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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

 

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CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): April 6, 2004

 

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ALCOA INC.

(Exact name of Registrant as specified in its charter)

 

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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)

 

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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

 

(c)

Exhibits.

 

99.1

Alcoa Inc. Press Release dated April 6, 2004 (furnished pursuant to Item 12).

 

99.2

Alcoa Inc. Supplemental Financial Information (furnished pursuant to Item 12).

 

Item 12. Results of Operations and Financial Condition.

 

On April 6, 2004, Alcoa Inc. issued a press release announcing its financial results for the quarter ended March 31, 2004. 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.

 

* * * * *

 

In accordance with General Instruction B.6 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, 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.

 

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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.

 

 

Dated: April 7, 2004

 

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Alcoa Inc. Press Release dated April 6, 2004.
99.2		Alcoa Inc. Supplemental Financial Information.

 

4

Exhibit 99.1

 

 

 

FOR IMMEDIATE RELEASE

 

Investor Contact		Media Contact
William F. Oplinger		Kevin G. Lowery
(212) 836-2674		(412) 553-1424

 

Net Income Rises 135 Percent over Year-Ago Quarter;

Revenue Highest Since 2001

 

Highlights:

 

•

Net income was $355 million, up 135% from first quarter of 2003.

 

•

Income from continuing operations was $350 million, up 79% from 2003.

 

•

$108 million in new annual savings toward third-straight $1 billion-plus cost challenge; 230 basis point decline in cost of goods to 77.9% of sales.

 

•

Debt to capital ratio at 34.9%, within the company’s targeted range.

 

•

Five of six segments showed double-digit increases in profitability year over year; engineered products up 88% and flat rolled products up 25%.

 

•

Substantial completion of divestiture program with sale of specialty chemicals and other businesses.

 

New York, NY – April 6, 2004 — Alcoa today reported first quarter net income of $355 million, or $0.41 per diluted share, more than double the $151 million, or $0.17, in the first quarter of 2003, and up 22 percent from $291 million, or $0.33, in the previous quarter.

 

Income from continuing operations was $350 million, or $0.40, up 79 percent from the $195 million, or $0.23, in the first quarter of 2003, and higher than the $340 million, or $0.39, in the previous quarter. The previous quarter’s results included $105 million in pre-tax gains from insurance settlements and a lower effective tax rate. The first quarter benefits from a $58 million after-tax gain on the sale of the chemicals business, half of which was offset by higher costs from a customer bankruptcy, litigation settlements, and restructuring.

 

“In the quarter, our downstream aluminum businesses strengthened as end markets in Europe and the U.S. expanded,” said Alain Belda, Chairman and CEO of Alcoa. “Demand for aluminum fabricated products was the highest in three years, driving prices higher. In a stronger market, we achieved earnings growth by keeping our focus on both growth and costs, laying the groundwork for further improvements in profitability.”

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Market Overview

 

Revenue in the quarter was $5.7 billion, the highest in almost three years, and up 11 percent year over year and 3 percent on a sequential basis. Higher aluminum prices and stronger shipments of engineered and flat-rolled products offset the seasonal decline in consumer packaging and lower third-party alumina sales as more alumina was dedicated to internal demand. The strong fabricated aluminum shipments were driven by double-digit increases in sales to the commercial vehicle, automotive, and aerospace markets.

 

“Looking forward, we expect that the recent, rapid increase in aluminum prices will have a greater impact in the second quarter and contribute to improved profitability,” said Belda. On a year-over-year basis, the alumina, aluminum, and flat-rolled products segments all benefited from more robust pricing.

 

Costs, Savings, and Management Actions

 

In the quarter, the company achieved $27 million in new sustainable savings — $108 million on an annualized basis — toward its $1.2 billion cost challenge. Those savings overcame higher employee benefit costs, and contributed to a 230 basis-point reduction in cost of goods sold to 77.9 percent of sales. In addition, energy costs were $40 million higher than in the fourth quarter.

