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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______
Commission file number 1-12001
ALLEGHENY TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 25-1792394
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 394-2800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class Name of each exchange on which
registered
- -------------------------------------------------------------------------------
Common Stock, $0.10 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934).
Yes X No
--- ---
At March 10, 2003, the Registrant had outstanding 80,643,779 shares of
its Common Stock.
The aggregate market value of the Registrant's voting stock held by
non-affiliates at June 28, 2002 was approximately $1,203 million, based on the
closing price per share of Common Stock on that date of $15.80 as reported on
the New York Stock Exchange. Shares of Common Stock known by the Registrant to
be beneficially owned by directors of the Registrant and officers of the
Registrant subject to the reporting and other requirements of Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are not
included in the computation. The Registrant, however, has made no determination
that such persons are "affiliates" within the meaning of Rule 12b-2 under the
Exchange Act.
Documents Incorporated By Reference
Selected portions of the 2002 Annual Report to Stockholders - Part I, Part II
and Part IV of this Report.
Selected portions of the Proxy Statement for 2003 Annual Meeting of Stockholders
- - Part III of this Report. The information included in the Proxy Statement as
required by paragraphs (a) and (b) of Item 306 of Regulation S-K and paragraphs
(k) and (l) of Item 402 of Regulation S-K is not incorporated by reference in
this Form 10-K.
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INDEX
PAGE
NUMBER
------
PART I.............................................................................................3
Item 1. Business.....................................................................3
Item 2. Properties..................................................................12
Item 3. Legal Proceedings...........................................................14
Item 4. Submission of Matters to a Vote of Security Holders.........................17
PART II...........................................................................................17
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................................17
Item 6. Selected Financial Data.....................................................18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..................18
Item 8. Financial Statements and Supplementary Data.................................18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................................18
PART III..........................................................................................18
Item 10. Directors and Executive Officers of the Registrant..........................18
Item 11. Executive Compensation......................................................18
Item 12. Security Ownership of Certain Beneficial Owners and
Management.............................................................19
Item 13. Certain Relationships and Related Transactions..............................19
Item 14. Controls and Procedures.....................................................19
PART IV...........................................................................................19
Item 15. Exhibits, Financial Statement Schedules, and Report on Form 8-K.............19
SIGNATURES........................................................................................21
CERTIFICATIONS....................................................................................22
EXHIBIT
INDEX.............................................................................................26
2
PART I
ITEM 1. BUSINESS
THE COMPANY
Allegheny Technologies Incorporated is one of the largest and most
diversified specialty materials producers in the world. We use innovative
technologies to offer global markets a wide range of specialty materials.
High-value products include super stainless steel, nickel-based and cobalt-based
alloys and superalloys, titanium and titanium alloys, specialty steels, tungsten
materials, exotic alloys, which include zirconium, hafnium and niobium, 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 electrical and tool steels, and forgings and castings. We operate in the
following three business segments, which accounted for the following percentages
of total revenues of $1.91 billion, $2.13 billion, and $2.46 billion for the
years ended December 31, 2002, 2001, and 2000, respectively:
2002 2001 2000
---- ---- ----
Flat-Rolled Products 55% 51% 59%
High Performance Metals 33% 36% 30%
Industrial Products 12% 13% 11%
Additional financial information with respect to our business segments,
including their contributions to operating profit and their identifiable assets
for the three years ended December 31, 2002 is presented under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations" on pages 9 through 14 of the 2002 Annual
Report to Stockholders (the "2002 Annual Report") and in Note 10 of the Notes to
Consolidated Financial Statements on pages 49 through 51 of the 2002 Annual
Report and is incorporated herein by reference.
Allegheny Technologies Incorporated is a Delaware corporation with its
principal executive offices located at 1000 Six PPG Place, Pittsburgh,
Pennsylvania 15222-5479, telephone number (412) 394-2800. References to
"Allegheny Technologies," the "Company", the "Registrant", "we", "our" and "us"
and similar terms mean Allegheny Technologies Incorporated and its subsidiaries,
unless the context otherwise requires.
OUR BUSINESS
Specialty materials play a significant role in our lives. Allegheny
Technologies is a world leader in the manufacture of both high value and
commodity specialty products. Our high value products accounted for 69% of total
sales in 2002 and our commodity products accounted for 31% of total sales in
2002. Specialty materials are produced in a variety of forms, including sheet,
strip, foil, plate, slab, ingot, billet, bar, rod, wire, coil, tubing, and
shapes, and are selected for use in environments that demand materials having
exceptional hardness, toughness, strength, resistance to heat, corrosion or
abrasion, or a combination of these characteristics. Common end uses of our
products include jet engines, air frames, electrical energy production and
generation, automotive, chemical processing, oil and gas, construction and
mining, machine and cutting tools, appliances and food equipment,
transportation, and medical equipment and implants.
3
Flat-Rolled Products Segment
Our Flat-Rolled Product segment produces, converts and distributes
stainless steel, nickel-based alloys and superalloys, and titanium and
titanium-based alloys, in sheet, strip, plate and foil, and Precision Rolled
Strip(R) products, as well as silicon electrical steels and tool steels. The
operations in this segment are Allegheny Ludlum, Allegheny Rodney, Rome Metals
and Allegheny Ludlum's 60% interest in the Chinese joint venture company known
as Shanghai STAL Precision Stainless Steel Company Limited ("STAL"), which
commenced commercial production in 2000. The remaining 40% interest in STAL is
owned by the Baosteel Group, a state authorized investment company whose equity
securities are publicly traded in the People's Republic of China.
Stainless steel and nickel-based alloys contain elements such as
chromium, nickel and molybdenum for strength and corrosion and heat resistance;
titanium and titanium-based alloys provide higher strength-to-weight ratios and
are corrosion-resistant; tool steel alloys include carbon, tungsten, molybdenum
and other metals to make them both hard and malleable; and electrical steel
contains silicon to minimize electrical energy loss when in use. We offer these
flat-rolled products in a broad selection of grades, sizes and finishes designed
to meet international specifications. We provide technical support for material
selection. Our wide array of alloys and product forms provides customers with
choices from which to select the optimum alloy for their application.
Sheet. Stainless steel, nickel-based alloy and titanium sheet products
are used in a wide variety of consumer and industrial applications such as food
preparation, appliance, automotive, aerospace and medical applications that
require ease of cleaning and fabrication, as well as corrosion resistance.
Approximately 64% by volume of our sheet products are sold to service centers,
which have slitting, cutting or other processing facilities, with the remainder
sold directly to end-use customers.
Strip. Stainless steel, nickel-based alloy and titanium strip products
are used in a variety of consumer and industrial products and a wide range of
automotive components. We also offer very thin Precision Rolled Strip(R)
products which range from 0.015 inch to less than 0.0015 inch (0.38 - 0.038 mm)
thick. Our Precision Rolled Strip(R) products include stainless steel,
nickel-based alloys, titanium and titanium alloys, and carbon steel that are
used by customers to fabricate a variety of different products ranging from
automobile components to photographic, computer, building and construction and
consumer products. Approximately 45% by volume of our strip products are shipped
directly to end-use customers, with the remainder to service centers, including
our own distribution network for flat-rolled strip materials.
