UNITED STATES
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 10, 2008 (January 9, 2008)
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) |
| 390 Park Avenue, New York, New York | 10022-4608 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Office of Investor Relations 212-836-2674
Office of the Secretary 212-836-2732
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
On January 9, 2008, Alcoa Inc. issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2007. A copy of the press release is attached hereto as Exhibit 99 and incorporated herein by reference.
The information in this Current Report on Form 8-K, including Exhibit 99, is being furnished in accordance with the provisions of General Instruction B.2 of Form 8-K.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits. |
The following is furnished as an exhibit to this report:
| 99 | Alcoa Inc. press release dated January 9, 2008. |
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 | |||
| Name: | Lawrence R. Purtell | |||
| Title: | Executive Vice President and General Counsel | |||
Date: January 10, 2008
3
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 99 |
Alcoa Inc. press release dated January 9, 2008. |
4
Exhibit 99
[Alcoa logo]
FOR IMMEDIATE RELEASE
| Investor Contact |
Media Contact | |
| Tony Thene |
Kevin G. Lowery | |
| (212) 836-2674 |
(412) 553-1424 | |
| Mobile (724) 422-7844 |
Alcoa 2007 Revenues, Income and Cash From Operations Highest in Company’s History
Annual Highlights:
| • | 2007 revenues at an all-time record of $30.7 billion; |
| • | Income from continuing operations an all-time high of $2.6 billion, or $2.95 per diluted share, a 19 percent increase from 2006; |
| • | Cash from operations an all-time Company record of $3.1 billion, 21 percent higher than 2006; |
| • | Return on capital at 12.7 percent including investments in growth projects; excluding growth projects, ROC stands at 16.1 percent; |
| • | Debt-to-capital ratio stands at 30.2 percent, lower than a year ago despite substantial share repurchase; |
| • | Major progress on portfolio management with agreement to sell packaging, divestiture of automotive castings, monetization of Chalco stake, and creation of soft alloy joint venture; |
| • | Completed major growth projects – Fjardaal smelter in Iceland and Mosjoen anode plant in Norway – and significant progress on other projects; |
| • | Dividend increased 13 percent in 2007. |
4th Quarter 2007 Highlights:
| • | Revenues of $7.4 billion in the quarter; |
| • | Income from continuing operations of $624 million, or $0.74 per share; results include favorable restructuring adjustment and tax benefit totaling $323 million or $0.38 per share, almost all of which stems from packaging sale agreement; |
| • | Repurchased approximately 68 million shares through end of fourth quarter, with approximately 150 million shares, or 18 percent of shares outstanding, remaining within authorization; |
| • | Cash from operations in the quarter was $643 million. |
NEW YORK—January 9, 2008 – Alcoa (NYSE: AA) today announced it achieved record results in revenues, income from continuing operations and cash from operations for the full year 2007. Revenues for 2007 were $30.7 billion, compared
to $30.4 billion in 2006. Annual income from continuing operations rose to $2.6 billion, or $2.95 per diluted share, for 2007, a 19 percent increase compared to $2.2 billion, or $2.47, in 2006. And, cash from operations for 2007 increased 21 percent to more than $3.1 billion from $2.6 billion in 2006.
“For the second year in a row, Alcoa has achieved company all-time records in revenues, income from continuing operations and cash generation,” said Alain Belda, Alcoa Chairman and CEO. “We battled substantially higher material input and energy costs, and currency impacts while simultaneously continuing to execute on the largest capital investment program in our history.”
“We have invested in new plants, expanded production at others, modernized operations, renegotiated long-term power agreements, and built new energy facilities to extend our energy access at competitive rates, while also continuing to invest in growth markets such as Brazil, China and Russia,” Belda said.
“These actions, combined with portfolio and cash flow management, our share repurchase program, conservative leverage, and our commitment to sustainability delivered results now, and will continue to generate quality profitable growth for decades,” added Belda. “In 2007, Alcoans delivered yet again. This is what builds a stronger Company for our stakeholders.”
Fourth quarter income from continuing operations was $624 million, or $0.74. Included in the results are a favorable restructuring adjustment and a tax benefit totaling $323 million or $0.38 per share, almost all of which stems from the recent agreement to sell the packaging and consumer businesses. Income from continuing operations in the 2006 fourth quarter was $258 million, or $0.29, and $558 million, or $0.64, in the third quarter 2007.
