Allegheny Technologies Comments on Accounting for Retirement Benefits, 2002 Fourth Quarter Business Conditions and Amended Bank Credit Agreement.

Business Editors

PITTSBURGH--(BUSINESS WIRE)--Dec. 19, 2002

Allegheny Technologies Incorporated (NYSE:ATI) confirmed that a previously disclosed balance sheet charge would be taken against stockholders' equity as of December 31, 2002, due to the reduction in the value of the Company's pension investments caused by the significant decline in global equity markets. The Company emphasized that there is no charge against earnings and no cash impact related to this balance sheet charge of approximately $415 million. The Company also expects to record a pre-tax earnings charge of approximately $45 million, or $0.35 per share after tax, in the fourth quarter of 2002, relating to asset impairments and workforce reductions; all but $3 million of this charge is non-cash. These asset impairments and workforce reductions should provide future annual pre-tax cost savings of approximately $5 million. In addition, the Company amended its bank credit agreement in several significant respects.

Accounting for Retirement Benefits

Earlier this year the Company had disclosed the need to write off the pension asset recorded on its balance sheet and reflect a minimum pension liability in 2002 if the value of pension assets, measured as of November 30, 2002, were less than the accumulated pension benefit obligation (ABO). At the measurement date, the preliminary value of pension plan investments was $1.65 billion, and the preliminary ABO was $1.87 billion. In accordance with accounting standards, the approximately $415 million charge against stockholders' equity would be reversed in subsequent years if the value of pension plan investments returns to a level that exceeds the ABO as of a future annual measurement date. This charge does not impact the Company's compliance with debt covenants in the bank credit agreement. Based upon current actuarial analyses and forecasts, the Company does not expect to be required to make contributions to the defined benefit pension plan during the next several years.

The Company has completed its annual review of discount rate and long-term expected rate of return on investment assumptions for 2003. The discount rate for both pension and retiree healthcare liabilities will be 6.75%, based on the Moody's average AA corporate bond yield at the Company's measurement date. The Company had previously assumed a discount rate of 7.0%. The long-term expected rate of return on pension assets will be 8.75%, compared to the previously assumed rate of return of 9.0%. The long-term expected rate of return on investments in the VEBA trusts, which provide partial funding for the Company's retiree medical benefits obligations, will be 9.0%. The Company had previously assumed a long-term expected rate of return of approximately 15.0% when a large percentage of investments were in private equities.

As a result of the lower level of pension plan investments, combined with the changes in assumptions discussed above and higher projected retiree healthcare costs, the Company expects pre-tax retirement benefit expenses to increase significantly in 2003 to approximately $135 million, compared to $22 million in 2002. Approximately $105 million of the estimated 2003 retirement benefit expenses is expected to be non-cash.

Fourth Quarter 2002 Business Conditions

Economic conditions for many of the Company's markets remain weak and uncertain. Demand for commodity stainless steel products has weakened in the fourth quarter compared to the third quarter. Capital goods and commercial aerospace markets have remained depressed. As a result, the Company expects fourth quarter 2002 operating profit to be significantly lower than the third quarter 2002.

With its continuing focus on cost reduction and cash conservation, the Company is indefinitely idling its Massillon, OH stainless steel plate facility, due to continuing poor demand for wide continuous mill plate products. In accordance with accounting standards, the indefinite idling is treated as an asset impairment. In addition, the Company plans to implement further workforce reductions of approximately 90 employees in the High Performance Metals and Industrial Products segments, mostly in Europe.

Bank Credit Agreement

The Company reduced its bank credit facility to $250 million from $325 million. The amended credit agreement has a $150 million long-term facility scheduled to expire in December 2006, and a $100 million 364-day facility scheduled to expire on December 19, 2003. In addition, the interest coverage covenant in the credit agreement was reduced to 2.0 times EBITDA, as defined in the agreement, for the fourth quarter 2002 through the fourth quarter 2003. The Company believes that the amended facility provides it with adequate liquidity. There are no borrowings currently outstanding under the bank credit agreement.

This news release contains forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained in Allegheny Technologies' filings with the Securities and Exchange Commission.

Allegheny Technologies Incorporated (NYSE:ATI) is one of the largest and most diversified specialty materials producers in the world with revenues of approximately $2.1 billion in 2001. The Company has approximately 10,000 employees worldwide and its talented people use innovative technologies to offer growing global markets a wide range of specialty materials. High-value products include nickel-based and cobalt-based alloys and superalloys, titanium and titanium alloys, specialty steels, super stainless steel, exotic alloys, which include zirconium, hafnium and niobium, tungsten materials, and highly engineered strip and Precision Rolled Strip(R) products. In addition, we produce commodity specialty materials such as stainless steel sheet and plate, silicon and tool steels, and forgings and castings. The Allegheny Technologies website can be found at www.alleghenytechnologies.com.