[Allegheny Technologies logo] Exhibit 99.1
Allegheny Technologies Announces First Quarter Results
-- Sales increased 20% compared to the first quarter 2003
-- First quarter loss of $50.4 million, or $0.63 per share,
includes a LIFO inventory valuation reserve increase of $48.1
million related to significantly higher raw materials costs
-- Cost reductions, before the effects of inflation, totaled
$26.6 million in the first quarter 2004
PITTSBURGH, PA - April 21, 2004 - Allegheny Technologies Incorporated
(NYSE:ATI) reported a net loss of $50.4 million, or $0.63 per share,
on sales of $577.8 million for the first quarter ended March 31, 2004.
Results included a LIFO (last-in, first-out) inventory valuation
reserve increase of $48.1 million, primarily due to the effects of
rapidly rising raw materials costs, which increased approximately 30%
in the first quarter 2004 compared to the fourth quarter 2003.
Retirement benefit expense, primarily non-cash, was $36.0 million, or
$0.45 per share, in the quarter. First quarter 2004 results do not
include an income tax benefit as a result of a deferred tax valuation
allowance recorded in the fourth quarter 2003.
In the first quarter 2003, ATI reported a net loss before the
cumulative effect of a change in accounting principle of $25.8
million, or $0.32 per share, on sales of $480.5 million. First quarter
2003 results included a LIFO inventory valuation reserve increase of
$3.0 million and retirement benefit expense, primarily non-cash, of
$34.8 million, or $0.28 per share. First quarter 2003 results included
an income tax benefit of $14.2 million, or $0.18 per share.
"We saw the first signs of real strength in market demand for many
of our products during the first quarter 2004. Strong demand is
continuing in the second quarter, and we are currently booking orders
into the third quarter," said Pat Hassey, ATI's President and Chief
Executive Officer. "Compared to the first quarter 2003, Flat-Rolled
Products segment sales increased 28%, High Performance Metals segment
sales increased 11% and Engineered Products segment sales increased
12%.
"In our Flat-Rolled Products segment, demand from a variety of
markets improved, particularly for our high-value products such as
strip, Precision Rolled Strip(R), nickel alloys, specialty steel and
titanium products. During the first quarter, flat-rolled products
base-selling prices began to recover from historical lows. The
stainless steel commodity cold-rolled sheet base-selling price, which
excludes the impact of raw material surcharges, increased by over 10%
from the historical low price in December 2003. Price increases along
with surcharge revisions have been effective in helping to offset
rapidly rising raw materials costs on a cash basis.
"In our High Performance Metals segment, demand for our
nickel-based superalloys and premium titanium alloys improved. We saw
more stable inventory in the supply chain, improving demand for spare
parts from the commercial aerospace market, and continued strong
demand from the military aerospace market. Our exotic alloys business
continued to perform well. Demand remained strong from the government
market, super-conducting applications for the high energy physics
market and corrosion markets, such as chemical processing,
particularly in Asia.
"Our newly expanded state-of-the-art long products rolling mill
began production in April on budget and on schedule. This advanced
rolling mill, located in Richburg, South Carolina, provides enhanced
technological capabilities enabling ATI to grow our high performance
metals business.
"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 ATI Business System is driving lean manufacturing, quality
improvement and cost reductions throughout the Company. For example,
even though raw materials costs rose rapidly during the first quarter,
managed working capital as a percent of annualized sales decreased to
approximately 26% at the end of the quarter compared to nearly 31% at
the end of 2003. We also achieved nearly $27 million of cost
reductions, before the effects of inflation, in the first quarter
2004. We are on track to achieve our $104 million cost reduction goal
for 2004.
"We are continuing discussions with the United Steelworkers of
America looking for ways to "fix" our stainless steel business and
better secure a strong future for Allegheny Ludlum and its employees.
"We continue to make progress toward completing the previously
announced acquisition of substantially all of the assets of J&L
Specialty Steel, which remains subject to certain closing conditions.
This acquisition is expected to complement and enhance our competitive
position in the North American flat-rolled stainless steel market. It
maintains historical domestic capacity and keeps significant J&L
equipment in production.
"As the second quarter 2004 begins, we see improving market
conditions across most of our businesses. In addition, we are
beginning to see less volatility for some of the key raw materials
that we use. If these trends continue, we expect to see gradual
improvement in earnings per share through the remainder of 2004."
