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SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under sec.240.14a-12
ALLEGHENY TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[Allegheny Technologies Logo]
1000 Six PPG Place
Pittsburgh, PA 15222-5479
March 28, 2003
To our Stockholders:
We are pleased to invite you to attend the 2003 Annual Meeting of Stockholders.
The meeting will be held at 11:00 a.m., Eastern Standard Time, on Thursday, May
8, 2003, in the Grand Ballroom, 17(th) Floor, Omni William Penn Hotel, 530
William Penn Place, Pittsburgh, Pennsylvania. The location is accessible to
disabled persons.
This booklet includes the notice of meeting as well as the Company's proxy
statement. Enclosed with this booklet are the following:
- Proxy or voting instruction card (including instructions for telephone and
Internet voting)
- Proxy or voting instruction card return envelope (postage paid if mailed in
the U.S.)
A copy of the Company's Annual Report for the year 2002 is also enclosed.
Please read the proxy statement and vote your shares as soon as possible. We
encourage you to take advantage of voting by telephone or Internet as explained
on the enclosed proxy or voting instruction card. Or, you may vote by
completing, signing and returning your proxy or voting instruction card in the
enclosed postage-paid envelope. It is important that you vote, whether you own a
few or many shares and whether or not you plan to attend the meeting.
If you are a stockholder of record and plan to attend the meeting, please mark
the appropriate box on the proxy card, or enter the appropriate information by
telephone or Internet, so that we can send your admission ticket to you before
the meeting.
We look forward to seeing as many of you as possible at the 2003 Annual Meeting.
Sincerely,
/s/ Robert P. Bozzone
Robert P. Bozzone
Chairman
/s/ James L. Murdy
James L. Murdy
President and Chief Executive Officer
ALLEGHENY TECHNOLOGIES INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MEETING DATE: Thursday, May 8, 2003
TIME: 11:00 a.m., Eastern Standard Time
PLACE: Grand Ballroom
17(th) Floor
Omni William Penn Hotel
530 William Penn Place
Pittsburgh, Pennsylvania
RECORD DATE: March 10, 2003
AGENDA
1) Election of a class of four directors;
2) Ratification of the selection of independent accountants for 2003; and
3) Transaction of any other business properly brought before the meeting.
STOCKHOLDER LIST
A list of stockholders entitled to vote will be available during business hours
for 10 days prior to the meeting at the Company's executive offices, 1000 Six
PPG Place, Pittsburgh, Pennsylvania 15222-5479, for examination by any
stockholder for any legally valid purpose.
ADMISSION TO THE MEETING
Holders of Allegheny Technologies stock or their authorized representatives by
proxy may attend the meeting. If you are a stockholder of record and you plan to
attend the meeting, you may obtain an admission ticket from us by mail by
checking the box on the proxy card indicating your planned attendance and
returning the completed proxy card promptly, or by entering the appropriate
information by telephone or Internet. If your shares are held through an
intermediary such as a broker or a bank, you should present proof of your
ownership at the meeting. Proof of ownership could include a proxy from your
bank or broker or a copy of your account statement.
On behalf of the Board of Directors:
/s/ Jon D. Walton
Jon D. Walton
Senior Vice President,
Chief Legal and Administrative Officer
Dated: March 28, 2003
PROXY STATEMENT
TABLE OF CONTENTS
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PAGE
----
Voting Procedures........................................... 1
Board Composition and Practices............................. 2
Item A on Proxy Card--Election of Directors................. 2
Committees of the Board of Directors........................ 7
Report of Audit Committee................................. 8
Director Compensation....................................... 10
Item B on Proxy Card--Ratification of Selection of
Independent Accountants................................... 11
Other Business.............................................. 11
Stock Ownership Information................................. 12
Section 16(a) Beneficial Ownership Reporting Compliance... 12
Five Percent Owners of Common Stock....................... 12
Stock Ownership of Management............................. 13
Report on Executive Compensation............................ 14
Executive Compensation...................................... 17
Summary Compensation Table................................ 17
Stock Options............................................. 19
Long-Term Incentive Program............................... 20
Pension Plans............................................. 21
Employment and Change in Control Agreements............... 23
Cumulative Total Stockholder Return......................... 24
Certain Transactions........................................ 25
Other Information........................................... 26
Annual Report on Form 10-K................................ 26
2004 Annual Meeting and Stockholder Proposals............. 26
Proxy Solicitation........................................ 26
Electronic Access to Proxy Materials and Annual Report.... 27
YOUR VOTE IS IMPORTANT
PLEASE VOTE AS SOON AS POSSIBLE. YOU CAN HELP ALLEGHENY TECHNOLOGIES REDUCE
EXPENSES BY VOTING YOUR SHARES BY TELEPHONE OR INTERNET; YOUR PROXY CARD
CONTAINS THE INSTRUCTIONS. OR, COMPLETE, SIGN AND DATE YOUR PROXY CARD AND
RETURN IT AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
PROXY STATEMENT FOR
2003 ANNUAL MEETING OF STOCKHOLDERS
VOTING PROCEDURES
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WHO MAY VOTE
If you were a stockholder on the books of the Company at the close of business
on March 10, 2003, you may vote at the annual meeting. On that day, 80,643,779
shares of our Common Stock were outstanding.
Each share is entitled to one vote. In order to vote, you must either designate
a proxy to vote on your behalf or attend the meeting and vote your shares in
person. The Board of Directors requests your proxy so that your shares will
count toward a quorum and be voted at the meeting.
METHODS OF VOTING
All stockholders may transmit their proxy votes by mail, telephone or Internet.
Stockholders who hold their shares through a bank or broker can vote by
telephone or Internet if their bank or broker offers those options.
- BY MAIL. Stockholders may complete, sign, date and return their proxy cards in
the postage-paid envelope provided. If you sign, date and return your proxy
card without indicating how you want to vote, your proxy will be voted as
recommended by the Board of Directors.
- BY TELEPHONE OR INTERNET. Stockholders of record may vote by using the
toll-free telephone number or Internet website address listed on the proxy
card. Participants who hold stock in Company employee benefit plans also may
vote by telephone or the Internet. Your proxy card contains a control number
that will identify you as a stockholder when you vote by telephone or
Internet. You may use the telephone and Internet procedures to vote your
shares and to confirm that your votes were properly recorded. Please see your
proxy card for specific instructions.
You can help the Company save money by electing to receive future proxy
statements and annual reports over the Internet instead of by mail, as described
in this Proxy Statement under the heading "Other Information--Electronic Access
to Proxy Materials and Annual Report" on page 27.
REVOKING YOUR PROXY
You may change your mind and revoke your proxy at any time before it is voted at
the meeting by:
- sending a written notice to revoke your proxy to the Corporate Secretary at
the Company's executive office;
- transmitting a proxy dated later than your prior proxy either by mail,
telephone or Internet; or
- attending the annual meeting and voting in person or by proxy (except for
shares held in the employee plans described below).
VOTING BY EMPLOYEE BENEFIT
PLAN PARTICIPANTS
Participants who hold Common Stock in one of the Company's defined contribution
savings or retirement or stock ownership plans may tell the plan trustee how to
vote the shares of Common Stock allocated to their accounts. You may either sign
and return the voting instruction card provided by the plan or transmit your
instructions by telephone or Internet. If you do not transmit instructions, your
shares will be voted as the plan administrator directs or as otherwise provided
in the plan.
VOTING SHARES HELD BY
BROKERS, BANKS AND OTHER
NOMINEES
If you hold your shares in a broker, bank or other nominee account, you are a
"beneficial owner" of Company Common Stock. In order to vote your shares, you
must give voting instructions to your broker, bank or other intermediary who is
the "nominee holder" of your shares. The Company asks brokers, banks and other
nominee holders to obtain voting instructions from the beneficial owners of
shares that are registered in the nominee's name. Proxies that are transmitted
by nominee holders on behalf of beneficial owners will count toward a quorum and
will be voted as instructed by the nominee holder.
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QUORUM FOR MEETING
A majority of the outstanding shares, present or represented by a proxy,
constitutes a quorum. A quorum is necessary to conduct business at the annual
meeting. You are part of the quorum if you have voted by proxy. Abstentions,
broker non-votes and votes withheld from director nominees count as "shares
present" at the meeting for purposes of determining a quorum. Abstentions and
broker non-votes do not count in the voting results. A broker non-vote occurs
when a broker, bank or other nominee holder does not vote on a particular item
because the nominee holder does not have discretionary authority to vote on that
item and has not received instructions from the beneficial owner of the shares.
CONFIDENTIAL VOTING POLICY
The Company maintains a policy of keeping stockholder votes confidential.
BOARD COMPOSITION AND PRACTICES
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INFORMATION AND MEETINGS
The Board of Directors directs the management of the business and affairs of the
Company as provided in the by-laws of the Company and the laws of the State of
Delaware. The Board is not involved in day-to-day operations. Members of the
Board keep informed about the Company's business through discussions with the
senior management and other officers and managers of the Company and its
subsidiaries, by reviewing analyses and reports sent to them, and by
participating in Board and committee meetings.
Regular meetings of the Board were held seven times in 2002. Special meetings
are scheduled when required; one was held in 2002. In 2002, average attendance
at Board and committee meetings was approximately 96%.
NUMBER OF DIRECTORS
The Board of Directors determines the number of directors. The Board currently
consists of 13 members.
DIRECTOR TERMS
The directors are divided into three classes and the directors in each class
generally serve for a three-year term unless the director is unable to serve due
to death, retirement or disability. The term of one class of directors expires
each year at the annual meeting of stockholders. The Board may fill a vacancy by
electing a new director to the same class as the director being replaced. The
Board may also create a new director position in any class and elect a director
to hold the newly created position until the term of the class expires.
