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): October 10, 2006
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 412-553-4707
(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 October 10, 2006, Alcoa Inc. issued a press release announcing its financial results for the third quarter of 2006. 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 October 10, 2006.
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: October 11, 2006
3
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99 | Alcoa Inc. press release dated October 10, 2006. |
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 ANNOUNCES 3rd QUARTER 2006 INCOME FROM CONTINUING
OPERATIONS OF $540 MILLION, or $0.62 PER SHARE, UP 89% FROM YEAR AGO
Highlights:
| • | Income from continuing operations up 89% versus year-ago quarter. |
| • | Revenues 19% higher than year-ago quarter. |
| • | Cash from operations was $748 million including the impact of a discretionary $200 million pension contribution, 52% higher than the year-ago quarter and 94% higher year-to-date. |
| • | Debt-to-capital ratio at 32.8%, within target range despite major investments in strategic growth projects. |
| • | Year-to-date income from continuing operations $1.9 billion, or $2.17 per share, up 82% from year ago. |
| • | Year-to-date annualized return on capital of 14.3%, up from 8.7% in 2005. |
NEW YORK, NY – October 10, 2006 – Alcoa (NYSE: AA) today announced third quarter 2006 income from continuing operations of $540 million, or $0.62 per diluted share, an 89 percent increase from the third quarter of 2005. As expected, due to seasonal slow-downs and lower metal prices, income was lower on a sequential basis, down from $0.85 in the second quarter.
In the first nine months of 2006, Alcoa has generated more profits than in any full year in the company’s history. Year-to-date income from continuing operations was $1.9 billion, 82 percent higher than the same period in 2005.
Net income for the quarter was $537 million, or $0.61, an 85 percent increase from 2005’s $0.33 and 28 percent below the $0.85 in the second quarter.
Revenues for the quarter increased 19 percent from a year ago to $7.6 billion. Compared to the second quarter of 2006, sales decreased 2 percent primarily due to lower metal prices and seasonality. Prices for aluminum on the London Metal Exchange declined six percent this quarter.
“We continue to drive stronger performance than our results in 2005, with both the top and bottom line showing double-digit improvements over the third quarter of last year,” said Alain Belda, Alcoa Chairman and CEO. “2006 is already the strongest in Alcoa’s history, and we will continue to deliver in the fourth quarter.
“In July, we said the third quarter would be solid, but would reflect the traditional seasonal slow-down and lower metal prices. In fact, the quarter was the third best in company history even though metal prices on the LME declined six percent. While the North American automotive and the housing construction markets are softening, most of our downstream markets continue to be strong – especially aerospace and commercial transportation,” Belda added.
Cash from operations for the quarter was $748 million including the impact of a discretionary $200 million contribution to the company’s pension plans. Year-to-date, cash from operations is more than $1.2 billion, a 94 percent increase from a year ago.
Balance Sheet and Growth Projects
During the quarter, the company made strong progress on projects designed to seize growth as aluminum consumption is projected to double in the next 14 years. The Alcoa Fjardaal smelter in Iceland is now 75 percent complete and is expected to produce its first metal in the second quarter of 2007. In Brazil, the new Juruti bauxite mine and the expansion of the Sao Luis alumina refinery are underway. The refinery will produce an additional 2.1 million mtpy beginning in 2009. In North America, work continued on environmental upgrades at the company’s Warrick, Indiana smelter which will help secure its power generation self-sufficiency. At the Intalco smelter in Ferndale, WA, the company will be starting up a second potline which will produce an additional 7,500 metric tons per month beginning in the first half of 2007.
Capital expenditures for the quarter were $737 million, with 75 percent dedicated to growth projects. Year to-date, the company has invested $1.4 billion in growth projects, or approximately 67 percent of capital expenditures.
In the quarter, Alcoa also announced a definitive agreement to sell its Home Exteriors vinyl siding business. That sale, which will generate more than $300 million in cash to fund growth projects, is expected to be completed in the fourth quarter of 2006.
Days of working capital were relatively flat in the quarter compared to the third quarter of 2005. The Company’s debt-to-capital ratio stood at 32.8 percent at the end of the quarter, within the Company’s target range.
During the current quarter, the company’s effective tax rate was 24.7 percent. In the quarter, the Company recorded a discrete tax benefit of $18 million related to the cumulative correction of its deferred tax assets attributable to an international location.
The Company’s year to date annualized return on capital was 14.3 percent, compared to 8.7 percent a year ago. On a trailing four quarters basis, return on capital for the third quarter 2006 was 14.1 percent after excluding investments on growth, and 12.2 percent including those investments.
