EXHIBIT 99.1
(Logo Omitted)
NEWS RELEASE
Contact: Dan L. Greenfield
412-394-3004
ALLEGHENY TECHNOLOGIES ANNOUNCES FIRST QUARTER RESULTS
Pittsburgh, PA - April 22, 2003 - Allegheny Technologies Incorporated (NYSE:
ATI) reported a net loss before the cumulative effect of change in accounting
principle of $25.8 million, or $0.32 per share, on sales of $480.5 million for
the first quarter ended March 31, 2003. During the same period in 2002, the
Company reported a net loss of $11.1 million, or $0.14 per share, on sales of
$493.1 million.
THREE MONTHS ENDED
MARCH 31
IN MILLIONS
-------------------------
2003 2002
------- -------
Sales $ 480.5 $ 493.1
Net loss before the cumulative effect
of change in accounting principle (25.8) (11.1)
Cumulative effect of change
in accounting principle (1.3) --
------- -------
Net loss $ (27.1) $ (11.1)
PER DILUTED SHARE
-----------------
Net loss before the cumulative effect
of change in accounting principle $ (0.32) $ (0.14)
Cumulative effect of change
in accounting principle (0.02) --
------- -------
Net loss $ (0.34) $ (0.14)
On January 1, 2003, the Company adopted Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143").
The adoption of SFAS 143
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resulted in an after-tax charge of $1.3 million, or $0.02 per share. This charge
is reported as a cumulative effect of change in accounting principle.
COMMENTS
"Business conditions in most of our end-markets remained very weak and uncertain
in the first quarter," said Jim Murdy, Allegheny Technologies' president and
chief executive officer. "These market conditions combined with higher pension,
healthcare, and energy costs resulted in the net loss in the first quarter.
"Retirement benefit expense was the biggest negative in the first quarter. This
resulted from the severe decline in the equity markets over the past three years
combined with the impact of lower expected returns on benefit plan investments
and a lower discount rate assumption on liabilities. Pre-tax retirement benefit
expense was $34.8 million in the first quarter 2003, compared to $5.7 million
in the comparable year ago period. Essentially all of this $29.1 million
increase is non-cash. On a per share basis, retirement benefit expense
represented $0.28 per share of our $0.32 per share first quarter net loss
before the cumulative effect of change in accounting principle.
"We are continuing to successfully focus on those factors which are within our
control by reducing costs, conserving cash, and enhancing our competitive
position. Gross cost reductions, before the effects of inflation, totaled $28
million in the first quarter 2003. In recognition of the continuing economic
uncertainty, we have increased our 2003 cost reduction goal to $115 million from
our initial goal of $90 million. At the end of the first quarter 2003, managed
working capital as a percent of sales improved to 30% percent compared to 33% at
the end of 2002. Cash flow from operating activities was $45 million in the
first quarter primarily due to receipt of our 2002 federal income tax refund. As
a result, cash on hand increased by $52 million to a total of $111 million at
the end of the first quarter.
"While overall demand remained weak and pricing poor in our Flat-Rolled Products
segment, our commercial successes in 2002 improved our position in several key
markets. Shipments of cold-rolled sheet, net of emission control alloys,
improved by 10%, silicon electrical steel shipments improved by 8%, and
shipments of Precision Rolled Strip(R) products improved by 10%, compared to the
same period last year. However, shipments of continuous-mill-plate (CMP)
products
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were reduced significantly, primarily due to the fourth quarter 2002 indefinite
idling of our wide CMP finishing facility and continuing weak demand for these
products.
"Commercial aerospace, our largest High Performance Metals market, remains very
difficult. Nevertheless, we continued to be profitable in this business. We
enhanced our position for premium high performance nickel and titanium alloys
and benefited from improved demand for military applications. We also saw
continued growth from the biomedical market. Orders in the first quarter at our
Allvac operation exceeded shipments resulting in an increase to backlog for the
first time since the second quarter of 2001. Our exotic alloys business also had
a strong first quarter and is benefiting from sustained high demand from
government and high-energy physics markets.
"These commercial successes are due to our excellent reputation for quality,
service, delivery reliability and technical leadership. We plan to continue to
enhance our leading market positions, reduce costs and conserve cash, so that we
remain well-positioned across our broad range of products to take advantage of
expanded opportunities when the economy recovers."
