In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS 146”). This statement establishes accounting guidelines for the recognition and measurement of liabilities for costs associated with exit or disposal activities initially at fair value in the period in which the liabilities are incurred, rather than at the date of a commitment to an exit or disposal plan. This standard was effective January 1, 2003 for all exit or disposal activities initiated after that date. The Company adopted this standard at January 1, 2003. SFAS 146 has no effect on the Company’s restructuring charges recorded in 2002 and prior periods. In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others” (“FIN 45”). This interpretation changes the accounting recognition and disclosure requirements for certain guarantees issued on behalf of other parties which represent either a contingent or a non-contingent obligation for the guarantor to make payments or to perform specified activities. Effective January 1, 2003, FIN 45 mandates the separate fair value recognition of guarantees entered into on or after that date. At December 31, 2003, the Company had no material guarantees as defined in FIN 45.  In December 2003, the FASB issued a revised Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). A variable interest entity (“VIE”) is one where the contractual or ownership interests in an entity change with changes in the entity’s net asset value. This interpretation requires the consolidation of a VIE by the primary beneficiary, and also requires disclosure about VIEs where an enterprise has a significant variable interest but is not the primary beneficiary. VIEs that are considered to be special purpose entities require recognition under  FIN 46 in the 2003 fourth quarter. FIN 46, as revised, is applied to all other VIEs in the 2004 first quarter. At December 31, 2003, the Company had no interests in entities qualifying as VIEs.  Certain amounts from prior years have been reclassified to conform with the 2003 presentation. Inventories, before progress payments, determined on the last-in, first-out method were $292.4 million at December 31, 2003 and $327.0 million at December 31, 2002. The remainder of the inventory was determined using the first-in, first-out and average cost methods. These inventory values do not differ materially from current cost. During 2003 and 2002, inventory usage resulted in liquidations of last-in, first-out inventory quantities. These inventories were carried at the lower costs prevailing in prior years as compared with the cost of current purchases. The effect of these last-in, first-out liquidations was to decrease cost of sales by $7.9 million in 2003 and by $3.7 million in 2002. 40 Annual Report 2003 ATI December 31,) December 31,) (In millions) 2003) 2002) Raw materials and supplies $037.5) $032.7) Work-in-process 356.2) 358.5) Finished goods 84.9) 80.4) Total inventories at current cost 478.6) 471.6) Less allowances to reduce current cost values to LIFO basis (111.7) (74.7) Progress payments (7.2) (4.6) Total inventories $359.7) $392.3) Reclassifications  Note 2. Inventories —