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)
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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 |
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.
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
.
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
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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%
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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.
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.
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.
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.
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.
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:
(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
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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
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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
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.
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*
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* 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.
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.
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.
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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.
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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.
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.
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
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.
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
===== =====
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(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.
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.
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.
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.
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.
(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.
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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.
Date: March 24, 2003 By /s/ James L. Murdy
--------------------------------
James L. Murdy
President and Chief Executive Officer
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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
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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
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
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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
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
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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)).
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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).*
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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)).*
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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).
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* 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.
Page
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ARTICLE I AMENDMENTS TO ORIGINAL CREDIT AGREEMENT.......................................................3
Section 1.01. Amended Definitions.....................................................................3
Section 1.02. Additional Definitions..................................................................6
Section 1.03. Amendment to Section 2.1Aa..............................................................6
Section 1.04. Amendment to Section 2.1Ba..............................................................6
Section 1.05. Amendment to Section 2.2a...............................................................7
Section 1.06. Amendment to Section 2.2b...............................................................7
Section 1.07. Amendment to Section 2.3a...............................................................8
Section 1.08. Amendment to Section 2.8................................................................8
Section 1.09. Amendment to Section 2.12...............................................................8
Section 1.10. Amendment to Section 5.4...............................................................10
Section 1.11. Amendment to Section 5.5...............................................................11
Section 1.12. Amendment to Lender Signature Pages....................................................11
Section 1.13. Additional Exhibit.....................................................................11
Section 1.14. No Other Amendments....................................................................11
ARTICLE II BORROWER'S SUPPLEMENTAL REPRESENTATIONS......................................................12
Section 2.01. Incorporation by Reference.............................................................12
Section 2.02. Corporate Authority....................................................................12
Section 2.03. Validity of this Second Amendment......................................................12
Section 2.04. Financial Statements...................................................................12
Section 2.05. Absence of Litigation..................................................................13
Section 2.06. Amendment Closing Fee..................................................................13
ARTICLE III CONDITIONS PRECEDENT.........................................................................13
Section 3.01. Conditions Precedent...................................................................13
ARTICLE IV GENERAL PROVISIONS...........................................................................14
Section 4.01. Ratification of Terms..................................................................14
Section 4.02. References.............................................................................15
Section 4.03. Incorporation Into Existing Credit Agreement...........................................15
Section 4.04. Counterparts...........................................................................15
Section 4.05. Capitalized Terms......................................................................15
Section 4.06. Taxes..................................................................................15
Section 4.07. Costs and Expenses.....................................................................15
Section 4.08. Severability...........................................................................16
Section 4.09. Governing Law..........................................................................16
Section 4.10. Headings...............................................................................16
Section 4.11. Acknowledgment of Amendment of the Short Term Revolving Credit Note....................16
Section 4.12. Amendment of Notes.....................................................................16
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THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment") dated as of December 20, 2002, to that certain Credit Agreement dated as of December 21, 2001 (the Credit Agreement together with the exhibits and schedules thereto and all modifications, amendments, extensions, renewals, substitutions or replacements prior to the date hereof, the "Original Credit Agreement"), among ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation, as the borrower (the "Borrower"), the FINANCIAL INSTITUTIONS listed on the signature pages hereto and each other financial institution which from time to time becomes a party thereto in accordance with Section 9.6a of the Original Credit Agreement (individually a "Lender" and collectively the "Lenders"), MELLON BANK, N.A., JPMORGAN CHASE BANK, and BANK OF AMERICA, N.A., as Syndication Agents (individually a "Syndication Agent" and collectively the "Syndication Agents") and PNC BANK, NATIONAL ASSOCIATION, a national banking association, Documentation and Administrative Agent for the Lenders (in such capacity the "Agent"), as such Original Credit Agreement has been amended by that certain First Amendment to Credit Agreement dated as of August 12, 2002, by and among the Borrower, the Lenders which are parties thereto, the Syndication Agents and the Agent (the Original Credit Agreement, as so amended by such First Amendment to Credit Agreement, is hereinafter referred to as the "Existing Credit Agreement")
WHEREAS, the Borrower, the Lenders, the Syndication Agents and the Agent have entered into the Existing Credit Agreement pursuant to which the Lenders have made certain financial accommodations available to the Borrower, including a long term revolving credit commitment and a short term revolving credit commitment;
WHEREAS, the Borrower has requested an extension of the Short Term Revolving Credit Commitment pursuant to the terms of Section 2.8 of the Existing Credit Agreement;
WHEREAS, the Borrower, the Lenders the Syndication Agents and the Agent have agreed pursuant to the terms hereof (i) to extend the Short Term Revolving Credit Commitment until December 19, 2003; (ii) to reduce the aggregate Short Term Revolving Credit Commitment hereunder to $100,000,000; and (iii) to reduce the aggregate Long Term Revolving Credit Commitment hereunder to $150,000,000;
WHEREAS, the Borrower, the Required Lenders and the Agent have agreed pursuant to the terms hereof to amend certain additional provisions of the Existing Credit Agreement on the terms set forth below; and
WHEREAS, the Borrower, the Syndication Agents, the Agent and the Required Lenders acknowledge that PNC Capital Markets, Inc. ("PNC Capital"), has acted as the lead arranger for this amendment; provided however, PNC Capital is not, and shall not be, a party to this Second Amendment.
