UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From                      to                     

ALLEGHENY TECHNOLOGIES INCORPORATED

 

(Exact name of registrant as specified in its charter)

Delaware		25-1792394
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
1000 Six PPG Place
Pittsburgh, Pennsylvania		15222-5479
(Address of Principal Executive Offices)		(Zip Code)

(412) 394-2800

(Registrant’s telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ      No o

     Indicate by check mark whether the Registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o      No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o     No þ

     At July 29, 2009, the registrant had outstanding 98,073,310 shares of its Common Stock.

 

 

ALLEGHENY TECHNOLOGIES INCORPORATED
SEC FORM 10-Q
QUARTER ENDED JUNE 30, 2009

INDEX

						Page No.
PART I. — FINANCIAL INFORMATION
		Item 1.		Financial Statements
		Consolidated Balance Sheets					3
		Consolidated Statements of Operations					4
		Consolidated Statements of Cash Flows					5
		Statements of Changes in Consolidated Equity					6
		Notes to Consolidated Financial Statements					7
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
		Item 3.		Quantitative and Qualitative Disclosures About Market Risk			34
		Item 4.		Controls and Procedures			36
PART II. — OTHER INFORMATION
		Item 1.		Legal Proceedings			36
		Item 1A.		Risk Factors			36
		Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			36
		Item 4.		Submission of Matters to a Vote of Security Holders			37
		Item 6.		Exhibits			38
SIGNATURES							39
EXHIBIT INDEX							40
EX-31.1
EX-31.2
EX-32.1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share amounts)
(Unaudited)

		June 30,				December 31,
		2009				2008
ASSETS
Cash and cash equivalents		$	850.7			$	469.9
Accounts receivable, net			398.2				530.5
Inventories, net			692.9				887.6
Prepaid expenses and other current assets			76.2				41.4
Total Current Assets			2,018.0				1,929.4
Property, plant and equipment, net			1,787.0				1,633.6
Cost in excess of net assets acquired			197.3				190.9
Prepaid pension asset			122.2				—
Deferred income taxes			49.9				281.6
Other assets			147.0				134.9
Total Assets		$	4,321.4			$	4,170.4
LIABILITIES AND EQUITY
Accounts payable		$	236.4			$	278.5
Accrued liabilities			229.6				322.0
Deferred income taxes			35.3				78.2
Short-term debt and current portion of long-term debt			17.5				15.2
Total Current Liabilities			518.8				693.9
Long-term debt			1,055.9				494.6
Accrued postretirement benefits			449.8				446.9
Pension liabilities			34.5				378.2
Other long-term liabilities			114.8				127.8
Total Liabilities			2,173.8				2,141.4
Equity:
ATI Stockholders’ Equity:
Preferred stock, par value $0.10: authorized- 50,000,000 shares; issued-none			—				—
Common stock, par value $0.10: authorized-500,000,000 shares; issued-102,404,256 shares at June 30, 2009 and December 31, 2008; outstanding- 98,073,010 shares at June 30, 2009 and 97,330,969 shares at December 31, 2008			10.2				10.2
Additional paid-in capital			641.5				651.8
Retained earnings			2,227.2				2,286.7
Treasury stock: 4,331,246 shares at June 30, 2009 and 5,073,287 shares at December 31, 2008			(208.7	)			(244.8	)
Accumulated other comprehensive loss, net of tax			(594.7	)			(746.5	)
Total ATI Stockholders’ Equity			2,075.5				1,957.4
Noncontrolling interests			72.1				71.6
Total Equity			2,147.6				2,029.0
Total Liabilities and Equity		$	4,321.4			$	4,170.4

The accompanying notes are an integral part of these statements.

ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Sales		$	710.0			$	1,461.2			$	1,541.6			$	2,804.6
Costs and expenses:
Cost of sales			634.8				1,128.9				1,385.7				2,181.7
Selling and administrative expenses			64.4				79.2				145.2				149.4
Income before interest, other income (expense) and income taxes			10.8				253.1				10.7				473.5
Interest expense, net			(1.3	)			(1.3	)			(1.2	)			(1.1	)
Debt extinguishment costs			(9.2	)			—				(9.2	)			—
Other income (expense), net			(0.3	)			0.6				—				1.6
Income before income tax provision			—				252.4				0.3				474.0
Income tax provision			11.7				81.2				6.7				159.1
Net income (loss)			(11.7	)			171.2				(6.4	)			314.9
Less: Net income attributable to noncontrolling interests			1.7				2.3				1.1				4.0
Net income (loss) attributable to ATI		$	(13.4	)		$	168.9			$	(7.5	)		$	310.9
Basic net income (loss) per common share attributable to ATI common stockholders		$	(0.14	)		$	1.68			$	(0.08	)		$	3.09
Diluted net income (loss) per common share attributable to ATI common stockholders		$	(0.14	)		$	1.66			$	(0.08	)		$	3.06
Dividends declared per common share		$	0.18			$	0.18			$	0.36			$	0.36

The accompanying notes are an integral part of these statements.

ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

		Six Months Ended
		June 30,
		2009				2008
Operating Activities:
Net income (loss)		$	(6.4	)		$	314.9
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			64.4				56.5
Deferred income taxes			108.3				26.9
Change in operating assets and liabilities:
Inventories			194.6				(255.1	)
Accounts receivable			132.3				(86.1	)
Accounts payable			(42.1	)			62.8
Retirement benefits			(299.4	)			(13.8	)
Accrued income taxes			(42.2	)			(3.1	)
Accrued liabilities and other			(28.2	)			(6.7	)
Cash provided by operating activities			81.3				96.3
Investing Activities:
Purchases of property, plant and equipment			(211.5	)			(255.4	)
Asset disposals and other			(1.3	)			(0.2	)
Cash used in investing activities			(212.8	)			(255.6	)
Financing Activities:
Borrowings on long-term debt			752.5				—
Payments on long-term debt and capital leases			(188.6	)			(8.8	)
Net repayments under credit facilities			2.4				3.4
Debt issuance costs			(18.1	)			—
Dividends paid to shareholders			(35.3	)			(36.4	)
Dividends paid to noncontrolling interests			(0.8	)			—
Shares repurchased for income tax withholding on share-based compensation			(0.7	)			(15.5	)
Exercises of stock options			0.5				1.1
Tax benefit on share-based compensation			0.4				(9.2	)
Purchase of treasury stock			—				(88.4	)
Cash provided by (used in) financing activities			512.3				(153.8	)
Increase (decrease) in cash and cash equivalents			380.8				(313.1	)
Cash and cash equivalents at beginning of the year			469.9				623.3
Cash and cash equivalents at end of period		$	850.7			$	310.2

The accompanying notes are an integral part of these statements.

ALLEGHENY TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
STATEMENTS OF CHANGES IN CONSOLIDATED EQUITY
(In millions, except per share amounts)
(Unaudited)

		ATI Stockholders
																		Accumulated
						Additional												Other								Non-
		Common				Paid-In				Retained				Treasury				Comprehensive				Comprehensive				controlling				Total
		Stock				Capital				Earnings				Stock				Income (Loss)				Income				Interests				Equity
Balance, December 31, 2007		$	10.2			$	693.7			$	1,830.7			$	(75.4	)		$	(237.2	)		$	—			$	57.2			$	2,279.2
Net income			—				—				310.9				—				—				310.9				4.0				314.9
Other comprehensive income, net of tax:
Pension plans and other postretirement benefits			—				—				—				—				4.1				4.1				—				4.1
Foreign currency translation gains			—				—				—				—				6.3				6.3				6.0				12.3
Unrealized gains on derivatives			—				—				—				—				17.4				17.4				—				17.4
Comprehensive income			—				—				310.9				—				27.8			$	338.7				10.0				348.7
Purchase of treasury stock			—				—				—				(88.4	)			—								—				(88.4	)
Effect of changing the measurement date for pension plans and other postretirement benefits, net of tax			—				—				—				—				1.2								—				1.2
Cash dividends on common stock ($0.36 per share)			—				—				(36.4	)			—				—								—				(36.4	)
Employee stock plans			—				(49.2	)			(0.4	)			36.2				—								—				(13.4	)
Balance, June 30, 2008		$	10.2			$	644.5			$	2,104.8			$	(127.6	)		$	(208.2	)						$	67.2			$	2,490.9
Balance, December 31, 2008		$	10.2			$	651.8			$	2,286.7			$	(244.8	)		$	(746.5	)		$	—			$	71.6			$	2,029.0
Net income (loss)			—				—				(7.5	)			—				—				(7.5	)			1.1				(6.4	)
Other comprehensive income (loss), net of tax:
Pension plans and other postretirement benefits			—				—				—				—				99.7				99.7				—				99.7
Foreign currency translation gains (losses)			—				—				—				—				25.9				25.9				0.2				26.1
Unrealized gains on derivatives			—				—				—				—				26.2				26.2				—				26.2
Comprehensive income (loss)			—				—				(7.5	)			—				151.8			$	144.3				1.3				145.6
Cash dividends on common stock ($0.36 per share)			—				—				(35.3	)			—				—								—				(35.3	)
Cash dividends paid to noncontrolling interests			—				—				—				—				—								(0.8	)			(0.8	)
Employee stock plans			—				(10.3	)			(16.7	)			36.1				—								—				9.1
Balance, June 30, 2009		$	10.2			$	641.5			$	2,227.2			$	(208.7	)		$	(594.7	)						$	72.1			$	2,147.6

The accompanying notes are an integral part of these statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1. Accounting Policies

Basis of Presentation

     The interim consolidated financial statements include the accounts of Allegheny Technologies Incorporated and its subsidiaries. Unless the context requires otherwise, “Allegheny Technologies”, “ATI” and “the Company” refer to Allegheny Technologies Incorporated and its subsidiaries.

     These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2008 Annual Report on Form 10-K. The results of operations for these interim periods are not necessarily indicative of the operating results for any future period. In preparing the financial statements for the period ended June 30, 2009, the Company has evaluated subsequent events through the date of issue, which was August 3, 2009. The December 31, 2008 financial information has been derived from our audited financial statements, which were revised in the current period to reflect changes in the presentation of noncontrolling interests (formerly minority interests) in accordance with the required adoption of the accounting standard discussed below. Certain amounts from prior years have been reclassified to conform with the 2009 presentation.

