- Net assets available for benefits $18,995,349 $4,156,514 $1,492,055 $49,094,068 $99,746,033 $27,858,603 ============================================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY SELF- VALUE VALUE STOCK DIRECTED PARTICIPANT FUND FUND FUND FUND LOANS TOTAL ------------------------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $27,656,220 $ -- $ -- $201,140,239 Interest in registered investment company 15,446,354 2,964,614 -- 340,241 -- 46,609,812 Participant notes receivable -- -- -- -- 4,367,721 4,367,721 Other -- -- -- (30,000) -- (30,000) ------------------------------------------------------------------------------------------- Net assets available for benefits $15,446,354 $2,964,614 $27,656,220 $310,241 $4,367,721 $252,087,772 =========================================================================================== See accompanying notes. 7 Allegheny Ludlum Retirement Savings Plan Statement of Net Assets Available for Benefits with Fund Information December 31, 1996 LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS GROWTH AND GROWTH INCOME EQUITY INCOME DISCIPLINED INCOME FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $14,879,939 $1,611,821 $439,188 $44,539,226 $104,124,226 $ -- Interest in registered investment company -- -- -- -- -- 14,395,124 Participant notes receivable -- -- -- -- -- -- ------------------------------------------------------------------------------------------- Net assets available for benefits $14,879,939 $1,611,821 $439,188 $44,539,226 $104,124,226 $14,395,124 =========================================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK PARTICIPANT FUND FUND FUND LOANS TOTAL ---------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $27,817,471 $ -- $193,411,871 Interest in registered investment company 3,896,312 797,458 -- -- 19,088,894 Participant notes receivable -- -- -- 3,920,878 3,920,878 ---------------------------------------------------------------------------- Net assets available for benefits $3,896,312 $797,458 $27,817,471 $3,920,878 $216,421,643 ============================================================================ See accompanying notes. 8 Allegheny Ludlum Retirement Savings Plan Statement of Changes in Net Assets Available for Benefits with Fund Information Year ended December 31, 1997 LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS GROWTH AND GROWTH INCOME EQUITY INCOME DISCIPLINED INCOME FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------------------------ ADDITIONS Cash contributions: Employer $ 702,727 $ 249,631 $ 62,837 $ 2,004,482 $ 3,677,232 $ 1,145,475 Employee 565,903 183,655 47,169 1,510,645 2,153,794 964,562 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts 3,216,461 728,854 122,079 11,149,275 6,587,944 -- Earnings from registered investment companies -- -- -- -- -- 5,946,391 Interest income -- -- -- -- 1,396 -- Interfund transfers 243,216 1,525,897 907,445 (7,998,026) (7,564,050) 6,009,014 ------------------------------------------------------------------------------------------------ 4,728,307 2,688,037 1,139,530 6,666,376 4,856,316 14,065,442 Deductions: Distributions to participants 612,897 143,344 86,663 2,111,534 9,234,509 601,963 Administrative expenses -- -- -- -- -- -- ------------------------------------------------------------------------------------------------ Net additions (deductions) 4,115,410 2,544,693 1,052,867 4,554,842 (4,378,193) 13,463,479 Net assets available for benefits at beginning of year 14,879,939 1,611,821 439,188 44,539,226 104,124,226 14,395,124 ------------------------------------------------------------------------------------------------ Net assets available for benefits at end of year $18,995,349 $4,156,514 $1,492,055 $49,094,068 $ 99,746,033 $27,858,603 ================================================================================================ DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY SELF- VALUE VALUE STOCK DIRECTED PARTICIPANT FUND FUND FUND FUND LOANS TOTAL ------------------------------------------------------------------------------------------ ADDITIONS Cash contributions: Employer $ 625,035 $ 160,574 $ 398,923 $ -- $ -- $ 9,026,916 Employee 566,507 134,766 311,109 -- -- 6,438,110 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts -- -- 3,977,292 -- -- 25,781,905 Earnings from registered investment companies 2,345,108 89,494 -- 28,693 -- 8,409,686 Interest income -- -- -- -- 377,707 379,103 Interfund transfers 8,238,142 1,802,110 (3,514,614) 281,730 69,136 -- ------------------------------------------------------------------------------------------ 11,774,792 2,186,944 1,172,710 310,423 446,843 50,035,720 Deductions: Distributions to participants 224,750 19,788 1,333,961 -- -- 14,369,409 Administrative expenses -- -- -- 182 -- 182 ------------------------------------------------------------------------------------------ Net additions (deductions) 11,550,042 2,167,156 (161,251) 310,241 446,843 35,666,129 Net assets available for benefits at beginning of year 3,896,312 797,458 27,817,471 -- 3,920,878 216,421,643 ------------------------------------------------------------------------------------------ Net assets available for benefits at end of year $15,446,354 $2,964,614 $27,656,220 $310,241 $4,367,721 $252,087,772 ========================================================================================== See accompanying notes. 9 Allegheny Ludlum Retirement Savings Plan Statement of Changes in Net Assets Available for Benefits with Fund Information Year ended December 31, 1996 LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS GROWTH AND GROWTH INCOME EQUITY INCOME DISCIPLINED INCOME FUND FUND FUND FUND FUND STOCK FUND ================================================================================================== ADDITIONS Cash contributions: Employer $ 386,847 $ 57,089 $ 18,517 $ 1,848,054 $ 4,489,026 $ 416,100 Employee 270,372 39,757 15,274 1,739,640 2,657,007 311,427 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts 1,125,886 86,964 19,237 5,992,506 6,502,404 -- Net gain from collective -- -- -- -- -- -- investment funds Earnings from registered investment 319 1,263 579 -- -- 2,028,289 companies Interest -- -- -- 437 4,216 -- Dividend income -- -- -- -- -- -- Net appreciation in fair value of -- -- -- -- -- -- assets Transfer (to) from other ALC savings plans -- (9,380) -- 8,421 (15,060) 7,829 Interfund transfers 13,475,766 1,436,440 386,380 1,572,011 (8,122,082) 11,765,432 -------------------------------------------------------------------------------------------------- 15,259,190 1,612,133 439,987 11,161,069 5,515,511 14,529,077 Deductions: Distributions to participants 379,251 312 799 1,426,689 10,537,442 133,953 Fees -- -- -- 741 3,426 -- -------------------------------------------------------------------------------------------------- 379,251 312 799 1,427,430 10,540,868 133,953 -------------------------------------------------------------------------------------------------- Net additions 14,879,939 1,611,821 439,188 9,733,639 (5,025,357) 14,395,124 (deductions) Net assets available for benefits at beginning of year -- -- -- 34,805,587 109,149,583 -- -------------------------------------------------------------------------------------------------- Net assets available for benefits at end of year $14,879,939 $1,611,821 $439,188 $44,539,226 $104,124,226 $14,395,124 ================================================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY STOCK VALUE VALUE STOCK INDEX DIVERSIFIED PARTICIPANT FUND FUND FUND FUND FUND LOANS TOTAL ====================================================================================================== ADDITIONS Cash contributions: Employer $ 79,076 $ 28,971 $ 1,449,105 $ 150,926 $ 191,521 $ -- $ 9,115,232 Employee 63,784 22,649 381,914 193,218 287,014 -- 5,982,056 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts -- -- 4,553,778 56 520,330 -- 18,801,161 Net gain from collective -- -- -- 308,832 -- -- 308,832 investment funds Earnings from registered investment 255,400 30,519 99 38,837 -- -- 2,355,305 companies Interest -- -- 1,438 1,457 104 304,416 312,068 Dividend income -- -- 184,751 -- -- -- 184,751 Net appreciation in fair value of -- -- 2,102,392 -- -- -- 2,102,392 assets Transfer (to) from other ALC savings plans 10,443 -- (23,657) -- -- -- (21,404) Interfund transfers 3,528,950 715,915 (5,732,031) (6,080,798) (12,852,269) (93,714) -- ------------------------------------------------------------------------------------------------------ 3,937,653 798,054 2,917,789 (5,387,472) (11,853,300) 210,702 39,140,393 Deductions: Distributions to participants 41,341 596 1,139,278 75,302 277,037 -- 14,012,000 Fees -- -- 2,646 4,716 482 -- 12,011 ------------------------------------------------------------------------------------------------------ 41,341 596 1,141,924 80,018 277,519 -- 14,024,011 ------------------------------------------------------------------------------------------------------ Net additions 3,896,312 797,458 1,775,865 (5,467,490) (12,130,819) 210,702 25,116,382 (deductions) Net assets available for benefits at beginning of year -- -- 26,041,606 5,467,490 12,130,819 3,710,176 191,305,261 ------------------------------------------------------------------------------------------------------ Net assets available for benefits at end of year $3,896,312 $ 797,458 $27,817,471 $ -- $ -- $3,920,878 $216,421,643 ====================================================================================================== See accompanying notes. 10 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements December 31, 1997 1. SIGNIFICANT ACCOUNTING POLICIES Investments are stated at fair value determined as follows: Allegheny Teledyne Incorporated (Allegheny Teledyne) common stock in the Company Stock Fund is stated at the quoted market price on the New York Stock Exchange. The Fixed Income Fund is stated at cost plus net earnings. All other funds are stated at their net asset value, based on the quoted market prices of the securities held in such funds on applicable exchanges. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain amounts in the 1996 financial statements have been reclassified to conform to the 1997 presentation. 2. DESCRIPTION OF THE PLAN The Allegheny Ludlum Retirement Savings Plan (the Plan) is a defined contribution plan within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA). Allegheny Ludlum Corporation (ALC) is a wholly owned subsidiary of Allegheny Teledyne. Depending on participants' years of service, participants can defer between 1% and 14%, subject to Internal Revenue Service limitations, of their eligible wages, including profit sharing awards, and contribute them to the Plan. ALC contributes 6.5% of participants monthly pensionable earnings, as described in the Plan, and in addition contributes $43.34 per month per participant. 11 2. DESCRIPTION OF THE PLAN (CONTINUED) During 1996, the Plan was amended to allow for additional investment options and to discontinue the Stock Index Fund and Diversified investment options. The investment options provided by the Plan for the years ended December 31, 1997 and 1996 are as follows: Lifestyle Growth and Income Fund--invests in equity and fixed income securities and may invest up to 15% of its assets in international securities. Lifestyle Growth Fund--invests in equity and fixed income securities and may invest up to 25% of its assets in international securities. Lifestyle Income Fund--consists of common stock, fixed income securities and short-term money market instruments. Alliance Equity Fund--consists of common stocks. Fixed Income Fund--consists of amounts invested in insurance companies or other financial institutions under an agreement with repayment in full, plus interest at a fixed rate. Dreyfus Disciplined Stock Fund--invests in equity securities and may invest up to 20% of its assets in high quality money market accounts. Dreyfus Small Company Value Fund--invests primarily in small company equities and to a limited degree in bonds and money market instruments. Dreyfus International Value Fund--consists of equity securities of foreign company equities, and to a limited degree, in bonds and money market instruments. Company Stock Fund--consists of Allegheny Teledyne common stock. Stock Index Fund--invests in a collective trust that invests in common stocks of companies comprising the S&P 500. Diversified Fund--consists of a combination of common or preferred capital stocks, bonds, notes, and debentures. 12 2. DESCRIPTION OF THE PLAN (CONTINUED) Effective April 1, 1997, participants can elect to participate in the self-directed account if they have at least a $10,000 balance in the Plan. The minimum initial investment amount in the self-directed fund, which is comprised of various mutual funds, is $5,000. Separate accounts are maintained by the Plan Sponsor for each participating employee. Trustee fees and asset management fees charged for the administration of all funds are charged against net assets available for benefits of the respective fund. Certain other expenses of administering the Plan are paid by the Plan Sponsor. Under certain provisions of the Plan, contributions by the Plan Sponsor, which have been allocated to the accounts of the participants, may be subject to forfeiture upon participants' termination of employment. Such forfeitures will be used to reduce contributions by the employer and were $189,738 and $3,370 during 1997 and 1996, respectively. Employer contributions allocated to a participant's account become fully vested after a participant completes five full years of service. Employee contributions and the fixed dollar retirement contributions are fully vested at all times. Active employees can borrow up to 50% of their vested account balances minus any outstanding loans. The loan amounts are further limited to a minimum of $1,000 and a maximum of $50,000, and an employee can obtain no more than three loans at one time. Interest rates are determined based on commercially accepted criteria, and payment schedules vary based on the type of the loan. General purpose loans are repaid over 12 to 60 months, and primary residence loans are repaid up to 180 months. Payments are made by payroll deductions. In the event that the Plan is partially or completely terminated, or the Plan Sponsor permanently discontinues making contributions, all amounts credited to the accounts of the affected participants become fully vested and nonforfeitable. Effective January 1, 1998, Plan assets of $880,000 were transferred in from another plan sponsored by ALC. 13 2. DESCRIPTION OF THE PLAN (CONTINUED) Information about the Plan is contained in the Summary Plan Description. Copies of this Summary Plan Description are available from the Allegheny Teledyne Personnel and Compensation Committee (Committee). 