Three Months Ended
March 31
In Millions
-------------------------
2004 2003
----------- ------------
Sales $577.8 $480.5
Loss before income taxes (50.4) (40.0)
Net loss before the cumulative
effect of change in accounting
principle (50.4) (25.8)
Cumulative effect of change
in accounting principle - (1.3)
----------- ------------
Net loss $(50.4) $(27.1)
Per Diluted Share
-------------------------
Net loss before the cumulative
effect of change in accounting
principle $(0.63) $(0.32)
Cumulative effect of change
in accounting principle - (0.02)
----------- ------------
Net loss $(0.63) $(0.34)
FIRST QUARTER 2004 FINANCIAL HIGHLIGHTS
-- SALES were $577.8 million, up 20% compared to the first
quarter 2003. Sales were up 28% in the Flat-Rolled Products
segment, 11% in the High Performance Metals segment, and 12%
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.
-- LOSS BEFORE TAXES was $50.4 million, compared to last year's
pretax loss of $40.0 million. Results for 2004 included a LIFO
inventory valuation reserve increase of $48.1 million, due to
an approximately 30% increase in costs in the first quarter
2004 compared to the fourth quarter 2003 for the major raw
materials that we use. For the same 2003 period, the increase
to the LIFO inventory valuation reserve was $3.0 million.
-- RETIREMENT BENEFIT EXPENSE in the first quarter 2004 was $36.0
million compared to $34.8 million in the first quarter 2003.
Approximately 82% of the 2004 retirement benefit expense is
non-cash.
-- CASH FLOW from operations was a negative $0.2 million in the
first quarter 2004 due primarily to a $63.1 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 $12.1 million.
Cash on-hand ended the quarter at $67.3 million, $12.3 million
lower than year-end 2003. We had no borrowings outstanding
under our secured credit facility during the first quarter
2004.
-- COST REDUCTIONS, before the effects of inflation, totaled
$26.6 million company-wide. Our 2004 cost reduction goal is
$104 million.
FLAT-ROLLED PRODUCTS SEGMENT
Market Conditions
-- Demand improved from capital goods markets while demand from
automotive and other consumer durables markets remained good.
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 first quarter 2003.
First quarter 2004 compared to first quarter 2003
-- Sales increased 28% to $329.6 million primarily due to
improved demand from capital goods markets, and the impact of
higher raw material surcharges and base-selling price
increases. Total tons shipped increased 5%. Shipments of
commodity products increased 4% and shipments of high-value
products increased 7%. Average transaction prices, which
include surcharges, were 22% higher. Average base-selling
prices, which exclude surcharges, increased by approximately
3%.
-- The segment had an operating loss of $11.0 million compared to
an operating loss of $1.3 million last year. Higher raw
material costs, which resulted in a LIFO inventory valuation
reserve increase of $37.6 million in the first quarter 2004,
offset the benefits of additional surcharges, higher
base-selling prices and cost reduction initiatives. The 2003
first quarter included a LIFO inventory valuation reserve
increase of $3.9 million.
-- Energy costs increased $2.4 million, net of $0.4 million in
gains from natural gas derivatives.
-- Results benefited from $13 million in cost reductions, before
the effects of inflation.
HIGH PERFORMANCE METALS SEGMENT
Market Conditions
-- Demand for nickel-based superalloys and titanium alloys
improved as the commercial aerospace supply chain was stable.
Demand improved 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 and high energy physics markets
and corrosion markets, particularly in Asia.
First quarter 2004 compared to first quarter 2003
-- Sales increased 11% to $178.7 million. Shipments were up 3%
for nickel-based and specialty steel alloys, 9% for titanium
alloys and 27% for exotic alloys.
-- Operating profit declined to $7.9 million compared to an
operating profit of $8.3 million as the impact of higher raw
material costs offset increased sales and the benefits of cost
reduction initiatives. The rise in raw material costs resulted
in a LIFO inventory valuation reserve increase of $8.6 million
in 2004, compared to $1.0 million in 2003.
-- Results benefited from $10 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 for tungsten carbide products
and cutting tools due to a pickup in overall manufacturing
activity. Demand improved considerably for forged products
from the Class 8 truck market and for cast products from the
improving manufacturing sector and transportation and wind
energy markets.
First quarter 2004 compared to first quarter 2003
-- Sales improved 12% to $69.5 million.
-- Operating profit improved to $3.8 million compared to $1.8
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 an increase to the LIFO inventory valuation
reserve of $1.9 million in 2004 compared to a decrease of $1.9
million in 2003.
-- Results benefited from $2 million of cost reductions, before
the effects of inflation.
RETIREMENT BENEFIT EXPENSE
-- Retirement benefit expense was $36.0 million in the first
quarter 2004, compared to $34.8 million in the first quarter
2003. Approximately $29.7 million of the first quarter 2004
retirement benefit expense was non-cash.
