DEF 14A
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j9219101def14a.txt
NOTICE AND PROXY STATEMENT
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
ALLEGHENY TECHNOLOGIES INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
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[Allegheny Technologies Logo]
1000 Six PPG Place
Pittsburgh, PA 15222-5479
March 18, 2002
To our Stockholders:
We are pleased to invite you to attend the 2002 Annual Meeting of Stockholders.
The meeting will be held at 11:00 a.m., Eastern Standard Time, on Thursday, May
9, 2002, in the Room 1000 Auditorium, 10th Floor, Two Mellon Bank Center, 435
Fifth Avenue, 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 2001 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 2002 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 9, 2002
TIME: 11:00 a.m., Eastern Standard Time
PLACE: Room 1000 Auditorium, 10th Floor
Two Mellon Bank Center (Union Trust Building)
435 Fifth Avenue
Pittsburgh, Pennsylvania
RECORD DATE: March 11, 2002
AGENDA
1) Election of a class of five directors;
2) Ratification of the appointment of independent accountants for 2002; 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 18, 2002
PROXY STATEMENT
TABLE OF CONTENTS
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PAGE
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Voting Procedures........................................... 1
Board Composition and Practices............................. 2
Item A on Proxy Card--Election of Directors................. 3
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
2003 Annual Meeting and Stockholder Proposals............. 26
Proxy Solicitation........................................ 26
Electronic Access to Proxy Materials and Annual Report.... 27
Appendix A -- Audit Committee Charter
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
2002 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 11, 2002, you may vote at the annual meeting. On that day, 80,568,079
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 Secretary of the Company
at the Company's executive office;
- transmitting a proxy dated later than your prior proxy either by mail,
telephone or Internet;
- 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. However,
abstentions and broker non-votes do not count in the voting results. A broker
non-vote occurs when a broker, bank or other nominee who holds shares for a
beneficial owner does not vote on a particular item because the nominee 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 2001. Special meetings
are scheduled when required; three were held in 2001. In 2001, average
attendance at Board and committee meetings was approximately 94%. George
Kourpias attended fewer than 75% of the total number of meetings of the Board
and the committee on which he serves.
NUMBER OF DIRECTORS
The Board determines the number of directors. The Board currently consists of 12
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.
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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 five
incumbent directors whose terms expire at the 2002 Annual Meeting.
The five 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 in the
card will vote your shares for the election of the five 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE FIVE
NOMINEES.
NOMINEES - TERM TO EXPIRE AT 2005 ANNUAL MEETING (CLASS III)
ROBERT P. BOZZONE
Age: 68
Director Since: 1996
ATI Board Committees: Executive Committee and Committee on Governance.
Principal Occupation: Chairman, Allegheny Technologies Incorporated.
Recent Business Experience: Mr. Bozzone was Chairman, President and Chief Executive
Officer of the Company from December 2000 until 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, Teledyne Technologies Incorporated and Water Pik
Technologies, Inc. (Chairman of the Board).
FRANK V. CAHOUET
Age: 69
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.
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JAMES C. DIGGS
Age: 53
Director Since: 2001
ATI Board Committee: Committee on Governance.
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: 67
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, The PNC Financial Services
Group, Inc. and Water Pik Technologies, Inc.
CHARLES J. QUEENAN, JR.
Age: 71
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.
CONTINUING DIRECTORS -- TERM EXPIRES AT THE 2003 ANNUAL MEETING (CLASS I)
DIANE C. CREEL
Age: 53
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.
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C. FRED FETTEROLF
Age: 73
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 Directorships: Commonwealth Industries, Inc., DENTSPLY International Inc.
and Teledyne Technologies Incorporated.
JAMES E. ROHR
Age: 53
Director Since: 1996
ATI Board Committees: Executive Committee, Audit Committee, Finance Committee
and Technology Committee.
Principal Occupation: Chairman, President and Chief Executive Officer, The PNC
Financial Services Group, Inc.
Recent Business Experience: Mr. Rohr has been Chairman, President and Chief Executive
Officer of the PNC Financial Services Group since May
2001. He has been President since 1992 and assumed the
additional position of Chief Executive Officer in May of
2000.
Other Directorships: BlackRock, Inc., Equitable Resources, Inc., The PNC Bank
Financial Services Group, Inc. and Water Pik Technologies,
Inc.
CONTINUING DIRECTORS - TERM EXPIRES AT 2004 ANNUAL MEETING (CLASS II)
PAUL S. BRENTLINGER
Age: 74
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
headquartered in Cleveland, Ohio and Menlo Park,
California.
