SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 8, 2004
ALCOA INC.
(Exact name of Registrant as specified in its charter)
| 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 12. | Results of Operations and Financial Condition. |
On January 8, 2004, Alcoa Inc. issued a press release announcing its earnings for the fourth quarter of 2003. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. A copy of supplemental financial information that accompanied the press release is attached hereto as Exhibit 99.2 and incorporated herein by reference.
Exhibits:
| 99.1 |
Press release, dated January 8, 2004, issued by Alcoa Inc. | |
| 99.2 |
Supplemental Financial Information of Alcoa Inc. |
* * * * *
The information in this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
2
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: January 9, 2004
3
INDEX TO EXHIBITS
| Exhibit No. |
Description | |
| 99.1 |
Press release, dated January 8, 2004, issued by Alcoa Inc. | |
| 99.2 |
Supplemental Financial Information of Alcoa Inc. | |
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
| Investor Contact William F. Oplinger (212) 836-2674 |
Media Contact Kevin G. Lowery (412) 553-1424 |
Fourth Quarter Income From Continuing Operations at $0.39;
Up $486 Million from Year-Ago Quarter;
Full-Year Up 117 Percent Over 2002
Highlights:
| • | $340 million of income from continuing operations for the fourth quarter up from a loss of $146 million in the same quarter 2002 |
| • | $1.034 billion, or $1.20 per diluted share, in income from continuing operations for the full year – up 117 percent over 2002 |
| • | $1.2 billion of debt reduction in 2003 with the company’s debt-to- capital ratio declining from 43.1 to 35.1 percent |
| • | The company surpasses its goal of $1 billion in annual cost savings |
| • | Every segment showed improved profitability over 2002 |
New York, NY—January 8, 2004—Alcoa today reported fourth quarter income from continuing operations of $340 million, or $0.39 per diluted share, up 21 percent from the previous quarter’s $282 million, $0.33 per share. The results were a substantial improvement over the loss from continuing operations of $146 million, $0.17 per share, in the fourth quarter of last year.
Net income in the fourth quarter was $291 million, up 4 percent from $280 million in the third quarter of 2003, and significantly improved from a loss of $223 million in the fourth quarter of 2002.
The difference between net income and income from continuing operations in the fourth quarter of 2003 is due primarily to an adjustment to the anticipated proceeds from the sale of discontinued operations. Both measures are recognized by Generally Accepted Accounting Principles.
For the full year, income from continuing operations was $1.034 billion, $1.20 per diluted share, the highest in three years. Net income was $938 million, $1.08 per diluted share, a 123 percent improvement over 2002.
“Over the year, we improved productivity, managed capital, and worked every lever in our control to offset cost increases for raw materials, energy, benefits, and the impact of a weakened dollar,” said Alain Belda, Chairman and CEO of Alcoa. “The result was consistently improving profitability, a considerably stronger balance sheet, and a company that is well positioned for future growth as world markets continue to strengthen. That is what we promised last year, and our team delivered.”
Market Overview
For the full year, revenues increased 6 percent to $21.5 billion after integration of newly acquired packaging and fastener businesses. “As global demand for alumina and aluminum continues to increase, we expect to realize the benefits of the improved market,” said Belda.
In the fourth quarter of 2003, sales were $5.5 billion, increasing 9 percent over 2002 and 4 percent over the third quarter. Sequentially, strong alumina shipments and higher aluminum prices overcame slightly lower volumes in markets that typically experience weakness in the fourth quarter: closures, can sheet, and building and construction.
Solid Improvement of the Balance Sheet
“Aggressive capital controls, management of working capital, and the initial benefits of a well-designed divestiture plan helped us retire more than $1.2 billion in debt over the year,” said Belda. The company cut its debt-to-capital ratio in 2003 from 43.1 to 35.1 percent, an improvement of 370 basis points from the third quarter. In 2003, capital expenditures were $867 million, 32 percent below last year’s level of $1.27 billion.