New Accounting Pronouncement Adopted

As required, in the first quarter 2009, the Company adopted FASB Statement of Financial Accounting Standards No. 160 (“FAS 160”), “Noncontrolling Interests in Consolidated Financial Statements”. Early adoption of this standard was prohibited. FAS 160 changes the classification of noncontrolling (minority) interests on the balance sheet and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Under the new standard, noncontrolling interests are considered equity and are reported as an element of stockholders’ equity rather than within the mezzanine or liability sections of the balance sheet. In addition, the practice of reporting minority interest expense or benefit changed. Under the new standard, net income encompasses the total income before noncontrolling interest expense or benefit. The income statement includes separate disclosure of the attribution of income or loss between the controlling and noncontrolling interests. Absent a change in control, increases and decreases in the noncontrolling ownership interest amount are accounted for as equity transactions. As a result of adopting FAS 160, the balance sheet and the income statement have been recast retrospectively for the presentation of noncontrolling interest in our STAL joint venture.

     On January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 157 (“FAS 157”), “Fair Value Measurements,” as it relates to nonfinancial assets and nonfinancial liabilities. FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. The adoption of FAS 157, as it relates to nonfinancial assets and nonfinancial liabilities, had no impact on the financial statements. The provisions of FAS 157 will be applied at such time a fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of FAS 157.

Note 2. Inventories

     Inventories at June 30, 2009 and December 31, 2008 were as follows (in millions):

		June 30,				December 31,
		2009				2008
Raw materials and supplies		$	138.3			$	163.6
Work-in-process			580.1				772.6
Finished goods			129.9				164.9
Total inventories at current cost			848.3				1,101.1
Less allowances to reduce current cost values to LIFO basis			(151.1	)			(205.6	)
Progress payments			(4.3	)			(7.9	)
Total inventories, net		$	692.9			$	887.6

     Inventories are stated at the lower of cost (last-in, first-out (“LIFO”), first-in, first-out (“FIFO”), and average cost methods) or market, less progress payments. Most of the Company’s inventory is valued utilizing the LIFO costing methodology. Inventory of the Company’s non-U.S. operations is valued using average cost or FIFO methods. The effect of using the LIFO methodology to value inventory, rather than FIFO, decreased cost of sales by $54.5 million for the first six months of 2009 compared to an increase to cost of sales of $4.7 million for the first six months of 2008.

Note 3. Supplemental Financial Statement Information

     The estimated fair value of financial instruments at June 30, 2009 and December 31, 2008 was as follows:

		June 30, 2009								December 31, 2008
		Carrying				Estimated				Carrying				Estimated
(In millions)		Amount				Fair Value				Amount				Fair Value
Cash and cash equivalents		$	850.7			$	850.7			$	469.9			$	469.9
Derivative financial instruments:
Assets			23.7				23.7				17.2				17.2
Liabilities			26.2				26.2				61.5				61.5
Debt:
Allegheny Technologies $402.5 million 4.25% Convertible Notes due 2014		$	402.5				442.3				—				—
Allegheny Technologies $350 million 9.375% Notes due 2019			350.0				367.5				—				—
Allegheny Technologies $300 million 8.375% Notes due 2011, net (a)			118.1				125.9				304.2				306.6
Allegheny Ludlum 6.95% debentures due 2025			150.0				126.4				150.0				144.3
Promissory note for J&L asset acquisition			25.6				25.6				30.7				30.7
Foreign credit agreements			18.2				18.2				15.6				15.6
Industrial revenue bonds, due through 2020			8.8				8.8				9.0				9.0
Capitalized leases and other			0.2				0.2				0.3				0.3

     The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:

     Cash and cash equivalents: The carrying amount on the balance sheet approximates fair value.

     Derivative financial instruments: Fair values for derivatives were measured using exchange-traded prices for the hedged items. The fair value was determined using Level 2 information, including consideration of counterparty risk and the Company’s credit risk.

     Short-term and long-term debt: The fair values of the Allegheny Technologies 4.25% Convertible Notes, the Allegheny Technologies 9.375% Notes, the Allegheny Technologies 8.375% Notes, and the Allegheny Ludlum 6.95% debentures were based on quoted market prices. The carrying amounts of the other short-term and long-term debt approximate fair value.

     Property, plant and equipment at June 30, 2009 and December 31, 2008 were as follows (in millions):

		June 30,				December 31,
		2009				2008
Land		$	23.6			$	23.1
Buildings			321.0				310.9
Equipment and leasehold improvements			2,707.7				2,508.5
			3,052.3				2,842.5
Accumulated depreciation and amortization			(1,265.3	)			(1,208.9	)
Total property, plant and equipment, net		$	1,787.0			$	1,633.6

Note 4. Debt

     Debt at June 30, 2009 and December 31, 2008 was as follows (in millions):