Other Directorship: Teledyne Technologies Incorporated.
GEORGE J. KOURPIAS
Age: 69
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.
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JAMES L. MURDY
Age: 63
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.
WILLIAM G. OUCHI
Age: 58
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 Federal Bank of California, Sempra Energy and Water
Pik Technologies, Inc.
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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. The Executive Committee met twice during 2001.
AUDIT COMMITTEE
The Audit Committee is comprised of four members who, under the rules of the New
York Stock Exchange, are independent. The Committee operates under a written
charter adopted by the Board of Directors (Appendix A). 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 Chairman of 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.
Members of the Audit Committee also serve as members of the Finance Committee,
but members who attend a joint meeting of the two Committees receive a single
meeting fee for their attendance at that meeting.
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 once in 2001 and jointly with the Finance Committee six times in
2001. 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.
The Committee did not meet separately in 2001 but did meet jointly with the
Audit Committee six times in 2001.
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;
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- Assignments to Board committees and appointments of committee chairs;
- 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 four times in 2001.
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 "2003 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; and
- Policy matters relating to employee benefits and employee benefit plans.
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 six times in 2001.
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
five times in 2001.
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 twice in 2001.
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, 2001, which include
the consolidated balance sheets of the Company as of December 31, 2001 and 2000,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2001,
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 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.
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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, 2001
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
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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 $3,000. Directors who are employees of the Company do not
receive any compensation for their services on the Board or its committees.
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.
Although he retired as an active employee from the Company effective July 1,
2001, Robert P. Bozzone retains his position as Chairman of the Board of
Directors. The Personnel and Compensation Committee took action in July 2001 to
approve the compensation of the Chairman at the rate of a monthly cash retainer
of $14,551 in lieu of Board retainer and meeting fees. In addition, Mr. Bozzone
is entitled to participate in all plans or programs of the Company in which
non-employee directors participate. The Committee discussed the compensation
with Hewitt Associates, which advised that the compensation is competitive and
appropriate. In October 2001, in view of the difficult business and economic
conditions impacting the Company, Mr. Bozzone voluntarily reduced the amount of
his retainer by 20%.
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ITEM B ON PROXY CARD -- RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
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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 $1,534,000, in the aggregate, for
professional services rendered by them for the audit of the Company's annual
financial statements for the Company's 2001 fiscal year, the reviews of the
interim financial statements included in the Company's Quarterly Reports on Form
10-Q for the Company's 2001 fiscal year, foreign statutory audits ($242,000) and
the audits of the Company's employee benefit plans ($216,000).
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During 2001, 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 $526,890, in the aggregate, for
professional services rendered in 2001 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, 2002,
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 2001.
FIVE PERCENT OWNERS OF COMMON STOCK
As of February 15, 2002, 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
------------------------------------------------------------------------------------------
(a) Based upon a 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 6, 2002 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.
12
STOCK OWNERSHIP OF MANAGEMENT
The following table shows the shares of Common Stock reported to the Company as
beneficially owned as of March 1, 2002 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.............................. 2,702,942 19,605 2,722,547(1)
Paul S. Brentlinger............................ 7,893 3,268 11,161
Frank V. Cahouet............................... 96 45,648 45,744
Diane C. Creel................................. 1,717 19,287 21,004
James C. Diggs................................. 393 0 393
C. Fred Fetterolf.............................. 9,148 3,268 12,416
Richard J. Harshman............................ 103,145 33,469 136,614
Douglas A. Kittenbrink......................... 120,092 50,996 171,088
George J. Kourpias............................. 801 1,000 1,801
W. Craig McClelland............................ 13,049 3,268 16,317
James L. Murdy................................. 223,816 86,151 309,967
William G. Ouchi............................... 10,481 12,358 22,839
Charles J. Queenan, Jr......................... 355,908 3,268 359,176
James E. Rohr.................................. 6,320 3,268 9,588
Jack W. Shilling............................... 152,897 57,553 210,450
Jon D. Walton.................................. 168,201 77,648 245,849
All directors, named officers and other
statutory insiders as a group (17)........... 3,937,674 471,748 4,409,422(1)
-------------------------------------------------------------------------------------------------
(1) The percentage of outstanding shares is 3.4% for Mr. Bozzone and 5.5% for
the group. The percentage of outstanding shares held by named officers in
the table is less than 1%.