NOW THEREFORE, in consideration of the mutual premises contained herein and other good and valuable consideration, the Borrower, the Required Lenders, the Syndication Agents
and the Agent, with the intent to be legally bound hereby, agree that the Existing Credit Agreement shall be amended as follows:
Section 1.01. Amended Definitions. Section 1.1 of the Existing Credit Agreement is hereby amended such that the following definitions shall be amended and restated as set forth below.
"Applicable Short Term Revolving Credit LIBOR Margin" means for each LIBOR Portion of the Short Term Revolving Credit Loans, the percentage (expressed in basis points) determined from time to time based upon the Senior Ratings then in effect from Moody's and S&P set forth under the relevant column heading below:
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Applicable Short Term Revolving
Senior Ratings Credit LIBOR Margin
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Level I
-------
Senior Ratings are equal to or better than A from S&P or A2 from Moody's 32.5 Basis Points
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Level II
--------
Senior Ratings are A- from S&P or A3 from Moody's 40 Basis Points
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Level III
---------
Senior Ratings are BBB+ from S&P or Baa1 from Moody's 45 Basis Points
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Level IV
--------
Senior Ratings are BBB from S&P or Baa2 from Moody's 75 Basis Points
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Level V
-------
Senior Ratings are BBB- from S&P or Baa3 from Moody's 95 Basis Points
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Level VI
--------
Senior Ratings are less than BBB- from S&P and Baa3 from Moody's 142.5 Basis Points
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provided, however, that (i) in the event the Senior Ratings of S&P and Moody's do not coincide, the Applicable Short Term Revolving Credit LIBOR Margin shall be determined utilizing the higher of such Senior Ratings; and (ii) in the event only one Senior Rating is in effect, the Applicable Short Term Revolving Credit LIBOR Margin set forth opposite such Senior Rating shall apply.
"Consolidated EBITDA" means for any period Consolidated Net Income for such period (x) excluding therefrom (A) any extraordinary items of gain or loss (including without limitation those items created by mandated changes in accounting treatment), (B) any gain or loss of any other Person accounted for on the equity method, except to the extent of cash distributions received during the relevant period, (C) any other non-cash non-recurring items of gain or loss not covered in clauses (A) and (B) of this definition, (D) any cash charge in an amount not to exceed Ten Million Dollars ($10,000,000) recorded by the Borrower for its Fiscal Year ending December 31, 2002 for the payment of severance costs incurred in connection with restructuring costs recognized by the Borrower during 2002, and (E) any non-cash pension expense and any non-cash pension income resulting from the application of SFAS 87 and that portion of SFAS 106 expenses equal to the cash payments from the VEBA, (y) plus the aggregate amounts deducted in determining Consolidated Net Income for such period in respect of (i) Consolidated Interest Expense (ii) depreciation expense, (iii) any amortization of goodwill or other intangible assets and (iv) income taxes.
"Consolidated Total Indebtedness" means the Indebtedness of the Borrower and its Consolidated Subsidiaries determined on a Consolidated basis in accordance with GAAP, consistently applied, together with the funded amount under any Securitization Contract entered into by a Special Purpose Subsidiary, less the sum of cash and Cash Equivalents on the Consolidated balance sheet of the Borrower in excess of $25,000,000 as of the date of any determination of the Consolidated Total Indebtedness of the Borrower; provided, however, that any Revolving Credit Loans outstanding in excess of $50,000,000 on the date of any determination of Consolidated Total Indebtedness shall be included in the calculation of Consolidated Total Indebtedness on such date regardless of the amount of cash and Cash Equivalents on the Consolidated balance sheet of the Borrower as of such date of determination.
