Allegheny Technologies Inc. reported net income of $66.3 million on sales of $879.6 million for the first quarter of 2005.

The $66.3 million net income ($0.66 per share) compares a net loss of $50.4 million ($(0.63) per share) in the first quarter of 2004.

Sales, $879.6 million, were 52% higher than sales of $577.8 million in the year-ago first quarter. Sales increased 59% in the Flat-Rolled Products segment, 47% in the High Performance Metals segment, and 32% in the Engineered Products segment.

Comments—"Our strong first quarter results are a good start to achieving the next level of success for ATI," said L. Patrick Hassey, Chairman, President and CEO of Allegheny Technologies. "Robust demand from the early stage recovery of the commercial aerospace market drove High Performance Metals segment results. We continue to be encouraged by the improved market and cost position of our Flat-Rolled Products segment. Our Engineered Products segment also performed very well and is becoming more important to our results.

"ATI sales increased by 52% compared to the first quarter 2004 and by more than 13% compared to the fourth quarter 2004. Overall segment operating profit improved to $114 million, and operating margins reached nearly 13% of sales. Operating performance benefited from strong demand, higher selling prices, ongoing cost reductions and capital investments, and from ATI Business System manufacturing initiatives.

"First quarter operating margin in our High Performance Metals segment exceeded 24%. Demand was robust from the aerospace market for our titanium alloys, nickel-based superalloys, and vacuum melted specialty steels. In addition, our exotic alloys business had another outstanding quarter due to continued government, corrosion, and medical market strength.

"First quarter results in our Flat-Rolled Products segment were good. We expect to do better. Shipments were 172,800 tons and segment operating margin was 7.5%. Operating and quality costs were higher than expected as we balanced production flow in the first quarter. In addition, some of our stainless steel sheet service center and tubing customers were adjusting their inventories, which had risen at the end of 2004, due in part to an import surge in December. Stainless steel sheet imports through February 2005, the latest data available, returned to approximately the 2004 monthly average. Importantly, most end markets for our flat-rolled products remained solid.

"In our Engineered Products segment, operating margins increased to over 12% as a result of ATI Business System improvements and strong demand from several key markets, such as oil and gas, aerospace, and transportation markets as well as general manufacturing.

Financial Highlights—Segment operating profit was $113.9 million, an increase of $113.3 million compared to the first quarter 2004, as a result of improved performance across all three business segments. First quarter 2005 results included a LIFO inventory valuation reserve charge of $5.7 million, due primarily to higher titanium scrap costs. The LIFO inventory valuation reserve charge was $48.1 million in the first quarter 2004.

Retirement benefit expense was $20.2 million compared to $36.0 million last year, primarily as a result of actions taken in the second quarter 2004 to control retiree medical costs and the favorable effect of the Medicare prescription drug legislation.

Cash on hand was $231.2 million at March 31, 2005. Cash flow used in operations during the first quarter 2005 was $4.7 million as the significant improvement in operating earnings was more than offset by a $122.2 million investment in managed working capital. Cash on hand was $231.2 million at March 31, 2005. Cost reductions, before the effects of inflation, totaled $30 million company-wide for the quarter. The company’s 2005 cost reduction goal is $100 million.

Outlook—"We remain optimistic about the prospects for ATI. Backlogs in our High Performance Metals segment are at near record levels and lead times continue to lengthen. We expect sustained demand for our materials used for jet engine after-market parts and new commercial jet engines and airframes. In addition, we see continued strength for our exotic alloys. In our Flat-Rolled Products segment, capital goods markets are expected to remain strong. We believe stainless steel service center supply chain inventories will be in balance by the end of the second quarter 2005. The global electrical steel markets for power distribution are looking for added supply as that market gains momentum. Markets for our Engineered Products segment businesses remain robust."

Allegheny Technologies Inc. is one of the largest and most diversified specialty materials producers in the world, with revenues of approximately $2.7 billion during 2004. 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^® products. Commodity specialty materials include stainless steel sheet and plate, silicon and tool steels, and forgings and castings.