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| October 7, 2008
Alcoa Reports Third Quarter 2008 Results; Taking Action to Preserve Profitability, Liquidity Through the Downturn
Highlights:-
Net income of $268 million, or $0.33 per share, includes $29 million
or $0.04 per share for restructuring.
-
The sequential impact of currency translation was a negative $52
million or $0.06 per share.
-
Revenues of $7.2 billion, up from $6.5 billion in 3rd
quarter of 2007, excluding divested businesses.
-
Alumina segment improved ATOI over 2nd
quarter, and Engineered Products segment had strongest 3rd
quarter profitability in history.
-
Segment ATOI of $633 million, with two of four segments higher than 3rd
quarter of 2007.
-
Completed purchase of two percent of shares in the quarter, bringing
total share buy-back to 12 percent, or roughly half of the authorized
levels.
-
Cash on hand at $831 million and debt-to-capital stands at 36.3
percent.
-
Trailing 12-month ROC stands at 11.5 percent excluding investments in
growth.
-
Taking action to preserve and enhance strong balance sheet during
unprecedented volatility in financial markets.
-
Curtailing non-critical capital programs, suspending share repurchases.
NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE: AA) today reported third quarter net income of $268
million, or $0.33 per diluted share. The results include a previously
announced $31 million after-tax charge, or $0.04 per share, for the
temporary curtailment of the Rockdale, TX aluminum smelter. The negative
impact of currency translation on a sequential basis was $52 million, or
$0.06 per share.
Net income in the third quarter of 2007 was $555 million, or $0.63 per
share. Included in the third quarter 2007 results was the net benefit of
$218 million, or $0.25 per share, for the gain on the sale of the company’s
stake in Chalco, restructuring, and transaction costs. Net income in the
second quarter of 2008 was $546 million, or $0.66 per share.
“Despite rising costs and sluggish end
markets, combined profitability in the four business segments was in
line with last year’s third quarter,”
said Klaus Kleinfeld, Alcoa President and Chief Executive Officer.
“Recently, aluminum prices have fallen
steeply and demand has softened further, while input costs remain high,”
said Kleinfeld. “The resulting margin squeeze
will have a greater impact going forward, but will be somewhat mitigated
by the easing of energy prices and a stronger U.S. dollar. We will
continue to manage our business to keep it competitive in a turbulent
global environment.
“We have taken action to conserve cash and
maximize profitability through very adverse economic conditions,”
said Kleinfeld. “Given the sharp decline in
metal prices and increasingly soft demand in our key markets, we are
stopping all non-critical capital projects, making targeted reductions
to match market conditions, and are adjusting our manufacturing capacity
to meet demand in rapidly changing upstream and downstream markets. We
are halting production at our smelter in Rockdale, Texas, adjusting
alumina capacity accordingly, and are continually reviewing
under-performing assets throughout our portfolio. And, we are suspending
our share buy-back program.
“While we face volatile and uncertain markets
today, longer term trends will drive a rebound in global aluminum demand
and the forward market reflects underlying optimism on medium term
aluminum pricing,” said Kleinfeld. “During
difficult times, we will examine opportunities across the industry to
improve our competitiveness, use every lever to improve profitability,
and position the company to deliver stronger value when demand improves.”
Revenues for the quarter were $7.2 billion, down slightly from $7.6
billion in the second quarter of 2008 due to lower metal prices,
seasonal downturns in Europe, and weak end markets, particularly the
automotive sector. Revenues in the third quarter 2007 were $6.5 billion
after excluding the divested businesses.
In the first nine months of 2008, net income was $1.1 billion, or $1.36
per share, and revenues were $22.2 billion. Year-to-date, cash from
operations was $626 million, which includes a discretionary $400 million
pension contribution in the third quarter.
Capital expenditures for the quarter were $877 million, with 65 percent
dedicated to growth projects. The Company’s
debt-to-capital ratio stood at 36.3 percent at the end of the quarter.
The 12-month trailing return on capital (ROC) stood at 11.5 percent at
the end of the third quarter, excluding investments in growth.
Segment and Other Results
Alumina
After-tax operating income (ATOI) was $206 million, an increase of $16
million, or 8 percent, from the prior quarter. Overall production
declined slightly in the quarter (30 kmt lower) because of the
production loss from the Point Comfort refinery (60 kmt), which was
closed during Hurricane Ike. Strong operating performance and a stronger
U.S. dollar offset the lower production and higher input costs. Net of
insurance recovery, the natural gas supply disruption in Western
Australia lowered ATOI by $9 million on a sequential basis.