Net income for the fourth quarter 2007 was $632 million, or $0.75, which includes the restructuring adjustment and the benefit from the agreement to sell the packaging and consumer business. Net income for the fourth quarter 2006 was $359 million, or $0.41, and $555 million, or $0.63, in the 2007 third quarter.
Revenues for the 2007 fourth quarter were $7.4 billion, compared to $7.8 billion a year ago as a result of lower LME prices and the exclusion of results from the soft alloy extrusion business which is now part of a joint venture. The soft alloy extrusion business had revenues of approximately $560 million in the fourth quarter of 2006.
Cash Generation, ROC, and Growth
Cash from operations in the fourth quarter 2007 was $643 million, bringing full-year cash from operations to more than $3.1 billion, compared to $2.6 billion in 2006 and helping to keep the Company’s debt-to-capital ratio within its targeted range at 30.2 percent.
The Company’s trailing 12-month return on capital (ROC) was 16.1 percent, excluding investments in growth projects. Including investments in growth projects, ROC stands at 12.7 percent, well above the cost of capital.
In 2007, the Company completed major growth projects, including its first greenfield smelter in 20 years in Iceland, a new anode plant in Mosjoen, Norway, and its third flat-rolled products facility in China (Kunshan). In addition, major progress was made on several other growth projects including the Juruti bauxite mine, the expansion of the Bohai rolling mill in China, and expansion of the Sao Luis alumina refinery.
The Company made significant progress to extend the life of existing facilities through renegotiating long-term power agreements including those in Massena, NY and Wenatchee, WA in 2007. The Company also continued investments in Brazil including the Serra do Facao hydroelectric project to further increase its self-sufficiency there.
The Company is now operating primary aluminum production at a run rate of approximately four million metric tons per year.
The Company made major progress in 2007 on its portfolio management plan. During the year, the Company reached agreement to sell its packaging and consumer businesses; divested the automotive castings business; monetized its stake in Chalco to enable redeployment of capital into other value-adding options, including projects in China; and formed a joint venture with Sapa for its soft alloy extrusion business.
In 2007, Alcoa also increased its share repurchase program from 10 percent to 25 percent of outstanding shares and increased its dividend by 13 percent during the year. Through the end of the fourth quarter the Company has repurchased 68 million shares, or approximately eight percent of shares outstanding, as part of its share repurchase program, leaving approximately 150 million shares, or 18 percent of shares outstanding, remaining within the authorization.
Segment and Other Results
(all comparisons on a sequential quarter basis, unless noted)
Alumina – After-tax operating income (ATOI) was $205 million, a decrease of $10 million, or five percent, from the prior quarter. System production increased by a net of 80 kmt as Suralco, San Ciprian and Pinjarra set quarterly production records and Jamalco continued its recovery from Hurricane Dean. However, higher freight and energy costs and unfavorable currency offset production gains.
Primary Metals – ATOI was $196 million, down $87 million, or 31 percent, compared to the prior quarter. The majority of the decrease resulted from lower LME prices and unfavorable currency. These items were partially offset by the
recovery at the Rockdale and Tennessee smelters and a three percent production increase. The company purchased approximately 55 kmt of primary metal for internal use.
Flat-Rolled Products – ATOI was a loss of $16 million for the quarter, down $77 million from the prior quarter. Weak performance in Russia and China accounted for 50 percent of the ATOI decline in the quarter. For Russia specifically, the increased loss was due to higher operational and energy costs and unfavorable currency. The remaining decline in the segment’s ATOI is mostly due to general market weakness in the U.S. and Europe flat-rolled businesses, weaker product mix, and de-stocking by aerospace customers. Finally, results for the Australian flat-rolled business declined following restructuring last quarter that is designed to reduce headcount and simplify product mix. In addition, the weakening U.S. dollar has had a negative impact in this business.
Extruded and End Products – ATOI was $16 million, up $3 million, or 23 percent, from the prior quarter. Market and operating conditions were comparable to the prior quarter with margin improvements accounting for the increase.
Engineered Solutions – ATOI was $58 million or essentially flat to the prior quarter ATOI of $60 million. Improvements from the wire harness business restructuring offset the weaker market conditions in forgings and investment castings. On a year over year basis, the Fastening Systems and Power & Propulsion (Howmet) businesses had outstanding years with ATOI up 36 percent and 47 percent, respectively.
Packaging & Consumer – ATOI was $56 million, up $20 million, or 56 percent, from the prior quarter. The normal seasonal decrease in the closures business was offset by seasonal improvements in the consumer products business. With the pending sale, depreciation was ceased in the segment leading to a positive impact of approximately $20 million.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on January 9th to present the quarter’s results. The meeting will be webcast via alcoa.com. Call information and related details are available at www.alcoa.com under “Invest.”
