Exhibit 99.1
Allegheny Technologies Unveils 2004 Cost Reduction Plan, Comments on
Fourth Quarter 2003 Special Charges and 2004 Outlook
PITTSBURGH--(BUSINESS WIRE)--Dec. 19, 2003--Allegheny Technologies
Incorporated (NYSE:ATI) announced that it has set a target of $104
million of additional cost reductions in 2004. As part of its cost
reduction efforts, ATI is taking action to reduce fixed costs and
streamline operations. Therefore, the Company expects to record
pre-tax special charges in the fourth quarter 2003, which are
substantially all non-cash. These charges include $65 to $75 million
relating primarily to salaried workforce reductions and asset
impairments. In addition, the Company expects to record a non-cash
accounting special charge of between $100 and $130 million for the
establishment of a valuation allowance for a portion of its net
deferred tax assets.
Also, during the fourth quarter 2003, ATI expects LIFO accounting
to negatively impact earnings by between $12 and $15 million pre-tax,
or $0.09 to $0.12 per share after-tax, compared to the third quarter
2003. This negative non-cash impact to earnings results from the
effect of rapidly rising raw materials costs on ATI's LIFO accounting
methodology.
2004 Outlook
"We expect to achieve our 2003 cost reduction target of
$115 million and have established an initial goal to reduce costs by
another $104 million in 2004," said Pat Hassey, ATI's President and
Chief Executive Officer. "We also anticipate ending 2003 with improved
liquidity as compared to both 2002 and 2001 year-end results.
"Our goal is to continue to reduce costs, improve productivity and
streamline our businesses in order to lower operating breakeven points
throughout ATI. We are accelerating implementation of the ATI Business
System, which leads to simplification of manufacturing process
flowpaths, and taking actions to reduce fixed costs.
"Several key economic indicators which could favorably impact
business conditions in 2004 are moving in a positive direction. As a
result of better market conditions, pricing for many of our products
is expected to increase beginning in the first quarter of 2004. We
believe that these improving conditions combined with the ATI Business
System implementation and our aggressive cost reductions and good
liquidity leave ATI well-positioned for better operating earnings in
2004."
Fourth Quarter 2003 Special Charges
ATI expects to record pre-tax special charges of approximately
$65 to $75 million, or $0.50 to $0.57 per share after tax, in the
fourth quarter 2003. These charges are substantially all non-cash and
are primarily the result of actions taken to reduce fixed costs and
streamline operations. The actions are expected to provide annual cost
savings of approximately $23 million beginning in the first quarter of
2004. These pre-tax charges are:
-- Approximately $10 million from previously announced salaried
workforce reductions totaling 276 employees, or approximately
10% of total salaried employees, across ATI's operations and
the corporate headquarters. These reductions were implemented
in November 2003. The reduction in corporate staff gives ATI
the opportunity to reduce leased office space, resulting in
additional future cost savings.
-- Charges of between $50 and $60 million for impairment of
certain assets in the Flat-Rolled Products segment. The
majority of these charges relate to Allegheny Ludlum's
remaining assets located in Houston, PA and its Washington
Flat Roll coil facility located in Washington, PA. This does
not impact current operations at these facilities.
-- A charge of approximately $5 million related to closed company
environmental matters.
Deferred Tax Assets Valuation Allowance
ATI also expects to record a non-cash accounting special charge in
the fourth quarter 2003 to establish a valuation allowance for a
portion of the Company's net deferred tax assets. The net deferred tax
assets at December 31, 2003, are projected at between $190 and
$210 million after the impact of the fourth quarter 2003 special
charges and before taking the valuation allowance into account. A
significant portion of these net deferred tax assets relate to the
Company's postretirement employee benefit obligations.
"At the end of 2003, we will not have any Federal tax loss
carryforwards or tax credits that are scheduled to expire unutilized,"
said Rich Harshman, ATI's Executive Vice President, Finance and Chief
Financial Officer. "Before 2003 we had realized, through Federal
income tax refunds, all prior years' Federal income tax net operating
losses. In addition, as disclosed in our third quarter 2003 Form 10-Q,
a significant portion of our deferred tax assets do not expire for a
number of years while others have indefinite lives.
"However, our current evaluation, as prescribed by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
indicates that a valuation allowance of between $100 and $130 million
of our net deferred tax assets will likely be required at December 31,
2003, because of ATI's recent history of losses. This accounting
charge will result in additional non-cash tax expense in the fourth
quarter of 2003 in the amount of the valuation allowance.
"This charge does not affect ATI's liquidity or our ability to
utilize and realize the deferred tax assets in the future. It also
does not reflect our long-term outlook for our business. In addition,
the charge may be reversed in a future period based on consideration
of all available evidence as prescribed in SFAS 109."
This news release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are
subject to uncertainties and changes in circumstances. Actual results
may differ materially from those expressed or implied in the
forward-looking statements. Additional information concerning factors
that could cause actual results to differ materially from those
projected in the forward-looking statements is contained in Allegheny
Technologies' filings with the Securities and Exchange Commission. We
assume no duty to update our forward-looking statements.
Allegheny Technologies Incorporated 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 nearly 8,800
employees worldwide 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 provide
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.
CONTACT: Allegheny Technologies Incorporated
Dan L. Greenfield, 412-394-3004