Segment and Other Results
Alumina – After-tax operating income (“ATOI”) was $271 million, down $7 million from the previous quarter, but up 74 percent from the year-ago quarter. Unfavorable currency effects, energy prices, and mix offset higher sales volumes supported by record production levels of 3,890 KMT in the quarter.
Primary Metals – Segment ATOI was $346 million, down $143 million or 29 percent from the prior quarter and up 106 percent from the year-ago quarter. The ATOI decrease resulted from lower LME prices, higher raw material costs and unfavorable currency. Third-party realized metal prices declined $108 per ton, or four percent, to $2,620 per ton. The Company purchased roughly 130 kmt of primary metal for internal use as part of its strategy to sell value-added products.
Flat-Rolled Products – ATOI for the segment was $48 million, down 39 percent from the prior quarter and down 41 percent from the year-ago quarter. The decline was primarily due to seasonal shutdowns and mill outages in North America and Europe, and an increase in direct material and energy costs. These impacts were somewhat offset by a more favorable product mix. Included in the results were $13 million in continuing start-up costs for new facilities in Russia and China as part of the long-term growth strategy.
Extruded and End Products – ATOI declined $1 million from the prior quarter due to seasonally lower volumes, offset by a more favorable mix. Segment ATOI remained flat in comparison to the prior year quarter.
Engineered Solutions – Segment ATOI declined $25 million from the prior quarter due to scheduled summer shutdowns in the auto industry coupled with lower demand in the North American automotive market. However, ATOI rose $41 million, or 121 percent, above the prior year quarter. Strong demand in the aerospace and commercial vehicle markets, continued productivity gains and targeted price increases led to the improved results.
Packaging and Consumer – Segment ATOI was lower by $13 million versus the previous quarter and $4 million from the year-ago quarter primarily due to seasonal weakness in Food Packaging and Closures and higher resin costs, partially offset by continued strength in the Consumer business. It is anticipated that the lagged recovery of the third quarter raw material cost increases will benefit the fourth quarter.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on October 10th 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, 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 closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 129,000 employees in 44 countries and has been named one of the top 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. 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 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 increased energy and raw materials costs, or other cost inflation; (d) Alcoa’s inability to achieve the level of cost savings, productivity improvements 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, 2005, Forms 10-Q for the quarters ended March 31, 2006 and June 30, 2006 and other reports filed with the Securities and Exchange Commission.
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share, and metric ton amounts)
| Quarter ended | ||||||||||||
| September 30, 2005 (a) |
June 30, 2006 (a) |
September 30, 2006 |
||||||||||
| Sales |
$ | 6,401 | $ | 7,797 | $ | 7,631 | ||||||
| Cost of goods sold |
5,263 | 5,827 | 6,015 | |||||||||