Plate. Stainless steel, nickel-based alloy and titanium plate products
are primarily used in industrial equipment that requires ease of cleaning or
corrosion-resistant capabilities such as pollution control scrubbers, food
processing equipment, pulp and paper equipment, chemical processing equipment,
power generation equipment and aerospace applications. We process and distribute
stainless steel and nickel alloy plate and titanium and titanium alloy plate
products in a wide variety of grades and gauges. Approximately 77% by volume of
our plate products are sold to service centers, with the remainder sold directly
to end-use customers.
Silicon Electrical Steel. Our grain-oriented silicon electrical steel
products are used generally in applications in which electrical conductivity and
magnetic properties are important.
4
These products are sold directly to end-use customers, including manufacturers
of transformers and communications equipment.
High Performance Metals Segment
Our High Performance Metals segment produces, converts and distributes
a wide range of high performance alloys, including nickel- and cobalt-based
alloys and superalloys, titanium and titanium-based alloys, exotic alloys such
as zirconium, hafnium, niobium, tantalum, and their related alloys, and other
specialty materials, primarily in slab, ingot, billet, bar, rod, wire, coil and
seamless tube forms. The operations in this segment are Allvac, Allvac Ltd
(U.K.) and Wah Chang, which also produces and sells zirconium chemicals.
Nickel-, Cobalt- and Titanium-Based Alloys and Superalloys. Our
nickel-, iron-, cobalt- and titanium-based alloys and superalloys are engineered
to retain exceptional strength and corrosion resistance at temperatures through
2,000 degrees Fahrenheit (1,093 degrees Celsius) and are used in critical,
high-stress applications. These products are designed for the high performance
requirements of aerospace, oil and gas, power generation, chemical processing,
transportation, biomedical, marine and nuclear industries.
Exotic Alloys - Zirconium, Hafnium, Niobium and Tantalum. We are a
leading global producer of zirconium, a highly corrosion-resistant metal that is
transparent to neutrons. Zirconium is used for fuel tubes and structural parts
in nuclear power reactors and for corrosion-resistant chemical industry
applications, and is also used in the jewelry and personal hygiene industries.
Hafnium, derived as a by-product of zirconium, is principally used for control
rods in nuclear reactors due to its ability to absorb neutrons, and as an
alloying addition in aerospace applications. We also produce niobium, also known
as columbium, in various forms and alloys. The higher quality grades of niobium
we produce are used as an alloying addition in superalloys for jet engines and
for aerospace applications such as rocket and fuel nozzles. Niobium and related
alloys also are used in applications requiring superconducting characteristics
for high-strength magnets, including in medical devices for body-scanning,
accelerators for high-energy physics, and fusion energy projects for the
generation of electricity. We also produce tantalum, one of the most
corrosion-resistant metals, which is used for medical implants, chemical process
equipment and aerospace engine components.
Industrial Segment
Our Industrial Products segment's principal business includes the
production of tungsten powder, tungsten heavy alloys, tungsten carbide materials
and carbide cutting tools. The segment also produces large grey and ductile iron
castings and carbon alloy steel forgings. The operations in this segment are
Metalworking Products, Casting Service and Portland Forge.
Cutting Tools and Tungsten Carbide Products. We produce a line of
sintered tungsten carbide products that approach diamond hardness for the
metalworking, mining, oil and gas, and other industries requiring tools with
extra hardness. Cemented carbide products, which may be coated or uncoated, are
used as super-hard cutters in the high-speed machining and cutting of steel,
high temperature alloys and other applications where hardness and wear
resistance are important. Technical developments related to ceramics, coatings
and other disciplines are incorporated in these products.
5
We also produce tungsten for worldwide markets from numerous and varied
tungsten-bearing raw materials to produce tungsten and tungsten carbide powders.
Previously used cemented carbide parts are also recycled into tungsten carbide
powder.
Forgings and Castings. We forge carbon alloy steels into finished forms
that are used in a diverse number of industries. With the latest screw-type
forging presses, we produce carbon alloy steel forgings in sizes ranging from
one pound to more than 200 pounds.
We also cast grey and ductile iron metals in sizes ranging from 1,000
pounds to 160,000 pounds and in forms ranging from diesel locomotive engine
blocks to housings and parts for power generation equipment, tools, and
automobiles.
CAPITAL INVESTMENTS
The current 2003 capital expenditure plan is approximately $70 million
for operational necessities and for completion of capital programs which
commenced in 2002.
COMPETITION
Markets for both our high value and commodity products and services in
each of our principal business segments are highly competitive. We compete with
many manufacturers which, depending on the product involved, range from large
diversified enterprises to smaller companies specializing in particular
products. Factors that affect our competitive position are manufacturing costs,
industry manufacturing capacity, the quality of our products, services and
delivery capabilities, our capabilities to produce a wide range of specialty
materials in various unique grades, alloys and product forms, our technology
capabilities including our research and development efforts, our marketing
strategies and price.
We face competition from domestic and foreign competitors, a number of
which are government subsidized. In 1999, the United States imposed antidumping
and countervailing duties on dumped and subsidized imports of stainless steel
sheet and strip in coils and stainless steel plate in coils from companies in
ten foreign countries. Current administrative reviews by the U.S. Commerce
Department are revising the findings at lower duty rates. We continue to monitor
unfairly traded imports from foreign producers for appropriate action.
On March 5, 2002, President Bush announced a decision imposing tarriffs
on certain steel imports resulting from his June 5, 2001 order for an
investigation by the U.S. International Trade Commission ("ITC") under Section
201 of the 1974 Trade Act ("Section 201") related to certain specialty steel
products. Section 201 allows the President to restrict imports or impose tariffs
on imports that are seriously injuring a domestic industry. Specialty steel
products under investigation for the years 1996 through 2000 included stainless
steel bar, rod and wire, and tool steel. The Section 201 tariffs imposed on
certain steel imports have had minimal impact on our business because of limited
applicability to our products.
6
RAW MATERIALS AND SUPPLIES
Substantially all parts and materials required in the manufacture of
our products are available from more than one supplier and the sources and
availability of raw materials essential to its businesses are adequate.
The principal raw materials we use in the production of our specialty
materials are scrap (including nickel-, chromium-, titanium- and
molybdenum-bearing scrap), nickel, titanium sponge, zirconium sand and sponge,
ferrochromium, ferrosilicon, molybdenum and molybdenum alloys, ammonium
paratungstate, manganese and manganese alloys, cobalt, niobium and other
alloying materials.
Purchase prices of certain critical raw materials are volatile. As a
result, our operating results could be subject to significant fluctuation. For
example, since we generally use in excess of 40,000 tons of nickel each year, a
hypothetical change of $1.00 per pound in nickel prices would result in
increased costs of approximately $80 million.
In addition, certain of these raw materials, such as nickel, cobalt,
ferrochromium and titanium sponge, can be acquired by us and our specialty
materials industry competitors, in large part, only from foreign sources. Some
of these foreign sources are located in countries that may be subject to
unstable political and economic conditions, which might disrupt supplies or
affect the price of these materials.