		June 30,				December 31,
		2009				2008
Allegheny Technologies $402.5 million 4.25% Convertible Notes due 2014		$	402.5			$	—
Allegheny Technologies $350 million 9.375% Notes due 2019			350.0				—
Allegheny Technologies $300 million 8.375% Notes due 2011, net (a)			118.1				304.2
Allegheny Ludlum 6.95% debentures due 2025			150.0				150.0
Domestic Bank Group $400 million unsecured credit agreement			—				—
Promissory note for J&L asset acquisition			25.6				30.7
Foreign credit agreements			18.2				15.6
Industrial revenue bonds, due through 2020			8.8				9.0
Other			0.2				0.3
Total short-term and long-term debt			1,073.4				509.8
Short-term debt and current portion of long-term debt			(17.5	)			(15.2	)
Total long-term debt		$	1,055.9			$	494.6

Convertible Notes

In June 2009, the Company issued and sold $402.5 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2014 (the “Convertible Notes”). Interest is payable semi-annually on June 1 and December 1 of each year. The Convertible Notes were issued under ATI’s shelf registration statement and are not listed on any national securities exchange. Net proceeds of $390.2 million from the sale of the Convertible Notes were used to make a $350 million voluntary cash contribution to the Company’s U.S. defined benefit pension plan, and the balance was used for general corporate purposes including funding of contributions to trusts established to fund retiree medical benefits. The Convertible Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt. The underwriting fees and other third-party expenses for the issuance of the Convertible Notes were $12.3 million and will be amortized to interest expense over the 5-year term of the Convertible Notes.

     The Company does not have the right to redeem the Convertible Notes prior to the stated maturity date. Holders of the Convertible Notes have the option to convert their notes into shares of ATI common stock at any time prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date (June 1, 2014). The initial conversion rate for the Convertible Notes is 23.9263 shares of ATI common stock per $1,000 (in whole dollars) principal amount of notes (9,630,335 shares), equivalent to a conversion price of approximately $41.795 per share, subject to adjustment, as defined in the Convertible Notes. Other than receiving cash in lieu of fractional shares, holders do not have the option to receive cash instead of shares of common stock upon conversion. Accrued and unpaid interest that exists upon conversion of a note will be deemed paid by the delivery of shares of ATI common stock and no cash payment or additional shares will be given to holders.

     If the Company undergoes a fundamental change, as defined in the Convertible Notes, holders may require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest up to, but excluding, the repurchase date. Such a repurchase will be made in cash.

2019 Notes

In June 2009, the Company issued $350 million in aggregate principal amount of 9.375% unsecured Senior Notes with a maturity of June 2019 (the “2019 Notes”). Interest is payable semi-annually on June 1 and December 1 of each year. The 2019 Notes were issued under ATI’s shelf registration statement and are not listed on any national securities exchange. Net proceeds of $344.2 million from the sale of the 2019 Notes were used to retire $183.3 million of the Company’s 2011 Notes, as discussed below, and for general corporate purposes. The underwriting fees, discount, and other third-party expenses for the issuance of the 2019 Notes were $5.8 million and will be amortized to interest expense over the 10-year term of the 2019 Notes. The 2019 Notes are unsecured and unsubordinated obligations of the Company and equally ranked with all of its existing and future senior unsecured debt. The 2019 Notes restrict the Company’s ability to create certain liens, to enter into sale leaseback transactions, and to consolidate, merge or transfer all, or substantially all, of our assets. The Company has the option to redeem the 2019 Notes, as a whole or in part, at any time or from time to time, on at least 30 days, but not more than 60 days, prior notice to the holders of the Notes at a redemption price specified in the 2019 Notes. The 2019 Notes are subject to repurchase upon the occurrence of a change in control repurchase event (as defined in the 2019 Notes) at a repurchase price in cash equal to 101% of the aggregate principal amount of the Notes repurchased, plus any accrued and unpaid interest on the 2019 Notes repurchased.

Retirement of 2011 Notes

In June 2009, the Company completed a tender offer for the Company’s 8.375% Notes due in 2011 (the “2011 Notes”) of which $300 million in aggregate principal amount was outstanding prior to the tender offer. As a result of the tender offer, the Company retired $183.3 million of the 2011 Notes and recognized a pre-tax charge of $9.2 million in the 2009 second quarter for the costs of acquiring the 2011 Notes. As of June 30, 2009, $116.7 million in face value of the 2011 Notes remain outstanding.

Amendment to Unsecured Credit Agreement

In May 2009, the Company amended its $400 million domestic bank group credit agreement to redefine the two financial covenants to provide additional financial flexibility. The amendment restates the definition of consolidated earnings before interest and taxes, and consolidated earnings before income, taxes, depreciation and amortization as used in the interest coverage and leverage ratios to exclude any non-cash pension expense or income and restates the definition of consolidated indebtedness used in the leverage ratio, which previously was based on gross indebtedness, to be net of cash on hand in excess of $50 million. As of June 30, 2009, there had been no borrowings made under the facility, although a portion of the facility was used to support approximately $12 million in letters of credit.

     The Company has an additional separate credit facility for the issuance of letters of credit. As of June 30, 2009, $30 million in letters of credit was outstanding under this facility.

     In addition, STAL, the Company’s Chinese joint venture company in which ATI has a 60% interest, had approximately $5 million in letters of credit outstanding as of June 30, 2009 related to the expansion of its operations in Shanghai, China. These letters of credit are supported solely by STAL’s financial capability without any guarantees from the joint venture partners.

