Other comprehensive income (loss) amounts are net of income tax expense (benefit) at the effective tax rate for each year, prior to the recognition of the 2003 deferred tax valuation allowance.  Authorized preferred stock may be issued in one or more series, with designations, powers and preferences as shall be designated by the Board of Directors. At December 31, 2003, there were no shares of preferred stock issued. During 2000, the Company adopted the Allegheny Technologies Incorporated 2000 Incentive Plan (the “Incentive Plan”). Options granted under the Incentive Plan, and predecessor plans, have been granted at not less than market prices on the dates of grant. Options granted under the Incentive Plan have a maximum term of 10 years. Vesting of stock options granted under the Incentive Plan generally occurs in three annual increments, beginning on the first anniversary of the grant date.  The Company accounts for its stock option plans in accordance with APB Opinion 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Under APB Opinion 25, for awards which vest without a performance-based contingency, no compensation expense for stock option plans is recognized because the exercise price of the Company’s employee stock options equals the market price of the underlying stock at the date of the grant. If compensation cost for these stock option awards had been determined using the fair-value method prescribed by FASB Statement No. 123, “Accounting for Stock-Based Compensation,” (“SFAS 123”) the net loss would have increased by $3.3 million (or $0.04 per diluted share), $3.8 million (or $0.04 per diluted share) and $5.0 million (or $0.07 per diluted share) for the years ended December 31, 2003, 2002 and 2001, respectively. Under SFAS 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: Stock option transactions under the Company’s employee plans for the years ended December 31, 2003, 2002 and 2001 are summarized as follows: 44 Annual Report 2003 ATI Note 6. Stockholders’ Equity — Preferred Stock Common Stock (shares in thousands) 2003) 2002) 2001) Weighted Weighted Weighted Number of Average Number of Average Number of Average Shares Exercise Price Shares Exercise Price Shares Exercise Price Outstanding, beginning of year 7,919) $20.42) 5,077) $27.88) 4,480) $30.26) Granted 2,155) 4.29) 3,141) 9.04) 847) 17.08) Exercised (72) 7.25) —) —) (28) 14.53) Cancelled (2,921) 29.80) (299) 28.07) (222) 30.75) Outstanding at end of year 7,081) $11.80) 7,919) $20.42) 5,077) $27.88) Exercisable at end of year 2,792) $18.85) 4,190) $29.38) 3,453) $32.10) 2003) 2002) 2001) Expected dividend yield 7.4%) 4.4% ) 4.7% ) Expected volatility 51%) 35% ) 39% ) Risk-free interest rate 3.5%) 4.0% ) 4.8% ) Expected lives (in years) 8.0) 8.0 ) 8.0 ) Weighted average fair value of options granted during year $01.05) $02.95 ) $04.89 )