| Selling, general administrative, and other expenses |
304 | 354 | 326 | |||||||||
| Research and development expenses |
51 | 50 | 53 | |||||||||
| Provision for depreciation, depletion, and amortization |
319 | 324 | 325 | |||||||||
| Restructuring and other charges |
7 | (9 | ) | (3 | ) | |||||||
| Interest expense |
96 | 98 | 101 | |||||||||
| Other income, net |
(92 | ) | (61 | ) | (48 | ) | ||||||
| Total costs and expenses |
5,948 | 6,583 | 6,769 | |||||||||
| Income from continuing operations before taxes on income |
453 | 1,214 | 862 | |||||||||
| Provision for taxes on income |
109 | 341 | 213 | |||||||||
| Income from continuing operations before minority interests’ share |
344 | 873 | 649 | |||||||||
| Less: Minority interests’ share |
59 | 124 | 109 | |||||||||
| Income from continuing operations |
285 | 749 | 540 | |||||||||
| Income (loss) from discontinued operations |
4 | (5 | ) | (3 | ) | |||||||
| NET INCOME |
$ | 289 | $ | 744 | $ | 537 | ||||||
| Earnings (loss) per common share: |
||||||||||||
| Basic: |
||||||||||||
| Income from continuing operations |
$ | .33 | $ | .86 | $ | .62 | ||||||
| Loss from discontinued operations |
— | (.01 | ) | — | ||||||||
| Net income |
$ | .33 | $ | .85 | $ | .62 | ||||||
| Diluted: |
||||||||||||
| Income from continuing operations |
$ | .32 | $ | .85 | $ | .62 | ||||||
| Income (loss) from discontinued operations |
.01 | — | (.01 | ) | ||||||||
| Net income |
$ | .33 | $ | .85 | $ | .61 | ||||||
| Average number of shares used to compute: |
||||||||||||
| Basic earnings per common share |
872,515,797 | 869,811,164 | 867,589,707 | |||||||||
| Diluted earnings per common share |
876,583,063 | 877,005,617 | 873,494,404 | |||||||||
| Shipments of aluminum products (metric tons) |
1,412,000 | 1,400,000 | 1,396,000 | |||||||||
| (a) | Prior periods’ financial statements have been reclassified to reflect the Hawesville, KY automotive casting facility and the home exteriors business in discontinued operations in 2006. |
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share, and metric ton amounts)
| Nine months ended September 30, | ||||||||
| 2005 (a) | 2006 | |||||||
| Sales |
$ | 19,032 | $ | 22,539 | ||||
| Cost of goods sold |
15,366 | 17,186 | ||||||
| Selling, general administrative, and other expenses |
947 | 1,035 | ||||||
| Research and development expenses |
143 | 150 | ||||||
| Provision for depreciation, depletion, and amortization |
941 | 955 | ||||||
| Restructuring and other charges |
266 | (11 | ) | |||||
| Interest expense |
261 | 291 | ||||||
| Other income, net |
(475 | ) | (144 | ) | ||||
| Total costs and expenses |
17,449 | 19,462 | ||||||
| Income from continuing operations before taxes on income |
1,583 | 3,077 | ||||||
| Provision for taxes on income |
360 | 836 | ||||||
| Income from continuing operations before minority interests’ share |
1,223 | 2,241 | ||||||
| Less: Minority interests’ share |
179 | 338 | ||||||
| Income from continuing operations |
1,044 | 1,903 | ||||||
| Loss from discontinued operations |
(35 | ) | (14 | ) | ||||
| NET INCOME |
$ | 1,009 | $ | 1,889 | ||||
| Earnings (loss) per common share: |
||||||||
| Basic: |
||||||||
| Income from continuing operations |
$ | 1.20 | $ | 2.19 | ||||
| Loss from discontinued operations |
(.04 | ) | (.02 | ) | ||||
| Net income |
$ | 1.16 | $ | 2.17 | ||||
| Diluted: |
||||||||
| Income from continuing operations |
$ | 1.19 | $ | 2.17 | ||||
| Loss from discontinued operations |
(.04 | ) | (.01 | ) | ||||
| Net income |