ITEM A ON PROXY CARD -- ELECTION OF DIRECTORS
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The Board of Directors has nominated for election this year the class of four
incumbent directors whose terms expire at the 2003 Annual Meeting. Mr. Fetterolf
has advised the Company that he expects to retire from the Board at the 2004
Annual Meeting.
The four nominees who receive the highest number of votes cast will be elected.
If you sign and return your proxy card, the individuals named as proxies on the
card will vote your shares for the election of the four nominees named below,
unless you provide other instructions. You may withhold authority for the
proxies to vote your shares on any or all of the nominees by following the
instructions on your proxy card. If a nominee becomes unable to serve, the
proxies will vote for a Board-designated substitute or the Board may reduce the
number of directors.
Background information about the nominees and continuing directors follows.
2
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
THE ELECTION OF THE FOUR NOMINEES.
NOMINEES - TERM TO EXPIRE AT THE 2006 ANNUAL MEETING (CLASS I)
DIANE C. CREEL
Age: 54
Director Since: 1996
ATI Board Committees: Committee on Governance, Personnel and Compensation
Committee (Vice Chair) and Stock Incentive Award
Subcommittee (Chair).
Principal Occupation: Chief Executive Officer and President of Earth Tech, an
International consulting engineering firm and a unit of
Tyco International Ltd.
Other Directorships: Board of the Corporations and Trusts which comprise the
Fixed Income Funds of the American Funds Group, Goodrich
Corporation and Teledyne Technologies Incorporated.
C. FRED FETTEROLF
Age: 74
Director Since: 1996
ATI Board Committees: Personnel and Compensation Committee, Stock Incentive
Award Subcommittee and Technology Committee.
Recent Business Experience: Mr. Fetterolf was President and Chief Operating Officer of
Alcoa, Inc., prior to his retirement in 1991.
Other Directorship: Commonwealth Industries, Inc.
JAMES E. ROHR
Age: 54
Director Since: 1996
ATI Board Committees: Executive Committee, Audit Committee and Finance
Committee.
Principal Occupation: Chairman and Chief Executive Officer, The PNC Financial
Services Group, Inc.
Recent Business Experience: Mr. Rohr has been Chairman and Chief Executive Officer of
The PNC Financial Services Group, Inc. since May 2001. He
had served as President from 1992-2002 and assumed the
position of Chief Executive Officer in May of 2000. He was
named Chairman in May 2001.
Other Directorships: Blackrock, Inc., Equitable Resources, Inc. and The PNC
Financial Services Group, Inc.
3
BRIAN P. SIMMONS
Age: 42
Director Since: 2002
ATI Board Committees Finance Committee and Technology Committee.
Principal Occupation: Partner of Code Hennessy & Simmons LLC, a private
investment firm.
CONTINUING DIRECTORS -- TERM TO EXPIRE AT 2004 ANNUAL MEETING (CLASS II)
PAUL S. BRENTLINGER
Age: 75
Director Since: 1996
ATI Board Committees: Audit Committee (Vice Chairman), Finance Committee (Vice
Chairman) and Technology Committee (Chairman).
Principal Occupation: Partner in Morgenthaler, a venture capital group.
GEORGE J. KOURPIAS
Age: 70
Director Since: 2000
ATI Board Committee: Technology Committee.
Recent Business Experience: Mr. Kourpias was International President, International
Association of Machinists and Aerospace Workers, prior to
his retirement in 1997.
Other Directorship: Northwest Airlines Corporation.
JAMES L. MURDY
Age: 64
Director Since: 1999
ATI Board Committee: Executive Committee.
Principal Occupation: President and Chief Executive Officer, Allegheny
Technologies Incorporated.
Recent Business Experience: Mr. Murdy served as Executive Vice President of the
Company from September 2000 until 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.
Other Directorship: Federated Investors, Inc.
4
WILLIAM G. OUCHI
Age: 59
Director Since: 1996
ATI Board Committees: Audit Committee, Finance Committee, Personnel and
Compensation Committee and Stock Incentive Award
Subcommittee.
Principal Occupation: Sanford & Betty Sigoloff Professor in Corporate Renewal,
The Anderson Graduate School of Management, University of
California at Los Angeles.
Recent Business Experience: From 1998 to June 2000, Dr. Ouchi also served as the Vice
Dean and Faculty Director of Executive Education Programs,
The Anderson Graduate School of Management, University of
California at Los Angeles.
Other Directorships: First Fed Financial, Sempra Energy and Water Pik
Technologies, Inc.
CONTINUING DIRECTORS - TERM TO EXPIRE AT 2005 ANNUAL MEETING (CLASS III)
ROBERT P. BOZZONE
Age: 69
Director Since: 1996
ATI Board Committee: Executive Committee (Chairman).
Recent Business Experience: Mr. Bozzone was Chairman, President and Chief Executive
Officer of the Company from December 2000 until July 2001.
He has served as Non-Executive Chairman since July 2001.
He had served as Vice Chairman of the Company beginning in
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.
Other Directorships: DQE, Inc., whose principal subsidiary is Duquesne Light
Company (Chairman of the Board), Teledyne Technologies
Incorporated and Water Pik Technologies, Inc. (Chairman of
the Board).
FRANK V. CAHOUET
Age: 70
Director Since: 1996
ATI Board Committees: Audit Committee (Chairman), Finance Committee (Chairman),
Committee on Governance and Technology Committee.
Recent Business Experience: Mr. Cahouet was Chairman, President and Chief Executive
Officer of Mellon Financial Corporation, a bank holding
company, and Mellon Bank, N.A., a banking corporation,
until his retirement in December 1998.
Other Directorships: Avery Dennison Corporation, Korn/Ferry International,
Saint-Gobain Corporation and Teledyne Technologies
Incorporated.
5
JAMES C. DIGGS
Age: 54
Director Since: 2001
ATI Board Committees: Committee on Governance and Technology Committee.
Principal Occupation: Senior Vice President and General Counsel of PPG
Industries, Inc., a producer of coatings, glass and
chemicals, since 1997.
Recent Business Experience: Prior to 1997, Mr. Diggs was Vice President and Assistant
General Counsel of TRW, Inc.
W. CRAIG MCCLELLAND
Age: 68
Director Since: 1996
ATI Board Committees: Committee on Governance (Chairman), Personnel and
Compensation Committee, Stock Incentive Award Subcommittee
and Technology Committee.
Recent Business Experience: Mr. McClelland was Chairman and Chief Executive Officer of
Union Camp Corporation, a manufacturer of paper products,
prior to his retirement in 1999.
Other Directorships: International Paper Company and Water Pik Technologies,
Inc.
CHARLES J. QUEENAN, JR.
Age: 72
Director Since: 1996
ATI Board Committees: Executive Committee and Personnel and Compensation
Committee (Chairman).
Principal Occupation: Senior Counsel of Kirkpatrick & Lockhart LLP,
attorneys-at-law.
Recent Business Experience: Prior to January 1996, Mr. Queenan was a partner of
Kirkpatrick & Lockhart LLP.
Other Directorships: Crane Co., Teledyne Technologies Incorporated and Water
Pik Technologies, Inc.
6
COMMITTEES OF THE BOARD OF DIRECTORS
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STANDING COMMITTEES
The Board of Directors has seven standing committees--Executive, Audit, Finance,
Governance, Personnel and Compensation, Stock Incentive Award Subcommittee of
the Personnel and Compensation Committee, and Technology--each of which has a
written charter.
EXECUTIVE COMMITTEE
The Executive Committee has broad powers to act on behalf of the Board of
Directors. In practice, the Executive Committee acts when emergency issues or
scheduling problems make it difficult to convene a meeting of all directors and
on specific matters referred to the Committee by the Board of Directors. The
Executive Committee reports all actions it takes at the next meeting of the
Board.
AUDIT COMMITTEE
The Audit Committee is comprised of four members who, under the current rules of
the New York Stock Exchange, are independent. The Committee operates under a
written charter adopted by the Board of Directors. The primary functions of the
Audit Committee are to:
- Recommend the appointment of the independent accountants to the Board of
Directors, considering the independence and effectiveness of the independent
accountants;
- Review the scope of the annual audit plan, proposed fees and other activities
of the independent accountants and the audit plan of the internal auditors;
- Review with management and the independent accountants, upon completion of the
annual audit, the financial statements and related reports to be filed with
the Securities and Exchange Commission;
- Provide the report of the Committee annually to the Board of Directors for
inclusion in the Company's annual meeting proxy statement; and
- Evaluate the Company's internal and external audit efforts, accounting and
financial controls and business ethics policies and practices by reviewing
reports by, and attending meetings with, the internal and external accountants
and management.
In addition, prior to the issuance of the Company's release of quarterly
earnings, the Committee reviews with the independent accountants and management
of the Company whether any matters are required to be communicated to the
Committee by the independent accountants under generally accepted auditing
standards.
The independent accountants and the internal auditors have full access to the
Committee and meet with the Committee, with, and on a routine basis without,
management being present, to discuss all appropriate matters. The Committee met
separately six times in 2002 and jointly with the Finance Committee four times
in 2002. The Audit Committee report begins on page 8.
FINANCE COMMITTEE
The Finance Committee makes recommendations to the Board of Directors regarding:
- Company debt and credit arrangements and other major financial proposals;
- Company relationships with banks and other financial institutions; and
- Policies with respect to dividends, capital structure and authorized stock.
In addition, the Committee acts as named fiduciary of the Company's defined
benefit and defined contribution pension plans.
The Committee met separately four times in 2002 and met jointly with the Audit
Committee four times in 2002.
COMMITTEE ON GOVERNANCE
The Committee on Governance administers the Company's compensation programs for
directors. In addition, the Committee reviews, evaluates and makes
recommendations to the Board of Directors regarding:
- Candidates for nomination as new Board members and nomination of incumbent
directors as continuing Board members when their terms expire;
- Assignments to Board committees and appointments of committee chairs;
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- The composition, organization and operations of the Board, including the
orientation of new members and the flow of information; and
- Policies on Board tenure and the retirement or resignation of incumbent
directors.
