UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1995
[ ] 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 1-9498
ALLEGHENY LUDLUM CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1364894
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Six PPG Place, Pittsburgh,PA 15222-5479
--------------------------------- ----------
(Address of principal executive offices) (Zip Code)
412-394-2800
------------
(Registrant's telephone number, including area code)
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
Number of shares of Common Stock outstanding as of May 5, 1995
70,192,783
<PAGE>
ALLEGHENY LUDLUM CORPORATION
SEC FORM 10-Q
FISCAL QUARTER ENDED APRIL 2, 1995
INDEX
Page No.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statement of Cash Flows 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
PART II. - OTHER INFORMATION
Item 6. Exhibits 11
Signatures 12
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands of dollars except per share amounts)
Fiscal Fiscal
Quarter Quarter
Ended Ended
April 2,1995 April 3,1994
------------ ------------
NET SALES $395,332 $313,932
Costs and Expenses:
Cost of products sold 313,742 245,717
Research, development and technology 11,217 10,111
Commercial and administrative 14,033 12,883
Depreciation and amortization 9,866 9,474
------- -------
348,858 278,185
------- -------
INCOME FROM STEEL OPERATIONS 46,474 35,747
Operating earnings from assets
held for sale 3,014 -
Other income (expense):
Interest expense -- net (757) (1,377)
Loss from
limited partnership - (2,590)
Other -- net 293 (217)
------- -------
(464) (4,184)
------- -------
Income before income taxes 49,024 31,563
Income taxes 20,170 13,445
------- -------
NET INCOME $ 28,854 $ 18,118
======= =======
Per common share:
Primary $.41 $.26
======= =======
Fully diluted $.39 $.25
======= =======
Dividends declared per common share $.12 $.12
======= =======
See notes to condensed consolidated financial statements
3
<PAGE>
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands of dollars)
April 2, January 1,
1995 1995
-------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 62,131 $ 11,185
Trade receivables--net 170,598 141,042
Inventories (Note 2) 195,288 232,379
Prepaid expenses and other current
assets 16,409 11,035
--------- ---------
TOTAL CURRENT ASSETS 444,426 395,641
Properties, plants and equipment--net 454,401 464,977
Cost in excess of net assets
acquired 133,004 133,862
Deferred income taxes 49,606 49,027
Assets held for sale 39,227 37,738
Other assets 12,986 13,453
--------- ---------
TOTAL ASSETS $1,133,650 $1,094,698
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,024 $ 1,993
Accounts payable 91,710 96,417
Accrued compensation and benefits 63,156 46,115
Income taxes payable and deferred 18,419 7,123
Other accrued expenses 27,470 18,632
--------- ---------
TOTAL CURRENT LIABILITIES 202,779 170,280
Long-term debt, less current portion 132,028 133,097
Pensions 132,302 135,758
Postretirement benefit liability 268,207 267,136
Other 24,005 26,721
--------- ---------
TOTAL LIABILITIES 759,321 732,992
4
<PAGE>
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands of dollars)
-Continued-
April 2, January 1,
1995 1995
-------- ----------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $1:
authorized--50,000,000 shares;
issued--none
Common stock, par value $ .10:
authorized--250,000,000 shares;
issued--72,878,242 shares 7,288 7,288
Additional capital 271,168 270,571
Retained earnings 156,776 136,027
Equity adjustment related to
minimum liability for pension plans (20,682) (20,682)
Common stock in treasury at cost--
2,629,339 and 2,227,671 shares (40,221) (31,498)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 374,329 361,706
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,133,650 $1,094,698
========= =========
See notes to condensed consolidated financial statements
5
<PAGE>
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands of dollars)
Fiscal Fiscal
Quarter Quarter
Ended Ended
April 2,1995 April 3,1994
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 28,854 $ 18,118
Adjustment to reconcile net income
to cash flow from operating activities:
Depreciation and amortization 9,866 9,474
Earnings from assets held for sale (3,014) -
Limited partnership loss - 2,590
Deferred taxes (1,755) (4,610)
Change in operating assets and liabilities:
Long-term retirement liabilities (2,385) (4,518)
Trade receivables (29,556) (24,112)
Inventories 37,091 31,481
Trade payables (4,707) (20,755)
Net change in other current assets
and current liabilities 32,020 17,751
Other changes (2,743) (4,659)
-------- -------
CASH FROM OPERATING ACTIVITIES 63,671 20,760
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of properties, plants and equipment--net (4,363) (12,262)
Sales of short-term investments - 19,976
Long-term investments 346 -
Assets held for sale 331 -
Increase in notes receivable (251) (316)
-------- --------
CASH (USED BY) FROM INVESTING ACTIVITIES (3,937) 7,398
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on senior secured debt
assumed in the 1993 acquisition - (25,000)
Payments on long-term debt and capital leases (1,038) (1,014)
Dividends paid - (8,504)
Purchases of treasury stock (10,073) (5,096)
Employee stock plans 2,323 1,683
-------- -------
CASH USED BY FINANCING ACTIVITIES (8,788) (37,931)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 50,946 (9,773)
Balance of cash and cash equivalents at
beginning of period 11,185 48,107
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 62,131 $ 38,334
======= =======
See notes to condensed consolidated financial statements
6
<PAGE>
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--FINANCIAL STATEMENTS
This financial information should be read in conjunction with the
financial statements and notes thereto for the fiscal year ended
January 1, 1995. The accompanying unaudited condensed
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting only of normal accruals) considered necessary for a
fair presentation have been included. Operating results for the
fiscal quarter ended April 2, 1995 are not necessarily indicative
of results of operations that may be expected for the fiscal year
ending December 31, 1995.