$ | 1.15 | $ | 2.16 | ||||
| Average number of shares used to compute: |
||||||||
| Basic earnings per common share |
872,054,221 | 869,241,174 | ||||||
| Diluted earnings per common share |
877,743,271 | 875,472,002 | ||||||
| Common stock outstanding at the end of the period |
872,706,561 | 867,077,839 | ||||||
| Shipments of aluminum products (metric tons) |
4,080,000 | 4,146,000 | ||||||
| (a) | Prior period financial statements have been reclassified to reflect the Hawesville, KY automotive casting facility and the home exteriors business in discontinued operations in 2006. |
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(in millions)
| December 31, 2005 (b) |
September 30, 2006 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 762 | $ | 562 | ||||
| Receivables from customers, less allowances: $75 in 2005 and $84 in 2006 |
2,860 | 3,523 | ||||||
| Other receivables |
427 | 337 | ||||||
| Inventories |
3,392 | 4,064 | ||||||
| Fair value of derivative contracts |
520 | 241 | ||||||
| Prepaid expenses and other current assets |
713 | 1,043 | ||||||
| Total current assets |
8,674 | 9,770 | ||||||
| Properties, plants and equipment, at cost |
26,769 | 29,025 | ||||||
| Less: accumulated depreciation, depletion and amortization |
13,661 | 14,544 | ||||||
| Net properties, plants and equipment |
13,108 | 14,481 | ||||||
| Goodwill |
6,212 | 6,286 | ||||||
| Investments |
1,370 | 1,379 | ||||||
| Other assets |
4,084 | 4,145 | ||||||
| Assets held for sale |
248 | 243 | ||||||
| Total assets |
$ | 33,696 | $ | 36,304 | ||||
| LIABILITIES |
||||||||
| Current liabilities: |
||||||||
| Short-term borrowings |
$ | 300 | $ | 441 | ||||
| Commercial paper |
912 | 2,193 | ||||||
| Accounts payable, trade |
2,570 | 2,700 | ||||||
| Accrued compensation and retirement costs |
1,096 | 1,040 | ||||||
| Taxes, including taxes on income |
871 | 1,019 | ||||||
| Other current liabilities |
1,445 | 1,166 | ||||||
| Long-term debt due within one year |
58 | 855 | ||||||
| Total current liabilities |
7,252 | 9,414 | ||||||
| Long-term debt, less amount due within one year |
5,279 | 4,446 | ||||||
| Accrued pension benefits |
1,477 | 1,248 | ||||||
| Accrued postretirement benefits |
2,105 | 2,082 | ||||||
| Other noncurrent liabilities and deferred credits |
1,821 | 1,931 | ||||||
| Deferred income taxes |
875 | 795 | ||||||
| Liabilities of operations held for sale |
149 | 154 | ||||||
| Total liabilities |
18,958 | 20,070 | ||||||
| MINORITY INTERESTS |
1,365 | 1,529 | ||||||
| SHAREHOLDERS’ EQUITY |
||||||||
| Preferred stock |
55 | 55 | ||||||
| Common stock |
925 | 925 | ||||||
| Additional capital |
5,720 | 5,811 | ||||||
| Retained earnings |
9,345 | 10,706 | ||||||
| Treasury stock, at cost |
(1,899 | ) | (2,022 | ) | ||||
| Accumulated other comprehensive loss |
(773 | ) | (770 | ) | ||||
| Total shareholders’ equity |
13,373 | 14,705 | ||||||
| Total liabilities and equity |
$ | 33,696 | $ | 36,304 | ||||
| (b) | Prior period financial statements have been reclassified to reflect the Hawesville, KY automotive casting facility and the home exteriors business in discontinued operations in 2006. |
Alcoa and subsidiaries
Condensed Statement of Consolidated Cash Flows (unaudited)
(in millions)
| Nine months ended September 30, |
||||||||
| 2005 (c) | 2006 | |||||||
| CASH FROM OPERATIONS |
||||||||
| Net income |
$ | 1,009 | $ | 1,889 | ||||
| Adjustments to reconcile net income to cash from operations: |
||||||||