The Committee met seven times in 2002.
Recommendations by stockholders of potential nominees must be directed to the
Corporate Secretary in the manner specified in the Company's certificate of
incorporation. See "2004 Annual Meeting and Stockholder Proposals" on page 26.
PERSONNEL AND COMPENSATION COMMITTEE
The Personnel and Compensation Committee, together with the Stock Incentive
Award Subcommittee (together referred to as the "Committee"), establishes, and
annually reassesses, the executive compensation program. Their Report on
Executive Compensation begins on page 14.
The Committee administers the Company's incentive compensation plans, except to
the extent the Stock Incentive Award Subcommittee administers the plans. The
Committee also reviews, evaluates and makes recommendations to the Stock
Incentive Award Subcommittee and/or the Board of Directors, and consults with
the Chief Executive Officer, as appropriate, regarding:
- Executive management organization matters;
- Compensation and benefits for officers who also serve as directors of the
Company;
- Compensation and benefit policies and procedures relating to officers who are
statutory insiders;
- Policy matters relating to employee benefits and employee benefit plans;
- Management succession plans generally as well as management succession plans
applicable to emergency situations; and
- Executive development programs, including consultation with the Chief
Executive Officer regarding candidates for senior executive positions.
None of the members of the Personnel and Compensation Committee is an employee
of the Company and each member is an "outside director" for the purposes of the
corporate compensation provisions contained in Section 162(m) of the Internal
Revenue Code. The Committee met eight times in 2002.
STOCK INCENTIVE AWARD SUBCOMMITTEE
The Stock Incentive Award Subcommittee is responsible for administering and
making awards under the Company's stock-based incentive compensation programs
for officers, referred to as "statutory insiders," who are required to file
reports under Section 16 of the Securities Exchange Act of 1934.
None of the members of the Subcommittee is an employee of the Company. Each
member is a "non-employee director" for the purposes of Rule 16b-3 of the
Securities and Exchange Commission and an "outside director" for the purposes of
the compensation provisions of the Internal Revenue Code. The Subcommittee met
six times in 2002.
TECHNOLOGY COMMITTEE
The Technology Committee assesses and makes recommendations to the Board of
Directors regarding:
- The impact of technologies that could materially affect the Company's success;
- The Company's technical capabilities; and
- Priorities, asset deployment and other matters related to the Company's
technical activities.
The Committee met once in 2002.
REPORT OF AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to the Company's
audited financial statements for the year ended December 31, 2002, which include
the consolidated balance sheets of the Company as of December 31, 2002 and 2001,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2002,
and the notes thereto (collectively, the "Financial Statements").
Management is responsible for the Company's internal controls and financial
reporting process. Ernst & Young LLP ("Ernst & Young"), the Company's
independent accountants, are
8
responsible for performing an independent audit of the Company's Financial
Statements in accordance with generally accepted auditing standards and for
issuing a report. One of the Audit Committee's responsibilities is to monitor
and oversee these processes.
The Audit Committee has reviewed, met and held discussions with the Company's
management, internal auditors, and the independent accountants regarding the
Financial Statements, including a discussion of quality, not just acceptability,
of the Company's accounting principles, and Ernst & Young's judgment regarding
these matters.
The Audit Committee discussed with the Company's internal auditors and
independent accountants the overall scope and plans for their respective audits.
The Audit Committee met with the internal auditors and independent accountants,
with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. The Audit Committee has
also discussed with Ernst & Young matters required to be discussed by applicable
auditing standards.
The Audit Committee has received the written disclosures and the letter from
Ernst & Young required by the Independence Standards Board and has also
considered the compatibility of non-audit services with Ernst & Young's
independence. This information was also discussed with Ernst & Young.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the Financial Statements be included
in the Company's Annual Report on Form 10-K for the year ended December 31, 2002
as filed with the Securities and Exchange Commission.
SUBMITTED BY:
AUDIT COMMITTEE, whose members are:
Frank V. Cahouet, Chairman
Paul S. Brentlinger, Vice Chairman
William G. Ouchi
James E. Rohr
9
DIRECTOR COMPENSATION
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Directors who are not employees of the Company are paid an annual retainer fee
of $28,000. Directors also are paid $1,500 for each Board meeting and $1,000 for
each committee meeting attended. Each non-employee chairman of a committee is
paid an annual fee of $5,000. Directors who are employees of the Company do not
receive any compensation for their services on the Board or its committees. Mr.
Bozzone's compensation as Chairman is a monthly cash retainer of $11,600 in lieu
of Board retainer and meeting fees.
The non-employee directors also participate in the 1996 Non-Employee Director
Stock Compensation Plan ("Director Stock Plan"). The purpose of the Director
Stock Plan is to provide non-employee directors with an increased personal
interest in the Company's performance.
Under the Director Stock Plan, options to purchase 1,000 shares of Common Stock
are granted to non-employee directors at the conclusion of each annual meeting
of stockholders. The purchase price of the Common Stock covered by these annual
options is the fair market value of the Common Stock on the date the option is
granted.
The Director Stock Plan also provides that each non-employee director is to
receive at least 25% of the annual retainer fee in the form of Common Stock
and/or options to acquire Common Stock. Each director may elect a greater
percentage. The directors also may elect to receive all or a percentage of their
meeting fees in the form of Common Stock and/or options to acquire Common Stock.
Options granted under this part of the Director Stock Plan are intended to
provide each electing director with options having an exercise value on the date
of grant equal to the foregone fees; that is, the difference between the
exercise price and the market price of the underlying shares of Common Stock on
the date of grant is intended to be equal to the foregone fees.
In order to continue to attract and retain non-employee directors of exceptional
ability and experience, the Company also maintains a Fee Continuation Plan for
Non-Employee Directors. Under the Plan, benefits are payable to a person who
serves as a non-employee director for at least five years. The annual benefit
equals the retainer fee in effect when the director retires from the Board.
Benefits are paid for each year of the participant's credited service as a
director (as defined in the Plan) up to a maximum of ten years.
10
ITEM B ON PROXY CARD -- RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
Ernst & Young has served as independent accountants for the Company since August
15, 1996 and served as independent accountants for Allegheny Ludlum Corporation
since 1980. The Board of Directors believes that Ernst & Young is knowledgeable
about the Company's operations and accounting practices and is well qualified to
act in the capacity of independent accountants.
AUDIT FEES
Ernst & Young has billed the Company $1,570,000 in the aggregate, for
professional services rendered by them for the audit of the Company's annual
financial statements for the Company's 2002 fiscal year, including the reviews
of the interim financial statements included in the Company's Quarterly Reports
on Form 10-Q for the Company's 2002 fiscal year, foreign statutory audits
($274,000) and the audits of the Company's employee benefit plans ($257,000).
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During 2002, Ernst & Young did not provide the Company with any professional
services related to financial information systems design and implementation as
described in Rule 2-01 of Regulation S-X.
ALL OTHER FEES
Ernst & Young has billed the Company $345,000, in the aggregate, for
professional services rendered in 2002 by Ernst & Young for all other services,
principally tax-related services.
In making its recommendation to ratify the appointment of Ernst & Young as the
Company's independent accountants for the fiscal year ending December 31, 2003,
the Audit Committee has considered whether the non-audit services provided by
Ernst & Young are compatible with maintaining the independence of Ernst & Young.
For this proposal to be adopted, a majority of the votes cast must be voted for
approval. If the stockholders do not ratify the selection of Ernst & Young, the
Board will reconsider the appointment of independent accountants. It is expected
that representatives of Ernst & Young will be present at the meeting and will
have an opportunity to make a statement and respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR RATIFICATION OF THE SELECTION OF
THE INDEPENDENT ACCOUNTANTS.
OTHER BUSINESS
--------------------------------------------------------------------------------
The Company knows of no business that may be presented for consideration at the
meeting other than the items indicated in the Notice of Annual Meeting. If other
matters are properly presented at the meeting, the persons designated as proxies
on your proxy card may vote at their discretion.
Following adjournment of the formal business meeting, James L. Murdy, President
and Chief Executive Officer, will address the meeting and will hold a general
discussion period during which the stockholders will have an opportunity to ask
questions about the Company and its business.
11
STOCK OWNERSHIP INFORMATION
--------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the Securities and Exchange Commission require the Company to
disclose late filings of reports of stock ownership (and changes in stock
ownership) by its directors and statutory insiders. To the best of the Company's
knowledge, all filings by these individuals were made on a timely basis in 2002.
FIVE PERCENT OWNERS OF COMMON STOCK
As of February 15, 2003, the Company had received notice that the individuals
and entities listed in the following table are beneficial owners of five percent
or more of Company Common Stock. In general, "beneficial ownership" includes
those shares a person has the power to vote or transfer, and options to acquire
Common Stock that are exercisable currently or within 60 days.
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class
------------------------------------------------------------------------------------------
Richard P. Simmons.......................................... 7,657,429(a) 9.5%
Birchmere
Quaker Hollow Road
Sewickley, PA 15143
The Singleton Group LLC..................................... 5,775,000(b) 7.2%
335 North Maple Drive, Suite 177
Beverly Hills, CA 90210
Capital Group International, Inc............................ 4,040,010(c) 5.0%
11100 Santa Monica Boulevard
Los Angeles, CA 90025
------------------------------------------------------------------------------------------
(a) Based upon a Schedule 13D/A filing made by Mr. Simmons on February 6, 2002,
as of December 31, 2001 Mr. Simmons beneficially owned all of these shares.
The amount shown includes options to acquire 171,584 shares which are
exercisable within 60 days of February 15, 2003 under Company incentive
stock plans.
