Form 10-K/A for ALLEGHENY TELEDYNE INC filed on 30 Jun 1999 UNITED STATES 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, 1998 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 files pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- At March 15, 1999, the Registrant had outstanding 193,696,608 shares of its Common Stock. The aggregate market value of the Registrant's voting stock held by non-affiliates at this date was approximately $3.4 billion, based on the closing price per share of Common Stock on this date of $20.00 as reported on the New York Stock Exchange. Shares of Common Stock known by the Registrant to be 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. Documents Incorporated By Reference Selected portions of the 1998 Annual Report to Stockholders ("1998 Annual Report") - Part I, Part II and Part IV of this Report. Selected portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders - Part III of this Report. The information included in the Proxy Statement as required by paragraphs (k) and (l) of Item 402 of Regulation S-K is not incorporated by reference in this Form 10-K/A (Amendment No. 1). 2 EXPLANATORY NOTE: Pursuant to this Form 10-K/A (Amendment No. 1) ("Amendment No. 1"), Allegheny Teledyne Incorporated (the "Registrant" or 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, 1998 ("1998 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 Lockport and Waterbury Facilities of Allegheny Ludlum Corporation; (4) Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan; (5) Teledyne 401(k) Plan; and (6) Oregon Metallurgical Corporation Savings Plan. "Item 8. Financial Statements and Supplementary Data" of Part II of the 1998 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) are incorporated by reference from pages 30 to 51 of the 1998 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...................................... 23 Savings and Security Plan of the Lockport and Waterbury Facilities of Allegheny Ludlum Corporation........................................ 40 Allegheny Ludlum Corporation Personal Retirement and 401(k) Savings Account Plan............................. 60 Teledyne 401(k) Plan................................................... 78 Oregon Metallurgical Corporation Savings Plan.......................... 92 3 Audited Financial Statements Allegheny Ludlum Retirement Savings Plan Years ended December 31, 1998 and 1997 with Report of Independent Auditors 4 Allegheny Ludlum Retirement Savings Plan Audited Financial Statements Years ended December 31, 1998 and 1997 CONTENTS Report of Independent Auditors .............................................6 Audited Financial Statements Statement of Net Assets Available for Benefits, with Fund Information as of December 31, 1998 .................................................7 Statement of Net Assets Available for Benefits, with Fund Information as of December 31, 1997 .................................................8 Statement of Changes in Net Assets Available for Benefits, with Fund Information, Year ended December 31, 1998................................9 Statement of Changes in Net Assets Available for Benefits, with Fund Information, Year ended December 31, 1997...............................10 Notes to Financial Statements .............................................11 Supplemental Schedules Line 27a--Schedule of Assets Held for Investment Purposes .................20 Line 27d--Schedule of Reportable Transactions..............................22 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 as of December 31, 1998 and 1997, 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, 1998 and 1997, 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, 1998, 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 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 Pittsburgh, Pennsylvania June 11, 1999 6 Allegheny Ludlum Retirement Savings Plan Statement of Net Assets Available for Benefits, with Fund Information December 31, 1998 DREYFUS DREYFUS DREYFUS 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 $ -- $ -- $ -- $ 38,128,531 $ 87,165,844 Interest in registered investment company -- -- -- -- -- Interest in common collective trusts 20,612,832 7,043,546 2,265,859 -- -- Participant notes receivable -- -- -- -- -- Other -- -- -- -- -- Other (payables) receivables (95,293) 38,623 (34,511) (415,472) (104,171) ---------------------------------------------------------------------------------------------- Net assets available for benefits $ 20,517,539 $ 7,082,169 $ 2,231,348 $ 37,713,059 $ 87,061,673 ============================================================================================== DREYFUS ALLEGHENY SMALL DREYFUS TELEDYNE COMPANY INTERNATIONAL COMPANY SELF- DISCIPLINED VALUE VALUE STOCK DIRECTED STOCK FUND FUND FUND FUND FUND -------------------------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ 35,230,900 $ -- $ -- $ 22,853,067 $ -- Interest in registered investment company -- 10,425,125 3,097,947 -- 1,237,357 Interest in common collective trusts -- -- -- -- -- Participant notes receivable -- -- -- -- -- Other -- -- -- -- 29,124 Other (payables) receivables (84,271) 104,499 46,454 (28,619) -- -------------------------------------------------------------------------------------------- Net assets available for benefits $ 35,146,629 $ 10,529,624 $ 3,144,401 $ 22,824,448 $ 1,266,481 ============================================================================================ PARTICIPANT LOANS TOTAL -------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ 183,378,342 Interest in registered investment company -- 14,760,429 Interest in common collective trusts -- 29,922,237 Participant notes receivable 3,749,111 3,749,111 Other -- 29,124 Other (payables) receivables 5,673 (567,088) -------------------------------- Net assets available for benefits $ 3,754,784 $ 231,272,155 ================================ See accompanying notes. 7 Allegheny Ludlum Retirement Savings Plan Statement of Net Assets Available for Benefits, with Fund Information December 31, 1997 DREYFUS DREYFUS DREYFUS 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 $ 18,995,349 $ 4,156,514 $ 1,492,055 $ 49,094,068 $ 99,746,033 Interest in registered investment company -- -- -- -- -- Participant notes receivable -- -- -- -- -- Other -- -- -- -- -- ---------------------------------------------------------------------------------------------- Net assets available for benefits $ 18,995,349 $ 4,156,514 $ 1,492,055 $ 49,094,068 $ 99,746,033 ============================================================================================== DREYFUS SMALL DREYFUS DREYFUS COMPANY INTERNATIONAL COMPANY SELF- DISCIPLINED VALUE VALUE STOCK DIRECTED STOCK FUND FUND FUND FUND FUND ------------------------------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ -- $ -- $ 27,656,220 $ -- Interest in registered investment company 27,858,603 15,446,354 2,964,614 -- 340,241 Participant notes receivable -- -- -- -- -- Other -- -- -- -- (30,000) ------------------------------------------------------------------------------------------- Net assets available for benefits $ 27,858,603 $ 15,446,354 $ 2,964,614 $ 27,656,220 $ 310,241 =========================================================================================== PARTICIPANT LOANS TOTAL -------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ -- $ 201,140,239 Interest in registered investment company -- 46,609,812 Participant notes receivable 4,367,721 4,367,721 Other -- (30,000) -------------------------------- Net assets available for benefits $ 4,367,721 $ 252,087,772 ================================ 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, 1998 DREYFUS DREYFUS DREYFUS LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED GROWTH AND GROWTH INCOME EQUITY INCOME INCOME FUND FUND FUND FUND FUND ---------------------------------------------------------------------------------------------- Additions: Contributions: Employer $ 753,484 $ 363,687 $ 102,129 $ 1,897,236 $ 3,311,379 Employee 618,058 333,937 88,607 1,458,599 2,197,227 Investment income: Net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts 1,375,578 441,132 101,399 (1,744,436) 6,577,957 Net gain (loss) from interest in registered investment companies -- -- -- -- -- Net gain from common interest in collective trusts 2,167,257 726,497 157,406 -- -- Interest income -- -- -- -- -- Other income (loss) 3,643 955 (247) (763) 3,285 Transfers in from outside of Plan 312,833 204,551 -- 176,557 206,138 Interfund transfers (253,340) 1,454,628 1,080,791 (7,866,805) 6,926,458 ---------------------------------------------------------------------------------------------- Total additions 4,977,513 3,525,387 1,530,085 (6,079,612) 19,222,444 Deductions: Distributions to participants 3,455,323 599,728 790,784 5,301,355 31,906,541 Administrative expenses -- 4 8 42 263 ---------------------------------------------------------------------------------------------- Total deductions 3,455,323 599,732 790,792 5,301,397 31,906,804 ---------------------------------------------------------------------------------------------- Net additions (deductions) 1,522,190 2,925,655 739,293 (11,381,009) (12,684,360) Net assets available for benefits at beginning of year 18,995,349 4,156,514 1,492,055 49,094,068 99,746,033 ---------------------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 20,517,539 $ 7,082,169 $ 2,231,348 $ 37,713,059 $ 87,061,673 ============================================================================================== DREYFUS ALLEGHENY SMALL DREYFUS TELEDYNE COMPANY INTERNATIONAL COMPANY SELF- DISCIPLINED VALUE VALUE STOCK DIRECTED STOCK FUND FUND FUND FUND FUND ---------------------------------------------------------------------------------------------- Additions: Contributions: Employer $ 1,417,870 $ 735,018 $ 202,162 $ 430,142 $ -- Employee 1,166,369 597,598 155,845 376,066 -- Investment income: Net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts 3,662,203 -- -- (3,941,336) -- Net gain (loss) from interest in registered investment companies 3,180,359 (1,003,817) 269,959 -- 142,045 Net gain from common interest in collective trusts -- -- -- -- -- Interest income -- -- -- -- -- Other income (loss) (17,366) (2,921) (254) 2,496 -- Transfers in from outside of Plan 983,304 -- 99,438 185,261 -- Interfund transfers 1,511,346 (3,750,226) 21,801 663,451 814,195 ---------------------------------------------------------------------------------------------- Total additions 11,904,085 (3,424,348) 748,951 (2,283,920) 956,240 Deductions: Distributions to participants 4,615,901 1,492,315 569,164 2,547,844 -- Administrative expenses 158 67 -- 8 -- ---------------------------------------------------------------------------------------------- Total deductions 4,616,059 1,492,382 569,164 2,547,852 -- ---------------------------------------------------------------------------------------------- Net additions (deductions) 7,288,026 (4,916,730) 179,787 (4,831,772) 956,240 Net assets available for benefits at beginning of year 27,858,603 15,446,354 2,964,614 27,656,220 310,241 ---------------------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 35,146,629 $ 10,529,624 $ 3,144,401 $ 22,824,448 $ 1,266,481 ============================================================================================== PARTICIPANT LOANS TOTAL --------------------------------- Additions: Contributions: Employer $ -- $ 9,213,107 Employee -- 6,992,306 Investment income: Net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts -- 6,472,497 Net gain (loss) from interest in registered investment companies -- 2,588,546 Net gain from common interest in collective trusts -- 3,051,160 Interest income 377,538 377,538 Other income (loss) -- (11,172) Transfers in from outside of Plan 40,632 2,208,714 Interfund transfers (602,299) -- --------------------------------- Total additions (184,129) 30,892,696 Deductions: Distributions to participants 428,808 51,707,763 Administrative expenses -- 550 --------------------------------- Total deductions 428,808 51,708,313 --------------------------------- Net additions (deductions) (612,937) (20,815,617) Net assets available for benefits at beginning of year 4,367,721 252,087,772 --------------------------------- Net assets available for benefits at end of year $ 3,754,784 $ 231,272,155 ================================= 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, 1997 DREYFUS DREYFUS DREYFUS LIFESTYLE LIFESTYLE LIFESTYLE ALLIANCE FIXED GROWTH AND GROWTH INCOME EQUITY INCOME INCOME FUND FUND FUND FUND FUND ---------------------------------------------------------------------------------------------- Additions: Contributions: Employer $ 702,727 $ 249,631 $ 62,837 $ 2,004,482 $ 3,677,232 Employee 565,903 183,655 47,169 1,510,645 2,153,794 Investment income: Net gain from interest in Allegheny Ludlum Corporation Master Trusts 3,216,461 728,854 122,079 11,149,275 6,587,944 Net gain from interest in registered investment companies -- -- -- -- -- Interest income -- -- -- -- 1,396 Interfund transfers 243,216 1,525,897 907,445 (7,998,026) (7,564,050) ---------------------------------------------------------------------------------------------- Total additions 4,728,307 2,688,037 1,139,530 6,666,376 4,856,316 Deductions: Distributions to participants 612,897 143,344 86,663 2,111,534 9,234,509 Administrative expenses -- -- -- -- -- ---------------------------------------------------------------------------------------------- Total deductions 612,897 143,344 86,663 2,111,534 9,234,509 ---------------------------------------------------------------------------------------------- Net additions (deductions) 4,115,410 2,544,693 1,052,867 4,554,842 (4,378,193) Net assets available for benefits at beginning of year 14,879,939 1,611,821 439,188 44,539,226 104,124,226 ---------------------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 18,995,349 $ 4,156,514 $ 1,492,055 $ 49,094,068 $ 99,746,033 ============================================================================================== DREYFUS SMALL DREYFUS DREYFUS COMPANY INTERNATIONAL COMPANY SELF- DISCIPLINED VALUE VALUE STOCK DIRECTED STOCK FUND FUND FUND FUND FUND ---------------------------------------------------------------------------------------------- Additions: Contributions: Employer $ 