The balance sheet will improve further in the first half of 2004 as the divestiture program outlined last January is completed. To date, the company has shed its Latin American PET business and an equity interest in Latasa, a South American can producer. In the first quarter, the company expects to close on the sale of its specialty chemicals, automotive fasteners, and packaging equipment businesses. The total proceeds of the divestiture program should be in line with the company’s earlier estimates—$750 million to $1 billion.
In addition, a strong return of 19.75 percent on the company’s pension investments essentially offset the impact of a 50 basis point decline in discount rates. As a result, the company did not record a material charge for minimum pension liability to its balance sheet in 2003.
Cost Savings and Management Actions
In the fourth quarter, the company surpassed its three-year $1 billion cost savings goal, marking the second time in six years that the company has achieved more than $1 billion in sustainable savings. That intense focus on profitability was critical as the company faced considerably higher costs for energy, raw materials, and benefits, as well as the impact of a weaker dollar on manufacturing operations outside the U.S. this year.
In the fourth quarter alone, those costs increased by more than $150 million before tax over the last quarter of 2002. Management actions that offset the higher costs included:
| • | Drove $12 million of new cost savings in the fourth quarter; |
| • | Reduced the company’s fourth-quarter effective tax rate to 21 percent by recognizing benefits from foreign net operating losses, offsetting higher taxes from the Latasa sale; |
| • | Recognizing $105 million in pre-tax gains from insurance settlements of a series of historical environmental matters in the U.S.; and |
| • | Achieved higher gross margins of 20.3 percent in 2003, up from 19.8 in 2002. |
Together with higher metal prices, these management actions more than compensated for higher costs in the quarter.
The company will announce a new set of long-term cost challenges at the 4th quarter analyst workshop on January 22, 2004.
Positioning the Company for Future Growth
Despite tight capital restraint, Alcoa continued to make long-term investments to improve its world-class position in alumina refining and smelting, and expand other high-growth businesses. Through Alcoa World Alumina and Chemicals (AWAC), Alcoa’s global alliance with Alumina Ltd., the company moved forward this year on its plan to add 1.1 million metric tons of annual capacity at its alumina refineries in Jamaica, Suriname, and Western Australia.
Final approvals were granted for the company’s new aluminum smelter in Iceland, and the company signed an MOU for a stake in the low-cost Alba facility in Bahrain. The company scaled
back higher-cost production at its smelters in Massena and Intalco, where higher energy costs had made the plants less competitive.
Providing Solutions to Customers
Through disciplined deployment of the Alcoa Business System, Alcoa intensified its focus on its customers in 2003. The company’s Market Sector Lead Teams developed a more coordinated approach to customers in all of Alcoa’s major markets. As a result, Alcoa was awarded significant new aerospace contracts, working with Airbus toward launch of its landmark new A380; and continued its expansion of new products such as Dura-Bright® wheels for the commercial transportation market, new customized siding for the home construction market, and Reynolds Wrap® Release® non-stick foil for the consumer.
In the automotive market, Alcoa collaborated with GM on its Cadillac 16 concept car, with Ford on its new F-150 truck and Jaguar XJ, with Toyota on a lightweight engine cradle for the Lexus RX330, with Ferrari on the 612 Scaglietti, and with Audi on its second-generation A8 sedan. The company also announced plans to create a single automotive customer center in Detroit.
In the fourth quarter, Alcoa’s AFL Automotive group announced that it is working with Pacific Insights on a new contract to design and supply a hi-tech component for new PACCAR and Peterbilt trucks. Alcoa Closure Systems International (CSI) business developed a new closure for the dairy market that is easy to open and offers improved tamper-proof capability.
Quarterly Analyst Workshop
Alcoa’s quarterly analyst workshop will be at 4:00 p.m. EST on Thursday, January 22, 2004. The meeting will be web cast via alcoa.com. Call information and related information will be available at www.alcoa.com under “Invest.”
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, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 120,000 employees in 41 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 (a) the company’s inability to complete or to complete in the anticipated timeframe pending divestitures, acquisitions or expansion projects or to realize the projected amount of proceeds from divestitures, (b) the company’s inability to achieve the level of cost savings or productivity improvements anticipated by management, (c) unexpected changes in global economic, business, competitive, market and regulatory factors, and (d) the other risk factors summarized in Alcoa’s 2002 Form 10-K Report and other SEC reports.