The table includes shares held as of March 1, 2002 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 229 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%. Awards are paid from a pool that generally
does not exceed 5% of operating profit.
For 2001, 40% of the AIP award was based on the achievement of predetermined
levels of operating income, 30% was based on controlling managed working
capital, 10% was based 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 is based on pre-established levels of safety
improvement.
For 2001, awards under the program ranged from 8.7% to 142.2% of the 2001 target
incentives because the targets and levels of achievement varied by business unit
and at the Company level. The bonus column of the Summary Compensation Table
contains the annual incentive award for 2001 for the named officers.
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 employee's salary grade and is at a level generally perceived to
be competitive. The Committee granted options periodically over the year for key
employees. The Committee anticipates making additional quarterly grants during
2002.
(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") for selected participants.
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
14
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. At the beginning of each year, the Committee
determines whether there will be a new TSRP award period starting in that year,
and 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 zero 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") is designed to encourage key executives to acquire
and retain Common Stock. Under the SARP, in 2001, executives selected by the
Committee were entitled to purchase shares or designate already-owned shares of
Common Stock that the Company agreed to match with a grant of restricted Common
Stock equal to 75% of the number of shares purchased or designated by the
participant. The restricted shares generally vest only if the participant holds
the purchased or designated shares for five years; the restrictions will lapse
if there is a change in control of the Company or the participant retires or
dies. In general for each SARP year, participants may purchase or designate a
maximum number of shares having a market price equal to the participant's base
salary. The Company will loan 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. The purchased shares
are pledged and held as security for these loans. Dividends paid on the
purchased and related restricted shares are applied to the loan balance. The
loan has a maximum term of ten years.
(4) Performance Share Program -- The Performance Share Program ("PSP") has been
replaced by the Total Shareholder Return Incentive Compensation Program for
selected participants. 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 executive'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 zero to 200% of the target 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).
Stock Ownership Guidelines. In 2000, the Company adopted stock ownership
guidelines for its executives and key employees. The guidelines call for a
targeted minimum level of stock ownership based on the executive's or key
employee's base salary, and are designed to further link these executives'
interests to increased stockholder value. The executives and key employees were
given five years to reach the targeted ownership levels. The guidelines for
stock ownership depend on the individual's salary and position within the
Company. Targeted ownership levels range from one to four times the executive's
or key employee's salary.
The CEO (target level is four times base salary), all Executive and Senior Vice
Presidents (target level is three times base salary), and certain other senior
officers have achieved the guideline level of stock ownership.
15
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 will participate in the Company's compensation programs, including the
AIP, SARP and TSRP. 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. In July and October 2001, Mr. Murdy received
options to purchase 15,000 shares of Company Common Stock in accordance with the
Company's award of quarterly stock option grants. 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.
COMPENSATION OF FORMER CHIEF EXECUTIVE OFFICER -- ROBERT P. BOZZONE
Robert P. Bozzone retired as the Company's President and Chief Executive Officer
effective July 1, 2001. Prior to his retirement, the Committee, after
consultation with Hewitt Associates, had approved Mr. Bozzone's annual base
salary of $800,000 and his participation in the Company's compensation programs
including AIP, SARP, PSP and TSRP. Mr. Bozzone's target incentive award under
the 2001-2003 TSRP award period was based upon his salary as of January 1, 2001,
consistent with other participants in the Program. Since his retirement, his
award has been prorated to the number of months in the award period prior to
retirement. In April 2001, Mr. Bozzone received options to purchase 15,000
shares of Company Common Stock in accordance with the Company's award of
quarterly stock option grants.
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). However, the Committee 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 2001
and 2002. Mr. Queenan does not participate in the 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 Robert P. Bozzone, who served as President
and Chief Executive Officer prior to his retirement on July 1, 2001, to James L.