1,145,475 $ 625,035 $ 160,574 $ 398,923 $ -- Employee 964,562 566,507 134,766 311,109 -- Investment income: Net gain from interest in Allegheny Ludlum Corporation Master Trusts -- -- -- 3,977,292 -- Net gain from interest in registered investment companies 5,946,391 2,345,108 89,494 -- 28,693 Interest income -- -- -- -- -- Interfund transfers 6,009,014 8,238,142 1,802,110 (3,514,614) 281,730 ---------------------------------------------------------------------------------------------- Total additions 14,065,442 11,774,792 2,186,944 1,172,710 310,423 Deductions: Distributions to participants 601,963 224,750 19,788 1,333,961 -- Administrative expenses -- -- -- -- 182 ---------------------------------------------------------------------------------------------- Total deductions 601,963 224,750 19,788 1,333,961 182 ---------------------------------------------------------------------------------------------- Net additions (deductions) 13,463,479 11,550,042 2,167,156 (161,251) 310,241 Net assets available for benefits at beginning of year 14,395,124 3,896,312 797,458 27,817,471 -- ---------------------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 27,858,603 $ 15,446,354 $ 2,964,614 $ 27,656,220 $ 310,241 ============================================================================================== PARTICIPANT LOANS TOTAL --------------------------------- Additions: Contributions: Employer $ -- $ 9,026,916 Employee -- 6,438,110 Investment income: Net gain from interest in Allegheny Ludlum Corporation Master Trusts -- 25,781,905 Net gain from interest in registered investment companies -- 8,409,686 Interest income 377,707 379,103 Interfund transfers 69,136 -- --------------------------------- Total additions 446,843 50,035,720 Deductions: Distributions to participants -- 14,369,409 Administrative expenses -- 182 --------------------------------- Total deductions -- 14,369,591 --------------------------------- Net additions (deductions) 446,843 35,666,129 Net assets available for benefits at beginning of year 3,920,878 216,421,643 --------------------------------- Net assets available for benefits at end of year $ 4,367,721 $ 252,087,772 ================================= See accompanying notes. 10 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements December 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES Investments are stated at fair value determined as follows: The Company Stock Fund consists of investments in Allegheny Teledyne Incorporated (Allegheny Teledyne) common stock and is stated at the quoted market price as listed on the New York Stock Exchange. The Fixed Income Fund is stated at cost plus net earnings, which approximates market value and is provided by the Plan's trustee. 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 Allegheny Ludlum Retirement Savings Plan (the Plan) is a defined contribution plan and is subject to the provisions of the Employee Retirement Income Security Act of 1974. 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. The investment options provided by the Plan are as follows: Dreyfus Lifestyle Growth and Income Fund--invests in equity and fixed income securities and may invest up to 15% of its assets in international securities. Dreyfus Lifestyle Growth Fund--invests in equity and fixed income securities and may invest up to 25% of its assets in international securities. 11 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) Dreyfus 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. Allegheny Teledyne Disciplined Stock Fund--invests in equity securities and may invest up to 20% of its assets in high quality money market accounts. Effective November 1, 1998, the Dreyfus Disciplined Stock Fund changed from a mutual fund to a separate account structure, and will be known as the Allegheny Teledyne Disciplined Stock Fund. Investment objective and strategy remain the same. 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. 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 future contributions by the employer. 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. 12 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) 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 over periods 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. Further information about the Plan, including eligibility, vesting, contributions, and withdrawals, is contained in the Summary Plan Description and related contracts. Copies of this Summary Plan Description are available from the Allegheny Teledyne Personnel and Compensation Committee. 3. INVESTMENTS As of December 31, 1998, 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, and the ALC Dreyfus Disciplined Stock Fund Master Trust. During 1998, the Dreyfus Lifestyle Growth and Income Fund, the Dreyfus Lifestyle Growth Fund, and the Dreyfus Lifestyle Income Fund were reclassified as common collective trusts from master trusts while the Allegheny Teledyne Disciplined Stock Fund was reclassified to a master trust from the Dreyfus Disciplined Stock Fund, a registered investment company. The Plan's participating interests in these master trusts as of December 31, 1998 and 1997 were as follows: 1998 1997 -------------------------------------------- ALC Fixed Income Master Trust 68.81% 73.72% ALC Alliance Equity Master Trust 80.47% 81.57% ALC ATI Common Stock Master Trust 70.95% 77.65% ALC Lifestyle Growth Fund Master Trust --% 81.23% ALC Lifestyle Income Fund Master Trust --% 81.72% ALC Lifestyle Growth and Income Fund Master Trust --% 83.53% Allegheny Teledyne Disciplined Stock Fund Master Trust 81.55% --% 13 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The composition of the net assets of the ALC Fixed Income Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------------------------- Guaranteed investment contracts: Confederation Life Insurance Company $ 2,575 $ 29,118 Continental Assurance Company -- 6,718,924 John Hancock Life Insurance Company 5,100,000 2,600,000 Life Insurance Company of Virginia -- 8,725,219 New York Life Insurance Company 13,258,607 15,169,828 Pacific Mutual Life Insurance Company 6,167,430 5,793,190 Peoples Security Life Insurance Company 10,367,671 11,038,629 Prudential Insurance Company -- 6,144,220 Southland Life Insurance Company 10,752,479 16,288,645 Transamerica Occidental 11,296,810 10,936,663 Sun America, Inc. 3,000,000 -- Business Mens Assurance Company of America 2,505,536 -- Protective Life Insurance Company 3,002,482 -- Safeco Life Insurance 3,000,000 -- ------------------------------------- 68,453,590 83,444,436 Synthetic contracts: Caisse des Depots et Consignations 12,865,126 3,879,321 Peoples Security Life Insurance Company 2,968,196 2,948,698 Transamerica Occidental 13,859,523 13,865,850 Union Bank of Switzerland 5,935,391 5,937,712 Westdeutsche Landesbank Girozentrale 16,952,480 13,727,581 ------------------------------------- 52,580,716 40,359,162 Temporary short-term investments 4,248,515 10,765,309 Accrued interest receivable 1,443,795 733,753 Other payables (88,501) (6,169) ------------------------------------- Total net assets $ 126,638,115 $ 135,296,491 ===================================== In May 1997, the ALC 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 ALC Fixed Income Master Trust. 