Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
  FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From                      to                     
Commission File Number 1-12001
 
  ALLEGHENY TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in its charter)
 
Delaware
 
25-1792394
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
1000 Six PPG Place
 
 
Pittsburgh, Pennsylvania
 
15222-5479
(Address of Principal Executive Offices)
 
(Zip Code)
(412) 394-2800
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   ý     No   ¨
Indicate by check mark whether the Registrant submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   ý     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   ý
At April 24, 2015 , the registrant had outstanding 109,215,499 shares of its Common Stock.
 

Table of Contents

ALLEGHENY TECHNOLOGIES INCORPORATED
SEC FORM 10-Q
Quarter Ended March 31, 2015
INDEX
 
Page No.
PART I. - FINANCIAL INFORMATION
 
 
 
Item 1. Financial Statements
 
 
 
Consolidated Balance Sheets
 
 
Consolidated Statements of Operations
 
 
Consolidated Statements of Comprehensive Income
 
 
Consolidated Statements of Cash Flows
 
 
Statements of Changes in Consolidated Equity
 
 
Notes to Consolidated Financial Statements
 
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
 
Item 4. Controls and Procedures
 
 
PART II. - OTHER INFORMATION
 
 
 
Item 1. Legal Proceedings
 
 
Item 1A. Risk Factors
 
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 
Item 6. Exhibits
 
 
SIGNATURES
 
 
EXHIBIT INDEX

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Allegheny Technologies Incorporated and Subsidiaries
Consolidated Balance Sheets
(In millions, except share and per share amounts)
(Current period unaudited)
 
March 31,
2015
 
December 31,
2014
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
238.0

 
$
269.5

Accounts receivable, net of allowances for doubtful accounts of $4.8 as of March 31, 2015 and December 31, 2014
690.9

 
603.6

Inventories, net
1,472.6

 
1,472.8

Prepaid expenses and other current assets
64.1

 
136.2

Total Current Assets
2,465.6

 
2,482.1

Property, plant and equipment, net
2,943.7

 
2,961.8

Cost in excess of net assets acquired
777.9

 
780.4

Other assets
369.6

 
358.3

Total Assets
$
6,556.8

 
$
6,582.6

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
559.5

 
$
556.7

Accrued liabilities
288.8

 
323.2

Deferred income taxes
70.8

 
62.2

Short term debt and current portion of long-term debt
17.9

 
17.8

Total Current Liabilities
937.0

 
959.9

Long-term debt
1,509.1

 
1,509.1

Accrued postretirement benefits
407.1

 
415.8

Pension liabilities
730.2

 
739.3

Deferred income taxes
91.3

 
80.9

Other long-term liabilities
162.0

 
156.2

Total Liabilities
3,836.7

 
3,861.2

Redeemable noncontrolling interest
12.1

 
12.1

Equity:
 
 
 
ATI Stockholders’ Equity:
 
 
 
Preferred stock, par value $0.10: authorized-50,000,000 shares; issued-none
—

 
—

Common stock, par value $0.10: authorized-500,000,000 shares; issued-109,695,171 shares at March 31, 2015 and December 31, 2014; outstanding- 109,172,045 shares at March 31, 2015 and 108,710,914 shares at December 31, 2014
11.0

 
11.0

Additional paid-in capital
1,154.2

 
1,164.2

Retained earnings
2,382.4

 
2,398.9

Treasury stock: 523,126 shares at March 31, 2015 and 984,257 shares at December 31, 2014
(22.2
)
 
(44.3
)
Accumulated other comprehensive loss, net of tax
(930.8
)
 
(931.4
)
Total ATI stockholders’ equity
2,594.6

 
2,598.4

Noncontrolling interests
113.4

 
110.9

Total Equity
2,708.0

 
2,709.3

Total Liabilities and Equity
$
6,556.8

 
$
6,582.6


The accompanying notes are an integral part of these statements.

1

Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
 
 
Three months ended March 31,
 
2015
 
2014
Sales
$
1,125.5

 
$
987.3

Costs and expenses:
 
 
 
Cost of sales
1,016.0

 
917.1

Selling and administrative expenses
63.1

 
67.7

Income before interest, other income and income taxes
46.4

 
2.5

Interest expense, net
(26.7
)
 
(29.1
)
Other income, net
0.9

 
0.6

Income (loss) from continuing operations before income taxes
20.6

 
(26.0
)
Income tax provision (benefit)
8.0

 
(10.0
)
Income (loss) from continuing operations
12.6

 
(16.0
)
Loss from discontinued operations, net of tax
—

 
(1.9
)
Net income (loss)
12.6

 
(17.9
)
Less: Net income attributable to noncontrolling interests
2.6

 
2.1

Net income (loss) attributable to ATI
$
10.0

 
$
(20.0
)
 
 
 
 
Income (loss) per common share:
 
 
 
Basic
 
 
 
Continuing operations attributable to ATI per common share
$
0.09

 
$
(0.17
)
Discontinued operations attributable to ATI per common share
—

 
(0.02
)
Basic net income (loss) attributable to ATI per common share
$
0.09

 
$
(0.19
)
 
 
 
 
Diluted
 
 
 
Continuing operations attributable to ATI per common share
$
0.09

 
$
(0.17
)
Discontinued operations attributable to ATI per common share
—

 
(0.02
)
Diluted net income (loss) attributable to ATI per common share
$
0.09

 
$
(0.19
)
Dividends declared per common share
$
0.18

 
$
0.18

 
 
 
 
Amounts attributable to ATI common stockholders:
 
 
 
Income (loss) from continuing operations, net of tax
$
10.0

 
$
(18.1
)
Loss from discontinued operations, net of tax
—

 
(1.9
)
Net income (loss)
$
10.0

 
$
(20.0
)
The accompanying notes are an integral part of these statements.


2

Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
 
 
Three months ended March 31,
 
2015
 
2014
Net income (loss)
$
12.6

 
$
(17.9
)
Currency translation adjustment
 
 
 
Unrealized net change arising during the period
(21.8
)
 
(3.3
)
Unrealized holding gain on securities
 
 
 
Net gain (loss) arising during the period
—

 
—

Derivatives
 
 
 
Net derivatives gain on hedge transactions
18.5

 
9.3

Reclassification to net income of net realized loss (gain)
(2.7
)
 
2.1

Income taxes on derivative transactions
6.1

 
4.4

Total
9.7

 
7.0

Postretirement benefit plans
 
 
 
Amortization of net actuarial loss
18.7

 
22.0

Prior service cost
 
 
 
Amortization to net income of net prior service cost (credits)
1.5

 
(0.2
)
Income taxes on postretirement benefit plans
7.7

 
8.4

Total
12.5

 
13.4

Other comprehensive income, net of tax
0.4

 
17.1

Comprehensive income (loss)
13.0

 
(0.8
)
Less: Comprehensive income attributable to noncontrolling interests
2.4

 
0.2

Comprehensive income (loss) attributable to ATI
$
10.6

 
$
(1.0
)
The accompanying notes are an integral part of these statements.


3

Allegheny Technologies Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
 
Three months ended March 31,
 
2015
 
2014
Operating Activities:
 
 
 
Net income (loss)
$
12.6

 
$
(17.9
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
45.6

 
44.0

Deferred taxes
5.0

 
(1.7
)
Changes in operating asset and liabilities:
 
 
 
Inventories
0.3

 
(82.6
)
Accounts receivable
(87.3
)
 
(28.6
)
Accounts payable
2.7

 
45.9

Retirement benefits
2.5

 
4.2

Accrued income taxes
60.6

 
(10.9
)
Accrued liabilities and other
(30.0
)
 
(9.3
)
Cash provided by (used in) operating activities
12.0

 
(56.9
)
Investing Activities:
 
 
 
Purchases of property, plant and equipment
(22.6
)
 
(39.6
)
Purchases of businesses, net of cash acquired
—

 
(71.1
)
Asset disposals and other
0.1

 
1.8

Cash used in investing activities
(22.5
)
 
(108.9
)
Financing Activities:
 
 
 
Payments on long-term debt and capital leases
(0.3
)
 
(0.1
)
Dividends paid to stockholders
(19.3
)
 
(19.3
)
Shares repurchased for income tax withholding on share-based compensation
(1.4
)
 
(3.9
)
Cash used in financing activities
(21.0
)
 
(23.3
)
Decrease in cash and cash equivalents
(31.5
)
 
(189.1
)
Cash and cash equivalents at beginning of period
269.5

 
1,026.8

Cash and cash equivalents at end of period
$
238.0

 
$
837.7

The accompanying notes are an integral part of these statements.


4

Allegheny Technologies Incorporated and Subsidiaries
Statements of Changes in Consolidated Equity
(In millions, except per share amounts)
(Unaudited)
 
 
ATI Stockholders
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity
Balance, December 31, 2013
$
11.0

 
$
1,185.9

 
$
2,490.1

 
$
(79.6
)
 
$
(713.2
)
 
$
100.5

 
$
2,994.7

Net income (loss)
—

 
—

 
(20.0
)
 
—

 
—

 
2.1

 
(17.9
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
18.9

 
(1.8
)
 
17.1

Cash dividends on common stock ($0.18 per share)
—

 
—

 
(19.3
)
 
—

 
—

 
—

 
(19.3
)
Employee stock plans
—

 
(25.7
)
 
(10.1
)
 
28.3

 
—

 
—

 
(7.5
)
Balance, March 31, 2014
$
11.0

 
$
1,160.2

 
$
2,440.7

 
$
(51.3
)
 
$
(694.3
)
 
$
100.8

 
$
2,967.1

Balance, December 31, 2014
$
11.0

 
$
1,164.2

 
$
2,398.9

 
$
(44.3
)
 
$
(931.4
)
 
$
110.9

 
$
2,709.3

Net income
—

 
—

 
10.0

 
—

 
—

 
2.6

 
12.6

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
0.6

 
(0.2
)
 
0.4

Cash dividends on common stock ($0.18 per share)
—

 
—

 
(19.3
)
 
—

 
—

 
—

 
(19.3
)
Redeemable noncontrolling interest
—

 
—

 
(0.1
)
 
—

 
—

 
0.1

 
—

Employee stock plans
—

 
(10.0
)
 
(7.1
)
 
22.1

 
—

 
—

 
5.0

Balance, March 31, 2015
$
11.0

 
$
1,154.2

 
$
2,382.4

 
$
(22.2
)
 
$
(930.8
)
 
$
113.4

 
$
2,708.0

The accompanying notes are an integral part of these statements.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note 1. Accounting Policies
The interim consolidated financial statements include the accounts of Allegheny Technologies Incorporated and its subsidiaries. Unless the context requires otherwise, “Allegheny Technologies”, “ATI” and “the Company” refer to Allegheny Technologies Incorporated and its subsidiaries.
These unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K. The results of operations for these interim periods are not necessarily indicative of the operating results for any future period. The December 31, 2014 financial information has been derived from the Company’s audited consolidated financial statements.
In 2013, the Company sold or announced closures of certain businesses that are reported as discontinued operations. Remaining closure activities were completed in 2014. Financial results for discontinued operations for the first quarter of 2014 were sales of $5.2 million , pretax losses of $2.8 million , and net assets of $2.9 million as of March 31, 2014 .
New Accounting Pronouncements Adopted
In January 2015, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to the criteria for reporting discontinued operations. Under the new criteria, a disposal of a component of an entity is required to be reported as discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. The criteria that there be no significant continuing involvement in the operations of the component after the disposal transaction has been removed under the new guidance. The new guidance also requires the presentation of the assets and liabilities of a disposal group that includes a discontinued operation for each comparative period and requires additional disclosures about discontinued operations, including the major line items constituting the pretax profit or loss of the discontinued operation, certain cash flow information for the discontinued operation, expanded disclosures about an entity’s significant continuing involvement in a discontinued operation, and disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation. The provisions of the new guidance are effective for all disposals that occur for the Company beginning in fiscal year 2015. The adoption of these changes had no impact on the consolidated financial statements.
Pending Accounting Pronouncements

In April 2015, the FASB issued new guidance on presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this guidance. This update will be effective for the Company beginning in fiscal year 2016, with early adoption permitted, and is applied on a retrospective basis. As of March 31, 2015 and December 31, 2014 , the Company had $10.6 million and $10.9 million , respectively, of debt issuance costs reported as assets on the consolidated balance sheet that will be reclassified to a reduction of the carrying amount of the debt liability upon the Company’s adoption of this new guidance.

In May 2014, the FASB issued changes to revenue recognition with customers. This update provides a five-step analysis of transactions to determine when and how revenue is recognized. An entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update will be effective for the Company beginning in fiscal year 2017. This update may be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

6

Note 2. Inventories
Inventories at March 31, 2015 and December 31, 2014 were as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Raw materials and supplies
$
234.5

 
$
249.3

Work-in-process
1,186.3

 
1,184.1

Finished goods
177.0

 
172.2

Total inventories at current cost
1,597.8

 
1,605.6

Adjustment from current cost to LIFO cost basis
4.3

 
4.8

Inventory valuation reserves
(66.4
)
 
(68.8
)
Progress payments
(63.1
)
 
(68.8
)
Total inventories, net
$
1,472.6

 
$
1,472.8

Inventories are stated at the lower of cost (last-in, first-out (“LIFO”), first-in, first-out (“FIFO”), and average cost methods) or market, less progress payments. Most of the Company’s inventory is valued utilizing the LIFO costing methodology. Inventory of the Company’s non-U.S. operations is valued using average cost or FIFO methods. The effect of using the LIFO methodology to value inventory, rather than FIFO, increased cost of sales by $0.5 million for the first three months of 2015 , which was offset by a $0.5 million reduction in net realizable value reserves on the carrying value of LIFO-based inventory. The first three months of 2014 results included a $9.0 million increase in cost of sales from using the LIFO costing methodology, which was offset by a $9.0 million reduction in net realizable value reserves on the carrying value of LIFO-based inventory. The first three months of 2015 and 2014 results included $5.3 million and $8.3 million , respectively, in inventory valuation charges related to the market-based valuation of industrial titanium products in the Flat Rolled Products segment.
Note 3. Property, Plant and Equipment
Property, plant and equipment at March 31, 2015 and December 31, 2014 was as follows (in millions):
 
March 31,
2015
 
December 31,
2014
Land
$
30.0

 
$
30.2

Buildings
1,053.1

 
1,048.9

Equipment and leasehold improvements
3,714.6

 
3,702.5

 
4,797.7

 
4,781.6

Accumulated depreciation and amortization
(1,854.0
)
 
(1,819.8
)
Total property, plant and equipment, net
$
2,943.7

 
$
2,961.8

The construction in progress portion of property, plant and equipment at March 31, 2015 was $57.2 million .

7

Note 4. Debt
Debt at March 31, 2015 and December 31, 2014 was as follows (in millions):  
 
March 31,
2015
 
December 31,
2014
Allegheny Technologies 5.875% Notes due 2023 (a)
$
500.0

 
$
500.0

Allegheny Technologies 5.95% Notes due 2021
500.0

 
500.0

Allegheny Technologies 9.375% Notes due 2019
350.0

 
350.0

Allegheny Ludlum 6.95% debentures due 2025
150.0

 
150.0

ATI Ladish Series B 6.14% Notes due 2016 (b)
11.7

 
11.9

ATI Ladish Series C 6.41% Notes due 2015 (c)
10.2

 
10.3

Domestic Bank Group $400 million credit facility
—

 
—

Foreign credit facilities
—

 
—

Industrial revenue bonds, due through 2020, and other
5.1

 
4.7

Total short-term and long-term debt
1,527.0

 
1,526.9

Short-term debt and current portion of long-term debt
17.9

 
17.8

Total long-term debt
$
1,509.1

 
$
1,509.1

 
(a)
Bearing interest at 6.375% effective February 15, 2015.
(b)
Includes fair value adjustments of $0.3 million at March 31, 2015 and $0.4 million at December 31, 2014 .
(c)
Includes fair value adjustments of $0.2 million at March 31, 2015 and $0.3 million at December 31, 2014 .

During the first quarter of 2015, Standard & Poor’s (“S&P”) downgraded the Company’s credit rating one notch to BB+ from BBB-, resulting in an increase of the interest rate on the Senior Notes due 2023 (the “2023 Notes”) from 6.125% as of December 31, 2014 to 6.375% effective with the interest period beginning February 15, 2015. Future downgrades of the Company’s credit ratings could result in additional increases to the interest cost with respect to the 2023 Notes.
There were no outstanding borrowings made under the Company’s $400 million senior domestic credit facility (“credit facility”) expiring May 31, 2018 as of March 31, 2015 , although approximately $4.7 million has been utilized to support the issuance of letters of credit. Average borrowings under the credit facility for the first quarter of 2015 were $73.7 million , bearing an average annual interest rate of 1.9% . The credit facility provides for a springing lien on certain of the Company’s accounts receivable and inventory. This springing lien became effective during the first quarter of 2015 as the Company’s credit ratings from both S&P’s and Moody’s are now below investment grade following S&P’s downgrade in the first quarter 2015 discussed above. This springing lien will be subsequently released if the Company’s credit rating returns to investment grade from either rating agency, assuming no event of default condition exists. The credit facility requires the Company to maintain a leverage ratio (measured as consolidated total indebtedness net of cash on hand in excess of $50 million , divided by consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, and non-cash pension expense, with the definition of consolidated EBIT excluding any gain or loss attributable to sale or other dispositions of assets outside the ordinary course of business, for the four prior fiscal quarters) of not greater than 5.00 for the quarter ended March 31, 2015, 4.50 for the quarter ended June 30, 2015, 3.75 for the quarter ended September 30, 2015, and 3.50 for the quarter ended December 31, 2015 and for each fiscal quarter thereafter. The credit facility also requires the Company to maintain an interest coverage ratio (consolidated EBITDA as calculated for the leverage ratio, divided by interest expense) of not less than 2.50 for the quarter ended March 31, 2015, 3.00 for the quarter ended June 30, 2015, 3.25 for the quarter ended September 30, 2015, and 3.50 for the quarter ended December 31, 2015 and for each fiscal quarter thereafter. At March 31, 2015 , the leverage ratio was 3.73 and the interest coverage ratio was 3.26 . The Company was in compliance with these required ratios during all applicable periods.
The Company has an additional separate credit facility for the issuance of letters of credit. As of March 31, 2015 , $32 million in letters of credit were outstanding under this facility.
In addition, Shanghai STAL Precision Stainless Steel Company Limited (STAL), the Company’s Chinese joint venture company in which ATI has a 60% interest, entered into a 125 million renminbi (approximately $20 million at March 31, 2015 exchange rates) revolving credit facility in April 2015, replacing a previous revolving credit facility that expired in 2014. Borrowings may be either in renminbi or U.S. dollars, with interest rates based on published Chinese or U.S. interbank offer rates, respectively. The credit facility is supported solely by STAL’s financial capability without any guarantees from the joint

8

venture partners. The credit facility requires STAL to maintain a minimum level of shareholders’ equity, and certain financial ratios.  
The ATI Ladish Series B and Series C Notes are guaranteed by ATI and are equally ranked with all of ATI’s existing and future senior unsecured debt.
Note 5. Derivative Financial Instruments and Hedging
As part of its risk management strategy, the Company, from time-to-time, utilizes derivative financial instruments to manage its exposure to changes in raw material prices, energy costs, foreign currencies, and interest rates. In accordance with applicable accounting standards, the Company accounts for most of these contracts as hedges. In general, hedge effectiveness is determined by examining the relationship between offsetting changes in fair value or cash flows attributable to the item being hedged, and the financial instrument being used for the hedge. Effectiveness is measured utilizing regression analysis and other techniques to determine whether the change in the fair market value or cash flows of the derivative exceeds the change in fair value or cash flow of the hedged item. Calculated ineffectiveness, if any, is immediately recognized in the consolidated statements of operations.
The Company sometimes uses futures and swap contracts to manage exposure to changes in prices for forecasted purchases of raw materials, such as nickel, and natural gas. Under these contracts, which are generally accounted for as cash flow hedges, the price of the item being hedged is fixed at the time that the contract is entered into and the Company is obligated to make or receive a payment equal to the net change between this fixed price and the market price at the date the contract matures.
The majority of ATI’s products are sold utilizing raw material surcharges and index mechanisms. However, as of March 31, 2015 , the Company had entered into financial hedging arrangements, primarily at the request of its customers, related to firm orders, for an aggregate notional amount of approximately 20% of its estimated annual nickel requirements. These nickel hedges extend to 2020.
At March 31, 2015 , the outstanding financial derivatives used to hedge the Company’s exposure to energy cost volatility included natural gas cost hedges for approximately 80% of its annual forecasted domestic requirements for 2015, approximately 75% for 2016, and approximately 45% for 2017.
While the majority of the Company’s direct export sales are transacted in U.S. dollars, foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates for those transactions denominated in a non-U.S. currency. The Company sometimes purchases foreign currency forward contracts that permit it to sell specified amounts of foreign currencies expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk, primarily euros. At March 31, 2015 , the Company held euro forward sales contracts designated as hedges with a notional value of approximately 375 million euro with maturity dates through February 2018, including approximately 157 million euro with maturities in 2015. In addition, the Company may also designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions.
During the first quarter of 2015, the Company net settled 126.5 million euro notional value of foreign currency forward contracts designated as cash flow hedges with 2015 maturity dates, receiving cash proceeds of $26.1 million which is reported in cash provided by operating activities on the consolidated cash flow statement. Deferred gains on these settled cash flow hedges currently recognized in accumulated other comprehensive income will be reclassified to earnings when the underlying transactions occur. The Company subsequently entered into 115 million euro notional value of foreign currency forward contracts designated as fair value hedges in the first quarter of 2015, all with 2015 maturity dates, and recorded a $5.0 million benefit in costs of sales on the consolidated statement of operations in the first quarter of 2015 for subsequent mark-to-market changes on these fair value hedges.
The Company may enter into derivative interest rate contracts to maintain a reasonable balance between fixed- and floating-rate debt. There were no unsettled derivative financial instruments related to debt balances for the periods presented.
There are no credit risk-related contingent features in the Company’s derivative contracts, and the contracts contained no provisions under which the Company has posted, or would be required to post, collateral. The counterparties to the Company’s derivative contracts are substantial and creditworthy commercial banks that are recognized market makers. The Company controls its credit exposure by diversifying across multiple counterparties and by monitoring credit ratings and credit default swap spreads of its counterparties. The Company also enters into master netting agreements with counterparties when possible.

