SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
--------------- ---------------
COMMISSION FILE NUMBER 1-12001
The 401(k) Plan
----------------------------
(Title of Plan)
ALLEGHENY TECHNOLOGIES INCORPORATED
(Name of Issuer of securities held pursuant to the Plan)
1000 Six PPG Place, Pittsburgh, Pennsylvania 15222-5479
(Address of Plan and of principal executive office of Issuer)
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
The 401(k) Plan
Years ended December 31, 2002 and 2001 with Report of Independent Auditors
The 401(k) Plan
Audited Financial Statements
and Supplemental Schedule
Years ended December 31, 2002 and 2001
CONTENTS
Report of Independent Auditors ................................................................................ 1
Audited Financial Statements
Statements of Net Assets Available for Benefits ............................................................... 2
Statements of Changes in Net Assets Available for Benefits..................................................... 3
Notes to Financial Statements ................................................................................. 4
Supplemental Schedule
Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year)................................................13
EXHIBITS
23 Consent of Independent Auditors
99 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Report of Independent Auditors
Allegheny Technologies Incorporated
We have audited the accompanying statements of net assets available for benefits
of The 401(k) Plan as of December 31, 2002 and 2001, and the related statements
of changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2002 is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
Pittsburgh, Pennsylvania /s/ Ernst & Young LLP
June 11, 2003
1
The 401(k) Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
2002 2001
-----------------------------------
Investments:
Interest in Allegheny Technologies Incorporated Savings
Plan Trust $ 48,261,282 $ 55,592,584
Interest in registered investment companies 24,440,212 25,134,460
Interest in common collective trusts 23,349,360 27,632,762
Participant loans 4,759,289 5,131,050
Corporate common stocks 2,758,998 7,077,011
Interest-bearing cash -- 1,727
-----------------------------------
Total investments 103,569,141 120,569,594
Other payables, net (553,862) (66,122)
-----------------------------------
Net assets available for benefits $ 103,015,279 $ 120,503,472
===================================
See accompanying notes.
2
The 401(k) Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
2002 2001
-----------------------------------
Contributions:
Employer $ 3,164,787 $ 2,627,766
Employee 10,434,842 10,059,044
-----------------------------------
Total contributions 13,599,629 12,686,810
Investment income (loss):
Net loss from interest in Allegheny Technologies Incorporated
Savings Plan Trust (8,100,719) (5,638,275)
Net loss from interest in registered investment companies (4,413,303) (3,635,411)
Net unrealized/realized loss on corporate common stocks (3,921,062) (110,129)
Net loss from interest in common collective trusts (3,838,275) (2,037,595)
Interest income 348,298 412,527
Dividend income 242,164 277,110
-----------------------------------
Total investment loss (19,682,897) (10,731,773)
Plan transfers 48,151 --
-----------------------------------
(6,035,117) 1,955,037
Distributions to participants (11,417,423) (9,593,209)
Plan transfers -- (2,524,562)
Administrative expenses and other, net (35,653) (9,825)
-----------------------------------
(11,453,076) (12,127,596)
===================================
Net decrease in net assets available for benefits (17,488,193) (10,172,559)
Net assets available for benefits at beginning of year 120,503,472 130,676,031
-----------------------------------
Net assets available for benefits at end of year $ 103,015,279 $ 120,503,472
===================================
See accompanying notes.
3
The 401(k) Plan
Notes to Financial Statements
December 31, 2002
1. SIGNIFICANT ACCOUNTING POLICIES
Investments are valued as follows:
Bank and insurance contracts with varying contract rates and maturity dates
are stated at contract value.
Although it is management's intention to hold the investment contracts in
the Fixed Income Fund until maturity, certain investment contracts provide
for adjustments to contract value for withdrawals made prior to maturity.