(b) As of December 31, 2000, The Singleton Group LLC, Caroline W. Singleton,
William W. Singleton and Donald E. Rugg held shared voting and dispositive
power with respect to 5,775,000 shares as indicated in Schedule 13G, as
amended, filed under the Securities Exchange Act of 1934 (the "Exchange
Act") by Caroline W. Singleton. As indicated in a Schedule 13G filed under
the Exchange Act in April 2000, Donald E. Rugg also held sole voting and
dispositive power with respect to 158 shares.
(c) Based upon a Schedule 13G filing made by Capital Group International, Inc.
on February 11, 2003, as of December 31, 2002, it beneficially owned
4,040,010 shares of Common Stock and had the sole power to direct the voting
and disposition of all of these shares.
12
STOCK OWNERSHIP OF MANAGEMENT
The following table shows the shares of Common Stock reported to the Company as
beneficially owned as of March 14, 2003 by the nominees for director, the
continuing directors and each officer named in the Summary Compensation Table.
Shares Shares That
Beneficially May Be Acquired Total
Beneficial Owner Owned Within 60 Days Shares
-------------------------------------------------------------------------------------------------
Robert P. Bozzone.............................. 2,703,022 29,605 2,732,627(1)
Paul S. Brentlinger............................ 11,208 4,268 15,476
Frank V. Cahouet............................... 96 48,004 48,100
Diane C. Creel................................. 2,715 20,287 23,002
James C. Diggs................................. 1,188 1,000 2,188
C. Fred Fetterolf.............................. 13,080 4,268 17,348
Richard J. Harshman............................ 129,802 46,800 176,602
Douglas A. Kittenbrink......................... 149,609 65,994 215,603
George J. Kourpias............................. 1,596 2,000 3,596
W. Craig McClelland............................ 15,046 4,268 19,314
James L. Murdy................................. 366,030 117,818 483,848
William G. Ouchi............................... 20,481 14,578 35,059
Charles J. Queenan, Jr......................... 356,906 4,268 361,174
James E. Rohr.................................. 7,149 4,268 11,417
Jack W. Shilling............................... 180,845 72,551 253,396
Brian P. Simmons............................... 9,661 0 9,661
Jon D. Walton.................................. 198,397 99,313 297,710
All directors, named officers and other
statutory insiders as a group (18)........... 4,242,004 603,481 4,845,485
-------------------------------------------------------------------------------------------------
(1) The percentage of outstanding shares is 6% for the group. Except for Mr.
Bozzone, who holds 3.4% of the outstanding shares, the percentage of
outstanding shares held by each director and named officer in the table is
less than 1%.
The table includes shares held as of March 4, 2003 in the Company's 401(k) plans
for the accounts of Messrs. Bozzone, Kittenbrink, Murdy, Shilling and Walton and
shares held jointly with the named individuals' spouses. The table also includes
the following shares where beneficial ownership is disclaimed: 120,000 shares
owned by Mr. Bozzone's wife; 100 shares owned by Mr. Brentlinger's wife; 1,300
shares owned by the Fetterolf Family Foundation; 1,534 shares owned by Mr.
Kittenbrink's children; 27,050 shares owned by Mr. Queenan's wife; 3,700 shares
owned by Mr. Walton's wife; and 243 shares held by the spouses of other
statutory insiders.
13
REPORT ON EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
The Personnel and Compensation Committee and Stock Incentive Award Subcommittee
furnish this report on executive compensation. In discussions of stock awards to
the named officers in the Summary Compensation Table and other statutory
insiders, the term "Committee" refers to the Stock Incentive Award Subcommittee.
EXECUTIVE COMPENSATION CHARACTERISTICS
Total executive compensation at the Company has the following characteristics:
- It is to be competitive in the aggregate, using a set of business and labor
market competitors, including data supplied by Hewitt Associates, a nationally
recognized executive compensation consulting firm, to gauge the competitive
marketplace. Competitive for these purposes is a target base compensation at
the 50th percentile (median) for comparable positions.
- It is to be performance oriented, with a substantial portion of total
compensation tied to internal and external measures of Company performance.
Superior performance should increase total compensation opportunities to well
above the 50th percentile level.
- It is to promote long-term careers with the Company.
COMPENSATION POLICIES AND PROGRAMS
Consistent with the characteristics outlined above, the Committee has adopted
the following policies and programs:
Base salary for all management positions will be at the industry or market
median for comparable positions unless there are sound reasons for significant
variations. Judgment is the guiding factor in base salary determinations, as
well as other compensation issues.
Short-term incentives under the Annual Incentive Plan ("AIP") are designed to
provide a competitive (50th percentile) award, based on the achievement of
predefined performance measures. Under the general provisions of the AIP, up to
200% of the target award is paid in the case of significant overachievement. The
majority of the award is based on financial performance achievement and is also
tied to the achievement of safety and other individual performance goals.
Discretionary adjustments of plus or minus 20% are allowed, so long as aggregate
adjustments do not exceed plus 5%. Total overall payout awards under the plan
pool in 2002 were limited to the greater of 5% of operating profit or 5% of
operating cash flow.
For 2002, 25% of the award for AIP participants was based on the achievement of
predetermined levels of operating income, 30% was based on inventory reductions
(turns), 25% on cost reductions, and 10% was tied to the achievement of specific
individual objectives. Given the importance the Company placed on safety, 10% of
the total award was based on pre-established levels of safety improvement.
For 2002, the officers named in the Summary Compensation Table on page 17
achieved the pre-established levels of targeted performance under the AIP. In
light of the difficult year experienced by the Company, however, the Committee
determined not to make AIP awards to any of the officers named in the Summary
Compensation Table and certain other top-level corporate and operating Company
executives. Other participants received AIP awards for 2002, reduced by the
Committee by 20% from actual levels of achievement because of the difficult year
experienced by the Company. Awards ranged from 0% to 75% of the 2002 target
incentives based on the targets and levels of achievement varied by business
unit and at the Company level.
Long-term incentives at the Company consist of the following components:
(1) Stock Options -- Historically, stock options have been awarded annually to
key employees approved by the Committee. The amount of the award generally
depends on the participant's salary grade and is at levels generally perceived
to be competitive. The Committee granted options periodically over the year for
key employees. In October 2002, the Committee made a special grant of options
under the existing Incentive Plan. Because the Black-
14
Scholes value of options granted to date in 2002 was less than competitive
levels, the increase was determined to be necessary in order to bring the
Company's levels of option grants to a competitive level. The Committee
anticipates making additional grants during 2003.
(2) Total Shareholder Return Incentive Compensation Program -- The Total
Shareholder Return Incentive Compensation Program ("TSRP") was instituted in
2001 to replace the Performance Share Program ("PSP"). Under the TSRP,
participants receive awards of performance share units that are earned based on
a comparison of the Company's total shareholder return ("TSR") for a three-year
award period with the TSR during such period of a peer group of companies
selected by the Board of Directors. The peer group is not the same as the peer
group indexes used in the performance graph on page 24. For each year, the
Committee determines whether there will be a new TSRP award period starting in
that year. If a new award period is established, the Committee selects the
eligible participants, establishes a target number of performance shares for
each participant and constructs the peer group of companies for that award
period. Awards under the TSRP range from 0% to 200% of the targeted number of
shares, depending on the percentile rank of the Company's TSR for the award
period as compared to the TSR of the peer group of companies for the same
period. Certificates for the number of earned shares of Common Stock, if any,
are issued to the participants after the end of the award period.
(3) Stock Acquisition and Retention Program -- The Stock Acquisition and
Retention Program ("SARP") was designed to encourage key executives to acquire
and retain Common Stock. Under the SARP, prior to the effective date of the
Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), executives selected by the
Committee were entitled to purchase shares or designate already-owned shares of
Common Stock (up to a maximum number of shares having a market price not to
exceed the participant's base salary) that the Company agreed to match with a
grant of restricted Common Stock equal to 50% to 100% of the number of shares
purchased or designated by the participant. The Company loaned a participant the
funds to purchase shares under the SARP at an interest rate equal to the minimum
rate necessary to avoid imputed interest income under the federal income tax
rules. In light of Sarbanes-Oxley, the Committee determined to terminate the
SARP and permit no loans to be extended thereunder. Loans and designations
outstanding at the effective date of Sarbanes-Oxley remain in effect on the same
terms and conditions as in effect prior to the effective date of Sarbanes-Oxley.
The Committee was advised by its consultant that, due to the termination of
SARP, the long-term compensation portion of the Company's compensation program
was no longer competitive. The Committee directed that the estimated value of
SARP participation be determined and that a program be implemented to provide
the value of the SARP portion of the long-term compensation program. The
Committee decided upon a transition program consisting of three components:
stock options, cash payments and restricted stock. The value of the aggregate of
such components of the replacement program is intended to be approximately equal
to the value of the terminated SARP participation. The Committee views the
program implemented to replace the terminated SARP to be transitional in nature
and intends to continue to evaluate appropriate replacement long-term incentive
compensation programs.
(4) Performance Share Program -- The Performance Share Program ("PSP") was
replaced by the Total Shareholder Return Incentive Compensation Program. The PSP
provided grants of performance share units that could be earned if specified
performance objectives were met over a multi-year cycle, which generally lasted
three years. At the beginning of each cycle, the Committee selected the eligible
participants and approved the performance objectives. For statutory insiders and
other corporate executives, performance was generally measured at the Company
level. The amount of the award opportunity generally depended on the
participant's salary grade at the beginning of the award period. At the time the
award opportunity was set, the awards were denominated two-thirds in shares of
Common Stock (based on the value of the shares immediately prior to the
beginning of the award period) and one-third in cash. Awards under the PSP
ranged from 0% to 200% of the target
15
incentive opportunity depending on the extent to which the performance goals
were achieved. Awards were generally paid to participants in three annual
installments after the conclusion of the performance cycle so long as they
remained Company employees (with exceptions for retirement, disability and
death). The final installment award payment to participants of the
now-terminated PSP was made in 2002.
