Table of Contents
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
Date of Report (Date of earliest event reported): April 4, 2003
ALCOA INC.
| Pennsylvania | 1-3610 | 25-0317820 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
| 201 Isabella Street, Pittsburgh, Pennsylvania | 15212-5858 | |||
| (Address of Principal Executive Offices) | (Zip Code) |
| Office of Investor Relations | 212-836-2674 | |
| Office of the Secretary | 412-553-4707 | |
| (Registrant’s telephone number, including area code) | ||
| Item 9. REGULATION FD DISCLOSURE. | ||||||||
| SIGNATURES | ||||||||
| INDEX TO EXHIBITS | ||||||||
| EX-99 PRESS RELEASE | ||||||||
Table of Contents
Item 9. REGULATION FD DISCLOSURE.
The following information is furnished pursuant to Item 12, "Disclosure of Results of Operations and Financial Condition."
On April 4, 2003, Alcoa Inc. issued a press release announcing its earnings for the first quarter of 2003. A copy of the press release is attached hereto as Exhibit 99.
Exhibits
99 Press release, dated April 4, 2003, issued by Alcoa Inc.
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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 hereunto duly authorized.
| ALCOA INC. | ||||
| By: | /s/ Lawrence R. Purtell | |||
| Lawrence R. Purtell | ||||
| Executive Vice President and | ||||
| General Counsel | ||||
| Dated: April 4, 2003 | ||||
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INDEX TO EXHIBITS
| Exhibit No. | Description | |||||
| 99 | Press release, dated April 4, 2003, issued by Alcoa Inc. |
4
Exhibit 99
[Alcoa logo]
FOR IMMEDIATE RELEASE
| Investor Contact | Media Contact | |
| William F. Oplinger | Kevin Lowery | |
| (212) 836-2674 | (412)553-1424 |
Strong Cost Savings Help Offset Higher Energy Prices,
Driving Alcoa’s Income From Continuing Operations Higher
Sequentially and Year-Over-Year
Highlights of the quarter:
| • | Income from continuing operations was $0.23 per diluted share versus a loss of $0.15 in the previous quarter and income of $0.22 in the year-ago quarter | ||
| • | Revenue was $5.11 billion, up from both the prior and year-ago quarters | ||
| • | Gross margin expanded sequentially from 19.2 percent to 20.3 percent | ||
| • | Cost savings were $52 million in the quarter, bringing the Company’s annual run rate on savings to $808 million | ||
| • | Every segment of the business demonstrated improved sequential profitability except Packaging and Consumer, which experienced seasonal declines. |
Pittsburgh, PA — April 4, 2003 — Alcoa today reported income from continuing operations in the first quarter of $195 million or $0.23 per diluted share compared to a loss from continuing operations of $125 million or $0.15 per diluted share in the previous quarter. The loss in the fourth quarter of 2002 included restructuring charges, goodwill impairment and losses on divestitures totaling $258 million. (See attached schedule.) Income from continuing operations was $184 million or $0.22 per diluted share in the first quarter of 2002.
“We are focused on managing what is under our control in a challenging business environment,” said Alain Belda, Chairman and CEO of Alcoa. “Despite significantly higher energy prices which offset more favorable metal prices, we achieved solid cost savings results from the restructuring undertaken over the last two years as well as synergies from acquired businesses. Every segment of the business demonstrated improved profitability except for Packaging and Consumer, which experienced typical seasonal declines. Given the uncertain economic and geopolitical outlook today, we will keep our focus on controlling costs, improving productivity, and building closer connections to our customers.”
Cost Savings
The company achieved $52 million in savings in the quarter. Consistent with Alcoa’s approach since its first cost challenge in 1998, the savings number
includes the effect of higher benefit costs, but excludes changes in energy prices due to volatility. Energy costs in the first quarter of 2003 were $75 million higher than the fourth quarter 2002 and $110 million higher than first quarter 2002. Benefit costs were $25 million higher than the previous quarter.
The cost savings were driven in large part by accelerating the benefits of prior years’ restructurings and the continued implementation of the Alcoa Business System. Despite higher energy and raw material costs, the company’s margin improved 110 basis points to 20.3 percent of sales in the quarter. Alcoa has now achieved $808 million toward its $1 billion cost savings goal by the end of 2003 and remains solidly on track to meet that challenge.
