Exhibit 99.1
(ALLEGHENY TECHNOLOGIES LOGO)
SPECIALTY MATERIALS THAT MAKE OUR WORLD
1000 Six PPG Place, Pittsburgh, PA 15222-5479 NEWS RELEASE...
Contact: Dan L. Greenfield
412- 394-3004
ALLEGHENY TECHNOLOGIES ANNOUNCES SECOND QUARTER RESULTS
- SALES INCREASED 32% COMPARED TO THE SECOND QUARTER 2003
- OPERATING PROFIT INCREASED TO $38.1 MILLION AS A RESULT OF IMPROVED
PERFORMANCE ACROSS ALL BUSINESS SEGMENTS, ESPECIALLY FLAT-ROLLED
PRODUCTS
- SECOND QUARTER NET INCOME OF $26.6 MILLION, OR $0.31 PER SHARE,
INCLUDES PREVIOUSLY ANNOUNCED NET SPECIAL GAIN OF $40.4 MILLION, OR
$0.48 PER SHARE
- GROSS COST REDUCTIONS TOTALED $63 MILLION IN THE FIRST HALF 2004,
RUNNING WELL AHEAD OF $104 MILLION PLAN
- OPEB LIABILITY REDUCED BY $331 MILLION, OR 36%
Pittsburgh, PA - July 20, 2004 - Allegheny Technologies Incorporated (NYSE: ATI)
reported net income of $26.6 million, or $0.31 per share, on sales of $646.5
million for the second quarter ended June 30, 2004. As previously announced,
results for the quarter included a net special gain of $40.4 million, or $0.48
per share, related to actions taken to control certain salaried retiree medical
costs, net of costs associated with Allegheny Ludlum's new labor agreement and
the acquisition of the J&L Specialty Steel (J&L) assets. In addition, results
included a LIFO (last-in, first-out) inventory valuation reserve charge of $26.1
million, primarily due to continued increases in raw material costs. Retirement
benefit expense, primarily non-cash, was $34.0 million, or $(0.40) per share, in
the quarter. Second quarter 2004 results do not include an income tax provision
or benefit as a result of a deferred tax valuation allowance recorded in the
fourth quarter 2003.
In the second quarter 2003, ATI reported a net loss of $26.0 million, or
$(0.32) per share on sales of $489.9 million. Results included retirement
benefit expense of $33.4 million, or $(0.26) per share.
Results for the six months ended June 30, 2004, were a net loss of $23.8
million, or $(0.30) per share, on sales of $1,224.3 million, compared to a net
loss of $53.1 million, or $(0.66) per share, on sales of $970.4 million for the
first six months of 2003. Six months 2004 results include a LIFO inventory
valuation reserve charge of $74.2 million and retirement benefit expense,
primarily non-cash, of $70.0 million, or $(0.87) per share. Six months 2003
results included an income tax benefit of $29.0 million, or $0.36 per share, a
$1.3 million, or $(0.02) per share, charge for the cumulative effect of change
in accounting principle, and retirement benefit expense of $68.2 million, or
$(0.54) per share.
Page 1
"During the second quarter 2004, we made substantial progress toward
transforming our stainless steel business and delivering on-going positive
earnings per share," said Pat Hassey, ATI's Chairman, President and Chief
Executive Officer. "A new progressive labor agreement covering represented
employees at ATI Allegheny Ludlum was reached with the United Steelworkers of
America (USWA). We completed the J&L asset acquisition and are making good
progress integrating our new facilities.
"In addition, we reduced our Other Post Retirement Benefit (OPEB)
liability by approximately $331 million, reflecting actions taken in the second
quarter to control our retiree medical costs and the favorable impact of the new
Federal Medicare prescription drug program.
"Demand for our products continues to be strong. Compared to the second
quarter 2003, sales increased significantly in all three of our business
segments. Operating profit also increased across all of our segments.
"The performance of our Flat-Rolled Products segment during the second
quarter was especially impressive. Sales increased by 47% compared to the same
period last year. Operating profit reached $20 million as a result of strong
demand, price restoration and the impact of our cost reduction efforts prior to
the J&L asset acquisition.