9

The fair values of the Company’s derivative financial instruments are presented below, representing the gross amounts recognized which are not offset by counterparty or by type of item hedged. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy, which includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs derived principally from or corroborated by observable market data.
(In millions)
Asset derivatives
 
Balance sheet location
 
March 31,
2015
 
December 31,
2014
Derivatives designated as hedging instruments:
 
 
 
 
Foreign exchange contracts
 
Prepaid expenses and other current assets
 
$
23.1

 
$
23.6

Nickel and other raw material contracts
 
Prepaid expenses and other current assets
 
—

 
1.1

Foreign exchange contracts
 
Other assets
 
46.0

 
28.3

Nickel and other raw material contracts
 
Other assets
 
—

 
0.5

Total derivatives designated as hedging instruments
 
69.1

 
53.5

Derivatives not designated as hedging instruments:
 
 
 
 
Foreign exchange contracts
 
Prepaid expenses and other current assets
 
—

 
6.4

Total derivatives not designated as hedging instruments
 
—

 
6.4

Total asset derivatives
 
 
 
$
69.1

 
$
59.9

Liability derivatives
 
Balance sheet location
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Natural gas contracts
 
Accrued liabilities
 
$
12.1

 
$
10.2

Nickel and other raw material contracts
 
Accrued liabilities
 
9.9

 
5.8

Electricity contracts
 
Accrued liabilities
 
—

 
0.1

Natural gas contracts
 
Other long-term liabilities
 
11.8

 
7.9

Nickel and other raw material contracts
 
Other long-term liabilities
 
9.4

 
3.0

Total derivatives designated as hedging instruments
 
43.2

 
27.0

Derivatives not designated as hedging instruments:
 
 
 
 
Foreign exchange contracts
 
Accrued liabilities
 
0.4

 
—

Total derivatives not designated as hedging instruments
 
0.4

 
—

Total liability derivatives
 
 
 
$
43.6

 
$
27.0

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

10

Activity with regard to derivatives designated as cash flow hedges for the three month periods ended March 31, 2015 and 2014 was as follows (in millions):  
 
Amount of Gain (Loss)
Recognized in OCI on
Derivatives
(Effective Portion)
 
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion) (a)
 
Amount of Gain (Loss)
Recognized in Income
on Derivatives (Ineffective
Portion and Amount
Excluded from
Effectiveness Testing) (b)
Derivatives in Cash Flow
Three months ended March 31,
 
Three months ended March 31,
 
Three months ended March 31,
Hedging Relationships
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Nickel and other raw material contracts
$
(9.6
)
 
$
3.0

 
$
(2.2
)
 
$
(1.7
)
 
$
—

 
$
—

Natural gas contracts
(6.0
)
 
2.3

 
(2.4
)
 
1.4

 
—

 
—

Electricity contracts
—

 
0.9

 
(0.1
)
 
0.4

 
—

 
—

Foreign exchange contracts
27.0

 
(0.5
)
 
6.4

 
(1.4
)
 
—

 
—

Total
$
11.4

 
$
5.7

 
$
1.7

 
$
(1.3
)
 
$
—

 
$
—


(a)
The gains (losses) reclassified from accumulated OCI into income related to the effective portion of the derivatives are presented in cost of sales in the same period or periods in which the hedged item affects earnings.
(b)
The gains (losses) recognized in income on derivatives related to the ineffective portion and the amount excluded from effectiveness testing are presented in selling and administrative expenses.
Assuming market prices remain constant with those at March 31, 2015 , a gain of $0.7 million is expected to be recognized over the next 12 months.
The disclosures of gains or losses presented above for nickel and other raw material contracts and foreign currency contracts do not take into account the anticipated underlying transactions. Since these derivative contracts represent hedges, the net effect of any gain or loss on results of operations may be fully or partially offset.
During the first quarter of 2015, the Company net settled 40.3 million euro notional value of foreign currency forward contracts that were not designated as hedges, receiving cash proceeds of $11.8 million which is reported in cash provided by operating activities on the consolidated cash flow statement. The Company also entered into 30 million euro notional value of foreign currency forward contracts not designated as hedges in the first quarter of 2015 with maturity dates through February 2016.
Derivatives that are not designated as hedging instruments were as follows:
(In millions)
Amount of Gain (Loss) Recognized
in Income on Derivatives
Derivatives Not Designated
Three months ended March 31,
as Hedging Instruments
2015
 
2014
Foreign exchange contracts
$
3.5

 
$
0.2

Changes in the fair value of foreign exchange contract derivatives not designated as hedging instruments are recorded in cost of sales.


11

Note 6. Fair Value of Financial Instruments
The estimated fair value of financial instruments at March 31, 2015 was as follows:  
 
 
 
Fair Value Measurements at Reporting Date Using
(In millions)
Total
Carrying
Amount
 
Total
Estimated
Fair Value
 
Quoted Prices in
Active Markets for
Identical Assets(Level 1)
 
Significant
Observable
Inputs
(Level 2)
Cash and cash equivalents
$
238.0

 
$
238.0

 
$
238.0

 
$
—

Derivative financial instruments:
 
 
 
 
 
 
 
Assets
69.1

 
69.1

 
—

 
69.1

Liabilities
43.6

 
43.6

 
—

 
43.6

Debt
1,527.0

 
1,679.6

 
1,652.6

 
27.0

The estimated fair value of financial instruments at December 31, 2014 was as follows:
 
 
 
 
Fair Value Measurements at Reporting Date Using
(In millions)
Total
Carrying
Amount
 
Total
Estimated
Fair Value
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
Cash and cash equivalents
$
269.5

 
$
269.5

 
$
269.5

 
$
—

Derivative financial instruments:
 
 
 
 
 
 
 
Assets
59.9

 
59.9

 
—

 
59.9

Liabilities
27.0

 
27.0

 
—

 
27.0

Debt
1,526.9

 
1,616.0

 
1,589.1

 
26.9

In accordance with accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards established three levels of a fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. No transfers between levels were reported in 2015 or 2014 .

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
Cash and cash equivalents: Fair value was determined using Level 1 information.
Derivative financial instruments: Fair values for derivatives were measured using exchange-traded prices for the hedged items. The fair value was determined using Level 2 information, including consideration of counterparty risk and the Company’s credit risk.
Short-term and long-term debt: The fair values of the Company’s publicly traded debt were based on Level 1 information. The fair values of the other short-term and long-term debt were determined using Level 2 information.

12

Note 7. Pension Plans and Other Postretirement Benefits
The Company has defined benefit pension plans or defined contribution plans covering substantially all employees. Benefits under the defined benefit pension plans are generally based on years of service and/or final average pay. The Company funds the U.S. pension plans in accordance with the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code.
The Company also sponsors several postretirement plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. In most plans, Company contributions towards premiums are capped based on the cost as of a certain date, thereby creating a defined contribution. For the non-collectively bargained plans, the Company maintains the right to amend or terminate the plans at its discretion.
For the three month periods ended March 31, 2015 and 2014 , the components of pension expense and components of other postretirement benefit expense for the Company’s defined benefit plans included the following (in millions):  
 
Pension Benefits
 
Other Postretirement Benefits
 
Three months ended March 31,
 
Three months ended March 31,
 
2015
 
2014
 
2015
 
2014
Service cost - benefits earned during the year
$
5.7

 
$
7.4

 
$
0.7

 
$
0.7

Interest cost on benefits earned in prior years
30.3

 
33.4

 
4.5

 
6.0

Expected return on plan assets
(42.1
)
 
(46.1
)
 
—

 
—

Amortization of prior service cost (credit)
0.3

 
0.6

 
1.2

 
(0.8
)
Amortization of net actuarial loss
15.1

 
18.5

 
3.6

 
3.5

Total retirement benefit expense
$
9.3

 
$
13.8

 
$
10.0

 
$
9.4

Other postretirement benefit costs for a defined contribution plan were $0.7 million for the three months ended March 31, 2014 .
Note 8. Income Taxes
First quarter 2015 results included a provision for income taxes of $8.0 million , or 38.8% of income from continuing operations before income tax, compared to a benefit of $10.0 million , or 38.5% of loss from continuing operations before income tax, for the 2014 comparable period. The income tax rate in 2015 is higher than normal due to the Company’s inability to use the federal domestic manufacturing deduction tax benefit due to net operating loss carryforwards. A federal income tax refund of $59.9 million was received in the first quarter of 2015. Income taxes in the first quarter 2014 included discrete tax benefits of $2.2 million primarily associated with adjustments to prior years’ and foreign taxes.

13

Note 9. Business Segments
The Company operates in two business segments: High Performance Materials & Components and Flat Rolled Products. The measure of segment operating profit, which is used to analyze the performance and results of the business segments, excludes income taxes, corporate expenses, net interest expense, retirement benefit expense, closed company expenses and restructuring costs, if any. Discontinued operations are also excluded. Management believes segment operating profit, as defined, provides an appropriate measure of controllable operating results at the business segment level. Following is certain financial information with respect to the Company’s business segments for the periods indicated (in millions):
 
 
Three months ended March 31,
 
2015
 
2014
Total sales:
 
 
 
High Performance Materials & Components
$
564.9

 
$
504.1

Flat Rolled Products
604.7

 
529.6

 
1,169.6

 
1,033.7

Intersegment sales:
 
 
 
High Performance Materials & Components
22.1

 
19.7

Flat Rolled Products
22.0

 
26.7

 
44.1

 
46.4

Sales to external customers:
 
 
 
High Performance Materials & Components
542.8

 
484.4

Flat Rolled Products
582.7

 
502.9

 
$
1,125.5

 
$
987.3

Operating profit (loss):
 
 
 
High Performance Materials & Components
$
75.9

 
$
69.1

Flat Rolled Products
7.9

 
(25.6
)
Total operating profit
83.8

 
43.5

Corporate expenses
(11.8
)
 
(11.5
)
Interest expense, net
(26.7
)
 
(29.1
)
Closed company and other expenses
(5.4
)
 
(5.0
)
Retirement benefit expense
(19.3
)
 
(23.9
)
Income (loss) from continuing operations before income taxes
$
20.6

 
$
(26.0
)
Retirement benefit expense represents defined benefit pension expense and other postretirement benefit expense for both defined benefit and defined contribution plans. Operating profit with respect to the Company’s business segments excludes any retirement benefit expense. Costs associated with multiemployer pension plans are included in segment operating profit, and costs associated with defined contribution retirement plans are included in segment operating profit or corporate expenses, as applicable.
Interest expense, net of interest income, in the first quarter 2015 was $26.7 million , compared to net interest expense of $29.1 million in the first quarter 2014 . The decrease in interest expense was primarily due to lower debt levels. Interest expense benefited from the capitalization of interest costs of $0.6 million in the first quarter 2015 compared to $2.3 million in the first quarter 2014 . The decrease in capitalized interest primarily related to the Flat Rolled Products segment Hot-Rolling and Processing Facility.

14

Note 10. Redeemable Noncontrolling Interest
The holders of the 15% noncontrolling interest in ATI Flowform Products have a put option to require the Company to purchase their equity interest at a redemption value determinable from a specified formula based on a multiple of EBITDA (subject to a fixed minimum linked to the original acquisition date value). The put option is fully exercisable beginning in the second quarter of 2017, and is also exercisable under certain other circumstances. The put option cannot be separated from the noncontrolling interest, and the combination of a noncontrolling interest and the redemption feature requires classification as redeemable noncontrolling interest in the consolidated balance sheet, separate from Stockholders’ Equity.
The carrying amount of the redeemable noncontrolling interest approximates its maximum redemption value. Any subsequent change in maximum redemption value is adjusted through retained earnings. The adjustment to the carrying amount for the quarter ended March 31, 2015 reduced retained earnings by $0.1 million . The Company applied the two-class method of calculating earnings per share, and as such this adjustment to the carrying amount was reflected in earnings per share. The redeemable noncontrolling interest was $12.1 million as of March 31, 2015 and December 31, 2014 , which was unchanged from the acquisition date value.
Note 11. Per Share Information
The following table sets forth the computation of basic and diluted income from continuing operations per common share:  
 
Three Months Ended
(In millions, except per share amounts)
March 31,
2015
 
2014
Numerator for basic income (loss) from continuing operations per common share –
 
 
 
Income (loss) from continuing operations attributable to ATI
$
10.0

 
$
(18.1
)
Redeemable noncontrolling interest (Note 10)
(0.1
)
 
—

Numerator for diluted income (loss) from continuing operations per common share –
 
 
 
Income (loss) from continuing operations available to ATI after assumed conversions
$
9.9

 
$
(18.1
)
Denominator for basic net income (loss) per common share-weighted average shares
107.2

 
107.0

Effect of dilutive securities:
 
 
 
Share-based compensation
0.8

 
—

4.25% Convertible Notes due 2014
—

 
—

Denominator for diluted net income (loss) per common share – adjusted weighted average shares assuming conversions
108.0

 
107.0

Basic income (loss) from continuing operations attributable to ATI per common share
$
0.09

 
$
(0.17
)
Diluted income (loss) from continuing operations attributable to ATI per common share
$
0.09

 
$
(0.17
)
Common stock that would be issuable upon the assumed conversion of the 2014 Convertible Notes (prior to maturity on June 2, 2014) and other option equivalents and contingently issuable shares are excluded from the computation of contingently issuable shares, and therefore, from the denominator for diluted earnings per share, if the effect of inclusion is anti-dilutive. There were no anti-dilutive shares for the three month period ended March 31, 2015 and 10.0 million anti-dilutive shares for the three month period ended March 31, 2014 .
Note 12. Financial Information for Subsidiary and Guarantor Parent
The payment obligations under the $150 million 6.95% debentures due 2025 issued by Allegheny Ludlum, LLC (the “Subsidiary”) are fully and unconditionally guaranteed by Allegheny Technologies Incorporated (the “Guarantor Parent”). In accordance with positions established by the Securities and Exchange Commission, the following financial information sets forth separately financial information with respect to the Subsidiary, the Non-guarantor Subsidiaries and the Guarantor Parent. The principal elimination entries eliminate investments in subsidiaries and certain intercompany balances and transactions.
ATI is the plan sponsor for the U.S. qualified defined benefit pension plan (the “Plan”) which covers certain current and former employees of the Subsidiary and the Non-guarantor Subsidiaries. As a result, the balance sheets presented for the Subsidiary and the Non-guarantor Subsidiaries do not include any Plan assets or liabilities, or the related deferred taxes. The Plan assets, liabilities and related deferred taxes and pension income or expense are recognized by the Guarantor Parent. Management and royalty fees charged to the Subsidiary and to the Non-guarantor Subsidiaries by the Guarantor Parent have been excluded solely for purposes of this presentation.

15

Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Balance Sheets
March 31, 2015
 
(In millions)
Guarantor
Parent
 
Subsidiary
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
2.5

 
$
12.0

 
$
223.5

 
$
—

 
$
238.0

Accounts receivable, net
0.1

 
222.4

 
468.4

 
—

 
690.9

Intercompany notes receivable
—

 
—

 
2,367.9

 
(2,367.9
)
 
—

Inventories, net
—

 
399.6

 
1,073.0

 
—

 
1,472.6

Prepaid expenses and other current assets
3.0

 
8.9

 
52.2

 
—

 
64.1

Total current assets
5.6

 
642.9

 
4,185.0

 
(2,367.9
)
 
2,465.6

Property, plant and equipment, net
2.5

 
1,544.9

 
1,396.3

 
—

 
2,943.7

Cost in excess of net assets acquired
—

 
126.6

 
651.3

 
—

 
777.9

Intercompany notes receivable
—

 
—

 
200.0

 
(200.0
)
 
—

Investment in subsidiaries
6,149.2

 
37.7

 
—

 
(6,186.9
)
 
—

Other assets
23.5

 
27.7

 
318.4

 
—

 
369.6

Total assets
$
6,180.8

 
$
2,379.8

 
$
6,751.0

 
$
(8,754.8
)
 
$
6,556.8

Liabilities and stockholders’ equity:
 
 
 
 
 
 
 
 
 
Accounts payable
$
2.8

 
$
336.9

 
$
219.8

 
$
—

 
$
559.5

Accrued liabilities
31.7

 
60.3

 
196.8

 
—

 
288.8

Intercompany notes payable
1,179.0

 
1,188.9

 
—

 
(2,367.9
)
 
—

Deferred income taxes
70.8

 
—

 
—

 
—

 
70.8

Short-term debt and current portion of long-term debt
0.6

 
0.1

 
17.2

 
—

 
17.9

Total current liabilities
1,284.9

 
1,586.2

 
433.8

 
(2,367.9
)
 
937.0

Long-term debt
1,351.0

 
150.3

 
7.8

 
—

 
1,509.1

Intercompany notes payable
—

 
200.0

 
—

 
(200.0
)
 
—

Accrued postretirement benefits
—

 
150.9

 
256.2

 
—

 
407.1

Pension liabilities
668.7

 
5.8

 
55.7

 
—

 
730.2

Deferred income taxes
91.3

 
—

 
—

 
—

 
91.3

Other long-term liabilities
76.9

 
20.9

 
64.2

 
—

 
162.0

Total liabilities
3,472.8

 
2,114.1

 
817.7

 
(2,567.9
)
 
3,836.7

Redeemable noncontrolling interest
—

 
—

 
12.1

 
—

 
12.1

Total stockholders’ equity
2,708.0

 
265.7

 
5,921.2

 
(6,186.9
)
 
2,708.0

Total liabilities and stockholders’ equity
$
6,180.8

 
$
2,379.8

 
$
6,751.0

 
$
(8,754.8
)
 
$
6,556.8



16


Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Statements of Operations and Comprehensive Income
For the three months ended March 31, 2015  
(In millions)
Guarantor
Parent
 
Subsidiary
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Sales
$
—

 
$
508.5

 
$
617.0

 
$
—

 
$
1,125.5

Cost of sales
2.2

 
504.0

 
509.8

 
—

 
1,016.0

Selling and administrative expenses
25.8

 
11.7

 
25.6

 
—

 
63.1

Income (loss) before interest, other income and income taxes
(28.0
)
 
(7.2
)
 
81.6

 
—

 
46.4

Interest income (expense), net
(28.0
)
 
(12.2
)
 
13.5

 
—

 
(26.7
)
Other income (loss) including equity in income of unconsolidated subsidiaries
76.6

 
0.4

 
0.6

 
(76.7
)
 
0.9

Income (loss) from continuing operations before income tax provision (benefit)
20.6

 
(19.0
)
 
95.7

 
(76.7
)
 
20.6

Income tax provision (benefit)
8.0

 
(6.6
)
 
34.1

 
(27.5
)
 
8.0

Income (loss) from continuing operations
12.6

 
(12.4
)
 
61.6

 
(49.2
)
 
12.6

Income (loss) from discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

Net income (loss)
12.6

 
(12.4
)
 
61.6

 
(49.2
)
 
12.6

Less: Net income attributable to noncontrolling interests
—

 
—

 
2.6

 
—

 
2.6

Net income (loss) attributable to ATI
$
12.6

 
$
(12.4
)
 
$
59.0

 
$
(49.2
)
 
$
10.0

Comprehensive income (loss) attributable to ATI
$
13.0

 
$
(9.1
)
 
$
37.8

 
$
(31.1
)
 
$
10.6


Condensed Statements of Cash Flows
For the three months ended March 31, 2015  
(In millions)
Guarantor
Parent
 
Subsidiary
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Cash flows provided by (used in) operating activities
$
(26.3
)
 
$
(42.3
)
 
$
80.6

 
$
—

 
$
12.0

Investing Activities:
 
 
 
 
 
 
 
 
 
Purchases of property, plant and equipment
—

 
(9.1
)
 
(13.5
)
 
—

 
(22.6
)
Net receipts/(payments) on intercompany activity
—

 
—

 
(96.9
)
 
96.9

 
—

Asset disposals and other
—

 
0.1

 
—

 
—

 
0.1

Cash flows provided by (used in) investing activities
—

 
(9.0
)
 
(110.4
)
 
96.9

 
(22.5
)
Financing Activities:
 
 
 
 
 
 
 
 
 
Net receipts/(payments) on intercompany activity
47.4

 
49.5

 
—

 
(96.9
)
 
—

Dividends paid to stockholders
(19.3
)
 
—

 
—

 
—

 
(19.3
)
Other
(1.5
)
 
—

 
(0.2
)
 
—

 
(1.7
)
Cash flows provided by (used in) financing activities
26.6

 
49.5

 
(0.2
)
 
(96.9
)
 
(21.0
)
Increase (decrease) in cash and cash equivalents
$
0.3

 
$
(1.8
)
 
$
(30.0
)
 
$
—

 
$
(31.5
)

17

Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Balance Sheets
December 31, 2014
 
Guarantor
 
 
 
Non-guarantor
 
 
 
 
(In millions)
Parent
 
Subsidiary
 
Subsidiaries
 
Eliminations
 
Consolidated
Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
2.2

 
$
13.8

 
$
253.5

 
$
—

 
$
269.5

Accounts receivable, net
0.1

 
209.1

 
394.4

 
—

 
603.6

Intercompany notes receivable
—

 
—

 
2,390.8

 
(2,390.8
)
 
—

Inventories, net
—

 
387.7

 
1,085.1

 
—

 
1,472.8

Prepaid expenses and other current assets
63.7

 
13.2

 
59.3

 
—

 
136.2

Total current assets
66.0

 
623.8

 
4,183.1

 
(2,390.8
)
 
2,482.1

Property, plant and equipment, net
2.2

 
1,545.1

 
1,414.5

 
—

 
2,961.8

Cost in excess of net assets acquired
—

 
126.6

 
653.8

 
—

 
780.4

Intercompany notes receivable
—

 
—

 
200.0

 
(200.0
)
 
—

Investment in subsidiaries
6,149.4

 
37.7

 
—

 
(6,187.1
)
 