About Alcoa
Alcoa is the world’s leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, through its growing position 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 including flat-rolled products, hard alloy extrusions, and forgings, Alcoa also markets Alcoa® wheels, fastening systems, precision and investment castings, structures and building systems. The Company has 107,000 employees in 44 countries and has been named one of the top most sustainable corporations in the world at the World Economic Forum in Davos, Switzerland. More information can be found at www.alcoa.com.
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. Alcoa disclaims any intention or obligation, other than as required by law, to update or revise any forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or aluminum industry conditions generally, including global supply and demand conditions and London Metal Exchange-based prices for primary aluminum, alumina and other products; (b) material adverse changes in the markets served by Alcoa, including the transportation, building, construction, distribution, packaging, industrial gas turbine and other markets; (c) Alcoa’s inability to mitigate impacts from unfavorable currency fluctuations or from increased energy, transportation and raw materials costs or other cost inflation; (d) Alcoa’s inability to achieve the level of cash generation, return on capital improvement, cost savings, or earnings or revenue growth anticipated by management; (e) Alcoa’s inability to complete its growth projects and integration of acquired facilities as planned and by targeted completion dates; (f) unfavorable changes in laws, governmental regulations or policies, currency exchange rates or competitive factors in the countries in which Alcoa operates; (g) significant legal proceedings or investigations adverse to Alcoa, including environmental, product liability, safety and health and other claims; and (h) the other risk factors summarized in Alcoa’s Form 10-K for the year ended December 31, 2006, Forms 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007, and other reports filed with the Securities and Exchange Commission.
Alcoa and subsidiaries
Statement of Consolidated Income (unaudited)
(in millions, except per-share, share, and metric ton amounts)
| Quarter ended | ||||||||||||
| December 31, 2006 |
September 30, 2007 |
December 31, 2007 |
||||||||||
| Sales |
$ | 7,840 | $ | 7,387 | $ | 7,387 | ||||||
| Cost of goods sold (exclusive of expenses below) |
6,132 | 5,910 | 6,153 | |||||||||
| Selling, general administrative, and other expenses |
367 | 365 | 383 | |||||||||
| Research and development expenses |
63 | 64 | 78 | |||||||||
| Provision for depreciation, depletion, and amortization |
325 | 338 | 309 | |||||||||
| Goodwill impairment charge |
— | 133 | — | |||||||||
| Restructuring and other charges |
554 | 444 | (14 | ) | ||||||||
| Interest expense |
93 | 151 | 81 | |||||||||
| Other income, net |
(49 | ) | (1,731 | ) | (78 | ) | ||||||
| Total costs and expenses |
7,485 | 5,674 | 6,912 | |||||||||
| Income from continuing operations before taxes on income |
355 | 1,713 | 475 | |||||||||
| (Benefit) provision for taxes on income |
(1 | ) | 1,079 | (213 | ) | |||||||
| Income from continuing operations before minority interests’ share |
356 | 634 | 688 | |||||||||
| Less: Minority interests’ share |
98 | 76 | 64 | |||||||||
| Income from continuing operations |
258 | 558 | 624 | |||||||||
| Income (loss) from discontinued operations |
101 | (3 | ) | 8 | ||||||||
| NET INCOME |
$ | 359 | $ | 555 | $ | 632 | ||||||
| Earnings (loss) per common share: |
||||||||||||
| Basic: |
||||||||||||
| Income from continuing operations |