"Long Term Revolving Credit Loan" shall mean any Disbursements made by the Lenders under the Long Term Revolving Credit Commitment, which Disbursements in the aggregate shall not exceed more than (x) $195,000,000 at any time outstanding prior to the Second Amendment Effective Date, and (y) $150,000,000 at any time outstanding on or after the Second Amendment Effective Date.
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Short Term Revolving Credit
Senior Ratings Facility Fee Percentage
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Level I
-------
Senior Ratings are equal to or better than A from S&P or A2 from Moody's 12.5 Basis Points
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Level II
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Senior Ratings are A- from S&P or A3 from Moody's 15 Basis Points
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Level III
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Senior Ratings are BBB+ from S&P or Baa1 from Moody's 20 Basis Points
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Level IV
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Senior Ratings are BBB from S&P or Baa2 from Moody's 25 Basis Points
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Level V
-------
Senior Ratings are BBB- from S&P or Baa3 from Moody's 30 Basis Points
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Level VI
--------
Senior Ratings are less than BBB- from S&P and Baa3 from Moody's 32.5 Basis Points
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provided that, in the event that the Senior Ratings of S&P and Moody's do not coincide, the Short Term Revolving Credit Facility Fee Percentage set forth above opposite the higher of such Senior Ratings will apply; and provided further, in the event that one Senior Rating is in effect, the Short Term Revolving Credit Facility Fee Percentage set forth above for such Senior Rating will apply.
"Short Term Revolving Credit Loans" shall mean any Disbursements made by the Lenders under the Short Term Revolving Credit Commitment which Disbursements in the aggregate shall not exceed more than (x) $130,000,000 at any time outstanding prior to the Second Amendment Effective Date, and (y) $100,000,000 at any time outstanding on or after the Second Amendment Effective Date.
Section 1.02. Additional Definitions. Section 1.1 of the Existing Credit Agreement is hereby amended such that the following definition shall be added thereto in the appropriate alphabetical order:
"Second Amendment Effective Date" means December 20, 2002.
"VEBA" means for purposes of this Agreement the Allegheny Ludlum Corporation Bargaining Unit, Voluntary Employee's Benefit Trust.
Section 1.03. Amendment to Section 2.1Aa. Section 2.1Aa of the Existing Credit Agreement is hereby amended and restated to read as follows:
2.1Aa LONG TERM REVOLVING CREDIT LOANS. The Lenders hereby severally establish, upon the terms and conditions hereinafter set forth and relying upon the representations and warranties herein set forth, a long term revolving credit commitment in favor of the Borrower in the maximum aggregate amount of (x) ONE HUNDRED NINETY-FIVE MILLION AND NO/100 DOLLARS ($195,000,000.00) at any time prior to the Second Amendment Effective Date, and (y) ONE HUNDRED FIFTY MILLION AND NO/100 DOLLARS ($150,000,000.00) at any time on or after the Second Amendment Effective Date (such commitment to lend as then in effect is herein referred to as the "Long Term Revolving Credit Commitment"). The Borrower shall have the right to borrow, repay and reborrow from the Lenders from the date hereof until the Long Term Revolving Credit Termination Date pursuant to draws upon the Long Term Revolving Credit Commitment the principal amount of which, together with Letters of Credit Outstanding and the principal amount of Bid Rate Loans and Swingline Loans (other than Bid Rate Loans or Swingline Loans allocated to the Short Term Revolving Credit Commitment) then outstanding, shall not exceed (i) $195,000,000 in the aggregate at any one time outstanding prior to the Second Amendment Effective Date, and (ii) $150,000,000 in the aggregate at any one time outstanding on or after the Second Amendment Effective Date.