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)
| Quarter ended |
||||||||||||
| December 31 2003 |
December 31 2002 (a) |
September 30 2003 (a) |
||||||||||
| Sales |
$ | 5,532 | $ | 5,096 | $ | 5,335 | ||||||
| Cost of goods sold |
4,435 | 4,121 | 4,226 | |||||||||
| Selling, general administrative and other Expenses |
346 | 343 | 305 | |||||||||
| Research and development expenses |
47 | 59 | 47 | |||||||||
| Provision for depreciation, depletion and Amortization |
312 | 297 | 295 | |||||||||
| Impairment of goodwill |
— | 44 | — | |||||||||
| Special items |
(26 | ) | 386 | 1 | ||||||||
| Interest expense |
71 | 97 | 75 | |||||||||
| Other income, net |
(139 | ) | (67 | ) | (42 | ) | ||||||
| 5,046 | 5,280 | 4,907 | ||||||||||
| Income (loss) from continuing operations before taxes on income |
486 | (184 | ) | 428 | ||||||||
| Provision (benefit) for taxes on income |
103 | (36 | ) | 92 | ||||||||
| Income (loss) from continuing operations before minority interests’ share |
383 | (148 | ) | 336 | ||||||||
| Less: Minority interests’ share |
43 | (2 | ) | 54 | ||||||||
| Income (loss) from continuing operations |
340 | (146 | ) | 282 | ||||||||
| Loss from discontinued operations |
(49 | ) | (77 | ) | (2 | ) | ||||||
| Cumulative effect of accounting change |
— | — | — | |||||||||
| NET INCOME (LOSS) |
$ | 291 | $ | (223 | ) | $ | 280 | |||||
| Earnings (loss) per common share: |
||||||||||||
| Basic: |
||||||||||||
| Income (loss) from continuing operations |
$ | .39 | $ | (.17 | ) | $ | .33 | |||||
| Loss from discontinued operations |
(.06 | ) | (.09 | ) | — | |||||||
| Cumulative effect of accounting change |
— | — | — | |||||||||
| Net income (loss) |
$ | .33 | $ | (.26 | ) | $ | .33 | |||||
| Diluted: |
||||||||||||
| Income (loss) from continuing operations |
$ | .39 | $ | (.17 | ) | $ | .33 | |||||
| Loss from discontinued operations |
(.06 | ) | (.09 | ) | — | |||||||
| Cumulative effect of accounting change |
— | — | — | |||||||||
| Net income (loss) |
$ | .33 | $ | (.26 | ) | $ | .33 | |||||
| Average number of shares used to compute: |
||||||||||||
| Basic earnings per common share |
866,243,592 | 844,456,673 | 855,477,116 | |||||||||
| Diluted earnings per common share |
871,969,592 | 844,456,673 | 859,375,461 | |||||||||
| Shipments of aluminum products (metric tons) |
1,320,000 | 1,325,000 | 1,262,000 | |||||||||
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)
| Twelve months ended |
||||||||
| December 31 2003 |
December 31 2002 (a) |
|||||||
| Sales |
$ | 21,504 | $ | 20,351 | ||||
| Cost of goods sold |
17,138 | 16,327 | ||||||
| Selling, general administrative and other expenses |
1,295 | 1,157 | ||||||
| Research and development expenses |
194 | 214 | ||||||
| Provision for depreciation, depletion and amortization |
1,194 | 1,111 | ||||||
| Impairment of goodwill |
— | 44 | ||||||
| Special items |
(26 | ) | 425 | |||||
| Interest expense |
314 | 350 | ||||||
| Other income, net |
(274 | ) | (179 | ) | ||||
| 19,835 | 19,449 | |||||||
| Income from continuing operations before taxes on income |
1,669 | 902 | ||||||
| Provision for taxes on income |
404 | 291 | ||||||
| Income from continuing operations before minority interests’ share |
1,265 | 611 | ||||||
| Less: Minority interests’ share |
231 | 135 | ||||||