SEGMENT RESULTS
Comparative data by business segments for the first quarter ended March 31,
2003, is contained in the accompanying statements.
FLAT-ROLLED PRODUCTS
FIRST QUARTER 2003 COMPARED TO FIRST QUARTER 2002
Sales declined 1% to $258.8 million primarily due to continued weakness in
capital goods markets. Low pricing, higher energy costs and operating
inefficiencies more than offset lower depreciation expense resulting in an
operating loss of $1.0 million for the quarter, compared to an operating loss of
$0.4 million in the comparable 2002 period. Energy costs increased by $5.2
million compared to 2002, net of approximately $5 million in gains from natural
gas derivatives, as a result of higher natural gas and electricity prices.
Results for 2003 benefited from $15 million in gross cost reductions, before the
effects of inflation and higher energy costs, and the cancellation of $4.0
million in previously accrued management incentive compensation. In addition,
results for the 2003 first quarter were favorably impacted by approximately $4
million in lower depreciation expense
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compared to the same quarter of the prior year as a result of assets becoming
fully depreciated at the end of 2002. Total shipments decreased 2%, while
average prices increased 1%, primarily due to higher raw material surcharges.
HIGH PERFORMANCE METALS
FIRST QUARTER 2003 COMPARED TO FIRST QUARTER 2002
Sales declined 7% to $161.0 million due primarily to reduced demand from the
commercial aerospace and power generation markets, which was partially offset by
strong demand for premium exotic alloys from government and high energy physics
markets. Operating profit improved to $8.3 million compared to $4.3 million in
the year-ago period. Results for 2003 benefited from $10 million of gross cost
reductions, before the effects of inflation. Operating results for the 2002
period were adversely affected by a labor strike at our Wah Chang operation,
which was settled in March 2002. Shipments of nickel-based and specialty steel
products decreased 19% and shipments of titanium-based products decreased 7%.
Average prices of nickel-based and specialty steel products increased 4%, while
average prices of titanium-based products increased 6%, both due primarily to
product mix. Shipments of exotic alloys increased 7% and average prices were 8%
higher.
INDUSTRIAL PRODUCTS
Sales improved 4% to $60.7 million resulting in an operating profit of $1.5
million for the 2003 first quarter compared to an operating loss of $0.7 million
for the same period of 2002. Gross cost reductions, before the effects of
inflation, totaled $2 million in the first quarter 2003. At our Metalworking
Products operation, increased sales, particularly from the oil and gas market,
and continued cost reductions resulted in improved operating profit.
RETIREMENT BENEFITS - PENSION, MEDICAL AND LIFE INSURANCE
The severe decline in the equity markets over the past three years, and lower
expected returns on benefit plan investments and a lower discount rate
assumption for determining liabilities, resulted in a pre-tax retirement benefit
expense of $34.8 million in the first quarter of 2003 compared to $5.7 million
in the first quarter of 2002. This increase in retirement benefits expense
resulted in a $29.1 million pre-tax, or $0.24 per share after-tax, reduction in
first quarter 2003 earnings compared to the same period of 2002. The increase in
retirement benefit expense in 2003
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negatively affected both cost of sales and selling and administrative expenses
in the first quarter of 2003 compared to the same period last year. For the
three months ended March 31, 2003, retirement benefit expense impacted cost of
sales by $24.4 million and selling and administrative expenses by $10.4 million.
For the three months ended March 31, 2002, retirement benefit expense impacted
cost of sales by $1.3 million and selling and administrative expenses by $4.4
million. The majority of these retirement benefit expenses relate to our
Allegheny Ludlum operation. Approximately $28 million of the first quarter 2003
retirement benefit expense is non-cash.
The Company is not required to make cash contributions to the defined benefit
pension plan for 2003 and, based upon current actuarial studies, does not expect
to be required to make cash contributions to the defined benefit pension plan
during the next several years.
OTHER EARNINGS COMMENTS
Corporate expenses for the first quarter 2003 decreased 16% to $4.8 million
compared to the year-ago period primarily due to cost reductions.