Murdy, who became President and Chief Executive Officer on July 1, 2001, and to
each of the other four most highly compensated officers required to file reports
under Section 16 of the Securities Exchange Act of 1934, as of December 31, 2001
("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(1) Year ($)(2) ($)(3) ($)(4) Award($)(5) (Shares)(6) ($)(7) ($)(8)
-------------------------------------------------------------------------------------------------------------------------------
Robert P. Bozzone 2001 400,000 250,000 2,280 0 15,000 0 43,965
Chairman, Former President and 2000 57,143 0 0 602,862 15,000 0 1,679,360
Chief Executive Officer
James L. Murdy 2001 530,000 350,000 23,519 179,560 35,000 46,193 1,100,968
President and 2000 406,667 326,019 21,902 585,953 5,000 55,468 377,556
Chief Executive Officer 1999 370,000 229,770 631,027 122,079 40,000 220,920 942,540
Jack W. Shilling, 2001 365,000 200,000 27,192 52,459 15,000 27,586 323,500
Executive Vice President, 2000 322,500 238,550 20,566 473,248 5,000 33,126 180,288
Strategic Initiatives and
Technology
and Chief Technology Officer
Douglas A. Kittenbrink 2001 312,500 175,000 27,910 54,371 15,000 16,246 103,152
Executive Vice President, 2000 241,383 198,792 9,166 361,861 5,000 19,511 68,589
Chief Operating Officer
Jon D. Walton 2001 320,000 175,000 22,306 30,903 15,000 34,479 260,896
Senior Vice President, 2000 287,500 238,550 21,573 431,358 5,000 41,403 177,673
Chief Legal and Administrative 1999 275,000 170,775 473,028 97,687 40,000 157,800 777,025
Officer
Richard J. Harshman 2001 257,500 125,000 20,389 23,167 12,500 18,077 61,552
Senior Vice President-Finance
and Chief Financial Officer
(1) Mr. Bozzone served as Chairman, President and Chief Executive Officer from
December 6, 2000 until he retired as an active employee on July 1, 2001. Mr.
Murdy became President and Chief Executive Officer on July 1, 2001. Prior to
July 1, 2001, Mr. Murdy served as Executive Vice President. Mr. Shilling
became Executive Vice President, Strategic Initiatives and Technology and
Chief Technology Officer, Mr. Kittenbrink became Executive Vice President,
Chief Operating Officer and Mr. Walton became Senior Vice President, Chief
Legal and Administrative Officer on July 1, 2001. As announced in December
2001, Mr. Harshman was elected Senior Vice President-Finance and Chief
Financial Officer. He became a statutory insider of the Company in September
2000.
(2) 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.
(3) Includes payments under the Company's Annual Incentive Plan.
17
(4) In accordance with applicable regulations, 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. In addition, the number provided for 2000 may differ slightly from
the number provided in the proxy statement for the 2001 annual meeting due
to minor administrative corrections.
(5) Represents the closing 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, 2001 and
closing market price of such shares (if unrestricted) on the last business
day of 2001 were: Mr. Bozzone, 46,374 shares, ($776,765); Mr. Murdy, 63,732
shares ($1,067,511); Mr. Shilling, 43,560 shares ($729,630); Mr.
Kittenbrink, 33,984 shares ($569,232); Mr. Walton, 39,436 shares ($660,553);
and Mr. Harshman, 26,128 shares ($437,644).
(6) 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.
(7) The amounts shown include cash and the closing market price of Common Stock
distributed under the PSP. For 2001, the payments were made under the
Company's PSP for the 1998-1999 award period.
(8) 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 21. For 2001, the amounts accrued were: Mr. Bozzone, $0; Mr.
Murdy, $997,558; Mr. Shilling, $245,699; Mr. Kittenbrink, $47,104; Mr.
Walton, $191,836; and Mr. Harshman, $18,966. Includes 2001 Company
contributions pursuant to the retirement portion of the Company's Retirement
Savings Plan to Mr. Bozzone of $11,310 and to the accounts of each other
named officer in the amount of $11,570 each. Includes 2001 Company
contributions pursuant to the savings portion of the Retirement Savings Plan
to the accounts of Messrs. Murdy, Shilling, Kittenbrink, Walton and Harshman
in the approximate amount of $5,250 each. Includes 2001 Company
contributions to the Benefit Restoration Plan, as follows: Mr. Bozzone,
$14,950; Mr. Murdy, $69,302; Mr. Shilling, $47,073; Mr. Kittenbrink,
$32,273; Mr. Walton, $42,348; and Mr. Harshman, $25,766. 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 which are equivalent to
the portion of the payments or benefits which cannot be paid or accrued
under such plans due to limitations imposed by the Internal Revenue Code.
Also included are the dollar value of the benefit to the named officers of
the remainder of Company-paid premiums for "split dollar" life insurance;
for 2001, such amounts were as follows: Mr. Bozzone, $12,455; Mr. Murdy,
$17,288; Mr. Shilling, $13,908; Mr. Kittenbrink, $6,955; Mr. Walton, $9,892;
and Mr. Harshman, $0.
18
STOCK OPTIONS
The first table sets forth information regarding options granted during 2001
under the Allegheny Technologies Incentive Plan.