COMPENSATION OF CHIEF EXECUTIVE OFFICER -- JAMES L. MURDY
On July 1, 2001, James L. Murdy was selected to serve as the Company's President
and Chief Executive Officer. In July 2001, the Committee, after consultation
with Hewitt Associates, took action regarding the compensation of Mr. Murdy
consistent with the compensation program, including the performance-based
components of the program that the Committee had adopted for the Company's chief
executive officer. Mr. Murdy's annual base salary was established at $650,000,
and he participates in the Company's compensation programs, including the AIP
and TSRP. In 2002, Mr. Murdy was granted options to purchase 180,000 shares of
Company Common Stock. The Committee believes, based upon the advice of
consultants, that the compensation program established for the Company's chief
executive officer is competitive and appropriate.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(a) of the Internal Revenue Code imposes limits on tax deductions for
annual compensation paid to a chief executive officer and other highly
compensated officers unless the compensation qualifies as "performance-based" or
is otherwise exempt under the law. The Company's Incentive Plan is intended to
meet the deductibility requirements of the regulations promulgated under Section
162(m). The Committee, however, may determine in any year that it would be in
the best interests of the Company for certain awards to be paid under the
Incentive Plan that would not satisfy the requirements of Section 162(m) for
deductibility.
SUBMITTED BY:
PERSONNEL AND COMPENSATION
COMMITTEE, whose members are:
Charles J. Queenan, Jr., Chairman
Diane C. Creel, Vice Chair
C. Fred Fetterolf
W. Craig McClelland
William G. Ouchi
STOCK INCENTIVE AWARD
SUBCOMMITTEE, whose members are:
Diane C. Creel, Chair
C. Fred Fetterolf
W. Craig McClelland
William G. Ouchi
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Personnel and Compensation Committee or Stock Incentive Award
Subcommittee is an officer or employee of the Company. Mr. Queenan serves as
senior counsel to a law firm that provided services to the Company during 2002
and 2003. Mr. Queenan does not participate in that firm's earnings or profits.
No other member of the Committee has a current or prior relationship, and no
officer who is a statutory insider of the Company has a relationship to any
other company required to be described under the Securities and Exchange
Commission rules relating to disclosure of executive compensation.
16
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth information about the
compensation paid by the Company to each of the five most highly compensated
officers required to file reports under Section 16 of the Securities Exchange
Act of 1934, as of December 31, 2002 (the "named officers").
Annual Compensation Long-Term Compensation
--------------------------------- --------------------------------------
Awards Payouts
------ -------
Other Securities
Annual Under-
Name and Compen- Restricted lying LTIP All Other
Principal Salary Bonus sation Stock Options Payouts Compensation
Positions Year ($)(1) ($)(2) ($)(3) Award($)(4) (Shares)(5) ($)(6) ($)(7)
-------------------------------------------------------------------------------------------------------------------------------
James L. Murdy 2002 585,000 0 54,332 325,000 180,000 48,287 683,169
President and 2001 530,000 350,000 23,519 180,000 35,000 46,193 1,100,968
Chief Executive Officer 2000 406,667 326,019 21,902 585,953 5,000 55,468 377,556
Jack W. Shilling 2002 400,000 0 62,165 400,000 60,000 28,837 316,869
Executive Vice President, 2001 365,000 200,000 27,192 52,487 15,000 27,586 323,500
Strategic Initiatives and
Technology 2000 322,500 238,550 20,566 473,248 5,000 33,126 180,288
and Chief Technology Officer
Douglas A. Kittenbrink 2002 350,000 0 57,073 268,000 60,000 16,983 169,361
Executive Vice President, 2001 312,500 175,000 27,910 56,245 15,000 16,246 103,152
Chief Operating Officer 2000 241,383 198,792 9,166 361,861 5,000 19,511 68,589
Jon D. Walton 2002 340,000 0 60,478 340,000 60,000 36,042 357,605
Senior Vice President, 2001 320,000 175,000 22,306 29,962 15,000 34,479 260,896
Chief Legal and Administrative 2000 287,500 238,550 21,573 431,358 5,000 41,403 177,673
Officer
Richard J. Harshman 2002 300,000 0 58,160 300,000 60,000 18,896 129,783
Senior Vice President-Finance 2001 257,500 125,000 20,389 22,462 12,500 18,077 61,552
and Chief Financial Officer
(1) Includes cash compensation deferred pursuant to the savings portion of the
Company's Retirement Savings Plan, a qualified defined contribution plan
under Section 401(a) of the Internal Revenue Code. In October 2001, in view
of the difficult business and economic conditions impacting the Company, Mr.
Murdy voluntarily suspended payment of 20% of his base salary. That
compensation rate was restored as of July 1, 2002.
(2) Includes payments under the Company's Annual Incentive Plan. For 2002, the
named officers achieved the pre-established levels of targeted performance
under the AIP. In light of the difficult year experienced by the Company,
however, the Committee determined not to make AIP awards to any of the named
officers.
(3) In accordance with applicable regulations, for 2000 and 2001, the amounts do
not include perquisites and other personal benefits received individually by
the named officers because the aggregate value of such benefits did not
exceed the lesser of $50,000 or 10% of the total annual salary and bonus for
the named officers.
(4) Issued prior to the effective date of Sarbanes-Oxley. Represents the market
price on the award date of shares of restricted Common Stock awarded to the
named officers under the Company's SARP. Dividends are paid on the
restricted shares. The total number of restricted shares held by the named
officers on December 31, 2002 and closing market price of such shares (if
unrestricted) on the last business day of 2002 were Mr. Murdy, 80,683
shares; ($502,655); Mr. Shilling, 65,200 shares ($406,196); Mr. Kittenbrink,
50,230 shares, ($312,933); Mr. Walton, 58,369 shares ($363,639); and Mr.
Harshman, 45,439 shares ($283,085).
17
(5) Reflects options granted under the Company's Incentive Plan. The amount
shown represents the number of shares the officer could purchase by
exercising the options.
(6) The amounts shown include cash and the closing market price of Common Stock
distributed under the PSP which was discontinued beginning in 2001. For
2002, the final installment payments were made under the Company's PSP for
the 1999-2000 award period.
(7) Includes the cash portion of the transition program adopted to prospectively
replace SARP, the long-term incentive plan discontinued in light of
Sarbanes-Oxley which amounts were: Mr. Murdy, $292,000; Mr. Shilling,
$120,000, Mr. Kittenbrink, $87,500; Mr. Walton, $187,000 and Mr. Harshman,
$60,000. Includes annual accruals by the Company for possible future
payments to the named officers under the Supplemental Pension Plan described
under "Pension Plans" on page 22. For 2002, the amounts accrued were: Mr.
Murdy, $290,649; Mr. Shilling, $133,349; Mr. Kittenbrink, $30,737; Mr.
Walton, $116,010; and Mr. Harshman, $24,638. Includes 2002 Company
contributions pursuant to the retirement portion of the Company's Retirement
Savings Plan to the named officers in the amount of $13,520 each. In 2002,
the Company did not make any contributions to the savings portion of the
Company's Retirement Savings Plan to the named officers. Includes 2002
Company contributions to the Benefit Restoration Plan, as follows: Mr.
Murdy, $87,000; Mr. Shilling, $50,000; Mr. Kittenbrink, $37,604; Mr. Walton,
$41,075; and Mr. Harshman, $31,625. Under the Benefit Restoration Plan, the
Company supplements the payments received by participants under the pension
provisions described under "Pension Plans" on page 21 and the Retirement
Savings Plan by making payments to or accruing benefits on behalf of the
participants in amounts that are equivalent to the portion of the payments
or benefits that cannot be paid or accrued under such plans due to
limitations imposed by the Internal Revenue Code.
18
STOCK OPTIONS
The first table sets forth information regarding options granted during 2002
under the Company's Incentive Plan. As of March 14, 2003, the market value of
the common stock issuable upon exercise of all options reflected in the table
was significantly less than the exercise prices of the options.
The second table indicates the named officers who exercised stock options during
2002 and sets forth the unexercised options held at December 31, 2002.
OPTION GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants(1) Price Appreciation for Option Term(4)
--------------------------------------------------------------------------------------- --------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration 0% 5% 10%
Name (#)(2) Year ($/Share) Date ($)(3) ($) ($)
---- ------------ ------------ ------------- ----------------- ------ -------- ----------
J. L. Murdy........... 15,000 0.5% $15.030 1/22/2012 0 $141,750 $ 359,250
15,000 0.5% $16.925 4/22/2012 0 $159,750 $ 404,700
15,000 0.5% $10.635 7/22/2012 0 $100,350 $ 254,400
15,000 0.5% $ 7.245 10/21/2012 0 $ 68,400 $ 173,250
120,000 3.8% $ 7.245 10/21/2012 0 $547,200 $1,386,000
J. W. Shilling........ 5,000 0.2% $15.030 1/22/2012 0 $ 47,250 $ 119,750
5,000 0.2% $16.925 4/22/2012 0 $ 53,250 $ 134,900
5,000 0.2% $10.635 7/22/2012 0 $ 33,450 $ 84,800
5,000 0.2% $ 7.245 10/21/2012 0 $ 22,800 $ 57,750
40,000 1.3% $ 7.245 10/21/2012 0 $182,400 $ 462,000
D. A. Kittenbrink..... 5,000 0.2% $15.030 1/22/2012 0 $ 47,250 $ 119,750
5,000 0.2% $16.925 4/22/2012 0 $ 53,250 $ 134,900
5,000 0.2% $10.635 7/22/2012 0 $ 33,450 $ 84,800
5,000 0.2% $ 7.245 10/21/2012 0 $ 22,800 $ 57,750
40,000 1.3% $ 7.245 10/21/2012 0 $182,400 $ 462,000
J. D. Walton.......... 5,000 0.2% $15.030 1/22/2012 0 $ 47,250 $ 119,750
5,000 0.2% $16.925 4/22/2012 0 $ 53,250 $ 134,900
5,000 0.2% $10.635 7/22/2012 0 $ 33,450 $ 84,800
5,000 0.2% $ 7.245 10/21/2012 0 $ 22,800 $ 57,750
40,000 1.3% $ 7.245 10/21/2012 0 $182,400 $ 462,000
R. J. Harshman........ 5,000 0.2% $15.030 1/22/2012 0 $ 47,250 $ 119,750
5,000 0.2% $16.925 4/22/2012 0 $ 53,250 $ 134,900
5,000 0.2% $10.635 7/22/2012 0 $ 33,450 $ 84,800
5,000 0.2% $ 7.245 10/21/2012 0 $ 22,800 $ 57,750
40,000 1.3% $ 7.245 10/21/2012 0 $182,400 $ 462,000
--------------------------------------------------------------------------------------------------------------------------------
(1) In general, except for limited instances, including estate-planning
purposes, and at the discretion of the Committee, stock options become
exercisable in three annual installments beginning one year after the date
of grant. Options include the right to pay the exercise price in cash,
Common Stock or a combination, and the right to have shares withheld by the
Company to pay withholding tax obligations due on the exercise.