Note 5. Per Share Information

     The following table sets forth the computation of basic and diluted net income (loss) per common share (in millions, except per share amounts):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Numerator for basic and diluted net income (loss) per common share — net income (loss) attributable to ATI common stockholders		$	(13.4	)		$	168.9			$	(7.5	)		$	310.9
Denominator:
Denominator for basic net income (loss) per common share-weighted average shares			97.2				100.7				97.2				100.7
Effect of dilutive securities:
Option equivalents			—				0.5				—				0.5
Contingently issuable shares			—				0.3				—				0.3
Denominator for diluted net income (loss) per common share — adjusted weighted average shares and assumed conversions			97.2				101.5				97.2				101.5
Basic net income (loss) per common share attributable to ATI common stockholders		$	(0.14	)		$	1.68			$	(0.08	)		$	3.09
Diluted net income (loss) per common share attributable to ATI common stockholders		$	(0.14	)		$	1.66			$	(0.08	)		$	3.06

     Common stock which would be issuable that relate to the assumed conversion of the 2014 Notes and other option equivalents and contingently issuable shares were excluded from the computation of contingently issuable shares, and therefore the denominator for diluted earnings per share, for the three months and six months ended June 30, 2009, because the effect of inclusion would have been anti-dilutive. Excluded shares for the three months and six months ended June 30, 2009 were 4.3 million and 2.4 million, respectively.

Note 6. Derivative Financial Instruments and Hedging

     As part of its risk management strategy, the Company, from time-to-time, utilizes derivative financial instruments to manage its exposure to changes in raw material prices, energy costs, foreign currencies, and interest rates. In accordance with applicable accounting standards, the Company accounts for all of these contracts as hedges. In general, hedge effectiveness is determined by examining the relationship between offsetting changes in fair value or cash flows attributable to the item being hedged, and the financial instrument being used for the hedge. Effectiveness is measured utilizing regression analysis and other techniques to determine whether the change in the fair market value or cash flows of the derivative exceeds the change in fair value or cash flow of the hedged item. Calculated ineffectiveness, if any, is immediately recognized on the statement of operations.

     The Company sometimes uses futures and swap contracts to manage exposure to changes in prices for forecasted purchases of raw materials, such as nickel, and natural gas. Generally under these contracts, which are accounted for as cash flow hedges, the price of the item being hedged is fixed at the time that the contract is entered into and the Company is obligated to make or receive a payment equal to the net change between this fixed price and the market price at the date the contract matures.

     The majority of ATI’s products are sold utilizing raw material surcharges and index mechanisms. However, as of June 30, 2009, the Company had entered into financial hedging arrangements primarily at the request of its customers, related to firm orders, for approximately 6% of the Company’s total annual nickel requirements through 2010. Any gain or loss associated with these hedging arrangements is included in the selling price to the customer requesting the hedge over the designated hedge period.

     At June 30, 2009, the outstanding financial derivatives used to hedge the Company’s exposure to natural gas cost volatility represented approximately 40% of our forecasted requirements for the next three years.

     While the majority of the Company’s direct export sales are transacted in U.S. dollars, foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates for those transactions denominated in a non-U.S. currency. The Company sometimes purchases foreign currency forward contracts that permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk. At June 30, 2009, the outstanding financial derivatives used to hedge the Company’s exposure to foreign currency, primarily euros, represented approximately 7% of our forecasted total international sales through 2011. In addition, the Company may also designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions.

     The Company may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt. There were no unsettled derivative financial instruments related to debt balances for the periods presented, although previously settled contracts remain a component of the recorded value of debt. See Note 4. Debt, for further information.

     The fair values of the Company’s derivative financial instruments are presented below. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy, which includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs derived principally from or corroborated by observable market data.

				June 30,				December 31,
(in millions)		Balance sheet location		2009				2008
Asset derivatives
Nickel and other raw material contracts		Prepaid expenses and other current assets		$	7.5			$	—
Foreign exchange contracts		Prepaid expenses and other current assets			5.6				7.0
Foreign exchange contracts		Other assets			6.7				10.2
Nickel and other raw material contracts		Other assets			3.9				—
Total asset derivatives				$	23.7			$	17.2
Liability derivatives
Natural gas contracts		Accrued liabilities		$	13.4			$	14.3
Nickel and other raw material contracts		Accrued liabilities			3.6				31.6
Foreign exchange contracts		Accrued liabilities			0.1				0.2
Natural gas contracts		Other long-term liabilities			9.1				10.0
Nickel and other raw material contracts		Other long-term liabilities			—				5.4
Total liability derivatives				$	26.2			$	61.5

     For derivative financial instruments that are designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged item affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current period results. The Company did not use fair value or net investment hedges for the periods presented.