We purchase our nickel requirements principally from producers in
Australia, Canada, Norway, Russia, and the Dominican Republic. Zirconium sponge
is purchased from a source in France, while zirconium sand is purchased from
both U.S. and Australian sources. Cobalt is purchased primarily from producers
in Canada. More than 80% of the world's reserves of ferrochromium are located in
South Africa, Zimbabwe, Albania, and Kazakhstan. We also purchase titanium
sponge from sources in Kazakhstan, Japan and Russia.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Quantitative and Qualitative Disclosure About Market
Risk and Other Matters -Forward Looking Statements - Volatility of Energy
Prices; Availability of Energy Resources" and " - Volatility of Prices of
Critical Raw Materials; Unavailability of Raw Materials" on pages 26 through 27
of the 2002 Annual Report.
EXPORT SALES AND FOREIGN OPERATIONS
International sales represented approximately 23%, 23%, and 18% of our
total sales in 2002, 2001, and 2000, respectively. These figures include export
sales by U.S. operations to customers in foreign countries, which accounted for
approximately 15%, 15%, and 12% of our total sales in each of 2002, 2001, and
2000, respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Quantitative and Qualitative Disclosure
About Market Risk and Other Matters - Forward Looking Statements - Export Sales"
on page 28 of the 2002 Annual Report. Our overseas sales, marketing and
distribution efforts are aided by international marketing offices or
representatives located at various locations throughout the world. See Note 10
of the Notes to Consolidated Financial Statements on pages 49 through 51 of the
2002 Annual Report for more information regarding international sales activity.
7
For 2002, our sales in the United States and Canada represented 77% and
2%, respectively, of total 2002 sales. Within Europe, our sales to the United
Kingdom, France and Germany represented 5%, 3% and 5%, respectively, of total
sales.
Our Metalworking Products business manufactures high precision
threading, milling, boring and drilling systems for the European market from
locations in the United Kingdom, Spain, France, Germany and Switzerland. Our
Allvac Ltd business has manufacturing capabilities in the United Kingdom and has
enhanced service to customers by improving the sales and distribution network
for our nickel-based alloys, specialty steel and titanium in Europe. The STAL
joint venture in the People's Republic of China produces Precision Rolled
Strip(R) products, which enables us to offer our Precision Rolled Strip(R)
products more effectively to markets in China and other Asian countries.
BACKLOG, SEASONALITY AND CYCLICALITY
Our backlog of confirmed orders was approximately $412.1 million at
December 31, 2002 and $488.9 million at December 31, 2001. We expect that
approximately 88% of confirmed orders on hand at December 31, 2002 will be
fulfilled during the year ending December 31, 2003. Backlog of confirmed orders
of the Flat-Rolled Products segment was $76.3 million at December 31, 2002 and
$105.2 million at December 31, 2001. We expect that approximately 100% of the
confirmed orders on hand at December 31, 2002 for this segment will be fulfilled
during the year ending December 31, 2003. Backlog of confirmed orders of the
High Performance Metals segment was approximately $300.0 million at December 31,
2002 and $377.9 million at December 31, 2001. We expect that approximately 84%
of the confirmed orders on hand at December 31, 2002 for this segment will be
fulfilled during the year ending December 31, 2003.
Generally, our sales and operations are not seasonal. However, demand
for our products are cyclical over longer periods because specialty materials
customers operate in cyclical industries and are subject to changes in general
economic conditions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Quantitative and Qualitative Disclosure
About Market Risk and Other Matters - Forward Looking Statements - Cyclical
Demand for Products" on page 26 of the 2002 Annual Report.
RESEARCH, DEVELOPMENT AND TECHNICAL SERVICES
We believe that our research and development capabilities give us an
edge in developing new products and manufacturing processes that contribute to
the profitable growth potential of our businesses on a long-term basis. We
conduct research and development at our various operating locations both for our
own account and, on a limited basis, for customers on a contract basis.
Estimates of the components of research and development for each of our three
segments for the years ended December 31, 2002, 2001, and 2000 included the
following:
8
(In millions) 2002 2001 2000
---- ---- ----
Company-Funded:
Flat-Rolled Products $ 4.1 $ 4.5 $ 6.3
High Performance Metals 5.8 5.0 5.0
Industrial Products 2.1 1.8 2.3
----- ----- -----
$12.0 $11.3 $13.6
----- ----- -----
Customer-Funded:
Flat-Rolled Products $ 0.6 $ -- $ --
High Performance Metals 2.1 2.0 2.0
----- ----- -----
$ 2.7 $ 2.0 $ 2.0
----- ----- -----
Total Research and Development $14.7 $13.3 $15.6
===== ===== =====
With respect to the Flat-Rolled Products and High Performance Metals
segments, our research, development and technical service activities are closely
interrelated and are directed toward cost reduction, process improvement,
process control, quality assurance and control, system development, the
development of new manufacturing methods, the improvement of existing
manufacturing methods, the improvement of existing products, and the development
of new products.
We own several hundred United States patents, many of which are also
filed under the patent laws of other nations. Although these patents, as well as
our numerous trademarks, technical information, license agreements, and other
intellectual property, have been and are expected to be of value, we believe
that the loss of any single such item or technically related group of such items
would not materially affect the conduct of our business.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
We are subject to various domestic and international environmental laws
and regulations that govern the discharge of pollutants into the air or water,
and the disposal of hazardous substances, and which may require that we
investigate and remediate the effects of the release or disposal of materials at
sites associated with past and present operations, including sites at which we
have been identified as a potentially responsible party ("PRP") under the
Federal Superfund laws, and comparable state laws. We could incur substantial
cleanup costs, fines, and civil or criminal sanctions, third party property
damage or personal injury claims as a result of violations or liabilities under
these laws or non-compliance with environmental permits required at our
facilities. We are currently involved in the investigation and remediation of a
number of our current and former sites as well as third party locations sites
under these laws.
With respect to proceedings brought under the Federal Superfund laws,
or similar state statutes, we have been identified as a PRP at approximately 31
of such sites, excluding those at which we believe we have no future liability.
Our involvement is limited or de minimis at approximately 13 of these sites, and
the potential loss exposure with respect to any of the remaining 18 individual
sites is not considered to be material.
We are a party to various cost-sharing arrangements with other PRPs at
the sites. The terms of the cost-sharing arrangements are subject to
non-disclosure agreements as confidential information. Nevertheless, the
cost-sharing arrangements generally require all PRPs to post financial assurance
of the performance of the obligations or to pre-pay into an escrow or trust
9
account their share of anticipated site-related costs. In addition, the Federal
government, through various agencies, is a party to several such arrangements.
At December 31, 2002, our reserves for environmental remediation
totaled approximately $41.0 million. Based on currently available information,
we do not believe that there is a reasonable possibility that a loss exceeding
the amount already accrued for any of the matters with which we are currently
associated (either individually or in the aggregate) will be an amount that
would be material to a decision to buy or sell our securities. Future
developments, administrative actions or liabilities relating to environmental
matters, however, could have a material adverse effect on our financial
condition and results of operation.
See the discussion of related matters in Item 3. Legal Proceedings.
