Allegheny Technologies Incorporated NYSE: ATI May 3, 2009 By: John Ortelle

What ATI Does Allegheny Technologies aims to build “The best specialty metals company in the world.” ATI is a manufacturer of specialty metals, including flat rolled metals, high performance metals and engineered products. Markets served include: aerospace, defense, oil and gas, nuclear energy, chemical process industry, automotive, construction, and medical.

Allegheny Technologies Allegheny Technologies is a diversified specialty metals producer with a growing global reach; ATI has production facilities in North America, Europe, and Asia. 30% of ATI sales are international; this percentage has grown in recent years because of a concentrated strategy by the firm to become more globally diversified.

ATI 1 Year Price Chart

Five Forces Suppliers: Raw material commodities. Customers: Many large organizations with bargaining power such as Boeing, the US gov’t and large oil and gas companies. Threat of new entrants: Large capital outlay required to enter market. Threat of Substitutes: No real substitute for specialty metals in most applications. Rivalry: Fairly intense rivalry between firms; ATI is one of the the largest and is attempting to differentiate through quality measures and large product offering.

SWOT Analysis Strengths: $506m cash $400m untapped domestic credit facility Two new production facilities opening in ’09 Well diversified customer base Total cash on hand exceeds total debt: $506m to $503.5m Planned cost reductions in ’09 of $150m Weaknesses: Soft demand for most products Sensitivity to economy Lower profit margins due to raw materials mismatch charges of $60m in 1Q ’09. Will continue with $20m in charges in 2Q ’09.

SWOT Analysis Opportunities: Can take advantage of stimulus plans in the U.S. and China U.S. DOD report calls for more ground combat and support vehicles– ATI can benefit by providing armor and metal for frames Can take advantage of low raw materials costs If economy recovers, ATI is in position to return to higher levels of profitability Only 30% of sales international; room to expand. Threats: Weak economy may not recover for some time Future inflation may drive raw material costs up Pricing environment may worsen due to competition Weak demand may lead to reduction in capital expenditures. Schedule pushouts in the aerospace industry may continue in the short term.

Selected Statistics 2008 Allegheny Technologies Price$33.40 Market Cap$3,255m Revenues$5,310 m EPS (2008)5.55 Profit Margin10.70% P/E (ttm)7.7x P/CF3.6x P/Sales0.7x P/ Tang. Book1.9x EV per share33.19 EV/EBITDA3.29 Current Ratio2.78 Quick Ratio1.5 Asset TO1.27 ROA13.6% ROE28.9% Debt/Equity0.26 Dividend per share$0.72 Dividend yield2.20% Payout Ratio16.72%

Competitor Comparison NameAllegheny Technologies Inc. Carpenter Technology Corp. IndustryIndustrial Metals Current Share Price Market Value$3,255 mil$911 mil Revenues$5,310 mil$1,831 mil Net Earnings$566 mil$220 mil Price/Sales Price/Cash Flow Price/Book ROE28.9%28.1% ROA13.6%13.4%

Time Series Comparison

PRIOR YEAR CASHFLOW YEAR GROWTH RATE 0.2 CASH FLOW DISCOUNT RATE AS DECIMAL (.00) 0.15 DISCOUNT FACTOR ( DISCOUNTED VALUE PER ANNUM SUM OF PRESENT VALUE OF CASHFLOWS RESIDUAL VALUE CASHFLOW IN YEAR GROWTH RATE AS DECIMAL (.00) (g) 0.04 CASHFLOW IN YEAR CAPITALIZATION RATE (k - g) 0.11 VALUE AT THE END OF YEAR DISCOUNT FACTOR YEAR PRESENT VALUE OF RESIDUAL $2, INTRINSIC VALUE (MILLIONS) $4, NUMBER OF SHARES: 97,450,00 0 INTRINSIC VALUE PER SHARE $43.85 INTRINSIC(PER SHARE)/MARKET FIRST 10 YEAR GROWTH RATE: 20.00% 2ND PERIOD GROWTH RATE: 4.00% DISCOUNT RATE: 15.00%

1Q 2009 Results ATI beat analysts’ expectations, reporting an EPS of $.06 per share. Suffered from soft demand in most markets, as well as $60 m out of phase raw materials charges– as a result of the drop in prices over the past few months. Revenues and profits suffered as a result of terrible economic conditions.

1Q 2009 Results Cash increased to $506m in 1Q ‘09 from $470m in 4Q 2008 This was helped along by a decrease in managed working capital of $216.2m YTD Cost Reductions- $34.8m; planned minimum reductions of $150m for Invested $108m in self funded projects: $450m planned for 2009 No large debt maturities until 2011

Looking Forward ATI is ideally positioned to take advantage of a turn in the economy. Government stimulus packages, especially in the U.S. and China will benefit ATI. The shift in US government Defense spending to more ground combat vehicles will benefit ATI– they make armor for these vehicles. Increase in the amount of nuclear power plants presents another opportunity for ATI. In the short term, the economic environment is difficult, but ATI is cutting costs and adjusting production, while still self funding capital investments. The entire specialty metals industry is attractively valued, but ATI provides diversification both it its wide product offerings and geographically, making it the most attractive investment.

Recommendation I recommend that you BUY Allegheny Technologies, especially if it dips back down below $30 per share.

Questions?