(2) Options were granted on January 22, 2002, April 22, 2002, July 22, 2002 and
October 21, 2002.
(3) No gain to the optionees is possible without stock price appreciation, which
will benefit all stockholders commensurately.
(4) These assumed "potential realizable values" are mathematically derived from
certain prescribed rates of stock price appreciation. The actual value of
these option grants depends on the future performance of the Common Stock
and overall stock market conditions. The values reflected in this table may
not be achieved.
19
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Shares Options at FY-End(#) FY-End($)(1)
Acquired Value --------------------------- ---------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- -------------- ----------- ------------- ----------- -------------
J. L. Murdy....................... 0 0 112,818 205,001 0 0
J. W. Shilling.................... 0 0 70,885 71,669 0 0
D. A. Kittenbrink................. 0 0 64,328 71,669 0 0
J. D. Walton...................... 0 0 97,647 71,669 0 0
R. J. Harshman.................... 0 0 45,134 69,169 0 0
(1) The "value" of unexercised options is calculated by subtracting the exercise
price per share from $6.13, which was the average of the high and low sales
prices of a share of Company Common Stock on the New York Stock Exchange on
the last business day of 2002.
LONG-TERM INCENTIVE PROGRAM
The following table sets forth information about awards for the 2002-2004 award
period established in 2002 under the Total Shareholder Return Incentive
Compensation Program.
The amounts included in the Estimated Future Payouts columns represent the
potential issuance of Common Stock to the named officers depending on the level
of achievement (i.e., threshold, target or maximum) of the performance goals for
the three-year award period. Participants will not receive any shares of Common
Stock under the program if the Company does not achieve the threshold level of
performance objectives during the award period.
TOTAL SHAREHOLDER RETURN INCENTIVE COMPENSATION PROGRAM -- AWARDS IN LAST FISCAL
YEAR
--------------------------------------------------------------------------------
Estimated Future Payouts
Under Non-Stock Price-Based Plans
Number of Performance or ----------------------------------
Shares, Units Other Period Until Threshold Target Maximum Value as of
Name or Other Rights Maturation or Payout(1) (#) (#) (#) 12/31/02
---- --------------- ----------------------- ---------- -------- -------- -----------
J. L. Murdy.......... 24,825 2002-2004 12,412 24,825 49,650 0
J. W. Shilling....... 12,731 2002-2004 6,365 12,731 25,462 0
D. A. Kittenbrink.... 11,139 2002-2004 5,569 11,139 22,278 0
J. D. Walton......... 10,821 2002-2004 5,410 10,821 21,642 0
R. J. Harshman....... 9,548 2002-2004 4,774 9,548 19,096 0
(1) The amount of the award is based on base salary at the beginning of the
award period. At the time the award opportunity was set, the awards were
denominated in shares of Common Stock (with the number of shares based on
average price of a share of Common Stock on the New York Stock Exchange for
a fixed period immediately prior to the beginning of the award period).
20
PENSION PLANS
The Company maintains a qualified defined benefit pension plan, called the
Allegheny Technologies Incorporated Pension Plan ("ATI Pension Plan"), which has
a number of benefit formulas that apply separately to various groups of
employees and retirees. In general, the variances among formulas are determined
by work location and job classification. One major difference is whether the
employee was employed by Allegheny Ludlum Corporation ("Allegheny Ludlum") or
Teledyne, Inc. ("TDY") at the time those corporations engaged in a business
combination to form the Company in 1996.
The benefits payable from a qualified defined benefit plan are limited by the
Internal Revenue Code. The Company has established non-qualified plans to
restore benefits to employees affected by those limitations. Messrs. Murdy,
Kittenbrink and Walton do not participate in the defined benefit portion of the
restoration plans.
The following table shows the estimated annual benefits calculated on a straight
life annuity basis payable under the provisions of the ATI Pension Plan
generally applicable to Allegheny Ludlum employees with the corresponding
defined benefit portion of the benefit restoration plan for salaried
participants in specified compensation and years of service classifications upon
attainment of age 65:
Estimated Annual Pension Benefits for
Representative Years of Continuous Service*
-------------------------------------------------------------------------
Remuneration 20 25 30 35 40 45
------------ -------- ---------- ---------- ---------- ---------- ----------
$ 200,000 $ 64,000 $ 80,000 $ 96,000 $ 112,000 $ 128,000 $ 144,000
300,000 96,000 120,000 144,000 168,000 192,000 216,000
400,000 128,000 160,000 192,000 224,000 256,000 288,000
500,000 160,000 200,000 240,000 280,000 320,000 360,000
600,000 192,000 240,000 288,000 336,000 384,000 432,000
800,000 256,000 320,000 384,000 448,000 512,000 576,000
1,000,000 320,000 400,000 480,000 560,000 640,000 720,000
1,500,000 480,000 600,000 720,000 840,000 960,000 1,080,000
2,000,000 640,000 800,000 960,000 1,120,000 1,280,000 1,440,000
2,500,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000
* The set of formulas used to determine retirement benefits under the pension
provisions applicable to employees of Allegheny Ludlum considers the
participant's annual eligible earnings in the highest five consecutive years
of the last ten years prior to retirement at an accrual rate per year of
service not to exceed limitations under applicable law multiplied by years of
service recognized under the ATI Pension Plan. Eligible earnings include base
salary, including tax-deferred contributions by the employee under the
Company's savings plans, and awards, when received, under the Company's
short-term incentive plans. Benefits are not subject to deduction for social
security or other offset amounts.
21
The following table shows the estimated annual benefits calculated on a straight
life annuity basis payable under the provisions of the ATI Pension Plan
generally applicable to TDY employees with the corresponding defined benefit
portion of the benefit restoration plan for salaried participants in specified
compensation and years of service classifications upon attainment of age 65:
Estimated Annual Pension Benefits for
Representative Years of Continuous Service for TDY*
-------------------------------------------------------------------------
Remuneration 20 25 30 35 40 45
------------ -------- ---------- ---------- ---------- ---------- ----------
$ 200,000 $ 60,872 $ 76,090 $ 91,308 $ 106,526 $ 121,745 $ 136,963
300,000 93,872 117,340 140,808 164,276 187,745 211,213
400,000 126,872 158,590 190,308 222,026 253,745 285,463
500,000 159,872 199,840 239,808 279,776 319,745 359,713
600,000 192,872 241,090 289,308 337,526 385,745 433,963
800,000 258,872 323,590 388,308 453,026 517,745 582,463
1,000,000 324,872 406,090 487,308 568,526 649,745 730,963
1,500,000 489,872 612,340 734,808 857,276 979,745 1,102,213
2,000,000 654,872 818,590 982,308 1,146,026 1,309,745 1,473,463
2,500,000 819,872 1,024,840 1,229,808 1,434,776 1,639,745 1,844,713
* The formula considers the participant's annual eligible earnings in the
highest five consecutive years of the last ten years prior to retirement, and
the participant's years of service, except for employees in the corporate
headquarters, which uses years of service to 1998. Eligible earnings include
base salary, including tax-deferred contributions by the employee under the
Company's savings plans, and awards, when received, under the Company's
short-term incentive plans. Benefits are not subject to deduction for social
security or other offset amounts.
As of December 31, 2002, credited years of service recognized under the ATI
Pension Plan were 14.58 for Mr. Murdy, 29.92 for Mr. Shilling, 10.5 for Mr.
Kittenbrink, 16.83 for Mr. Walton and 21.17 for Mr. Harshman.
In addition, the Company has established a Supplemental Pension Plan that
provides certain key employees of the Company and its subsidiaries, including
Messrs. Murdy, Shilling, Kittenbrink, Walton, and Harshman (or their
beneficiaries in the event of death), with monthly payments in the event of
retirement, disability or death, equal to 50% of monthly base salary as of the
date of retirement, disability or death. Monthly retirement benefits start
following the end of the two month period after the later of (1) age 62, if
actual retirement occurs prior to age 62 but after age 58 with the approval of
the Board of Directors, or (2) the date actual retirement occurs and generally
continue for a 118-month period. The plan describes the events that will
terminate an employee's participation in the plan. Since the payment of benefits
to the participants is contingent on future events, the amount to be paid in the
future with respect to such officers cannot be determined at this time.