Additional related information is presented under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Quantitative and Qualitative Disclosure About Market Risk and Other Matters -
Forward Looking Statements - Risks Associated with Environmental Matters" on
pages 24 through 25 of the 2002 Annual Report and in Notes 1 and 14 of the Notes
to Consolidated Financial Statements on pages 35 through 36, and pages 58
through 60, respectively, of the 2002 Annual Report.
EMPLOYEES
We have approximately 9,650 employees. A portion of our workforce is
covered by various collective bargaining agreements, principally with the United
Steelworkers of America ("USWA"), including: approximately 3,450 Allegheny
Ludlum production and maintenance employees covered by collective bargaining
agreements between Allegheny Ludlum and the USWA, which are effective through
June 2007; approximately 165 Oremet employees covered by a collective bargaining
agreement with the USWA, which are effective through June 2007; and
approximately 600 Wah Chang employees covered by a collective bargaining
agreement with the USWA, which continues through March 2008. Negotiations are
ongoing for a new collective bargaining agreement with the USWA affecting
approximately 140 full and part-time employees at various Allegheny Ludlum
facilities in Western Pennsylvania. Also, negotiations are expected to begin for
a new collective bargaining agreement with the USWA affecting approximately 104
employees at the Casting Service facility in LaPorte, Indiana.
Generally, agreements that expire may be terminated after notice by the
union. After termination, the union may authorize a strike. A strike by the
employees covered by one or more of the collective bargaining agreements could
materially adversely effect our operating results. There can be no assurance
that we will succeed in concluding collective bargaining agreements with the
unions to replace those that expire.
See the discussion of related matters under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Quantitative and Qualitative Disclosure About Market Risk and Other Matters -
Forward Looking Statements - Labor Matters" on page 27 of the 2002 Annual
Report.
10
AVAILABLE INFORMATION
Our internet website address is http://www.alleghenytechnologies.com.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free
of charge through our Internet website as soon as reasonably practicable after
we electronically file such material with, or furnish such material to, the
Securities and Exchange Commission. Our Internet website and the content
contained therein or connected thereto are not intended to be incorporated into
this Annual Report on Form 10-K.
PRINCIPAL OFFICERS OF THE REGISTRANT
Principal officers of the Company as of February 28, 2003 are as
follows:
NAME AGE TITLE
- ---- --- -----
Robert P. Bozzone 69 Chairman of the Board and Director*
James L. Murdy 64 President and Chief Executive Officer and Director*
Richard J. Harshman 46 Senior Vice President, Finance and Chief Financial Officer*
Douglas A. Kittenbrink 47 Executive Vice President and Chief Operating Officer*
Robert S. Park 58 Vice President, Treasurer
Dale G. Reid 47 Vice President, Controller and Chief Accounting Officer*
Jack W. Shilling 59 Executive Vice President, Strategic Initiatives and Technology and Chief
Technology Officer*
Jon D. Walton 60 Senior Vice President, Chief Legal and Administrative Officer*
- --------------------
* Such officers are subject to the reporting and other requirements of Section
16 of the Securities Exchange Act of 1934, as amended.
Set forth below are descriptions of the business background for the
past five years of the principal officers of the Company.
Robert P. Bozzone has been Chairman of the Board since December 2000
and had served as interim President and Chief Executive Officer from December
2000 until July 2001. Mr. Bozzone also served as Vice Chairman beginning August
1996 and was Vice Chairman of Allegheny Ludlum Corporation from August 1994 to
August 1996. Previously, he was President and Chief Executive Officer of
Allegheny Ludlum Corporation until his retirement from active employment with
the Company in July 1994.
James L. Murdy has been President and Chief Executive Officer since
July 2001. He served as Executive Vice President from September 2000 to July
2001 and as Executive Vice President, Finance and Administration and Chief
Financial Officer from December 1996 to September 2000. He served as Senior Vice
President - Finance and Chief Financial Officer from August 1996 to December
1996, having previously served as the Senior Vice President-Finance and Chief
Financial Officer of Allegheny Ludlum Corporation.
11
Richard J. Harshman has been Senior Vice President, Finance and Chief
Financial Officer as announced in December 2001 and served as Vice President,
Finance and Chief Financial Officer from December 2000 to December 2001. Between
September 2000 and December 2000, Mr. Harshman served as Vice President,
Controller and Acting Chief Financial Officer. Previously, he had been Vice
President, Investor Relations and Corporate Communications from July 1998, and
prior to that served as Senior Vice President, Finance and Administration, at
Allvac from 1995.
Douglas A. Kittenbrink has been Executive Vice President and Chief
Operating Officer since July 2001, and served as President of Allegheny Ludlum
Corporation from April 2000 to November 2002. Previously he served as Senior
Vice President, Manufacturing Engineering, Information Technology and Production
Control of Allegheny Ludlum. He also served as Vice President, Engineering and
Information Technology of Allegheny Ludlum from August 1994 to January 1998.
Robert S. Park has been Vice President, Treasurer since August 1996.
From May 1994 to August 1996, Mr. Park served as Vice President, Treasurer of
Allegheny Ludlum Corporation. Previously, he served as Treasurer of Allegheny
Ludlum.
Dale G. Reid has been Vice President, Controller and Chief Accounting
Officer since December 2000. Between September 2000 and December 2000, he served
as Vice President, Finance for Allegheny Ludlum Corporation. Previously, he had
been Vice President, Controller and Chief Accounting Officer from August 1996
and prior to that served as Chief Accounting Officer and Controller of Teledyne,
Inc.
Jack W. Shilling has been Executive Vice President, Strategic
Initiatives and Technology and Chief Technology Officer since July 2001. He
served as President of the High Performance Metals Group from April 2000 to July
2001. Previously he served as President of Allegheny Ludlum Corporation. He also
served as Executive Vice President of Allegheny Ludlum from 1996 to 1998.
Jon D. Walton has been Senior Vice President, Chief Legal and
Administrative Officer since July 2001. He was Senior Vice President, General
Counsel and Secretary from August 1997 to July 2001. Previously, he served as
Vice President, General Counsel and Secretary from August 1996 to August 1997,
and prior to that served in the same capacity as an officer of Allegheny Ludlum
Corporation.
ITEM 2. PROPERTIES
Our principal domestic facilities as of December 31, 2002 are listed
below by segment. Of those facilities listed below which are owned, three are
subject to mortgages or similar encumbrances securing borrowings under certain
industrial development authority financings. Although the facilities vary in
terms of age and condition, we believe that these facilities have been
well-maintained.
12
APPROXIMATE
SQUARE FOOTAGE
FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED)
----------------- ------------- --------------
FLAT-ROLLED PRODUCTS SEGMENT
Brackenridge Works Manufacturing of stainless steel and other 2,443,000 (owned)
Brackenridge and Natrona, PA specialty material strip, sheet, and plate and
silicon electrical steel strip and sheet.
West Leechburg Works Manufacturing of stainless steel and other 1,415,000 (owned)
West Leechburg and specialty material strip and sheet and silicon
Bagdad, PA electrical steel strip and sheet.
Vandergrift Plant Manufacturing of stainless steel and other 966,000 (owned)
Vandergrift, PA specialty material strip and sheet.