"In our High Performance Metals segment, shipments of our premium titanium
alloys increased by 23% compared to last year's second quarter. Demand for
commercial aerospace spare parts improved considerably as revenue passenger
miles began to recover. Our exotic alloys business continued to perform well.
Demand remained strong from the government, high-energy physics and medical
markets and corrosion markets, particularly in Asia.
"Sales in our Engineered Products segment increased as a result of
improved demand from several key markets, as well as a pickup in overall
manufacturing demand.
"The effects of the ATI Business System and our ongoing cost reductions
were apparent in the second quarter. Operating profit as a percentage of sales
improved to nearly 6%, which is the highest level since the 2000 third quarter.
This was achieved even with the negative impact of significant LIFO inventory
valuation reserve charges. Managed working capital as a percent of annualized
sales improved to approximately 27% at the end of the quarter compared to nearly
31% at the end of 2003, excluding the effect of the J&L asset acquisition. We
also achieved $63 million of cost reductions, before the effects of inflation,
in the first half of 2004. We are running well ahead of our initial $104 million
cost reduction goal for 2004. This does not include the previously announced
$200 million of cost structure improvements and synergies from the J&L asset
acquisition and new labor agreement.
"Cash generation over the first six months has been strong. Cash on hand
was $64 million, only $16 million less than at year-end 2003, even though
managed working capital increased by $111 million in the first six months of
2004. In addition, cash outlays for net capital investments, acquisitions and
debt repayments totaled over $40 million in the first half of 2004. We continued
to have no cash borrowings under our secured credit facility.
"As the third quarter 2004 begins, we expect sales to continue to grow. We
also expect cost reductions and cost structure improvements to further improve
operating margins. Retirement benefit expense will be further reduced by $9
million in the third quarter 2004. We expect to see continued improvement in our
operating results and are targeting to achieve positive earnings per share in
the second half 2004 without the benefit of special items."
Page 2
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------------- -----------------------------
IN MILLIONS
--------------------------------------------------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Sales $ 646.5 $ 489.9 $ 1,224.3 $ 970.4
Net income (loss) $ 26.6 $ (26.0) $ (23.8) $ (53.1)
Special gain, net $ 40.4 -- $ 40.4 --
Cumulative effect of change in
accounting principle -- -- -- $ (1.3)
Net loss excluding special gain and
before cumulative effect of change in
accounting principle
$ (13.8) $ (26.0) $ (64.2) $ (51.8)
PER DILUTED SHARE
--------------------------------------------------------------------
Net income (loss) $ 0.31 $ (0.32) $ (0.30) $ (0.66)
Special gain, net $ 0.48 -- $ 0.48 --
Cumulative effect of change in
accounting principle -- -- -- $ (0.02)
Net loss excluding special gain and
before cumulative effect of change in
accounting principle $ (0.17) $ (0.32) $ (0.78) $ (0.64)
SECOND QUARTER 2004 FINANCIAL HIGHLIGHTS
- SALES were $646.5 million, up 32% compared to the second quarter
2003. Sales were up 47% in the Flat-Rolled Products segment, 15% in
the High Performance Metals segment, and 16% in the Engineered
Products segment. During the quarter, we increased base-selling
prices for most of our products and implemented additional
surcharges for certain raw materials for many of our products.
- OPERATING PROFIT increased to $38.1 million as a result of improved
performance across all of the business segments. This improvement
was led by the Flat-Rolled Products segment with an operating profit
of $20.0 million, the first operating profit for this segment since
the 2002 third quarter. Results for 2004 included a LIFO inventory
valuation reserve charge of $26.1 million, due primarily to an
increase in costs in the second quarter 2004 compared to the fourth
quarter 2003 for most of the major raw materials that we use,
especially chromium, molybdenum, and scrap. For the same 2003
period, the LIFO inventory valuation reserve charge was $9.3
million.
- INCOME BEFORE TAXES was $26.6 million, compared to last year's loss
of $40.8 million, which includes a net special gain of $40.4
million.