3. INVESTMENTS The Plan is a participant in the ALC Fixed Income Master Trust, the ALC Alliance Equity Master Trust, the ALC ATI Common Stock Master Trust, ALC Lifestyle Growth Fund Master Trust, the ALC Lifestyle Income Fund Master Trust, and the ALC Lifestyle Growth and Income Fund Master Trust. The Plan's participating interests in these master trusts as of December 31 were as follows: 1997 1996 --------------------------- ALC Fixed Income Master Trust 73.72% 73.50% ALC Alliance Equity Master Trust 81.57% 83.15% ALC ATI Common Stock Master Trust 77.65% 78.46% ALC Lifestyle Growth Fund Master Trust 81.23% 82.69% ALC Lifestyle Income Fund Master Trust 81.72% 74.41% ALC Lifestyle Growth and Income Fund Master Trust 83.53% 82.44% The composition of the net assets of the ALC Fixed Income Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------------- Guaranteed investment contracts: Confederation Life Insurance Company $ 29,118 $ 4,024,149 Continental Assurance Company 6,718,924 9,404,989 John Hancock Life Insurance Company 2,600,000 -- Life Insurance Company of Virginia 8,725,219 15,918,713 New York Life Insurance Company 15,169,828 14,124,589 Pacific Mutual Life Insurance Company 5,793,190 5,441,658 Peoples Security Life Insurance Company 11,038,629 10,403,430 Prudential Insurance Company 6,144,220 14,396,590 Southland Life Insurance Company 16,288,645 15,200,545 Security Life of Denver -- 5,000,000 Protective Life Insurance Company -- 3,751,970 Transamerica Occidental 10,936,663 10,597,526 ----------------------------------- 83,444,436 108,264,159 14 3. INVESTMENTS (CONTINUED) 1997 1996 -------------------------------- Synthetic contracts: Caisse des Depots et Consignations 3,879,321 3,642,950 Peoples Security 2,948,698 -- Transamerica Occidental 13,865,850 -- Union Bank of Switzerland 5,937,712 5,920,612 Westdeutsche Landesbank 13,727,581 13,668,143 -------------------------------- 40,359,162 23,231,705 Temporary short-term investments 10,765,309 9,512,226 Accrued interest receivable 733,753 655,473 Other payables (6,169) (4,306) -------------------------------- Total net assets $135,296,491 $141,659,257 ================================ In May 1997, the Allegheny Ludlum Corporation Fixed Income Master Trust received approximately $4,500,000 related to the Confederation Life Insurance Company Guaranteed Investment Contract in accordance with the liquidation plan. Management is unable to determine additional amounts, if any, that will be received by the Allegheny Ludlum Corporation Fixed Income Master Trust. The composition of net assets of the ALC Alliance Equity Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 -------------------------------- Investment in registered investment companies: Alliance Equity Fund S.A. #4 (865.1940 and 994.6310 shares, respectively) $60,199,619 $53,579,310 Cash 90 -- Operating payables (10,341) (16,348) -------------------------------- Total net assets $60,189,368 $53,562,962 ================================ 15 3. INVESTMENTS (CONTINUED) The composition of net assets of the ALC ATI Common Stock Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Allegheny Teledyne Incorporated Common Stock (1,347.732 and 1,537.708 shares, respectively) $34,872,566 $35,367,284 Receivables 4,527 58,750 Short Term Investment Fund 738,595 48,275 Operating payables (822) (564) ----------------------------- Total net assets $35,614,866 $35,473,745 ============================= The composition of assets of the ALC Lifestyle Growth Fund Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Dreyfus Lifestyle Growth Fund $5,117,053 $1,949,121 Operating payables (5) (1) ----------------------------- $5,117,048 $1,949,120 ============================= The composition of assets of the ALC Lifestyle Income Fund Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Dreyfus Lifestyle Income Fund $1,825,632 $590,191 Operating payables (2) -- ----------------------------- $1,825,630 $590,191 ============================= 16 3. INVESTMENTS (CONTINUED) The composition of assets of the ALC Lifestyle Growth and Income Fund Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ------------------------------------- Dreyfus Lifestyle Growth and Income Fund $22,740,752 $18,049,004 Receivables 56 1 ------------------------------------- $22,740,808 $18,049,005 ===================================== Detail information regarding the composition of the various Lifestyle funds are reported in the separate collective trust filings. The composition of the changes in net assets of the various master trusts is as follows: ALC FIXED INCOME MASTER ALC ALLIANCE EQUITY MASTER ALC ATI COMMON STOCK MASTER TRUST TRUST TRUST ----------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ----------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 ----------------------------------------------------------------------------------------------------- Investment income: Interest income (loss) $ 8,694,877 $ 8,225,640 $ -- $ 16,937 $ (1,554) $ 15,713 Realized gains on sale of investments -- -- -- -- 1,835,342 1,588,011 Unrealized appreciation in fair value of investments -- -- -- -- 2,318,151 3,346,346 Dividends -- -- -- -- 837,662 537,617 Net gain, registered registered companies -- -- 13,819,313 7,335,440 -- -- Net gain, common collective funds 468,281 743,008 -- -- 73,411 -- Other income 1,343 -- -- -- -- -- Administrative expenses (189,938) (256,059) (211,873) (173,713) (27,286) (14,043) Transfers (15,337,329) (10,804,451) (6,981,034) 5,469,649 (4,894,605) 30,000,101 --------------------------------------------------------------------------------------------------- Net increase (decrease) (6,362,766) (2,091,862) 6,626,406 12,648,313 141,121 35,473,745 Total net assets at beginning of year 141,659,257 143,751,119 53,562,962 40,914,649 35,473,745 -- --------------------------------------------------------------------------------------------------- Total net assets at end of year $135,296,491 $141,659,257 $60,189,368 $53,562,962 $35,614,866 $35,473,745 =================================================================================================== 17 3. INVESTMENTS (CONTINUED) ALC LIFESTYLE GROWTH FUND ALC LIFESTYLE INCOME FUND ALC LIFESTYLE GROWTH AND MASTER TRUST MASTER TRUST INCOME FUND MASTER TRUST ------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 ------------------------------------------------------------------------------------------------------- Investment income: Interest income $ -- $ -- $ 105 $ -- $ 1 $ 110 Realized gains on sale of -- -- -- -- -- 3,769,730 investments Unrealized depreciation in fair value of -- -- -- -- -- (3,794,673) investments Net gain, common collective funds 882,650 113,120 152,034 24,356 3,853,009 1,384,385 Transfers 2,285,394 1,836,065 1,083,338 565,870 838,793 762,689 Administrative expenses (116) (65) (38) (35) -- (402) ------------------------------------------------------------------------------------------------------- Net increase 3,167,928 1,949,120 1,235,439 590,191 4,691,803 2,121,839 Total net assets at beginning of year 1,949,120 -- 590,191 -- 18,049,005 15,927,166 ------------------------------------------------------------------------------------------------------- Total net assets at end of year $ 5,117,048 $ 1,949,120 $ 1,825,630 $ 590,191 $22,740,808 $ 18,049,005 ======================================================================================================= The average yield for 1997 and 1996 for the ALC Fixed Income Master Trust was 6.57% and 6.43%, respectively. Credited interest rates on the contracts ranged from 5.60% to 8.18% and 5.24% to 8.18% for 1997 and 1996, respectively, and are determined at contract inception. Interest, realized and unrealized gains and losses, and management fees from the master trusts are included in the allocation of net earnings (losses) from master trusts on the statement of changes in net assets available for benefits. 18 3. INVESTMENTS (CONTINUED) The changes in cumulative net unrealized gain (loss) for the years ended December 31, 1997 and 1996 are as follows: LIFESTYLE GROWTH DREYFUS AND LIFESTYLE LIFESTYLE ALLIANCE DISCIPLINED INCOME GROWTH INCOME EQUITY STOCK FUND FUND FUND FUND FUND -------------------------------------------------------------------------- Balance at December 31, 1995 $ 2,841,405 $ -- $ -- $12,961,877 $ -- Unrealized gain (loss) (1,776,840) 81,197 8,777 5,733,121 169,246 -------------------------------------------------------------------------- Balance at December 31, 1996 1,064,565 81,197 8,777 18,694,998 169,246 Unrealized gain (loss) 2,588,204 463,784 52,212 (7,699,031) 2,133,690 -------------------------------------------------------------------------- Balance at December 31, 1997 $ 3,652,769 $544,981 $60,989 $10,995,967 $2,302,936 ========================================================================== DREYFUS DREYFUS SMALL INTER- COMPANY NATIONAL COMPANY STOCK VALUE VALUE STOCK INDEX FUND FUND FUND FUND TOTAL ------------------------------------------------------------------------------- Balance at December 31, 1995 $ -- $ -- $ 5,516,526 $ 728,110 $22,047,918 Unrealized gain (loss) (199,140) 14,680 2,102,392 (728,110) 5,405,323 ------------------------------------------------------------------------------- Balance at December 31, 1996 (199,140) 14,680 7,618,918 -- 27,453,241 Unrealized gain (loss) 1,529,186 (88,996) (4,166,023) -- (5,186,974) ------------------------------------------------------------------------------- Balance at December 31, 1997 $1,330,046 $(74,316) $ 3,452,895 $ -- $22,266,267 =============================================================================== 4. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated July 23, 1996, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code of 1986 (the Code) and that the trust, therefore, is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code and ERISA to maintain its tax-exempt status. The administrator is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. 5. TRANSACTIONS WITH PARTIES-IN-INTEREST Investment fees paid during the year for services rendered were based on customary and reasonable rates for such services. 19 6. YEAR 2000 (UNAUDITED) Allegheny Teledyne has initiated formal communications with its significant service providers (plan trustee and plan recordkeeper) to determine the extent to which the Plan's systems or operations are vulnerable to those parties' failure to remediate their own Year 2000 issues. In addition, Allegheny Teledyne has been reviewing its own internal systems that impact the processing of employee benefits. Allegheny Teledyne expects that all necessary modifications to these internal systems will be completed prior to any significant impact on these internal systems. The Plan's service providers have indicated that they are presently taking steps to ensure that the Plan's systems and operations will be Year 2000 compliant. 20 SCHEDULES 21 Allegheny Ludlum Retirement Savings Plan Item 27a--Schedule of Assets Held for Investment Purposes December 31, 1997 MARKET DESCRIPTION UNITS/SHARES COST VALUE VALUE - --------------------------------------------------------------------------------------------------------------------- Dreyfus Disciplined Stock Fund*: Interest in Dreyfus Disciplined Stock Fund 895,199.333 shares $25,555,667 $27,858,603 Dreyfus Small Company Value Fund*: Interest in Dreyfus Small Company Value Fund 733,097.031 shares 14,116,308 15,446,354 Dreyfus International Value Fund*: Interest in Dreyfus International Value Fund 203,055.763 shares 3,038,930 2,964,614 Self-Directed Fund: Dreyfus 100% U.S. Treasury Money Market Fund* 30,435.300 shares 30,435 30,435 Dreyfus Appreciation Fund, Inc.* 658.430 shares 20,209 21,320 Dreyfus/Laurel Funds, Inc. Premier Midcap Stock Fund* 218.223 shares 3,643 3,341 Dreyfus Growth & Value Funds--Midcap Value* 1,817.114 shares 40,033 37,287 Dreyfus Growth & Income Small Co. Value Fund* 214.839 shares 4,527 4,527 Fidelity Puritan Tr. Puritan Fund 1,082.136 shares 19,940 20,972 Fidelity Low Priced Stock Fund 460.092 shares 10,808 11,562 Fidelity Secs. Fund Growth & Income Portfolio 299.125 shares 10,488 11,397 Fidelity Secs. Fund Dividend Growth Fund 491.449 shares 11,066 11,436 Janus Investment Fund Sh. Ben. Int. 705.607 shares 18,282 17,570 Janus Investment Fund Growth & Income Fund 713.463 shares 14,856 16,517 Janus Investment Fund Worldwide Fund 2,102.039 shares 75,000 79,415 Janus Investment Fund Overseas Fund 1,312.649 shares 22,035 22,827 T. Rowe Price Mid Cap Growth Fund 561.174 shares 15,010 16,050 T. Rowe Price Intl. Funds Inc. European Stock Fund 783.325 shares 15,000 15,165 Templeton Funds Inc. World Fund Class I 1,214.114 shares 20,758 20,420 ------------------------------------ 332,090 340,241 Participant Loans: Interest in Participant Loans 9.25% to 9.50% - 4,367,721 ------------------------------------ $43,042,995 $50,977,533 ==================================== *Party-in-interest 22 Allegheny Ludlum Retirement Savings Plan Item 27d--Schedule of Reportable Transactions Year ended December 31, 1997 PURCHASE PURCHASE SALE SELLING DESCRIPTION OF ASSETS TRANSACTIONS PRICE TRANSACTIONS PRICE GAIN - --------------------------------------------------------------------------------------------------------------------- Type (iii) transactions: Dreyfus Disciplined Stock Fund 159 $16,707,971 -- $ -- $ -- Dreyfus Disciplined Stock Fund -- -- 104 9,195,020 925,568 Dreyfus Small Company Value Fund 166 15,781,953 -- -- -- Dreyfus Small Company Value Fund -- -- 100 6,572,006 530,983 Dreyfus International Value Fund 128 3,598,523 -- -- -- Dreyfus International Value Fund -- -- 72 1,520,736 84,197 There were no Type (i), (ii), or (iv) transactions during the year ended December 31, 1997. 23 Audited Financial Statements 401(k) SAVINGS ACCOUNT PLAN FOR EMPLOYEES OF THE WASHINGTON PLANT Year ended December 31, 1997 and period April 1, 1996 through December 31, 1996 with Report of Independent Auditors 24 401(k) Savings Account Plan for Employees of the Washington Plant Audited Financial Statements Year ended December 31, 1997 and period April 1, 1996 through December 31, 1996 CONTENTS Report of Independent Auditors .................................................... 26 Audited Financial Statements Statements of Net Assets Available for Benefits with Fund Information.............. 27 Statements of Changes in Net Assets Available for Benefits with Fund Information... 29 Notes to Financial Statements ..................................................... 31 Schedules Item 27a--Schedule of Assets Held for Investment Purposes.......................... 41 Item 27d--Schedule of Reportable Transactions...................................... 42 25 REPORT OF INDEPENDENT AUDITORS The Plan Administrator 401(k) Savings Account Plan for Employees of the Washington Plant We have audited the accompanying statements of net assets available for benefits of the 401(k) Savings Account Plan for Employees of the Washington Plant (the Plan) as of December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the year ended December 31, 1997 and the period April 1, 1996 (date of the Plan's inception) through December 31, 1996. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and 1996, and the changes in net assets available for benefits for the year ended December 31, 1997 and the period April 1, 1996 through December 31, 1996, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1997 and reportable transactions for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The Fund Information in the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ ERNST & YOUNG LLP June 5, 1998 26 401(k) Savings Account Plan for Employees of the Washington Plant Statement of Net Assets Available for Benefits with Fund Information December 31, 1997 LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED GROWTH AND GROWTH INCOME EQUITY INCOME INCOME FUND FUND FUND FUND FUND ----------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $98,019 $4,596 $157 $263,569 $67,853 Interest in registered investment companies -- -- -- -- -- ----------------------------------------------------------------------------- Net assets available for benefits $98,019 $4,596 $157 $263,569 $67,853 ============================================================================= DREYFUS SMALL DREYFUS DREYFUS COMPANY INTERNATIONAL COMPANY DISCIPLINED VALUE VALUE STOCK STOCK FUND FUND FUND FUND TOTAL ------------------------------------------------------------------------------ ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $ -- $35,008 $469,202 Interest in registered investment companies 223,415 49,231 9,328 -- 281,974 ------------------------------------------------------------------------------ Net assets available for benefits $223,415 $49,231 $9,328 $35,008 $751,176 ============================================================================== See accompanying notes. 