—

Other assets
23.7

 
28.0

 
306.6

 
—

 
358.3

Total assets
$
6,241.3

 
$
2,361.2

 
$
6,758.0

 
$
(8,777.9
)
 
$
6,582.6

Liabilities and stockholders’ equity:
 
 
 
 
 
 
 
 
 
Accounts payable
$
4.5

 
$
302.0

 
$
250.2

 
$
—

 
$
556.7

Accrued liabilities
47.5

 
72.0

 
203.7

 
—

 
323.2

Intercompany notes payable
1,232.6

 
1,158.2

 
—

 
(2,390.8
)
 
—

Deferred income taxes
62.2

 
—

 
—

 
—

 
62.2

Short-term debt and current portion of long-term debt
0.5

 
0.1

 
17.2

 
—

 
17.8

Total current liabilities
1,347.3

 
1,532.3

 
471.1

 
(2,390.8
)
 
959.9

Long-term debt
1,350.6

 
150.3

 
8.2

 
—

 
1,509.1

Intercompany notes payable
—

 
200.0

 
—

 
(200.0
)
 
—

Accrued postretirement benefits
—

 
153.0

 
262.8

 
—

 
415.8

Pension liabilities
675.5

 
6.0

 
57.8

 
—

 
739.3

Deferred income taxes
80.9

 
—

 
—

 
—

 
80.9

Other long-term liabilities
77.7

 
22.5

 
56.0

 
—

 
156.2

Total liabilities
3,532.0

 
2,064.1

 
855.9

 
(2,590.8
)
 
3,861.2

Redeemable noncontrolling interest
—

 
—

 
12.1

 
—

 
12.1

Total stockholders’ equity
2,709.3

 
297.1

 
5,890.0

 
(6,187.1
)
 
2,709.3

Total liabilities and stockholders’ equity
$
6,241.3

 
$
2,361.2

 
$
6,758.0

 
$
(8,777.9
)
 
$
6,582.6





18

Allegheny Technologies Incorporated
Financial Information for Subsidiary and Guarantor Parent
Statements of Operations and Comprehensive Income
For the three months ended March 31, 2014  
(In millions)
Guarantor
Parent
 
Subsidiary
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Sales
$
—

 
$
427.9

 
$
559.4

 
$
—

 
$
987.3

Cost of sales
12.3

 
439.6

 
465.2

 
—

 
917.1

Selling and administrative expenses
27.1

 
10.1

 
30.5

 
—

 
67.7

Income (loss) before interest, other income and income taxes
(39.4
)
 
(21.8
)
 
63.7

 
—

 
2.5

Interest income (expense), net
(28.5
)
 
(10.6
)
 
10.0

 
—

 
(29.1
)
Other income (loss) including equity in income of unconsolidated subsidiaries
41.9

 
0.3

 
0.6

 
(42.2
)
 
0.6

Income (loss) from continuing operations before income tax provision (benefit)
(26.0
)
 
(32.1
)
 
74.3

 
(42.2
)
 
(26.0
)
Income tax provision (benefit)
(10.0
)
 
(11.3
)
 
26.4

 
(15.1
)
 
(10.0
)
Income (loss) from continuing operations
(16.0
)
 
(20.8
)
 
47.9

 
(27.1
)
 
(16.0
)
Income (loss) from discontinued operations, net of tax
(1.9
)

—


(1.9
)

1.9

 
(1.9
)
Net income (loss)
(17.9
)
 
(20.8
)
 
46.0

 
(25.2
)
 
(17.9
)
Less: Net income attributable to noncontrolling interests
—

 
—

 
2.1

 
—

 
2.1

Net income (loss) attributable to ATI
$
(17.9
)
 
$
(20.8
)
 
$
43.9

 
$
(25.2
)
 
$
(20.0
)
Comprehensive income (loss) attributable to ATI
$
(0.8
)
 
$
(18.8
)
 
$
42.5

 
$
(23.9
)
 
$
(1.0
)

Condensed Statements of Cash Flows
For the three months ended March 31, 2014
(In millions)
Guarantor
Parent
 
Subsidiary
 
Non-guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Cash flows provided by (used in) operating activities
$
(29.7
)
 
$
(125.6
)
 
$
98.4

 
$
—

 
$
(56.9
)
Investing Activities:
 
 
 
 
 
 
 
 
 
Purchases of property, plant and equipment
—

 
(26.3
)
 
(13.3
)
 
—

 
(39.6
)
Purchase of business, net of cash acquired
—

 
—

 
(71.1
)
 
—

 
(71.1
)
Net receipts/(payments) on intercompany activity
—

 
—

 
(208.9
)
 
208.9

 
—

Asset disposals and other
—

 
1.4

 
0.4

 
—

 
1.8

Cash flows provided by (used in) investing activities
—

 
(24.9
)
 
(292.9
)
 
208.9

 
(108.9
)
Financing Activities:
 
 
 
 
 
 
 
 
 
Net receipts/(payments) on intercompany activity
58.9

 
150.0

 
—

 
(208.9
)
 
—

Dividends paid to stockholders
(19.3
)
 
—

 
—

 
—

 
(19.3
)
Other
(4.0
)
 
—

 
—

 
—

 
(4.0
)
Cash flows provided by (used in) financing activities
35.6

 
150.0

 
—

 
(208.9
)
 
(23.3
)
Increase (decrease) in cash and cash equivalents
$
5.9

 
$
(0.5
)
 
$
(194.5
)
 
$
—

 
$
(189.1
)


19

Note 13. Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) (AOCI) by component, net of tax, for the three month period ended March 31, 2015 were as follows (in millions):
 
Post-
retirement
benefit plans
 
Currency
translation
adjustment
 
Unrealized
holding gains
on securities
 
Derivatives
 
Total
Attributable to ATI:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2014
$
(931.5
)
 
$
(16.2
)
 
$
—

 
$
16.3

 
$
(931.4
)
OCI before reclassifications
 
—

 
 
(21.6
)
 
 
—

 
 
11.4

 
(10.2
)
Amounts reclassified from AOCI
(a)
12.5

 
(b)
—

 
(b)
—

 
(c)
(1.7
)
 
10.8

Net current-period OCI
 
12.5

 
 
(21.6
)
 
 
—

 
 
9.7

 
0.6

Balance, March 31, 2015
$
(919.0
)
 
$
(37.8
)
 
$
—

 
$
26.0

 
$
(930.8
)
Attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2014
$
—

 
$
$
25.0

 
$
—

 
$
—

 
$
25.0

OCI before reclassifications
 
—

 
 
(0.2
)
 
 
—

 
 
—

 
(0.2
)
Amounts reclassified from AOCI
 
—

 
(b)
—

 
 
—

 
 
—

 
—

Net current-period OCI
 
—

 
 
(0.2
)
 
 
—

 
 
—

 
(0.2
)
Balance, March 31, 2015
$
—

 
$
24.8

 
$
—

 
$
—

 
$
24.8


(a)
Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 7).
(b)
No amounts were reclassified to earnings.
(c)
Amounts are included in cost of goods sold in the period or periods the hedged item affects earnings (see Note 5).

The changes in accumulated other comprehensive income (loss) (AOCI) by component, net of tax, for the three month period ended March 31, 2014 were as follows (in millions):
 
Post-
retirement
benefit plans
 
Currency
translation
adjustment
 
Unrealized
holding gains
on securities
 
Derivatives
 
Total
Attributable to ATI:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2013
$
(718.9
)
 
$
15.3

 
$
—

 
$
(9.6
)
 
$
(713.2
)
OCI before reclassifications
 
—

 
 
(1.5
)
 
 
—

 
 
5.7

 
4.2

Amounts reclassified from AOCI
(a)
13.4

 
(b)
—

 
(b)
—

 
(c)
1.3

 
14.7

Net current-period OCI
 
13.4

 
 
(1.5
)
 
 
—

 
 
7.0

 
18.9

Balance, March 31, 2014
$
(705.5
)
 
$
13.8

 
$
—

 
$
(2.6
)
 
$
(694.3
)
Attributable to noncontrolling interests:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2013
$
—

 
$
27.1

 
$
—

 
$
—

 
$
27.1

OCI before reclassifications
 
—

 
 
(1.8
)
 
 
—

 
 
—

 
(1.8
)
Amounts reclassified from AOCI
 
—

 
(b)
—

 
 
—

 
 
—

 
—

Net current-period OCI
 
—

 
 
(1.8
)
 
 
—

 
 
—

 
$
(1.8
)
Balance, March 31, 2013
$
—

 
$
25.3

 
$
—

 
$
—

 
$
25.3


(a)
Amounts were included in net periodic benefit cost for pension and other postretirement benefit plans (see Note 7).
(b)
No amounts were reclassified to earnings.
(c)
Amounts are included in cost of goods sold in the period or periods the hedged item affects earnings (see Note 5).







20

Reclassifications out of AOCI for the three month periods ended March 31, 2015 and 2014 were as follows:  
 
 
Amount reclassified from AOCI
 
 
Details about AOCI Components
(In millions)
 
Three months ended March 31, 2015
 
 
Three months ended March 31, 2014
 
 
Affected line item in the
statements of operations
Postretirement benefit plans
 
 
 
 
 
 
 
 
Prior service (cost) credit
 
$
(1.5
)
(a) 
 
$
0.2

(a) 
 
 
Actuarial losses
 
(18.7
)
(a) 
 
(22.0
)
(a) 
 
 
 
 
(20.2
)
(c) 
 
(21.8
)
(c) 
 
Total before tax
 
 
(7.7
)
 
 
(8.4
)
 
 
Tax provision (benefit)
 
 
$
(12.5
)
 
 
$
(13.4
)
 
 
Net of tax
Derivatives
 
 
 
 
 
 
 
 
Nickel and other raw material contracts
 
$
(3.6
)
(b) 
 
$
(2.8
)
(b) 
 
 
Natural gas contracts
 
(3.9
)
(b) 
 
2.3

(b) 
 
 
Electricity contracts
 
(0.2
)
(b) 
 
0.7

(b) 
 
 
Foreign exchange contracts
 
10.4

(b) 
 
(2.3
)
(b) 
 
 
 
 
2.7

(c) 
 
(2.1
)
(c) 
 
Total before tax
 
 
1.0

 
 
(0.8
)
 
 
Tax provision (benefit)
 
 
$
1.7

 
 
$
(1.3
)
 
 
Net of tax
 
(a)
Amounts are included in the computation of pension and other postretirement benefit expense, which is reported in both cost of goods sold and selling and administrative expenses. For additional information, see Note 7.
(b)
Amounts are included in cost of goods sold in the period or periods the hedged item affects earnings. For additional information, see Note 5.
(c)
For pretax items, positive amounts are income and negative amounts are expense in terms of the impact to net income. Tax effects are presented in conformity with ATI’s presentation in the consolidated statements of operations.
Note 14. Commitments and Contingencies
The Company is subject to various domestic and international environmental laws and regulations that govern the discharge of pollutants and disposal of wastes, and which may require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. The Company could incur substantial cleanup costs, fines, and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations or liabilities under these laws or noncompliance with environmental permits required at its facilities. The Company is currently involved in the investigation and remediation of a number of its current and former sites, as well as third party sites.
Environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable. In many cases, however, the Company is not able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss. Estimates of the Company’s liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number, participation, and financial condition of other potentially responsible parties (“PRPs”). The Company adjusts its accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on the Company’s consolidated results of operations in a given period, but the Company cannot reliably predict the amounts of such future adjustments.
At March 31, 2015 , the Company’s reserves for environmental remediation obligations totaled approximately $17 million , of which $9 million was included in other current liabilities. The reserve includes estimated probable future costs of $5 million for federal Superfund and comparable state-managed sites; $10 million for formerly owned or operated sites for which the Company has remediation or indemnification obligations; $1 million for owned or controlled sites at which Company operations have been discontinued; and $1 million for sites utilized by the Company in its ongoing operations. The Company continues to evaluate whether it may be able to recover a portion of past and future costs for environmental liabilities from third parties and to pursue such recoveries where appropriate.

21

Based on currently available information, it is reasonably possible that costs for recorded matters may exceed the Company’s recorded reserves by as much as $19 million . However, future investigation or remediation activities may result in the discovery of additional hazardous materials, potentially higher levels of contamination than discovered during prior investigation, and may impact costs of the success or lack thereof in remedial solutions. Therefore, future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on the Company’s consolidated financial condition or results of operations.
The timing of expenditures depends on a number of factors that vary by site. The Company expects that it will expend present accruals over many years and that remediation of all sites with which it has been identified will be completed within thirty years.
See Note 20. Commitments and Contingencies to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2014 for a discussion of legal proceedings affecting the Company.
A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently and formerly owned businesses, including those pertaining to product liability, patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, health and safety and occupational disease, and stockholder and corporate governance matters. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s consolidated results of operations for that period.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
ATI is one of the largest and most diversified specialty materials and components producers in the world. We use innovative technologies to offer global markets a wide range of specialty materials solutions. Our products include titanium and titanium alloys, nickel-based alloys and superalloys, zirconium and related alloys, advanced powder alloys, stainless and specialty steel alloys, grain-oriented electrical steel, forgings, castings, components, and machining capabilities. Our specialty materials are produced in a wide range of alloys and product forms and are selected for use in applications that demand metals having exceptional hardness, toughness, strength, resistance to heat, corrosion or abrasion, or a combination of these characteristics. We are a fully integrated supplier, from alloy development, to raw materials (for titanium sponge) to melting and hot-working (for other specialty alloy systems), through highly engineered finished components.
Our first quarter 2015 results from continuing operations were sales of $1.13 billion and net income attributable to ATI of $10.0 million , or $0.09 per share, compared to first quarter 2014 sales of $987.3 million and net loss attributable to ATI of $18.1 million , or $(0.17) per share. Compared to the first quarter 2014 , sales increased 12% in the High Performance Materials & Components business segment and 16% in the Flat Rolled Products business segment. Operating results for the first quarter of 2015 reflect higher shipment volumes for most products, which more than offset lower selling prices, including the effects of raw material surcharges and index pricing mechanisms, compared to the first quarter of 2014 .

22

Demand from the global aerospace and defense, oil & gas/chemical process industry, electrical energy, automotive and medical markets represented 78% of our sales for the three months ended March 31, 2015 . The automotive market is now a key global growth market for the Company. Comparative information for our overall revenues (in millions) by market and their respective percentages of total revenues for the three month periods ended March 31, 2015 and 2014 were as follows:
 
 
Three Months Ended

Three Months Ended
Market
March 31, 2015
 
March 31, 2014
Aerospace & Defense
$
407.5

 
36
%
 
$
350.2

 
35
%
Oil & Gas/Chemical Process Industry
210.2

 
19
%
 
161.9

 
16
%
Electrical Energy
108.3

 
10
%
 
105.7

 
11
%
Automotive
96.3

 
8
%
 
98.8

 
10
%
Medical
57.9

 
5
%
 
48.1

 
5
%
Subtotal - Key Markets
880.2

 
78
%
 
764.7

 
77
%
Construction/Mining
80.2

 
7
%
 
75.0

 
8
%
Food Equipment & Appliances
70.9

 
6
%
 
54.3

 
5
%
Transportation
39.5

 
4
%
 
36.4

 
4
%
Electronics/Computers/Communication
33.3

 
3
%
 
31.8

 
3
%
Conversion Services & Other
21.4

 
2
%
 
25.1

 
3
%
Total
$
1,125.5

 
100
%
 
$
987.3

 
100
%
For the first quarter 2015 , international sales increased 21% to $454 million and represented 40% of total sales, compared to $374 million or 38% of total sales for the first quarter 2014 . ATI’s international sales are mostly to the aerospace, oil & gas, chemical process industry, electrical energy, automotive and medical markets. Sales of our high-value products (titanium and titanium alloys, nickel-based alloys and specialty alloys, zirconium and related alloys, precision forgings, castings and components, grain-oriented electrical steel, and precision and engineered strip) represented 79% of total sales for the three months ended March 31, 2015 . Comparative information for our major high-value and standard products based on their percentages of our total sales is as follows:  

Three months ended March 31,
 
2015

2014
High-Value Products
 
 
 
Nickel-based alloys and specialty alloys
29
%
 
25
%
Titanium and titanium alloys
16
%
 
15
%
Precision forgings, castings and components
13
%
 
14
%
Precision and engineered strip
12
%
 
14
%
Zirconium and related alloys
5
%
 
6
%
Grain-oriented electrical steel
4
%
 
4
%
Total High-Value Products
79
%
 
78
%
Standard Products
 
 
 
Stainless steel sheet
11
%
 
10
%
Specialty stainless sheet
7
%
 
9
%
Stainless steel plate and other
3
%
 
3
%
Total Standard Products
21
%
 
22
%
Grand Total
100
%
 
100
%
Total titanium mill product shipments, including Uniti joint venture conversion, were 9.8 million pounds in the first quarter 2015 , representing a 12% increase compared to the first quarter 2014 , due to higher volume in the High Performance Materials & Components segment, driven by aerospace market demand.

23

Segment operating profit for the first quarter 2015 was $83.8 million , or 7.4% of sales, compared to $43.5 million , or 4.4% of sales for the first quarter 2014 . First quarter 2015 results included $12.4 million of Hot-Rolling and Processing Facility (HRPF) start-up and Rowley titanium sponge facility Premium Quality (PQ) qualification costs. First quarter 2014 segment results included $8.3 million in inventory valuation charges related to the market-based valuation of industrial titanium products in the Flat Rolled Products segment. Segment operating profit as a percentage of sales for the three month periods ended March 31, 2015 and 2014 was:
 
Three months ended March 31,
 
2015
 
2014
High Performance Materials & Components
14.0
%
 
14.3
 %
Flat Rolled Products
1.4
%
 
(5.1
)%
Our measure of segment operating profit, which we use to analyze the performance and results of our business segments, excludes income taxes, corporate expenses, net interest expense, retirement benefit expense, closed company expenses and restructuring costs, if any. Discontinued operations are also excluded. We believe segment operating profit, as defined, provides an appropriate measure of controllable operating results at the business segment level.
Segment operating profit for the first quarter 2015 in the High Performance Materials & Components segment was $75.9 million , or 14.0% of sales, compared to $69.1 million , or 14.3% of sales, for the first quarter 2014 . The Flat Rolled Products segment operating profit for the first quarter 2015 was $7.9 million , or 1.4% of sales, compared to segment operating loss of $25.6 million , or (5.1)% of sales, for the first quarter 2014 . Segment operating profit benefited from $24.6 million in cost reductions during the first quarter 2015 .
Income from continuing operations before tax for the first quarter 2015 was $20.6 million , or 1.8% of sales, compared to a loss from continuing operations before tax of $26.0 million , or (2.6)% of sales, for the first quarter 2014 . Net income from continuing operations attributable to ATI for the first quarter 2015 was $10.0 million , or $0.09 per share, compared to net loss from continuing operations attributable to ATI of $18.1 million , or $(0.17) per share, for the first quarter 2014 .

In our High Performance Materials & Components segment, we expect to see demand for our mill products, forgings and investment castings grow throughout 2015 and over the next several years due to strong demand from airframe and jet engine OEMs. In this segment, demand from the oil & gas market, primarily for exploration applications, is expected to remain soft for the balance of 2015. The titanium PQ product and process qualification program remains on schedule for mid-year 2015 completion for products used in jet engine rotating parts made with ATI Rowley titanium sponge. We also expect segment results to continue to be negatively impacted by low operating rates at the Rowley facility throughout 2015 as we steadily increase titanium sponge production throughout the year.

In our Flat Rolled Products segment, we expect improved volume and a better product mix in the second quarter 2015 as we begin to realize the range of capabilities of the HRPF. For example, during the second quarter, we expect to ship more 60”-wide stainless, auto-exhaust alloys, and 48”-wide nickel-based alloy coils compared to the first quarter. Selling prices and demand for our standard stainless products will remain uncertain until raw material prices stabilize. Base selling prices for standard stainless sheet are also being pressured by imports, mainly from China. Nickel plate shipments for a large oil & gas pipeline project are expected to continue to benefit second quarter results. Trailing HRPF start-up costs of approximately $3 million are expected to be incurred in the second quarter. We continue to expect fourth quarter 2015 operating profit to benefit at an annualized rate of approximately $150 million, compared to 2014, which includes the elimination of start-up costs.

Our long-term strategy is to bring our industry-leading portfolio of products, technologies, and manufacturing capabilities to diversified high-value global markets with high barriers to entry. The markets we serve are inherently cyclical. We are currently in an unusual time when some of our key markets are very volatile. Our strategy is to offset or limit the resulting negative impact from this volatility with the benefits of ATI’s diversified product mix and end market focus. Our strategy includes being focused on actions to align and integrate ATI’s specialty materials businesses, enhance ATI’s competitive position, and continuously improve the cost structure and operating efficiencies of our businesses to achieve long-term sustainable profitable growth.

24

Business Segment Results
The High Performance Materials & Components and Flat Rolled Products business segments represented the following percentages of our total revenues and segment operating profit for the first three months of 2015 and 2014 :
 
2015
 
2014

Revenue
 
Operating
Profit
 
Revenue
 
Operating
Profit (Loss)
High Performance Materials & Components
48
%
 
91
%
 
49
%
 
159
 %
Flat Rolled Products
52
%
 
9
%
 
51
%
 
(59
)%
High Performance Materials & Components Segment
First quarter 2015 sales increased 12.1% to $542.8 million compared to the first quarter 2014 , primarily as a result of higher mill product shipments. Sales of titanium and titanium-related alloys were 25% higher than the first quarter 2014 . Sales of nickel-based and specialty alloys were 16% higher than the first quarter 2014 , sales of precision forgings, castings and components were 3% higher, and sales for zirconium and related alloys were flat. Sales to the aerospace market increased 16% compared to the prior year quarter, with sales to the jet engine and airframe aerospace markets up 18% and 22%, respectively. Sales to the oil & gas/chemical process industry decreased 10% compared to the first quarter 2014, reflecting lower sales to the oil & gas market for exploration and other down-hole applications. Sales to the medical and electrical energy markets increased 30% and 27%, respectively, both compared to the prior year first quarter .