$ | .30 | $ | .64 | $ | .74 | ||||||
| Income (loss) from discontinued operations |
.11 | — | .01 | |||||||||
| Net income |
$ | .41 | $ | .64 | $ | .75 | ||||||
| Diluted: |
||||||||||||
| Income from continuing operations |
$ | .29 | $ | .64 | $ | .74 | ||||||
| Income (loss) from discontinued operations |
.12 | (.01 | ) | .01 | ||||||||
| Net income |
$ | .41 | $ | .63 | $ | .75 | ||||||
| Average number of shares used to compute: |
||||||||||||
| Basic earnings per common share |
867,331,378 | 867,664,875 | 837,404,682 | |||||||||
| Diluted earnings per common share |
873,059,079 | 877,700,035 | 845,831,650 | |||||||||
| Shipments of aluminum products (metric tons) |
1,399,000 | 1,328,000 | 1,336,000 | |||||||||
Alcoa and subsidiaries
Statement of Consolidated Income (unaudited), continued
(in millions, except per-share, share, and metric ton amounts)
| Year ended December 31, |
||||||||
| 2006 | 2007 | |||||||
| Sales |
$ | 30,379 | $ | 30,748 | ||||
| Cost of goods sold (exclusive of expenses below) |
23,318 | 24,248 | ||||||
| Selling, general administrative, and other expenses |
1,402 | 1,472 | ||||||
| Research and development expenses |
213 | 249 | ||||||
| Provision for depreciation, depletion, and amortization |
1,280 | 1,268 | ||||||
| Goodwill impairment charge |
— | 133 | ||||||
| Restructuring and other charges |
543 | 399 | ||||||
| Interest expense |
384 | 401 | ||||||
| Other income, net |
(193 | ) | (1,913 | ) | ||||
| Total costs and expenses |
26,947 | 26,257 | ||||||
| Income from continuing operations before taxes on income |
3,432 | 4,491 | ||||||
| Provision for taxes on income |
835 | 1,555 | ||||||
| Income from continuing operations before minority interests’ share |
2,597 | 2,936 | ||||||
| Less: Minority interests’ share |
436 | 365 | ||||||
| Income from continuing operations |
2,161 | 2,571 | ||||||
| Income (loss) from discontinued operations |
87 | (7 | ) | |||||
| NET INCOME |
$ | 2,248 | $ | 2,564 | ||||
| Earnings (loss) per common share: |
||||||||
| Basic: |
||||||||
| Income from continuing operations |
$ | 2.49 | $ | 2.98 | ||||
| Income (loss) from discontinued operations |
.10 | — | ||||||
| Net income |
$ | 2.59 | $ | 2.98 | ||||
| Diluted: |
||||||||
| Income from continuing operations |
$ | 2.47 | $ | 2.95 | ||||
| Income (loss) from discontinued operations |
.10 | — | ||||||
| Net income |
$ | 2.57 | $ | 2.95 | ||||
| Average number of shares used to compute: |
||||||||
| Basic earnings per common share |
868,819,955 | 860,771,021 | ||||||
| Diluted earnings per common share |
874,963,528 | 869,459,078 | ||||||
| Common stock outstanding at the end of the period |
867,739,544 | 827,401,800 | ||||||
| Shipments of aluminum products (metric tons) |
5,545,000 | 5,393,000 | ||||||
Alcoa and subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
| December 31, 2006 (a) |
December 31, 2007 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 506 | $ | 483 | ||||
| Receivables from customers, less allowances of $68 in 2006 and $72 in 2007 |
2,788 | 2,602 | ||||||
| Other receivables |
301 | 451 | ||||||
| Inventories |
3,380 | 3,326 | ||||||
| Prepaid expenses and other current assets |
1,378 | 1,224 | ||||||
| Total current assets |
8,353 | 8,086 | ||||||
| Properties, plants, and equipment |
27,689 | 31,601 | ||||||
| Less: accumulated depreciation, depletion, and amortization |
13,682 | 14,722 | ||||||
| Properties, plants, and equipment, net |
14,007 | 16,879 | ||||||
| Goodwill |
4,885 | 4,806 | ||||||
| Investments |
1,718 | 2,038 | ||||||
| Other assets |
3,939 | 4,046 | ||||||
| Assets held for sale |
4,281 | 2,948 | ||||||
| Total assets |
$ | 37,183 | $ | 38,803 | ||||
| LIABILITIES |
||||||||
| Current liabilities: |
||||||||