27 401(k) Savings Account Plan for Employees of the Washington Plant Statement of Net Assets Available for Benefits with Fund Information December 31, 1996 LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS GROWTH AND GROWTH EQUITY INCOME DISCIPLINED INCOME FUND FUND FUND FUND STOCK FUND ---------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $36,746 $127 $133,664 $20,871 $ -- Interest in registered investment companies -- -- -- -- 83,181 ---------------------------------------------------------------------------- Net assets available for benefits $36,746 $127 $133,664 $20,871 $83,181 ============================================================================ DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK FUND FUND FUND TOTAL -------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $13,752 $205,160 Interest in registered investment companies 938 3,001 -- 87,120 -------------------------------------------------------------- Net assets available for benefits $938 $3,001 $13,752 $292,280 ============================================================== See accompanying notes. 28 401(k) Savings Account Plan for Employees of the Washington Plant Statement of Changes in Net Assets Available for Benefits with Fund Information Year ended December 31, 1997 LIFESTYLE GROWTH LIFESTYLE LIFESTYLE ALLIANCE FIXED AND INCOME GROWTH INCOME EQUITY INCOME FUND FUND FUND FUND FUND ------------------------------------------------------------------ ADDITIONS Employee contributions $37,068 $3,085 $151 $108,583 $35,755 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts 11,610 513 6 53,012 3,154 Earnings from registered investment companies -- -- -- -- -- Interfund transfers 12,661 874 -- (31,297) 8,642 ------------------------------------------------------------------ 61,339 4,472 157 130,298 47,551 Deductions: Distributions to participants 66 3 -- 393 569 ------------------------------------------------------------------ Net additions 61,273 4,469 157 129,905 46,982 Net assets available for benefits at beginning of year 36,746 127 -- 133,664 20,871 ------------------------------------------------------------------ Net assets available for benefits at end of year $98,019 $4,596 $157 $263,569 $67,853 ================================================================== DREYFUS DREYFUS SMALL DREYFUS DISCIPLINED COMPANY INTERNATIONAL COMPANY STOCK VALUE VALUE STOCK FUND FUND FUND FUND TOTAL ---------------------------------------------------------------------- ADDITIONS Employee contributions $ 95,405 $43,193 $6,849 $15,781 $345,870 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts -- -- -- 1,773 70,068 Earnings from registered investment companies 40,440 4,084 209 -- 44,733 Interfund transfers 5,016 1,016 (614) 3,702 -- ----------------------------------------------------------------------- 140,861 48,293 6,444 21,256 460,671 Deductions: Distributions to participants 627 -- 117 -- 1,775 ----------------------------------------------------------------------- Net additions 140,234 48,293 6,327 21,256 458,896 Net assets available for benefits at beginning of year 83,181 938 3,001 13,752 292,280 ----------------------------------------------------------------------- Net assets available for benefits at end of year $223,415 $49,231 $9,328 $35,008 $751,176 ======================================================================= See accompanying notes. 29 401(k) Savings Account Plan for Employees of the Washington Plant Statement of Changes in Net Assets Available for Benefits with Fund Information Period April 1, 1996 through December 31, 1996 LIFESTYLE DREYFUS GROWTH LIFESTYLE ALLIANCE FIXED DISCIPLINED AND INCOME GROWTH EQUITY INCOME STOCK FUND FUND FUND FUND FUND ------------------------------------------------------------------- ADDITIONS Employee contributions $36,271 $313 $123,206 $19,407 $74,617 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts 2,183 48 8,671 576 -- Net gain from Collective Investment Funds -- -- -- -- 5,130 Earnings from registered investment companies -- -- -- -- 6,405 Dividend income -- -- -- -- -- Net appreciation in fair value of investments -- -- -- -- -- Interfund transfers (1,708) (234) 1,787 888 (2,971) ------------------------------------------------------------------- 36,746 127 133,664 20,871 83,181 Deductions: Distributions to participants -- -- -- -- -- ------------------------------------------------------------------- -- -- -- -- -- ------------------------------------------------------------------- Net additions 36,746 127 133,664 20,871 83,181 Net assets available for benefits at beginning of period -- -- -- -- -- ------------------------------------------------------------------- Net assets available for benefits at end of period $36,746 $127 $133,664 $20,871 $83,181 =================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK FUND FUND FUND TOTAL ------------------------------------------------------- ADDITIONS Employee contributions $887 $ 877 $11,269 $266,847 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts -- -- 1,648 13,126 Net gain from Collective Investment Funds 1 -- 7 5,138 Earnings from registered investment companies 50 65 -- 6,520 Dividend income -- -- 39 39 Net appreciation in fair value of investments -- -- 610 610 Interfund transfers -- 2,059 179 -- ------------------------------------------------------- 938 3,001 13,752 292,280 Deductions: Distributions to participants -- -- -- -- ------------------------------------------------------- -- -- -- -- ------------------------------------------------------- Net additions 938 3,001 13,752 292,280 Net assets available for benefits at beginning of period -- -- -- -- ------------------------------------------------------- Net assets available for benefits at end of period $938 $3,001 $13,752 $292,280 ======================================================= See accompanying notes. 30 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements December 31, 1997 1. SIGNIFICANT ACCOUNTING POLICIES Investments are stated at fair value determined as follows: Allegheny Teledyne Incorporated (Allegheny Teledyne) common stock in the Company Stock Fund is stated at the quoted market price on the New York Stock Exchange. The Fixed Income Fund is stated at cost plus net earnings, which approximates market value. All other funds are stated at their net asset value, based on the quoted market prices of the securities held in such funds on applicable exchanges. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. DESCRIPTION OF THE PLAN The 401(k) Savings Account Plan for Employees of the Washington Plant (the Plan) is a defined contribution plan within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA). The purpose of the Plan is to encourage thrift and to assist union employees accumulate a fund to supplement retirement income by allowing eligible employees to make tax-deferred contributions to the Plan. Employee contributions to the Plan can range between 1% and 18% of eligible wages subject to Internal Revenue Service (IRS) limitations. In addition, the employee's annual pretax profit sharing award and pretax Longevity Incentive Payment Plan award may be contributed at the employee's discretion. 