22
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The Company entered employment agreements with Messrs. Murdy and Walton in
connection with the combination of Allegheny Ludlum and Teledyne in 1996. The
agreements provide for the payment of base salary as well as for eligibility to
participate in incentive compensation, equity, employee and fringe benefit plans
offered to senior executives of the Company. By their terms, the agreements
renew automatically each month absent notice from one party to the other, so
that the then remaining term is one year. The agreements generally terminate
prior to the expiration date without breach by any party in the event of the
death, disability or voluntary resignation of the employee. The Company may also
terminate the agreement for cause without breach by it. An employee may resign
for good reason (which is defined to include demotion, reduction in base pay or
movement of corporate headquarters) and receive severance payments equal to the
base pay and bonus, determined based on actual financial results, as well as
continued participation in certain compensation and employee benefit plans, for
one year, including certain supplemental pension benefits.
In 2000, the Company entered into change in control severance agreements, as
amended, with the named officers and other key employees to assure the Company
that it will have the continued support of the executive and the availability of
the executive's advice and counsel notwithstanding the possibility, threat or
occurrence of a change in control (as defined in the agreement). In general, the
agreements provide for the payment of severance benefits if a change in control
occurs and within 24 months after the change in control either the Company
terminates the executive's employment with the Company without cause (as
defined) or the executive terminates employment with the Company for good reason
(as defined). Severance compensation includes a multiple of base salary (three
for Messrs. Murdy, Shilling, Kittenbrink, Walton, and Harshman), certain accrued
benefits, a prorated payment of an incentive bonus equal to that which would
have been paid had the Company achieved 120% of target, a lump-sum payment under
the long-term incentive program based on the Company's performance for completed
years and for future years assuming that the Company would have achieved 120% of
target, the continuation of welfare benefits for 36 months and reimbursement for
outplacement services. The agreements also provide for the vesting of
outstanding options and the lifting of restrictions on stock awarded under the
SARP. The agreements have a term of three years, which three-year term will
continue to be extended until either party gives written notice that it no
longer wants to continue to extend the term. If a change of control occurs
during the term, the agreements will remain in effect for the longer of three
years or until all obligations of the Company under the agreements have been
fulfilled.
23
CUMULATIVE TOTAL STOCKHOLDER RETURN
--------------------------------------------------------------------------------
The graph set forth below shows the cumulative total stockholder return (i.e.,
price change plus reinvestment of dividends) on the Common Stock from December
31, 1997 through December 31, 2002 as compared to the S&P 500 Index and the S&P
Iron & Steel Index. The graph assumes that $100 was invested on December 31,
1997.
[GRAPH]
ALLEGHENY TECHNOLOGIES INC S&P 500 INDEX S & P 500 STEEL
-------------------------- ------------- ---------------
Dec-97 100.00 100.00 100.00
Dec-98 81.48 128.58 86.61
Dec-99 52.65 155.63 95.27
Dec-00 38.76 141.46 59.89
Dec-01 42.75 124.65 76.86
Dec-02 16.80 97.10 58.69
On November 29, 1999, the Company completed the transformation, which included
the spin-offs of Teledyne Technologies Incorporated (NYSE: TDY) and Water Pik
Technologies, Inc. (NYSE: PIK). In the spin-offs, holders of record on November
22, 1999 received one Teledyne Technologies share for each seven shares of
Company Common Stock and one Water Pik share for each twenty shares of Company
Common Stock, based on the number of shares of Company Common Stock they held
prior to the one-for-two reverse stock split. Therefore, the value illustrated
above from the period December 1999 through December 2002, does not include
Teledyne Technologies and Water Pik Technologies.
24
CERTAIN TRANSACTIONS
--------------------------------------------------------------------------------
Code Hennessy & Simmons Funds. ATI Funding Corporation, the parent company to
Allegheny Ludlum Corporation, is invested as a limited partner in two general
partnerships: 10% interest in Code Hennessy & Simmons Management, L.P. ("CHSM
I") which has a .484% interest in Code Hennessy & Simmons, L.P. ("CHS I") and 5%
interest in Code Hennessy & Simmons Management II, L.P. ("CHSM II") which has a
2.935% interest in Code Hennessy & Simmons LP II ("CHS II"). The objective of
both funds has been to seek maximum return by investing in leveraged buyouts of
operating companies. The investment in CHSM I has essentially been liquidated
and had an unaudited book value as of December 31, 2002 of $49,985 while the
unaudited book value in CHSM II is $442,886. The general partner of CHS II is
CHSM II, L.P., whose stockholders are Andrew W. Code, Daniel J. Hennessy, and
Brian P. Simmons, each of whom has an equal interest in that firm. Brian P.
Simmons is a member of the Company's Board of Directors and is the son of
Richard P. Simmons, who beneficially owns more than 5% of the Common Stock of
the Company.
CHSM II is responsible for managing the selection and structuring of CHS II's
investments. In 2002, the annual base management fee for CHS II was 1.05%
percent of the fund's total capital commitments. This fee, offset by fees that
the general partner charges to companies that the fund acquires, is paid by the
limited partners of CHS II. After offset for fees, the net amounts paid to CHSM
II by CHS II limited partners was zero percent.
Kirkpatrick & Lockhart LLP. The Company retained the law firm of Kirkpatrick &
Lockhart LLP to perform services for the Company during 2002 and 2003. Charles
J. Queenan, Jr., a member of the Company's Board of Directors, is Senior Counsel
to that law firm. See "Compensation Committee Interlocks and Insider
Participation" on page 16.
Loans under Stock Acquisition and Retention Programs. Under the terms of the
Company's stock acquisition and retention programs, prior to the effective date
of Sarbanes-Oxley, eligible participants were entitled to deliver a promissory
note, payable to the Company, as payment for the purchase price of shares of
Common Stock purchased under the programs. Each note has a term of not more than
10 years and is secured by the shares of Common Stock being purchased with the
note. Interest accrues on the notes at a rate, as determined on the applicable
purchase date, equal to the lesser of the average borrowing rate of the Company
or the prime lending rate of PNC Bank, but not lower than the minimum rate
necessary to avoid imputed interest under applicable federal income tax laws.
During the 2002 fiscal year and prior to the effective date of Sarbanes-Oxley,
Messrs. Murdy, Shilling, Kittenbrink, Walton, and Harshman delivered promissory
notes to the Company for the purchase price of Common Stock purchased under the
2002 program. Terry L. Dunlap, President of Allegheny Ludlum Corporation, and a
member of Mr. Bozzone's immediate family, previously delivered a promissory note
to the Company under the programs. The largest amount of indebtedness
outstanding under the programs during the 2002 fiscal year and the amount of
indebtedness outstanding under the programs as of December 31, 2002 were
$1,755,000 for Mr. Murdy, $1,361,000 for Mr. Shilling, $962,000 for Mr.
Kittenbrink, $1,309,000 for Mr. Walton, $826,000 for Mr. Harshman and $92,000
for Mr. Dunlap.
25
OTHER INFORMATION
--------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, WITHOUT EXHIBITS, CAN BE
OBTAINED WITHOUT CHARGE FROM THE CORPORATE SECRETARY AT 1000 SIX PPG PLACE,
PITTSBURGH, PENNSYLVANIA 15222-5479 OR (412) 394-2800.
2004 ANNUAL MEETING AND STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Securities and Exchange Commission, proposals of
stockholders intended to be presented at the 2004 Annual Meeting of Stockholders
must be received no later than November 28, 2003 for inclusion in the proxy
statement and proxy card for that meeting. In addition, the Company's
certificate of incorporation provides that in order for nominations or other
business to be properly brought before an annual meeting by a stockholder, the
stockholder must give timely notice thereof in writing to the Corporate
Secretary. To be timely, a stockholder's notice must be delivered to the
Secretary not less than 75 days and not more than 90 days prior to the first
anniversary of the preceding year's annual meeting which, in the case of the
2004 Annual Meeting of Stockholders, would be no earlier than February 9, 2004
and no later than February 24, 2004. If, however, the date of the annual meeting
is advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, to be timely, notice by the stockholder must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the later of the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first made.
The Company's certificate of incorporation also requires that such notice
contain certain additional information. Copies of the certificate of
incorporation can be obtained without charge from the Corporate Secretary.
PROXY SOLICITATION
The Company pays the cost of preparing, assembling and mailing this
proxy-soliciting material. We will reimburse banks, brokers and other nominee
holders for reasonable expenses they incur in sending these proxy materials to
our beneficial stockholders whose stock is registered in the nominee's name.
The Company has engaged Morrow & Co. to help solicit proxies from brokers, banks
and other nominee holders of the Common Stock at a cost of $8,000 plus expenses.
Our employees may also solicit proxies for no additional compensation.
26
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT
Stockholders can elect to view future Company proxy statements and annual
reports over the Internet instead of receiving paper copies in the mail and thus
can save the Company the cost of producing and mailing these documents. Costs
normally associated with electronic access, such as usage and telephonic
charges, will be borne by you.
If you are a registered stockholder, you can choose to receive future annual
reports and proxy statements electronically by following the prompt if you
choose to vote over the Internet. If you hold your Company stock in nominee name
(such as through a broker), check the information provided by your nominee for
instructions on how to elect to view future proxy statements and annual reports
over the Internet.
Stockholders who choose to view future proxy statements and annual reports over
the Internet will receive instructions containing the Internet address of those
materials, as well as voting instructions, approximately four weeks before
future meetings.
If you enroll to view the Company's future annual reports and proxy statements
electronically and vote your proxy over the Internet, your enrollment will
remain in effect for all future stockholders' meetings unless you cancel it. To
cancel, registered stockholders should access www.melloninvestor.com and follow
the instructions to cancel your enrollment. You should retain your control
number appearing on your enclosed proxy card. If you hold your Company stock in
nominee name, check the information provided by your nominee holder for
instructions on how to cancel your enrollment.
If at any time you would like to receive a paper copy of the annual report or
proxy statement, please write to Allegheny Technologies Incorporated, Corporate
Secretary, 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479.