All other funds are stated at their net asset value, based on the quoted
market prices of the securities held in such funds on applicable exchanges.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
2. DESCRIPTION OF THE PLAN
The 401(k) Plan (the Plan) is a defined contribution plan and is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The purpose of the Plan is to provide retirement benefits to eligible employees
through company contributions and to encourage employee thrift by permitting
eligible employees to defer a part of their compensation and contribute such
deferral to the Plan. The Plan allows employees to contribute a portion of
eligible wages each pay period through payroll deductions subject to Internal
Revenue Code limitations. Qualifying employee contributions are partially
matched by Allegheny Technologies Incorporated (ATI, the Plan Sponsor), up to
the lesser of a maximum of $1,000 annually for each participant, or 50% of
participants' deferrals up to a maximum of 3.5% of total eligible wages (except
for Allvac and Wah Chang). For the Company's Allvac and Wah Chang operations,
effective January 1, 2002, the $1,000 maximum limit on matching contributions
was removed.
In addition, annual flat dollar contributions will be paid into the Plan at the
end of each year provided the following criteria are met: the employee must have
contributed a minimum of 2% of their total earnings for the year into the Plan;
the employee must have completed a minimum
4
The 401(k) Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
of 1,000 hours during the calendar year; and the employee must be an active, non
union employee as of December 31st of that year. The exception to this rule is
that employees who retire during the calendar year will remain eligible for this
contribution, so long as they meet the 1,000 hour rule. Such retirees will
receive a pro rated contribution, based on the number of months they worked in
the year. However, an employee who terminates (not retires) prior to December
31st will not be eligible for this flat dollar contribution, regardless of the
number of hours worked.
The flat dollar contribution amounts are based on the employee's years of
service, as follows:
Years Amount of Contribution
----- ----------------------
0 - 4 $100
5 - 9 $500
10 - 14 $600
15 - 19 $700
20 - 24 $800
25 - 29 $1,000
30 - 34 $1,500
35 or more $2,000
Separate accounts are maintained by the Plan Sponsor for each participating
employee. Trustee fees and asset management fees charged by the Plan's trustee,
Mellon Bank, N.A., for the administration of all funds are charged against net
assets available for benefits of the respective fund. Certain other expenses of
administering the Plan are paid by the Plan Sponsor.
5
The 401(k) Plan
Notes to Financial Statements (continued)
2. DESCRIPTION OF THE PLAN (CONTINUED)
Participants may make "in-service" and hardship withdrawals as outlined in the
plan document.
Active employees can borrow up to 50% of their vested account balances minus any
outstanding loans. The loan amounts are further limited to a minimum of $1,000
and a maximum of $50,000, and an employee can obtain no more than three loans at
one time. Interest rates are determined based on commercially accepted criteria,
and payment schedules vary based on the type of the loan. General-purpose loans
are repaid over 6 to 60 months, and primary residence loans are repaid over
periods up to 180 months. Payments are made by payroll deductions.
Effective November 29, 1999, Allegheny Teledyne Incorporated's name was changed
to Allegheny Technologies Incorporated. Also, the Aerospace and Electronics and
Consumer segments of Allegheny Teledyne were spun off into two new freestanding
public companies--Teledyne Technologies Incorporated and Water Pik Technologies,
Inc. Stockholders of Allegheny Teledyne became stockholders of Teledyne
Technologies Incorporated and Water Pik Technologies, Inc., thus creating two
new master trusts. Participants continued to hold interests in the two new
companies until December 31, 2002, at which time these two holdings were
terminated and the assets were transferred to one of the other plan investment
options.
Further information about the Plan, including eligibility, vesting,
contributions, and withdrawals, is contained in the plan documents, summary plan
description and related contracts. These documents are available from the
Plan Sponsor.
6
The 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
The following presents investments that represent 5% or more of the Plan's net
assets as of December 31, 2002 and 2001.