| Short-term borrowings |
$ | 462 | $ | 569 | ||||
| Commercial paper |
340 | 856 | ||||||
| Accounts payable, trade |
2,407 | 2,787 | ||||||
| Accrued compensation and retirement costs |
949 | 943 | ||||||
| Taxes, including taxes on income |
851 | 644 | ||||||
| Other current liabilities |
1,360 | 1,165 | ||||||
| Long-term debt due within one year |
510 | 202 | ||||||
| Total current liabilities |
6,879 | 7,166 | ||||||
| Commercial paper |
1,132 | — | ||||||
| Long-term debt, less amount due within one year |
4,777 | 6,371 | ||||||
| Accrued pension benefits |
1,540 | 1,098 | ||||||
| Accrued postretirement benefits |
2,956 | 2,753 | ||||||
| Other noncurrent liabilities and deferred credits |
2,002 | 1,943 | ||||||
| Deferred income taxes |
762 | 545 | ||||||
| Liabilities of operations held for sale |
704 | 451 | ||||||
| Total liabilities |
20,752 | 20,327 | ||||||
| MINORITY INTERESTS |
1,800 | 2,460 | ||||||
| SHAREHOLDERS’ EQUITY |
||||||||
| Preferred stock |
55 | 55 | ||||||
| Common stock |
925 | 925 | ||||||
| Additional capital |
5,817 | 5,774 | ||||||
| Retained earnings |
11,066 | 13,039 | ||||||
| Treasury stock, at cost |
(1,999 | ) | (3,440 | ) | ||||
| Accumulated other comprehensive loss |
(1,233 | ) | (337 | ) | ||||
| Total shareholders’ equity |
14,631 | 16,016 | ||||||
| Total liabilities and equity |
$ | 37,183 | $ | 38,803 | ||||
| (a) | The Consolidated Balance Sheet as of December 31, 2006 has been reclassified to reflect the movement of the automotive castings and packaging and consumer businesses to held for sale in the third quarter of 2007. |
Alcoa and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
| Year ended December 31, |
||||||||
| 2006 (b) | 2007 | |||||||
| CASH FROM OPERATIONS |
||||||||
| Net income |
$ | 2,248 | $ | 2,564 | ||||
| Adjustments to reconcile net income to cash from operations: |
||||||||
| Depreciation, depletion, and amortization |
1,280 | 1,269 | ||||||
| Deferred income taxes |
(68 | ) | 248 | |||||
| Equity income, net of dividends |
(89 | ) | (116 | ) | ||||
| Goodwill impairment charge |
— | 133 | ||||||
| Restructuring and other charges |
543 | 399 | ||||||
| Gains from investing activities – asset sales |
(25 | ) | (1,800 | ) | ||||
| Provision for doubtful accounts |
22 | 15 | ||||||
| (Income) loss from discontinued operations |
(87 | ) | 7 | |||||
| Minority interests |
436 | 365 | ||||||
| Stock-based compensation |
72 | 97 | ||||||
| Excess tax benefits from stock-based payment arrangements |
(17 | ) | (79 | ) | ||||
| Other (c) |
(222 | ) | (81 | ) | ||||
| Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
||||||||
| (Increase) decrease in receivables |
(109 | ) | 517 | |||||
| (Increase) decrease in inventories |
(509 | ) | 186 | |||||
| (Increase) in prepaid expenses and other current assets |
(175 | ) | (129 | ) | ||||
| (Decrease) increase in accounts payable and accrued expenses |
(285 | ) | 79 | |||||
| Increase (decrease) in taxes, including taxes on income (c) |
30 | (169 | ) | |||||
| Cash received on long-term aluminum supply contract |
— | 93 | ||||||
| Pension contributions |
(397 | ) | (322 | ) | ||||
| Net change in noncurrent assets and liabilities |
(41 | ) | (172 | ) | ||||
| (Increase) decrease in net assets held for sale |
(44 | ) | 8 | |||||
| CASH PROVIDED FROM CONTINUING OPERATIONS |
2,563 | 3,112 | ||||||
| CASH PROVIDED FROM (USED FOR) DISCONTINUED OPERATIONS |
4 | (1 | ) | |||||
| CASH PROVIDED FROM OPERATIONS |
2,567 | 3,111 | ||||||
| FINANCING ACTIVITIES |
||||||||
| Net change in short-term borrowings |
126 | 94 | ||||||
| Net change in commercial paper |
560 | (617 | ) | |||||
| Additions to long-term debt |
29 | 2,050 | ||||||
| Debt issuance costs |
— | (126 | ) | |||||