Washington Plant Manufacturing of specialty material plate. 615,000 (owned)
Washington, PA
Washington Flat-Roll Plant Manufacturing of stainless steel sheet. 350,000 (owned)
Washington, PA
Wallingford Plant Manufacturing of stainless steel and other 591,000 (owned)
Wallingford and specialty material strip.
Waterbury, CT
Houston Plant Manufacturing of stainless steel and other 298,000 (owned)
Houston, PA specialty material.
Latrobe Plant Manufacturing of nickel-based and other specialty 468,000 (owned)
Latrobe, PA steel.
New Castle Plant Manufacturing of stainless steel sheet. 178,000 (owned)
New Castle, IN
Massillon Plant Manufacturing of stainless steel and other 165,000 (owned)
Massillon, OH specialty material plate on 96-inch wide anneal
and pickle line.
Allegheny Rodney Strip Plant Manufacturing of stainless steel precision rolled 250,000 (leased)
New Bedford, MA thin sheet strip and foil, custom roll-formed and
stretch-formed shapes.
HIGH PERFORMANCE METALS SEGMENT
Monroe Plant Production of nickel and titanium products and 640,000 (owned)
Monroe, NC other specialty steel long products.
Lockport Plant Manufacturing nickel-based alloy and other 282,000 (leased)
Lockport, NY specialty material products.
Richburg Plant Production of nickel and titanium product and 221,000 (owned)
Richburg, SC other specialty steel long products.
Bakers Plant Production of titanium ingot. 60,000 (owned)
Monroe, NC
Oremet Facility Production of titanium ingot, mill products and 491,000 (owned)
Albany, OR castings.
Wah Chang Facility Production of zirconium, hafnium, niobium, 917,000 (owned)
Albany, OR titanium and tantalum.
13
APPROXIMATE
SQUARE FOOTAGE
FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED)
----------------- ------------- --------------
Richland Plant Production of titanium ingots, slabs and 103,000 (owned)
Richland, WA electrodes.
Huntsville Plant Production of exotic alloys and other specialty 91,000 (owned)
Huntsville, AL material wire.
Frackville, PA Production of titanium wire products. 55,000 (owned)
INDUSTRIAL PRODUCTS SEGMENT
Waynesboro, PA Production of threading systems. 386,000 (owned)
Huntsville, AL Production of tungsten and tungsten carbide 293,000 (owned)
powders.
Grant, AL Production of primary tungsten sintered parts. 88,000 (leased)
Houston, TX Production of tungsten carbide products used in 120,000 (owned)
oil and gas drilling applications.
Nashville, TN Production of tungsten carbide and cutting tools. 134,000 (owned)
La Porte, IN Manufacturing of large ductile and grey iron 453,000 (owned)
castings.
Portland, IN Manufacturing of carbon and alloy steel forgings. 215,000 (owned)
Lebanon, KY Manufacturing of carbon and alloy steel forgings. 100,000 (owned)
Gurley, AL Production of tungsten, tungsten carbide and 435,000 (leased)
molybdenum powders.
We also own or lease production facilities in a number of foreign
countries, including the United Kingdom, Germany, France, Spain, Switzerland,
and the People's Republic of China. We own and/or lease and operate
625,000-square foot facilities for melt and remelt, machining and bar mill
operations, laboratories and offices located on a 25-acre site in Sheffield,
England, and a 40,000-square foot leased facility in Sheffield, England for
computer numerically controlled milling and machine operations. Through our STAL
joint venture, we operate a 130,000-square foot facility for finishing Precision
Rolled Strip(R) products in the Xin-Zhuang Industrial Zone, Shanghai, China.
Our executive offices, located at PPG Place in Pittsburgh, Pennsylvania
are leased. These facilities are modern and sufficient for us to carry on our
current activities.
ITEM 3. LEGAL PROCEEDINGS
We become involved from time to time in various lawsuits, claims and
proceedings relating to the conduct of our business, including those pertaining
to environmental, government contracting, product liability, patent
infringement, commercial, employment, employee benefits, and stockholder
matters.
In June 1995, the U.S. Government commenced an action against Allegheny
Ludlum in the United States District Court for the Western District of
Pennsylvania, alleging multiple violations of the Federal Clean Water Act. The
trial of this matter concluded in February 2001.
14
In February 2002, the Court issued a decision imposing a penalty of $8.2 million
for incidents at five facilities that occurred over a period of approximately
six years which Allegheny Ludlum had reported to the appropriate environmental
agencies. We asked the Court to reconsider its decision, which the Court denied
in October 2002. We appealed the Court's decision. At December 31, 2002, we had
adequate reserves for this matter.
Allegheny Ludlum and the United Steelworkers of America ("USWA") are
parties to various collective bargaining agreements which set forth a "Profit
Sharing Plan". We were involved in litigation with the USWA regarding Profit
Sharing Pool calculations for 1996, 1997, 1998 and 1999. The USWA claimed
adjustments that alleged we owed to USWA-represented employees approximately $32
million. We maintained that our certified determinations of the Profit Sharing
Pool calculations were made as prescribed by the Profit Sharing Plan. On January
13, 2003, we formalized a settlement agreement with the USWA that provided for
an aggregate $5 million distribution to eligible employees. At December 31,
2002, we had adequate reserves for this matter.
In March 1995, Kaiser Aerospace & Electronics Corporation ("Kaiser")
filed a civil complaint against Teledyne Industries, Inc. (now TDY Industries,
Inc. ("TDY")), a wholly-owned subsidiary of the Company and Dimeling Schreiber &
Park ("DS&P"), DS&P's general partners, and New Piper Aircraft, Inc. in the
state court for Miami-Dade County, Florida. The complaint alleged that TDY
breached a Cooperation and Shareholder's Agreement with Kaiser under which the
parties agreed to cooperate in the filing and promotion of a proposed plan for
acquiring out of bankruptcy the assets of Piper Aircraft, a manufacturer of
general aviation aircraft. TDY and Kaiser are engaged in discovery and have
agreed to participate in a mediation. Kaiser requests that the court impose a
constructive trust on TDY's equity interest in privately held New Piper
Aircraft, Inc., which represents approximately 30% of the equity of New Piper
Aircraft, Inc. In the alternative, Kaiser also seeks unspecified damages in an
amount "to be determined at trial." The trial for this matter is not set. While
the outcome of the litigation cannot be predicted, and we believe that the
claims are not meritorious, an adverse resolution of this matter could have a
material adverse effect on our results of operations and financial condition.
TDY and the San Diego Unified Port District ("Port District") entered
into a lease of property located in San Diego, California ("San Diego facility")
on October 1, 1984. TDY operated its Teledyne Ryan Aeronautical division
("Ryan") at the San Diego facility until May 1999, when substantially all the
assets and business of Ryan were sold to Northrop Grumman Corporation
("Northrop"). Northrop subleased a portion of the property with the approval of
the Port District until early 2001. TDY also entered into three separate
sublease arrangements for portions of the property subject to the approval of
the Port District, which the Port District refused. After its administrative
appeal to the Port District was denied, TDY commenced a lawsuit against the Port
District. The complaint, filed in December 2001 in state court in San Diego,
alleges breach of contract, inverse condemnation, tortious interference with a
prospective economic advantage and other causes of action relating to the Port
District's failure to consent to subleases of the space. The Complaint seeks at
least $4 million for damages from the Port District and declaratory relief. The
trial for this matter is scheduled for October 2003.