Comparative information for our High Performance Materials & Components segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the three month periods ended March 31, 2015 and 2014 is as follows:  
 
Three Months Ended
 
Three Months Ended
Market
March 31, 2015
 
March 31, 2014
Aerospace:
 
 
 
 
 
 
 
Jet Engines
$
182.6

 
34
%
 
$
154.8

 
32
%
Airframes
113.7

 
21
%
 
93.1

 
19
%
Government
42.2

 
7
%
 
42.9

 
9
%
Total Aerospace
338.5

 
62
%
 
290.8

 
60
%
Medical
54.6

 
10
%
 
42.1

 
9
%
Oil & Gas/Chemical Process Industry
39.9

 
7
%
 
44.2

 
9
%
Electrical Energy
35.7

 
7
%
 
28.2

 
6
%
Defense
26.3

 
5
%
 
26.5

 
5
%
Construction/Mining
16.6

 
3
%
 
17.2

 
4
%
Transportation
14.6

 
3
%
 
13.1

 
3
%
Other
16.6

 
3
%
 
22.3

 
4
%
Total
$
542.8

 
100
%
 
$
484.4

 
100
%
International sales represented 41% of total segment sales for the first quarter 2015 . Comparative information for the High Performance Materials & Components segment’s major product categories, based on their percentages of sales for the three months ended March 31, 2015 and 2014 , is as follows:  
 
Three months ended March 31,
 
2015
 
2014
High-Value Products
 
 
 
Nickel-based alloys and specialty alloys
32
%
 
31
%
Titanium and titanium alloys
30
%
 
27
%
Precision forgings, castings and components
27
%
 
29
%
Zirconium and related alloys
11
%
 
13
%
Total High-Value Products
100
%
 
100
%
Segment operating profit in the first quarter 2015 increased to $75.9 million , or 14.0% of total sales, compared to $69.1 million , or 14.3% of total sales, for the first quarter 2014 primarily as a result of higher shipments and the benefit of cost

25

reductions. Prior year segment results include a net $8 million benefit for inventory valuation reserve adjustments, with no similar adjustment in our 2015 results. Segment results continued to be negatively impacted by low operating rates at our Rowley, UT titanium sponge facility and by the strategic decision to use ATI-produced titanium sponge rather than lower cost titanium scrap to manufacture certain titanium products. Results benefited from $15.1 million in gross cost reductions in the first quarter 2015 .
Flat Rolled Products Segment
First quarter 2015 sales increased 16% compared to the first quarter 2014 , to $582.7 million , primarily due to higher shipments of both high-value and standard products. Shipments of high-value products increased 5% compared to the first quarter 2014 , with shipments of our Precision Rolled Strip® and engineered strip products, and nickel-based alloys showing the largest increases. Shipments of standard stainless products increased 3% . Average selling prices increased 5% for standard stainless products, and average selling prices for high-value products increased 16% , both compared to the first quarter 2014 . First quarter 2015 Flat Rolled Products segment titanium shipments, including Uniti joint venture conversion, were 2.0 million pounds, a 17% decrease compared to the first quarter 2014 , reflecting weaker project-based work in industrial titanium markets.

Comparative information for our Flat Rolled Products segment revenues (in millions) by market and their respective percentages of the segment’s overall revenues for the three month periods ended March 31, 2015 and 2014 is as follows:
 
Three Months Ended
 
Three Months Ended
Market
March 31, 2015
 
March 31, 2014
Oil & Gas/Chemical Process Industry
$
170.4

 
29
%
 
$
117.6

 
23
%
Automotive
94.9

 
16
%
 
95.3

 
19
%
Electrical Energy
72.7

 
12
%
 
77.6

 
15
%
Food Equipment & Appliances
70.2

 
12
%
 
53.9

 
11
%
Construction/Mining
63.6

 
11
%
 
57.8

 
12
%
Aerospace & Defense
42.7

 
8
%
 
32.8

 
7
%
Electronics/Computers/Communication
32.3

 
6
%
 
31.2

 
6
%
Transportation
24.9

 
4
%
 
23.3

 
5
%
Medical
3.3

 
1
%
 
5.9

 
1
%
Other
7.7

 
1
%
 
7.5

 
1
%
Total
$
582.7

 
100
%
 
$
502.9

 
100
%
International sales represented 40% of total segment sales for the first quarter 2015 . Comparative information for the Flat Rolled Products segment’s major product categories, based on their percentages of sales for the three months ended March 31, 2015 and 2014 , is as follows:

Three months ended March 31,
 
2015
 
2014
High-Value Products
 
 
 
Nickel-based alloys and specialty alloys
27
%
 
19
%
Precision and engineered strip
24
%
 
27
%
Grain-oriented electrical steel
8
%
 
9
%
Titanium and titanium alloys
3
%
 
4
%
Total High-Value Products
62
%
 
59
%
Standard Products
 
 
 
Stainless steel sheet
21
%
 
19
%
Specialty stainless sheet
14
%
 
18
%
Stainless steel plate
3
%
 
4
%
Total Standard Products
38
%
 
41
%
Grand Total
100
%
 
100
%
Segment operating profit was $7.9 million , or 1.4% of sales, for the first quarter 2015 , compared to a segment operating loss of $25.6 million , or (5.1)% of sales, for the first quarter 2014 . Results for 2015 reflect the benefits of higher shipment volumes,

26

and higher selling prices for standard products and lower inventory valuation reserve charges. First quarter 2015 segment operating results included $6.2 million of inventory charges primarily related to the market-based valuation of industrial titanium products, compared to $16.3 million of inventory charges in the first quarter of 2014 including an $8.0 million LIFO inventory valuation reserve charge and an $8.3 million charge for market-based valuation of industrial titanium products.
Segment results also included $5.6 million of HRPF start-up costs. The HRPF is now fully integrated into daily operations and producing our high-value and standard flat rolled products in wider, longer, and thinner coils. As expected, we are also seeing significant operating improvement at our finishing facilities from the larger coils with tighter and consistent gauge control from edge-to-edge and tip-to-tail. We are now focused on continuous improvement in product quality, operating efficiency, and delivery performance. We expect HRPF pre-tax start-up costs of approximately $3 million in the second quarter 2015. The HRPF is the key enabler to our Flat Rolled Products business being a more efficient and cost competitive producer of both high-value and standard flat rolled products. As we move through 2015 our focus will be on improving the operating efficiency of the HRPF and implementing a more competitive cost structure in this business. We continue to expect fourth quarter 2015 operating profit to benefit at an annualized rate of approximately $150 million, compared to 2014, which includes the elimination of start-up costs.
Results benefited from $9.5 million in gross costs reductions in the first quarter 2015 .

Comparative shipment volume and average selling price information of the segment’s products for the three months ended March 31, 2015 and 2014 is provided in the following table:
 
Three months ended March 31,
 
%
 
2015
 
2014
 
Change
Volume (000’s pounds):
 
 
 
 
 
High-value
129,203

 
122,769

 
5
%
Standard
171,154

 
165,401

 
3
%
Total
300,357

 
288,170

 
4
%
Average prices (per lb.):
 
 
 
 
 
High-value
$
2.75

 
$
2.38

 
16
%
Standard
$
1.30

 
$
1.25

 
5
%
Combined Average
$
1.93

 
$
1.73

 
12
%
Corporate Items
Corporate expenses for the first quarter 2015 were $11.8 million , compared to $11.5 million in the first quarter 2014 . The increase in corporate expenses for the three month period ended March 31, 2015 was primarily the result of higher incentive compensation expenses associated with performance plans.
Interest expense, net of interest income, in the first quarter 2015 was $26.7 million , compared to net interest expense of $29.1 million in the first quarter 2014 . The decrease in interest expense for the three month period ended March 31, 2015 was primarily due to lower debt levels. Interest expense benefited from the capitalization of interest costs on major strategic capital projects by $0.6 million in the first quarter 2015 compared to $2.3 million in the first quarter 2014 , primarily related to the HRPF.
Closed company and other expenses for the first quarter 2015 were $5.4 million , compared to $5.0 million for the first quarter 2014 . These items are presented primarily in selling and administrative expenses in the consolidated statements of operations.
Retirement benefit expense, which includes pension expense and other postretirement expense, decreased to $19.3 million in the first quarter 2015 , compared to $23.9 million in the first quarter 2014 . The decrease in retirement benefit expense was due to lower pension expense, primarily resulting from the use of a longer amortization period to recognize net actuarial losses. Approximately 95% of 2015 retirement benefit expense is included in cost of sales, with the remainder included in selling and administrative expenses.
Income Taxes
The first quarter 2015 provision for income taxes was $8.0 million , or 38.8% of income from continuing operations before income tax, compared to the first quarter 2014 benefit for income taxes of $10.0 million , or 38.5% of loss from continuing operations before income tax. The income tax rate in 2015 is higher than normal due to the Company’s inability to use the

27

federal domestic manufacturing deduction tax benefit due to net operating loss carryforwards. Income taxes in the first quarter 2014 included discrete tax benefits of $2.2 million primarily associated with adjustments to prior years’ and foreign taxes.
Financial Condition and Liquidity
We believe that internally generated funds, current cash on hand and available borrowings under existing credit facilities will be adequate to meet foreseeable liquidity needs, including the completion of the HRPF. If we need to obtain additional financing using the credit markets, the cost and the terms and conditions of such borrowing may be influenced by our credit rating. We have no significant debt maturities until June 2019.
There were no outstanding borrowings made under the Company’s $400 million senior domestic credit facility (“credit facility”) as of March 31, 2015 , although approximately $4.7 million has been utilized to support the issuance of letters of credit. Average borrowings under the credit facility for the first quarter of 2015 were $73.7 million, bearing an average annual interest rate of 1.9%. The credit facility provides for a springing lien on certain of the Company’s accounts receivable and inventory. This springing lien became effective during the first quarter of 2015 as the Company’s credit ratings from both Standard & Poor’s (“S&P”) and Moody’s are now below investment grade following S&P’s downgrade to BB+ in the first quarter 2015. This springing lien will be subsequently released if the Company’s credit rating returns to investment grade from either rating agency, assuming no event of default condition exists. Changes in our credit rating do not impact our access to, or the cost of, our existing credit facilities. The credit facility requires the Company to maintain a leverage ratio (measured as consolidated total indebtedness net of cash on hand in excess of $50 million , divided by consolidated EBITDA, defined as earnings before interest, taxes, depreciation and amortization, and non-cash pension expense, with the definition of consolidated EBIT excluding any gain or loss attributable to sale or other dispositions of assets outside the ordinary course of business, for the four prior fiscal quarters) of not greater than 5.00 for the quarter ended March 31, 2015, 4.50 for the quarter ended June 30, 2015, 3.75 for the quarter ended September 30, 2015, and 3.50 for the quarter ended December 31, 2015 and for each fiscal quarter thereafter. The credit facility also requires the Company to maintain an interest coverage ratio (consolidated EBITDA as calculated for the leverage ratio, divided by interest expense) of not less than 2.50 for the quarter ended March 31, 2015, 3.00 for the quarter ended June 30, 2015, 3.25 for the quarter ended September 30, 2015, and 3.50 for the quarter ended December 31, 2015 and for each fiscal quarter thereafter. At March 31, 2015 , the leverage ratio was 3.73 and the interest coverage ratio was 3.26 . The Company was in compliance with these required ratios during all applicable periods.
We have no off-balance sheet arrangements as defined in Item 303(a)(4) of SEC Regulation S-K.
Cash Flow and Working Capital
For the three months ended March 31, 2015 , cash flow provided by operations was $12.0 million , despite a $79.4 million investment in managed working capital associated with increased business activity. During the first quarter of 2015, operating cash activities included a $59.9 million federal tax refund and the net settlement of certain foreign currency forward contracts for cash proceeds of $37.9 million (see Note 5. Derivatives for further explanation). Cash used in investing activities was $22.5 million in the first three months of 2015 , primarily for capital expenditures. Cash used in financing activities was $21.0 million in the first three months of 2015 and consisted primarily of dividend payments of $19.3 million to ATI stockholders. At March 31, 2015 , cash and cash equivalents on hand totaled $238.0 million , a decrease of $31.5 million from year end 2014 . As of March 31, 2015 , $84.7 million of cash and cash equivalents were held by our foreign subsidiaries.

As part of managing the liquidity of our business, we focus on controlling managed working capital, which is defined as gross accounts receivable and gross inventories, less accounts payable. In measuring performance in controlling managed working capital, we exclude the effects of LIFO and other inventory valuation reserves, and reserves for uncollectible accounts receivable which, due to their nature, are managed separately. At March 31, 2015 , managed working capital decreased to 35.6% of annualized total ATI sales compared to 38.5% of annualized sales at December 31, 2014 . During the first three months of 2015 , managed working capital increased by $79.4 million , to $1.7 billion . The increase in managed working capital from December 31, 2014 resulted from an $86.3 million increase in accounts receivable, partially offset by a $2.6 million decrease in inventory and a $4.3 million increase in accounts payable. Days sales outstanding, which measures actual collection timing for accounts receivable, increased slightly in 2015 compared to year end 2014. Gross inventory turns, which exclude the effect of LIFO inventory valuation reserves, declined nearly 15% at March 31, 2015 compared to year end 2014 reflecting a greater investment in inventory to support improving business volumes.

28

The components of managed working capital at March 31, 2015 and December 31, 2014 were as follows:  
 
March 31,
 
December 31,
(In millions)
2015
 
2014
Accounts receivable
$
690.9

 
$
603.6

Inventory
1,472.6

 
1,472.8

Accounts payable
(559.5
)
 
(556.7
)
Subtotal
1,604.0

 
1,519.7

Allowance for doubtful accounts
4.8

 
4.8

LIFO reserve
(4.3
)
 
(4.8
)
Inventory reserves
66.4

 
68.9

Corporate and other
3.0

 
5.9

Managed working capital
$
1,673.9

 
1,594.5

Annualized prior 2 months sales
$
4,699.1

 
$
4,144.5

Managed working capital as a % of annualized sales
35.6
%
 
38.5
%
Change in managed working capital from December 31, 2014
$
79.4

 
 
Capital Expenditures
We have significantly expanded and continue to expand our manufacturing capabilities to meet expected intermediate and long-term demand from the aerospace (engine and airframe), oil & gas, chemical process industry, electrical energy, automotive and medical markets, especially for titanium and titanium-based alloys, nickel-based alloys and superalloys, specialty alloys, and zirconium and related alloys.
Our most significant ongoing capital expenditure project is the HRPF at our existing Flat Rolled Products segment Brackenridge, PA operations. We expect improved productivity, lower costs, and higher quality for our diversified product mix of flat rolled specialty materials from this strategic project, including nickel-based and specialty alloys, titanium and titanium alloys, zirconium alloys, Precision Rolled Strip products, and stainless sheet and coiled plate products. The HRPF is now fully integrated into daily operations and is producing our high-value and standard flat rolled products in wider, longer, and thinner coils as designed. We are now focused on continuous improvement in product quality, operating efficiency, and delivery performance.
Capital expenditures were $22.6 million for the first three months of 2015 . We currently expect our 2015 capital expenditures to be approximately $290 million, approximately half of which is related to completion of payments associated with the HRPF. We expect to fund these capital expenditures with cash on hand and cash flow generated from our operations and if needed, by using a portion of our $400 million domestic credit facility.
Debt
At March 31, 2015 , we had $1,527.0 million in total outstanding debt, compared to $1,526.9 million at December 31, 2014 .
In managing our overall capital structure, some of the measures on which we focus are net debt to total capitalization, which is the percentage of our debt, net of cash that may be available to reduce borrowings, to our total invested and borrowed capital, and total debt to total capitalization, which excludes cash balances. Net debt as a percentage of total capitalization was 33.2% at March 31, 2015 , compared to 32.6% at December 31, 2014 . The net debt to total capitalization was determined as follows:
 
(In millions)
March 31, 2015
 
December 31, 2014
Total debt
$
1,527.0

 
$
1,526.9

Less: Cash
(238.0
)
 
(269.5
)
Net debt
$
1,289.0

 
$
1,257.4

Total ATI stockholders’ equity
2,594.6

 
2,598.4

Net ATI total capital
$
3,883.6

 
$
3,855.8

Net debt to ATI total capital
33.2
%
 
32.6
%
Total debt to total capitalization of 37.0% at March 31, 2015 remained unchanged from December 31, 2014 .

29

Total debt to total capitalization was determined as follows:
 
(In millions)
March 31, 2015
 
December 31, 2014
Total debt
$
1,527.0

 
$
1,526.9

Total ATI stockholders’ equity
2,594.6

 
2,598.4

Total ATI capital
$
4,121.6

 
$
4,125.3

Total debt to total ATI capital
37.0
%
 
37.0
%

During the first quarter of 2015, S&P downgraded the Company’s credit rating one notch to BB+ from BBB, resulting in an increase of the interest rate on the Senior Notes due 2023 (the “2023 Notes”) from 6.125% as of December 31, 2014 to 6.375% effective with the interest period beginning February 15, 2015. Future downgrades of the Company’s credit ratings could result in additional increases to the interest cost with respect to the 2023 Notes.
We have a $400 million credit facility that includes a $200 million sublimit for the issuance of letters of credit. Under the terms of the facility, we may increase the size of the facility by up to $100 million without seeking the further approval of the lending group. Although there were no outstanding borrowings made under the credit facility as of March 31, 2015 , average borrowings for the first quarter of 2015 were $73.7 million bearing an average annual interest rate of 1.9%. The credit facility provides for a springing lien on certain of the Company’s accounts receivable and inventory. This springing lien became effective during the first quarter of 2015 as the Company’s credit ratings from both S&P’s and Moody’s are now below investment grade following S&P’s downgrade in the first quarter 2015 discussed above. This springing lien will be subsequently released if the Company’s credit rating returns to investment grade from either rating agency, assuming no event of default condition exists.
We have an additional, separate credit facility for the issuance of letters of credit. As of March 31, 2015 , $32 million in letters of credit were outstanding under this facility.
In addition, Shanghai STAL Precision Stainless Steel Company Limited (STAL), the Company’s Chinese joint venture company in which ATI has a 60% interest, entered into a 125 million renminbi (approximately $20 million at March 31, 2015 exchange rates) revolving credit facility in April 2015, replacing a previous revolving credit facility that expired in 2014. Borrowings may be either in renminbi or U.S. dollars, with interest rates based on published Chinese or U.S. interbank offer rates, respectively. The credit facility is supported solely by STAL’s financial capability without any guarantees from the joint venture partners. The credit facility requires STAL to maintain a minimum level of shareholders’ equity, and certain financial ratios.  
Dividends
A regular quarterly dividend of $0.18 per share of common stock was paid on March 25, 2015 to stockholders of record at the close of business on March 11, 2015. The payment of dividends and the amount of such dividends depends upon matters deemed relevant by our Board of Directors, such as our results of operations, financial condition, cash requirements, future prospects, any limitations imposed by law, credit agreements or senior securities, and other factors deemed relevant and appropriate.
Critical Accounting Policies
Inventory
At March 31, 2015 , we had net inventory of $1,472.6 million . Inventories are stated at the lower of cost (last-in, first-out (“LIFO”), first-in, first-out (“FIFO”) and average cost methods) or market, less progress payments. Costs include direct material, direct labor and applicable manufacturing and engineering overhead, and other direct costs. Most of our inventory is valued utilizing the LIFO costing methodology. Inventory of our non-U.S. operations is valued using average cost or FIFO methods. Under the LIFO inventory valuation method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these material and other costs may have been incurred at significantly different values due to the length of time of our production cycle. In a period of rising prices, cost of sales expense recognized under LIFO is generally higher than the cash costs incurred to acquire the inventory sold. Conversely, in a period of declining raw material prices, cost of sales recognized under LIFO is generally lower than cash costs incurred to acquire the inventory sold. Generally, over time based on overall inflationary trends in raw materials, labor and overhead costs, the use of the LIFO inventory valuation method will result in a LIFO inventory valuation reserve, as the higher current period costs are included in cost of sales and the balance sheet carrying value of inventory is reduced.

