Allegheny Technologies Inc. (ATI) reported net income of $91.7 million on sales of $904.2 million for the second quarter 2005.

Second Quarter Results—The $91.7 million net income ($0.91 per share) compares to net income of $26.6 million ($0.31 per share) for the second quarter 2004. Sales of $904.2 million were 40% higher than second quarter 2004 sales of $646.5 million. Sales increased 32% in the Flat-Rolled Products segment, 57% in the High Performance Metals segment, and 35% in the Engineered Products segment.

Segment operating profit was $141.8 million, an increase of $103.7 million compared to the second quarter 2004, as a result of improved performance across all three business segments. Results included a LIFO inventory valuation reserve charge of $26.3 million, due primarily to higher titanium scrap and tungsten raw material costs. The LIFO inventory valuation reserve charge in the second quarter 2004 was $26.1 million.

Cost reductions, before the effects of inflation, totaled $37.0 million company-wide in the second quarter. The company’s 2005 cost reduction goal is $100 million.

Six Month Results—Net income of $152.7 million ($1.53 per share) compares to a net loss of $23.8 million ($0.30 loss per share) for the first six months of 2004. Sales of $1,783.8 million compare to sales of $1,224.3 million for the first six months of 2004.

Cash flow from operations was $59.8 million in the first half 2005 as significantly higher operating results more than offset the further investment of $222.5 million in managed working capital resulting from improved market conditions.

Cash on hand was $253.2 million at June 30, 2005. Cost reductions, before the effects of inflation, totaled $67.1 million company-wide in the first half of 2005. The company’s 2005 cost reduction goal is $100 million.

Comments—"Second quarter results are another milestone that demonstrates the earnings potential of the transformed Allegheny Technologies. ATI revenue and operating profit reached all-time highs. Cash flow from operations was nearly $65 million even after further investments of over $100 million in managed working capital," said L. Patrick Hassey, Chairman, President and CEO of Allegheny Technologies.

"Robust demand from the early stage recovery of the commercial aerospace market and another strong quarter from our exotic alloys business drove the High Performance Metals segment sales and operating profit to record levels. Our High Performance Metals segment operating margins exceeded 25% of sales.

"Operating margins in our Flat-Rolled Products segment improved to nearly 11% of sales. Our high-value flat-rolled product mix was particularly strong due to demand for our flat-rolled nickel-based alloys, specialty steels, and titanium products from the oil and gas, electrical energy, aerospace, and chemical processing markets. Total flat-rolled shipments were less than the first quarter 2005 due to ongoing service center inventory reductions for certain stainless products.

"Sales in our Engineered Products segment also reached record levels due to strong demand from the oil and gas, automotive, mining, and aerospace markets. Sales were aided by our April 2005 asset acquisition of Garryson Limited in the U.K. Segment operating margins were just under 12%.

Outlook—"We remain confident about the prospects for ATI and continue to build a foundation for further growth,” commented Hassey. “As an example, sales of our nickel-based alloys, titanium alloys, exotic alloys, and high-value specialty steels reached 40% of ATI's sales during the first half 2005, compared to 35% of sales during the first half 2004. This represents an increase of $275 million in sales.

"We believe our second half 2005 earnings performance will be similar to the first half 2005 earnings performance. Demand for our High Performance Metals products is expected to remain robust. Demand for our Engineered Products is expected to remain very good. Overall, third quarter 2005 earnings are likely to be lower than the fourth quarter 2005 due primarily to normal seasonal slowing in the Flat-Rolled Products segment. We expect to see reduced shipments of stainless commodity products through most of the third quarter 2005 from continuing inventory management actions throughout the supply chain. We are taking action in our flat-rolled products business to reduce inventory and are encouraged by published reports that many global stainless steel producers also are adjusting their production to market demand. Cash flow from operations during the second half 2005 is expected to be very strong as earnings are no longer anticipated to be offset by considerable investments in managed working capital."

Allegheny Technologies is one of the largest and most diversified specialty materials producers in the world with revenues of approximately $2.7 billion in 2004. ATI has approximately 9,000 full-time employees world-wide. Its principle markets are aerospace, construction and mining, chemical processing/oil & gas, food equipment and appliance, automotive, electrical energy, machine and cutting tools, and medical. Products include nickel-based alloys and superalloys, titanium and titanium alloys, stainless and specialty steels, zirconium, hafnium, and niobium, tungsten materials, silicon and tool steels, and forgings and castings.