First quarter 2003 interest expense, net of interest income, decreased to $7.4
million from $9.9 million in the year-ago period. At the end of the 2002 first
quarter, we entered into "receive fixed, pay floating" interest rate swap
contracts for $150 million related to the 8.375% 10-year Notes issued in
December 2001. The impact of these swap contracts was to decrease interest
expense by $1.7 million for the 2003 first quarter compared to the same period
last year. During the first quarter of 2003, we terminated certain of the
interest rate swap contracts and realized cash proceeds of $14.6 million, and
entered into new "receive fixed, pay floating" interest rate swap contracts for
an equivalent notional value. Since these interest rate swap contracts were
designated as a hedge of our interest expense on the 10-year Notes, the $14.6
million gain realized on termination of the contracts is recognized ratably into
income over the remaining nine-year life of the Notes as a reduction to interest
expense.
FINANCIAL HIGHLIGHTS
At March 31, 2003, cash on hand was $111.4 million, an increase of $52.0 million
from 2002 year-end. Cash flow from operating activities was $45.2 million,
including the receipt of our 2002 federal income tax refund of $48.3 million,
which more than offset a $12.7 million increase in
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managed working capital. The increase in managed working capital was primarily
due to a $21 million increase in accounts receivable because of higher sales in
the first quarter 2003 compared to the fourth quarter of 2002. In the 2002 first
quarter, cash flow from operations was $81.9 million, including the receipt of a
federal income tax refund of $43.2 million and a reduction in managed working
capital of $40.9 million. Cash used in investing activities declined to $5.9
million in the first quarter 2003 compared to $12.7 million in the first quarter
of 2002, primarily due to proceeds on sales of non-strategic real estate assets.
Cash provided by financing activities was $12.7 million in the first quarter of
2003 and included proceeds of $14.6 million on the termination of the interest
rate swap arrangements discussed above, less $4.8 million of dividend payments.
Cash used in financing activities in the comparable 2002 period was $72.4
million and included $56.3 million in debt reduction and $16.1 million of
dividend payments. There were no borrowings outstanding at the end of the 2003
first quarter under the Company's $250 million unsecured domestic bank credit
facility.
As part of managing the liquidity of the Company, we focus on controlling
managed working capital, which is defined as gross accounts receivable and gross
inventories less accounts payable. We exclude the effects of the LIFO inventory
valuation reserves, excess and obsolete inventory reserves, and reserves for
uncollectible accounts receivable, which, due to their nature, are managed
separately. At March 31, 2003, managed working capital was 30% of annualized
sales compared to 33% of annualized sales at 2002 year-end.
NEW ACCOUNTING PRONOUNCEMENT
On January 1, 2003, we adopted Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). Under SFAS 143,
obligations associated with the retirement of tangible long-lived assets are
capitalized and amortized to expense over an asset's useful life. The adoption
of SFAS 143 resulted in an after-tax charge of $1.3 million, or $0.02 per share.
This charge is reported as a cumulative effect of change in accounting
principle.
* * * * * * * * * * * *
Allegheny Technologies will conduct a conference call with investors and
analysts on April 22 2003, at 1 p.m. ET to discuss the earnings results. The
conference call will be broadcast live on www.alleghenytechnologies.com. To
access the broadcast, click on "First Quarter Conference Call". In addition, the
conference call will be available through the CCBN website, located at
www.ccbn.com.
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This news release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Certain statements in this
news release relate to future events and expectations and, as such, constitute
forward-looking statements. Forward-looking statements include those containing
such words as "anticipates," "believes," "estimates," "expects," "would,"
"should," "will," "will likely result," "forecast," "outlook," "projects," and
similar expressions. Such forward-looking statements are based on management's
current expectations and include known and unknown risks, uncertainties and
other factors, many of which we are unable to predict or control, that may cause
our actual results or performance to materially differ from any future results
or performance expressed or implied by such statements. Various of these factors
are described from time to time in our filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year ended December
31, 2002, and our Quarterly Reports on Form 10-Q. We assume no duty to update
our forward-looking statements.
Allegheny Technologies Incorporated (NYSE: ATI) is one of the largest and most
diversified specialty materials producers in the world, with revenues of
approximately $1.9 billion in 2002. The Company has approximately 9,650
employees world-wide and its talented people use innovative technologies to
offer growing global markets a wide range of specialty materials. High-value
products include nickel-based and cobalt-based alloys and superalloys, titanium
and titanium alloys, specialty steels, super stainless steel, exotic alloys,
which include zirconium, hafnium and niobium, tungsten materials, and highly
engineered strip and Precision Rolled Strip(R) products. In addition, we produce
commodity specialty materials such as stainless steel sheet and plate, silicon
and tool steels, and forgings and castings. The Allegheny Technologies website
can be found at www.alleghenytechnologies.com.