| Income from continuing operations |
1,034 | 476 | ||||||
| Loss from discontinued operations |
(49 | ) | (90 | ) | ||||
| Cumulative effect of accounting change |
(47 | ) | 34 | |||||
| NET INCOME |
$ | 938 | $ | 420 | ||||
| Earnings (loss) per common share: |
||||||||
| Basic: |
||||||||
| Income from continuing operations |
$ | 1.21 | $ | .56 | ||||
| Loss from discontinued operations |
(.06 | ) | (.11 | ) | ||||
| Cumulative effect of accounting change |
(.06 | ) | .04 | |||||
| Net income |
$ | 1.09 | $ | .49 | ||||
| Diluted: |
||||||||
| Income from continuing operations |
$ | 1.20 | $ | .56 | ||||
| Loss from discontinued operations |
(.06 | ) | (.11 | ) | ||||
| Cumulative effect of accounting change |
(.06 | ) | .04 | |||||
| Net income |
$ | 1.08 | $ | .49 | ||||
| Average number of shares used to compute: |
||||||||
| Basic earnings per common share |
853,352,313 | 845,438,913 | ||||||
| Diluted earnings per common share |
856,586,189 | 849,848,984 | ||||||
| Common stock outstanding at the end of the period |
868,490,686 | 844,819,462 | ||||||
| Shipments of aluminum products (metric tons) |
5,047,000 | 5,236,000 | ||||||
| (a) | Prior periods have been adjusted to reflect the reclassification of certain businesses between discontinued operations and continuing operations in the third and fourth quarters of 2003. |
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(in millions)
| December 31 2003 |
December 31 2002 (b) |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 576 | $ | 344 | ||||
| Receivables from customers, less allowances: $105 in 2003 and $124 in 2002 |
2,521 | 2,361 | ||||||
| Other receivables |
350 | 171 | ||||||
| Inventories |
2,524 | 2,414 | ||||||
| Deferred income taxes |
267 | 469 | ||||||
| Prepaid expenses and other current assets |
502 | 506 | ||||||
| Total current assets |
6,740 | 6,265 | ||||||
| Properties, plants and equipment, at cost |
24,797 | 22,818 | ||||||
| Less: accumulated depreciation, depletion and amortization |
12,240 | 10,708 | ||||||
| Net properties, plants and equipment |
12,557 | 12,110 | ||||||
| Goodwill |
6,549 | 6,379 | ||||||
| Other assets |
5,316 | 4,438 | ||||||
| Assets held for sale |
549 | 618 | ||||||
| Total assets |
$ | 31,711 | $ | 29,810 | ||||
| LIABILITIES |
||||||||
| Current liabilities: |
||||||||
| Short-term borrowings |
$ | 56 | $ | 39 | ||||
| Accounts payable, trade |
1,976 | 1,621 | ||||||
| Accrued compensation and retirement costs |
948 | 936 | ||||||
| Taxes, including taxes on income |
703 | 814 | ||||||
| Other current liabilities |
878 | 966 | ||||||
| Long-term debt due within one year |
523 | 83 | ||||||
| Total current liabilities |
5,084 | 4,459 | ||||||
| Long-term debt, less amount due within one year |
6,692 | 8,366 | ||||||
| Accrued postretirement benefits |
2,220 | 2,319 | ||||||
| Other noncurrent liabilities and deferred credits |
3,389 | 2,867 | ||||||
| Deferred income taxes |
804 | 520 | ||||||
| Liabilities of operations held for sale |
107 | 59 | ||||||
| Total liabilities |
18,296 | 18,590 | ||||||
| MINORITY INTERESTS |
1,340 | 1,293 | ||||||
| COMMITMENTS AND CONTINGENCIES |
||||||||
| SHAREHOLDERS’ EQUITY |
||||||||
| Preferred stock |
55 | 55 | ||||||
| Common stock |
925 | 925 | ||||||
| Additional capital |