31 2. DESCRIPTION OF THE PLAN (CONTINUED) The investment options provided by the Plan are as follows: Lifestyle Growth and Income Fund--invests in equity and fixed income securities and may invest up to 15% of its assets in international securities. Lifestyle Growth Fund--invests in equity and fixed income securities and may invest up to 25% of its assets in international securities. Lifestyle Income Fund--consists of common stock, fixed income securities and short-term money market instruments. Alliance Equity Fund--consists of common stock. Fixed Income Fund--consists of amounts invested in insurance companies or other financial institutions under an agreement with repayment in full, plus interest at a fixed rate. Dreyfus Disciplined Stock Fund--invests in equity securities and may invest up to 20% of its assets in high quality money market accounts. Dreyfus Small Company Value Fund--invests primarily in small domestic and foreign company equities and to a limited degree, in bonds and money market instruments. Dreyfus International Value Fund--consists of equity securities of foreign company equities, and to a limited degree, in bonds and money market instruments. Company Stock Fund--consists of Allegheny Teledyne common stock. Separate accounts are maintained by the plan sponsor for each participating employee. Trustee fees and asset management fees charged for the administration of all funds are charged against net assets available for benefits of the respective fund. Certain other expenses of administering the Plan are paid by the plan sponsor. 32 2. DESCRIPTION OF THE PLAN (CONTINUED) In the event that the Plan is partially or completely terminated, all amounts credited to the accounts of the affected participants become fully vested. Information about the Plan is contained in the Summary Plan Description. Copies of this Summary Plan Description are available from the Allegheny Teledyne Personnel and Compensation Committee (the Committee). 3. INVESTMENTS The Plan is a participant in the ALC Fixed Income Master Trust, the ALC Alliance Equity Master Trust, ALC ATI Common Stock Master Trust, ALC Lifestyle Growth Fund Master Trust, ALC Lifestyle Income Fund Master Trust and ALC Lifestyle Growth and Income Fund Master Trust. The Plan's participating interests in these master trusts as of December 31 were as follows: 1997 1996 ------------------------- ALC Fixed Income Master Trust 0.05% 0.01% ALC Alliance Equity Master Trust 0.44% 0.25% ALC ATI Common Stock Master Trust 0.10% 0.04% ALC Lifestyle Growth Fund Master Trust .09% .01% ALC Lifestyle Income Fund Master Trust -- -- ALC Lifestyle Growth and Income Fund Master Trust .43% .20% The composition of the net assets of the ALC Fixed Income Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------------- Guaranteed investment contracts: Confederation Life Insurance Company $ 29,118 $ 4,024,149 Continental Assurance Company 6,718,924 9,404,989 John Hancock Life Insurance Company 2,600,000 -- Life Insurance Company of Virginia 8,725,219 15,918,713 New York Life Insurance Company 15,169,828 14,124,589 Pacific Mutual Life Insurance Company 5,793,190 5,441,658 Peoples Security Life Insurance Company 11,038,629 10,403,430 Prudential Insurance Company 6,144,220 14,396,590 Southland Life Insurance Company 16,288,645 15,200,545 Security Life of Denver -- 5,000,000 Protective Life Insurance Company -- 3,751,970 Transamerica Occidental 10,936,663 10,597,526 ----------------------------------- 83,444,436 108,264,159 33 3. INVESTMENTS (CONTINUED) 1997 1996 ---------------------------------- Synthetic contracts: Caisse des Depots et Consignations 3,879,321 3,642,950 Peoples Security 2,948,698 -- Transamerica Occidental 13,865,850 -- Union Bank of Switzerland 5,937,712 5,920,612 Westdeutsche Landesbank 13,727,581 13,668,143 ---------------------------------- 40,359,162 23,231,705 Temporary short-term investments 10,765,309 9,512,226 Accrued interest receivable 733,753 655,473 Other payables (6,169) (4,306) ---------------------------------- Total net assets $135,296,491 $141,659,257 ================================== In May 1997, the Allegheny Ludlum Corporation Fixed Income Master Trust received approximately $4,500,000 related to the Confederation Life Insurance Company Guaranteed Investment Contract in accordance with the liquidation plan. Management is unable to determine additional amounts, if any, that will be received by the Allegheny Ludlum Corporation Fixed Income Master Trust. The composition of net assets of the ALC Alliance Equity Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ---------------------------------- Investment in registered investment companies: Alliance Equity Fund S.A. #4 (865.1940 and 994.6310 shares, respectively) $60,199,619 $53,579,310 Cash 90 -- Operating payables (10,341) (16,348) ---------------------------------- Total net assets $60,189,368 $53,562,962 ================================== 34 3. INVESTMENTS (CONTINUED) The composition of net assets of the ALC ATI Common Stock Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Allegheny Teledyne Incorporated Common Stock (1,347.732 and 1,537.708 shares, respectively) $34,872,566 $35,367,284 Receivables 4,527 58,750 Short Term Investment Fund 738,595 48,275 Operating payables (822) (564) ----------------------------- Total net assets $35,614,866 $35,473,745 ============================= The composition of assets of the ALC Lifestyle Growth Fund Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Dreyfus Lifestyle Growth Fund $5,117,053 $1,949,121 Operating payables (5) (1) ----------------------------- $5,117,048 $1,949,120 ============================= The composition of assets of the ALC Lifestyle Income Fund Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Dreyfus Lifestyle Income Fund $1,825,632 $590,191 Operating payables (2) -- ----------------------------- $1,825,630 $590,191 ============================= The composition of assets of the ALC Lifestyle Growth and Income Fund Master Trust at December 31, 1997 and 1996 was as follows: 1997 1996 ----------------------------- Dreyfus Lifestyle Growth & Income Fund $22,740,752 $18,049,004 Receivables 56 1 ----------------------------- $22,740,808 $18,049,005 ============================= Detail information regarding the composition of the various lifestyle funds are reported in the separate collective trust filings. 35 3. INVESTMENTS (CONTINUED) The composition of the changes in net assets of the various master trusts is as follows: ALC FIXED INCOME MASTER ALC ALLIANCE EQUITY MASTER ALC ATI COMMON STOCK MASTER TRUST TRUST TRUST ---------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 ---------------------------------------------------------------------------------------------------------- Investment income: Interest income (loss) $ 8,694,877 $ 8,225,640 $ -- $ 16,937 $ (1,554) $ 15,713 Realized gains on sale of investments -- -- -- -- 1,835,342 1,588,011 Unrealized appreciation in fair value of investments -- -- -- -- 2,318,151 3,346,346 Dividends -- -- -- -- 837,662 537,617 Net gain, registered investment companies -- -- 13,819,313 7,335,440 -- -- Net gain, common collective funds 468,281 743,008 -- -- 73,411 -- Other income 1,343 -- -- -- -- -- Administrative expenses (189,938) (256,059) (211,873) (173,713) (27,286) (14,043) Transfers (15,337,329) (10,804,451) (6,981,034) 5,469,649 (4,894,605) 30,000,101 ---------------------------------------------------------------------------------------------------------- Net increase (decrease) (6,362,766) (2,091,862) 6,626,406 12,648,313 141,121 35,473,745 Total net assets at beginning of year 141,659,257 143,751,119 53,562,962 40,914,649 35,473,745 -- ---------------------------------------------------------------------------------------------------------- Total net assets at end of year $135,296,491 $141,659,257 $60,189,368 $53,562,962 $35,614,866 $35,473,745 ========================================================================================================== 36 3. INVESTMENTS (CONTINUED) ALC LIFESTYLE GROWTH FUND ALC LIFESTYLE INCOME FUND ALC LIFESTYLE GROWTH AND MASTER TRUST MASTER TRUST INCOME FUND MASTER TRUST ---------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------------------------------------------------------- 1997 1996 1997 1996 1997 1996 ---------------------------------------------------------------------------------------------- Investment