14 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The composition of net assets of the ALC Alliance Equity Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------------- Investment in registered investment companies: Alliance Equity Fund S.A. #4 (6,966.434 and 865.194 shares, respectively) $ 47,408,255 $ 60,199,619 Cash 117 90 Operating payables (26,007) (10,341) ---------------------------------- Total net assets $ 47,382,365 $ 60,189,368 ================================== The composition of net assets of the ALC ATI Common Stock Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------------- Allegheny Teledyne Incorporated common stock (1,544,975 and 1,347,732 shares, respectively) $ 31,575,427 $ 34,872,566 Receivables 196,291 4,527 Short-Term Investment Fund 450,324 738,595 Operating payables (10,492) (822) ---------------------------------- Total net assets $ 32,211,550 $ 35,614,866 ================================== The composition of assets of the ALC Lifestyle Growth Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------------- Dreyfus Lifestyle Growth Fund $ -- $ 5,117,053 Operating payables -- (5) ---------------------------------- $ -- $ 5,117,048 ================================== The composition of assets of the ALC Lifestyle Income Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------------- Dreyfus Lifestyle Income Fund $ -- $ 1,825,632 Operating payables -- (2) ---------------------------------- $ -- $ 1,825,630 ================================== 15 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The composition of assets of the ALC Lifestyle Growth and Income Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------------- Dreyfus Lifestyle Growth and Income Fund $ -- $ 22,740,752 Receivables -- 56 ---------------------------------- $ -- $ 22,740,808 ================================== The composition of net assets of the Allegheny Teledyne Disciplined Stock Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------------- Corporate common stock $ 41,699,413 $ -- Noninterest-bearing cash (5,217) -- Receivables 58,761 -- Short-Term Investment Fund 1,499,311 -- Operating payables (51,809) -- ---------------------------------- Total net assets $ 43,200,459 $ -- ================================== 16 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 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 --------------------------------------------------------------------------------------------- 1998 1997 1998 1997 1998 1997 --------------------------------------------------------------------------------------------- Investment income (loss): Interest income (loss) $ 8,359,937 $ 8,694,877 $ -- $ -- $ (113) $ (1,554) Realized (loss) gain on sale of -- -- -- -- (620,712) 1,835,342 investments Unrealized (depreciation) appreciation in fair value of investments -- -- -- -- (5,308,345) 2,318,151 Dividends -- -- -- -- 934,022 837,662 Net (loss) gain, registered investment companies -- -- (2,106,215) 13,819,313 -- -- Net gain, common collective trusts 408,717 468,281 -- -- 41,352 73,411 Other income 1,147 1,343 -- -- -- -- Administrative expenses (191,163) (189,938) (237,876) (211,873) (24,196) (27,286) Transfers (17,237,014) (15,337,329) (10,462,912) (6,981,034) 1,574,676 (4,894,605) --------------------------------------------------------------------------------------------- Net increase (decrease) (8,658,376) (6,362,766) (12,807,003) 6,626,406 (3,403,316) 141,121 Total net assets at beginning of year 135,296,491 141,659,257 60,189,368 53,562,962 35,614,866 35,473,745 --------------------------------------------------------------------------------------------- Total net assets at end of year $126,638,115 $135,296,491 $47,382,365 $60,189,368 $32,211,550 $35,614,866 ============================================================================================= 17 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) ALC LIFESTYLE GROWTH ALC LIFESTYLE INCOME ALC LIFESTYLE GROWTH AND FUND MASTER TRUST FUND MASTER TRUST INCOME FUND MASTER TRUST ---------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------------------------------------------------- 1998* 1997 1998* 1997 1998* 1997 ---------------------------------------------------------------------------------------- Investment income (loss): Interest income (loss) $ -- $ -- $ -- $ 105 $ -- $ 1 Realized gain on sale of investments -- -- -- -- -- -- Unrealized appreciation in fair value of investments -- -- -- -- -- -- Dividends -- -- -- -- -- -- Net gain, common collective trusts 514,556 882,650 109,828 152,034 1,558,031 3,853,009 Other loss (14) -- -- -- (10) -- Administrative expenses (94) (116) (34) (38) (229) -- Transfers (5,631,496) 2,285,394 (1,935,424) 1,083,338 (24,298,600) 838,793 ---------------------------------------------------------------------------------------- Net increase (decrease) (5,117,048) 3,167,928 (1,825,630) 1,235,439 (22,740,808) 4,691,803 Total net assets at beginning of year 5,117,048 1,949,120 1,825,630 590,191 22,740,808 18,049,005 ---------------------------------------------------------------------------------------- Total net assets at end of year $ -- $ 5,117,048 $ -- $ 1,825,630 $ -- $ 22,740,808 ======================================================================================== ALLEGHENY TELEDYNE DISCIPLINED STOCK FUND MASTER TRUST ------------------------ YEAR ENDED DECEMBER 31 ------------------------ 1998 1997 ------------------------ Investment income (loss): Interest income (loss) $ (925) $ -- Realized gain on sale of investments 107,964 -- Unrealized appreciation in fair value of investments 4,322,009 -- Dividends 87,868 -- Net gain, common collective trusts 26,165 -- Other loss -- -- Administrative expenses (51,809) -- Transfers 38,709,187 -- ------------------------ Net increase (decrease) 43,200,459 -- Total net assets at beginning of year -- -- ------------------------ Total net assets at end of year $ 43,200,459 $ -- ======================== * Partial year only. Reclassified as common collective trusts. The average yield for 1998 and 1997 for the ALC Fixed Income Master Trust was 6.55% and 6.57%, respectively. Credited interest rates on the contracts ranged from 5.13% to 8.18% and 5.60% to 8.18% for 1998 and 1997, 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 net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts on the statement of changes in net assets available for benefits. 18 Allegheny Ludlum Retirement Savings Plan Notes to Financial Statements (continued) 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, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes that the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt. 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. 6. YEAR 2000 READINESS DISCLOSURE (UNAUDITED) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle Year 2000 dates. The Plan Sponsor is taking a two-phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Internal resources are being utilized to upgrade or modify existing software applications, and test the software and equipment for the Year 2000 modifications. The Plan Sponsor believes that it has substantially completed this phase of the project. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. For the second phase of the project, plan management established formal communications with its third party service providers to determine that they have developed plans to address their own Year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they expect to be Year 2000 compliant by mid-1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the Year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan because they are confident that all material systems will be Year 2000 ready. 7. SUBSEQUENT EVENT Effective July 1, 1999, the Plan will no longer offer the Dreyfus Small Company Value Fund as an investment option. The Dreyfus Emerging Leaders Fund will be offered to participants as a new investment option as of this date. 19 Allegheny Ludlum Retirement Savings Plan EIN 25-1364894 Plan 004 Line 27a--Schedule of Assets Held for Investment Purposes December 31, 1998 CURRENT DESCRIPTION UNITS/SHARES COST VALUE VALUE ---------------------------------------------------------------------------------------------------------------------- Common Collective Trusts ------------------------ Dreyfus Lifestyle Growth and Income Fund*: Interest in Dreyfus Lifestyle Growth and Income Fund 1,319,441.510 shares $18,553,762 $20,612,832 Dreyfus Lifestyle Growth Fund*: Interest in Dreyfus Lifestyle Growth Fund 396,724.803 shares 6,309,277 7,043,546 Dreyfus Lifestyle Income Fund*: Interest in Dreyfus Lifestyle Income Fund 171,183.496 shares 2,159,031 2,265,859 ------------------------------------- Total Common Collective Trusts 27,022,070 29,922,237 Registered Investment Companies ------------------------------- Dreyfus Small Company Value Fund*: Interest in Dreyfus Small Company Value Fund 527,854.405 shares 10,119,212 10,425,125 Dreyfus International Value Fund*: Interest in Dreyfus International Value Fund 204,620.016 shares 3,109,456 3,097,947 Self-Directed Fund: American Century Quantitative Equity Growth Fund 1,380.485 shares 30,643 31,351 American Century 20th Century Ultra Fund 300.726 shares 10,854 10,047 Barron Asset Fund 834.709 shares 43,034 42,186 Berger Small Cap Value Fund 1,680.335 shares 31,474 32,464 Dreyfus 100% U.S. Treasury Money Market Fund* 162,294.820 shares 162,295 162,295 Dreyfus Appreciation Fund, Inc.* 663.109 shares 20,405 27,897 Dreyfus Technology Growth Fund* 3,005.487 shares 50,245 62,364 Fidelity Puritan Fund 1,218.333 shares 22,422 24,452 Fidelity Low Priced Stock Fund 508.686 shares 11,803 11,623 Fidelity Growth & Income Fund 318.998 shares 12,198 14,623 Fidelity Dividend Growth Fund 540.766 shares 12,221 15,536 Fidelity Select Financial Services Portfolio 96.358 shares 10,109 9,504 Fidelity Select Home Finance Portfolio 190.367 shares 10,035 8,239 Fidelity Select Biotechnology Portfolio 305.157 shares 10,035 12,136 Fidelity Select Brokerage and Investment Management 220.459 shares 10,035 8,481 Fidelity Select Electronics Portfolio 345.873 shares 11,853 16,104 Fidelity Select Computer Portfolio 207.383 shares 10,035 14,042 Gabelli Global Interactive Couch Potato Fund 126.291 shares 2,091 2,146 Gabelli Growth Fund 1,249.010 shares 41,182 44,215 Invesco Health Science Portfolio 42.852 shares 2,794 2,616 Janus Growth and Income Fund 1,500.554 shares 37,228 43,666 Janus Worldwide Fund 2,622.608 shares 100,606 124,207 Janus Twenty Fund 2,559.909 shares 111,708 136,443 Janus Special Situations Fund 607.227 shares 9,176 10,572 Janus Overseas Fund 3,034.335 shares 55,706 60,929 Janus Fund 1,193.072 shares 32,827 40,147 Guardian Park Ave Fund 937.402 shares 46,508 48,632 Phoenix Strategic Theme Fund Class A 121.569 shares 2,002 1,980 T. Rowe Price Equity Income Fund 407.642 shares 10,843 10,729 20 Line 27a--Schedule of Assets Held for Investment Purposes (continued) CURRENT DESCRIPTION UNITS/SHARES COST VALUE VALUE ---------------------------------------------------------------------------------------------------------------------- T. Rowe Price Mid-Cap Growth Fund 1,196.476 shares 37,562 40,776 T. Rowe Price Value Fund 1,813.642 shares 34,400 33,208 Safeco Growth Fund 390.930 shares 10,035 8,874 Strong American Utilities Fund 4,178.117 shares 63,829 70,234 Vanguard/Windsor II Portfolio 173.899 shares 5,559 5,191 Vanguard Index Trust 500 Portfolio 433.947 shares 43,000 49,448 ------------------------------------- Total Self-Directed Fund 1,116,752 1,237,357 ------------------------------------- Total Registered Investment Companies 14,345,420 14,760,429 Participant loans 8.75% to 9.50% -- 3,749,111 ------------------------------------- $41,367,490 $48,431,777 ===================================== *Party-in-interest 21 Allegheny Ludlum Retirement Savings Plan EIN 25-1364894 Plan 004 Line 27d--Schedule of Reportable Transactions Year ended December 31, 1998 CURRENT VALUE OF ASSETS ON PURCHASE SELLING COST OF TRANSACTION NET DESCRIPTION PRICE PRICE ASSET DATE GAIN ------------------------------------------------------------------------------------------------------------------ Type (i) transactions: Dreyfus Disciplined Stock Fund $ -- $31,378,316 $27,898,261 $31,378,316 $ 3,480,055 Dreyfus Lifestyle Growth and Income Fund 20,277,990 -- 20,277,990 20,277,990 -- Type (iii) transactions: Dreyfus Disciplined Stock Fund 16,957,031 -- 16,957,031 16,957,031 -- Dreyfus Disciplined Stock Fund -- 47,960,058 42,709,908 47,960,058 5,250,150 Dreyfus Small Company Value Fund 5,971,806 -- 5,971,806 5,971,806 -- Dreyfus Small Company Value Fund -- 9,993,746 9,986,738 9,993,746 7,008 Dreyfus Lifestyle Growth and Income Fund 22,349,396 -- 22,349,396 22,349,396 -- Dreyfus Lifestyle Growth and Income Fund -- 3,903,821 3,795,634 3,903,821 108,187 There were no Type (ii) or (iv) transactions during the year ended December 31, 1998. 22 Audited Financial Statements 401(k) Savings Account Plan for Employees of the Washington Plant Years ended December 31, 1998 and 1997 with Report of Independent Auditors 23 401(k) Savings Account Plan for Employees of the Washington Plant Audited Financial Statements Years ended December 31, 1998 and 1997 CONTENTS Report of Independent Auditors ...........................................25 Audited Financial Statements Statement of Net Assets Available for Benefits, with Fund Information as of December 31, 1998 ...................................26 Statement of Net Assets Available for Benefits, with Fund Information as of December 31, 1997 ...................................27 Statement of Changes in Net Assets Available for Benefits, with Fund Information, Year ended December 31, 1998 .............................28 Statement of Changes in Net Assets Available for Benefits, with Fund Information, Year ended December 31, 1997 .............................29 Notes to Financial Statements ............................................30 Supplemental Schedules Line 27a--Schedule of Assets Held for Investment Purposes.................38 Line 27d--Schedule of Reportable Transactions.............................39 24 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 as of December 31, 1998 and 1997, 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 