Section 1.04. Amendment to Section 2.1Ba. Section 2.1Ba of the Existing Credit Agreement is hereby amended and restated to read as follows:
2.1Ba SHORT TERM REVOLVING CREDIT LOANS. The Lenders hereby severally establish, upon the terms and conditions hereinafter set forth and relying upon the representations and warranties herein set forth, a short term revolving credit commitment in favor of the Borrower in the maximum aggregate amount of (x) ONE HUNDRED THIRTY MILLION AND NO/100 DOLLARS ($130,000,000.00) at any time prior to the Second Amendment Effective Date, and (y) ONE HUNDRED MILLION AND NO/100 DOLLARS ($100,000,000.00) at any time on or after the Second Amendment Effective Date (such commitment to lend as then in effect is herein referred to as the "Short Term Revolving Credit Commitment"). The Borrower shall have the right to borrow, repay and reborrow from the Lenders from the date hereof until the Short Term Revolving Credit Termination Date pursuant to draws upon the Short Term Revolving Credit Commitment the principal amount of which, together with the principal amount of Bid Rate Loans and Swingline Loans (other than Bid Rate Loans or Swingline Loans allocated to the Long Term Revolving Credit Commitment) then outstanding, shall not
Section 1.05. Amendment to Section 2.2a. Section 2.2a of the Existing Credit Agreement is hereby amended and restated to read as follows:
2.2a BID RATE. Subject to the provisions of this Section 2.2, each Lender severally agrees that the Borrower may request Bid Rate Loans, in an aggregate amount at any one time outstanding not to exceed (i) $325,000,000 at any time prior to the Second Amendment Effective Date, and (ii) $250,000,000 at any time on or after the Second Amendment Effective Date (or the sum of $150,000,000 plus any remaining Short Term Revolving Credit Commitment on and after any Short Term Revolving Credit Termination Date) less the Letters of Credit Outstanding and the aggregate principal amount of all Revolving Credit Loans and Swingline Loans then outstanding, which shall bear interest at the Bid Rate Option. In selecting a Bid Rate Option from any Lender, such Lender may make an advance in excess of such Lender's Commitment.
Section 1.06. Amendment to Section 2.2b. Section 2.2b of the Existing Credit Agreement is hereby amended and restated to read as follows:
2.2b LIMITATIONS ON AND EVIDENCE OF BID RATE LOANS. Except as provided under Section 2.2c(vi) hereof, each Bid Rate Loan or repayment of a Bid Rate Loan must be in the minimum principal amount of $5,000,000 or, if in excess of $5,000,000, in integral multiples of $1,000,000. The obligation of the Borrower to repay, on the Long Term Revolving Credit Termination Date (if the Borrower has requested a Disbursement under the Long Term Revolving Credit Commitment), the aggregate unpaid principal amount of such Bid Rate Loans advanced by each Lender shall be evidenced by the Bid Rate Notes substantially in the form of Exhibit "B-1" hereto, one made payable to each Lender in the amount of (i) $195,000,000 at any time prior to the Second Amendment Effective Date, and (ii) $150,000,000 at any time on or after the Second Amendment Effective Date. The obligation of the Borrower to repay, on the Short Term Revolving Credit Termination Date (if the Borrower has requested the Disbursement under the Short Term Revolving Credit Commitment), the aggregate unpaid principal amount of such Bid Rate Loans advanced by each Lender shall be evidenced by the Bid Rate Notes substantially in the form of Exhibit "B-2" hereto, one made payable to each Lender in the amount of (i) $130,000,000 at any time prior to the Second Amendment Effective Date, and (ii) $100,000,000 at any time on or after the Second Amendment Effective Date. The Borrower shall have, with the prior written consent of the Lender making such Bid Rate Loan, the right to prepay any Bid Rate Loan prior to the end of the relevant Bid Rate Interest Period. The Borrower shall repay each individual Bid Rate Loan, together with interest thereon on the last day of the Bid Rate Interest Period applicable to it. The principal amount actually due and owing each Lender shall be the aggregate unpaid principal amount of all Disbursements of Bid Rate Loans made by such Lender, all as shown on the Loan Account established pursuant to Section 2.13 hereof.
2.3a SWINGLINE RATE. Subject to the provisions of this Section 2.3, each Swingline Lender severally agrees that the Borrower may request that Swingline Loans, in an aggregate amount at any one time outstanding not to exceed the lesser of (i) $25,000,000 or (ii) an amount which, when added to the Letters of Credit Outstanding and the aggregate principal amount of all other Loans then outstanding, does not exceed (i) $325,000,000 at any time prior to the Second Amendment Effective Date, and (ii) $250,000,000 at any time on or after the Second Amendment Effective Date (so long as both the Long Term Revolving Credit Commitments and all of the initial Short Term Revolving Credit Commitments are outstanding; the sum of $150,000,000 plus the sum of any remaining Short Term Revolving Credit Commitments if a Short Term Revolving Credit Termination Date has occurred with respect to one or more Lenders plus the outstanding balance of the Term Loans, if any; and the sum of $150,000,000 plus the outstanding Term Loans, if any, in the event that only the Long Term Revolving Credit Commitment is outstanding), which shall bear interest at the Swingline Option.