Despite the Port District's failure to consent to the three subleases,
TDY continued its marketing efforts to sublease the San Diego facility. The
rental payments and other expenses for the property amounted to approximately
$0.4 million per month. At December 31, 2002, we had a reserve of approximately
$3 million to cover the costs of occupying the San Diego facility.
15
TDY and the Port District discussed resolution of this matter but did not reach
any agreement even after court-sponsored mediation. In June 2002 TDY ceased
paying rent on the grounds that the Port District had rescinded the Lease when
it refused to allow TDY to sublease the property and that the Port District's
condemnation of the property voided the lease. In September 2002, the Port
District demanded that rent be paid or possession of the property be returned to
the Port District. TDY returned possession to the Port District on October 31,
2002 and denied that any remaining amounts were due under the lease.
The Port District filed a cross-complaint against TDY in March 2003.
The Complaint alleges breach of contract for failure to pay rent and for certain
environmental contamination on the property. The Port District seeks $1.2
million in past rent, along with future rent and an unspecified sum of damages
for failure to remedy. The Port District also alleges anticipatory breach
relating to removal of structures and debris from the San Diego facility and
seeks specific performance or reimbursement to the Port District. The Port
District further alleges that it is entitled to indemnity for potential
liability related to environmental matters at the San Diego facility, and seeks
a declaratory judgment in its favor. TDY has various defenses to the allegations
in the Port District's Complaint and denies that it has any obligation to the
Port District.
In another matter related to the San Diego facility, the Port District
requested that the California Department of Toxic Substances Control ("DTSC")
evaluate whether the property is regulated as a hazardous waste transportation,
storage, or disposal facility under the Resource Conservation and Recovery Act
("RCRA") and similar state laws. DTSC recognizes that the information pertaining
to the RCRA permitting status of the property is ambiguous and referred the
issue of the property's RCRA permitting status to DTSC's Legal Office for
further consideration. TDY discussed this matter directly with DTSC's Legal
Office and DTSC agreed to refrain from taking action regarding this issue until
after completion of DTSC's Legal Office review. To the extent the facility is
subject to RCRA permitting and corrective action is required at the property,
DTSC has agreed that the San Diego Regional Water Quality Control Board
("Regional Board") is the appropriate agency to oversee the corrective action
work. The Regional Board is currently overseeing other investigative work at the
site, the costs of which are included in our environmental reserves.
We are conducting an environmental assessment of portions of the San
Diego facility at the request of the Regional Board. At this stage of the
assessment, we cannot predict if any remediation will be necessary. We
remediated in 1998 and continue to monitor a lagoon near the San Diego facility.
Also, we are seeking approval from the San Diego Department of Public Health for
the 1996 closure of four underground storage tanks at the San Diego facility. We
are evaluating potential claims we have against neighboring property owners and
other PRPs related to the environmental condition of the San Diego facility.
TDY and another wholly-owned subsidiary, among others, have been
identified by the U.S. Environmental Protection Agency (EPA) as PRPs at the Li
Tungsten Superfund Site in Glen Cove, New York. We believe that most of the
contamination at the Site resulted from work done while the United States
government either owned or controlled operations at the Site, or from processes
done for various agencies of the United States, and that the United States is
liable for a substantial portion of the remediation costs at the Site. In
November 2000, TDY filed a cost recovery and contribution action against the
United States government. Discovery is ongoing but no trial date has been set.
In March 2003, the Court ordered the parties, including the United States
government, to fund a portion of the remediation costs at the Site. An adverse
resolution
16
of this matter could have a material adverse effect on the results of operations
and financial condition.
A number of other lawsuits, claims and proceedings have been or may be
asserted against us relating to the conduct of our business, including those
pertaining to product liability, patent infringement, commercial, employment,
employee benefits, environmental and stockholder matters. While the outcome of
litigation cannot be predicted with certainty, and some lawsuits, claims or
proceedings may be determined adversely to the Company, we do not believe that
the disposition of any such pending matters is likely to have a material adverse
effect on our financial condition or liquidity, although the resolution in any
reporting period of one or more of these matters could have a material adverse
effect on our results of operations for that period.
For additional information see Note 14 of the Notes to Consolidated
Financial Statements on pages 58 through 60 of the 2002 Annual Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information required by this item is incorporated by reference to
"Common Stock Prices" on page 64 of the 2002 Annual Report.
Equity Compensation Plan Information
Information about our equity compensation plans at December 31, 2002 was as
follows:
Number of Shares Number of Shares
to be Issued Upon Weighted Average Remaining
Exercise of Exercise Price of Available for
Outstanding Options Outstanding Options Future Issuance (a)
--------------------------------------------------------------------
(In thousands, except per share amounts)
Equity Compensation Plans
Approved by Shareholders 7,919 $ 20.42 4,592
Equity Compensation Plans Not
Approved by Shareholders 0 $0 0
----- -----
Total 7,919 4,592
===== =====
(a) Of these shares, a maximum of 410,000 shares are reserved for the Total
Shareholder Return Incentive Compensation Program. Under this program,
participants receive awards of performance share units that are earned based
on a comparison of our total shareholder return ("TSR") for a three-year
period with the TSR during the same such period of a peer group of companies
selected by the Board of Directors.
17
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference to
"Selected Financial Data" on pages 63 and 64 of the 2002 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information required by this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 9 through 64 of the 2002 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Quantitative and Qualitative Disclosure About Market Risk and Other
Matters - Forward Looking Statements - Volatility of Energy Prices; Availability
of Energy Resources" and "- Volatility of Prices of Critical Raw Materials;
Unavailability of Raw Materials" and "- Interest Rate Risk" on pages 26 through
28 of the 2002 Annual Report and Note 1 of the Notes to Consolidated Financial
Statements on pages 34 and 36 of the 2002 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to Consolidated
Financial Statements listed in Item 14(a)(1) are incorporated by reference to
pages 29 through 61 of the 2002 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the information set forth under the caption "Principal
Officers of the Registrant" in Part I of this report, the information concerning
our directors required by this item is incorporated by reference to "Election of
Directors" as set forth in the 2003 Proxy Statement filed by us pursuant to
Regulation 14A (the "2003 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference to
"Director Compensation," "Executive Compensation" and "Compensation Committee
Interlocks and Insider Participation" as set forth in the 2003 Proxy Statement.
We do not incorporate by reference in this Form 10-K either the "Report on
Executive Compensation" or the "Cumulative Total Stockholder Return" section of
the 2003 Proxy Statement.
18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference to
"Stock Ownership Information" as set forth in the 2003 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference to
"Certain Transactions" as set forth in the 2003 Proxy Statement.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated
the Company's disclosure controls and procedures as of December 31,
2002, and they concluded that these controls and procedures are
effective.