-- The 2004 retirement benefit expense does not include the
expected favorable impact on our postretirement medical
expense from the enactment of the Federal Medicare
prescription drug benefit program in December 2003, pending
final authoritative accounting guidance regarding how the
benefit is to be recognized in the financial statements.
-- For the first quarter 2004, retirement benefit expense
increased cost of sales by $27.6 million, and selling and
administrative expenses by $8.4 million. For the first quarter
2003, retirement benefit expense increased cost of sales by
$24.4 million, and selling and administrative expenses by
$10.4 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 first quarter 2004 were $5.6
million compared to $4.8 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
program, which 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
non-cash stock-based compensation expense, selling and
administrative expenses as a percentage of sales declined to
7.3% in the 2004 first quarter from 8.6% in the same period of
2003.
-- No income tax benefit was recognized in the 2004 first quarter
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 tax loss, or when tax losses, if any, are
recoverable as cash refunds.
CASH FLOW, WORKING CAPITAL AND DEBT
-- Cash on hand was $67.3 million at March 31, 2004, a decrease
of $12.3 million from 2003 year-end.
-- First quarter 2004 cash flow from operations was a negative
$0.2 million due primarily to a $75.4 million increase in
managed working capital in the quarter, partially offset by
the receipt of a $6.9 million federal income tax refund
pertaining to our 2003 tax return.
-- The increase in managed working capital was due to a $63.1
million increase in accounts receivable, which reflects the
higher level of sales in the first quarter 2004, compared to
the fourth quarter 2003, and a $59.1 million increase in
inventory mostly as a result of higher raw material costs,
which was partially offset by a $46.8 million increase in
accounts payable. The majority of the increase in raw material
costs should be recovered through surcharges.
-- At March 31, 2004, managed working capital was 26.4% of
annualized sales 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 $10.9 million in the
first quarter 2004 and consisted primarily of $12.1 million of
capital expenditures, net of $1.2 million of proceeds from the
disposal of miscellaneous assets.
-- Cash used in financing activities was $1.2 million in the
first quarter 2004, and included a net decrease in debt of
$3.1 million, primarily due to a $9.5 million repayment of an
industrial revenue bond partially offset by a $6.5 million net
increase in borrowings at our STAL China joint venture, and by
$1.9 million of proceeds received from the exercise of stock
options.
-- There were no borrowings outstanding during the first quarter
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 April 21, 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
"First 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 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 8,800 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.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Operations
(Unaudited - Dollars in millions, except per share amounts)
Three Months
Ended
March 31
------- -------
2004 2003
------- -------
Sales $577.8 $480.5
Costs and expenses:
Cost of sales 567.4 465.9
Selling and administrative expenses 53.7 47.7
------- -------
Loss before interest, other
income and income taxes (43.3) (33.1)
Interest expense, net (8.2) (7.4)
Other income, net 1.1 0.5
------- -------
Loss before income tax provision (benefit)
and cumulative effect of change in
accounting principle (50.4) (40.0)
Income tax provision (benefit) - (14.2)
------- -------
Net loss before cumulative effect of
change in accounting principle (50.4) (25.8)
Cumulative effect of change in accounting
principle - (1.3)
------- -------
Net loss $(50.4) $(27.1)
======= =======
Basic and diluted net loss per common
share before cumulative effect
of change in accounting principle $(0.63) $(0.32)
Cumulative effect of change in accounting
principle - (0.02)
------- -------
Basic and diluted net loss
per common share $(0.63) $(0.34)
======= =======
Weighted average common shares
outstanding -- basic and diluted
(millions) 80.4 80.7
Actual common shares outstanding--
end of period (millions) 81.2 81.0
Allegheny Technologies Incorporated and Subsidiaries
Sales and Operating Profit (Loss) by Business Segment
(Unaudited - Dollars in millions)
Q1 2004 Q1 2003
------- -------
Sales:
Flat-Rolled Products $329.6 $257.3
High Performance Metals 178.7 161.0
Engineered Products 69.5 62.2
------- -------
Total External Sales $577.8 $480.5
======= =======
Operating Profit (Loss):
Flat-Rolled Products $(11.0) $(1.3)
% of Sales -3.3% -0.5%
High Performance Metals 7.8 8.3
% of Sales 4.4% 5.2%
Engineered Products 3.8 1.8
% of Sales 5.5% 2.9%
------- -------
Operating Profit (Loss) 0.6 8.8
% of Sales 0.1% 1.8%
Corporate expenses (5.6) (4.8)
Interest expense, net (8.2) (7.4)
------- -------
Subtotal (13.2) (3.4)
Other costs, net of gains
on asset sales (1.2) (1.8)
Retirement benefit expense (a) (36.0)(a) (34.8)
------- -------
Loss before
income taxes $(50.4) $(40.0)
======= =======
(a) Includes non-cash expenses of $29.7 million and $28.2 million for
the 2004 and 2003 first quarter, respectively.