Markets
Sales were $5.11 billion up from $5.06 billion in the fourth quarter of last year – and up 4% from $4.9 billion in the first quarter of 2002. Sequentially, higher upstream pricing and the inclusion of Fairchild Fasteners revenues offset seasonal declines in the packaging and consumer markets. While the aerospace, industrial gas turbine and commercial building markets remain soft, the company benefited from aggressive cost cutting in businesses serving those markets. Automotive markets remained strong in the quarter while residential construction weakened due to severe winter weather in the U.S.
Acquisitions and Divestitures
Fairchild Fasteners, a part of Alcoa Fastening Systems since December 2002, has already achieved $19 million in annualized synergies. These savings are excluded from the $1 billion cost challenge. Alcoa continues to pursue the divestiture of non-core businesses announced earlier this year, and expects to use proceeds from those sales to pay down debt.
Customers
Alcoa continues to strengthen its performance by developing innovative products that add value for its customers. Introduced last summer, Reynolds Wrap® Release®, an innovative new non-stick foil, has now established a strong presence in the North American market. Almost five million households throughout the United States have already tried Reynolds Wrap® Release® and almost 50% of these consumers have plans to come back for more — twice the number of consumers who typically make a repeat purchase of a new product in this market.
Alcoa Dura-Bright® wheels continue to gain acceptance in the market and are on track to triple sales from the previous year. Dura-Bright® wheels have been used primarily in transit bus and motor home applications, and are now being rapidly adopted in trucks and trailers. They were named as one of the top 50 new products for 2002 by Heavy Duty Trucking magazine.
Alcoa was also selected to supply metallic solutions for regional and business jets to Bombardier.
Accounting Change and Other Items
In the first quarter of 2003, Alcoa adopted Financial Accounting Standard No. 143, “Accounting for Asset Retirement Obligations.” The cumulative effect of adopting this standard was a one-time, non-cash charge of $47 million. Including this charge, Alcoa’s net income for the quarter was $151 million. Net income in the first quarter of 2002 included a one time, non-cash gain of $34 million upon adoption of FAS No. 142.
Sequentially, the negative impact of foreign currency translation and lower non-operating income were partially offset by higher equity earnings.
About Alcoa
Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa’s businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap® foils and plastic wraps, Alcoa® wheels, and Baco® household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks. The company has 127,000 employees in 40 countries. More information can be found at www.alcoa.com
Alcoa Business System
The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.
Forward Looking Statement
Certain statements in this release relate to future events and expectations and
as such constitute forward-looking statements involving known and unknown risks
and uncertainties that may cause actual results, performance or achievements of
Alcoa to be different 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 the company’s
inability to achieve the level of cost savings or productivity improvements
anticipated by management, including possible increases in the cost of doing
business resulting from war or terrorist activities; and other risk factors