Net income per common share was computed based on the weighted
average number of shares of common stock outstanding during the
periods: 70,567,973 shares for the fiscal quarter ended April 2,
1995 and 70,938,937 shares for the fiscal quarter ended April 3,
1994.
The Company's fiscal year and fiscal quarters end on the Sunday
closest to the last day of the calendar month.
NOTE 2--INVENTORIES
Inventories consisted of the following:
April 2, January 1,
1995 1995
-------- ---------
(in thousands of dollars)
Raw materials $ 41,865 $ 52,332
Work-in-process and finished products 209,735 213,282
Supplies 15,807 16,048
------- -------
Total inventories at current cost 267,407 281,662
Less allowances to reduce current
cost values to LIFO basis 72,119 49,283
------- -------
$195,288 $232,379
======= =======
Substantially all of the Company's inventories are determined by
the LIFO method.
7
<PAGE>
NOTE 3--LITIGATION
The Company is a defendant in a case filed in 1989 by Allegheny
International, Inc. in the United States District Court for the
Western District of Pennsylvania which is being pursued by
Sunbeam-Oster, Inc. The case involves claims for reimbursement
of various alleged insurance coverage costs and recovery of a
refund received by Allegheny Ludlum with respect to a federal
income tax overpayment, in the aggregate amount of approximately
$8 million. The Company believes that Sunbeam-Oster's claims are
without merit and is defending the case vigorously.
8
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the information in
the Condensed Consolidated Financial Statements and Notes to the Condensed
Consolidated Financial Statements.
RESULTS OF OPERATIONS
Net sales by product line were as follows:
Fiscal Quarter Ended
------------------------------
April 2, 1995 April 3, 1994
------------- -------------
(millions)
Stainless steel $321.9 $246.0
Silicon electrical steel 35.7 42.9
Other specialty alloy 37.7 25.0
----- -----
Total net sales $395.3 $313.9
===== =====
Sales and shipments reached record highs in the 1995 first quarter.
Net sales increased 26% in the first quarter of 1995 compared to the first
quarter of 1994. Shipments increased to 165,383 tons in the 1995 period
compared to 145,061 tons in the 1994 period. Market demand for stainless
steel and other specialty alloy products continues to be strong. The
favorable effect of this high market demand is expected to continue for at
least several months.
Stainless steel sales increased 31% in the first quarter of 1995
compared to the first quarter of 1994. The increase was due to higher
shipments combined with price increases and selling price surcharges that
were necessitated by sharply higher raw material costs.
Silicon electrical steel sales decreased 17% in the 1995 first quarter
compared to the 1994 quarter. The decrease was due to lower shipments of
domestic and finished export products resulting from lower demand for the
Company's products. The decrease was partially offset by increased
shipments of semi-finished export products and higher prices for most
silicon electrical steel products.
Other specialty alloy sales increased 51% over the 1994 period due to
higher shipments of high temperature and corrosion resistant alloys and
tool steels, higher prices, selling price surcharges necessitated by
sharply increased raw material costs and a shift to higher value products.
Cost of products sold as a percentage of net sales increased 1.1
percentage points in the first quarter of 1995 compared to the first
quarter of 1994. The increase was primarily due to sharply increased raw
material costs and the production of certain products on less efficient
alternate equipment to meet strong market demand. Based on the current mix
of products and specifications in its product line, the Company has been
operating most of its stainless steel facilities at virtual capacity.
Market prices for chromium continue to increase while market prices for
molybdenum and nickel have decreased from the high levels reached in the
first quarter of 1995. Price surcharges for molybdenum and chromium are
expected to continue in the second quarter of 1995.