DECEMBER 31
2002 2001
------------------------------
Allegheny Technologies Disciplined Stock Fund $28,994,544 $40,956,787
Fixed Income Master Trust Fund 18,879,997 14,304,314
Dreyfus LifeStyle Growth & Income Fund 15,447,814 18,643,505
Dreyfus Bond Market Index 9,696,550 7,181,316
Prudential Jennison Growth Fund, Class A Shares 7,054,970 9,844,233
Dreyfus LifeStyle Growth Fund 5,741,808 7,379,558
Certain of the Plan's investments are in the Allegheny Technologies Incorporated
Savings Plan Trust, which has three subsidiary Master Trusts: the Allegheny
Technologies Disciplined Stock Fund Master Trust, the Alliance Equity Master
Trust and the Fixed Income Master Trust, which are institutional separate
accounts valued on a unitized trust basis (collectively, the "Master Trust").
The Master Trust was established for the investment of assets of the Plan, and
several other ATI sponsored retirement plans. Each participating retirement plan
has an undivided interest in the Master Trust. At December 31, 2002 and 2001,
the Plan's interest in the net assets of the Allegheny Technologies Disciplined
Stock Fund Master Trust, the Alliance Equity Master Trust and the Fixed Income
Master Trust were as follows:
2002 2001
--------------------
Allegheny Technologies Disciplined Stock Fund Master Trust 52.79% 52.83%
Fixed Income Master Trust 10.44 8.64
Alliance Equity Master Trust 1.46 0.83
Investment income and expenses are allocated to the Plan based upon its pro rata
share in the net assets of the Master Trust.
7
The 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The composition of the net assets of the Fixed Income Master Trust at December
31, 2002 and 2001 was as follows:
2002 2001
--------------------------------
Guaranteed investment contracts:
Business Mens Assurance Company of America $ -- $ 1,246,890
Canada Life 2,757,412 2,743,536
Combined Life Insurance Company -- 3,097,946
GE Life and Annuity 10,420,327 11,812,375
Hartford Life Insurance Company 10,460,185 10,025,160
John Hancock Life Insurance Company 9,854,982 14,218,029
Monumental Life Insurance Company 2,363,422 3,331,280
New York Life Insurance Company 7,808,955 7,729,985
Ohio National Life 5,976,900 7,936,620
Pacific Mutual Life Insurance Company 6,074,436 6,036,924
Principal Life 1,134,634 3,000,000
Protective Life Insurance Company 1,006,463 1,002,333
Pruco Pace Credit Enhanced 8,689,223 9,950,359
Safeco Life Insurance 1,973,290 3,000,505
Security Life of Denver 6,465,137 6,181,488
Sun America, Inc. 2,988,024 2,992,868
United of Omaha 7,226,335 7,188,790
--------------------------------
85,199,725 101,495,088
Synthetic guaranteed investment contracts:
Caisse des Depots et Consignations 4,953,210 7,800,826
CIT Equipment 996,925 992,755
Common Wealth Edison 2,999,980 1,976,061
Commit to purchase FNMA 02-74 LC 3,071,979 --
Conn RRB Spec Trust 2,948,436 2,987,164
Detroit Edison 2,027,941 2,018,460
FHLMC 5,977,227 2,466,660
Illinois Power Sp Trust 1,971,078 1,957,161
MBNA Master CC Trust 1,993,490 1,983,492
MDA Monumental BGI Wrap 41,868,727 --
Peco Energy Company 1,970,899 1,982,788
Peoples Security Life Insurance Company 2,491,608 6,602,162
Public Service 2,036,624 1,998,629
Transamerica Occidental 6,568,303 9,559,425
Union Bank of Switzerland 174,682 2,737,675
Westdeutsche Landesbank Girozentrale 3,556,463 9,387,186
--------------------------------
85,607,572 54,450,444
Interest in common collective trust 7,972,257 7,680,629
Receivables -- 381,024
Interest-bearing cash 212,167 --
Other 1,817,668 1,635,070
--------------------------------
Total net assets $180,809,389 $165,642,255
================================
8
The 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The Fixed Income Fund (the Fund) invests in guaranteed investment contracts
(GICs) and actively managed structured or synthetic investment contracts (SICs).