Page 3
- RETIREMENT BENEFIT EXPENSE in the second quarter 2004 was $34.0
million compared to $33.4 million in the second quarter 2003.
Approximately 81% of the 2004 retirement benefit expense is
non-cash.
- CASH FLOW from operations was $21.6 million in the first half 2004
as improved operating results offset increases in managed working
capital due primarily to a $57.7 million increase in accounts
receivable during the quarter, as well as higher gross inventory
levels, which were partially offset by increased accounts payable.
The higher accounts receivable resulted from increased sales,
including the effects of raw material surcharges. Capital
expenditures were $25.2 million. Cash on-hand ended the quarter at
$64.0 million. We had no borrowings outstanding under our secured
credit facility during the first half 2004.
- COST REDUCTIONS, before the effects of inflation, totaled $63.2
million company-wide for the first half of 2004. Our initial 2004
cost reduction goal was established at $104 million, excluding the
anticipated cost reductions and synergies from the J&L asset
acquisition and the new labor agreement for ATI Allegheny Ludlum.
FLAT-ROLLED PRODUCTS SEGMENT
MARKET CONDITIONS
- Demand remained good from the automotive and Asian infrastructure
markets. Demand continued to be strong from the residential
construction and remodeling markets. Demand improved from
transportation and construction machinery markets. Our raw material
surcharges, which continued to escalate during the quarter due to
rising raw material prices, combined with higher base selling
prices, resulted in higher average transaction prices compared to
the second quarter 2003.
SECOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003
- Sales increased 47% to $379.2 million primarily due to improved
demand from capital goods markets, the impact of higher raw material
surcharges and base-selling price increases, and the J&L asset
acquisition. Total tons shipped increased by approximately 13,200
tons, or 11%. Shipments of commodity products increased 6% and
shipments of high-value products increased 23%. Average transaction
prices, which include surcharges, were 32% higher. Average
base-selling prices, which exclude surcharges, increased by
approximately 10%.
- The segment had operating income of $20.0 million compared to an
operating loss of $6.2 million last year. The benefits of additional
surcharges, higher base-selling prices and cost reduction
initiatives were partially offset by higher raw material costs,
which resulted in a LIFO inventory valuation reserve charge of $15.2
million in the second quarter 2004. The 2003 second quarter included
a LIFO inventory valuation reserve charge of $9.1 million.
- The J&L asset acquisition was completed June 1, 2004, and second
quarter 2004 results include less than one month of sales,
approximately $18 million, related to this transaction. However,
since the acquisition was accounted for as a purchase, second
quarter results essentially did not include any operating profit on
sales of the purchased J&L inventory. In addition, results for the
third quarter will not include any operating profit on sales of
purchased inventory until the inventory acquired is depleted, which
is expected to occur in the second half of the third quarter.
- Energy costs increased $3.5 million, net of $1.0 million in gains
from natural gas derivatives.
- Results benefited from $21 million in cost reductions, before the
effects of inflation.
Page 4
HIGH PERFORMANCE METALS SEGMENT
MARKET CONDITIONS
- The commercial aerospace market remained stable. Demand improved
considerably for spare parts from the commercial aerospace market
and remained strong from the military aerospace market. Our exotic
alloys business continued to benefit from sustained high demand from
government, high energy physics and medical markets and corrosion
markets, particularly in Asia.
SECOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003
- Sales increased 15% to $192.5 million. Shipments were up 23% for
titanium alloys, while shipments declined 9% for nickel-based and
specialty steel alloys and 7% for exotic alloys, both due in part to
product mix. Average selling prices increased 26% for nickel-based
and specialty steel alloys, and 9% for exotic alloys while average
selling prices for titanium alloys were essentially flat.
- Operating profit increased to $12.6 million compared to an operating
profit of $11.6 million for the prior year period as improved sales
and cost reduction initiatives offset the impact of higher raw
material costs, and production inefficiencies and start-up costs
associated with the Richburg, SC rolling mill following the
completion of an extensive upgrade. The rise in raw material costs
resulted in a LIFO inventory valuation reserve charge of $6.1
million in 2004, compared to $0.2 million in 2003.
