Allegheny Technologies Inc. reported net income of $35.0 million on sales of $778.1 million for the fourth quarter ended December 31, 2004.

Fourth Quarter Results—Net income of $35.0 million ($0.35 per share) compares to a net loss of $232.7 million (loss of $2.89 per share) in the fourth quarter of 2003. Sales of $778.1 million compares to sales of $484.4 million in the fourth quarter of 2003.

Results included a LIFO (last-in, first-out) inventory valuation reserve charge of $29.5 million (primarily due to continued increases in raw material costs) and retirement benefit expense of $25.0 million. Fourth quarter 2003 results included net non-recurring special charges of $198.3 million ($2.46 per share); a LIFO inventory valuation reserve charge of $14.2 million; and retirement benefit expense of $32.7 million.

Full Year Results—Net income of $19.8 million ($0.22 per share) compare to a net loss of $314.6 million (loss of $3.89 per share) for 2003. Sales of $2.7 billion compare to sales of $1.9 billion in 2003.

Results included a LIFO inventory valuation reserve charge of $112.2 million; retirement benefit expense of $119.8 million; and a $40.4 million ($0.48 per share) special gain related to actions taken to control certain retiree medical costs, net of costs related to the new ATI Allegheny Ludlum labor agreement and the June 2004 J&L asset acquisition. Full year 2003 results included net special charges of $201.3 million ($2.49 per share); a $1.3 million ($0.02 per share) charge for the cumulative effect of change in accounting principle; a LIFO inventory valuation reserve charge of $37.0 million; and retirement benefit expense of $134.4 million.

Comments—“ATI's results are an outcome of our strategy to transition ATI to profitability and position the Company for long-term success,” said Pat Hassey, Chairman, President and CEO of Allegheny Technologies. "Revenues significantly increased in each of our segments as a result of improved demand from most markets, pricing actions, and higher raw material surcharges. Compared to last year, sales increased 61% to $778 million in the fourth quarter 2004 and increased by 41% to $2.7 billion for the full-year 2004. Importantly, ATI was profitable for the full-year 2004, and the fourth quarter net income of $0.35 per share demonstrated the results of our revenue growth, strategic investments and cost reductions.

“Flat-Rolled Products segment fourth quarter results were aided by the recovery in the U.S. stainless steel market, pricing actions, and the successful integration of our recently acquired stainless steel assets. Continuing operating efficiencies and cost reductions were both enhanced by our new progressive labor agreement in our stainless steel business. A key 2004 strategy for ATI was to 'fix' our stainless steel business. We believe our stainless steel business is now positioned for long-term profitable growth and cash generation.

“Fourth quarter results in our High Performance Metals segment were very good as a result of improved demand from commercial aerospace, higher selling prices, and operating efficiencies from our recently expanded Richburg, SC rolling mill. In addition, our exotic alloys business performed well due to continued strong demand, improved product mix, and continuing operating efficiencies and cost reductions. Segment operating margins reached nearly 19% of sales.

“In our Engineered Products segment, fourth quarter results improved as a result of strong demand from several key markets, higher selling prices, and the benefits from cost reductions.

Outlook—“We continue to be optimistic about 2005,” continued Pat Hassey. “While 2004 was a period of transition and transformation for ATI, we expect 2005 to be a year of revenue growth and accelerating profitability. Most of our end markets remain strong. Sales are expected to grow due to the full year impact of significantly improved prices and higher volumes. Overall, we expect base-prices to be higher in 2005 than in 2004 for approximately 95% of this year's shipments in our Flat-Rolled Products and High Performance Metals segments. Our High Performance Metals segment unfilled orders increased by approximately $100 million at the end of 2004 compared to year-end 2003. We remain encouraged by the aerospace market build forecasts in terms of both the number and size of aircraft as well as increased high performance metal content.

“We expect a full year of benefits in 2005 from the strategic assets added in 2004, principally the stainless steel meltshop and finishing operations in Midland, Pa., and Louisville, Ohio, acquired in June 2004, the upgraded Brackenridge, Pa., stainless steel meltshop completed in September 2004, and the expanded high performance metals long-products rolling mill in Richburg, S.C., which began production in mid-2004.

“We plan to continue to improve operating performance through the ATI Business System. We have established a 2005 cost reduction goal of approximately $100 million, before the effects of inflation, which includes certain synergies and cost reductions from the J&L asset acquisition and the new labor agreement in our stainless steel business. Finally, retirement benefit expense is projected to be approximately $33 million lower in 2005 than in 2004, primarily as a result of actions taken in 2004 to control retiree medical costs.”

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^(R) products. Commodity specialty materials include stainless steel sheet and plate, silicon and tool steels, and forgings and castings.