     Activity with regard to derivatives designated as cash flow hedges for the three and six month periods ended June 30, 2009 was as follows (in millions):

										Amount of Gain (Loss)
						Amount of Gain (Loss)				Recognized in Income
		Amount of Gain				Reclassified from				on Derivatives (Ineffective
Derivatives in FAS 133		(Loss) Recognized in				Accumulated OCI				Portion and Amount
Cash Flow Hedging		OCI on Derivatives				into Income				Excluded from
Relationships		(Effective Portion)				(Effective Portion) (a)				Effectiveness Testing) (b)
		Quarter ended				Quarter ended				Quarter ended
		June 30, 2009				June 30, 2009				June 30, 2009
Nickel and other raw material contracts		$	16.2			$	(5.5	)		$	—
Natural gas contracts			1.9				(4.4	)			—
Foreign exchange contracts			(5.4	)			1.6				—
Total		$	12.7			$	(8.3	)		$	—
		Six Months ended				Six Months ended				Six Months ended
		June 30, 2009				June 30, 2009				June 30, 2009
Nickel and other raw material contracts		$	16.1			$	(12.0	)		$	—
Natural gas contracts			(8.1	)			(9.1	)			—
Foreign exchange contracts			0.8				3.7				0.6
Total		$	8.8			$	(17.4	)		$	0.6

     Assuming market prices remain constant with the rates at June 30, 2009, a loss of $2.5 million is expected to be recognized over the next 12 months.

     The disclosures of gains or losses presented above for nickel and other raw material contracts and foreign currency contracts do not take into account the anticipated underlying transactions. Since these derivative contracts represent hedges, the net effect of any gain or loss on results of operations may be fully or partially offset.

     There are no credit risk-related contingent features in our derivative contracts, and the contracts contained no provisions under which we have posted, or would be required to post, collateral. The counterparties to our derivative contracts were substantial and creditworthy commercial banks that are recognized market makers. We control our credit exposure by diversifying across multiple counterparties and by monitoring credit ratings and credit default swap spreads of our counterparties. We also enter into master netting agreements with counterparties when possible.

Note 7. Income Taxes

     Second quarter 2009 results included a provision for income taxes of $11.7 million compared to an income tax provision of $81.2 million, or 32.2% of income before tax, for the comparable 2008 period. The second quarter 2009 tax provision included a non-recurring tax charge of $11.5 million, primarily associated with the tax consequences of the June 2009 $350 million voluntary contribution to the pension plan. The effective tax rate, excluding the non-recurring tax charge, was 41.1% for 2009. The second quarter 2008 tax provision included a favorable discrete net tax benefit of $11.2 million, primarily associated with a tax refund related to prior years.

     For the first half 2009, the provision of income taxes was $6.7 million compared to $159.1 million, or 33.6% of income before tax, for the first half 2008. The 2009 first quarter benefited from a lower income tax provision due primarily to $5.1 million of discrete adjustments associated primarily with prior years’ taxes. The 2008 first quarter included a discrete benefit of $2.6 million related to foreign taxes.

     As a result of the $350 million voluntary pension contribution in June 2009 which was designated to pertain to the 2008 tax year, the Company received a U.S. Federal income tax refund of $108.5 million in the second quarter 2009.

Note 8. Pension Plans and Other Postretirement Benefits

     The Company has defined benefit pension plans and defined contribution plans covering substantially all employees. Benefits under the defined benefit pension plans are generally based on years of service and/or final average pay. The Company funds the U.S. pension plans in accordance with the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code.

     The Company also sponsors several postretirement plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. In most plans, Company contributions towards premiums are capped based on the cost as of a certain date, thereby creating a defined contribution. For the non-collectively bargained plans, the Company maintains the right to amend or terminate the plans at its discretion.

     In June 2009, the Company made a $350 million voluntary cash contribution to its’ U.S. defined benefit pension plan to improve the plan’s funded position. As a result of this significant voluntary pension contribution and the associated remeasurement of plan assets and liabilities, 2009 pension expense is expected to be reduced by $27.5 million to $98.7 million, compared to a previous estimate of $126.2 million. As a result, retirement benefit expense, which includes pension expense and other post-retirement expense, is now expected to be approximately $25.5 million in both the third and fourth quarters of 2009.

     For the three and six month periods ended June 30, 2009 and 2008, the components of pension (income) expense and components of other postretirement benefit expense for the Company’s defined benefit plans included the following (in millions):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Pension Benefits:
Service cost — benefits earned during the year		$	6.0			$	7.0			$	12.1			$	14.0
Interest cost on benefits earned in prior years			34.5				32.7				68.9				65.3
Expected return on plan assets			(37.2	)			(50.2	)			(71.9	)			(100.4	)
Amortization of prior service cost			4.1				4.2				8.2				8.3
Amortization of net actuarial loss			20.2				3.3				41.8				6.5
Total pension (income) expense		$	27.6			$	(3.0	)		$	59.1			$	(6.3	)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Other Postretirement Benefits:
Service cost — benefits earned during the year		$	0.8			$	0.7			$	1.5			$	1.5
Interest cost on benefits earned in prior years			8.1				7.9				16.3				15.8
Expected return on plan assets			(0.4	)			(1.4	)			(0.8	)			(2.8	)
Amortization of prior service cost (credit)			(4.8	)			(5.3	)			(9.6	)			(10.6	)
Amortization of net actuarial loss			1.6				1.3				3.2				2.6
Total other postretirement benefit expense		$	5.3			$	3.2			$	10.6			$	6.5
Total retirement benefit expense — defined benefit plans		$	32.9			$	0.2			$	69.7			$	0.2

     Other postretirement benefit costs for a defined contribution plan were $0.5 million and $1.0 million for the three and six months ended June 30, 2009, respectively. For 2008, other postretirement costs for a defined contribution plan were $3.1 million for both the three and six months ended June 30, 2008.