Section 1.08. Amendment to Section 2.8. Section 2.8 of the Existing Credit Agreement is hereby amended to add a new Subsection 2.8c which shall read as follows:
2.8c AGREED TO EXTENSION OF SHORT TERM REVOLVING CREDIT COMMITMENTS. Pursuant to Section 2.8a, as of the Second Amendment Effective Date, the date of the Short Term Revolving Credit Termination Date is extended to December 19, 2003. As of the Second Amendment Effective Date the aggregate Short Term Revolving Credit Commitment is $100,000,000. Each of the Lenders with a Short Term Revolving Credit Commitment as of the date preceding the Second Amendment Effective Date agrees to the extension of the Short Term Revolving Credit Termination Date to December 19, 2003.
Section 1.09. Amendment to Section 2.12. Section 2.12 of the Existing Credit Agreement is hereby amended and restated to read as follows:
2.12 REDUCTIONS IN AVAILABILITY.
2.12a VOLUNTARY REDUCTION OF AVAILABILITY. At any time and from time to time upon no less than three (3) Business Days prior written notice to the Agent, the Borrower may terminate, in whole or in part, without penalty, the then unused portion of the Commitments, thereby causing a corresponding abatement of the applicable Facility Fee. Each such reduction shall be in a minimum principal amount of $10,000,000 or in integral multiples thereof. The applicable Facility Fee shall cease to accrue with respect to any unused portion of the commitments so terminated on either (i) the date five (5) Business Days after receipt of such notice or (ii) the date so designated in the written notice if such written notice is given to the Agent more than five (5) Business Days prior to the effective date of such termination. Notice of termination once given shall be irrevocable and the portion of the Commitments so terminated shall not be available for borrowing once such notice has been given under the terms hereof. The Agent shall
2.12b MANDATORY REDUCTION OF AVAILABILITY. The Commitments shall be automatically and permanently reduced contemporaneously with the closing of any Securitization permitted by Section 5.5 hereof in the amount required by the terms of Section 5.5 for such permitted Securitization. Any such mandatory permanent reduction of the Commitments shall be applied first to the Short Term Revolving Credit Commitments and then to the Long Term Revolving Credit Commitments. To the extent that, at the time of any such mandatory permanent reduction of the Short Term Revolving Credit Commitments, the aggregate amount of (a) the Short Term Revolving Credit Loans outstanding and (b) the Bid Rate Loans and Swingline Loans outstanding hereunder and allocated to the Short Term Revolving Credit Commitments exceeds the Short Term Revolving Credit Commitments, as so reduced, the Borrower, on or before the date on which the mandatory reduction of the Short Term Revolving Credit Commitments becomes effective, shall make a mandatory repayment of Loans outstanding sufficient to reduce (ii) the sum of (x) the Short Term Revolving Credit Loans outstanding hereunder, plus (y) Bid Rate Loans and Swingline Loans outstanding hereunder and allocated to the Short Term Revolving Credit Commitments to an amount equal to or lesser than the Short Term Revolving Credit Commitments, as so reduced. To the extent that, at the time of any such mandatory permanent reduction of the Long Term Revolving Credit Commitments, the aggregate amount of (a) the Letters of Credit Outstanding, (b) the Long Term Revolving Credit Loans outstanding and (c) Bid Rate Loans and Swingline Loans outstanding hereunder and allocated to the Long Term Revolving Credit Commitments exceeds the Long Term Revolving Credit Commitments, as so reduced, the Borrower, on or before the date on which the mandatory reduction of the Long Term Revolving Credit Commitments becomes effective, shall make a mandatory repayment of Loans outstanding sufficient to reduce (i) the sum of (x) Letters of Credit Outstanding, plus (y) Long Term Revolving Credit Loans outstanding hereunder, plus (z) Bid Rate Loans and Swingline Loans outstanding hereunder and allocated to the Long Term Revolving Credit Commitments to an amount equal to or lesser than the Long Term Revolving Credit Commitments, as so reduced. The Agent shall notify each Lender of the reduction of the Commitments and the application of such reduction to the Short Term Revolving Credit Commitments and/or the Long Term Revolving Credit Commitments, as applicable. From and after the effective date of any such reduction of the Short Term Revolving Credit Commitments, the applicable Short Term Revolving Credit Facility Fee set forth in Subsection 2.6b hereof shall be calculated on the basis of each Lender's Short Term Revolving Credit Commitment Percentage of
