Note 3. Debt — Debt at December 31, 2003 and 2002 was as follows: (In millions) 2003) 2002) Allegheny Technologies $300 million 8.375% Notes due 2011, net (a) $309.4) $312.3) Allegheny Ludlum 6.95% debentures, due 2025 150.0) 150.0) Domestic Bank Group $325 million secured credit agreement — ) —) Foreign credit agreements 35.0) 26.7) Industrial revenue bonds, due through 2007 20.1) 21.5) Capitalized leases and other 17.6) 8.6) Total short-term and long-term debt 532.1) 519.1) Short-term debt and current portion of long-term debt (27.8) (9.7) Total long-term debt $504.3) $509.4) (a) Includes fair value adjustments for interest rate swap contracts of $15.2 million (including $1.4 million for interest rate swap contracts currently outstanding and $13.8 million for deferred gains on settled interest rate swap contracts) and $18.7 million at December 31, 2003 and December 31, 2002, respectively. Interest expense was $33.9 million in 2003, $37.3 million in 2002 and $30.7 million in 2001. Interest expense in 2003 was reduced by $2.1 million from interest capitalization on capital projects. Interest and commitment fees paid were $39.2 million in 2003, $37.5 million in 2002 and $31.1 million in 2001. Net interest expense includes interest income of $6.2 million in 2003, $3.0 million in 2002 and $1.4 million in 2001. Interest income in 2003 was primarily comprised of $4.0 million related to a Federal income tax refund associated with prior years. Scheduled maturities of borrowings during the next five years are $27.8 million in 2004, $6.6 million in 2005, $3.5 million in 2006, $21.8 million in 2007 and $3.6 million in 2008. In December 2001, the Company issued $300 million of 8.375% Notes due December 15, 2011 which are registered under the Securities Act of 1933. Interest on the Notes is payable semi-annually, on June 15 and December 15, and is subject to adjustment under certain circumstances. These Notes contain default provisions with respect to default for the following, among other things: nonpayment of interest on the Notes for 30 days, default in payment of principal when due, or failure to cure the breach of a covenant as provided in the Notes. Any violation of the default provision could result in the requirement to immediately repay the borrowings. These Notes are presented on the balance sheet net of issuance costs of $5.9 million, which are being amortized over the life of the debt. In 2002, the Company entered into interest rate swap contracts with respect to a $150 million notional amount related to the Notes, which involved the receipt of fixed rate amounts in exchange for floating rate interest payments over the life of the contracts without an exchange of the underlying principal amount. These “receive fixed, pay floating” arrangements were designated as fair value hedges, and effectively converted $150 million of the Notes to variable rate debt. As a result, changes in the fair value of the swap contracts and the notional amount of the underlying fixed rate debt are recognized in the statement of operations. In 2003, the Company terminated the majority of these interest rate swap contracts and received $15.3 million in cash. The $15.3 million gain on settlement remains a component of the reported balance of the Notes, and will be ratably recognized as a reduction to interest expense over the remaining life of the Notes, which is approximately eight years. Subsequent to the interest rate swap terminations, the Company entered into new “receive fixed, pay floating” interest rate swap arrangements related to the Notes which re-established, in total, a $150 million notional amount that effectively converted this portion of the Notes to variable rate debt. The result of the “receive fixed, pay floating” arrangements was a decrease in interest expense of $6.7 million and $4.9 million for the years ended December 31, 2003 and December 31, 2002, respectively, compared to the fixed interest expense of the ten-year Notes. At December 31, 2003 and December 31, 2002, the adjustments of these swap contracts to fair market value resulted in the recognition of assets of $1.4 million and $18.7 million, respectively, on the balance sheet, included in other assets, with offsetting increases in long-term debt. The Company has the ability to terminate the swaps and receive (pay) the asset (liability) fair value of the swaps.  During the 2003 second quarter, the Company entered into a $325 million four-year senior secured domestic revolving credit facility (“the secured credit facility” or “the facility”). The facility, which replaced a $250 million unsecured facility, is secured by all accounts receivable and inventory of the Company’s U. S. operations, and includes capacity for up to $150 million of letters of credit. As of December 31, 2003, there had been no borrowings made under either the secured credit facility or the former unsecured credit facility since the beginning of 2002. The Company’s outstanding letters of credit issued under the secured credit facility were approximately $94 million at December 31, 2003.  ATI Annual Report 2003 41