The second table indicates the named officers who exercised stock options during
2001 and sets forth the unexercised options held at December 31, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants(1) Price Appreciation for Option Term(4)
------------------------------------------------------------------------------------------- -------------------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or
Granted in Fiscal Base Price Expiration 0% 5% 10%
Name (#)(2) Year ($/Share) Date ($)(3) ($) ($)
---- ------------ ------------ ------------- ----------------- ------- -------- --------
R. P. Bozzone............. 15,000 1.8% $17.375 4/23/2011 0 163,800 415,500
J. L. Murdy............... 5,000 0.6% $17.375 4/23/2011 0 54,600 138,500
15,000 1.8% $19.100 7/20/2011 0 180,150 456,600
15,000 1.8% $14.985 10/22/2011 0 141,300 358,350
J. W. Shilling............ 5,000 0.6% $17.375 4/23/2011 0 54,600 138,500
5,000 0.6% $19.100 7/20/2011 0 60,050 152,200
5,000 0.6% $14.985 10/22/2011 0 47,100 119,450
D. A. Kittenbrink......... 5,000 0.6% $17.375 4/23/2011 0 54,600 138,500
5,000 0.6% $19.100 7/20/2011 0 60,050 152,200
5,000 0.6% $14.985 10/22/2011 0 47,100 119,450
J. D. Walton.............. 5,000 0.6% $17.375 4/23/2011 0 54,600 138,500
5,000 0.6% $19.100 7/20/2011 0 60,050 152,200
5,000 0.6% $14.985 10/22/2011 0 47,100 119,450
R. J. Harshman............ 2,500 0.3% $17.375 4/23/2011 0 27,300 69,250
5,000 0.6% $19.100 7/20/2011 0 60,050 152,200
5,000 0.6% $14.985 10/22/2011 0 47,100 119,450
-----------------------------------------------------------------------------------------------------------------------------------
(1) In general, except for limited instances, including estate planning
purposes, and at the discretion of the Committee, stock options become
exercisable in three annual installments beginning one year after the date
of grant. Options include the right to pay the exercise price in cash,
Common Stock or a combination, and the right to have shares withheld by the
Company to pay withholding tax obligations due on the exercise.
(2) Options were granted on April 23, 2001, July 20, 2001 and October 22, 2001.
(3) No gain to the optionees is possible without stock price appreciation, which
will benefit all stockholders commensurately.
(4) These assumed "potential realizable values" are mathematically derived from
certain prescribed rates of stock price appreciation. The actual value of
these option grants depends on the future performance of the Common Stock
and overall stock market conditions. The values reflected in this table may
not be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options at
Shares Options at FY-End(#) FY-End($)(1)
Acquired Value --------------------------- ---------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- -------------- ----------- ------------- ----------- -------------
R. P. Bozzone..................... 0 0 19,605 25,000 0 0
J. L. Murdy....................... 0 0 86,152 51,667 0 25,800
J. W. Shilling.................... 0 0 57,554 25,000 0 8,600
D. A. Kittenbrink................. 0 0 50,997 25,000 0 8,600
J. D. Walton...................... 0 0 77,649 31,667 0 8,600
R. J. Harshman.................... 0 0 33,470 20,833 0 8,600
(1) The "value" of unexercised options is calculated by subtracting the exercise
price per share from $16.71, 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 2001.
19
LONG TERM INCENTIVE PROGRAM
The following table sets forth information about awards for the 2001-2003 award
period established in 2001 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
Name or Other Rights Maturations or Payout(1) (#) (#) (#)
---- --------------- ------------------------ --------- ------ -------
R. P. Bozzone(2)..................... 4,457 2001-2003 2,228 4,457 8,914
J. L. Murdy.......................... 11,421 2001-2003 5,710 11,421 22,842
J. W. Shilling....................... 9,192 2001-2003 4,596 9,192 18,384
D. A. Kittenbrink.................... 7,660 2001-2003 3,830 7,660 15,320
J. D. Walton......................... 8,357 2001-2003 4,178 8,357 16,714
R. J. Harshman....................... 5,348 2001-2003 2,674 5,348 10,696
(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).
(2) For Mr. Bozzone, the amount of the award opportunity was prorated based upon
the date of his retirement as an active employee effective July 1, 2001.