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(Current period unaudited--Dollars in millions)
March 31, December 31,
2004 2003
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $67.3 $79.6
Accounts receivable, net of allowances for
doubtful accounts of $11.0 and $10.2 at
March 31, 2004 and December 31, 2003,
respectively 311.0 248.8
Inventories, net 366.9 359.7
Income tax refunds receivable 0.3 7.2
Prepaid expenses and
other current assets 37.3 48.0
--------- ---------
Total current assets 782.8 743.3
Property, plant and equipment, net 711.2 711.1
Cost in excess of net assets acquired 206.3 198.4
Deferred pension asset 144.0 144.0
Deferred income taxes 34.3 34.3
Other assets 62.7 53.8
--------- ---------
Total Assets $1,941.3 $1,884.9
========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $219.4 $172.3
Accrued liabilities 207.5 194.6
Short term debt and current
portion of long-term debt 21.8 27.8
--------- ---------
Total current liabilities 448.7 394.7
Long-term debt 512.4 504.3
Accrued postretirement benefits 518.0 507.2
Pension liabilities 238.6 220.6
Other long-term liabilities 87.3 83.4
--------- ---------
Total liabilities 1,805.0 1,710.2
--------- ---------
Total stockholders' equity 136.3 174.7
--------- ---------
Total Liabilities and Stockholders' Equity $1,941.3 $1,884.9
========= =========
Allegheny Technologies Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited--Dollars in millions)
Three Months
Ended
March 31
---------------
2004 2003
------- -------
Operating Activities:
Net loss $(50.4) $(27.1)
Cumulative effect of change in accounting
principle - 1.3
Depreciation and amortization 18.8 18.0
Change in pension assets/liabilities 17.5 22.4
Deferred income taxes - (13.3)
Income tax refunds received 6.9 48.3
Change in managed working capital (75.4) (21.6)
Accrued liabilities and other 82.4 17.2
------- -------
Cash provided by (used in) operating activities (0.2) 45.2
------- -------
Investing Activities:
Purchases of property, plant and equipment (12.1) (11.8)
Asset disposals and other 1.2 5.9
------- -------
Cash used in investing activities (10.9) (5.9)
------- -------
Financing Activities:
Net increase (decrease) in debt (3.1) 2.9
Interest rate swap termination - 14.6
Dividends paid - (4.8)
Other 1.9 -
------- -------
Cash provided by (used in) financing activities (1.2) 12.7
------- -------
Increase (decrease) in cash and cash equivalents (12.3) 52.0
Cash and cash equivalents at beginning of period 79.6 59.4
------- -------
Cash and cash equivalents at end of period $67.3 $111.4
======= =======
Allegheny Technologies Incorporated and Subsidiaries
Selected Financial Data
(Unaudited)
Q1 2004 Q1 2003
-------- --------
Volume:
Flat-Rolled Products (finished tons) 124,987 118,964
-------- --------
Commodity 87,016 83,492
High value 37,971 35,472
High Performance Metals
(000's lbs.)
Nickel-based and
specialty steel alloys 8,944 8,692
Titanium mill products 5,023 4,615
Exotic alloys 1,185 932
Average Prices:
Flat-Rolled Products (per finished ton) $2,636 $2,159
Commodity $2,006 $1,564
High value $4,081 $3,557
High Performance Metals (per lb.)
Nickel-based and specialty
steel alloys $7.73 $6.73
Titanium mill products $11.41 $12.85
Exotic alloys $36.32 $37.75
Allegheny Technologies Incorporated and Subsidiaries
Other Financial Information
Managed Working Capital
(Unaudited - Dollars in millions)
March 31, 2004
Change in
March 31, December 31, Managed
2004 2003 Working Capital
---------- ---------- ---------------
Accounts receivable $311.0 $248.8
Inventory 366.9 359.7
Accounts payable (219.4) (172.3)
---------- ----------
Subtotal 458.5 436.2
Allowance for doubtful accounts 11.0 10.2
LIFO reserve 159.8 111.7
Corporate and other 21.6 17.4
---------- ---------- ---------------
Managed working capital $650.9 $575.5 $75.4
========== ========== ===============
Annualized prior 2 months
sales $2,463.0 $1,874.0
========== ==========
Managed working capital as a
% of annualized sales 26.4% 30.7%
CONTACT: Allegheny Technologies Incorporated, Pittsburgh
Dan L. Greenfield, 412-394-3004