Note 9. Business Segments

     Following is certain financial information with respect to the Company’s business segments for the periods indicated (in millions):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Total sales:
High Performance Metals		$	336.7			$	560.2			$	743.7			$	1,085.3
Flat-Rolled Products			342.1				851.0				729.0				1611.6
Engineered Products			60.1				135.7				135.7				264.2
			738.9				1,546.9				1,608.4				2,961.1
Intersegment sales:
High Performance Metals			16.2				55.7				35.3				99.8
Flat-Rolled Products			6.9				16.9				15.6				30.6
Engineered Products			5.8				13.1				15.9				26.1
			28.9				85.7				66.8				156.5
Sales to external customers:
High Performance Metals			320.5				504.5				708.4				985.5
Flat-Rolled Products			335.2				834.1				713.4				1581.0
Engineered Products			54.3				122.6				119.8				238.1
		$	710.0			$	1,461.2			$	1,541.6			$	2,804.6
Operating profit (loss):
High Performance Metals		$	41.0			$	150.8			$	95.3			$	282.2
Flat-Rolled Products			22.3				113.6				30.0				216.5
Engineered Products			(9.4	)			11.0				(15.5	)			16.7
Total operating profit			53.9				275.4				109.8				515.4
Corporate expenses			(8.6	)			(15.4	)			(23.0	)			(33.1	)
Interest income, net			(1.3	)			(1.3	)			(1.2	)			(1.1	)
Other expense, net of gains on asset sales			(1.4	)			(3.0	)			(5.4	)			(3.9	)
Debt extinguishment costs			(9.2	)			—				(9.2	)			—
Retirement benefit expense			(33.4	)			(3.3	)			(70.7	)			(3.3	)
Income before income taxes		$	—			$	252.4			$	0.3			$	474.0

     Retirement benefit expense represents defined benefit plan pension expense, and other postretirement benefit expense for both defined benefit and defined contribution plans. Operating profit with respect to the Company’s business segments excludes any retirement benefit expense.

     Corporate expenses for the three months ended June 30, 2009 were $8.6 million, compared to $15.4 million for the three months ended June 30, 2008. This decrease is due primarily to lower expenses associated with long-term performance-based cash incentive compensation programs.

     Other expense, net of gains on asset sales, primarily includes charges incurred in connection with closed operations and other non-operating income or expense. These items are presented primarily in selling and administrative expenses and in other expense in the statement of income. These items resulted in net charges of $1.4 million for the three months ended June 30, 2009 and $3.0 million for the three months ended June 30, 2008. This increase was primarily related to lower foreign currency gains, and higher franchise and other non-income related taxes.

Note 10. Financial Information for Subsidiary and Guarantor Parent

     The payment obligations under the $150 million 6.95% debentures due 2025 issued by Allegheny Ludlum Corporation (the “Subsidiary”) are fully and unconditionally guaranteed by Allegheny Technologies Incorporated (the “Guarantor Parent”). In accordance with positions established by the Securities and Exchange Commission, the following financial information sets forth separately financial information with respect to the Subsidiary, the non-guarantor subsidiaries and the Guarantor Parent. The principal elimination entries eliminate investments in subsidiaries and certain intercompany balances and transactions. Investments in subsidiaries, which are eliminated in consolidation, are included in other assets on the balance sheets.

     Allegheny Technologies is the plan sponsor for the U.S. qualified defined benefit pension plan (the “Plan”) which covers certain current and former employees of the Subsidiary and the non-guarantor subsidiaries. As a result, the balance sheets presented for the Subsidiary and the non-guarantor subsidiaries do not include any Plan assets or liabilities, or the related deferred taxes. The Plan assets, liabilities and related deferred taxes and pension income or expense are recognized by the Guarantor Parent. Management and royalty fees charged to the Subsidiary and to the non-guarantor subsidiaries by the Guarantor Parent have been excluded solely for purposes of this presentation.

     Cash flows related to intercompany activity between the Guarantor Parent, the Subsidiary, and the non-guarantor subsidiaries are presented as financing activities on the condensed statements of cash flows.

Note 10. CONTINUED

Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Balance Sheets
June 30, 2009