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. One formula applies to individuals who were employees of
Allegheny Ludlum Corporation ("Allegheny Ludlum") in 1988 when that company
established a defined contribution program and ceased accruals under the defined
benefit pension plan except for those employees who met certain age and service
criteria in 1988. A second formula applies to individuals who were employees of
certain divisions of TDY Industries, Inc. ("TDY") prior to 1998 and met certain
age and service criteria.
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. The following table
shows the estimated annual benefits calculated on a straight life annuity basis
payable under the Allegheny Ludlum provisions of the ATI Pension Plan and the
defined benefit portion of the benefit restoration plan to 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 formula used to determine retirement benefits under the pension
provisions applicable to employees of Allegheny Ludlum in 1988 considers the
participant's annual eligible earnings in the highest five consecutive years
of the last ten years prior to retirement or, in the case of Allegheny Ludlum
employees with frozen benefits, prior to 1988, and the number of the
participant's years of service. 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 TDY provisions of the ATI Pension Plan and
the defined benefit portion of the non-qualified restoration plan to 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 61,162 76,453 91,744 107,034 122,325 137,615
300,000 94,162 117,703 141,244 164,784 188,325 211,865
400,000 127,162 158,953 190,744 222,534 254,325 286,115
500,000 160,162 200,203 240,244 280,284 320,325 360,365
600,000 193,162 241,453 289,744 338,034 386,325 434,615
800,000 259,162 323,953 388,744 453,534 518,325 583,115
1,000,000 325,162 406,453 487,744 569,034 650,325 731,615
1,500,000 490,162 612,703 735,244 857,784 980,325 1,102,865
2,000,000 655,162 818,953 982,744 1,146,534 1,310,325 1,474,115
2,500,000 820,162 1,025,203 1,230,244 1,435,284 1,640,325 1,845,365
* 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, 2001, credited years of service under the Allegheny Ludlum
provisions of the ATI Pension Plan were .58 for Mr. Murdy, 28.92 for Mr.
Shilling, and 2.83 for Mr. Walton. Mr. Bozzone retired from active employment
with the Company effective July 1, 2001, with 39.67 years of service. As of
December 31, 2001, credited years of service under the TDY provisions of the ATI
Pension Plan were 20.17 for Mr. Harshman. Mr. Kittenbrink does not participate
under the ATI Pension Plan.
In addition, the Company has established a Supplemental Pension Plan which
provides certain key employees of the Company and its subsidiaries, including
Messrs. Bozzone, 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 (other than Mr. Bozzone) 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, 1996 through December 31, 2001 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,
1996.
[GRAPH]
ALLEGHENY TECHNOLOGIES INC S&P 500 INDEX IRON & STEEL-500
-------------------------- ------------- ----------------
Dec-96 100 100 100
Dec-97 115.21 133.36 101.74
Dec-98 93.87 171.48 88.18
Dec-99 60.65 207.56 97.01
Dec-00 44.65 188.66 61.03
Dec-01 49.26 166.24 78.32
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.
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: .484% interest in Code Hennessy & Simmons Management I, L.P.
("CHSM I") which is the general partner for Code Hennessy & Simmons I, L.P.
("CHS I") and 2.935% interest in Code Hennessy & Simmons Management II, L.P.
("CHSM II") which is the general partner 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 a book value as of September 30, 2001 of
$81,886 while the book value in CHSM II is $702,556. 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 the son of Richard P. Simmons, who beneficially owns more than 5% of
the Common Stock of the Company.
A subsidiary of Allegheny Ludlum Corporation was a limited partner in CHS II
during 2001 and received no cash distributions. The book value of this limited
partnership investment ($4,656,085) was distributed as a non-cash dividend to
Allegheny Ludlum Corporation, who subsequently contributed this investment
interest at year-end to the Allegheny Ludlum Corporation Bargaining Unit
Voluntary Employee Benefit Association ("VEBA"), a qualified defined benefit
trust for post retirement medical benefits.
CHSM II is responsible for managing the selection and structuring of CHS II's
investments. In 2001, the annual base management fee for CHS II was 1.25%
percent of the fund's total capital commitments until June 1, 2001 and 1.05%
thereafter. These fees were offset by fees that the general partner charges to
companies that the fund acquires. After offset for fees, the net amounts
received by CHSM II was zero percent.