30

The prices for many of the raw materials we use have been extremely volatile during the past several years. Since we value most of our inventory utilizing the LIFO inventory costing methodology, a rise in raw material costs has a negative effect on our operating results by increasing cost of sales while lowering the carrying value of inventory, while, conversely, a fall in material costs results in a benefit to operating results by reducing cost of sales and increasing the inventory carrying value. For example, in 2014, the effect of rising raw material costs on our LIFO inventory valuation method resulted in cost of sales from continuing operations which were $24.6 million higher than would have been recognized had we utilized the FIFO methodology to value our inventory. Conversely, in 2013, the effect of falling raw material costs on our LIFO inventory valuation method resulted in cost of sales from continuing operations which were $80.9 million lower than would have been recognized had we utilized the FIFO methodology to value our inventory. However, in cases where inventory at FIFO cost is lower than the LIFO carrying value, a write-down of the inventory to market may be required, subject to a lower of cost or market evaluation.
Since the LIFO inventory valuation methodology is designed for annual determination, interim estimates of the annual LIFO valuation are required. We recognize the effects of the LIFO inventory valuation method on an interim basis by projecting the expected annual LIFO cost and allocating that projection to the interim quarters equally. These projections of annual LIFO inventory valuation reserve changes are updated quarterly and are evaluated based upon material, labor and overhead costs and projections for such costs at the end of the year plus projections regarding year end inventory levels.
In applying the lower of cost or market principle, market means current replacement cost, subject to a ceiling (market value shall not exceed net realizable value) and a floor (market shall not be less than net realizable value reduced by an allowance for a normal profit margin). We evaluate product lines on a quarterly basis to identify inventory values that exceed estimated net realizable value. The calculation of a resulting reserve, if any, is recognized as an expense in the period that the need for the reserve is identified. We recorded a $0.5 million increase to our cost of sales for changes in our LIFO inventory valuation method in the first quarter of 2015 which was offset by a $0.5 million reduction in net realizable value reserves on the carrying value of LIFO-based inventory. The first quarter of 2015 results also included $5.3 million in inventory valuation charges related to the market-based valuation of industrial titanium products in the Flat Rolled Products segment.
It is our general policy to write-down to scrap value any inventory that is identified as obsolete and any inventory that has aged or has not moved in more than twelve months. In some instances this criterion is up to twenty-four months due to the longer manufacturing and distribution process for such products.
The LIFO inventory valuation methodology is not utilized by many of the companies with which we compete, including foreign competitors. As such, our results of operations may not be comparable to those of our competitors during periods of volatile material costs due, in part, to the differences between the LIFO inventory valuation method and other acceptable inventory valuation methods.
Other Critical Accounting Policies
A summary of other significant accounting policies is discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014 .
The preparation of the financial statements in accordance with U.S. generally accepted accounting principles requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities. Significant areas of uncertainty that require judgments, estimates and assumptions include the accounting for derivatives, retirement plans, income taxes, environmental and other contingencies as well as asset impairment, inventory valuation and collectability of accounts receivable. We use historical and other information that we consider to be relevant to make these judgments and estimates. However, actual results may differ from those estimates and assumptions that are used to prepare our financial statements.
New Accounting Pronouncements Adopted
In January 2015, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to the criteria for reporting discontinued operations. Under the new criteria, a disposal of a component of an entity is required to be reported as discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. The criteria that there be no significant continuing involvement in the operations of the component after the disposal transaction has been removed under the new guidance. The new guidance also requires the presentation of the assets and liabilities of a disposal group that includes a discontinued operation for each comparative period and requires additional disclosures about discontinued operations, including the major line items constituting the pretax profit or loss of the discontinued operation, certain cash flow information for the discontinued operation, expanded disclosures about an entity’s significant continuing involvement in a discontinued operation, and disclosures about a disposal of an individually

31

significant component of an entity that does not qualify for discontinued operations presentation. The provisions of the new guidance are effective for all disposals that occur for the Company beginning in fiscal year 2015. The adoption of these changes had no impact on the consolidated financial statements.
Pending Accounting Pronouncements

In April 2015, the FASB issued new guidance on presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this guidance. This update will be effective for the Company beginning in fiscal year 2016, with early adoption permitted, and is applied on a retrospective basis. As of March 31, 2015 and December 31, 2014 , the Company had $10.6 million and $10.9 million , respectively, of debt issuance costs reported as assets on the consolidated balance sheet that will be reclassified to a reduction of the carrying amount of the debt liability upon the Company’s adoption of this new guidance.

In May 2014, the FASB issued changes to revenue recognition with customers. This update provides a five-step analysis of transactions to determine when and how revenue is recognized. An entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update will be effective for the Company beginning in fiscal year 2017. This update may be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
Forward-Looking and Other Statements
From time to time, we have made and may continue to make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this report relate to future events and expectations and, as such, constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which we are unable to predict or control, that may cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or industry conditions generally, including global supply and demand conditions and prices for our specialty materials; (b) material adverse changes in the markets we serve, including the aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, construction and mining, and other markets; (c) our inability to achieve the level of cost savings, productivity improvements, synergies, growth or other benefits anticipated by management, from strategic investments and the integration of acquired businesses, whether due to significant increases in energy, raw materials or employee benefits costs, the possibility of project cost overruns or unanticipated costs and expenses, or other factors; (d) volatility of prices and availability of supply of the raw materials that are critical to the manufacture of our products; (e) declines in the value of our defined benefit pension plan assets or unfavorable changes in laws or regulations that govern pension plan funding; (f) significant legal proceedings or investigations adverse to us; and (g) other risk factors summarized in our Annual Report on Form 10-K for the year ended December 31, 2014 , and in other reports filed with the Securities and Exchange Commission. We assume no duty to update our forward-looking statements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
As part of our risk management strategy, we utilize derivative financial instruments, from time to time, to hedge our exposure to changes in energy and raw material prices, foreign currencies, and interest rates. We monitor the third-party financial institutions which are our counterparty to these financial instruments on a daily basis and diversify our transactions among counterparties to minimize exposure to any one of these entities. Fair values for derivatives were measured using exchange-traded prices for the hedged items including consideration of counterparty risk and the Company’s credit risk. Our exposure to volatility in interest rates is presently not material, as nearly all of our debt is at fixed interest rates.
Volatility of Energy Prices. Energy resources markets are subject to conditions that create uncertainty in the prices and availability of energy resources. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Increases in energy costs, or changes in costs relative to energy costs paid by competitors, have and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations and financial condition. We use approximately

32

12 to 14 million MMBtu’s of natural gas annually, depending upon business conditions, in the manufacture of our products. These purchases of natural gas expose us to risk of higher natural gas prices. For example, a hypothetical $1.00 per MMBtu increase in the price of natural gas would result in increased annual energy costs of approximately $12 to $14 million. We use several approaches to minimize any material adverse effect on our results of operations or financial condition from volatile energy prices. These approaches include incorporating an energy surcharge on many of our products and using financial derivatives to reduce exposure to energy price volatility.
At March 31, 2015 , the outstanding financial derivatives used to hedge our exposure to energy cost volatility included natural gas hedges. For natural gas, approximately 80% of our forecasted domestic requirements are hedged for 2015 , approximately 75% for 2016 , and approximately 45% for 2017 . The net mark-to-market valuation of these outstanding natural gas hedges at March 31, 2015 was an unrealized pre-tax loss of $23.9 million, comprised of $12.1 million in accrued liabilities and $11.8 million in other long-term liabilities. For the three months ended March 31, 2015 , the effects of natural gas hedging activity increased cost of sales by $3.9 million .
Volatility of Raw Material Prices. We use raw materials surcharge and index mechanisms to offset the impact of increased raw material costs; however, competitive factors in the marketplace can limit our ability to institute such mechanisms, and there can be a delay between the increase in the price of raw materials and the realization of the benefit of such mechanisms. For example, in 2014 , we used approximately 120 million pounds of nickel; therefore, a hypothetical change of $1.00 per pound in nickel prices would result in increased costs of approximately $120 million. In addition, in 2014 , we also used approximately 830 million pounds of ferrous scrap in the production of our flat rolled products; a hypothetical change of $0.01 per pound would result in increased costs of approximately $8 million. While we enter into raw materials futures contracts from time-to-time to hedge exposure to price fluctuations, such as for nickel, we cannot be certain that our hedge position adequately reduces exposure. We believe that we have adequate controls to monitor these contracts, but we may not be able to accurately assess exposure to price volatility in the markets for critical raw materials.

The majority of our products are sold utilizing raw material surcharges and index mechanisms. However, as of March 31, 2015 , we had entered into financial hedging arrangements, primarily at the request of our customers, related to firm orders for an aggregate amount of approximately 20% of our estimated annual nickel requirements. These nickel hedges extend to 2020. Any gain or loss associated with these hedging arrangements is included in cost of sales. At March 31, 2015 , the net mark-to-market valuation of our outstanding raw material hedges was an unrealized pre-tax loss of $19.3 million, comprised of $9.9 million in accrued liabilities and $9.4 million in other long-term liabilities on the balance sheet.
Foreign Currency Risk. Foreign currency exchange contracts are used, from time-to-time, to limit transactional exposure to changes in currency exchange rates. We sometimes purchase foreign currency forward contracts that permit us to sell specified amounts of foreign currencies expected to be received from our export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts are designated as hedges of the variability in cash flows of a portion of the forecasted future export sales transactions which otherwise would expose the Company to foreign currency risk, primarily euros. At March 31, 2015 , the Company held euro forward sales contracts designated as hedges with a notional value of approximately 375 million euro with maturity dates through February 2018, including approximately 157 million euro with maturities in 2015. In addition, we may also designate cash balances held in foreign currencies as hedges of forecasted foreign currency transactions.
During the first quarter of 2015, the Company net settled 126.5 million euro notional value of foreign currency forward contracts designated as cash flow hedges with 2015 maturity dates, receiving cash proceeds of $26.1 million which is reported in cash provided by operating activities on the consolidated cash flow statement. Deferred gains on these settled cash flow hedges currently recognized in accumulated other comprehensive income will be reclassified to earnings when the underlying transactions occur. The Company subsequently entered into 115 million euro notional value of foreign currency forward contracts designated as fair value hedges in the first quarter of 2015, all with 2015 maturity dates, and recorded a $5.0 million benefit in costs of sales on the consolidated statement of operations in the first quarter of 2015 for subsequent mark-to-market changes on these fair value hedges.
We may also enter into foreign currency forward contracts that are not designated as hedges, which are denominated in the same foreign currency in which export sales are denominated. During the first quarter of 2015, the Company net settled 40.3 million euro notional value of foreign currency forward contracts that were not designated as hedges, receiving cash proceeds of $11.8 million which is reported in cash provided by operating activities on the consolidated cash flow statement. The Company also entered into 30 million euro notional value of foreign currency forward contracts not designated as hedges in the first quarter of 2015 with maturity dates through February 2016.

33

At March 31, 2015 , the net mark-to-market valuation of the outstanding foreign currency forward contracts was an unrealized pre-tax gain of $68.7 million, of which $23.1 million is included in prepaid expenses and other current assets, $46.0 million in other long-term assets, and $0.4 million in accrued liabilities on the balance sheet.
Item 4.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2015 , and they concluded that these disclosure controls and procedures are effective.
(b) Changes in Internal Controls
There was no change in our internal controls over financial reporting identified in connection with the evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2015 conducted by our Chief Executive Officer and Chief Financial Officer, that occurred during the quarter ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
A number of lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its currently or formerly owned businesses, including those pertaining to product liability, patent infringement, commercial, government contracting, construction, employment, employee and retiree benefits, taxes, environmental, health and safety and occupational disease, and stockholder and corporate governance matters. Certain of such lawsuits, claims and proceedings are described in our Annual Report on Form 10-K for the year ended December 31, 2014 , and addressed in Note 14 to the unaudited interim financial statements included herein. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company’s financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company’s results of operations for that period.
Item 1A.
Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 , which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Set forth below is information regarding the Company’s stock repurchases during the period covered by this report, comprising shares repurchased by ATI from employees to satisfy employee-owed taxes on share-based compensation.
Period
 
Total Number of Shares (or Units) Purchased
 
Average Price Paid per Share (or Unit)
 
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1-31, 2015
 
48,271

 
$
28.57

 
—

 
$
—

February 1-28, 2015
 
—

 
—

 
—

 
—

March 1-31, 2015
 
—

 
—

 
—

 
—

Total
 
48,271

 
$
28.57

 
—

 
$
—


34

Item 6.
Exhibits
(a) Exhibits
10.1
 
Form of Long Term Shareholder Value Award Agreement (filed herewith).*
 
 
 
10.2
 
Form of Performance/Restricted Stock Award Agreement (filed herewith).*
 
 
 
10.3
 
Form of Total Shareholder Return Award Agreement (filed herewith).*
 
 
 
10.4
 
Allegheny Technologies Incorporated Defined Contribution Restoration Plan, as amended and restated as of January 1, 2015 (filed herewith).*
 
 
 
10.5
 
Administrative Rules for the Non-Employee Director Restricted Stock Program, effective as of May 1, 2015 (filed herewith).*
 
 
 
12.1
 
Computation of the Ratio of Earnings to Fixed Charges (filed herewith).
 
 
 
31.1
 
Certification of Chief Executive Officer required by Securities and Exchange Commission Rule 13a – 14(a) or 15d – 14(a) (filed herewith).
 
 
 
31.2
 
Certification of Chief Financial Officer required by Securities and Exchange Commission Rule 13a – 14(a) or 15d – 14(a) (filed herewith).
 
 
 
32.1
 
Certification pursuant to 18 U.S.C. Section 1350 (filed herewith).
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Report.




35

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ALLEGHENY TECHNOLOGIES INCORPORATED
(Registrant)
 
Date:
May 4, 2015
 
By
 
/s/ Patrick J. DeCourcy
 
 
 
 
 
Patrick J. DeCourcy
 
 
 
 
 
Senior Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
 
 
Date:
May 4, 2015
 
By
 
/s/ Karl D. Schwartz
 
 
 
 
 
Karl D. Schwartz
 
 
 
 
 
Controller and Chief Accounting Officer
(Principal Accounting Officer)

36
Table of Contents

EXHIBIT INDEX
 
10.1
 
Form of Long Term Shareholder Value Award Agreement (filed herewith).*
 
 
 
10.2
 
Form of Performance/Restricted Stock Award Agreement (filed herewith).*
 
 
 
10.3
 
Form of Total Shareholder Return Award Agreement (filed herewith).*
 
 
 
10.4
 
Allegheny Technologies Incorporated Defined Contribution Restoration Plan, as amended and restated as of January 1, 2015 (filed herewith).*
 
 
 
10.5
 
Administrative Rules for the Non-Employee Director Restricted Stock Program, effective as of May 1, 2015 (filed herewith).*
 
 
 
12.1
 
Computation of the Ratio of Earnings to Fixed Charges (filed herewith).
 
 
 
31.1
 
Certification of Chief Executive Officer required by Securities and Exchange Commission Rule 13a – 14(a) or 15d – 14(a).
 
 
 
31.2
 
Certification of Chief Financial Officer required by Securities and Exchange Commission Rule 13a – 14(a) or 15d – 14(a).
 
 
 
32.1
 
Certification pursuant to 18 U.S.C. Section 1350.
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Report.


37

Exhibit 10.1

FORM OF
OPERATIONAL GOALS
LONG-TERM SHAREHOLDER VALUE
AWARD AGREEMENT

This Long-Term Shareholder Value Award Agreement (the “Agreement”) is effective as of «Date» by and between ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the “Company”) and «Name» (the “Participant”).

WHEREAS, the Company has adopted the Allegheny Technologies Incorporated «Year» Incentive Plan (the “Plan”) and, in accordance with the Plan, has adopted Administrative Rules for the Long-Term Performance Plan (“LTPP”);

WHEREAS, the Administrative Rules for the LTPP allow for the grant of opportunities to earn shares of Common Stock based on the degree of achievement of specific and objective Operational Goals (a “Long-Term Shareholder Value or LTSV Award”) to (i) assist the Company to retain and motivate key management employees; (ii) reward key management employees for the overall success of the Company; and (iii) provide a means of encouraging key management employees to acquire shares of Company Common Stock.

WHEREAS, the LTPP provides that each award made under the LTPP to be measured by relative LTSV (a “LTSV Target Award”) shall be evidenced by an Award Agreement (each a “LTSV Award Agreement”) between the Company and the key management employee who receives a LTSV Target Award under the LTPP setting forth the terms and conditions of such LTSV Target Award;

WHEREAS, in consideration of the Restrictive Covenants and other good and valuable consideration, the Company desires to make a LTSV Target Award to the Participant and evidence such LTSV Target Award by this LTSV Award Agreement and the Participant, having read and understood the Plan and the LTPP, is willing to enter into this LTSV Award Agreement on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the covenants and agreements herein contained and intending to be legally bound, the parties hereto agree with each other as follows:

Subject to the attainment of the Performance Levels described below and to the terms and conditions of the Plan, the LTPP Administrative Rules and the Terms and Conditions of Award attached hereto and incorporated herein by reference, by which Participant agrees to be bound, the Company awards to Participant the LTSV Award described below, with respect to the Performance Period described below:

PERFORMANCE PERIOD: «Date» through «Date».

LTSV TARGET AWARD: «LTSV_Shares_Awarded» shares of Company Common Stock, equals applicable base salary times «Company Performance Achievement % (AIP)» (which is the Participant’s target award opportunity as a percent of salary) divided by $«Price», which is the average of the high and low trading prices of Company Common Stock on the date of grant.



PERFORMANCE LEVELS: The following sets forth the Operational Goals applicable to this LTSV Award for the «Range of Years» Performance Period:


«List of applicable operational goals and relative weighting percentages»


THE NUMBER OF SHARES DELIVERED UNDER THIS LTSV AWARD AGREEMENT WILL EQUAL THE LTSV TARGET AWARD TIMES THE APPLICABLE PERCENT OF ACTUAL ACHIEVEMENT OF THE OPERATIONAL GOALS. THE COMMITTEE WILL DETERMINE THE DEGREE TO WHICH EACH OPERATIONAL GOAL HAS BEEN ACHIEVED AND SHALL ADD THE PERCENTAGES TOGETHER AND MULTIPLY THE SUM OF SUCH PERCENTAGES BY THE NUMBER OF LTSV SHARES SET FORTH AS THE LTSV TARGET AWARD. NO AWARD SHALL BE DELIVERED UNLESS THE PARTICIPANT HAS FULLY COMPLIED WITH ALL CORPORATION POLICIES, INCLUDING, BUT NOT LIMITED TO, THE COMPANY’S CORPORATE GUIDELINES FOR BUSINESS CONDUCT AND ETHICS, THE RESTRICTIVE COVENANTS AND THE CLAWBACK POLICIES AND AGREEMENTS.

IN WITNESS WHEREOF, the parties hereto have executed this LTSV Award Agreement effective the day and year first above written.

ALLEGHENY TECHNOLOGIES INCORPORATED

By:
 
Name:
  «Name»
Title:
«Title»


PARTICIPANT
 
WITNESS
 
 
 
«Name»
 
 



2

TERMS AND CONDITIONS OF LTSV AWARD

Section 1: Definitions

Capitalized words used but not defined below or elsewhere in these Terms and Conditions shall have the meanings ascribed to them in the Plan.

“ Administrative Rules ” or “ LTPP ” shall mean the Administrative Rules for the LTPP adopted by the Committee effective «Date», as the same may be amended from time to time.

“ Award ” or “ LTSV Award ” shall mean the grant of a LTSV Target Award evidenced by this Award Agreement.

“ Award Agreement ” or “ LTSV Award Agreement ” shall mean this agreement evidencing this grant under the LTPP Administrative Rules and the Plan opportunities measured by LTSV.

“ Committee ” means the Personnel and Compensation Committee of the Board of Directors.

“ Common Stock ” shall mean the common stock, $0.10 par value per share, of Allegheny Technologies Incorporated.

“ Company ” shall mean Allegheny Technologies Incorporated and its subsidiaries, unless the context requires otherwise.

“ Disability ” shall mean the total and permanent disability of Participant as determined by the Committee in its sole discretion.

“ Operational Goals” shall mean the specific and objective operational goals set out above which shall include and shall have incorporated and included therein the longer form explanations of the elements of each such Operational Goal in the Company’s books and records as if such descriptions were set forth at length.

“ Performance Period ” or “ LTSV Performance Period ” shall mean for this Award Agreement, the calendar years «Year», «Year» and «Year».

“ Performance Level ” or “ LTSV Performance Level ” shall mean the sum of the percentages of actual achievement of the LTSV Operational Goals as determined by the Committee.

“Proof of Ownership” shall mean a certificate or certificates, electronic or book entry evidencing shares awarded subject to achievement of the Operational Goals or delivered to the extent the Operational Goals have been achieved.

“ Restrictive Covenants ” shall mean those covenants not to compete, not to solicit business or employees of the Company and not to disparage the Company, its officers, directors or employees, in each case for a period of one (1) year after termination of employment for any reason, as such Restrictive Covenants are more fully set forth herein.

“ Retirement ” means a termination of employment with the Company and each of its subsidiaries, with the consent of the Company, at or after (i) attaining age 55 and (ii) completing five (5) years of employment with the Company and/or any subsidiary of the Company.


3

“ Target Award ” or “ LTSV Target Award ” means this grant of an opportunity to earn the number of LTSV Shares set out in the LTSV Award Agreement if each Operational Goal is achieved in full.

Section 2: LTSV Award

2.1      Subject to the attainment of the LTSV Performance Levels and to the terms and conditions otherwise set forth in the Plan, the LTPP Administrative Rules and this Award Agreement, the Company awards to Participant the LTSV Award described in the first two pages of this Award Agreement with respect to the Performance Period described therein.

Section 3: Payment

3.1      Subject to the withholding obligations and any requirements of Section 5 then applicable, the Company shall deliver to the Participant Proof of Ownership representing the LTSV Awards, if any, for the LTSV Performance Period within seventy-five (75) days after the end of the LTSV Performance Period.

3.2      If the Participant terminates employment with the Company and each subsidiary of the Company during a then uncompleted LTSV Performance Period for reasons other than death, Disability or Retirement, any LTSV Target Award for any then uncompleted LTSV Performance Period shall be forfeited automatically and the shares represented by such LTSV Target Awards shall again be eligible for awards under the Rules.

3.3      If the Participant terminates employment with the Company and each Subsidiary of the Company during a then uncompleted LTSV Performance Period due to the Participant’s death, Disability, or Retirement, a pro rata award determined by multiplying the number of LTSV Shares set out in the Award Agreement by the Performance Level for the LTSV Performance Period and then multiplying that result by a fraction, the numerator of which is the number of months the Participant was employed by the Company during the LTSV Performance Period and the denominator is thirty-six (36). Any award determined to be payable shall be paid after the end of the applicable LTSV Performance Period.

Section 4: Restrictive Covenants

4.1      Non-Competition . For a period of one (1) year after the Participant’s termination of employment with the Company (including for this Section 4 any of the Company’s subsidiaries and affiliates) for any reason, the Participant will not directly or indirectly (i) serve as an owner, principal, partner, employee, consultant, officer, director or agent of an entity, including a sole proprietorship, that engages or is planning to engage in any business in which the Company is engaged in any market in which the Company is engaged at the time of the Participant’s termination of employment, including the production and delivery of specialty materials and products for the aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, and construction and mining markets (each such entity in such market is referred to as a “Competing Business”). Participant shall not be deemed to be in violation of this covenant if the Participant is the owner of not more than 2% of a corporation the stock of which is traded on a recognized securities exchange.

4.2      Non-Solicitation of Customers. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant shall not, directly or indirectly, on behalf of a Competing Business solicit or attempt to divert the business or patronage of any business entity that has purchased specialty materials from the Company within two (2) years prior to the termination of the Participant’s employment and shall not assist any person or business entity in planning or making such a solicitation.

4


4.3      Non-Solicitation of Employees. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant will not solicit or assist another person or entity to solicit any person who consults with the Company or is employed by the Company to cease consulting with the Company or to leave the employ of the Company or to accept a consulting or other business relationship or employment with another person or entity, whether or not a Competing Business.