401(k) Savings Account Plan for Employees of the Washington Plant as of December 31, 1998 and 1997, and the changes in 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, 1998, 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 Pittsburgh, Pennsylvania June 11, 1999 25 401(k) Savings Account Plan for Employees of the Washington Plant Statement of Net Assets Available for Benefits, with Fund Information December 31, 1998 DREYFUS DREYFUS DREYFUS 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 $ -- $ -- $ -- $ 279,582 $ 143,364 Interest in registered investment companies -- -- -- -- -- Interest in common collective trusts 143,554 57,108 7,667 -- -- -------------------------------------------------------------------------- Net assets available for benefits $ 143,554 $ 57,108 $ 7,667 $ 279,582 $ 143,364 ========================================================================== DREYFUS ALLEGHENY SMALL DREYFUS TELEDYNE COMPANY INTERNATIONAL COMPANY DISCIPLINED VALUE VALUE STOCK STOCK FUND FUND FUND FUND TOTAL ----------------------------------------------------------------------- ASSETS Investments: Interest in Allegheny Ludlum Corporation Master Trusts $ 403,630 $ -- $ -- $ 115,325 $ 941,901 Interest in registered investment companies -- 56,201 12,472 -- 68,673 Interest in common collective trusts -- -- -- -- 208,329 ---------------------------------------------------------------------- Net assets available for benefits $ 403,630 $ 56,201 $ 12,472 $ 115,325 $1,218,903 =====================================================================- See accompanying notes. 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 DREYFUS DREYFUS DREYFUS 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 Changes in Net Assets Available for Benefits, with Fund Information Year ended December 31, 1998 DREYFUS LIFESTYLE DREYFUS DREYFUS GROWTH LIFESTYLE LIFESTYLE ALLIANCE FIXED AND INCOME GROWTH INCOME EQUITY INCOME FUND FUND FUND FUND FUND -------------------------------------------------------------------------------- Additions: Employee contributions $ 42,302 $ 32,556 $ 6,467 $ 84,765 $ 39,230 Investment income (loss): Net gain from interest in common collective trusts 14,421 5,624 362 -- -- Net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts 5,945 850 61 (11,578) 7,192 Net gain (loss) from interest in registered investment companies -- -- -- -- -- Interfund transfers (17,133) 13,482 620 (57,174) 29,089 -------------------------------------------------------------------------------- Total additions 45,535 52,512 7,510 16,013 75,511 Deductions: Distributions to participants -- -- -- -- -- -------------------------------------------------------------------------------- Net additions 45,535 52,512 7,510 16,013 75,511 Net assets available for benefits at beginning of year 98,019 4,596 157 263,569 67,853 -------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 143,554 $ 57,108 $ 7,667 $ 279,582 $ 143,364 ================================================================================ ALLEGHENY DREYFUS TELEDYNE SMALL DREYFUS DISCIPLINED COMPANY INTERNATIONAL COMPANY STOCK VALUE VALUE STOCK FUND FUND FUND FUND TOTAL ---------------------------------------------------------------------------------- Additions: Employee contributions $ 112,162 $ 41,426 $ 6,606 $ 20,658 $ 386,172 Investment income (loss): Net gain from interest in common collective trusts -- -- -- -- 20,407 Net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts 41,780 -- -- (116) 44,134 Net gain (loss) from interest in registered investment companies 22,373 (6,368) 1,009 -- 17,014 Interfund transfers 3,900 (28,088) (4,471) 59,775 -- --------------------------------------------------------------------------------- Total additions 180,215 6,970 3,144 80,317 467,727 Deductions: Distributions to participants -- -- -- -- -- --------------------------------------------------------------------------------- Net additions 180,215 6,970 3,144 80,317 467,727 Net assets available for benefits at beginning of year 223,415 49,231 9,328 35,008 751,176 --------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 403,630 $ 56,201 $ 12,472 $ 115,325 $1,218,903 ================================================================================= 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 DREYFUS LIFESTYLE DREYFUS DREYFUS 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: Net gain from interest in Allegheny Ludlum Corporation Master Trusts 11,610 513 6 53,012 3,154 Net gain from interest in registered investment companies -- -- -- -- -- Interfund transfers 12,661 874 -- (31,297) 8,642 ---------------------------------------------------------------- Total additions 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: Net gain from interest in Allegheny Ludlum Corporation Master Trusts -- -- -- 1,773 70,068 Net gain from interest in registered investment companies 40,440 4,084 209 -- 44,733 Interfund transfers 5,016 1,016 (614) 3,702 -- ------------------------------------------------------------------- Total additions 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 Notes to Financial Statements December 31, 1998 1. SIGNIFICANT ACCOUNTING POLICIES Investments are stated at fair value determined as follows: The Company Stock Fund consists of investments in Allegheny Teledyne Incorporated (Allegheny Teledyne) common stock and is stated at the quoted market price as listed on the New York Stock Exchange. The Fixed Income Fund is stated at cost plus net earnings, which approximates market value and is provided by the Plan's trustee. 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 and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The purpose of the Plan is to encourage thrift and to assist union employees in accumulating 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. The Plan is comprised, solely, of employee contributions. 30 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) The investment options provided by the Plan are as follows: Dreyfus Lifestyle Growth and Income Fund--invests in equity and fixed income securities and may invest up to 15% of its assets in international securities. Dreyfus Lifestyle Growth Fund--invests in equity and fixed income securities and may invest up to 25% of its assets in international securities. Dreyfus 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. Allegheny Teledyne Disciplined Stock Fund--invests in equity securities and may invest up to 20% of its assets in high quality money market accounts. Effective November 1, 1998, the Dreyfus Disciplined Stock Fund changed from a mutual fund to a separate account structure, and will be known as the Allegheny Teledyne Disciplined Stock Fund. Investment objective and strategy remain the same. 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. 31 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 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. Further information about the Plan, including eligibility, vesting, contributions, and withdrawals, is contained in the Summary Plan Description and related contracts. Copies of this Summary Plan Description are available from the Allegheny Teledyne Personnel and Compensation Committee. 