| Depreciation, depletion, and amortization |
944 | 955 | ||||||
| Deferred income taxes |
(116 | ) | (78 | ) | ||||
| Equity loss (income), net of dividends |
48 | (65 | ) | |||||
| Restructuring and other charges |
266 | (11 | ) | |||||
| Gains from investing activities – sale of assets |
(409 | ) | (11 | ) | ||||
| Provision for doubtful accounts |
13 | 16 | ||||||
| Loss from discontinued operations |
35 | 14 | ||||||
| Minority interests |
179 | 338 | ||||||
| Stock-based compensation |
18 | 57 | ||||||
| Excess tax benefits from share-based payment arrangements |
— | (16 | ) | |||||
| Other |
(28 | ) | (128 | ) | ||||
| Changes in assets and liabilities, excluding effects of acquisitions and divestitures: |
||||||||
| Increase in receivables |
(531 | ) | (402 | ) | ||||
| Increase in inventories |
(491 | ) | (565 | ) | ||||
| Increase in prepaid expenses and other current assets |
(26 | ) | (201 | ) | ||||
| Increase (decrease) in accounts payable and accrued expenses |
277 | (404 | ) | |||||
| (Decrease) increase in taxes, including taxes on income |
(68 | ) | 202 | |||||
| Cash paid on long-term aluminum supply contract |
(93 | ) | — | |||||
| Pension contributions |
(364 | ) | (344 | ) | ||||
| Net change in noncurrent assets and liabilities |
17 | (12 | ) | |||||
| CASH PROVIDED FROM CONTINUING OPERATIONS |
680 | 1,234 | ||||||
| CASH USED FOR DISCONTINUED OPERATIONS |
(43 | ) | — | |||||
| CASH PROVIDED FROM OPERATIONS |
637 | 1,234 | ||||||
| FINANCING ACTIVITIES |
||||||||
| Net changes to short-term borrowings |
4 | 86 | ||||||
| Common stock issued for stock compensation plans |
27 | 141 | ||||||
| Repurchase of common stock |
— | (290 | ) | |||||
| Dividends paid to shareholders |
(393 | ) | (392 | ) | ||||
| Dividends paid to minority interests |
(74 | ) | (281 | ) | ||||
| Net change in commercial paper |
532 | 1,281 | ||||||
| Additions to long-term debt |
272 | 20 | ||||||
| Payments on long-term debt |
(249 | ) | (32 | ) | ||||
| Excess tax benefits from share-based payment arrangements |
— | 16 | ||||||
| Other |
— | 64 | ||||||
| CASH PROVIDED FROM FINANCING ACTIVITIES |
119 | 613 | ||||||
| INVESTING ACTIVITIES |
||||||||
| Capital expenditures |
(1,365 | ) | (2,054 | ) | ||||
| Capital expenditures of discontinued operations |
(11 | ) | (4 | ) | ||||
| Acquisition of minority interests |
(176 | ) | (1 | ) | ||||
| Acquisitions, net of cash acquired |
(257 | ) | 8 | |||||
| Proceeds from the sale of assets |
90 | 19 | ||||||
| Sale of investments |
1,081 | 7 | ||||||
| Change in short-term investments and restricted cash |
(17 | ) | (3 | ) | ||||
| Additions to investments |
(18 | ) | (52 | ) | ||||
| Other |
(8 | ) | 8 | |||||
| CASH USED FOR INVESTING ACTIVITIES |
(681 | ) | (2,072 | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
— | 25 | ||||||
| Net change in cash and cash equivalents |
75 | (200 | ) | |||||
| Cash and cash equivalents at beginning of year |
457 | 762 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 532 | $ | 562 | ||||
| (c) | Prior period financial statements have been reclassified to reflect the Hawesville, KY automotive casting facility and the home exteriors business in discontinued operations in 2006. |
Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except metric ton amounts and realized prices)
| 1Q05 | 2Q05 | 3Q05 | 4Q05 | 2005 | 1Q06 | 2Q06 | 3Q06 | ||||||||||||||||||||||||
| Alumina: | |||||||||||||||||||||||||||||||
| Third-party shipments (Kmt) |
