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Allegheny Technologies Reports
1st Quarter Results

April 22, 2004 — Allegheny Technologies Inc. reported a net loss of $50.4 million on sales of $577.8 million for the first quarter ended March 31, 2004.

The net loss, $50.4 million ($0.63 per share) compares to a net loss of $27.1 million ($0.32 per share) for the first quarter of 2003. Sales, $577.8 million, represent a 20% increase compared to the first quarter 2003.

Results this quarter included a LIFO inventory valuation reserve increase of $48.1 million, primarily due to the effects of rapidly rising raw materials costs. Retirement benefit expense, primarily non-cash, was $36.0 million ($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 comparison, ATI reported a first-quarter 2003 net loss before the cumulative effect of a change in accounting principle of $25.8 million ($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 ($0.28 per share). First quarter 2003 results included an income tax benefit of $14.2 million ($0.18 per share).

Comments—"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 CEO. "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, S.C., 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.

Operations—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. There were no borrowings outstanding under the company’s secured credit facility during the first quarter 2004. Cost reductions, before the effects of inflation, totaled $26.6 million company-wide; the company’s 2004 cost reduction goal is $104 million.

Outlook—"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.”

Allegheny Technologies Inc. is one of the largest and most diversified specialty materials producers in the world, with revenues of approximately $1.9 billion in 2003. 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. Commodity specialty materials include stainless steel sheet and plate, silicon and tool steels, and forgings and castings.

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