4.4      Non-Disparagement. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant shall not disparage the Company or its business, agents, servants, employees, officers or directors.

4.5      Confidentiality. For a period of three (3) years after the Participant’s termination of employment with the Company for any reason, the Participant shall not disclose, divulge or use any material non-public information of the Company, including, but not limited to, manufacturing processes, customer lists, marketing plans or procedure proprietary information and trade secrets.

4.6      Consideration and Remedies . The Participant recognizes and acknowledges that the opportunity to earn compensation or receive shares of Company stock under this Agreement is adequate consideration for the covenants set forth in this Section 4. The Participant further acknowledges that the Company has no adequate remedy at law should the Participant violate or threaten to or attempt to violate any one or more of the covenants in this Section 4 and the Participant agrees that the Company is entitled to an injunction or other equitable relief restraining the Participant from violating or threatening to or attempting to violate any one or more of the covenants set forth in Section 4.

Section 5: Miscellaneous

5.1      General Restriction . To the extent any LTSV Target Award is denominated in Common Stock under this Award Agreement, it shall be subject to the requirement that if at any time the Committee shall determine that any listing or registration of the shares of Common Stock or any consent or approval of any governmental body or any other agreement or consent is necessary or desirable as a condition of the issuance of shares of Common Stock or cash in satisfaction thereof, such issuance of shares of Common Stock may not be consummated unless such requirement is satisfied in a manner acceptable to the Committee. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action to cause the issuance of shares pursuant to the distribution of LTSV Awards to comply with any law or regulation of any governmental authority.

5.2      Non-Assignability . No LTSV Target Award granted under this Award Agreement shall be assignable or transferable by the Participant, except by will or by the laws of descent and distribution. During the life of the Participant, any LTSV Awards shall be payable only to the Participant. No assignment or transfer of a LTSV Target Award or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, and immediately upon such purported assignment or transfer, the LTSV Target Awards shall terminate and become of no further effect.


5.3      Withholding Obligations . Whenever the Company makes delivery under the Plan, in whole or in part, the Company shall notify the Participant of the amount of withholding for tax, if any, which must be paid under federal and, where applicable, state and local law. The Company shall, in the discretion of the Company, but with the consent of the Committee, arrange for payment for such withholding for taxes in

5

any one or combination of the following ways: (i) acceptance of an amount in cash paid by the Participant; or (ii) reduction in the number of shares to be issued by that number of shares which, in aggregate, have a value equal to such withholding amount. If the full amount of the required withholding is not recovered in the above manner, the Participant shall, forthwith upon receipt of notice, remit the deficiency to the Company. No shares of Common Stock shall be issued or delivered to the Participant (and/or the Participant's designee) until all applicable withholding obligations shall have been satisfied in full.

5.4      Delivery of Proof of Ownership . As soon as practicable after compliance by the Participant with all applicable conditions including, but not limited to, the satisfaction of the Withholding Obligations described in Section 5.3 hereof, the Company will issue and deliver by mail, or cause delivery by mail, to the Participant at the address of the Company’s records, Proof of Ownership registered in the name of the Participant (and/or the Participant's designee) for the number of shares of Common Stock which the Participant is entitled to receive (subject to reduction for withholding as provided in Section 5.3 hereof) under the provisions of this Award Agreement.

5.5      No Right to Employment . Nothing in the Plan or in this Award Agreement shall confer upon the Participant the right to continue in the employ of the Company or any subsidiary or affect any right that the Company or a subsidiary may have to terminate the employment of the Participant.

5.6      Amendment or Termination of the Plan . The Plan, or any part thereof (including the Administrative Rules) may be terminated or may, from time to time, be amended, each in accordance with the Plan or LTPP Administrative Rules, as applicable, provided, however, the termination or amendment of the Plan or the LTPP Administrative Rules shall not, without the consent of the Participant, affect Participant's rights under this Award Agreement.

5.7      Investment Representation . Under the federal and/or state securities laws, the Participant may be required to deliver, and, if so, shall deliver, to the Committee, upon demand by the Committee, at the time of any payment of Common Stock, a written representation that the shares to be acquired are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to delivery of any shares shall be a condition precedent to the right of the Participant to receive any shares.

5.8      No Rights as Shareholder . The Participant shall have no rights as a stockholder of the Company with respect to shares of Common Stock subject to the Award evidenced this Award Agreement unless and until Proof of Ownership for shares of Common Stock is issued to the Participant.

5.9      Adjustment of Award . In the event of any change or changes in the outstanding Common Stock of the Company by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares or any rights offering to purchase a substantial amount of Common Stock at a price substantially below fair market value or of any similar change affecting the Common Stock, any of which takes effect after the first grant of a LTSV Target Award under this Award Agreement, the Committee may, in its discretion, appropriately adjust the number of shares of Common Stock which may be issued under this Award Agreement, the number of shares of Common Stock subject to LTSV Target Awards under this Award Agreement and any and all other adjustments deemed appropriate by the Committee to prevent substantial dilution or enlargement of the rights granted to the Participant in such manner as the Committee shall deem appropriate. Any adjustment so made shall be final and binding upon the Participant.

5.10      Awards Not a Bar to Corporate Event . The existence of the LTSV Target Awards granted hereunder shall not affect in any way the right or the power of the Company or its stockholders to make or authorize

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any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

5.11      Not Income for Qualified Plans . No amounts of income received by a Participant pursuant to this Award Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or any of its affiliates.

5.12      Meaning of Participant . Whenever the word “Participant” is used in any provision of this Award Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the LTSV Target Awards may be transferred by will or by the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

5.13      Determinations of Committee . The actions taken and determinations of the Committee made pursuant to this Award Agreement and of the Committee pursuant to the Plan and the LTPP Administrative Rules shall be final, conclusive and binding upon the Company and upon the Participant. No member of the Committee shall be liable for any action taken or determination made relating to this Award Agreement, the Plan or the LTPP Administrative Rules if made in good faith.


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Exhibit 10.2

FORM OF PERFORMANCE/RESTRICTED STOCK AGREEMENT

This Performance/Restricted Stock Agreement (the “Agreement”) made as of «Date» by and between ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the “Corporation”) and «NAME» (the “Participant”).

WHEREAS, the Corporation sponsors and maintains the Allegheny Technologies Incorporated «Year» Incentive Plan (the “Incentive Plan”);

WHEREAS, the Corporation desires to encourage the Participant to remain an employee of the Corporation and, during such employment, to contribute substantially to the financial performance of the Corporation and, to provide that incentive, the Corporation has awarded, subject to the performance and employment restrictions described herein, the Participant an aggregate of «PRSP_Shares_Awarded» shares (“Shares Subject to Restrictions”) of the common stock of the Corporation, $0.10 par value per share (“Common Stock”);

WHEREAS, as a member of Management’s Executive Council, half of the Shares Subject to Restrictions are subject to the Corporation’s attainment of the performance requirements set forth in Paragraph 3(b) (the “Performance Criteria”); and half of the Shares Subject to Restrictions are subject to the Participant’s remaining an employee (except in instances of death, Disability or Retirement as described below) during the Restriction Period set forth in Paragraph 3(c), subject to accelerated termination of the Restriction in the event of attainment of the Performance Criteria;

WHEREAS, Shares Subject to Restrictions may be held or delivered, as the context in this Restricted Stock Agreement indicates, in the form of a certificate or certificates, or electronic or book entry (“Proof of Ownership”); and

WHEREAS, the Corporation and the Participant desire to evidence the award of the Shares Subject to Restrictions and the terms and conditions applicable thereto in this Restricted Stock Agreement.

NOW THEREFORE, in consideration of the Restrictive Covenants and the mutual promises and covenants contained herein and intending to be legally bound, the Corporation and the Participant agree as follows:

1.      Grant of Shares Subject to Restrictions . The Corporation hereby grants to the Participant, as of the date first written above, the Shares Subject to Restrictions subject to the restrictions and other terms and conditions set forth herein. Simultaneously with the execution and delivery of this Agreement, the Participant shall deliver to the Corporation a stock power endorsed in blank relating to the Shares Subject to Restrictions (including in such power any increases or adjustments to the Shares Subject to Restrictions). As soon as practicable after the Date of Grant, the Corporation shall direct that the Shares Subject to Restrictions be registered in the name of and Proof of Ownership issued to the Participant and initially bearing the legend or electronic notation, as the case may be, described in Paragraph 6. The Shares Subject to Restrictions and any Proof of Ownership representing the Shares Subject to Restrictions shall be held in the custody of the Corporation or its designee until the expiration of the applicable Restrictions. Upon any forfeiture in accordance with Paragraph 4 of the Shares Subject to Restrictions, the forfeited shares and any Proof of Ownership representing the forfeited Shares Subject to Restrictions shall be canceled.



2.      Restrictions . The Participant shall have all rights and privileges of a stockholder of the Corporation with respect to the Shares Subject to Restrictions, except that the following restrictions shall apply:

(a)      None of the Shares Subject to Restrictions may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the “Restriction Period” as defined below, except to the extent of the Corporation’s earlier attainment of the Performance Criteria, as defined below.

(b)      The Shares Subject to Restrictions are subject to forfeiture during the Restriction Period in accordance with Paragraph 4 of this Agreement.

(c)      The Shares Subject to Restrictions and any Proof of Ownership representing the Shares Subject to Restrictions shall be held in custody by the Corporation or its designee until such time as either the Performance Criteria are attained or the Restriction Period shall have been completed.

(d)      Dividends paid with respect to the Shares Subject to Restrictions during the Restriction Period shall not be paid to the Participant and, instead, shall be converted into additional shares of Restricted Stock at the price at which shares of common stock of the Corporation are purchased under the Corporation’s outstanding dividend reinvestment program and on the date such purchases are made and such shares of Restricted Stock shall be additions to the shares subject to the Restrictions hereunder.

3.      Term of Restriction .

(a)      Subject to the forfeiture provisions of Paragraph 4 of this Agreement, the Restrictions shall lapse (i) with respect to half of the Shares Subject to Restrictions (x) on «Date» if the Participant is an employee of the Corporation on «Date», unless the Participant’s cessation of employment was due to the Participant’s death, Disability or Retirement (as those initially capitalized terms are defined below), or (y) subject to applicable clawback provisions, as soon as reasonably feasible after «Date» as it may be determined that the Performance Criteria have been attained and (ii) with respect to half of the Shares Subject to Restrictions, subject to applicable clawback provisions, as soon as reasonably feasible after «Date» as it may be determined that the Performance Criteria have been attained. With respect to the half of the Shares Subject to Restrictions subject only to the Performance Criteria, if the Corporation does not attain the Performance Criteria on or before the three-year measurement period ending «Date», such half of the Shares Subject to Restrictions shall be forfeited immediately upon the completion of that three-year measurement period.

(b)      For purposes of this Agreement, the “Performance Criteria” shall mean «Description of Applicable Performance Criteria». The period for measuring the Performance Criteria shall end as of «Date» and the Personnel and Compensation Committee shall as promptly as possible following the completion of the audit of the Corporation for the «Year» fiscal year determine whether the Performance Criteria have been met.

(c)      The period from the Date of Grant until the lapse of the applicable Restrictions with respect to the Shares Subject to Restrictions is the “Restriction Period” for purposes of this Agreement.

(d)    As soon as administratively practicable following the lapse of the Restrictions without a forfeiture of the applicable Shares Subject to Restrictions, and upon the satisfaction of all other applicable conditions as to such Shares Subject to Restrictions, including, but not limited to, the

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payment by the Participant of all applicable withholding taxes, if any, the Corporation shall deliver or cause to be delivered to the Participant shares of Common Stock, which may be in the form of a Proof of Ownership for such shares, equal in number to the applicable Shares Subject to Restrictions, which shall not be subject to the transfer restrictions set forth above and shall not bear the legend or electronic notation described in Paragraph 6. Without limiting the foregoing, (i) if the Performance Criteria are met, all Shares Subject to Restrictions shall become non-forfeitable and such Shares Subject to Restrictions or the Proof of Ownership representing such non-forfeitable shares of common stock of the Corporation shall be delivered as described above and (ii) if the Performance Criteria are not met, (x) half of the Shares Subject to Restrictions shall be forfeited immediately after the end of the measurement period for such Performance Criteria and (y) the remaining half of the Shares Subject to Restrictions shall be non-forfeitable, if at all, at the end of the Restriction Period.

4.      Forfeiture of Shares Subject to Restrictions . If the Participant’s employment with the Corporation and all of its direct or indirect subsidiaries is terminated by either party for any reason, including, but not limited to, the involuntary termination of the Participant’s employment with the Corporation for any reason, with or without cause, other than the Participant’s death, Disability, which the total and permanent disability of the Participant as determined by the Committee in its sole discretion, or Retirement with the consent of the Corporation when the Participant is at least fifty-five (55) years of age with at least five (5) years of service (“Retirement”), (i) all rights of the Participant to the Shares Subject to Restrictions which remain subject to the Restrictions shall terminate immediately and be forfeited in their entirety, and (ii) the forfeited Shares Subject to Restrictions and any Proof of Ownership representing the forfeited Shares Subject to Restrictions shall be canceled. If the Participant dies, becomes disabled or has a Retirement, the Participant (or the Participant’s beneficiary) shall receive the Shares Subject to Restrictions when, if and to the extent, the Restrictions lapse under Paragraph 3, multiplied by a fraction, the numerator of which is the number of months the Participant was employed by the Corporation under the Restriction Period and the denominator is thirty-six (36) months.

5.      Change of Control . All Shares Subject to Restrictions shall fully vest in the event of a Change of Control as defined in the Incentive Plan.

6.      Legend . During the Restriction Period, the shares of Restricted Stock and any Proof of Ownership evidencing the Shares Subject to Restrictions shall be endorsed with the following legend or equivalent electronic notation for electronic or book entry (in addition to any legend required under applicable securities laws or any agreement by which the Corporation is bound):

THE TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A RESTRICTED STOCK AGREEMENT ENTERED INTO BY AND BETWEEN ALLEGHENY TECHNOLOGIES INCORPORATED AND THE HOLDER OF THIS PROOF OF OWNERSHIP. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF THE CORPORATION.

7.      Withholding . The Corporation or its direct or indirect subsidiary may withhold from the number of Shares Subject to Restrictions or from any cash amount payable hereunder or any other cash payments due to the Participant all taxes, including social security taxes, which the Corporation or its direct or indirect subsidiary is required or otherwise authorized to withhold with respect to the Shares Subject to Restrictions.

8.      Adjustments to Number of Shares . Any shares issued to the Participant with respect to the Shares Subject to Restrictions in the event of any change in the number of outstanding common

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stock of the Corporation through the declaration of a stock dividend or a stock split or combination of shares or any other similar capitalization change shall be deemed to be Shares Subject to Restrictions subject to all the terms set forth in this Agreement.

9.      No Right to Continued Employment; Effect on Benefit Plans . This Agreement shall not confer upon the Participant any right with respect to continuance of his or her employment or other relationship, nor shall it interfere in any way with the right of the Corporation or its direct or indirect subsidiary to terminate his or her employment or other relationship at any time. Income realized by the Participant pursuant to this Agreement shall not be included in the Participant’s earnings for the purpose of any benefit plan in which the Participant may be enrolled or for which the Participant may become eligible unless otherwise specifically provided for in such plan.

10.      Participant Representations . In connection with the issuance of the Shares Subject to Restrictions, the Participant represents the following:

(a)      the Participant has reviewed with the Participant’s own tax advisors, the federal, state, local and foreign tax consequences of this Agreement and the transactions contemplated hereby. The Participant is relying solely on such advisors and not on any statements or representations of the Corporation or any of its agents. The Participant understands that the Participant (and not the Corporation) shall be responsible for the Participant’s own tax liability that may arise as a result of this Agreement and the transactions contemplated hereby.

(b)      the Participant has received, read and understood this Agreement and the Incentive Plan and agrees to abide by and be bound by their respective terms and conditions.

11.      Restrictive Covenants .

(a)     Non-Competition . For a period of one (1) year after the Participant’s termination of employment with the Company (including for this Paragraph 11 any of the Company’s subsidiaries and affiliates) for any reason, the Participant will not directly or indirectly (i) serve as an owner, principal, partner, employee, consultant, officer, director or agent of an entity, including a sole proprietorship, that engages or is planning to engage in any business in which the Company is engaged in any market in which the Company is engaged at the time of the Participant’s termination of employment, including the production and delivery of specialty materials and products for the aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, and construction and mining markets (each such entity in such market is referred to as a “Competing Business”). The Participant shall not be deemed to be in violation of this covenant if the Participant is the owner of not more than 2% of a corporation the stock of which is traded on a recognized securities exchange.

(b)      Non-Solicitation of Customers. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant shall not, directly or indirectly, on behalf of a Competing Business solicit or attempt to divert the business or patronage of any business entity that has purchased specialty materials from the Company within two (2) years prior to the termination of the Participant’s employment and shall not assist any person or business entity in planning or making such a solicitation.

(c)      Non-Solicitation of Employees. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant will not solicit or assist another person or entity to solicit any person who consults with the Company or is employed

4

by the Company to cease consulting with the Company or to leave the employ of the Company or to accept a consulting or other business relationship or employment with another person or entity, whether or not a Competing Business.

(d)      Non-Disparagement. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant shall not disparage the Company or its business, agents, servants, employees, officers or directors.

(e)      Confidentiality. For a period of three (3) years after the Participant’s termination of employment with the Company for any reason, the Participant shall not disclose, divulge or use any material non-public information of the Company, including, but not limited to, manufacturing processes, customer lists, marketing plans or procedure proprietary information and trade secrets.

(f)      Consideration and Remedies . The Participant recognizes and acknowledges that the opportunity to earn compensation or receive shares of Company stock under this Agreement is adequate consideration for the covenants set forth in this Paragraph 11. The Participant further acknowledges that the Company has no adequate remedy at law should the Participant violate or threaten to or attempt to violate any one or more of the covenants in this Paragraph 11 and the Participant agrees that the Company is entitled to an injunction or other equitable relief restraining the Participant from violating or threatening to or attempting to violate any one or more of the covenants set forth in Paragraph 11.

12.      Miscellaneous .

(a)      Governing Law . This Agreement shall be governed and construed in accordance with the domestic laws of the Commonwealth of Pennsylvania without regard to such Commonwealth’s principles of conflicts of laws.

(b)      Successors and Assigns . The provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. Neither this Agreement nor any rights hereunder shall be assignable or otherwise subject to hypothecation without the consent of all parties hereto.

(c)      Entire Agreement; Amendment . This Agreement contains the entire understanding between the parties hereto with respect to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, with respect to the subject matter of this Agreement. This Agreement may not be amended or modified without the written consent of the Corporation and the Participant.

(d)      Counterparts . This Agreement may be executed simultaneously in any number of counterparts, each of which when so executed and delivered shall be taken to be an original and all of which together shall constitute one document.

(e)      Compliance with Corporate Policies . No payment or delivery will be made under this Agreement or the PRSP unless the Participant has fully complied with all policies of the Corporation, applicable to employees including but not limited to, the Corporation’s Corporate Guidelines for Business Conduct and Ethics.


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(f)      Clawback . The Participant acknowledges and agrees that the Participant will repay any Overpayment as defined in any “Clawback of Incentive Payments” letter agreement between the Corporation and the Participant and that any such letter agreement is incorporated by reference herein.

(g)      Definitions . Initially capitalized terms not otherwise defined in this Performance/Restricted Stock Agreement shall have the meanings ascribed thereto in the Incentive Plan.

IN WITNESS WHEREOF, the parties have executed this Performance/Restricted Stock Agreement as of the date first written above.


ALLEGHENY TECHNOLOGIES INCORPORATED


By:
 
Name:
  «Name»
Title:
«Title»


PARTICIPANT
 
WITNESS
 
 
 
«Name»
 
 



6

Exhibit 10.3

FORM OF TOTAL SHAREHOLDER RETURN
AWARD AGREEMENT

This Total Shareholder Return Award Agreement (the “Agreement”) is effective as of «Date» by and between ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation (the “Company”) and «Name» (the “Participant”).

WHEREAS, the Company has adopted the Allegheny Technologies Incorporated «Year» Incentive Plan (the “Plan”) and, in accordance with the Plan, has adopted Administrative Rules for the Long Term Performance Plan (“LTPP”);

WHEREAS, the Administrative Rules for the LTPP allow for the grant of opportunities to earn shares of Common Stock based on the Company’s relative Total Shareholder Return (“TSR”) to (i) assist the Company to retain and motivate key management employees; (ii) reward key management employees for the overall success of the Company; and (iii) provide a means of encouraging key management employees to acquire shares of Company Common Stock.

WHEREAS, the LTPP provides that each award made under the LTPP to be measured by relative TSR (a “TSR Target Award”) shall be evidenced by an Award Agreement (each a “TSR Award Agreement”) between the Company and the key management employee who receives a TSR Target Award under the LTPP setting forth the terms and conditions of such TSR Target Award;

WHEREAS, in consideration of the Restrictive Covenants and other good and valuable consideration, the Company desires to make a TSR Target Award to the Participant and evidence such TSR Target Award by this TSR Award Agreement and the Participant, having read and understood the Plan and the LTPP, is willing to enter into this TSR Award Agreement on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the covenants and agreements herein contained and intending to be legally bound, the parties hereto agree with each other as follows:

Subject to the attainment of the Performance Levels described below and to the terms and conditions of the Plan, the LTPP Administrative Rules and the Terms and Conditions of Award attached hereto and incorporated herein by reference, by which Participant agrees to be bound, the Company awards to Participant the TSR Award described below, with respect to the Performance Period described below:

PERFORMANCE PERIOD: «Date» through «Date».

TSR TARGET AWARD: «TSR_Shares_Awarded» of Company Common Stock, equals applicable base salary times «TSR_Award_Percent» (which is the Participant’s target award opportunity as a percent of salary) divided by $«Price» (which is the average of the high and low trading prices of stock for the thirty (30) trading days prior to «Date»).