1,923 | 1,951 | 2,017 | 1,966 | 7,857 | 2,023 | 2,108 | 2,205 | |||||||||||||||||||||||
| Alumina production (Kmt) |
3,583 | 3,621 | 3,688 | 3,706 | 14,598 | 3,702 | 3,746 | 3,890 | |||||||||||||||||||||||
| Third-party sales |
$ | 505 | $ | 533 | $ | 531 | $ | 561 | $ | 2,130 | $ | 628 | $ | 713 | $ | 733 | |||||||||||||||
| Intersegment sales |
$ | 393 | $ | 439 | $ | 424 | $ | 451 | $ | 1,707 | $ | 555 | $ | 515 | $ | 524 | |||||||||||||||
| ATOI |
$ | 161 | $ | 182 | $ | 156 | $ | 183 | $ | 682 | $ | 242 | $ | 278 | $ | 271 | |||||||||||||||
| Depreciation, depletion and amortization |
$ | 41 | $ | 43 | $ | 44 | $ | 44 | $ | 172 | $ | 43 | $ | 46 | $ | 47 | |||||||||||||||
| Income taxes |
$ | 61 | $ | 66 | $ | 47 | $ | 72 | $ | 246 | $ | 93 | $ | 112 | $ | 108 | |||||||||||||||
| Equity (loss) income |
$ | (1 | ) | $ | — | $ | — | $ | 1 | $ | — | $ | (1 | ) | $ | — | $ | (2 | ) | ||||||||||||
| Primary Metals: | |||||||||||||||||||||||||||||||
| Third-party realized price – aluminum |
$ | 2,042 | $ | 1,977 | $ | 1,963 | $ | 2,177 | $ | 2,044 | $ | 2,534 | $ | 2,728 | $ | 2,620 | |||||||||||||||
| Third-party shipments (Kmt) |
487 | 520 | 590 | 557 | 2,154 | 488 | 508 | 535 | |||||||||||||||||||||||
| Aluminum production (Kmt) |
851 | 899 | 904 | 900 | 3,554 | 867 | 882 | 895 | |||||||||||||||||||||||
| Third-party sales |
$ | 1,089 | $ | 1,124 | $ | 1,204 | $ | 1,281 | $ | 4,698 | $ | 1,408 | $ | 1,589 | $ | 1,476 | |||||||||||||||
| Intersegment sales |
$ | 1,303 | $ | 1,215 | $ | 1,108 | $ | 1,182 | $ | 4,808 | $ | 1,521 | $ | 1,696 | $ | 1,467 | |||||||||||||||
| ATOI |
$ | 225 | $ | 187 | $ | 168 | $ | 242 | $ | 822 | $ | 445 | $ | 489 | $ | 346 | |||||||||||||||
| Depreciation, depletion and amortization |
$ | 90 | $ | 90 | $ | 93 | $ | 95 | $ | 368 | $ | 96 | $ | 102 | $ | 100 | |||||||||||||||
| Income taxes |
$ | 92 | $ | 75 | $ | 50 | $ | 90 | $ | 307 | $ | 197 | $ | 209 | $ | 140 | |||||||||||||||
| Equity income (loss) |
$ | 18 | $ | (76 | ) | $ | 20 | $ | 26 | $ | (12 | ) | $ | 20 | $ | 28 | $ | 16 | |||||||||||||
| Flat-Rolled Products: | |||||||||||||||||||||||||||||||
| Third-party shipments (Kmt) |
509 | 560 | 543 | 544 | 2,156 | 562 | 579 | 568 | |||||||||||||||||||||||
| Third-party sales |
$ | 1,655 | $ | 1,763 | $ | 1,679 | $ | 1,739 | $ | 6,836 | $ | 1,940 | $ | 2,115 | $ | 2,115 | |||||||||||||||
| Intersegment sales |
$ | 34 | $ | 36 | $ | 29 | $ | 29 | $ | 128 | $ | 49 | $ | 66 | $ | 65 | |||||||||||||||
| ATOI |
$ | 75 | $ | 70 | $ | 81 | $ | 62 | $ | 288 | $ | 66 | $ | 79 | $ | 48 | |||||||||||||||
| Depreciation, depletion and amortization |
$ | 52 | $ | 54 | $ | 57 | $ | 54 | $ | 217 | $ | 50 | $ | 57 | $ | 57 | |||||||||||||||
| Income taxes |
$ | 24 | $ | 27 | $ | 30 | $ | 30 | $ | 111 | $ | 26 | $ | 25 | $ | 19 | |||||||||||||||
| Equity loss |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | ||||||||||||||
| Extruded and End Products: | |||||||||||||||||||||||||||||||
| Third-party shipments (Kmt) |
211 | 226 | 212 | 204 | 853 | 223 | 231 | 220 | |||||||||||||||||||||||
| Third-party sales |
$ | 915 | $ | 992 | $ | 930 | $ | 892 | $ | 3,729 | $ | 1,038 | $ | 1,165 | $ | 1,146 | |||||||||||||||
| Intersegment sales |
$ | 14 | $ | 19 | $ | 14 | $ | 17 | $ | 64 | $ | 23 | $ | 31 | $ | 20 | |||||||||||||||
| ATOI |
$ | 11 | $ | 14 | $ | 16 | $ | (2 | ) | $ | 39 | $ | — | $ | 17 | $ | 16 | ||||||||||||||
| Depreciation, depletion and amortization (1) |
$ | 29 | $ | 30 | $ | 30 | $ | 30 | $ | 119 | $ | 28 | $ | 30 | $ | 29 | |||||||||||||||