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ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Dollars in millions, except per share amounts)
THREE MONTHS ENDED
MARCH 31
-----------------------
2003 2002
------- -------
SALES $ 480.5 $ 493.1
Costs and expenses:
Cost of sales 465.9 452.7
Selling and administrative
expenses 47.7 50.5
------- -------
Loss before interest expense, other
income and income taxes (33.1) (10.1)
Interest expense, net 7.4 9.9
Other income, net 0.5 2.0
------- -------
Loss before income tax benefit and
cumulative effect of change in
accounting principle (40.0) (18.0)
Income tax benefit (14.2) (6.9)
------- -------
Net loss before cumulative effect of
change in accounting principle (25.8) (11.1)
Cumulative effect of change in
accounting principle, net of tax (1.3) --
------- -------
NET LOSS $ (27.1) $ (11.1)
======= =======
Basic and diluted net loss per common
share before cumulative effect of
change in accounting principle $ (0.32) $ (0.14)
Cumulative effect of change in
accounting principle (0.02) --
------- -------
Basic and diluted net loss per common
share $ (0.34) $ (0.14)
======= =======
Weighted average common shares
outstanding -- basic and diluted
(millions) 80.7 80.4
Actual common shares outstanding--
end of period (millions) 81.0 80.6
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ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SALES AND OPERATING PROFIT (LOSS) BY BUSINESS SEGMENT
(Unaudited - Dollars in millions)
Q1 2003 Q4 2002 Q3 2002 Q2 2002 Q1 2002
-------- -------- -------- -------- --------
Sales:
Flat-Rolled Products $ 258.8 $ 243.0 $ 266.4 $ 276.7 $ 262.1
High Performance Metals 161.0 156.1 146.1 154.9 172.9
Industrial Products 60.7 55.1 56.8 59.6 58.1
-------- -------- -------- -------- --------
TOTAL EXTERNAL SALES $ 480.5 $ 454.2 $ 469.3 $ 491.2 $ 493.1
======== ======== ======== ======== ========
Operating Profit (Loss):
Flat-Rolled Products $ (1.0) $ (12.1) $ 3.9 $ 0.7 $ (0.4)
% of Sales (0.4%) (5.0%) 1.5% 0.3% (0.2%)
High Performance Metals 8.3 9.0 9.3 8.6 4.3
% of Sales 5.2% 5.8% 6.4% 5.6% 2.5%
Industrial Products 1.5 0.9 1.6 2.2 (0.7)
% of Sales 2.5% 1.6% 2.8% 3.7% (1.2%)
-------- -------- -------- -------- --------
OPERATING PROFIT (LOSS) 8.8 (2.2) 14.8 11.5 3.2
% of Sales 1.8% (0.5%) 3.2% 2.3% 0.6%
Corporate expenses (4.8) (4.8) (5.6) (4.5) (5.7)
Interest expense, net (7.4) (8.2) (8.3) (7.9) (9.9)
-------- -------- -------- -------- --------
Subtotal (3.4) (15.2) 0.9 (0.9) (12.4)
Restructuring costs and other
costs, net of gains on asset
sales (1.8) (41.3) (9.1) (4.1) 0.1
Retirement benefit expense
(34.8)(a) (5.2) (5.4) (5.5) (5.7)
-------- -------- -------- -------- --------
LOSS BEFORE INCOME TAX BENEFIT $ (40.0) $ (61.7) $ (13.6) $ (10.5) $ (18.0)
======== ======== ======== ======== ========
(a) $28.2 million of the 2003 first quarter retirement benefit expense
was non-cash.