 

On the sale of its specialty chemicals business, the company earned $58 million after-tax, half of which was offset in the quarter by costs associated with litigation settlements in the U.S., debt allowances for a bankrupt customer, and ongoing restructuring to reduce costs. The reduction of the effective tax rate was driven by the chemicals sale and is included in the $58 million gain figure.

 

Stronger Balance Sheet

 

The company’s debt-to-capital ratio declined to 34.9 percent, putting it within the company’s targeted range. The company has reduced its debt by approximately $1.5 billion in the past 12 months, lowering its debt-to-capital ratio by 850 basis points. In addition to the sale of the chemicals business, the company substantially completed its divestiture program by selling two foil mills, and the automotive fasteners and packaging equipment businesses.

 

The company continued to manage capital effectively as days of working capital decreased in the quarter. In the quarter, capital expenditures were $192 million, 69 percent of depreciation.

 

Positioning the Company for Future Growth

 

Alcoa continues to make long-term investments to improve its world-class refining position. Alcoa World Alumina and Chemicals, Alcoa’s global alliance with Alumina Ltd., received approval for an upgrade at its Pinjarra refinery. Along with a newly completed expansion at its Jamaica refinery and on-going expansion at its Suriname facility, that project will add 1.1 million metric tons per year to alumina capacity. The company is in varying stages of planning and designing alumina expansions in Brazil, Jamaica, and Australia. Final decisions on those projects are expected in the second half of the year.

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Discussions on Brazilian and Canadian smelter projects continue, and infrastructure construction for the new smelter in Iceland is proceeding on schedule. The company also announced plans to build a new low-cost extrusion plant in Romania to serve the building and construction market in Europe.

 

Providing Solutions to Customers

 

The company leveraged its technology and manufacturing excellence to provide innovative solutions for customers in transportation markets. In the automotive market, Alcoa worked in partnership with General Motors to commercialize GM’s new forming process for aluminum body and closure panels featured on the lift gate for the 2004 Chevrolet Malibu Maxx. This advance will help extend luxury, aluminum styling to higher-volume vehicles, accelerating the deployment of aluminum in automotive applications.

 

Alcoa Fastening Systems signed new three-year agreements with Mitsubishi and Kawasaki to supply the Japanese manufacturers with over 350 different fasteners for various commercial aircraft programs.

 

Alcoa Wheels and Forged Products signed a 3-year contract with Heil Trailer, makers of tankers and trailers, to supply 12,000 to 15,000 wheels per year to its factories in the U.S., U.K., Argentina and Thailand. In the Australian and New Zealand markets, AFL Automotive was named the full service electrical distribution supplier for Sterling Trucks.

 

Quarterly Analyst Workshop

 

Alcoa’s quarterly analyst workshop will be at 4:00 p.m. EDT on Thursday, April 22, 2004. The meeting will be web cast via alcoa.com. Call information and related details 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. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing its expertise in design, engineering, and production to customers. 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. Alcoa has been a member of the Dow Jones Industrial Average for 45 years and the Dow Jones Sustainability Indices since 2001. The company has 120,000 employees in 41 countries. More information can be found at www.alcoa.com

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Alcoa Business System

 

The Alcoa Business System, or ABS, is an integrated set of principles and tools used to manage Alcoa businesses, based on three principles: make to use; eliminate waste; and people linchpin the system. ABS begins with an understanding of customers’ requirements, identifies what is needed to meet them, and then empowers employees to eliminate waste and solve problems through continuous improvements in costs, quality and speed.

 

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 2003 Form 10-K Report and other SEC reports.