Kirkpatrick & Lockhart LLP. The Company retained the law firm of Kirkpatrick &
Lockhart LLP to perform services for the Company during 2001 and 2002. 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, eligible participants may
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 2001 fiscal year, Messrs. Murdy, Shilling,
Kittenbrink, Walton, and Harshman delivered promissory notes to the Company to
pay the purchase price of Common Stock purchased under the 2001 program. Terry
L. Dunlap, Vice President Procurement, Information Technology and Chief
Information Officer, 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 2001 fiscal
year and the amount of indebtedness outstanding under the programs as of
December 31, 2001 were $1,560,822 for Mr. Murdy, $1,094,005 for Mr. Shilling,
$737,295 for Mr. Kittenbrink, $1,050,253 for Mr. Walton, $582,074 for Mr.
Harshman and $95,146 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.
2003 ANNUAL MEETING AND STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Securities and Exchange Commission, proposals of
stockholders intended to be presented at the 2003 Annual Meeting of Stockholders
must be received no later than November 20, 2002 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
2003 Annual Meeting of Stockholders, would be no earlier than February 8, 2003
and no later than February 23, 2003. 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 report and proxy statement
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
https://vault.melloninvestor.com/isd/ 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 18, 2002
27
APPENDIX A
AUDIT COMMITTEE CHARTER
The Board of Directors shall appoint annually the Audit Committee (the
"Committee") and appoint its Chairman. Members of the Committee shall serve at
the will of the Board of Directors.
COMPOSITION
The Committee shall be comprised of three or more directors, each of whom shall
be independent of management and the Company and free from any relationships to
the Company that might, in the opinion of the Board of Directors, interfere with
the exercise of his or her independent judgment in carrying out the functions of
the Committee. The Board of Directors shall apply the New York Stock Exchange
corporate governance listing standards for purposes of evaluating a Committee
member's independence. Each member of the Committee shall, when appointed to the
Committee or within a reasonable period of time thereafter, be "financially
literate" in the business judgment of the Board of Directors. At least one
member of the Committee shall have accounting or related financial management
"expertise," as such qualification is interpreted by the Board of Directors in
its business judgment.
Members of the Committee shall also serve as members of the Finance Committee
and may also serve on other committees of the Board of Directors. The Chairman
of the Committee shall also serve as the Chairman of the Finance Committee and
shall receive one fee for his or her position as Chairman of both Committees.
Members of both the Audit Committee and the Finance Committee who attend a joint
meeting of the Committees shall receive a single meeting fee for their
attendance at such joint meeting.
RESPONSIBILITY
The Committee shall:
1. Provide assistance to the Board of Directors in fulfilling its statutory and
fiduciary responsibilities for fiscal examinations of the Company and in
monitoring management's and the independent accountants' participation in the
Company's accounting and financial reporting process.
2. Review the Company's administrative, operational and internal accounting
controls and its prescribed fiscal procedures and codes of conduct with the
independent accountants and the Company's financial management.
3. Review the engagement of the independent accountants and the audit plan of
the internal audit function.
4. Recommend to the Board of Directors whether, based on discussions with
management and the independent accountants, the financial statements shall be
included in the Company's Annual Report on Form 10-K.
5. Annually review and reassess the adequacy of the Committee Charter.
Notwithstanding that the Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Committee to plan or conduct audits
or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
Management is responsible for preparing the Company's financial statements and
the independent accountants are responsible for auditing those financial
statements.
AUTHORITY
The Committee shall have authority to review any matter or activity involving
financial accounting, reporting, conflict of interest, or internal controls of
the Company.
FUNCTIONS
The Committee shall:
1. Recommend to the Board of Directors the appointment or nomination of the
independent accountants for the coming year, considering the independence and
effectiveness of the independent accountants. The independent accountants
shall be accountable to the Committee and the Board of Directors, which have
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent accountants.
2. Review the scope and general extent of the annual audit plan and other
activities and proposed fees of the independent accountants and the audit
plan of the internal audit function. Obtain the written statement from the
independent accountants that the accountants are required to furnish to the
Committee under Independence Standards Board Standard No. 1. Discuss with the
independent accountants and consider any disclosed relationships or services,
including non-audit services, that may impair the objectivity and
independence of the independent accountants in order to recommend that the
Company's Board of Directors take appropriate action, as necessary, in
response to such relationships in order to satisfy itself of the accountants'
independence.
3. Prior to the issuance of the Company's release of quarterly earnings, the
Chairman of the Committee shall review 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. If matters are required to be communicated, the Committee
shall discuss such matters with the independent accountants and the
management of the Company.