| Payments on long-term debt |
(36 | ) | (873 | ) | ||||
| Common stock issued for stock compensation plans |
155 | 835 | ||||||
| Excess tax benefits from stock-based payment arrangements |
17 | 79 | ||||||
| Repurchase of common stock |
(290 | ) | (2,496 | ) | ||||
| Dividends paid to shareholders |
(523 | ) | (590 | ) | ||||
| Dividends paid to minority interests |
(400 | ) | (368 | ) | ||||
| Contributions from minority interests |
342 | 474 | ||||||
| CASH USED FOR FINANCING ACTIVITIES |
(20 | ) | (1,538 | ) | ||||
| INVESTING ACTIVITIES |
||||||||
| Capital expenditures |
(3,201 | ) | (3,636 | ) | ||||
| Capital expenditures of discontinued operations |
(4 | ) | — | |||||
| Proceeds from the sale of assets |
372 | 183 | ||||||
| Additions to investments |
(58 | ) | (131 | ) | ||||
| Sales of investments |
35 | 2,011 | ||||||
| Net change in short-term investments and restricted cash |
(4 | ) | 3 | |||||
| Other |
19 | (55 | ) | |||||
| CASH USED FOR INVESTING ACTIVITIES |
(2,841 | ) | (1,625 | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
38 | 29 | ||||||
| Net change in cash and cash equivalents |
(256 | ) | (23 | ) | ||||
| Cash and cash equivalents at beginning of year |
762 | 506 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR |
$ | 506 | $ | 483 | ||||
| (b) | The Statement of Consolidated Cash Flows for the year ended December 31, 2006 has been reclassified to reflect the movement of the automotive castings and packaging and consumer businesses to held for sale in the third quarter of 2007. |
| (c) | A reclassification of $53 related to income taxes was made in the Statement of Consolidated Cash Flows for the year ended December 31, 2006 to conform to the current period presentation. |
Alcoa and subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized prices; production and shipments in thousands of metric tons [kmt])
| 4Q06 | 2006 | 1Q07 | 2Q07 | 3Q07 | 4Q07 | 2007 | |||||||||||||||||||
| Alumina: |
|||||||||||||||||||||||||
| Alumina production (kmt) |
3,790 | 15,128 | 3,655 | 3,799 | 3,775 | 3,855 | 15,084 | ||||||||||||||||||
| Third-party alumina shipments (kmt) |
2,084 | 8,420 | 1,877 | 1,990 | 1,937 | 2,030 | 7,834 | ||||||||||||||||||
| Third-party sales |
$ | 711 | $ | 2,785 | $ | 645 | $ | 712 | $ | 664 | $ | 688 | $ | 2,709 | |||||||||||
| Intersegment sales |
$ | 550 | $ | 2,144 | $ | 579 | $ | 587 | $ | 631 | $ | 651 | $ | 2,448 | |||||||||||
| Equity income (loss) |
$ | 1 | $ | (2 | ) | $ | 1 | $ | — | $ | (1 | ) | $ | 1 | $ | 1 | |||||||||
| Depreciation, depletion, and amortization |
$ | 56 | $ | 192 | $ | 56 | $ | 62 | $ | 76 | $ | 73 | $ | 267 | |||||||||||
| Income taxes |
$ | 115 | $ | 428 | $ | 100 | $ | 102 | $ | 89 | $ | 49 | $ | 340 | |||||||||||
| After-tax operating income (ATOI) |
$ | 259 | $ | 1,050 | $ | 260 | $ | 276 | $ | 215 | $ | 205 | $ | 956 | |||||||||||
| Primary Metals: |
|||||||||||||||||||||||||
| Aluminum production (kmt) |
908 | 3,552 | 899 | 901 | 934 | 959 | 3,693 | ||||||||||||||||||
| Third-party aluminum shipments (kmt) |
556 | 2,087 | 518 | 565 | 584 | 624 | 2,291 | ||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ | 2,766 | $ | 2,665 | $ | 2,902 | $ | 2,879 | $ | 2,734 | $ | 2,646 | $ | 2,784 | |||||||||||
| Third-party sales |
$ | 1,698 | $ | 6,171 | $ | 1,633 | $ | 1,746 | $ | 1,600 | $ | 1,597 | $ | 6,576 | |||||||||||
| Intersegment sales |
$ | 1,524 | $ | 6,208 | $ | 1,477 | $ | 1,283 | $ | 1,171 | $ | 1,063 | $ | 4,994 | |||||||||||
| Equity income |
$ | 18 | $ | 82 | $ | 22 | $ | 18 | $ | 11 | $ | 6 | $ | 57 | |||||||||||
| Depreciation, depletion, and amortization |
$ | 97 | $ | 395 | $ | 95 | $ | 102 | $ | 102 | $ | 111 | $ | 410 | |||||||||||
| Income taxes |