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Alcoa and subsidiaries

Condensed Statement of Consolidated Income (unaudited)

(in millions, except per-share, share, and metric ton amounts)

 

		Quarter ended
		March 31 2004				March 31 2003				December 31 2003
Sales		$	5,696			$	5,140			$	5,532
Cost of goods sold			4,438				4,098				4,435
Selling, general administrative, and other expenses			344				297				346
Research and development expenses			45				50				47
Provision for depreciation, depletion, and amortization			303				285				312
Restructuring and other charges			(31	)			(4	)			(26	)
Interest expense			64				88				71
Other income, net			(22	)			(36	)			(139	)
			5,141				4,778				5,046
Income from continuing operations before taxes on income			555				362				486
Provision for taxes on income			155				108				103
Income from continuing operations before minority interests’ share			400				254				383
Less: Minority interests’ share			50				59				43
Income from continuing operations			350				195				340
Income (loss) from discontinued operations			5				3				(49	)
Cumulative effect of accounting change			—				(47	)			—
NET INCOME		$	355			$	151			$	291
Earnings (loss) per common share:
Basic:
Income from continuing operations		$	.40			$	.23			$	.39
Income (loss) from discontinued operations			.01				—				(.06	)
Cumulative effect of accounting change			—				(.06	)			—
Net income		$	.41			$	.17			$	.33
Diluted:
Income from continuing operations		$	.40			$	.23			$	.39
Income (loss) from discontinued operations			.01				—				(.06	)
Cumulative effect of accounting change			—				(.06	)			—
Net income		$	.41			$	.17			$	.33
Average number of shares used to compute:
Basic earnings per common share			869,402,685				845,065,093				866,243,592
Diluted earnings per common share			878,755,125				846,328,622				871,969,592
Common stock outstanding at the end of the period			869,356,569				845,157,381				868,490,686
Shipments of aluminum products (metric tons)			1,312,000				1,198,000				1,320,000

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Alcoa and subsidiaries

Condensed Consolidated Balance Sheet (unaudited)

(in millions)

 

		March 31 2004				December 31 2003
ASSETS
Current assets:
Cash and cash equivalents		$	459			$	576
Receivables from customers, less allowances: $116 in 2004 and $105 in 2003			2,854				2,521
Other receivables			275				350
Inventories			2,816				2,524
Deferred income taxes			240				267
Prepaid expenses and other current assets			656				502
Total current assets			7,300				6,740
Properties, plants, and equipment, at cost			24,930				24,797
Less: accumulated depreciation, depletion, and amortization			12,459				12,240
Net properties, plants, and equipment			12,471				12,557
Goodwill			6,567				6,549
Other assets			5,563				5,316
Assets held for sale			198				549
Total assets		$	32,099			$	31,711
LIABILITIES
Current liabilities:
Short-term borrowings		$	38			$	56
Accounts payable, trade			2,230				1,976
Accrued compensation and retirement costs			953				948
Taxes, including taxes on income			680				703
Other current liabilities			923				878
Long-term debt due within one year			490				523
Total current liabilities			5,314				5,084
Long-term debt, less amount due within one year			6,782				6,692
Accrued postretirement benefits			2,213				2,220
Other noncurrent liabilities and deferred credits			3,249				3,389
Deferred income taxes			851				804
Liabilities of operations held for sale			39				107
Total liabilities			18,448				18,296
MINORITY INTERESTS			1,357				1,340
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred stock			55				55
Common stock			925				925
Additional capital			5,792				5,831
Retained earnings			8,074				7,850
Treasury stock, at cost			(1,986	)			(2,017	)
Accumulated other comprehensive loss			(566	)			(569	)
Total shareholders’ equity			12,294				12,075
Total liabilities and equity		$	32,099			$	31,711

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Alcoa and subsidiaries

Segment Information (unaudited)

(in millions, except metric ton amounts and realized prices)

 