- Results benefited from $12 million of cost reductions, before the
effects of inflation.
ENGINEERED PRODUCTS SEGMENT
MARKET CONDITIONS
- Demand for tungsten products remained strong from the oil and gas
market and demand improved from the automotive and transportation
markets. Demand remained strong for forged products from the Class 8
truck market and for cast products from the improving manufacturing
sector and transportation and wind energy markets.
SECOND QUARTER 2004 COMPARED TO SECOND QUARTER 2003
- Sales improved 16% to $74.8 million.
- Operating profit improved to $5.5 million compared to $3.2 million
last year due to higher sales volumes, improved pricing, and the
benefits from cost reductions, which offset higher raw material
costs. The rise in raw material costs resulted in a LIFO inventory
valuation reserve charge of $4.8 million in 2004 compared to no
effect in 2003.
- Results benefited from $3 million of cost reductions, before the
effects of inflation.
SPECIAL GAIN, NET
- Results for the second quarter included a previously announced
one-time net special gain of $40.4 million, or $0.48 per share:
- A $71.5 million curtailment and settlement gain as a
result of actions taken to cap, beginning in 2005, and
then eliminate, beginning in 2010, certain retiree
medical benefits not related to the new labor agreement.
- A $25.4 million charge resulting from Transition
Assistance Program (TAP) incentives related to the new
labor agreement with the USWA. The TAP incentives
Page 5
will be paid from ATI's pension fund over the next 2 1/2
years to 650 Allegheny Ludlum employees who retire by
2006.
- A $5.7 million charge as a result of other costs
associated with the new labor agreement and the J&L
asset acquisition.
RETIREMENT BENEFIT EXPENSE
- Retirement benefit expense was $34.0 million in the second quarter
2004, compared to $33.4 million in the second quarter 2003.
Approximately $27.2 million of the second quarter 2004 retirement
benefit expense was non-cash.
- For the second quarter 2004, retirement benefit expense included in
cost of sales was $25.3 million, and in selling and administrative
expenses was $8.7 million. For the second quarter 2003, retirement
benefit expense included in cost of sales was $23.5 million, and in
selling and administrative expenses was $9.9 million.
- Actions taken during the second quarter 2004 to control retiree
medical costs and the favorable impact from the enactment of the
Federal Medicare prescription drug benefit program reduced ATI's
OPEB liability by approximately $331 million, or 36%. At the
beginning of 2004, retirement benefit expense (pension and OPEB) was
estimated at $143 million for the year, including $68 million for
OPEB. As a result of reduced OPEB liabilities, the revised OPEB
expense estimate for 2004 is $46 million. Based on current actuarial
assumptions, we expect OPEB expense for 2005 to be further reduced
to approximately $23 million.
- ATI is not required to make cash contributions to its defined
benefit pension plan for 2004 and, based upon current actuarial
studies, does not expect to be required to make cash contributions
to its defined benefit pension plan during the next several years.
OTHER EXPENSES
- Corporate expenses for the second quarter 2004 were $8.9 million
compared to $5.3 million in the year-ago period. This increase is
due primarily to non-cash expenses associated with the Company's
stock-based long-term incentive compensation programs, which more
than offset savings associated with reductions in staffing and other
efforts to control costs at the corporate office.
- Excluding the effects of retirement benefit expense and an increase
of $7.0 million in non-cash stock-based compensation expense
compared to the prior year quarter, selling and administrative
expenses as a percentage of sales declined to 6.5% in the 2004
second quarter from 8.6% in the same period of 2003.
- No income tax benefit was recognized in the second quarter 2004
since we cannot tax benefit current operating losses due to
cumulative losses incurred during 2001 through 2003. We recorded a
valuation allowance in the 2003 fourth quarter for a major portion
of our deferred tax assets in accordance with SFAS No. 109
"Accounting for Income Taxes". Future tax provisions or benefits
will be recognized when taxable income exceeds the 2003 net
operating tax loss carry-forward, or when tax losses, if any, are
recoverable as cash refunds.