summarized in Alcoa’s SEC reports.
FINANCIAL REPORT
Alcoa and subsidiaries
Supplemental Net Income and EPS Information (unaudited)
(in millions, except per-share amounts)
| Net Income | Diluted EPS | |||||||||||||||||||||||||
| 1Q03 | 4Q02 | 1Q02 | 1Q03 | 4Q02 | 1Q02 | |||||||||||||||||||||
GAAP Net income (loss) |
$ | 151 | $ | (223 | ) | $ | 218 | $ | 0.17 | $ | (.27 | ) | $ | .26 | ||||||||||||
Cumulative effect of accounting change |
47 | — | (34 | ) | 0.06 | — | (.04 | ) | ||||||||||||||||||
Discontinued operations – operating
(income) loss |
(3 | ) | 20 | — | — | .03 | — | |||||||||||||||||||
Discontinued operations – loss on
Divestitures |
— | 78 | — | — | .09 | — | ||||||||||||||||||||
GAAP Income (loss) from continuing
operations |
$ | 195 | $ | (125 | ) | $ | 184 | $ | 0.23 | $ | (.15 | ) | $ | .22 | ||||||||||||
One-time charges: |
||||||||||||||||||||||||||
Special items – restructurings |
(3 | ) | 95 | — | ||||||||||||||||||||||
Special items – loss on divestitures |
— | 143 | — | |||||||||||||||||||||||
Goodwill impairment |
— | 20 | — | |||||||||||||||||||||||
Income from continuing operations
excluding one-time charges (1) |
$ | 192 | $ | 133 | $ | 184 | $ | 0.23 | $ | 0.16 | $ | 0.22 | ||||||||||||||
Average diluted shares outstanding |
846 | 844 | 854 | |||||||||||||||||||||||
| (1) | Alcoa believes that presenting income from continuing operations excluding one-time charges is an additional measure of performance that investors can use to compare operating results between reporting periods. The schedule above allows for ease of analysis in reviewing Alcoa’s earnings performance using these measures. Income from continuing operations excluding one-time charges can provide a more relevant view of a company’s performance. |
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)
| Quarter ended | ||||||||||||||||
| March 31 | March 31 | December 31 | ||||||||||||||
| 2003 | 2002 | 2002 | ||||||||||||||
Sales |
$ | 5,112 | $ | 4,900 | $ | 5,061 | ||||||||||
Cost of goods sold |
4,073 | 3,968 | 4,088 | |||||||||||||
Selling, general administrative and other
expenses |
294 | 273 | 339 | |||||||||||||
Research and development expenses |
50 | 51 | 58 | |||||||||||||
Provision for depreciation, depletion and |
||||||||||||||||
Amortization |
285 | 259 | 297 | |||||||||||||
Impairment of goodwill |
— | — | 44 | |||||||||||||
Special items |
(4 | ) | — | 368 | ||||||||||||
Interest expense |
88 | 75 | 97 | |||||||||||||
Other income, net |
(37 | ) | (55 | ) | (67 | ) | ||||||||||
| 4,749 | 4,571 | 5,224 | ||||||||||||||
Income (loss) from continuing operations before
taxes on income |
363 | 329 | (163 | ) | ||||||||||||
(Provision) benefit for taxes on income |
(109 | ) | (104 | ) | 36 | |||||||||||
Income (loss) from continuing operations before
minority interests’ share |
254 | 225 | (127 | ) | ||||||||||||
Less: Minority interests’ share |
59 | 41 | (2 | ) | ||||||||||||
Income (loss) from continuing operations |
195 | 184 | (125 | ) | ||||||||||||
Income (loss) from discontinued operations |
3 | — | (98 | ) | ||||||||||||
Cumulative effect of accounting change |
(47 | ) | 34 | — | ||||||||||||
NET INCOME (LOSS) |
$ | 151 | $ | 218 | $ | (223 | ) | |||||||||
Earnings (loss) per common share: |
||||||||||||||||
Basic: |
||||||||||||||||
Income (loss) from continuing operations |
$ | .23 | $ | .22 | $ | (.15 | ) | |||||||||
Loss from discontinued operations |
— | — | (.12 | ) | ||||||||||||
Cumulative effect of accounting change |
(.06 | ) | .04 | — | ||||||||||||
Net income (loss) |