		1Q03				2Q03				3Q03				4Q03				2003				1Q04
Consolidated Third-Party Revenues:
Alumina and Chemicals		$	449			$	491			$	526			$	536			$	2,002			$	463
Primary Metals			732				805				816				876				3,229				878
Flat-Rolled Products			1,152				1,200				1,176				1,287				4,815				1,450
Engineered Products			1,390				1,455				1,369				1,375				5,589				1,523
Packaging and Consumer			749				836				812				818				3,215				744
Other			668				710				636				640				2,654				638
Total		$	5,140			$	5,497			$	5,335			$	5,532			$	21,504			$	5,696
		1Q03				2Q03				3Q03				4Q03				2003				1Q04
Consolidated Intersegment Revenues:
Alumina and Chemicals		$	240			$	248			$	258			$	275			$	1,021			$	338
Primary Metals			840				690				740				828				3,098				1,038
Flat-Rolled Products			20				15				17				14				66				23
Engineered Products			9				5				5				5				24				4
Packaging and Consumer			—				—				—				—				—				—
Other			—				—				—				—				—				—
Total		$	1,109			$	958			$	1,020			$	1,122			$	4,209			$	1,403
		1Q03				2Q03				3Q03				4Q03				2003				1Q04
Consolidated Third-Party Shipments (Kmt):
Alumina and Chemicals			1,794				1,939				1,982				1,956				7,671				1,718
Primary Metals			453				495				488				516				1,952				469
Flat-Rolled Products			434				453				450				482				1,819				515
Engineered Products			223				221				222				213				879				234
Packaging and Consumer			36				42				40				49				167				38
Other			52				56				62				60				230				56
Total Aluminum			1,198				1,267				1,262				1,320				5,047				1,312
Alcoa’s average realized price-Primary		$	0.69			$	0.68			$	0.71			$	0.73			$	0.70			$	0.79
		1Q03				2Q03				3Q03				4Q03				2003				1Q04
After-Tax Operating Income (ATOI):
Alumina and Chemicals		$	91			$	89			$	113			$	122			$	415				127
Primary Metals			166				162				163				166				657				192
Flat-Rolled Products			53				56				59				53				221				66
Engineered Products			29				46				47				33				155				62
Packaging and Consumer			53				57				52				52				214				35
Other			9				17				8				17				51				18
Total		$	401			$	427			$	442			$	443			$	1,713			$	500
		1Q03				2Q03				3Q03				4Q03				2003				1Q04
Reconciliation of ATOI to consolidated net income:
Total ATOI		$	401			$	427			$	442			$	443			$	1,713			$	500
Impact of intersegment profit adjustments			7				(4	)			2				4				9				23
Unallocated amounts (net of tax):
Interest income			5				6				7				6				24				7
Interest expense			(57	)			(52	)			(49	)			(46	)			(204	)			(41	)
Minority interests			(59	)			(75	)			(54	)			(43	)			(231	)			(50	)
Corporate expense			(57	)			(81	)			(65	)			(84	)			(287	)			(74	)
Restructuring and other charges			4				(2	)			(1	)			25				26				31
Discontinued operations			3				(1	)			(2	)			(49	)			(49	)			5
Accounting change			(47	)			—				—				—				(47	)			—
Other			(49	)			(2	)			—				35				(16	)			(46	)
Consolidated net income		$	151			$	216			$	280			$	291			$	938			$	355

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
		1Q04				4Q03				1Q03				1Q04			4Q03			1Q03
GAAP Net income		$	355			$	291			$	151			$	.41		$	.33		$	.17
Discontinued operations – operating loss (income)			—				4				(3	)
Discontinued operations – (gain) loss on divestitures			(5	)			45				—
Cumulative effect of accounting change			—				—				47
GAAP income from continuing operations		$	350			$	340			$	195			$	.40		$	.39		$	.23
Restructuring and other charges (2):
Restructurings			8				(4	)			(3	)
Gain on divestitures			(58	)			(21	)			—
Income from continuing operations excluding restructuring and other charges (1)		$	300			$	315			$	192			$	.34		$	.36		$	.23
Average diluted shares outstanding															879			872			846

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(1)

Alcoa believes that income from continuing operations excluding restructuring and other charges 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:

 

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Alcoa reviews the operating results of its businesses excluding the impacts of restructurings and divestitures. 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.

 

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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.

 

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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.

 

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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.

 

•

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.

 

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There can be no assurance that additional restructurings and divestitures 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 other charges.

 

(2)

Restructuring and other charges totaled $31 of income for the first quarter of 2004 before taxes and minority interests. The amount principally represents a realized gain on the sale of the specialty chemicals business, partially offset by layoff charges. After taxes and minority interests, restructuring and other charges amounted to income of $50 in the first quarter of 2004.