9
<PAGE>
Research, development and technology costs increased in the 1995 first
quarter compared to the first quarter of 1994 primarily due to increased
expense for incentive compensation plans related to Company financial
results or common stock value and higher technical support of
manufacturing processes due to increased production levels.
Commercial and administrative costs increased in the 1995 quarter over
the 1994 quarter primarily due to increased expense for compensation plans
related to Company financial results or common stock value, which were
partially offset by lower expense for the Washington Plant due to realized
synergies following the acquisition of the plant in 1993.
Earnings from assets held for sale are primarily attributable to two
companies acquired in 1993. Two investment banking firms have been
engaged to handle the sale of these companies.
Other income-net in 1995 benefited from the sale of surplus
equipment and business interruption insurance claim recovery which were
partially offset by the write-off of non-productive equipment.
The decrease in the effective income tax rate to 41.1% in 1995 from
42.6% in 1994 resulted primarily from lower state tax rates.
FINANCIAL CONDITION AND LIQUIDITY
Working capital increased to $241.6 million at the end of the first
quarter of 1995 compared to $225.4 million at the end of 1994. The
current ratios were 2.2 and 2.3 in the same periods. The increase in
working capital was primarily due to higher balances of cash and trade
receivables due to higher sales which were partially offset by lower
inventories and increased liabilities for compensation and benefits and
income taxes.
In the first three months of 1995, cash on hand and cash from
operations of $63.7 million were used to invest $4.4 million in capital
equipment, pay down $1.0 million of debt and purchase $10.1 million in
treasury stock. These transactions resulted in a cash position of $62.1
million at the end of the first quarter of 1995.
A total of $100 million continues to be available under the Company's
revolving credit agreement dated December 28, 1990, as amended. The
supplemental $50 million revolving credit agreement the Company entered in
May 1994, in connection with the 1994 labor strike, expired April 30, 1995.
The Company continues to estimate that capital expenditures will be
approximately $30 million for the year 1995.
The Company anticipates that internally generated funds, current cash
on hand and borrowing from existing credit lines will be adequate to meet
foreseeable needs.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits
(a) Exhibits
(11) Computation of Per Share Earnings
(27) Financial Data Schedule
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALLEGHENY LUDLUM CORPORATION
By /s/ J.L. Murdy
----------------------------
J. L. Murdy
Senior Vice President - Finance
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
May 15, 1995
12
<PAGE>
Exhibit 11
Allegheny Ludlum Corporation
Computation of Per Share Earnings
(Dollars and Shares in Thousands
Except Per Share Amounts)
Fiscal Quarter Ended
--------------------
PRIMARY April 2, 1995 April 3, 1994
------------- --------------
Net Income $28,854 $18,118
------ ------
Weighted average number of
common shares 70,568 70,939
Per share of common stock:
Net Income $.41 $.26
FULLY DILUTED
-------------
Net Income $28,854 $18,118
Tax effected interest related
to 5 - 7/8% convertible
subordinated debentures 852 843
------ ------
Adjusted Net Income $29,706 $18,961
------ ------
Weighted average number of common
shares 70,568 70,939
Weighted average number of
convertible subordinated debenture
common shares on an "if converted"
basis 4,938 4,938
Weighted average number of common
shares related to employee stock
plans (1) 465 597
------ ------
75,971 76,474
Net income per share of
common stock $.39 $.25
====== ======
(1) Not used in primary calculation due to dilution being
less than 3%.
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's consolidated statement of income for the fiscal three months
ended April 2, 1995 and consolidated balance sheet as of April 2, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-02-1995
<PERIOD-END> APR-02-1995
<CASH> 62,131
<SECURITIES> 0
<RECEIVABLES> 174,329
<ALLOWANCES> 3,731
<INVENTORY> 195,288
<CURRENT-ASSETS> 444,426
<PP&E> 661,698
<DEPRECIATION> 207,297
<TOTAL-ASSETS> 1,133,650
<CURRENT-LIABILITIES> 202,779
<BONDS> 132,028
<COMMON> 7,288
0
0
<OTHER-SE> 367,041
<TOTAL-LIABILITY-AND-EQUITY> 1,133,650
<SALES> 395,332
<TOTAL-REVENUES> 395,332
<CGS> 313,742
<TOTAL-COSTS> 313,742
<OTHER-EXPENSES> 31,809
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 757
<INCOME-PRETAX> 49,024
<INCOME-TAX> 20,170
<INCOME-CONTINUING> 28,854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,854
<EPS-PRIMARY> .41
<EPS-DILUTED> .39
</TABLE>