$ | 180 | $ | 726 | $ | 214 | $ | 196 | $ | 80 | $ | 52 | $ | 542 | |||||||||||
| ATOI |
$ | 480 | $ | 1,760 | $ | 504 | $ | 462 | $ | 283 | $ | 196 | $ | 1,445 | |||||||||||
| Flat-Rolled Products: |
|||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) |
564 | 2,273 | 568 | 583 | 602 | 574 | 2,327 | ||||||||||||||||||
| Third-party sales |
$ | 2,127 | $ | 8,297 | $ | 2,275 | $ | 2,344 | $ | 2,309 | $ | 2,243 | $ | 9,171 | |||||||||||
| Intersegment sales |
$ | 66 | $ | 246 | $ | 60 | $ | 63 | $ | 59 | $ | 59 | $ | 241 | |||||||||||
| Equity loss |
$ | (1 | ) | $ | (2 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
| Depreciation, depletion, and amortization |
$ | 55 | $ | 219 | $ | 55 | $ | 55 | $ | 58 | $ | 55 | $ | 223 | |||||||||||
| Income taxes |
$ | (2 | ) | $ | 68 | $ | 26 | $ | 33 | $ | 31 | $ | 5 | $ | 95 | ||||||||||
| ATOI |
$ | 62 | $ | 255 | $ | 62 | $ | 93 | $ | 61 | $ | (16 | ) | $ | 200 | ||||||||||
| Extruded and End Products: |
|||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) |
203 | 877 | 213 | 146 | 78 | 69 | 506 | ||||||||||||||||||
| Third-party sales |
$ | 1,070 | $ | 4,419 | $ | 1,175 | $ | 965 | $ | 563 | $ | 543 | $ | 3,246 | |||||||||||
| Intersegment sales |
$ | 25 | $ | 99 | $ | 42 | $ | 26 | $ | 13 | $ | 7 | $ | 88 | |||||||||||
| Equity income (loss) |
$ | — | $ | — | $ | — | $ | 9 | $ | (2 | ) | $ | 7 | $ | 14 | ||||||||||
| Depreciation, depletion, and amortization |
$ | 31 | $ | 118 | $ | 9 | $ | 10 | $ | 11 | $ | 9 | $ | 39 | |||||||||||
| Income taxes |
$ | 2 | $ | 18 | $ | 11 | $ | 29 | $ | 5 | $ | 9 | $ | 54 | |||||||||||
| ATOI |
$ | 27 | $ | 60 | $ | 34 | $ | 46 | $ | 13 | $ | 16 | $ | 109 | |||||||||||
| Engineered Solutions: |
|||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) |
30 | 139 | 31 | 30 | 27 | 24 | 112 | ||||||||||||||||||
| Third-party sales |
$ | 1,346 | $ | 5,456 | $ | 1,449 | $ | 1,478 | $ | 1,407 | $ | 1,391 | $ | 5,725 | |||||||||||
| Equity loss |
$ | (5 | ) | $ | (4 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
| Depreciation, depletion, and amortization |
$ | 44 | $ | 169 | $ | 41 | $ | 42 | $ | 46 | $ | 43 | $ | 172 | |||||||||||
| Income taxes |
$ | (15 | ) | $ | 101 | $ | 44 | $ | 47 | $ | 38 | $ | 11 | $ | 140 | ||||||||||
| ATOI |
$ | 73 | $ | 331 | $ | 93 | $ | 105 | $ | 60 | $ | 58 | $ | 316 | |||||||||||
| Packaging and Consumer: |
|||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) |
46 | 169 | 35 | 40 | 37 | 45 | 157 | ||||||||||||||||||
| Third-party sales |
$ | 837 | $ | 3,235 | $ | 736 | $ | 837 | $ | 828 | $ | 887 | $ | 3,288 | |||||||||||
| Equity income |
$ | 1 | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||
| Depreciation, depletion, and amortization |
$ | 32 | $ | 124 | $ | 30 | $ | 30 | $ | 29 | $ | — | $ | 89 | |||||||||||
| Income taxes |
$ | 11 | $ | 33 | $ | 7 | $ | 17 | $ | 17 | $ | 27 | $ | 68 | |||||||||||
| ATOI |
$ | 26 | $ | 95 | $ | 19 | $ | 37 | $ | 36 | $ | 56 | $ | 148 | |||||||||||
Alcoa and subsidiaries
Segment Information (unaudited), continued
(in millions)
| Reconciliation of ATOI to consolidated net income: | 4Q06 | 2006 | 1Q07 | 2Q07 | 3Q07 | 4Q07 | 2007 | |||||||||||||||||||||
| Total segment ATOI |
$ | 927 | $ | 3,551 | $ | 972 | $ | 1,019 | $ | 668 | $ | 515 | $ | 3,174 | ||||||||||||||
| Unallocated amounts (net of tax): |
||||||||||||||||||||||||||||
| Impact of LIFO |
(66 | ) | (170 | ) | (27 | ) | (16 | ) | 10 | 9 | (24 | ) | ||||||||||||||||
| Interest income |
14 | 58 | 11 | 9 | 10 | 10 | 40 | |||||||||||||||||||||
| Interest expense |
(61 | ) | (250 | ) | (54 | ) | (56 | ) | (98 | ) | (53 | ) | (261 | ) | ||||||||||||||
| Minority interests |
(98 | ) | (436 | ) | (115 | ) | (110 | ) | (76 | ) | (64 | ) | (365 | ) | ||||||||||||||