Page 6
CASH FLOW, WORKING CAPITAL AND DEBT
- Cash on hand was $64.0 million at June 30, 2004, a decrease of $15.6
million from 2003 year-end.
- First half 2004 cash flow from operations was $21.6 million as
improved operating results for 2004 and the receipt of a $6.9
million Federal income tax refund pertaining to our 2003 tax return
offset a $110.9 million increase in managed working capital.
- The increase in managed working capital was due to a $57.7 million
increase in accounts receivable, which reflects the higher level of
sales in the second quarter 2004, compared to the fourth quarter
2003, and a $110.3 million increase in inventory mostly as a result
of higher raw material costs, which was partially offset by a $57.1
million increase in accounts payable. The majority of the increase
in raw material costs should be recovered through surcharges.
- At June 30, 2004, managed working capital was 26.9% of annualized
sales, excluding the effect of the J&L asset acquisition, compared
to 30.7% of annualized sales at 2003 year-end. We define managed
working capital as accounts receivable and gross inventories less
accounts payable.
- Cash used in investing activities was $31.7 million in the first
half 2004 and consisted primarily of $24.2 million of capital
expenditures, net of $1.0 million of proceeds from the disposal of
miscellaneous assets, and $7.5 million related to the J&L asset
acquisition.
- Cash used in financing activities was $5.5 million in the first
half 2004, and included a decrease in net borrowings of $3.2
million and payment of dividends of $4.9 million, offset by $2.6
million of proceeds received from the exercise of stock options.
- There were no borrowings outstanding during the first half 2004
under ATI's $325 million secured borrowing facility, although a
portion of the letters of credit capacity was utilized.
NEW ACCOUNTING PRONOUNCEMENT ADOPTED IN 2003
The adoption of Statement of Financial Accounting Standards No. 143 "Accounting
for Asset Retirement Obligations" ("SFAS 143") resulted in an after-tax charge
of $1.3 million, or $(0.02) per share in the 2003 first quarter. 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 July 20, 2004, at 1 p.m. ET to discuss the financial results. The
conference call will be broadcast live on www.alleghenytechnologies.com. To
access the broadcast, click on "Second Quarter Conference Call". In addition,
the conference call will be available through the CCBN website, located at
www.ccbn.com.
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
Page 7
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, 2003, 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 2003. The Company has approximately 9,000 full
time 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.
# # #
Page 8
ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Dollars in millions, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------ -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
SALES $ 646.5 $ 489.9 $ 1,224.3 $ 970.4
Costs and expenses:
Cost of sales 593.9 469.1 1,161.3 935.0
Selling and administrative expenses 57.8 53.4 111.5 101.1
Curtailment gain, net of restructuring costs (40.4) -- (40.4) --
--------- --------- --------- ---------
Income (loss) before interest, other
income and income taxes 35.2 (32.6) (8.1) (65.7)