3. INVESTMENTS As of December 31, 1998, 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, and the ALC Dreyfus Disciplined Stock Fund Master Trust. During 1998, the Dreyfus Lifestyle Growth and Income Fund, the Dreyfus Lifestyle Growth Fund, and the Dreyfus Lifestyle Income Fund were reclassified as common collective trusts from master trusts, while the Allegheny Teledyne Disciplined Stock Fund was reclassified to a master trust from the Dreyfus Disciplined Stock Fund, a registered investment company. The Plan's participating interests in these master trusts as of December 31, 1998 and 1997 were as follows: 1998 1997 ------------------------------- ALC Fixed Income Master Trust 0.11% 0.05% ALC Alliance Equity Master Trust 0.59% 0.44% ALC ATI Common Stock Master Trust 0.36% 0.10% ALC Lifestyle Growth Fund Master Trust --% .09% ALC Lifestyle Income Fund Master Trust --% --% ALC Lifestyle Growth and Income Fund Master Trust --% 0.43% Allegheny Teledyne Disciplined Stock Fund Master Trust 0.93% --% The composition of the net assets of the ALC Fixed Income Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ---------------------------- Guaranteed investment contracts: Confederation Life Insurance Company $ 2,575 $ 29,118 Continental Assurance Company -- 6,718,924 John Hancock Life Insurance Company 5,100,000 2,600,000 Life Insurance Company of Virginia -- 8,725,219 New York Life Insurance Company 13,258,607 15,169,828 Pacific Mutual Life Insurance Company 6,167,430 5,793,190 Peoples Security Life Insurance Company 10,367,671 11,038,629 Prudential Insurance Company -- 6,144,220 32 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) 1998 1997 -------------------------------------- Southland Life Insurance Company 10,752,479 16,288,645 Transamerica Occidental 11,296,810 10,936,663 Sun America, Inc. 3,000,000 -- Business Mens Assurance Company of America 2,505,536 -- Protective Life Insurance Company 3,002,482 -- Safeco Life Insurance 3,000,000 -- -------------------------------------- 68,453,590 83,444,436 Synthetic contracts: Caisse des Depots et Consignations 12,865,126 3,879,321 Peoples Security Life Insurance Company 2,968,196 2,948,698 Transamerica Occidental 13,859,523 13,865,850 Union Bank of Switzerland 5,935,391 5,937,712 Westdeutsche Landesbank Girozentrale 16,952,480 13,727,581 -------------------------------------- 52,580,716 40,359,162 Temporary short-term investments 4,248,515 10,765,309 Accrued interest receivable 1,443,795 733,753 Other payables (88,501) (6,169) -------------------------------------- Total net assets $126,638,115 $135,296,491 ====================================== In May 1997, the ALC 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 ALC Fixed Income Master Trust. The composition of net assets of the ALC Alliance Equity Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------------------------ Investment in registered investment companies: Alliance Equity Fund S.A. #4 (6,966.434 and 865.194 shares, respectively) $47,408,255 $60,199,619 Cash 117 90 Operating payables (26,007) (10,341) ------------------------------------ Total net assets $47,382,365 $60,189,368 ==================================== 33 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The composition of net assets of the ALC ATI Common Stock Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------------------------- Allegheny Teledyne Incorporated common stock (1,544,975 and 1,347,732 shares, respectively) $31,575,427 $34,872,566 Receivables 196,291 4,527 Short-Term Investment Fund 450,324 738,595 Operating payables (10,492) (822) ------------------------------------- Total net assets $32,211,550 $35,614,866 ===================================== The composition of assets of the ALC Lifestyle Growth Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------ ------------------- Dreyfus Lifestyle Growth Fund $-- $5,117,053 Operating payables -- (5) ------------------ ------------------- $-- $5,117,048 ================== =================== The composition of assets of the ALC Lifestyle Income Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------ ------------------- Dreyfus Lifestyle Income Fund $-- $1,825,632 Operating payables -- (2) ------------------ ------------------- $-- $1,825,630 ================== =================== The composition of assets of the ALC Lifestyle Growth and Income Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------ ------------------- Dreyfus Lifestyle Growth and Income Fund $-- $22,740,752 Receivables -- 56 ------------------ ------------------- $-- $22,740,808 ================== =================== 34 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) The composition of net assets of the Allegheny Teledyne Disciplined Stock Fund Master Trust at December 31, 1998 and 1997 was as follows: 1998 1997 ------------------ ------------------- Corporate common stock $41,699,413 $-- Noninterest-bearing cash (5,217) -- Receivables 58,761 -- Short-Term Investment Fund 1,499,311 -- Operating payables (51,809) -- ------------------ ------------------- Total net assets $43,200,459 $-- ================== =================== 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 ----------------------------------------------------------------------------------------------------- 1998 1997 1998 1997 1998 1997 ------------- ------------- ------------- ------------- ------------- ------------- Investment income (loss): Interest income (loss) $ 8,359,937 $ 8,694,877 $ -- $ -- $ (113) $ (1,554) Realized (loss) gain on sale of investments -- -- -- -- (620,712) 1,835,342 Unrealized (depreciation) appreciation in fair value of investments -- -- -- -- (5,308,345) 2,318,151 Dividends -- -- -- -- 934,022 837,662 Net (loss) gain, registered investment companies -- -- (2,106,215) 13,819,313 -- -- Net gain, common collective trusts 408,717 468,281 -- -- 41,352 73,411 Other income 1,147 1,343 -- -- -- -- Administrative expenses (191,163) (189,938) (237,876) (211,873) (24,196) (27,286) Transfers (17,237,014) (15,337,329) (10,462,912) (6,981,034) 1,574,676 (4,894,605) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) (8,658,376) (6,362,766) (12,807,003) 6,626,406 (3,403,316) 141,121 Total net assets at beginning of year 135,296,491 141,659,257 60,189,368 53,562,962 35,614,866 35,473,745 ------------- ------------- ------------- ------------- ------------- ------------- Total net assets at end of year $ 126,638,115 $ 135,296,491 $ 47,382,365 $ 60,189,368 $ 32,211,550 $ 35,614,866 ============= ============= ============= ============= ============= ============= 35 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 3. INVESTMENTS (CONTINUED) ALLEGHENY TELEDYNE ALC LIFESTYLE GROWTH ALC LIFESTYLE INCOME ALC LIFESTYLE GROWTH AND DISCIPLINED STOCK FUND FUND MASTER TRUST FUND MASTER TRUST INCOME FUND MASTER TRUST MASTER TRUST ---------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 ---------------------------------------------------------------------------------------------------- 1998* 1997 1998* 1997 1998* 1997 1998 1997 ----------- ---------- ----------- ----------- ------------ ----------- ----------- ------ Investment