PERFORMANCE LEVELS: The following table shows the performance award relationship under the TSR Award Agreements for the «Range of Years» performance period:
    
Outcome Relative to Peer Group TSR
Level of Performance
Three-Year Percentile
Ranking in TSR
Percent of Target
Award Earned
 
 
 
Below Threshold
Below 35 th  percentile
    0%
Threshold
35 th  percentile
  50%
Target
50 th  percentile
100%
Outstanding
90 th  percentile
200%

Note:   Interpolation between points will be made on a straight line basis on each scale.
Below the 35 th  percentile and above the 90 th  percentile, there will be no extrapolation.

THE NUMBER OF SHARES DELIVERED UNDER THIS TSR AWARD AGREEMENT WILL EQUAL THE TSR TARGET AWARD TIMES THE APPLICABLE PERCENT OF ACTUAL ACHIEVEMENT OF THE TSR PERFORMANCE LEVEL. NO AWARD SHALL BE DELIVERED UNLESS THE PARTICIPANT HAS FULLY COMPLIED WITH ALL CORPORATION POLICIES, INCLUDING, BUT NOT LIMITED TO, THE COMPANY’S CORPORATE GUIDELINES FOR BUSINESS CONDUCT AND ETHICS, THE RESTRICTIVE COVENANTS AND THE CLAWBACK POLICIES AND AGREEMENTS.

IN WITNESS WHEREOF, the parties hereto have executed this Total Shareholder Return Award Agreement effective the day and year first above written.

ALLEGHENY TECHNOLOGIES INCORPORATED


By:
 
Name:
  «Name»
Title:
«Title»


PARTICIPANT
 
WITNESS
 
 
 
«Name»
 
 
                    

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TERMS AND CONDITIONS OF TSR AWARD

Section 1: Definitions

Capitalized words used but not defined below or elsewhere in these Terms and Conditions shall have the meanings ascribed to them in the Plan.

“ Administrative Rules ” or “ LTPP ” shall mean the Administrative Rules for the LTPP adopted by the Committee effective «Date», as the same may be amended from time to time.

“ Award ” or “ TSR Award ” shall mean the grant of a TSR Target Award evidenced by this Award Agreement.

“ Award Agreement ” or “ TSR Award Agreement ” shall mean this agreement evidencing this grant under the LTPP Administrative Rules and the Plan of opportunities measured by TSR.

“ Committee ” means the Personnel and Compensation Committee of the Board of Directors.

“ Common Stock ” shall mean the common stock, $0.10 par value per share, of Allegheny Technologies Incorporated.

“ Company ” shall mean Allegheny Technologies Incorporated and its subsidiaries, unless the context requires otherwise.

“ Disability ” shall mean the total and permanent disability of Participant as determined by the Committee in its sole discretion.

“ Outstanding ” shall mean a relative standing of the Company’s TSR as against the TSR for the Peer Group, in each case for the TSR Performance Period, equal to or greater than 90%.

“ Performance Period ” or “ TSR Performance Period ” shall mean for this Award Agreement, the calendar years «Year», «Year» and «Year».

“Proof of Ownership” shall mean a certificate or certificates, electronic or book entry evidencing the number of shares of Common Stock determined by the Committee as the Participant’s TSR Awards for the Performance Period.

“ Peer Group ” shall mean the corporations listed on Exhibit 1 to this Award Agreement, subject to the adjustments to such group as permitted under the Administrative Rules.

“ Retirement ” means a termination of employment with the Company and each of its subsidiaries, with the consent of the Company, at or after (i) attaining age 55 and (ii) completing five (5) years of employment with the Company and/or any subsidiary of the Company.

“ Restrictive Covenants ” shall mean those covenants not to compete, not to solicit business or employees of the Company and not to disparage the Company, its officers, directors or employees, in each case for a period of no less than one (1) year after termination of employment for any reason as such Restrictive Covenants are more fully set forth herein.

“ Target ” shall mean a relative standing of the Company’s TSR as against the TSR of the Peer Group, in each case for the TSR Performance Period, of equal to or greater than 50% but less than 90%.


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“ Threshold ” shall mean a relative standing of the Company’s TSR as against the TSR of the Peer Group, in each case for the TSR Performance Period, of equal to or greater than 35% but less than 50%.

“TSR Performance Level ” means the measure of Company TSR performance relative to the Peer Group, as set forth on page 2 of this Award Agreement. In determining the final Performance Level, the Committee shall use straight-line interpolation between Threshold and Target, and between Target and Outstanding. No TSR Award will be earned for a Performance Level less than Threshold. No additional TSR Award above Outstanding will be earned for a Performance Level greater than Outstanding.

“ TSR Target Award ” means this grant of an opportunity to earn the number of TSR Shares at the Target Performance Level for the «Range of Years» Performance Period, but subject to actual achievement of the Performance Level.

Section 2: TSR Award

2.1      Subject to the attainment of the TSR Performance Levels and to the terms and conditions otherwise set forth in the Plan, the LTPP Administrative Rules and this Award Agreement, the Company awards to Participant the TSR Award described in the first two pages of this Award Agreement with respect to the Performance Period described therein.

Section 3: Delivery of TSR Awards

3.1      Subject to the withholding obligations and any requirements of Section 5 then applicable, the Company shall deliver to the Participant Proof of Ownership representing the TSR Awards, if any, for the TSR Performance Period within seventy-five (75) days after the end of the TSR Performance Period.

3.2      If the Participant terminates employment with the Company and each subsidiary of the Company during a then uncompleted TSR Performance Period for reasons other than death, Disability or Retirement, any TSR Target Award for any then uncompleted TSR Performance Period shall be forfeited automatically and the shares represented by such TSR Target Awards shall again be eligible for awards under the Rules.

3.3      If the Participant terminates employment with the Company and each Subsidiary of the Company during a then uncompleted TSR Performance Period due to the Participant’s death, Disability, or Retirement, a pro rata award determined by multiplying the number of TSR Shares set out in the Award Agreement by the Performance Level for the TSR Performance Period and then multiplying the result by a fraction, the numerator of which is the number of months the Participant was employed by the Company during the Performance Period and the denominator is 36. Any award determined to be payable shall be paid after the end of the applicable Performance Period.

Section 4: Restrictive Covenants

4.1      Non-Competition . For a period of one (1) year after the Participant’s termination of employment with the Company (including for this Section 4 any of the Company’s subsidiaries and affiliates) for any reason, the Participant will not directly or indirectly (i) serve as an owner, principal, partner, employee, consultant, officer, director or agent of an entity, including a sole proprietorship, that engages or is planning to engage in any business in which the Company is engaged in any market in which the Company is engaged at the time of the Participant’s termination of employment, including the production and delivery of specialty materials and products for the aerospace and defense, oil and gas/chemical process industry, electrical energy, medical, automotive, food equipment and appliance, and construction and mining markets (each such entity in such market is referred to as a “Competing Business”). Participant shall not be deemed to

4

be in violation of this covenant if the Participant is the owner of not more than 2% of a corporation the stock of which is traded on a recognized securities exchange.

4.2      Non-Solicitation of Customers. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant shall not, directly or indirectly, on behalf of a Competing Business solicit or attempt to divert the business or patronage of any business entity that has purchased specialty materials from the Company within two (2) years prior to the termination of the Participant’s employment and shall not assist any person or business entity in planning or making such a solicitation.

4.3      Non-Solicitation of Employees. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant will not solicit or assist another person or entity to solicit any person who consults with the Company or is employed by the Company to cease consulting with the Company or to leave the employ of the Company or to accept a consulting or other business relationship or employment with another person or entity, whether or not a Competing Business.

4.4      Non-Disparagement. For a period of one (1) year after the Participant’s termination of employment with the Company for any reason, the Participant shall not disparage the Company or its business, agents, servants, employees, officers or directors.

4.5      Confidentiality. For a period of three (3) years after the Participant’s termination of employment with the Company for any reason, the Participant shall not disclose, divulge or use any material non-public information of the Company, including, but not limited to, manufacturing processes, customer lists, marketing plans or procedure proprietary information and trade secrets.

4.6      Consideration and Remedies . The Participant recognizes and acknowledges that the opportunity to earn compensation or receive shares of Company Stock under this Agreement is adequate consideration for the covenants set forth in this Section 4. The Participant further acknowledges that the Company has no adequate remedy at law should the Participant violate or threaten to or attempt to violate any one or more of the covenants in this Section 4 and the Participant agrees that the Company is entitled to an injunction or other equitable relief restraining the Participant from violating or threatening to or attempting to violate any one or more of the covenants set forth in Section 4.

Section 5: Miscellaneous

5.1      General Restriction . To the extent any TSR Target Award is denominated in Common Stock under this Award Agreement, it shall be subject to the requirement that if at any time the Committee shall determine that any listing or registration of the shares of Common Stock or any consent or approval of any governmental body or any other agreement or consent is necessary or desirable as a condition of the issuance of shares of Common Stock or cash in satisfaction thereof, such issuance of shares of Common Stock may not be consummated unless such requirement is satisfied in a manner acceptable to the Committee. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action to cause the issuance of shares pursuant to the distribution of TSR Awards to comply with any law or regulation of any governmental authority.

5.2      Non-Assignability . No TSR Target Award granted under this Award Agreement shall be assignable or transferable by the Participant, except by will or by the laws of descent and distribution. During the life of the Participant, any TSR Awards shall be payable only to the Participant. No assignment or transfer of a

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TSR Target Award or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, and immediately upon such purported assignment or transfer, the TSR Target Awards shall terminate and become of no further effect.

5.3      Withholding Obligations . Whenever the Company makes delivery under the Plan, in whole or in part, the Company shall notify the Participant of the amount of withholding for tax, if any, which must be paid under federal and, where applicable, state and local law. The Company shall, in the discretion of the Company, but with the consent of the Committee, arrange for payment for such withholding for taxes in any one or combination of the following ways: (i) acceptance of an amount in cash paid by the Participant; or (ii) reduction in the number of shares to be issued by that number of shares which, in aggregate, have a value equal to such withholding amount. If the full amount of the required withholding is not recovered in the above manner, the Participant shall, forthwith upon receipt of notice, remit the deficiency to the Company. No shares of Common Stock shall be issued or delivered to the Participant (and/or the Participant's designee) until all applicable withholding obligations shall have been satisfied in full.

5.4      Delivery of Proof of Ownership . As soon as practicable after compliance by the Participant with all applicable conditions including, but not limited to, the satisfaction of the Withholding Obligations described in Section 5.3 hereof, the Company will issue and deliver by mail or electronic transfer, or cause delivery by mail or electronic transfer, to the Participant at the address of the Company’s records, Proof of Ownership registered in the name of the Participant (and/or the Participant's designee) for the number of shares of Common Stock which the Participant is entitled to receive (subject to reduction for withholding as provided in Section 5.3 hereof) under the provisions of this Award Agreement.

5.5      No Right to Employment . Nothing in the Plan or in this Award Agreement shall confer upon the Participant the right to continue in the employ of the Company or any subsidiary or affect any right that the Company or a subsidiary may have to terminate the employment of the Participant.

5.6      Amendment or Termination of the Plan . The Plan, or any part thereof (including the Administrative Rules) may be terminated or may, from time to time, be amended, each in accordance with the Plan or LTPP Administrative Rules, as applicable, provided, however, the termination or amendment of the Plan or the LTPP Administrative Rules shall not, without the consent of the Participant, affect Participant's rights under this Award Agreement.

5.7      Investment Representation . Under the federal and/or state securities laws, the Participant may be required to deliver, and, if so, shall deliver, to the Committee, upon demand by the Committee, at the time of any payment of Common Stock, a written representation that the shares to be acquired are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to delivery of any shares shall be a condition precedent to the right of the Participant to receive any shares.

5.8      No Rights as Shareholder . The Participant shall have no rights as a stockholder of the Company with respect to shares of Common Stock subject to the Award evidenced this Award Agreement unless and until Proof of Ownership for shares of Common Stock is issued to the Participant.

5.9      Adjustment of Award . In the event of any change or changes in the outstanding Common Stock of the Company by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares or any rights offering to purchase a substantial amount of Common Stock at a price substantially below fair market value or of any similar change affecting the Common Stock, any of which takes effect after the first grant of a TSR Target Award under this Award Agreement, the

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Committee may, in its discretion, appropriately adjust the number of shares of Common Stock which may be issued under this Award Agreement, the number of shares of Common Stock subject to TSR Target Awards under this Award Agreement and any and all other adjustments deemed appropriate by the Committee to prevent substantial dilution or enlargement of the rights granted to the Participant in such manner as the Committee shall deem appropriate. Any adjustment so made shall be final and binding upon the Participant.

5.10      Awards Not a Bar to Corporate Event . The existence of the TSR Target Awards granted hereunder shall not affect in any way the right or the power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

5.11      Not Income for Qualified Plans . No amounts of income received by a Participant pursuant to this Award Agreement shall be considered compensation for purposes of any pension or retirement plan, insurance plan or any other employee benefit plan of the Company or any of its affiliates.

5.12      Meaning of Participant . Whenever the word “Participant” is used in any provision of this Award Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the TSR Target Awards may be transferred by will or by the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

5.13      Determinations of Committee . The actions taken and determinations of the Committee made pursuant to this Award Agreement and of the Committee pursuant to the Plan and the LTPP Administrative Rules shall be final, conclusive and binding upon the Company and upon the Participant. No member of the Committee shall be liable for any action taken or determination made relating to this Award Agreement, the Plan or the LTPP Administrative Rules if made in good faith.


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Exhibit 1: List of Peer Companies («Range of Years» Performance Period)

«List of Peer Companies»


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Exhibit 10.4
















ALLEGHENY TECHNOLOGIES INCORPORATED
DEFINED CONTRIBUTION RESTORATION PLAN
As Amended and Restated as of
January 1, 2015















PURPOSE

The purpose of the Allegheny Technologies Incorporated Defined Contribution Restoration Plan is to restore to certain non-bargaining employees of Allegheny Technologies Incorporated and its subsidiaries and affiliates (collectively defined below as the “Company”) who participate in the Company’s Annual Incentive Plan (“AIP”) the value of the Company contributions and earnings thereon that would have been made to the qualified defined contribution plan in which the respective employees participate except for the limitations imposed on qualified defined contribution plans by Sections 401(a)(17), 401(k), 401(m), 402(g) or 415, or any other or successor section, of the Internal Revenue Code of 1986, as amended, by supplementing, on an unfunded basis, amounts payable under such qualified plans with amounts to be paid under this Plan.

Certain affiliates of the Company sponsored and maintained the Allegheny Technologies Incorporated Benefit Restoration Plan (defined below as the “Prior Plan”) for several years with regard to certain affiliates’ defined benefit and defined contribution plans (as defined in the Prior Plan, the “Defined Benefit Portion” and the “Defined Contribution Portion,” respectively). Effective December 31, 2014, with respect to all employees who are not members of collective bargaining units, the Company (i) froze accruals for all participants under the qualified defined benefit pension plans and (ii) standardized Company defined contribution formulas.

In addition, the Company took affirmative action to freeze defined benefit accruals under the Prior Plan and to clarify that the Defined Benefit Portion prohibits distributions in the form of a lump sum if the lump sum is an amount greater than $1,000. Otherwise, the Prior Plan shall remain in effect to the extent necessary to govern accrued but unpaid benefit obligations under the Defined Benefit Portion as well as payment times and forms of such accrued but unpaid defined benefit obligations.

From and after January 1, 2015, this Plan document governs the terms and conditions of the restoration for eligible participants of amounts that could not, prior to January 1, 2015, or cannot thereafter be contributed under the qualified defined contribution plans. As amended and restated, this Plan continues without change the timing and form of distribution of the Defined Contribution Portion of the Prior Plan and continues that timing and form of distribution for accruals on or after January 1, 2015.

     As amended and restated, the eligible participants are those who had a balance under the Defined Contribution Portion of the Prior Plan and, on and after January 1, 2015, are employees who are not members of a collective bargaining unit and who participate in the Company’s AIP. For each eligible individual who is affected by the limitations, his or her benefit under this Plan shall be the sum of (i) that individual’s benefit under the Defined Contribution Portion of the Prior Plan as of December 31, 2014, (ii) the sum of any Company contributions which cannot be made on or after January 1, 2015 because of the limitations and (iii) earnings on and after January 1, 2015 on (i) and (ii) above.     


        

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ARTICLE I. DEFINITIONS

1.01.      “ Account ” shall mean, with regard to the defined contribution amounts for each Participant, the unfunded bookkeeping account established by the Administrator to record the sum of all contributions made and earnings credited, including undistributed amounts credited under the Defined Contribution Portion of the Prior Plan, with respect to that Participant due to the Limitations as applied from time to time on the applicable Defined Contribution Plan.

1.02.      “ Administrator ” shall mean the person or committee appointed by the Company for such purpose under Article VI.

1.03.      “ AIP ” shall mean the Company’s Annual Incentive Plan, that is, the Company’s bonus plan that calculates bonuses based on achievements of predetermined goals and measured over a period of one year or its successor plan as may be in effect from time to time.

1.04.      “ Code ” shall mean the Internal Revenue Code of 1986, as the same shall be amended from time to time.

1.05.      “ Company ” shall mean, collectively, Allegheny Technologies Incorporated and its subsidiaries and affiliates.

1.06.      “ Company Retirement Contribution ” shall mean the periodic contribution made to a Participant’s account under the applicable Defined Contribution Plan whether or not the Participant defers any Compensation or otherwise contributes to the Plan determined by multiplying the percentage specified in the Defined Contribution Plan by the Participant’s Compensation.

1.07.      “ Compensation ” shall mean compensation as defined in the applicable Defined Contribution Plan without regard to the Limitations.

1.08.      “ Defined Contribution Plan ” shall mean, with respect to a particular Employee, the qualified defined contribution plan sponsored by the Company or any of its subsidiaries or affiliates in which the Employee participants at a relevant time.

1.09.      “ Deferrals ” shall mean the amount of pre-tax (or Roth after-tax) contributions determined by multiplying a Participant’s Compensation for a relevant period by the percentage of deferral authorized for that period by the Participant as a deferral under the applicable Defined Contribution Plan.

1.10.      “ Disability ” shall mean a Participant’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.

1.11.      “ Employee ” shall mean any employee of the Company or of any subsidiary or affiliate of the Company who, as of the time he or she is affected by the Limitations, participates in the Company’s Annual Incentive Plan and is not a member of a collective bargaining unit.

1.12.      “ Limitations ” shall mean any limitation with respect to a qualified defined contribution plan, within the meaning of Section 401(a) of the Code, sponsored by the Company or any subsidiary or affiliate on the amount of contributions or the accrual or payment of benefits to or on behalf of a Participant as imposed under Section 401(a)(17), Section 401(k), Section 401(m), Section 402(g), Section 415 and/or under any other or successor Section of the Code.

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1.13.      “ Matching Contributions ” shall mean the contributions made by the Company on the condition and to the extent the Employee makes contributions to the qualified defined contribution plan.

1.14.      “ Participant ” shall mean any Employee who meets the conditions for participation set forth in Article III and has a balance to his or her credit under the Plan.
        
1.15.      “ Plan ” shall mean this Allegheny Technologies Incorporated Defined Contribution Restoration Plan, as amended and restated effective January 1, 2015.

1.16.      “ Prior Plan ” shall mean the Allegheny Technologies Incorporated Benefit Restoration Plan as in effect December 31, 2014. The provisions of the Prior Plan shall survive this amendment and restatement to the extent necessary to govern the amount and payment of benefits accrued under the terms of the Prior Plan on or before December 31, 2014.

1.17.      “ Separation from Service ” shall mean, with respect to a particular Employee, his or her death, Disability, retirement or termination of employment. For purposes of this definition, a Participant shall be deemed to have a termination of employment if his or her circumstances indicate that that the employer and employee reasonably anticipate that no further services would be performed after a certain date or that the level of bona fide services the employee would perform after that date would permanently decrease to no more than 20% of the average level of bona fide services provided over the previous thirty-six (36) months.

1.18.      “ Specified Employee ” shall mean a person who is a key employee of the Company, as defined in Section 416(i)(1)(A)(i), (ii) or (iii) (applied in accordance with the regulations thereunder and disregarding Section 416(i)(5)), and which generally includes the fifty (50) highest paid employees of the Company, at any time during the twelve (12) month period preceding his or her Separation from Service.

        

ARTICLE II. EFFECTIVE DATE OF AMENDMENT AND RESTATEMENT; SURVIVAL OF PROVISIONS OF THE PRIOR PLAN

2.01.      Effective Date of Amendment and Restatement . The Effective Date of this Plan as amended and restated is January 1, 2015. As amended and restated, this Plan document shall govern the accrual, credit and distribution of the sum of (i) the Defined Contribution Portion as defined in the Prior Plan and in effect on December 31, 2014 and (ii) the amount credited to each Participant’s Account on or after January 1, 2015.

2.02.      Survival of Prior Plan . The terms, conditions and provisions of the Prior Plan shall remain in effect to the extent of the Defined Benefit Portion (as defined in the Prior Plan) and to the extent necessary to determine the amount of any benefit accrued as of
December 31, 2014 and the times and forms of payment of those benefits, provided, however, if an Employee is a Specified Person, as defined in Section 409A of the Code, at the time for distribution from this Plan or the Prior Plan even if not a Specified Person at the time of the benefit was accrued, such Employee shall not receive such distribution until the end of the month which is six months after the end of the month in which the distribution would otherwise have been made and, provided further, in no event shall any distribution of the Defined Benefit Portion of the Prior Plan be made in a lump sum if it has a lump sum value greater than $1,000.


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ARTICLE III. PARTICIPATION

3.01.      Individuals Eligible to Participate . To be eligible to participate and receive contribution credits under this Plan, an individual is required to be, at the time he or she is affected by the Limitations:

(a)      employed by the Company or a subsidiary or affiliate of the Company;

(b)      a participant in the Company’s Annual Incentive Plan or its successor; and

(c)
not be a member of a collective bargaining unit.

3.02.      Contributions by Participants . Participants shall not be permitted to make contributions in any form to this Plan.