Interest expense, net (7.8) (8.4) (16.0) (15.8)
Other income (expense), net (0.8) 0.2 0.3 0.7
--------- --------- --------- ---------
Income (loss) before income tax benefit
and cumulative effect of change in
accounting principle 26.6 (40.8) (23.8) (80.8)
Income tax benefit -- (14.8) -- (29.0)
--------- --------- --------- ---------
Net income (loss) before cumulative effect of
change in accounting principle 26.6 (26.0) (23.8) (51.8)
Cumulative effect of change in accounting
principle -- -- -- (1.3)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 26.6 $ (26.0) $ (23.8) $ (53.1)
========= ========= ========= =========
Basic net income (loss) per common share
before cumulative effect of change in
accounting principal $ 0.33 $ (0.32) $ (0.30) $ (0.64)
Cumulative effect of change in accounting
principle -- -- -- (0.02)
--------- --------- --------- ---------
BASIC NET INCOME (LOSS) PER COMMON SHARE $ 0.33 $ (0.32) $ (0.30) $ (0.66)
========= ========= ========= =========
Diluted net income (loss) per common
share before cumulative effect
of change in accounting principle $ 0.31 $ (0.32) $ (0.30) $ (0.64)
Cumulative effect of change in accounting
principle -- -- -- (0.02)
--------- --------- --------- ---------
DILUTED NET INCOME (LOSS) PER COMMON SHARE $ 0.31 $ (0.32) $ (0.30) $ (0.66)
========= ========= ========= =========
Weighted average common shares
outstanding -- basic (millions) 80.6 81.0 80.5 80.8
Weighted average common shares
outstanding -- diluted (millions) 84.6 81.0 80.5 80.8
Actual common shares outstanding--
end of period (millions) 81.4 81.0 81.4 81.0
Page 9
ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SALES AND OPERATING PROFIT (LOSS) BY BUSINESS SEGMENT
(Unaudited - Dollars in millions)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- ----------------------------
2004 2003 2004 2003
------------ ------------ ------------ -------------
Sales:
Flat-Rolled Products $379.2 $ 258.7 $ 708.8 $ 516.0
High Performance Metals 192.5 166.8 371.2 327.8
Engineered Products 74.8 64.4 144.3 126.6
----------- ----------- ----------- ------------
TOTAL EXTERNAL SALES $646.5 $ 489.9 $1,224.3 $ 970.4
=========== =========== =========== ============
Operating Profit (Loss):
Flat-Rolled Products $ 20.0 $ (6.2) $ 9.0 $ (7.5)
% of Sales 5.3% -2.4% 1.3% -1.5%
High Performance Metals 12.6 11.6 20.4 19.9
% of Sales 6.5% 7.0% 5.5% 6.1%
Engineered Products 5.5 3.2 9.3 5.0
% of Sales 7.4% 5.0% 6.4% 3.9%
----------- ----------- ----------- ------------
OPERATING PROFIT (LOSS) 38.1 8.6 38.7 17.4
% of Sales 5.9% 1.8% 3.2% 1.8%
Corporate expenses (8.9) (5.3) (14.5) (10.1)
Interest expense, net (7.8) (8.4) (16.0) (15.8)
----------- ----------- ----------- ------------
Subtotal 21.4 (5.1) 8.2 (8.5)
Curtailment gain, net of
restructuring costs 40.4 -- 40.4 --
Other expenses, net of gains
on asset sales (1.2) (2.3) (2.4) (4.1)
Retirement benefit expense (a) (34.0)(a) (33.4) (b) (70.0)(b) (68.2)
----------- ----------- ----------- ------------
INCOME (LOSS) BEFORE
INCOME TAXES $ 26.6 $ (40.8) $ (23.8) $ (80.8)
=========== =========== =========== ============
(a) Includes non-cash expenses of $27.2 million and $24.9 million for the 2004
and 2003 second quarter, respectively.
(b) Includes year-to-date non-cash expenses of $56.9 million and $53.1 million
for 2004 and 2003, respectively.