5,831 | 6,101 | ||||||
| Retained earnings |
7,850 | 7,428 | ||||||
| Treasury stock, at cost |
(2,017 | ) | (2,828 | ) | ||||
| Accumulated other comprehensive loss |
(569 | ) | (1,754 | ) | ||||
| Total shareholders’ equity |
12,075 | 9,927 | ||||||
| Total liabilities and equity |
$ | 31,711 | $ | 29,810 | ||||
| (b) | The prior period has been adjusted to reflect the reclassification of certain businesses between discontinued operations and continuing operations in the third and fourth quarters of 2003. |
Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)
| 4Q02 |
2002 |
1Q03 |
2Q03 |
3Q03 |
4Q03 |
2003 |
|||||||||||||||
| Consolidated Third-Party Revenues: | |||||||||||||||||||||
| Alumina and Chemicals |
430 | 1,743 | 449 | 491 | 526 | 536 | 2,002 | ||||||||||||||
| Primary Metals |
830 | 3,174 | 732 | 805 | 816 | 876 | 3,229 | ||||||||||||||
| Flat-Rolled Products |
1,130 | 4,640 | 1,152 | 1,200 | 1,176 | 1,287 | 4,815 | ||||||||||||||
| Engineered Products (c) |
1,161 | 5,150 | 1,390 | 1,455 | 1,369 | 1,375 | 5,589 | ||||||||||||||
| Packaging and Consumer (c) |
845 | 2,838 | 749 | 836 | 812 | 818 | 3,215 | ||||||||||||||
| Other |
700 | 2,806 | 668 | 710 | 636 | 640 | 2,654 | ||||||||||||||
| Total |
5,096 | 20,351 | 5,140 | 5,497 | 5,335 | 5,532 | 21,504 | ||||||||||||||
| 4Q02 |
2002 |
1Q03 |
2Q03 |
3Q03 |
4Q03 |
2003 |
|||||||||||||||
| Consolidated Intersegment Revenues: | |||||||||||||||||||||
| Alumina and Chemicals |
258 | 955 | 240 | 248 | 258 | 275 | 1,021 | ||||||||||||||
| Primary Metals |
619 | 2,655 | 840 | 690 | 740 | 828 | 3,098 | ||||||||||||||
| Flat-Rolled Products |
14 | 68 | 20 | 15 | 17 | 14 | 66 | ||||||||||||||
| Engineered Products |
8 | 34 | 9 | 5 | 5 | 5 | 24 | ||||||||||||||
| Packaging and Consumer |
— | — | — | — | — | — | — | ||||||||||||||
| Other |
— | — | — | — | — | — | — | ||||||||||||||
| Total |
899 | 3,712 | 1,109 | 958 | 1,020 | 1,122 | 4,209 | ||||||||||||||
| 4Q02 |
2002 |
1Q03 |
2Q03 |
3Q03 |
4Q03 |
2003 |
|||||||||||||||
| Consolidated Third-Party Shipments (KMT’s): | |||||||||||||||||||||
| Alumina and Chemicals |
1,926 | 7,486 | 1,794 | 1,939 | 1,982 | 1,956 | 7,671 | ||||||||||||||
| Primary Metals |
546 | 2,073 | 453 | 495 | 488 | 516 | 1,952 | ||||||||||||||
| Flat-Rolled Products |
433 | 1,774 | 434 | 453 | 450 | 482 | 1,819 | ||||||||||||||
| Engineered Products (c) |
208 | 919 | 223 | 221 | 222 | 213 | 879 | ||||||||||||||
| Packaging and Consumer |
55 | 162 | 36 | 42 | 40 | 49 | 167 | ||||||||||||||
| Other |
83 | 308 | 52 | 56 | 62 | 60 | 230 | ||||||||||||||
| Total Aluminum |
1,325 | 5,236 | 1,198 | 1,267 | 1,262 | 1,320 | 5,047 | ||||||||||||||
| Average realized price—Primary |
0.66 | 0.66 | 0.69 | 0.68 | 0.71 | 0.73 | 0.70 | ||||||||||||||
| 4Q02 |
2002 |
1Q03 |
2Q03 |
3Q03 |
4Q03 |
2003 |
|||||||||||||||
| After-Tax Operating Income (ATOI): | |||||||||||||||||||||
| Alumina and Chemicals |
84 | 315 | 91 | 89 | 113 | 122 | 415 | ||||||||||||||
| Primary Metals |
157 | 650 | 166 | 162 | 163 | 166 | 657 | ||||||||||||||
| Flat-Rolled Products |
47 | 220 | 53 | 56 | 59 | 53 | 221 | ||||||||||||||
| Engineered Products (c) |
(30 | ) | 105 | 29 | 46 | 47 | 33 | 155 | |||||||||||||
| Packaging and Consumer (c) |
64 | 197 | 53 | 57 | 52 | 52 | 214 | ||||||||||||||
| Other |