On behalf of the Board of Directors:
/s/ Jon D. Walton
Jon D. Walton
Senior Vice President, Chief Legal and Administrative Officer
Dated: March 28, 2003
27
IF YOU SIGN AND RETURN THIS CARD BUT DO NOT SPECIFY A VOTE, THE PROXIES WILL VOTE FOR ALL Please
ITEMS AND IN THEIR DISCRETION ON OTHER MATTERS. Mark Here [ ]
for Address
Change or
Comments
SEE REVERSE SIDE
The Board of Directors recommends a vote FOR Items A and B:
A. Election of the four nominees as directors:
FOR
the nominees (except WITHHELD
as indicated) from all nominees 01 Diane C. Creel, 02 C. Fred Fetterolf, 03 James E. Rohr, 04 Brian P. Simmons
(To withhold authority to vote for any nominee(s), write the name(s) of the
[ ] [ ] nominee(s) in the space that follows:)
-----------------------------------------------------------------------------
B.Selection of Independent Accountants. Please check here to request an admission [ ]
ticket to the Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] By checking the box to the right, I consent [ ]
to view the Company's Annual Reports and
Proxy Statements electronically via the
Internet. I understand that the Company may
no longer distribute printed materials to me
for any future stockholder meetings until
my consent is revoked. I understand that I
may revoke my consent at any time by giving
written notice to the Company.
SIGNATURE SIGNATURE DATE
----------------------------------------------- ------------------------------------------------ ------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ABOVE.
-----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11 PM EASTERN TIME
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------- ------------------------------------ ------------------------
INTERNET TELEPHONE MAIL
http://www.eproxy.com/ati 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control be prompted to enter your control return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope.
ballot. given.
------------------------------------- ------------------------------------ ------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT ON
THE INTERNET AT HTTP://WWW.ALLEGHENYTECHNOLOGIES.COM
ALLEGHENY TECHNOLOGIES INCORPORATED
PROXY FOR 2003 ANNUAL MEETING
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ALLEGHENY TECHNOLOGIES INCORPORATED
The undersigned hereby appoints Richard J. Harshman, Mary Beth Luksik and Jon D.
Walton or any of them, each with power of substitution and revocation, proxies
or proxy to vote all shares of Common Stock which the registered stockholder
named herein is entitled to vote with all powers which the stockholder would
possess if personally present, at the Annual Meeting of Stockholders of
Allegheny Technologies Incorporated on May 8, 2003, and any adjournments
thereof, upon the matters set forth on the reverse side of this card, and, in
their discretion, upon such other matters as may properly come before such
meeting.
STOCKHOLDERS MAY VOTE BY TOLL-FREE TELEPHONE OR INTERNET BY FOLLOWING THE
INSTRUCTIONS ON THE REVERSE SIDE OR STOCKHOLDERS MAY VOTE BY COMPLETING, DATING
AND SIGNING THIS PROXY CARD AND RETURNING IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
IF YOU WISH TO USE THIS CARD TO VOTE YOUR SHARES, PLEASE VOTE, DATE AND SIGN
ON THE REVERSE SIDE.
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
------------------------------------------------------------------------------
FOLD AND DETACH HERE
[logo]
Dear Stockholder,
Enclosed are materials relating to the Allegheny Technologies 2003 Annual
Meeting of Stockholders. The Notice of the Meeting and Proxy Statements describe
the formal business to be transacted at the meeting.
Your vote is important. Please vote your proxy promptly whether or not you
expect to attend the meeting. You may vote by toll-free telephone, by Internet
or by signing and returning the proxy card (above) in the enclosed postage-paid
envelope.
/s/ Jon D. Walton
Jon D. Walton
Senior Vice President, Chief Legal and Administrative Officer
-------------------------------------------------------
EASY WAYS TO SAVE THE COMPANY MONEY
1. Please consider voting by Telephone (1-800-435-6710); or Internet
(http://www.eproxy.com/ati).
2. Please consider consenting to view the Company's future Annual Reports and
Proxy Statements electronically, via the Internet. In order to consent:
- Please mark the appropriate box on the reverse side of this proxy card;
or
- Go to Allegheny Technologies' Transfer Agent's website,
http://vault.melloninvestor.com/isd/, and follow the prompts.
IF YOU SIGN AND RETURN THIS CARD BUT DO NOT SPECIFY A VOTE, THE PROXIES WILL VOTE FOR ALL Please
ITEMS AND IN THEIR DISCRETION ON OTHER MATTERS. Mark Here [ ]
for Address
Change or
Comments
SEE REVERSE SIDE
The Board of Directors recommends a vote FOR Items A and B:
A. Election of the four nominees as directors:
FOR
the nominees (except WITHHELD
as indicated) from all nominees 01 Diane C. Creel, 02 C. Fred Fetterolf, 03 James E. Rohr, 04 Brian P. Simmons
(To withhold authority to vote for any nominee(s), write the name(s) of the
[ ] [ ] nominee(s) in the space that follows:)
-----------------------------------------------------------------------------
B.Selection of Independent Accountants. Please check here to request an admission [ ]
ticket to the Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] By checking the box to the right, I consent [ ]
to view the Company's Annual Reports and
Proxy Statements electronically via the
Internet. I understand that the Company may
no longer distribute printed materials to me
for any future stockholder meetings until
my consent is revoked. I understand that I
may revoke my consent at any time by giving
written notice to the Company.
SIGNATURE SIGNATURE DATE
----------------------------------------------- ------------------------------------------------ ------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ABOVE. WHEN SIGNING AS A FIDUCIARY OR CORPORATE OFFICER, GIVE FULL TITLE. FOR JOINT
ACCOUNTS, PLEASE FURNISH BOTH SIGNATURES.
-----------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11 PM EASTERN TIME
ON MAY 1, 2003.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
------------------------------------- ------------------------------------ ------------------------
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/ATI 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control be prompted to enter your control return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope.
ballot. given.
------------------------------------- ------------------------------------ ------------------------
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE, YOU
DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT ON
THE INTERNET AT HTTP://WWW.ALLEGHENYTECHNOLOGIES.COM
ALLEGHENY TECHNOLOGIES INCORPORATED
VOTING INSTRUCTION CARD FOR 2003 ANNUAL MEETING
o PERSONAL RETIREMENT AND 401(k) SAVINGS ACCOUNT PLAN
o RETIREMENT SAVINGS PLAN
o SAVINGS AND SECURITY PLAN OF THE LOCKPORT AND WATERBURY FACILITIES
o THE 401(k) SAVINGS ACCOUNT PLAN OF THE WASHINGTON PLATE PLANT
o THE 401(k) PLAN
o ALLEGHENY RODNEY (ALSTRIP) PROFIT SHARING PLAN
o TDY INDUSTRIES, INC. PROFIT SHARING PLAN FOR CERTAIN EMPLOYEES OF
METALWORKING PRODUCTS
The undersigned hereby directs Mellon Bank, N.A., the Trustee of the above
Plans, to vote the full number of shares of Common Stock allocated to the
account of the undersigned under the Plans, at the Annual Meeting of
Stockholders of Allegheny Technologies Incorporated on May 8, 2003, and any
adjournments thereof, upon the matters set forth on the reverse of this card,
and, in its discretion, upon such other matters as may properly come before such
meeting.
PLAN PARTICIPANTS MAY GIVE DIRECTIONS BY TOLL-FREE TELEPHONE OR INTERNET BY
FOLLOWING THE INSTRUCTIONS ON THE REVERSE SIDE OR PARTICIPANTS MAY GIVE
DIRECTIONS BY COMPLETING, DATING AND SIGNING THIS CARD AND RETURNING IT PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU WISH TO USE THIS CARD TO VOTE YOUR SHARES, PLEASE VOTE,
DATE AND SIGN ON THE REVERSE SIDE.
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
------------------------------------------------------------------------------
FOLD AND DETACH HERE
o PERSONAL RETIREMENT AND 401(k) SAVINGS ACCOUNT PLAN
o RETIREMENT SAVINGS PLAN
o SAVINGS AND SECURITY PLAN OF THE LOCKPORT AND WATERBURY FACILITIES
o THE 401(k) SAVINGS ACCOUNT PLAN OF THE WASHINGTON PLATE PLANT
o THE 401(k) PLAN
o ALLEGHENY RODNEY (ALSTRIP) PROFIT SHARING PLAN
o TDY INDUSTRIES, INC. PROFIT SHARING PLAN FOR CERTAIN EMPLOYEES OF
METALWORKING PRODUCTS
As a Plan participant, you have the right to direct Mellon Bank, N.A., the Plan
Trustee, how to vote the shares of Allegheny Technologies Common Stock that are
allocated to your Plan account and shown on the attached voting instruction
card. The Trustee will hold your instructions in complete confidence except as
may be necessary to meet legal requirements.
You may vote by telephone, Internet or by completing, signing and returning the
voting instruction card (above). A postage-paid return envelope is enclosed.
The Trustee must receive your voting instructions by May 1, 2003. If the Trustee
does not receive your instructions by May 1, 2003, the plan administrator may
instruct the Trustee to vote your shares as the administrator directs.
You will receive a separate set of proxy solicitation materials for any shares
of Common Stock you own other than your Plan shares. Your non-plan shares must
be voted separately from your Plan shares.
-------------------------------------------------------
EASY WAYS TO SAVE THE COMPANY MONEY
1. Please consider voting by Telephone (1-800-435-6710); or Internet
(http://www.eproxy.com/ati).
2. Please consider consenting to view the Company's future Annual Reports and
Proxy Statements electronically, via the Internet. In order to consent:
- Please mark the appropriate box on the reverse side of this proxy
card; or
- Go to Allegheny Technologies' Transfer Agent's website,
http://vault.melloninvestor.com/isd/, and follow the prompts.