$ | .17 | $ | .26 | $ | (.27 | ) | |||||||||
Diluted: |
||||||||||||||||
Income (loss) from continuing operations |
$ | .23 | $ | .22 | $ | (.15 | ) | |||||||||
Loss from discontinued operations |
— | — | (.12 | ) | ||||||||||||
Cumulative effect of accounting change |
(.06 | ) | .04 | — | ||||||||||||
Net income (loss) |
$ | .17 | $ | .26 | $ | (.27 | ) | |||||||||
Average number of shares used to compute: |
||||||||||||||||
Basic earnings per common share |
845,065,093 | 847,105,553 | 844,456,673 | |||||||||||||
Diluted earnings per common share |
846,328,622 | 854,151,135 | 844,456,673 | |||||||||||||
Common stock outstanding at the end
of the period |
845,157,381 | 846,809,997 | 844,819,462 | |||||||||||||
Currency translation adjustments included in
net income |
$ | (13 | ) | $ | 2 | $ | 2 | |||||||||||||
Shipments of aluminum products (metric tons) |
1,192,000 | 1,251,000 | 1,320,000 |
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
| (unaudited) | |||||||||||
| March 31 | December 31 | ||||||||||
| 2003 | 2002 | ||||||||||
ASSETS |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 370 | $ | 344 | |||||||
Receivables from customers, less allowances: |
|||||||||||
$127 in 2003 and $120 in 2002 |
2,611 | 2,378 | |||||||||
Other receivables |
253 | 174 | |||||||||
Inventories |
2,557 | 2,441 | |||||||||
Deferred income taxes |
457 | 468 | |||||||||
Prepaid expenses and other current assets |
437 | 508 | |||||||||
Total current assets |
6,685 | 6,313 | |||||||||
Properties, plants and equipment, at cost |
23,606 | 23,120 | |||||||||
Less: accumulated depreciation, depletion and
Amortization |
11,420 | 11,009 | |||||||||
Net properties, plants and equipment |
12,186 | 12,111 | |||||||||
Goodwill |
6,365 | 6,365 | |||||||||
Other assets |
4,511 | 4,446 | |||||||||
Assets held for sale |
609 | 575 | |||||||||
Total assets |
$ | 30,356 | $ | 29,810 | |||||||
LIABILITIES |
|||||||||||
Current liabilities: |
|||||||||||
Short-term borrowings |
$ | 32 | $ | 37 | |||||||
Accounts payable, trade |
1,762 | 1,618 | |||||||||
Accrued compensation and retirement costs |
846 | 933 | |||||||||
Taxes, including taxes on income |
817 | 818 | |||||||||
Other current liabilities |
865 | 970 | |||||||||
Long-term debt due within one year |
75 | 85 | |||||||||
Total current liabilities |
4,397 | 4,461 | |||||||||
Long-term debt, less amount due within one year |
8,672 | 8,365 | |||||||||
Accrued postretirement benefits |
2,304 | 2,320 | |||||||||
Other noncurrent liabilities and deferred
credits |
2,931 | 2,878 | |||||||||
Deferred income taxes |
509 | 502 | |||||||||
Liabilities of operations held for sale |
90 | 64 | |||||||||
Total liabilities |
18,903 | 18,590 | |||||||||
MINORITY INTERESTS |
1,370 | 1,293 | |||||||||
COMMITMENTS AND CONTINGENCIES |
|||||||||||
SHAREHOLDERS’ EQUITY |
|||||||||||
Preferred stock |
55 | 55 | |||||||||
Common stock |
925 | 925 | |||||||||
Additional capital |
6,098 | 6,101 | |||||||||
Retained earnings |
7,451 | 7,428 | |||||||||
Treasury stock, at cost |
(2,819 | ) | (2,828 | ) | |||||||
Accumulated other comprehensive loss |
(1,627 | ) | (1,754 | ) | |||||||
Total shareholders’ equity |
10,083 | 9,927 | |||||||||
Total liabilities and equity |
$ | 30,356 | $ | 29,810 | |||||||
Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)
| Consolidated Third-Party Revenues: | 1Q02 | 2Q02 | 3Q02 | 4Q02 | 2002 | 1Q03 | |||||||||||||||||||||
Alumina and Chemicals |
425 | 419 | 469 | 430 | 1,743 | 449 | |||||||||||||||||||||
Primary Metals |
764 | 788 | 792 | 830 | 3,174 | 732 | |||||||||||||||||||||
Flat-Rolled Products |