(43 | ) | (9 | ) | 9 | 17 | 8 | 17 | 51 | ||||||||||||
| Total |
279 | 1,478 | 401 | 427 | 442 | 443 | 1,713 | ||||||||||||||
| 4Q02 |
2002 |
1Q03 |
2Q03 |
3Q03 |
4Q03 |
2003 |
|||||||||||||||
| Reconciliation of ATOI to consolidated net income: (c) | |||||||||||||||||||||
| Total ATOI |
279 | 1,478 | 401 | 427 | 442 | 443 | 1,713 | ||||||||||||||
| Impact of intersegment profit eliminations |
3 | (6 | ) | 7 | (4 | ) | 2 | 4 | 9 | ||||||||||||
| Unallocated amounts (net of tax): |
|||||||||||||||||||||
| Interest income |
5 | 31 | 5 | 6 | 7 | 6 | 24 | ||||||||||||||
| Interest expense |
(62 | ) | (227 | ) | (57 | ) | (52 | ) | (49 | ) | (46 | ) | (204 | ) | |||||||
| Minority interests |
2 | (135 | ) | (59 | ) | (75 | ) | (54 | ) | (43 | ) | (231 | ) | ||||||||
| Corporate expense |
(83 | ) | (234 | ) | (57 | ) | (81 | ) | (65 | ) | (84 | ) | (287 | ) | |||||||
| Special items |
(279 | ) | (304 | ) | 4 | (2 | ) | (1 | ) | 25 | 26 | ||||||||||
| Discontinued operations |
(77 | ) | (90 | ) | 3 | (1 | ) | (2 | ) | (49 | ) | (49 | ) | ||||||||
| Accounting change |
— | 34 | (47 | ) | — | — | — | (47 | ) | ||||||||||||
| Other |
(11 | ) | (127 | ) | (49 | ) | (2 | ) | — | 35 | (16 | ) | |||||||||
| Consolidated net income |
(223 | ) | 420 | 151 | 216 | 280 | 291 | 938 | |||||||||||||
| (c) | Prior periods have been adjusted to reflect the reclassification of certain businesses between discontinued operations and continuing operations in the third and fourth quarters of 2003. |
Exhibit 99.2
SUPPLEMENTAL FINANCIAL INFORMATION
Alcoa and subsidiaries
Net Income and EPS Information (unaudited)
(in millions, except per-share amounts)
| Net Income |
Diluted EPS |
||||||||||||||||||||
| 4Q03 |
3Q03 |
4Q02 |
4Q03 |
3Q03 |
4Q02 |
||||||||||||||||
| GAAP Net income (loss) |
$ | 291 | $ | 280 | $ | (223 | ) | $ | 0.33 | $ | 0.33 | $ | (0.26 | ) | |||||||
| Discontinued operations—operating loss |
4 | 2 | 18 | — | — | — | |||||||||||||||
| Discontinued operations—loss on divestitures |
45 | — | 59 | — | — | — | |||||||||||||||
| GAAP Income (loss) from continuing operations |
$ | 340 | $ | 282 | $ | (146 | ) | $ | 0.39 | $ | 0.33 | $ | (0.17 | ) | |||||||
| Special items (2): |
|||||||||||||||||||||
| Restructurings |
(4 | ) | 1 | 95 | — | — | — | ||||||||||||||
| (Gain) loss on divestitures |
(21 | ) | — | 161 | — | — | — | ||||||||||||||
| Goodwill impairment |
— | — | 20 | — | — | — | |||||||||||||||
| Income from continuing operations excluding charges for restructurings and divestitures and goodwill impairment (1) |
$ | 315 | $ | 283 | $ | 130 | $ | 0.36 | $ | 0.33 | $ | 0.16 | |||||||||
| Average diluted shares outstanding |
872 | 859 | 844 | ||||||||||||||||||
| Net Income |
Diluted EPS | |||||||||||||
| 2003 |
2002 |
2003 |
2002 | |||||||||||
| GAAP Net income |
$ | 938 | $ | 420 | $ | 1.08 | $ | 0.49 | ||||||
| Cumulative effect of accounting change |
47 | (34 | ) | — | — | |||||||||
| Discontinued operations—operating loss |
4 | 31 | — | — | ||||||||||
| Discontinued operations—loss on divestitures |
45 | 59 | — | — | ||||||||||
| GAAP Income from continuing operations |
$ | 1,034 | $ | 476 | $ | 1.20 | $ | 0.56 | ||||||
| Special items (2): |
||||||||||||||
| Restructurings |
(4 | ) | 118 | — | — | |||||||||
| (Gain) loss on divestitures |