			Guarantor								Non-guarantor
(In millions)			Parent				Subsidiary				Subsidiaries				Eliminations				Consolidated
Assets:
Cash and cash equivalents		$	1.1			$	637.5			$	212.1			$	—			$	850.7
Accounts receivable, net			0.1				143.4				254.7				—				398.2
Inventories, net			—				103.8				589.1				—				692.9
Prepaid expenses and other current assets			31.8				10.7				33.7				—				76.2
Total current assets			33.0				895.4				1,089.6				—				2,018.0
Property, plant and equipment, net			2.1				408.0				1,376.9				—				1,787.0
Cost in excess of net assets acquired			—				112.1				85.2				—				197.3
Prepaid pension asset			122.2				—				—				—				122.2
Deferred income taxes			49.9				—				—				—				49.9
Investments in subsidiaries and other assets			3,839.0				1,278.2				1,161.6				(6,131.8	)			147.0
Total assets		$	4,046.2			$	2,693.7			$	3,713.3			$	(6,131.8	)		$	4,321.4
Liabilities and stockholders’ equity:
Accounts payable		$	3.4			$	103.7			$	129.3			$	—			$	236.4
Accrued liabilities			935.3				57.1				719.1				(1,481.9	)			229.6
Deferred income taxes			35.3				—				—				—				35.3
Short-term debt and current portion of long-term debt			—				10.5				7.0				—				17.5
Total current liabilities			974.0				171.3				855.4				(1,481.9	)			518.8
Long-term debt			870.6				366.5				18.8				(200.0	)			1,055.9
Accrued postretirement benefits			—				271.3				178.5				—				449.8
Pension liabilities			9.6				2.9				22.0				—				34.5
Other long-term liabilities			44.4				21.6				48.8				—				114.8
Total liabilities			1,898.6				833.6				1,123.5				(1,681.9	)			2,173.8
Total stockholders’ equity			2,147.6				1,860.1				2,589.8				(4,449.9	)			2,147.6
Total liabilities and stockholders’ equity		$	4,046.2			$	2,693.7			$	3,713.3			$	(6,131.8	)		$	4,321.4

Note 10. CONTINUED

Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Statements of Income
For the six months ended June 30, 2009

			Guarantor								Non-guarantor
(In millions)			Parent				Subsidiary				Subsidiaries				Eliminations				Consolidated
Sales		$	—			$	659.5			$	882.1			$	—			$	1,541.6
Cost of sales			40.0				616.1				729.6				—				1,385.7
Selling and administrative expenses			52.9				18.3				74.0				—				145.2
Interest income (expense), net			3.6				(4.9	)			0.1				—				(1.2	)
Debt extinguishment costs			9.2				—				—				—				9.2
Other income (expense) including equity in income of unconsolidated subsidiaries			98.8				1.1				3.2				(103.1	)			—
Income before income tax provision			0.3				21.3				81.8				(103.1	)			0.3
Income tax provision (benefit)			6.7				9.1				39.3				(48.4	)			6.7
Net income (loss)			(6.4	)			12.2				42.5				(54.7	)			(6.4	)
Less: Net income attributable to noncontrolling interest			1.1				—				1.1				(1.1	)			1.1
Net income (loss) attributable to ATI		$	(7.5	)		$	12.2			$	41.4			$	(53.6	)		$	(7.5	)

Condensed Statements of Cash Flows
For the six months ended June 30, 2009

			Guarantor								Non-guarantor
(In millions)			Parent				Subsidiary				Subsidiaries				Eliminations				Consolidated
Cash flows provided by (used in) operating activities		$	(29.3	)		$	136.8			$	(26.2	)		$	—			$	81.3
Cash flows used in investing activities			(130.9	)			(35.8	)			(176.1	)			130.0				(212.8	)
Cash flows provided by financing activities			158.1				254.7				229.5				(130.0	)			512.3
Increase (decrease) in cash and cash equivalents		$	(2.1	)		$	355.7			$	27.2			$	—			$	380.8

Note 10. CONTINUED

Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Balance Sheets
December 31, 2008

			Guarantor								Non-guarantor
(In millions)			Parent				Subsidiary				Subsidiaries				Eliminations				Consolidated
Assets:
Cash and cash equivalents		$	3.2			$	281.8			$	184.9			$	—			$	469.9
Accounts receivable, net			0.3				191.9				338.3				—				530.5
Inventories, net			—				190.4				697.2				—				887.6
Prepaid expenses, and other current assets			0.6				4.7				36.1				—				41.4
Total current assets			4.1				668.8				1,256.5				—				1,929.4
Property, plant and equipment, net			1.5				395.2				1,236.9				—				1,633.6
Deferred income taxes			281.6				—				—				—				281.6
Cost in excess of net assets acquired			—				112.1				78.8				—				190.9
Investment in subsidiaries and other assets			4,666.3				1,514.7				1,304.3				(7,350.4	)			134.9
Total assets		$	4,953.5			$	2,690.8			$	3,876.5			$	(7,350.4	)		$	4,170.4
Liabilities and stockholders’ equity:
Accounts payable		$	3.7			$	83.7			$	191.1			$	—			$	278.5
Accrued liabilities			2,132.3				74.5				798.1				(2,682.9	)			322.0
Deferred income taxes			78.2				—				—				—				78.2
Short-term debt and current portion of long-term debt			—				10.5				4.7				—				15.2
Total current liabilities			2,214.2				168.7				993.9				(2,682.9	)			693.9
Long-term debt			304.2				371.8				18.6				(200.0	)			494.6
Postretirement benefits			—				270.9				176.0				—				446.9
Pension liabilities			351.2				3.2				23.8				—				378.2
Other long-term liabilities			54.9				18.3				54.6				—				127.8
Total liabilities			2,924.5				832.9				1,266.9				(2,882.9	)			2,141.4
Total stockholders’ equity			2,029.0				1,857.9				2,609.6				(4,467.5	)			2,029.0
Total liabilities and stockholders’ equity		$	4,953.5			$	2,690.8			$	3,876.5			$	(7,350.4	)		$	4,170.4