Page 10
ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Current period unaudited--Dollars in millions)
JUNE 30, DECEMBER 31,
2004 2003
--------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 64.0 $ 79.6
Accounts receivable, net of allowances for
doubtful accounts of $10.7 and $10.2 at
June 30, 2004 and December 31, 2003,
respectively 337.8 248.8
Inventories, net 451.1 359.7
Income tax refunds receivable 0.3 7.2
Prepaid expenses and
other current assets 33.9 48.0
-------- --------
TOTAL CURRENT ASSETS 887.1 743.3
Property, plant and equipment, net 733.4 711.1
Cost in excess of net assets acquired 201.3 198.4
Deferred pension asset 144.0 144.0
Deferred income taxes 34.3 34.3
Other assets 58.5 53.8
-------- --------
TOTAL ASSETS $2,058.6 $1,884.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 245.5 $ 172.3
Accrued liabilities 211.9 194.6
Short term debt and current
portion of long-term debt 35.9 27.8
-------- --------
TOTAL CURRENT LIABILITIES 493.3 394.7
Long-term debt 551.6 504.3
Accrued postretirement benefits 476.2 507.2
Pension liabilities 281.4 220.6
Other long-term liabilities 106.4 83.4
-------- --------
TOTAL LIABILITIES 1,908.9 1,710.2
-------- --------
TOTAL STOCKHOLDERS' EQUITY 149.7 174.7
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,058.6 $1,884.9
======== ========
Page 11
ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited--Dollars in millions)
SIX MONTHS ENDED
JUNE 30
---------------------
2004 2003
-------- --------
OPERATING ACTIVITIES:
Net loss $ (23.8) $ (53.1)
Cumulative effect of change in accounting
principle -- 1.3
Non-cash curtailment gain and restructuring
charges, net (45.6) --
Depreciation and amortization 37.9 37.1
Change in pension assets/liabilities 34.8 43.9
Income tax refunds received 6.9 48.5
Change in managed working capital (110.9) (45.0)
Accrued liabilities and other 122.3 (15.6)
------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 21.6 17.1
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (25.2) (28.8)
Acquisition of business (7.5) --
Asset disposals and other 1.0 6.7
------- -------
CASH USED IN INVESTING ACTIVITIES (31.7) (22.1)
------- -------
FINANCING ACTIVITIES:
Net increase (decrease) in debt (3.2) 6.2
Interest rate swap termination -- 15.3
Dividends paid (4.9) (9.7)
Other 2.6 --
------- -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (5.5) 11.8
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (15.6) 6.8
Cash and cash equivalents at beginning of period 79.6 59.4
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 64.0 $ 66.2
======= =======
Supplemental non-cash investing and financing activities
On June 1, 2004, the Company acquired substantially all of the assets of J&L
Specialty Steel, LLC for consideration of $67.2 million. Cash paid at closing
was $7.5 million, with promissory notes payable to the seller of $59.7 million.
Page 12
ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------- ---------------------
2004 2003 2004 2003
-------- -------- -------- --------
VOLUME:
Flat-Rolled Products (finished tons) 133,758 120,554 258,745 239,518
-------- -------- -------- --------
Commodity 92,838 87,337 179,854 170,829
High value 40,920 33,217 78,891 68,689
High Performance Metals
(000's lbs.)
Nickel-based and
specialty steel alloys 8,644 9,457 17,588 18,149
Titanium mill products 5,656 4,617 10,679 9,232
Exotic alloys 1,082 1,160 2,267 2,092
AVERAGE PRICES:
Flat-Rolled Products (per finished ton) $ 2,832 $ 2,144 $ 2,738 $ 2,151
Commodity $ 2,189 $ 1,550 $ 2,101 $ 1,557
High value $ 4,291 $ 3,708 $ 4,190 $ 3,630
High Performance Metals (per lb.)
Nickel-based and specialty
steel alloys $ 8.15 $ 6.47 $ 7.94 $ 6.59
Titanium mill products $ 11.20 $ 11.16 $ 11.30 $ 12.00
Exotic alloys $ 41.41 $ 38.10 $ 38.75 $ 37.94
Page 13
ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
OTHER FINANCIAL INFORMATION
MANAGED WORKING CAPITAL
(Unaudited - Dollars in millions)
JUNE 30, 2004
JUNE 30, DECEMBER 31, CHANGE IN MANAGED
2004 2003 WORKING CAPITAL
--------------- -------------- -----------------
Accounts receivable $ 337.8 $ 248.8
Inventory 451.1 359.7
Accounts payable (245.5) (172.3)
-------------- -------------
Subtotal 543.4 436.2
Acquisition of managed working capital (73.8) --
Allowance for doubtful accounts 10.7 10.2
LIFO reserve 185.9 111.7
Corporate and other 20.2 17.4
-------------- ------------- -----------------
Managed working capital $ 686.4 $ 575.5 $ 110.9
============== ============= =================
Annualized prior 2 months
sales $ 2,548.7 $ 1,874.0
============== =============
Managed working capital as a
% of annualized sales 26.9% 30.7%
Page 14