| Income taxes |
$ | (2 | ) | $ | 13 | $ | 7 | $ | 2 | $ | 20 | $ | 1 | $ | 8 | $ | 7 | ||||||||||||||
| Engineered Solutions: |
|||||||||||||||||||||||||||||||
| Third-party shipments (Kmt) |
38 | 37 | 36 | 34 | 145 | 37 | 38 | 34 | |||||||||||||||||||||||
| Third-party sales |
$ | 1,237 | $ | 1,282 | $ | 1,242 | $ | 1,271 | $ | 5,032 | $ | 1,360 | $ | 1,405 | $ | 1,345 | |||||||||||||||
| ATOI |
$ | 61 | $ | 61 | $ | 34 | $ | 47 | $ | 203 | $ | 83 | $ | 100 | $ | 75 | |||||||||||||||
| Depreciation, depletion and amortization |
$ | 47 | $ | 45 | $ | 42 | $ | 42 | $ | 176 | $ | 40 | $ | 42 | $ | 43 | |||||||||||||||
| Income taxes |
$ | 26 | $ | 30 | $ | 23 | $ | 10 | $ | 89 | $ | 37 | $ | 44 | $ | 35 | |||||||||||||||
| Equity income |
$ | 1 | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | — | $ | 1 | |||||||||||||||
| Packaging and Consumer: | |||||||||||||||||||||||||||||||
| Third-party shipments (Kmt) |
34 | 46 | 31 | 40 | 151 | 40 | 44 | 39 | |||||||||||||||||||||||
| Third-party sales |
$ | 708 | $ | 827 | $ | 806 | $ | 798 | $ | 3,139 | $ | 749 | $ | 834 | $ | 815 | |||||||||||||||
| ATOI |
$ | 16 | $ | 41 | $ | 28 | $ | 20 | $ | 105 | $ | 8 | $ | 37 | $ | 24 | |||||||||||||||
| Depreciation, depletion and amortization (1) |
$ | 32 | $ | 31 | $ | 31 | $ | 32 | $ | 126 | $ | 31 | $ | 31 | $ | 30 | |||||||||||||||
| Income taxes |
$ | 10 | $ | 18 | $ | 14 | $ | 8 | $ | 50 | $ | 5 | $ | 9 | $ | 8 | |||||||||||||||
| Equity income |
$ | 1 | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | — | $ | — | |||||||||||||||
| (1) | Segment depreciation, depletion and amortization has been adjusted from the previously reported annual amounts to reflect the movement of certain amounts to Corporate. |
Alcoa and subsidiaries
Segment Information (unaudited), continued
(in millions)
| 1Q05 | 2Q05 | 3Q05 | 4Q05 | 2005 | 1Q06 | 2Q06 | 3Q06 | |||||||||||||||||||||||||
| Reconciliation of ATOI to consolidated net income: | ||||||||||||||||||||||||||||||||
| Total ATOI |
$ | 549 | $ | 555 | $ | 483 | $ | 552 | $ | 2,139 | $ | 844 | $ | 1,000 | $ | 780 | ||||||||||||||||
| Unallocated amounts (net of tax): |
||||||||||||||||||||||||||||||||
| Impact of LIFO (2) |
(19 | ) | (2 | ) | (22 | ) | (56 | ) | (99 | ) | (36 | ) | (49 | ) | (19 | ) | ||||||||||||||||
| Interest income |
7 | 9 | 12 | 14 | 42 | 11 | 10 | 23 | ||||||||||||||||||||||||
| Interest expense |
(51 | ) | (56 | ) | (62 | ) | (51 | ) | (220 | ) | (60 | ) | (63 | ) | (66 | ) | ||||||||||||||||
| Minority interests |
(60 | ) | (60 | ) | (59 | ) | (80 | ) | (259 | ) | (105 | ) | (124 | ) | (109 | ) | ||||||||||||||||
| Corporate expense |
(69 | ) | (73 | ) | (82 | ) | (88 | ) | (312 | ) | (89 | ) | (82 | ) | (64 | ) | ||||||||||||||||
| Restructuring and other charges |
(30 | ) | (144 | ) | (5 | ) | (18 | ) | (197 | ) | (1 | ) | 6 | 2 | ||||||||||||||||||
| Discontinued operations |
(9 | ) | (30 | ) | 4 | 13 | (22 | ) | (6 | ) | (5 | ) | (3 | ) | ||||||||||||||||||
| Other (2) |
(58 | ) | 261 | 20 | (62 | ) | 161 | 50 | 51 | (7 | ) | |||||||||||||||||||||
| Consolidated net income |
$ | 260 | $ | 460 | $ | 289 | $ | 224 | $ | 1,233 | $ | 608 | $ | 744 | $ | 537 | ||||||||||||||||
| (2) | Certain amounts have been reclassified to Other so that this line reflects only the impact of LIFO. |
Prior periods’ segment information has been reclassified to reflect the movement of the Hawesville, KY automotive casting facility and the home exteriors business to discontinued operations in 2006.