income: Interest income $ -- $ -- $ 105 $ -- $ 1 $ 110 Realized gains on sale of -- -- -- -- -- 3,769,730 investments Unrealized depreciation in fair value of -- -- -- -- -- (3,794,673) investments Net gain, common collective funds 882,650 113,120 152,034 24,356 3,853,009 1,384,385 Transfers 2,285,394 1,836,065 1,083,338 565,870 838,793 762,689 Administrative expenses (116) (65) (38) (35) -- (402) ---------------------------------------------------------------------------------------------- Net increase 3,167,928 1,949,120 1,235,439 590,191 4,691,803 2,121,839 Total net assets at beginning of year 1,949,120 -- 590,191 -- 18,049,005 15,927,166 ---------------------------------------------------------------------------------------------- Total net assets at end of year $5,117,048 $1,949,120 $1,825,630 $590,191 $22,740,808 $18,049,005 ============================================================================================== The average yield for 1997 and 1996 for the ALC Fixed Income Master Trust was 6.57% and 6.43%, respectively. Credited interest rates on the contracts ranged from 5.60% to 8.18% and 5.24% to 8.18% for 1997 and 1996, respectively, and are determined at contract inception. Interest, realized and unrealized gains and losses, and management fees from the master trusts are included in the allocation of net earnings (losses) from master trusts on the statement of changes in net assets available for benefits. 37 3. INVESTMENTS (CONTINUED) The changes in cumulative net unrealized gain (loss) for the period April 1, 1996 through December 31, 1997 are as follows: LIFESTYLE DREYFUS DREYFUS GROWTH DREYFUS SMALL INTER- AND LIFESTYLE LIFESTYLE ALLIANCE DISCIPLINED COMPANY NATIONAL COMPANY INCOME GROWTH INCOME EQUITY STOCK VALUE VALUE STOCK FUND FUND FUND FUND FUND FUND FUND FUND TOTAL ---------------------------------------------------------------------------------------------------- Balance at April 1, 1996 $ -- $ -- $-- $ -- $ -- $ -- $ -- $ -- $ -- Unrealized gain (loss) 2,046 6 -- 6,084 884 (41) 17 1,647 10,643 ---------------------------------------------------------------------------------------------------- Balance at December 31, 1996 2,046 6 -- 6,084 884 (41) 17 1,647 10,643 Unrealized gain (loss) 10,614 378 6 46,060 15,774 2,598 (89) (77) 75,264 ---------------------------------------------------------------------------------------------------- Balance at December 31, 1997 $12,660 $384 $ 6 $52,144 $16,658 $2,557 $(72) $1,570 $85,907 ==================================================================================================== 4. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated March 3, 1998, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code of 1986 (the Code) and that the trust, therefore, is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code and ERISA to maintain its tax-exempt status. The administrator is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. 5. TRANSACTIONS WITH PARTIES-IN-INTEREST Investment fees paid during the period for services rendered were based on customary and reasonable rates for such services. 6. YEAR 2000 (UNAUDITED) Allegheny Teledyne has initiated formal communications with its significant service providers (plan trustee and plan recordkeeper) to determine the extent to which the Plan's systems or operations are vulnerable to those parties' failure to remediate their own Year 2000 issues. In addition, Allegheny Teledyne has been reviewing its own internal systems that impact the processing of employee benefits. Allegheny Teledyne expects that all necessary modifications to these internal systems will be completed prior to any significant impact on these internal systems. 38 6. YEAR 2000 (UNAUDITED) (CONTINUED) The Plan's service providers have indicated that they are presently taking steps to ensure that the Plan's systems and operations will be Year 2000 compliant. 39 SCHEDULES 40 401(k) Savings Account Plan for Employees of the Washington Plant Item 27a--Schedule of Assets Held for Investment Purposes December 31, 1997 DESCRIPTION UNITS/SHARES COST MARKET VALUE - ----------------------------------------------------------------------------------------------------------------------- Dreyfus Disciplined Stock Fund*: Interest in Dreyfus Disciplined Stock Fund 7,179.137 shares $206,757 $223,415 Dreyfus Small Company Value Fund*: Interest in Dreyfus Small Company Value Fund 2,336.477 shares 46,673 49,231 Dreyfus International Value Fund*: Interest in Dreyfus International Value Fund 638.833 shares 9,399 9,328 ----------------------------------- Total investments $262,829 $281,974 =================================== *Represents party-in-interest. 41 401(k) Savings Account Plan for Employees of the Washington Plant Item 27d--Schedule of Reportable Transactions Year ended December 31, 1997 PURCHASE PURCHASE SALE SELLING GAIN DESCRIPTION OF ASSETS TRANSACTIONS PRICE TRANSACTIONS PRICE (LOSS) - --------------------------------------------------------------------------------------------------------------------- Type (i) Transactions Dreyfus Disciplined Stock Fund 1 $ 10,587 -- $ -- $ -- Dreyfus Disciplined Stock Fund -- -- 1 6,005 924 Dreyfus Small Co. Value Fund 1 5,331 -- -- -- Dreyfus Small Co. Value Fund 1 4,401 -- -- -- Dreyfus Disciplined Stock Fund 1 9,085 -- -- -- Type (iii) Transactions Dreyfus Disciplined Stock Fund 40 113,621 -- -- -- Dreyfus Disciplined Stock Fund -- -- 6 13,827 1,939 Dreyfus Small Company Value Fund 29 49,670 -- -- -- Dreyfus Small Company Value Fund -- -- 2 5,462 659 Dreyfus International Value Fund 29 7,729 -- -- -- Dreyfus International Value Fund -- -- 3 1,611 7 There were no Type (ii) or (iv) transactions during the year ended December 31, 1997. 42 Audited Financial Statements SAVINGS AND SECURITY PLAN OF THE TUBULAR PRODUCTS/PLATE PRODUCTS DIVISIONS OF ALLEGHENY LUDLUM CORPORATION One Month ended January 31, 1998 and the years ended December 31, 1997 and 1996 with Report of Independent Auditors 43 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation Audited Financial Statements One Month ended January 31, 1998 and the years ended December 31, 1997 and 1996 CONTENTS Report of Independent Auditors .......................................... 45 Audited Financial Statements Statements of Net Assets Available for Benefits with Fund Information ................................................ 46 Statements of Changes in Net Assets Available for Benefits with Fund Information ................................................ 49 Notes to Financial Statements ........................................... 52 Schedules Item 27a--Schedule of Assets Held for Investment Purposes ............... 63 Item 27d--Schedule of Reportable Transactions............................ 64 44 REPORT OF INDEPENDENT AUDITORS Personnel and Compensation Committee Allegheny Ludlum Corporation We have audited the accompanying statements of net assets available for benefits of the Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation (the Plan) as of January 31, 1998 and December 31, 1997 and 1996, and the related statements of changes in net assets available for benefits for the one-month period and years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Savings and Security Plan of the Tubular Products/Plate Products Division of Allegheny Ludlum Corporation at January 31, 1998 and December 31, 1997 and 1996, and the changes in its net assets available for benefits for the one-month period and years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1997, and reportable transactions for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the financial statements. The Fund Information in the statement of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ ERNST & YOUNG LLP June 5, 1998 45 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation Statement of Net Assets Available for Benefits with Fund Information January 31, 1998 LIFESTYLE GROWTH AND LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS INCOME GROWTH INCOME EQUITY INCOME DISCIPLINED FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------- Net assets available for benefits $-- $-- $-- $-- $-- $-- =============================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK PARTICIPANT FUND FUND FUND LOANS TOTAL ------------------------------------------------------------------------ Net assets available for benefits $-- $-- $-- $-- $-- ======================================================================== See accompanying notes. 