income: Interest income (loss) $ -- $ -- $ -- $ 105 $ -- $ 1 $ (925) $ -- Realized gain on sale of investments -- -- -- -- -- -- 107,964 -- Unrealized appreciation in fair value of investments -- -- -- -- -- -- 4,322,009 -- Dividends -- -- -- -- -- -- 87,868 -- Net gain, common collective trusts 514,556 882,650 109,828 152,034 1,558,031 3,853,009 26,165 -- Other loss (14) -- -- -- (10) -- -- -- Administrative expenses (94) (116) (34) (38) (229) -- (51,809) -- Transfers (5,631,496) 2,285,394 (1,935,424) 1,083,338 (24,298,600) 838,793 38,709,187 -- ----------- ---------- ----------- ----------- ------------ ----------- ----------- ---- Net increase (decrease) (5,117,048) 3,167,928 (1,825,630) 1,235,439 (22,740,808) 4,691,803 43,200,459 -- Total net assets at beginning of year 5,117,048 1,949,120 1,825,630 590,191 22,740,808 18,049,005 -- -- ----------- ---------- ----------- ----------- ------------ ----------- ----------- ---- Total net assets at end of year $ -- $5,117,048 $ -- $ 1,825,630 $ -- $22,740,808 $43,200,459 $ -- =========== ========== =========== =========== ============ =========== =========== ==== * Partial year only. Reclassified as common collective trusts. The average yield for 1998 and 1997 for the ALC Fixed Income Master Trust was 6.55% and 6.57%, respectively. Credited interest rates on the contracts ranged from 5.13% to 8.18% and 5.60% to 8.18% for 1998 and 1997, 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 net gain (loss) from interest in Allegheny Ludlum Corporation Master Trusts on the statement of changes in net assets available for benefits. 36 401(k) Savings Account Plan for Employees of the Washington Plant Notes to Financial Statements (continued) 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, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes that the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt. 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 READINESS DISCLOSURE (UNAUDITED) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle Year 2000 dates. The Plan Sponsor is taking a two-phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Internal resources are being utilized to upgrade or modify existing software applications, and test the software and equipment for the Year 2000 modifications. The Plan Sponsor believes that it has substantially completed this phase of the project. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. For the second phase of the project, plan management established formal communications with its third party service providers to determine that they have developed plans to address their own Year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they expect to be Year 2000 compliant by mid-1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the Year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan because they are confident that all material systems will be Year 2000 ready. 7. SUBSEQUENT EVENT Effective July 1, 1999, the Plan will no longer offer the Dreyfus Small Company Value Fund as an investment option. The Dreyfus Emerging Leaders Fund will be offered to participants as a new investment option as of this date. 37 401(k) Savings Account Plan for Employees of the Washington Plant EIN 25-0575410 Plan 020 Line 27a--Schedule of Assets Held for Investment Purposes December 31, 1998 CURRENT DESCRIPTION UNITS/SHARES COST VALUE ----------------------------------------------------------------------------------------------------- Common Collective Trusts ------------------------ Dreyfus Lifestyle Growth and Income Fund* 9,188.988 shares 129,203 143,554 Dreyfus Lifestyle Growth Fund* 3,216.593 shares 51,364 57,108 Dreyfus Lifestyle Income Fund* 579.241 shares 7,277 7,667 ----------------------- Total Common Collective Trusts 187,844 208,329 Registered Investment Companies ------------------------------- Dreyfus Small Company Value Fund*: Interest in Dreyfus Small Company Value Fund 2,845.644 shares $ 56,846 $ 56,201 Dreyfus International Value Fund*: Interest in Dreyfus International Value Fund 823.753 shares 12,485 12,472 ----------------------- Total Registered Investment Companies 69,331 68,673 ----------------------- $257,175 $277,002 ======================= *Party-in-interest 38 401(k) Savings Account Plan for Employees of the Washington Plant EIN 25-0575410 Plan 020 Line 27d--Schedule of Reportable Transactions Year ended December 31, 1998 CURRENT VALUE OF ASSETS ON NET PURCHASE SELLING COST OF TRANSACTION GAIN DESCRIPTION PRICE PRICE ASSET DATE (LOSS) ------------------------------------------------------------------------------------------------------------------ Type (i) Transactions --------------------- Dreyfus Disciplined Stock Fund $ -- $311,849 $283,329 $311,849 $28,520 Dreyfus Lifestyle Growth and Income Fund 113,074 -- 113,074 113,074 -- Type (iii) Transactions ----------------------- Dreyfus Disciplined Stock Fund 223,069 -- 223,069 223,069 -- Dreyfus Disciplined Stock Fund -- 468,294 430,706 468,294 37,588 Dreyfus Small Company Value Fund 41,012 -- 41,012 41,012 -- Dreyfus Small Company Value Fund -- 27,628 30,840 27,628 (3,212) Dreyfus Lifestyle Growth and Income Fund 133,733 -- 133,733 133,733 -- Dreyfus Lifestyle Growth and Income Fund -- 4,600 4,530 4,600 70 Dreyfus Lifestyle Growth Fund 53,522 -- 53,522 53,522 -- Dreyfus Lifestyle Growth Fund -- 2,037 2,157 2,037 (120) There were no Type (ii) or (iv) transactions during the year ended December 31, 1998. 39 Audited Financial Statements Savings and Security Plan of the Lockport and Waterbury Facilities of Allegheny Ludlum Corporation Years ended December 31, 1998 and 1997 with Report of Independent Auditors 40 Savings and Security Plan of the Lockport and Waterbury Facilities of Allegheny Ludlum Corporation Audited Financial Statements Years ended December 31, 1998 and 1997 CONTENTS Report of Independent Auditors .............................................42 Audited Financial Statements Statement of Net Assets Available for Benefits, with Fund Information as of December 31, 1998 .....................................43 Statement of Net Assets Available for Benefits, with Fund Information as of December 31, 1997 .....................................44 Statement of Changes in Net Assets Available for Benefits, with Fund Information, Year ended December 31, 1998 .....................45 Statement of Changes in Net Assets Available for Benefits, with Fund Information, Year ended December 31, 1997 .....................46 Notes to Financial Statements ..............................................47 Supplemental Schedules Line 27a--Schedule of Assets Held for Investment Purposes ..................58 Line 27d--Schedule of Reportable Transactions...............................59 41 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 Lockport and Waterbury Facilities of Allegheny Ludlum Corporation as of December 31, 1998 and 1997, 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 Savings and Security Plan of the Lockport and Waterbury Facilities of Allegheny Ludlum Corporation at December 31, 1998 and 1997, 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, 1998, 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