(b) Changes in Internal Controls
There are no significant changes in internal controls or in other
factors that could significantly affect these controls subsequent to
December 31, 2002.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements included on pages
29 through 61 of the 2002 Annual Report are incorporated by reference:
Consolidated Statements of Income - Years Ended December 31,
2002, 2001, and 2000
Consolidated Balance Sheets at December 31, 2002 and 2001
Consolidated Statements of Cash Flows - Years Ended December
31, 2002, 2001, and 2000
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 2002, 2001, and 2000
Report of Ernst & Young LLP, Independent Auditors
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
All schedules set forth in the applicable accounting regulations
of the Commission either are not required under the related instructions or are
not applicable and, therefore, have been omitted.
19
(3) EXHIBITS
A list of exhibits included in this Report or incorporated by
reference is found in the Exhibit Index beginning on page 26 of this Report and
incorporated by reference.
(b) CURRENT REPORT ON FORM 8-K:
DATE NATURE OF REPORT
---- ----------------
November 14, 2002 Press Release, dated November 14, 2002,
regarding dividends.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALLEGHENY TECHNOLOGIES INCORPORATED
Date: March 24, 2003 By /s/ James L. Murdy
--------------------------------
James L. Murdy
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and as of the 24th day of March, 2003.
/s/ James L. Murdy /s/ Richard J. Harshman
- ------------------------------------- --------------------------------
James L. Murdy Richard J. Harshman
President and Chief Executive Officer Senior Vice President, Finance
and Director And Chief Financial Officer
(Principal Financial Officer)
/s/ Dale G. Reid
--------------------------------
Dale G. Reid
Vice President-Controller and
Chief Accounting Officer
(Principal Accounting Officer)
/s/ Robert P. Bozzone /s/ Paul S. Brentlinger
- ------------------------------------- --------------------------------
Robert P. Bozzone Paul S. Brentlinger
Chairman Director
/s/ Frank V. Cahouet /s/ Diane C. Creel
- ------------------------------------- --------------------------------
Frank V. Cahouet Diane C. Creel
Director Director
/s/ James C. Diggs /s/ C. Fred Fetterolf
- ------------------------------------- --------------------------------
James C. Diggs C. Fred Fetterolf
Director Director
/s/ George J. Kourpias /s/ W. Craig McClelland
- ------------------------------------- --------------------------------
George J. Kourpias W. Craig McClelland
Director Director
/s/ William G. Ouchi /s/ Charles J. Queenan, Jr.
- ------------------------------------- --------------------------------
William G. Ouchi Charles J. Queenan, Jr.
Director Director
/s/ James E. Rohr /s/ Brian P. Simmons
- ------------------------------------- --------------------------------
James E. Rohr Brian P. Simmons
Director Director
21
CERTIFICATIONS
I, James L. Murdy, President and Chief Executive Officer of Allegheny
Technologies Incorporated, certify that:
1. I have reviewed this annual report on Form 10-K of Allegheny Technologies
Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
22
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 24, 2003
/s/ James L. Murdy
---------------------------------------
James L. Murdy
President and Chief Executive Officer
23
CERTIFICATIONS
I, Richard J. Harshman, Senior Vice President-Finance and Chief Financial
Officer of Allegheny Technologies Incorporated, certify that:
1. I have reviewed this annual report on Form 10-K of Allegheny Technologies
Incorporated;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
24
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 24, 2003
/s/ Richard J. Harshman
----------------------------------------
Richard J. Harshman
Senior Vice President-Finance
and Chief Financial Officer
25
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.1 Separation and Distribution Agreement dated November 29, 1999 among
Allegheny Teledyne Incorporated (now known as Allegheny Technologies
Incorporated), TDY Holdings, LLC, Teledyne Industries, Inc., and
Teledyne Technologies Incorporated (incorporated by reference to
Exhibit 2.1 to Registrant's Current Report on Form 8-K dated November
29, 1999 (File No. 1-12001)).
2.2 Separation and Distribution Agreement dated November 29, 1999 among
Allegheny Teledyne Incorporated (now known as Allegheny Technologies
Incorporated), TDY Holdings, LLC, Teledyne Industries, Inc., and Water
Pik Technologies, Inc. (incorporated by reference to Exhibit 2.2 to
Registrant's Current Report on Form 8-K dated November 29, 1999 (File
No. 1-12001)).
3.1 Certificate of Incorporation of Allegheny Technologies Incorporated, as
amended, (incorporated by reference to Exhibit 3.1 to the Registrant's
Report on Form 10-K for the year ended December 31, 1999 (File No.
1-12001)).
3.2 Amended and Restated Bylaws of Allegheny Technologies Incorporated
(incorporated by reference to Exhibit 3.2 to the Registrant's Report on
Form 10-K for the year ended December 31, 1998 (File No. 1-12001)).
4.1 Credit Agreement dated as of December 21, 2001 (incorporated by
reference to Exhibit 4.1 of the Registrant's Report on Form 10-K for
the year ended December 31, 2001 (File No. 1-12001)), and First
Amendment to Credit Agreement dated as of August 12, 2002 (incorporated
by reference to Exhibit 4.1 to the Registrant's Report on Form 10-Q
dated August 14, 2002 (File No. 1-12001)), and Second Amendment to
Credit Agreement dated as of December 20, 2002 (filed herewith).
4.2 Indenture dated as of December 18, 2001 between Allegheny Technologies
Incorporated and The Bank of New York, as trustee, relating to
Allegheny Technologies Incorporated 8.375% Notes due 2011 (incorporated
by reference to Exhibit 4.2 to the Registrant's Report on Form 10-K for
the year ended December 31, 2001 (File No. 1-12001)).
4.3 Form of 8.375% Notes due 2011 (included as part of Exhibit 4.2).
4.4 Indenture dated as of December 15, 1995 between Allegheny Ludlum
Corporation and The Chase Manhattan Bank (National Association), as
trustee (relating to Allegheny Ludlum Corporation's 6.95% Debentures
due 2025) (incorporated by reference to Exhibit 4(a) to Allegheny
Ludlum Corporation's Report on Form 10-K for the year ended December
31, 1995 (File No. 1-9498)), and First Supplemental Indenture by and
among Allegheny Technologies Incorporated, Allegheny Ludlum Corporation
and The Chase Manhattan Bank (National Association), as Trustee, dated
as of August 15, 1996 (incorporated by reference to Exhibit 4.1 to
Registrant's Current Report on Form 8-K dated August 15, 1996 (File No.
1-12001)).
26
4.5 Rights Agreement dated March 12, 1998, including Certificate of
Designation for Series A Junior Participating Preferred Stock as filed
with the State of Delaware on March 13, 1998 (incorporated by reference
to Exhibit 1 to the Registrant's Current report on Form 8-K dated March
12, 1998 (File No. 1-12001)).