ARTICLE IV. RESTORATION OF BENEFITS

4.01.      Restoration . The applicable, if any, of the following amounts shall be credited to a Participant's Account:

(a)
Restoration of Matching Contributions. For each calendar year beginning on or after the Effective Date, the Company will credit to the Account of a Participant the difference between (i) the amount the Company would have contributed as Matching Contributions at the rate of deferrals elected by the Participant and actually in effect without regard to the Limitations and (ii) the amount the Company actually contributed as Matching Contributions at the rate of deferral actually elected by the Participant after giving effect to the Limitations. For purposes of determining the amount of restoration under this Section 4.01(a), the Administrator shall take into account changes in the rate of deferrals and the resulting effect on the rate of Matching Contributions both before and after the effect of the Limitations during the calendar year.

(c)
Restoration of Company Retirement Contributions. For each calendar year, the Company will credit to the Account of a Participant the difference between (i) the amount that the Company would have contributed as Company Retirement Contributions based on the Participant’s Compensation without regard to the Limitations and (ii) the amount the Company actually contributed as Company Retirement Contributions based on the Participant’s Compensation after giving effect to the Limitations.

4.02.      Earnings . Balances in a Participant's Account shall be credited with earnings as of the last day of each calendar year at the rate then in effect under the Stable Value Fund option in the Defined Contribution Plan, or a similar, alternative fund as elected by the Administrator from time to time after thirty (30) days’ notice to then Participants.

4.03.      Accounting . The Administrator shall establish on its records, for bookkeeping purposes, an account for each Participant receiving credits to record the amount credited as contributions under each subsection of Section 4.01 and earnings, if any, pursuant to Section 4.02. The Administrator shall post any contributions and earnings to such bookkeeping Account as soon as reasonable but no later than the March 15 th of the calendar year next following the calendar year in which the Limitations affected contributions to the Participants accounts in the Defined Contribution Plan. The Administrator shall

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respond to any inquiry of any Participant concerning the status of his account within thirty (30) days of receipt thereof.

4.05.      No Withdrawals or Loans . No withdrawals of or loans against any balance in an Account under the Plan may be made at any time by a Participant.

ARTICLE V. PAYMENT OF ACCOUNT

5.01.      Payment of Account .

(a)
Death. Except for Specified Employees, in the event of a Participant's death, the then balance in his or her Account (including any Company contributions for such calendar year pursuant to Section 4.01, whether or not then actually made, net of withholding of applicable federal, state and local taxes) shall be distributed in a single cash payment to his beneficiary designated pursuant to the applicable Defined Contribution Plan, as soon as administratively feasible after the Administrator receives notice of such death but in no event later than the March 15 th of the calendar year following the end of the calendar year in which such death occurred.

(b)
Disability, Retirement or Other Severance from Service. Except for Specified Employees, in the event of the Participant's Disability, Retirement or other severance from service, the then balance in his or her Account (including Company contributions for such calendar year pursuant to Section 4.01, whether or not then actually made, net of withholding or applicable federal, state and local income tax) shall be distributed in a single cash payment to the Participant as soon as administratively feasible after the Administrator receives notice of such event but in no event later than the March 15 th of the calendar year next following the calendar year in which such Disability, retirement or other separation from service occurred.

(c)
Specified Employees. Notwithstanding the foregoing, no distribution shall be made to any Participant who, at the time the distribution is otherwise due a Specified Employee until the date that is six (6) months after the date described in the applicable of subsections (a) and (b) above.

ARTICLE VI. ADMINISTRATION

The Plan shall be administered by the Administrator appointed for such purpose by the Company who shall have the power and duty to interpret the Plan and to make such rules and regulations as the Administrator, in its discretion, shall deem appropriate. The Administrator may retain such experts, consultants, or advisors as it, in its discretion deems necessary or appropriate to the administration of the Plan and/or may delegate to the Company or to employees of the Company such duties as it may deem necessary or appropriate. Any determination of the Administrator shall be final, conclusive and binding for all parties.

ARTICLE VII. AMENDMENT AND TERMINATION

The Company or its designee shall have the right to amend or terminate this Plan at any time, provided, however , that no amendment shall be made which would have the effect of decreasing the amount payable to any Participant hereunder.


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ARTICLE VIII. ASSIGNMENT

No benefit or other right under or created by this Plan shall be assignable by any Participant or the Participant's beneficiary by pledge or otherwise. Any attempt to assign, pledge or otherwise dispose of or anticipate benefits under this Plan shall be void.

ARTICLE IX. BENEFITS UNFUNDED

The benefits provided under this Plan shall be unfunded. All payments of benefits hereunder shall be made by the Company from general assets and the Company will not be obligated to establish any special or separate fund or make other segregation of assets to assure the payment of any benefits hereunder. In the event the Company establishes any fund or segregation, no party who is or becomes entitled to receive amounts hereunder shall have any right to assert any claim, levy or lien thereon or assert any right thereto unless such right is specifically set forth in writing. The rights of any party to receive payments of any benefits hereunder shall be no greater than the rights of an unsecured creditor of the Company.

ARTICLE X. ERISA

The Plan is an unfunded, non-qualified deferred compensation plan that benefits a select group of highly compensated employees, within the meaning of DOL Reg. 2520. As such, it is exempt from the reporting and disclosure rules of ERISA. The Administrator shall promptly distribute to each Participant who inquires a copy of this Plan document (and the Prior Plan, to if the Participant has a balance under the Prior Plan not taken into Account). The Administrator shall also follow the claims and appeals process set forth in this Section.

ARTICLE XI. MISCELLANEOUS

11.01.      Applicable Law . This Plan shall be governed by, and construed in accordance with, the law of the Commonwealth of Pennsylvania, except with regard to its principles of conflicts of laws or to the extent that the law of the Commonwealth of Pennsylvania shall have been specifically preempted by federal law.

11.02.      Incapacity of Recipient of Benefits . If any person entitled to receive benefits hereunder shall be physically or mentally incapable of receiving or acknowledging receipt of any payment of benefits, the Company, upon the receipt of satisfactory evidence that such incapacitated person is so incapacitated and that another person or institution is maintaining him or her and that no guardian or committee has been appointed for him or her, may provide for such payment of benefits hereunder to such person or institution maintaining him or her, and such payments so made shall be deemed for every purpose to have been made to such incapacitated person.

11.03.      Liability of Officers and Directors of the Company . No past, present or future officer or director of the Company shall be personally liable to any Participant, beneficiary or other person under any provision of this Plan.

11.04. Assets Owned by the Company . Nothing contained herein shall be deemed to give any Participant or his beneficiary any interest in any specific property of the Company or any right except to receive such distributions as are expressly provided for in this Plan.

11.05.      Withholding . The payment of any benefits under this Plan shall be net of any federal, state and local taxes which the Company is required to withhold.

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11.06.      Meaning of Certain Words . As used herein any gender shall include all other genders and the singular shall include the plural and the plural shall include the singular in all cases where such meaning would be appropriate. The terms “herein”, “hereto”, “hereunder”, and the like shall be deemed to refer to this Plan as a whole and not to any particular paragraph or other subdivision of this Plan.


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Exhibit 10.5

ALLEGHENY TECHNOLOGIES INCORPORATED
2015 INCENTIVE PLAN
ADMINISTRATIVE RULES FOR THE
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PROGRAM
Effective as of May 1, 2015

Article I. Adoption and Purpose of the Program
1.01 Adoption. These administrative rules were initially adopted by the Nominating and Governance Committee of the Board of Directors as a part of the Allegheny Technologies Incorporated 2015 Incentive Plan, as amended (the “Plan”) pursuant to the authority reserved in Section 3.1 of the Plan. This Non-Employee Director Restricted Stock Program (the “Non-Employee Director Restricted Stock Program”) is part of the Non-Employee Director Compensation Program, as approved by the Board of Directors on December 5, 2014 and effective January 1, 2015, (the “Non-Employee Director Compensation Program”) and shall be the guidelines for making certain automatic grants of Restricted Stock under Article VII of the Plan and administering the grants once made.
1.02 Purpose. The purposes of the Non-Employee Director Restricted Stock Program are (i) to assist the Company in retaining non-employee Directors of the Company who will contribute independent judgment and business experience to the success of the Company, (ii) to provide a means of encouraging non-employee Directors to acquire and hold shares of Company Common Stock and (iii) provide an opportunity to non-employee Directors to share in the growth of the Company achieved during their respective tenures as Directors.
Article II. Definitions
For purposes of these administrative rules, the capitalized terms set forth below shall have the following meanings. Capitalized terms used but not defined in these administrative rules shall have the same meanings as in the Plan.
2.01 Award Agreement means a written agreement between the Company and a Participant or a written acknowledgment from the Company specifically setting forth the terms and conditions of a Restricted Stock Award granted to a Participant pursuant to Article VI of these administrative rules, which terms and conditions may be set forth by incorporation of these administrative rules.
2.02 Board means the Board of Directors of the Company.
2.03 Business Day means any day on which the New York Stock Exchange shall be open for trading.
2.04 Cause means a determination by the Committee that a Participant has engaged in conduct that is dishonest or illegal, involves moral turpitude or jeopardizes the Company’s right to operate its business in the manner in which it is now operated.
2.05 Change in Control means Change in Control as defined in the Plan.
2.06 Committee means the Nominating and Governance Committee of the Board.
2.07 Company means Allegheny Technologies Incorporated, a Delaware corporation, and its successors.
2.08 Company Voting Securities means the combined voting power of all outstanding voting securities of the Company entitled to vote generally in the election of the Board.
2.09 Date of Grant means the Business Day as of which a Restricted Stock Award is granted in accordance with Article VI of these administrative rules.
2.10 Disability means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months or is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.


2.11 Effective Date means May 1, 2015, upon approval by the stockholders of the Company of the Plan.
2.12 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.13 Fair Market Value means, on any date, the average of the high and low quoted sales prices of a share of Common Stock, as reported on the Composite Tape for the New York Stock Exchange Listed Companies, on such date or, if there were no sales on such date, on the last date preceding such date on which a sale was reported.
2.14 Non-Employee Director Compensation Program shall have the meaning set forth in Section 1.01 of these administrative rules.
2.15 Non-Employee Director Restricted Stock Program shall have the meaning set forth in Section 1.01 of these administrative rules.
2.16 Outstanding Stock means, at any time, the issued and outstanding Common Stock.
2.17 Participant means all persons elected and qualified as non-employee Directors eligible to participate in and receive Restricted Stock Awards under Articles V and VI of these administrative rules.
2.18 Plan means the Allegheny Technologies Incorporated 2015 Incentive Plan, as may be amended from time to time.
2.19 Retirement means a cessation of membership on the Company’s Board of Directors for reasons other than Cause with the consent of the Board after rendering no less than one term of service as a non-employee Director.
2.20 Restricted Period means absent a different period set forth by the Committee with respect to a Restricted Stock Award, the period beginning on the Date of Grant and ending on the third anniversary of the Date of Grant.
2.21 Restricted Stock means shares of Common Stock subject to the restrictions set forth in these administrative rules or in an Award Agreement.
2.22 Restricted Stock Award means a grant of Restricted Stock under Article VI of these administrative rules.
2.23 Common Stock means Common Stock, par value $0.10 per share, of the Company.
2.24 Withholding Obligations means the amount of federal, state and local income and payroll taxes if any the Company determines in good faith must be withheld with respect to the vesting of a Restricted Stock Award. Withholding Obligations may be settled by the Participant, as permitted by the Committee in its discretion, in shares of Common Stock, cash, previously owned shares of Stock or any combination of the foregoing.
Article III. Administration
In addition to any power reserved to the Committee under Article III of the Plan, the Non-Employee Director Restricted Stock Program shall be administered by the Committee, which shall have exclusive and final authority and discretion in each determination, interpretation or other action affecting the Non-Employee Director Restricted Stock Program and its Participants. The Committee shall have the sole and absolute authority and discretion to interpret the Non-Employee Director Restricted Stock Program, to modify these administrative rules for the Non-Employee Director Restricted Stock Program under and make such other determinations in connection with the Non-Employee Director Restricted Stock Program as it may deem necessary or advisable. It is the intent of these administrative rules and of the Committee in adopting these administrative rules to have the Non-Employee Director Restricted Stock Program to operate as automatically and without exercise of discretion except to the extent necessary to supplement the administrative rules.
Article IV. Stock Issuable under the Non-Employee Director Compensation Program
4.01 Number of Shares of Stock Issuable. The Stock to be offered under the Non-Employee Director Restricted Stock Program shall be authorized and unissued Stock, or Stock which shall have been reacquired by the Company and held in its treasury.
4.02 Shares Subject to Terminated Awards. Shares of Restricted Stock forfeited as provided in Section 6.03 of these administrative rules may again be issued under the Non-Employee Director Restricted Stock Program.
Article V. Participation
5.01 Participants. Participants in the Non-Employee Director Restricted Stock Program shall be non-employee Directors of the Company. Each non-employee Director shall be automatically eligible for participation in this Non-Employee Director Restricted Stock Program immediately upon such person’s election and qualification as a non-employee Director. No designation shall be required in order for a non-employee Director to be or become eligible for participation or to participate in

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this Non-Employee Director Restricted Stock Program. Each Participant shall be eligible for grants of Restricted Stock as of the next scheduled grant date as provided by the Non-Employee Director Restricted Stock Program. Upon a person’s election and qualification as a non-employee Director, the Committee shall promptly provide to each such person these administrative rules and confirm the person’s eligibility to participate in the Non-Employee Director Restricted Program.
Article VI. Grants under the Non-Employee Director Compensation Program
6.01 Automatic Grants. Participants shall be automatically entitled to grants of shares of Restricted Stock as determined under these administrative rules. The Committee (or its designee, who may be an employee of the Company) shall promptly document each automatic grant in an Award Agreement and/or shares of Common Stock bearing a legend limiting the sale thereof. However, any delay in the documentation of an automatic grant shall not diminish the Participants rights thereto.
6.02 Determination of Grants. Each Participant shall be entitled to and shall receive a grant of a Restricted Stock Award with a value, determined using the Fair Market Value on the Date of Grant, equal to $100,000 (or such other amount as the Board may determine from time to time) in each calendar year.
(a) For continuing non-employee directors, grants shall be made once annually on the second Business Day after the date on which the annual meeting of stockholders is held, or if no such meeting is held, at such other time as the Board or the Committee may determine. The number of shares granted shall be determined by dividing $100,000 (or the rate then in effect) by the Fair Market Value on the Date of Grant, rounded to the next greater whole number share.
(b) For a non-employee director who joins the Board, the value of the Restricted Stock Award to be granted to such director shall be $100,000 (or the rate then in effect) multiplied by the fraction consisting of the number of months to be served in that calendar year divided by twelve. The number of shares granted shall be determined by dividing such amount by the Fair Market Value on the Date of Grant, rounded to the next greater whole number share. In this instance, the Date of Grant shall be the later of the date that the non-employee director joins the Board or the second Business Day after the date of the annual meeting for the then-current calendar year.
Article VII. Determination of Performance Reward Criteria and Delivery of Stock
7.01 Restrictions. Unless the Committee provides for additional restrictions:
(a) None of the Restricted Shares may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period and any attempt to sell, transfer, assign, pledge or otherwise encumber or dispose of the shares of Restricted Stock shall automatically and without further action by the Committee cause the Restricted Stock Award and shares of Restricted Stock evidenced thereby to be forfeited; (b) the shares of Restricted Stock shall be forfeited without further action of the Committee or the Company if the Participant ceases to be a member of the Board of Directors for reasons other than those permitted under Section 7.02 of these administrative rules and (c) the Restricted Stock shall be held in the custody of the Company or its designee until such time as the Restricted Period shall have been completed. The shares of Restricted Stock shall bear the following legend:
THE TRANSFERABILITY OF THESE SHARES IS SUBJECT TO THE TERMS AND CONDITIONS SET OUT IN ADMINISTRATIVE RULES FOR THE NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PROGRAM PROMULGATED UNDER THE ALLEGHENY TECHNOLOGIES INCORPORATED 2015 INCENTIVE PLAN. A COPY OF THOSE ADMINISTRATIVE RULES IS ON FILE AT THE OFFICE OF THE COMPANY.
7.02 Vesting of Restricted Stock. The Restricted Period will end and shares of Restricted Stock shall vest and become the property of each Participant at the end of the Restricted Period of that Restricted Stock Award, provided the Participant is then a member of the Board of Directors or if earlier upon the death, Disability or Retirement of the Participant.
7.03 Delivery of Shares . Except as may be provided by the Committee or elected by a Participant pursuant to this Section 7.03, shares without restrictive legends shall be delivered to the Participant as promptly as possible after the end of the Restricted Period with respect to a restricted Stock Award. If, in the reasonable judgment of the Committee or its designee, the Company has Withholding Obligations with respect to a particular Restricted Stock Award, the shares without the restrictive legend shall not be delivered to the Participant unless or until the Withholding Obligations are satisfied in a manner acceptable to the Committee. All shares without restrictive legends shall be delivered to the Participant by placing such shares or causing such shares to be placed in the U.S. mail, postage prepaid, to the address indicated by the Participant.
Article VIII. Miscellaneous
8.01 Application of Provisions of Plan . Except as set forth in these administrative rules, the provisions of the Plan shall apply to these administrative rules and are incorporated herein as if set forth at length.

3

8.02 Change in Control. In the event of a Change in Control, all then uncompleted Restricted Periods shall end and the Restricted Stock shall vest immediately coincident with the Change in Control. In addition, shares for which a Participant elected a deferral of delivery under Section 7.03 shall be delivered to the Participant coincident with the Change in Control. The intent of this provision is to permit and facilitate the Participant’s ability to deliver shares for sale or exchange in connection with that Change in Control.
8.03 Securities Laws Restrictions. Any Restricted Stock Award denominated in Common Stock shall be subject to the requirement that if at any time the Committee shall determine that any listing or registration of the shares of Common Stock or any consent or approval of any governmental body or any other agreement or consent is necessary or desirable as a condition to the granting of a Restricted Stock Award or issuance of shares of Common Stock or cash in satisfaction thereof, such grant of an award or issuance of shares of Common Stock may not be consummated unless such requirement is satisfied in a manner acceptable to the Committee. It is intended, unless the Committee determines otherwise, that the Non-Employee Director Restricted Stock Program complies with Rule 16b-3 as issued by the Securities and Exchange Commission. All interpretations of the Non-Employee Director Restricted Stock Program relating to Statutory Insiders shall be consistent with that Rule 16b-3 and the Exchange Act. In order to maintain compliance with any of Rule 16b-3 or the Exchange Act, the Committee may adopt such other administrative rules or provide restrictions on outstanding Restricted Stock Awards as it in its discretion shall deem necessary and such administrative rules or restrictions shall apply to outstanding Restricted Stock Awards as if set forth in these administrative rules or an applicable Award Agreement.
8.04 Investment Representation. By accepting a Restricted Stock Award, each Participant shall agree that the shares acquired in connection with that Restricted Stock Award are acquired for investment and not for resale or with a view to the distribution thereof and, upon demand, each Participant shall deliver to the Committee a written representation to that effect in a form and substance satisfactory to the Committee. Upon demand, delivery of such representation prior to the delivery of shares of Stock shall be a condition precedent to the Participant’s right to receive such shares of Stock.
8.05 Rights as Stockholders . Participants shall have all of the rights of stockholders of the Company with respect to all shares subject to an Award Agreement except for the right to receive dividends, whether in cash or Common Stock, when paid to other stockholders prior to the lapse of all restrictions on the Restricted Shares, provided, however, that any cash or Common Stock distributed as a dividend or otherwise with respect to any Restricted Shares as to which restrictions have not then lapsed shall be subject to the same restrictions as described in Section 7.02 and held or restricted as provided in Section 7.01 until such restrictions lapse.
8.06 Non-Uniform Determinations. The actions and determinations of the Committee need not be uniform and may be taken or made by the Committee selectively among employees or Participants, whether or not similarly situated.
8.07 Amendment and Termination of Administrative Rules. The Committee shall have complete power and authority to amend or terminate these administrative rules at any time it is deemed necessary or appropriate. No termination or amendment of the administrative rules may, without the consent of the Participant to whom any award shall theretofore have been granted under the Non-Employee Director Compensation Program, adversely affect the right of such individual under such award; provided, however , that the Committee may, in its sole discretion, make such provision in the Award Agreement for amendments which, in its sole discretion, it deems appropriate.
* * * * * * * * * * * * * *


4


Exhibit 12.1
Allegheny Technologies Incorporated
Computation of Ratio of Earnings to Fixed Charges
(Dollars in millions)
(Unaudited)
 
Three Months Ended
 
March 31, 2015
Income from continuing operations before income tax benefit and cumulative effect of change in accounting principle
$
20.6

Loss recognized on less than fifty percent owned persons
0.2

Noncontrolling interest in the income of subsidiary with fixed charges
(2.6
)
 
$
18.2

Fixed Charges:
 
Interest expense
$
26.5

Portion of rents deemed to be interest
1.8

Capitalized interest
0.6

Amortization of debt expense
0.4

Fixed charges excluding capitalized interest
29.3

Earnings adjustments:
 
Capitalized interest
(0.6
)
Earnings, as adjusted
$
46.9

Ratio of earnings to fixed charges
1.6







Exhibit 31.1
CERTIFICATIONS
I, Richard J. Harshman certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Allegheny Technologies Incorporated;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 4, 2015
 
/s/ Richard J. Harshman
Richard J. Harshman
Chairman, President and Chief Executive Officer




Exhibit 31.2
CERTIFICATIONS
I, Patrick J. DeCourcy certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Allegheny Technologies Incorporated;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2015
 
/s/ Patrick J. DeCourcy
Patrick J. DeCourcy
Senior Vice President, Finance and Chief Financial Officer




Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Allegheny Technologies Incorporated (the “Company”) on Form 10-Q for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


 
Date:
May 4, 2015
 
/s/ Richard J. Harshman
 
 
 
Richard J. Harshman
 
 
 
Chairman, President and Chief Executive Officer
 
 
 
Date:
May 4, 2015
 
/s/ Patrick J. DeCourcy
 
 
 
Patrick J. DeCourcy
 
 
 
Senior Vice President, Finance and Chief Financial Officer