1,156 | 1,192 | 1,162 | 1,130 | 4,640 | 1,152 | |||||||||||||||||||||
Engineered Products |
1,319 | 1,330 | 1,238 | 1,131 | 5,018 | 1,361 | |||||||||||||||||||||
Packaging and Consumer |
618 | 672 | 752 | 840 | 2,882 | 750 | |||||||||||||||||||||
Other |
618 | 757 | 731 | 700 | 2,806 | 668 | |||||||||||||||||||||
Total |
4,900 | 5,158 | 5,144 | 5,061 | 20,263 | 5,112 | |||||||||||||||||||||
Consolidated Intersegment |
|||||||||||||||||||||||||||
Revenues: |
1Q02 | 2Q02 | 3Q02 | 4Q02 | 2002 | 1Q03 | |||||||||||||||||||||
Alumina and Chemicals |
229 | 233 | 235 | 258 | 955 | 240 | |||||||||||||||||||||
Primary Metals |
629 | 770 | 637 | 619 | 2,655 | 840 | |||||||||||||||||||||
Flat-Rolled Products |
15 | 18 | 21 | 14 | 68 | 20 | |||||||||||||||||||||
Engineered Products |
8 | 10 | 8 | 8 | 34 | 9 | |||||||||||||||||||||
Packaging and Consumer |
— | — | — | — | — | - | |||||||||||||||||||||
Other |
— | — | — | — | — | - | |||||||||||||||||||||
Total |
881 | 1,031 | 901 | 899 | 3,712 | 1,109 | |||||||||||||||||||||
Consolidated
Third-Party Shipments |
|||||||||||||||||||||||||||
(KMT’s): |
1Q02 | 2Q02 | 3Q02 | 4Q02 | 2002 | 1Q03 | |||||||||||||||||||||
Alumina and Chemicals |
1,825 | 1,796 | 1,939 | 1,926 | 7,486 | 1,794 | |||||||||||||||||||||
Primary Metals |
503 | 507 | 517 | 546 | 2,073 | 453 | |||||||||||||||||||||
Flat-Rolled Products |
439 | 456 | 446 | 433 | 1,774 | 434 | |||||||||||||||||||||
Engineered Products |
221 | 244 | 223 | 203 | 891 | 217 | |||||||||||||||||||||
Packaging and Consumer |
30 | 31 | 46 | 55 | 162 | 36 | |||||||||||||||||||||
Other |
58 | 87 | 80 | 83 | 308 | 52 | |||||||||||||||||||||
Total Aluminum |
1,251 | 1,325 | 1,312 | 1,320 | 5,208 | 1,192 | |||||||||||||||||||||
Average realized price
- -Primary |
0.66 | 0.67 | 0.66 | 0.66 | 0.66 | 0.69 | |||||||||||||||||||||
After-Tax Operating Income (ATOI): |
1Q02 | 2Q02 | 3Q02 | 4Q02 | 2002 | 1Q03 | |||||||||||||||||||||
Alumina and Chemicals |
65 | 73 | 93 | 84 | 315 | 91 | |||||||||||||||||||||
Primary Metals |
143 | 175 | 175 | 157 | 650 | 166 | |||||||||||||||||||||
Flat-Rolled Products |
61 | 66 | 46 | 47 | 220 | 53 | |||||||||||||||||||||
Engineered Products |
58 | 44 | 33 | (28 | ) | 107 | 29 | ||||||||||||||||||||
Packaging and Consumer |
28 | 55 | 51 | 64 | 198 | 53 | |||||||||||||||||||||
Other |
7 | 19 | 8 | (43 | ) | (9 | ) | 9 | |||||||||||||||||||
Total |
362 | 432 | 406 | 281 | 1,481 | 401 | |||||||||||||||||||||
Reconciliation of ATOI to |
|||||||||||||||||||||||||||
Consolidated Net Income: |
1Q02 | 2Q02 | 3Q02 | 4Q02 | 2002 | 1Q03 | |||||||||||||||||||||
Total ATOI |
362 | 432 | 406 | 281 | 1,481 | 401 | |||||||||||||||||||||
Impact of intersegment profit
eliminations |
(3 | ) | (1 | ) | (5 | ) | 3 | (6 | ) | 7 | |||||||||||||||||
Unallocated amounts (net of
tax): |
|||||||||||||||||||||||||||
Interest income |
10 | 9 | 7 | 5 | 31 | 5 | |||||||||||||||||||||
Interest expense |
(49 | ) | (54 | ) | (62 | ) | (62 | ) | (227 | ) | (57 | ) | |||||||||||||||
Minority interests |
(41 | ) | (47 | ) | (49 | ) | 2 | (135 | ) | (59 | ) | ||||||||||||||||
Corporate expense |
(58 | ) | (53 | ) | (40 | ) | (83 | ) | (234 | ) | (57 | ) | |||||||||||||||
Special items |
— | — | (25 | ) | (261 | ) | (286 | ) | 4 | ||||||||||||||||||
Discontinued operations |
— | (5 | ) | (9 | ) | (98 | ) | (112 | ) | 3 | |||||||||||||||
Accounting change |
34 | — | — | — | 34 | (47 | ) | ||||||||||||||||||
Other |
(37 | ) | (49 | ) | (30 | ) | (10 | ) | (126 | ) | (49 | ) | |||||||||||||
Consolidated net income |
218 | 232 | 193 | (223 | ) | 420 | 151 | ||||||||||||||||||