(21 | ) | 161 | — | — | |||||||||
| Goodwill impairment |
— | 20 | — | — | ||||||||||
| Income from continuing operations excluding charges for restructurings and divestitures and goodwill impairment (1) |
$ | 1,009 | $ | 775 | $ | 1.17 | $ | 0.91 | ||||||
| Average diluted shares outstanding |
857 | 850 | ||||||||||||
| (1) | Alcoa believes that income from continuing operations excluding charges for restructurings and divestitures and goodwill impairment is a measure that should be presented in addition to income from continuing operations determined in accordance with GAAP. The following matters should be considered when evaluating this non-GAAP financial measure: |
| Ø | Alcoa reviews the operating results of its businesses excluding the impacts of restructurings and divestitures and goodwill impairment. Excluding the impacts of these charges can provide an additional basis of comparison. Management believes that these charges are unusual in nature, and would not be indicative of ongoing operating results. As a result, management believes these charges should be considered in order to compare past, current, and future periods. |
| Ø | The economic impacts of the restructuring and divestiture charges are described in the footnotes to Alcoa’s financial statements. Generally speaking, charges associated with restructurings include cash and non-cash charges and are the result of employee layoff, plant consolidation of assets, or plant closure costs. These actions are taken in order to achieve a lower cost base for future operating results. |
| Ø | Charges associated with divestitures principally represent adjustments to the carrying value of certain assets and liabilities and do not typically require a cash payment. These actions are taken primarily for strategic reasons as the company has decided not to participate in this portion of the portfolio of businesses. |
| Ø | Alcoa’s growth over the last five years, and the onset of the manufacturing recession led to the aforementioned charges in 2001 and 2002. Before the start of the recent manufacturing recession, Alcoa last recorded charges associated with restructuring and divestitures in 1997. |
| Ø | Restructuring and divestiture charges are typically material and are considered to be outside the normal operations of a business. Corporate management is responsible for making decisions about restructurings and divestitures. |
| Ø | There can be no assurance that additional restructurings and divestitures and goodwill impairment will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both income from continuing operations determined under GAAP as well as income from continuing operations excluding restructuring and divestiture charges and goodwill impairment. |
| (2) | Special items totaled $26 of income for the fourth quarter and full year of 2003 before taxes and minority interests. The amount principally represents net gains from assets held for sale including the reversal of previously established reserves for businesses that Alcoa decided to retain, and a realized gain on the sale of a business, partially offset by adjustments to estimated proceeds for ongoing sale activities. After taxes and minority interests, special items amounted to income of $25 in the fourth quarter and full year of 2003. |