The GICs are promises by a bank or insurance company to repay principal plus a
fixed rate of return through contract maturity. SICs differ from GICs in that
there are specific assets supporting the SICs, and these assets are owned by the
Master Trust. The bank or insurance company issues a wrapper contract that
allows participant-directed transactions to be made at contract value. The
assets supporting the SICs are comprised of government agency bonds, corporate
bonds, asset-backed securities (ABOs) and collateralized mortgage obligations
(CMOs) with fair values of $88,750,762 and $55,854,607 at December 31, 2002 and
2001, respectively. The contract value minus the market value of the wrapper
contracts at December 31, 2002 and 2001 is $(2,667,261) and $(1,397,030),
respectively.
Interest crediting rates on the GICs in the Fund are determined at the time of
purchase. Interest crediting rates on the SICs are either: (1) set at the time
of purchase for a fixed term and crediting rate; (2) set at the time of purchase
for a fixed term and variable crediting rate or (3) set at the time of purchase
and reset monthly within a "constant duration." A constant duration contract may
specify a duration of 2.5 years and the crediting rate is adjusted monthly based
upon quarterly rebalancing of eligible 2.5 year duration investment instruments
at the time of each resetting; in effect the contract never matures. At December
31, 2002 and 2001, the interest crediting rates for GICs and Fixed Maturity SICs
ranged from 3.27% to 8.05% and 3.49% to 8.05%, respectively.
For the year ended December 31, 2002 and 2001, the average annual yield
for the investment contracts in the Fund was 5.74% and 6.25%, respectively. Fair
value of the GICs was estimated by discounting the weighted average of the
Fund's cash flows at the then-current interest crediting rate for a comparable
maturity investment contract. Fair value for the SICs was estimated based on the
fair value of each contract's supporting assets at December 31, 2002 and 2001.
9
The 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The composition of net assets of the Alliance Equity Master Trust at December
31, 2002 and 2001 was as follows:
2002 2001
---------------------------------
Investment in registered investment companies:
Alliance Equity Fund S.A. #4 $26,603,639 $40,024,274
Operating payables (49,895) (64,365)
---------------------------------
Total net assets $26,553,744 $39,959,909
=================================
The composition of net assets of the Allegheny Technologies Disciplined Stock
Fund Master Trust at December 31, 2002 and 2001 was as follows:
2002 2001
---------------------------------
Corporate common stocks $53,256,475 $76,016,770
Interest in common collective trusts 1,630,752 1,410,015
Receivables 67,848 103,913
Payables (25,733) --
---------------------------------
Total net assets $54,929,342 $77,530,698
=================================
10
The 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
The composition of the changes in net assets of the various master trusts is as
follows:
ALLEGHENY TECHNOLOGIES
ALLIANCE EQUITY MASTER DISCIPLINED STOCK FUND MASTER
FIXED INCOME MASTER TRUST TRUST TRUST
--------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------------------------
2002 2001 2002 2001 2002 2001
--------------------------------------------------------------------------------------------------
Investment income (loss):
Interest income $ 9,786,577 $ 9,147,492 $ -- $ -- $ -- $ --
Net realized/unrealized
gain (loss) on
corporate common
stocks 1,528 -- -- -- (17,406,255) (12,375,289)
Dividends -- -- -- -- 948,623 941,613
Net gain (loss),
registered invest-
ment companies -- 32,606 (10,652,634) (9,248,179) -- --
Net gain, common
collective trusts 172,081 401,062 -- -- 13,761 53,202
Other income 69,815 -- -- -- -- --
Administrative expenses (236,944) (208,589) (118,618) (170,195) (424,085) (520,128)
Transfers 5,374,077 11,804,280 (2,634,913) (1,786,437) (5,733,400) (1,810,556)
--------------------------------------------------------------------------------------------------
Net increase (decrease) 15,167,134 21,176,851 (13,406,165) (11,204,811) (22,601,356) (13,711,158)
Total net assets at
beginning of year 165,642,255 144,465,404 39,959,909 51,164,720 77,530,698 91,241,856
--------------------------------------------------------------------------------------------------
Total net assets at
end of year $ 180,809,389 $ 165,642,255 $ 26,553,744 $ 39,959,909 $ 54,929,342 $ 77,530,698
==================================================================================================
11
The 401(k) Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
Interest, realized and unrealized gains and losses, and management fees from the
master trusts are included in the net loss from interest in Allegheny
Technologies Incorporated Savings Plan Trust on the statement of changes in net
assets available for benefits.
4. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated December 2, 1997, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the Code) and, therefore, the related trust is
exempt from taxation. Subsequent to this issuance of the determination letter,
the Plan was amended. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The plan administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan, as amended, is
qualified and the related trust is tax-exempt.
5. PARTIES-IN-INTEREST
Dreyfus Corporation is the manager of the Dreyfus Mutual Funds that are offered
as investment options under this Plan. Dreyfus Service Corporation is the funds'
distributor. Dreyfus Corporation and Dreyfus Service Corporation are both wholly
owned subsidiaries of Mellon Financial Corporation. Mellon Financial Corporation
also owns Mellon Bank, N.A., the Trustee for this Plan. Therefore, transactions
with these entities qualify as party-in-interest.
6. PLAN TERMINATION
Although it has not expressed any intent to do so, the Plan Sponsor has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
12
The 401(k) Plan
EIN 25-1792394 Plan 098
Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year)
December 31, 2002
INVESTMENT DESCRIPTION UNITS/SHARES CURRENT VALUE
----------------------------------------------------------------------------- --------------------- ------------------------
Interest in registered investment companies:
Dreyfus Bond Market Index Fund* 924,361.325 $ 9,696,550
Prudential Jennison Growth Fund, Class A Shares 701,289.243 7,054,970
Dreyfus Growth & Value International Fund* 251,511.675 3,028,201
MAS Mid Cap Growth Fund, Institutional Shares 241,435.320 2,916,539
Dreyfus Emerging Leaders Fund* 62,115.862 1,724,336
Dreyfus Premier Nextech Fund* 175.644 488
Self-directed account:
Wasatch Ultra Growth Fund 507.370 9,985
Vanguard/Windsor Fd II Portfolio 223.110 4,641
Dreyfus Premier Emerging Mkts Fd - C1.A* 112.254 1,245
Dreyfus Technology Growth Fund* 79.737 1,203
Harris Assoc. Invt Tr. Oakmark Intl Fd 65.793 864
Dreyfus Midcap Value Fund* 42.977 753
Strong Equity Fds - Technology 100 Fd 115.155 356
Ryder Ser Tr Dynamic Velocity 100 Fd 7.977 81
-----------
$24,440,212
===========
Interest in common collective investment funds:
Dreyfus LifeStyle Growth & Income Fund* 1,072,152.397 $15,447,814
Dreyfus LifeStyle Growth Fund* 427,208.825 5,741,808
Dreyfus LifeStyle Income Fund* 106,057.670 1,601,045
Dreyfus Short Term Investment Fund* 558,692.890 558,693
-----------
$23,349,360
===========
Participant loans* (5.25% to 10.50% with maturities through 2017) $ 4,759,289
===========
Interest in corporate common stocks:
Allegheny Technologies Incorporated common stock* 442,856.826 $ 2,758,998
===========
* Party-in-interest
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
administrators of the Plan have duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
ALLEGHENY TECHNOLOGIES INCORPORATED
THE 401(K) PLAN
By: /s/ Richard J. Harshman
------------------------------------
Date: June 27, 2003 Richard J. Harshman
Senior Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Officer)
14