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ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Current period unaudited--Dollars in millions)
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 111.4 $ 59.4
Accounts receivable, net of allowances for
doubtful accounts of $10.3 and $10.1
at March 31, 2003, and December 31, 2002,
respectively 260.4 239.3
Inventories, net 412.0 409.0
Income tax refunds receivable 3.6 51.9
Deferred income taxes 17.0 20.8
Prepaid expenses and
other current assets 28.7 32.0
--------- ---------
TOTAL CURRENT ASSETS 833.1 812.4
Property, plant and equipment, net 749.2 757.6
Deferred pension asset 165.1 165.1
Cost in excess of net assets acquired 195.8 194.4
Deferred income taxes 103.2 85.4
Other assets 60.2 78.3
--------- ---------
TOTAL ASSETS $ 2,106.6 $ 2,093.2
========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 178.1 $ 171.3
Accrued liabilities 164.7 161.0
Short term debt and current
portion of long-term debt 10.0 9.7
--------- ---------
TOTAL CURRENT LIABILITIES 352.8 342.0
Long-term debt 510.9 509.4
Accrued postretirement benefits 501.2 496.4
Pension liabilities 238.3 216.0
Other long-term liabilities 81.2 80.6
--------- ---------
TOTAL LIABILITIES 1,684.4 1,644.4
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 422.2 448.8
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,106.6 $ 2,093.2
========= =========
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ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--Dollars in millions)
THREE MONTHS ENDED
MARCH 31
----------------------
2003 2002
------ -------
OPERATING ACTIVITIES:
Net loss $(27.1) $ (11.1)
Cumulative effect of change in accounting principle 1.3 --
Depreciation and amortization 18.0 22.8
Change in managed working capital (12.7) 40.9
Income tax refunds receivable 48.3 43.2
Change in pension assets/liabilities 22.4 (3.1)
Other (5.0) (10.8)
------ -------
CASH PROVIDED BY OPERATING ACTIVITIES 45.2 81.9
------ -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (11.8) (15.4)
Asset disposals and other 5.9 2.7
------ -------
CASH USED IN INVESTING ACTIVITIES (5.9) (12.7)
------ -------
FINANCING ACTIVITIES:
Net increase (decrease) in debt 2.9 (56.3)
Interest rate swap termination 14.6 --
Dividends paid (4.8) (16.1)
------ -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 12.7 (72.4)
------ -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 52.0 (3.2)
Cash and cash equivalents at beginning of period 59.4 33.7
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $111.4 $ 30.5
====== =======
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ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
Q1 2003 Q4 2002 Q3 2002 Q2 2002 Q1 2002
-------- -------- -------- -------- --------
VOLUME:
Flat-Rolled Products (finished tons) 118,964 114,803 122,249 128,490 121,793
-------- -------- -------- -------- --------
Commodity 83,492 82,503 87,884 92,483 87,431
High value 35,472 32,300 34,365 36,007 34,362
High Performance Metals - nickel-
based and specialty steel
alloys (000's lbs.) 8,692 8,719 7,901 8,447 10,765
High Performance Metals - titanium
mill products (000's lbs.) 4,615 4,633 4,186 5,276 4,949
High Performance Metals - exotic
alloys (000's lbs.) 932 861 967 1,015 869
AVERAGE PRICES:
Flat-Rolled Products (per finished
ton) $ 2,159 $ 2,102 $ 2,163 $ 2,141 $ 2,129
Commodity $ 1,564 $ 1,490 $ 1,594 $ 1,541 $ 1,487
High value $ 3,557 $ 3,663 $ 3,617 $ 3,668 $ 3,761
High Performance Metals - nickel-
based and specialty steel
alloys (per lb.) $ 6.73 $ 6.09 $ 6.72 $ 6.32 $ 6.46
High Performance Metals - titanium
mill products (per lb.) $ 12.85 $ 12.36 $ 12.25 $ 10.76 $ 12.11
High Performance Metals - exotic
alloys (per lb.) $ 37.75 $ 43.33 $ 35.16 $ 32.45 $ 35.03
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ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
OTHER FINANCIAL INFORMATION
MANAGED WORKING CAPITAL
(Unaudited - Dollars in Millions)
MARCH 31, 2003 DECEMBER 31, 2002
-------------- -----------------
Accounts receivable $ 260.4 $ 239.3
Inventory 412.0 409.0
Accounts payable (178.1) (171.3)
-------- --------
Subtotal 494.3 477.0
Allowance for doubtful accounts 10.3 10.1
LIFO reserve 77.7 74.7
Corporate and other 10.5 18.3
-------- --------
Managed working capital $ 592.8 $ 580.1
======== ========
Annualized prior 2 months sales
$1,992.0 $1,741.0
======== ========
Managed working capital as a % of
annualized sales 30% 33%
# # #
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