The difference between total segment third-party sales and consolidated third-party sales is in Corporate.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions)
2006 Return on Capital
| Bloomberg (1) | Annualized (2) | |||||||
| Net income |
$ | 2,113 | $ | 2,519 | ||||
| Minority interests |
418 | 451 | ||||||
| Interest expense (after tax) |
272 | 283 | ||||||
| Numerator (sum total) |
$ | 2,803 | $ | 3,253 | ||||
| Average Balances | ||||||||
| Short-term borrowings |
$ | 356 | $ | 371 | ||||
| Short-term debt |
451 | 457 | ||||||
| Commercial paper |
1,678 | 1,553 | ||||||
| Long-term debt |
4,916 | 4,863 | ||||||
| Preferred stock |
55 | 55 | ||||||
| Minority interests |
1,416 | 1,447 | ||||||
| Common equity (3) |
14,120 | 13,984 | ||||||
| Denominator (sum total) |
$ | 22,992 | $ | 22,730 | ||||
| Return on capital |
12.2 | % | 14.3 | % | ||||
2006 Return on Capital,
Excluding Growth Investments
| Net income |
$ | 2,113 | ||
| Minority interests |
418 | |||
| Interest expense (after tax) |
272 | |||
| Numerator (sum total) |
$ | 2,803 | ||
| Russia and Bohai net loss |
85 | |||
| Adjusted net income |
$ | 2,888 | ||
| Average Balances (1) |
||||
| Short-term borrowings |
$ | 356 | ||
| Short-term debt |
451 | |||
| Commercial paper |
1,678 | |||
| Long-term debt |
4,916 | |||
| Preferred stock |
55 | |||
| Minority interests |
1,416 | |||
| Common equity (3) |
14,120 | |||
| Denominator (sum total) |
$ | 22,992 | ||
| Capital projects in progress and Russia and Bohai capital base |
(2,540 | ) | ||
| Adjusted capital base |
$ | 20,452 | ||
| Return on capital, excluding growth investments |
14.1 | % | ||
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 trailing four quarters. Average balances are calculated as (September 2005 ending balance + September 2006 ending balance) divided by 2. |
| (2) | The Annualized Methodology numerator amounts are calculated using the first nine months of 2006 balances divided by 9 and multiplying that result by 12. Average balances are calculated as (September 2006 ending balance + December 2005 ending balance) divided by 2. |
| (3) | Calculated as total shareholders’ equity, less preferred stock. |
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions)
2005 Return on Capital
| Bloomberg (4) | Annualized (5) | |||||||
| Net income |
$ | 1,277 | $ | 1,345 | ||||
| Minority interests |
227 | 239 | ||||||
| Interest expense (after tax) |
263 | 269 | ||||||
| Numerator (sum total) |
$ | 1,767 | $ | 1,853 | ||||
| Average Balances |
||||||||
| Short-term borrowings |
$ | 154 | $ | 269 | ||||
| Short-term debt |
272 | 52 | ||||||
| Commercial paper |
946 | 896 | ||||||
| Long-term debt |
5,382 | 5,366 | ||||||
| Preferred stock |
55 | 55 | ||||||
| Minority interests |
1,332 | 1,359 | ||||||
| Common equity (6) |
13,045 | 13,418 | ||||||
| Denominator (sum total) |
$ | 21,186 | $ | 21,415 | ||||
| Return on capital |
8.3 | % | 8.7 | % | ||||
2005 Return on Capital,
Excluding Growth Investments
| Net income |
$ | 1,277 | ||
| Minority interests |
227 | |||
| Interest expense (after tax) |
263 | |||
| Numerator (sum total) |
$ | 1,767 | ||
| Russia and Bohai net loss |
48 | |||
| Adjusted net income |
$ | 1,815 | ||
| Average Balances (4) |
||||
| Short-term borrowings |
$ | 154 | ||
| Short-term debt |
272 | |||
| Commercial paper |
946 | |||
| Long-term debt |
5,382 | |||
| Preferred stock |
55 | |||
| Minority interests |
1,332 | |||
| Common equity (6) |
13,045 | |||
| Denominator (sum total) |
$ | 21,186 | ||
| Capital projects in progress and Russia and Bohai capital base |
(1,736 | ) | ||
| Adjusted capital base |
$ | 19,450 | ||
| Return on capital, excluding growth investments |
9.3 | % | ||
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.
| (4) | The Bloomberg Methodology calculates ROC based on trailing four quarters. Average balances are calculated as (September 2004 ending balance + September 2005 ending balance) divided by 2. |
| (5) | The Annualized Methodology numerator amounts are calculated using the first nine months of 2005 balances divided by 9 and multiplying that result by 12. Average balances are calculated as (September 2005 ending balance + December 2004 ending balance) divided by 2. |
| (6) | Calculated as total shareholders’ equity, less preferred stock. |
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions)
| Quarter ended | |||||||||
| September 30, 2005 |
December 31, 2005 |
September 30, 2006 | |||||||
| Days of Working Capital | |||||||||
| Receivables from customers, less allowances |
$ | 2,997 | $ | 2,860 | $ | 3,523 | |||
| Add: Inventories |
3,453 | 3,392 | 4,064 | ||||||
| Less: Accounts payable, trade |
2,325 | 2,570 | 2,700 | ||||||
| Working Capital |
$ | 4,125 | $ | 3,682 | $ | 4,887 | |||
| Sales |
$ | 6,401 | $ | 6,536 | $ | 7,631 | |||
| Days of Working Capital |
59.3 | 51.8 | 58.9 | ||||||
Days of Working Capital = Working Capital divided by (Sales/number of days in the quarter)