10.1 Allegheny Technologies Incorporated 1996 Incentive Plan (incorporated
by reference to Exhibit 10.1 to the Registrant's Report on Form 10-K
for the year ended December 31, 1997 (File No. 1-12001)).*
10.2 Allegheny Technologies Incorporated Stock Acquisition and Retention
Plan effective January 1, 1997 (incorporated by reference to Exhibit
10.2 to the Registrant's Report on Form 10-K for the year ended
December 31, 1996 (File No. 1-12001)).*
10.3 Allegheny Technologies Incorporated Stock Acquisition and Retention
Program effective January 1, 1998, as amended and restated
(incorporated by reference to Exhibit 10.3 to the Registrant's Report
on Form 10-K for the year ended December 31, 1998 (File No. 1-12001)).*
10.4 Allegheny Technologies Incorporated Stock Acquisition and Retention
Program effective December 13, 2000 (incorporated by reference to
Exhibit 10.4 to the Registrant's Report on Form 10-K for the year ended
December 31, 2001 (File No. 1-12001)).*
10.5 Allegheny Technologies Incorporated 1996 Non-Employee Director Stock
Compensation Plan, as amended December 17, 1998 (incorporated by
reference to Exhibit 10.4 to the Registrant's Report on Form 10-K for
the year ended December 31, 1998 (File No. 1-12001)).*
10.6 Allegheny Technologies Incorporated Fee Continuation Plan for
Non-Employee Directors (incorporated by reference to Exhibit 10.4 to
the Company's Report on Form 10-K for the year ended December 31, 1997
(File No. 1-12001)).*
10.7 Supplemental Pension Plan for Certain Key Employees of Allegheny
Technologies Incorporated and its subsidiaries (formerly known as the
Allegheny Ludlum Corporation Key Man Salary Continuation Plan)
(incorporated by reference to Exhibit 10.7 to the Company's Report on
Form 10-K for the year ended December 31, 1997 (File No. 1-12001)).*
10.8 Allegheny Technologies Incorporated Benefit Restoration Plan, as
amended (incorporated by reference to Exhibit 10.8 to the Registrant's
Report on Form 10-K for the year ended December 31, 1999 (File No.
1-12001)).*
10.9 Allegheny Ludlum Corporation 1987 Stock Option Incentive Plan (as
amended and restated) (incorporated by reference to Exhibit 10(f) to
Allegheny Ludlum Corporation's Report on Form 10-K for the year ended
December 31, 1995 (File No. 1-9498)).*
10.10 Allegheny Ludlum Corporation Performance Share Plan (as amended and
restated) (incorporated by reference to the Registration Statement on
Form S-4 (No. 333-8235) of Allegheny Technologies Incorporated, appears
as Appendix F to the Joint Proxy Statement/Prospectus forming part of
the Registration Statement).*
27
10.11 Allegheny Ludlum Corporation Stock Acquisition and Retention Plan, as
restated effective as of August 15, 1996 (incorporated by reference to
Exhibit 10.10 to the Company's Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-12001)).*
10.12 Teledyne, Inc. 1990 Stock Option Plan (incorporated by reference to
Exhibit 10 to Teledyne, Inc.'s Report on Form 10-K for the year ended
December 31, 1990 (File No. 1-5212)).*
10.13 Teledyne, Inc. 1994 Long-Term Incentive Plan (incorporated by reference
to Exhibit A to Teledyne, Inc.'s 1994 proxy statement (File No.
1-5212)).*
10.14 Teledyne, Inc. 1995 Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit A to Teledyne, Inc.'s 1995 proxy
statement (File No. 1-5212)).*
10.15 Employment Agreement dated July 15, 1996 between Allegheny Technologies
Incorporated and James L. Murdy (incorporated by reference to Exhibit
10.4 to the Company's Registration Statement on Form S-4 (No.
333-8235)).*
10.16 Employment Agreement dated July 15, 1996 between Allegheny Technologies
Incorporated and Jon D. Walton (incorporated by reference to Exhibit
10.5 to the Company's Registration Statement on Form S-4 (No.
333-8235)).*
10.17 Form of Amended and Restated Change in Control Severance Agreement
(Senior Management)(incorporated by reference to Exhibit 10.17 to the
Registrant's Report on Form 10-K for the year ended December 31, 2001
(File No. 1-12001)).*
10.18 Employee Benefits Agreement dated November 29, 1999 between Allegheny
Technologies Incorporated and Teledyne Technologies Incorporated
(incorporated by reference to Exhibit 10.23 to the Registrant's Report
on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).*
10.19 Employee Benefits Agreement dated November 29, 1999 between Allegheny
Technologies Incorporated and Water Pik Technologies, Inc.
(incorporated by reference to Exhibit 10.24 to the Registrant's Report
on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).*
10.20 Tax Sharing and Indemnification Agreement dated November 29, 1999
between Allegheny Technologies Incorporated and Teledyne Technologies
(incorporated by reference to Exhibit 10.25 to the Registrant's Report
on Form 10-K for the year ended December 31, 1999 (File No. 1-12001)).
10.21 Tax Sharing and Indemnification Agreement dated November 29, 1999
between Allegheny Technologies Incorporated and Teledyne Technologies
Incorporated (incorporated by reference to Exhibit 10.26 to the
Registrant's Report on Form 10-K for the year ended December 31, 1999
(File No. 1-12001)).
10.22 Allegheny Technologies Incorporated Executive Deferred Compensation
Plan, as amended (incorporated by reference to Exhibit 10.27 to the
Registrant's Report on Form 10-K for the year ended December 31, 2000
(File No. 1-12001)).*
28
10.23 Allegheny Technologies Incorporated Performance Share Program
(incorporated by reference to Exhibit 10.22 to the Registrant's Report
on Form 10-K for 1998 (File 1-12001)).*
10.24 Allegheny Technologies Incorporated Stock Acquisition and Retention
Program effective January 1, 2001, as amended and restated (filed
herewith).*
10.25 Allegheny Technologies Incorporated 2000 Incentive Plan (incorporated
by reference to Exhibit 10.30 to the Registrant's Report on Form 10-K
for the year ended December 31, 1999 (File No. 1-12001)).*
10.26 Allegheny Technologies Incorporated Performance Share Program and form
of Participant Agreement for the 2000-2002 Award Period (incorporated
by reference to Exhibit 10.32 to the Registrant's Report on Form 10-K
for the year ended December 31, 2000 (File No. 1-12001)).*
10.27 Allegheny Technologies Incorporated Stock Acquisition and Retention
Program effective January 1, 2002 (filed herewith).*
10.28 Allegheny Technologies Incorporated Annual Incentive Plan for the year
2002 (filed herewith).*
10.29 Total Shareholder Return Incentive Compensation Program effective
January 1, 2001 (incorporated by reference to Exhibit 10.29 to the
Registrant's Report on Form 10-K for the year ended December 31, 2001
(File No. 1-12001)).*
10.30 Total Shareholder Return Incentive Compensation Program effective
January 1, 2002 (filed herewith).*
13.1 Pages 9 through that part of page 64 referencing financial data,
included in the Annual Report of Allegheny Technologies Incorporated
for the year ended December 31, 2002 (filed herewith).
21.1 Subsidiaries of the Registrant (filed herewith).
23.1 Consent of Ernst & Young LLP (filed herewith).
99.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
* Management contract or compensatory plan or arrangement required to be filed
as an Exhibit to this Report.
Certain instruments defining the rights of holders of long-term debt of the
Company and its subsidiaries have been omitted from the Exhibits in accordance
with Item 601(b)(4)(iii) of Regulation S-K. A copy of any omitted document will
be furnished to the Commission upon request.
29