| Corporate expense |
(82 | ) | (317 | ) | (86 | ) | (101 | ) | (101 | ) | (100 | ) | (388 | ) | ||||||||||||||
| Restructuring and other charges |
(386 | ) | (379 | ) | (18 | ) | 21 | (311 | ) | 1 | (307 | ) | ||||||||||||||||
| Discontinued operations |
101 | 87 | (11 | ) | (1 | ) | (3 | ) | 8 | (7 | ) | |||||||||||||||||
| Other |
10 | 104 | (10 | ) | (50 | ) | 456 | 306 | 702 | |||||||||||||||||||
| Consolidated net income |
$ | 359 | $ | 2,248 | $ | 662 | $ | 715 | $ | 555 | $ | 632 | $ | 2,564 | ||||||||||||||
The difference between certain segment financial information totals and consolidated financial information is in Corporate.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions)
| Bloomberg Return on Capital (1) |
|
Bloomberg Return on Capital, Excluding Growth Investments (1) |
| |||||||||||||||
| Year ended December 31, |
Year ended December 31, |
|||||||||||||||||
| 2006 | 2007 | 2006 | 2007 | |||||||||||||||
| Net income |
$ | 2,248 | $ | 2,564 | Net income | $ | 2,248 | $ | 2,564 | |||||||||
| Minority interests |
436 | 365 | Minority interests | 436 | 365 | |||||||||||||
| Interest expense |
Interest expense | |||||||||||||||||
| (after tax) |
291 | 262 | (after tax) | 291 | 262 | |||||||||||||
| Numerator |
$ | 2,975 | $ | 3,191 | Numerator | 2,975 | 3,191 | |||||||||||
| Net losses of growth investments (2) | 74 | 91 | ||||||||||||||||
| Adjusted numerator | $ | 3,049 | $ | 3,282 | ||||||||||||||
| Average Balances |
Average Balances | |||||||||||||||||
| Short-term borrowings |
$ | 386 | $ | 516 | Short-term borrowings | $ | 386 | $ | 516 | |||||||||
| Short-term debt |
284 | 356 | Short-term debt | 284 | 356 | |||||||||||||
| Commercial paper |
1,192 | 1,164 | Commercial paper | 1,192 | 1,164 | |||||||||||||
| Long-term debt |
5,027 | 5,574 | Long-term debt | 5,027 | 5,574 | |||||||||||||
| Preferred stock |
55 | 55 | Preferred stock | 55 | 55 | |||||||||||||
| Minority interests |
1,583 | 2,130 | Minority interests | 1,583 | 2,130 | |||||||||||||
| Common equity (3) |
13,947 | 15,269 | Common equity (3) | 13,947 | 15,269 | |||||||||||||
| Denominator |
$ | 22,474 | $ | 25,064 | Denominator | 22,474 | 25,064 | |||||||||||
| Capital projects in progress and capital base of growth investments (2) | (3,655 | ) | (4,620 | ) | ||||||||||||||
| Adjusted denominator | $ | 18,819 | $ | 20,444 | ||||||||||||||
| Return on capital |
13.2 | % | 12.7 | % | Return on capital, excluding growth investments | 16.2 | % | 16.1 | % | |||||||||
Return on capital, excluding growth investments is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because it provides greater insight with respect to the underlying operating performance of the company’s productive assets. The company has significant growth investments underway in its upstream and downstream businesses, as previously noted, with expected completion dates over the next several years. As these investments generally require a period of time before they are productive, management believes that a return on capital measure excluding these growth investments is more representative of current operating performance.
| (1) | The Bloomberg Methodology calculates ROC based on the trailing four quarters. Average balances are calculated as (December 2007 ending balance + December 2006 ending balance) divided by 2 for the year ending December 31, 2007, and (December 2006 ending balance + December 2005 ending balance) divided by 2 for the year ending December 31, 2006. |
| (2) | For all periods presented, growth investments include Russia and Bohai. Kunshan is also included as a growth investment for the year ending December 31, 2007. |
| (3) | Calculated as total shareholders’ equity less preferred stock. |