Section 1.10. Amendment to Section 5.4. Section 5.4 of the Existing Credit Agreement is hereby amended and restated to read as follows:
5.4 INTEREST COVERAGE RATIO. (i) At no time prior to or on September 30, 2002, shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters as of any Fiscal Quarter ended during such period, taken as a single accounting period, to its Consolidated Interest Expense for the same four (4) Fiscal Quarter period, taken as a single accounting period, be less than 2.25 to 1.0; (ii) at no time during the period after September 30, 2002 through December 31, 2003, shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters as of any Fiscal Quarter ended during such period, taken as a single accounting period, to its Consolidated Interest Expense for the same four (4) Fiscal Quarter period, taken as a single accounting period, be less than 2.00 to 1.0; (iii) at no time during the period after December 31, 2003, through June 30, 2004, shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters as of any Fiscal Quarter ended during such period, taken as a single accounting period, to its Consolidated Interest Expense for the same four (4) Fiscal Quarter period, taken as a single accounting period, be less than 2.50 to 1.0; (iv) at no time during the period after June 30, 2004 through December 31, 2004 shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters as of any Fiscal Quarter ended during such period, taken as a single accounting period, to its Consolidated Interest Expense for the same four (4) Fiscal Quarter period, taken as a single accounting period, be less than 3.0 to 1.0; and (v) at no time after December 31, 2004 shall the ratio of the Borrower's Consolidated EBITDA for the four (4) most recently completed Fiscal Quarters as of any Fiscal Quarter ended during such period, taken as a single accounting period, to its Consolidated Interest Expense for the same four (4) Fiscal Quarter period, taken as a single accounting period, be less than 3.50 to 1.0.
Section 1.11. Amendment to Section 5.5. Section 5.5 of the Existing Credit Agreement is hereby amended and restated to read as follows:
5.5 SALES OF ASSETS. The Borrower shall not nor shall it permit any Consolidated Subsidiary to enter into any arrangement, direct or indirect, pursuant to which the Borrower or any Consolidated Subsidiary shall sell or otherwise transfer or dispose of any property, real, personal or mixed, whether now owned or hereafter acquired, except (i) sales, transfers or dispositions in the ordinary course of business, (ii) the sale, transfer or other disposition of the stock or assets set forth on Schedule 5.5, (iii) sales, transfers or dispositions not in the ordinary course of business provided that the aggregate proceeds of all such sales, transfers and dispositions permitted by this item (iii)
Section 1.12. Amendment to Lender Signature Pages. The Existing Credit Agreement is hereby amended by deleting the information relating to each Lender's respective participation in the various commitments under the Existing Credit Agreement and their respective addresses for notice and LIBOR Rate Loan Funding purposes and substituting in replacement thereof all of the corresponding information set for on each Lender's signature page to this Second Amendment.
Section 1.13. Additional Exhibit. The Existing Credit Agreement is amended to include the Exhibits L-1, L-2, L-3 and L-4 attached to this Second Amendment.
Section 1.14. No Other Amendments. The amendments to the Existing Credit Agreement set forth in Sections 1.01 through 1.13 inclusive above do not either implicitly or explicitly alter or amend, except as expressly provided in this Second Amendment, the provisions of the Existing Credit Agreement. The amendments set forth in Sections 1.01 through 1.13 hereof do not waive, now or in the future, compliance with any other covenant, term or condition to be performed or complied with nor do they impair any rights or remedies of the Lenders or the Agent under the Existing Credit Agreement with respect to any such violation. Nothing in this Second Amendment shall be deemed or construed to be a release of, or a limitation upon, the Lenders', Syndication Agents' or the Agent's exercise of any of their respective rights and remedies under the Existing Credit Agreement and the other Loan Documents, whether arising as a consequence of any Events of Default which may now exist or otherwise, and all such rights and remedies are hereby expressly reserved.
Section 2.01. Incorporation by Reference. As an inducement to the Lenders, the Syndication Agents and the Agent to enter into