46 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation Statement of Net Assets Available for Benefits with Fund Information December 31, 1997 LIFESTYLE GROWTH AND LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS INCOME GROWTH INCOME EQUITY INCOME DISCIPLINED FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------ ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $73,012 $23,373 $9,801 $142,442 $297,806 $ -- Interest in registered investment companies -- -- -- -- -- 122,220 Participant notes receivable -- -- -- -- -- -- ------------------------------------------------------------------------------ Net assets available for benefits $73,012 $23,373 $9,801 $142,442 $297,806 $122,220 ============================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK PARTICIPANT FUND FUND FUND LOANS TOTAL --------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $154,795 $ -- $701,229 Interest in registered investment companies 15,106 10,413 -- -- 147,739 Participant notes receivable -- -- -- 31,290 31,290 ---------------------------------------------------------------------------- Net assets available for benefits $15,106 $10,413 $154,795 $31,290 $880,258 ============================================================================ See accompanying notes. 47 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation Statement of Net Assets Available for Benefits with Fund Information December 31, 1996 LIFESTYLE GROWTH AND LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS INCOME GROWTH INCOME EQUITY INCOME DISCIPLINED FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------ ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $254,640 $50,898 $29,770 $636,462 $3,554,103 $ -- Interest in registered investment companies -- -- -- -- -- 233,970 Participant notes receivable -- -- -- -- -- -- ============================================================================== Net assets available for benefits $254,640 $50,898 $29,770 $636,462 $3,554,103 $233,970 ============================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK PARTICIPANT FUND FUND FUND LOANS TOTAL -------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $817,568 $ -- $5,343,441 Interest in registered investment companies 31,553 54,275 -- -- 319,798 Participant notes receivable -- -- -- 369,623 369,623 ========================================================================== Net assets available for benefits $31,553 $54,275 $817,568 $369,623 $6,032,862 ========================================================================== See accompanying notes. 48 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation Statement of Changes in Net Assets Available for Benefits with Fund Information One Month ended January 31, 1998 LIFESTYLE GROWTH AND LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS INCOME GROWTH INCOME EQUITY INCOME DISCIPLINED FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------ Additions: Cash contributions: Employer $ -- $ -- $ -- $ -- $ -- $ -- Employee -- -- -- -- -- -- Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts -- -- -- -- -- -- Earnings from registered investment companies -- -- -- -- -- -- Interest income -- -- -- -- -- -- Transfer to other plans (73,012) (23,373) (9,801) (142,442) (297,806) (122,220) Interfund transfers -- -- -- -- -- -- ------------------------------------------------------------------------------ (73,012) (23,373) (9,801) (142,442) (297,806) (122,220) Deductions: Distributions to participants -- -- -- -- -- -- Fees -- -- -- -- -- -- ------------------------------------------------------------------------------ -- -- -- -- -- -- ------------------------------------------------------------------------------ Net deductions (73,012) (23,373) (9,801) (142,442) (297,806) (122,220) Net assets available for benefits at beginning of period 73,012 23,373 9,801 142,442 297,806 122,220 ------------------------------------------------------------------------------ Net assets available for benefits at end of period $ -- $ -- $ -- $ -- $ -- $ -- ============================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK PARTICIPANT FUND FUND FUND LOANS TOTAL ------------------------------------------------------------------------- Additions: Cash contributions: Employer $ -- $ -- $ -- $ -- $ -- Employee -- -- -- -- -- Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts -- -- -- -- -- Earnings from registered investment companies -- -- -- -- -- Interest income -- -- -- -- -- Transfer to other plans (15,106) (10,413) (154,795) (31,290) (880,258) Interfund transfers -- -- -- -- -- ------------------------------------------------------------------------- (15,106) (10,413) (154,795) (31,290) (880,258) Deductions: Distributions to participants -- -- -- -- -- Fees -- -- -- -- -- ------------------------------------------------------------------------- -- -- -- -- -- ------------------------------------------------------------------------- Net deductions (15,106) (10,413) (154,795) (31,290) (880,258) Net assets available for benefits at beginning of period 15,106 10,413 154,795 31,290 880,258 ------------------------------------------------------------------------- Net assets available for benefits at end of period $ -- $ -- $ -- $ -- $ -- ========================================================================= See accompanying notes. 49 Savings and Security Plan of the Tubular Products/Plate Products Divisions of Allegheny Ludlum Corporation Statement of Changes in Net Assets Available for Benefits with Fund Information Year ended December 31, 1997 LIFESTYLE GROWTH AND LIFESTYLE LIFESTYLE ALLIANCE FIXED DREYFUS INCOME GROWTH INCOME EQUITY INCOME DISCIPLINED FUND FUND FUND FUND FUND STOCK FUND ------------------------------------------------------------------------------- Additions: Cash contributions: Employer $ 14,822 $ 2,558 $ 990 $ 25,084 $ 83,312 $ 17,563 Employee 6,822 1,754 389 14,009 42,698 8,791 Investment income: Allocation of net earnings from Allegheny Ludlum Corporation Master Trusts 34,609 8,566 4,890 94,248 134,927 -- Earnings from registered investment companies -- -- -- -- -- 63,976 Interest income -- -- -- -- -- -- Transfer to other plans (191,129) (28,205) (98,380) (592,687) (3,326,938) (275,985) Interfund transfers (36,119) (7,908) 72,235 (17,285) 171,695 86,629 ------------------------------------------------------------------------------- (170,995) (23,235) (19,876) (476,631) (2,894,306) (99,026) Deductions: Distributions to participants 10,633 4,290 93 17,389 360,591 12,724 Fees -- -- -- -- 1,400 -- ------------------------------------------------------------------------------- 10,633 4,290 93 17,389 361,991 12,724 ------------------------------------------------------------------------------- Net deductions (181,628) (27,525) (19,969) (494,020) (3,256,297) (111,750) Net assets available for benefits at beginning of year 254,640 50,898 29,770 636,462 3,554,103 233,970 ------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 73,012 $23,373 $ 9,801 $142,442 $ 297,806 $122,220 =============================================================================== DREYFUS SMALL DREYFUS COMPANY INTERNATIONAL COMPANY VALUE VALUE STOCK PARTICIPANT FUND FUND FUND LOANS TOTAL