4. Review and discuss with management and the independent accountants, upon
completion of the annual audit, the Company's financial statements and
related SEC reports for their adequacy and compliance with generally accepted
accounting, reporting and disclosure principles. Obtain communications from
the independent accountants concerning the matters relating to the scope and
results of the independent accountants' audit that the independent
accountants are required to provide to the Committee under Statement on
Auditing Standards No. 61 as amended by Statement on Auditing Standard No.
90, and applicable professional standards.
5. Provide annually to the Board of Directors (a) the report of the Committee,
for inclusion in the Company's annual meeting proxy statement, which includes
the written statement required to be made by the Committee in order to comply
with proxy reporting obligations and (b) such written affirmation regarding
the Committee as is required by New York Stock Exchange corporate governance
listing standards.
6. Evaluate the effectiveness of the internal and external audit efforts, the
effectiveness of the accounting and financial controls, policies and
procedures, and the effectiveness of the Company's business ethics policies
and practices through a review of reports by, and at regular meetings with,
the internal auditors and the independent accountants and with management, as
appropriate.
MEETINGS
The Committee shall hold at least four meetings each year and others as deemed
necessary by its chairperson. A report on all Committee meetings will be
provided to the Board of Directors.
A-2
ALLEGHENY TECHNOLOGIES INCORPORATED
VOTING INSTRUCTION CARD FOR 2002 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 Allegheny Ludlum Corporation
(Washington 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 9, 2002, 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.
--------------------------------------------------------------------------------
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 Allegheny Ludlum Corporation
(Washington 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 3, 2002. If the Trustee
does not receive your instructions by May 3, 2002, 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,
https://vault.melloninvestor.com/isd/, and follow the prompts.
If you sign and return this card and do not specify a vote, your Plan shares
will be voted FOR all Items.
Please mark
your votes as
indicated in
this
example |X|
The Board of Directors recommends a vote FOR Items A and B:
A. Election of the five nominees as directors:
FOR WITHHELD
all nominees (except from all nominees
as indicated)
[ ] [ ]
01 Robert P. Bozzone, 02 Frank V. Cahouet, 03 James C. Diggs, 04 W. Craig
McClelland, 05 Charles J. Queenan, Jr.
(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.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please check here to request an admission ticket to the Meeting. [ ]
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(s)____________________ Signature(s)____________________ 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
YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY.
Internet and telephone voting is available through 4PM Eastern Time
the business day prior to annual meeting day.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
--------------------------- ------------------------- ------------------------
Internet OR Telephone OR Mail
http://www.eproxy.com/ati 1-800-435-6710
Use the Internet to vote Use any touch-tone Mark, sign and date
your proxy. Have your telephone to vote your your proxy card
proxy card in hand when proxy. Have your proxy and
you access the web site. card in hand when you return it in the
You will be prompted to call. You will be enclosed postage-paid
enter your control prompted to enter your envelope.
number, located in the control number, located
box below, to create and in the box below, and
submit an electronic then follow the
ballot. directions 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 2002 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 9, 2002, 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.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
[ALLEGHENY TECHNOLOGIES LOGO]
Dear Stockholder,
Enclosed are materials relating to the Allegheny Technologies 2002 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
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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,
https://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 Items and in their discretion on other matters.
Please mark
your votes as
indicated in this
example |X|
The Board of Directors recommends a vote FOR Items A and B:
A. Election of the five nominees as directors:
FOR WITHHELD
all nominees (except from all nominees
as indicated)
[ ] [ ]
01 Robert P. Bozzone, 02 Frank V. Cahouet, 03 James C. Diggs, 04 W. Craig
McClelland, 05 Charles J. Queenan, Jr.
(To withhold authority to vote for any nominee(s), write the name(s) of the
nominee(s) in the space that follows:)
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B. Selection of Independent Accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please check here to request an admission ticket to the Meeting. [ ]
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(s)____________________ Signature(s)____________________ 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.
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FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
YOUR VOTE IS IMPORTANT. PLEASE VOTE PROMPTLY.
Internet and telephone voting is available through 4PM Eastern Time the
business day prior to annual meeting day.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
--------------------------- ------------------------- ------------------------
Internet OR Telephone OR Mail
http://www.eproxy.com/ati 1-800-435-6710
Use the Internet to vote Use any touch-tone Mark, sign and date
your proxy. Have your telephone to vote your your proxy card
proxy card in hand when proxy. Have your proxy and
you access the web site. card in hand when you return it in the
You will be prompted to call. You will be enclosed postage-paid
enter your control prompted to enter your envelope.
number, located in the control number, located
box below, to create and in the box below, and
submit an electronic then follow the
ballot. directions 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