The company is on track to complete its expansion of the Sao Luis
refinery and the new Juruti bauxite mine in Brazil. Those expansions are
well under way and will begin to deliver positive cash flow to the
company in 2009.
Primary Metals
ATOI was $297 million, a decrease of $131 million, or 31 percent, from
the prior quarter. Third-party realized ingot price decreased
sequentially from $3,058/mt to $2,945/mt due to lower LME pricing
coupled with a less favorable product mix and lower regional pricing
premiums. Meanwhile, escalating market prices for carbon products and
energy continue to negatively impact earnings.
The company's newest smelter (Fjardaal) produced at nameplate capacity
for the second consecutive quarter and is currently the highest-quality
metal in Alcoa’s global system.
Flat-Rolled Products
ATOI was $29 million, a decrease of $26 million, or 47 percent, from the
prior quarter. This decline is slightly higher than the typical 35
percent seasonal decline that was forecasted during last quarter’s
analysts’ call. The higher than expected
decline is due to weaker than expected market conditions in North
America and Europe as well as the impact of the machinists’
strike at Boeing. In addition, alloying materials such as manganese,
silicon, and magnesium have experienced substantial price increases
year-over-year.
Engineered Products and Solutions
ATOI was $101 million, a record third quarter. This was a decrease of
$56 million, or 36 percent, from the prior quarter. This decline is
slightly higher than the typical 25 to 30 percent seasonal decline that
we forecasted during last quarter’s analysts’
call. The greater decline is primarily a result of weakening market
conditions. Due to tighter credit conditions and high gas prices, annual
automotive build rates are now projected to decline 14 percent in North
America. Commercial transportation markets have also been weaker than
expected. North America Class 8 truck builds dropped 13 percent
quarter-over-quarter. Also, lower demand for spares in the aerospace
after-market has been driven by little or no growth in global airline
capacity.
ATOI to Net Income Reconciliation
The largest variance in reconciling items was in the "Other" line item
which includes a $90 million unfavorable sequential change due to
currency translation.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on
Tuesday, October 7, 2008 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 leader in the production and management of primary
aluminum, fabricated aluminum and alumina combined, through its active
and growing participation 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, and building systems. The Company has
97,000 employees in 34 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 Statements
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 obligation to update publicly any forward-looking statements,
whether in response to new information, future events or otherwise,
except as required by applicable law. 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 fluctuations in London Metal Exchange-based prices for
primary aluminum and other products; (b) material adverse changes in the
markets served by Alcoa, including the transportation, aerospace,
building and construction, distribution, packaging, industrial gas
turbine and other markets; (c) Alcoa's inability to mitigate impacts
from energy supply interruptions or from unfavorable currency
fluctuations or from increased energy, transportation and raw materials
costs or other cost inflation; (d) continued volatility and further
deterioration in the financial markets, including severe disruptions in
the commercial paper, capital and credit markets; (e) Alcoa’s
inability to achieve the level of cash generation or conservation,
return on capital improvement, cost reductions, or earnings or revenue
growth anticipated by management; (f) Alcoa's inability to complete its
growth projects or achieve efficiency improvements at newly constructed
or acquired facilities as planned and by targeted completion dates; (g)
unfavorable changes in laws, governmental regulations or policies,
foreign currency exchange rates or competitive factors in the countries
in which Alcoa operates; (h) significant legal proceedings or
investigations adverse to Alcoa, including environmental, product
liability, safety and health and other claims; and (i) the other risk
factors summarized in Alcoa's Form 10-K for the year ended December 31,
2007, Forms 10-Q for the quarters ended March 31, 2008 and June 30,
2008, 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 | | | September 30, |
| June 30, |
| September 30, | | | 2007 | | 2008 | | 2008 | |
Sales
| |
$
|
7,387
| | |
$
|
7,620
| | |
$
|
7,234
| | | | | | | |
| |
Cost of goods sold (exclusive of expenses below)
| | |
5,910
| | | |
6,090
| | | |
5,944
| | |
Selling, general administrative, and other expenses
| | |
365
| | | |
306
| | | |
283
| | |
Research and development expenses
| | |
64
| | | |
64
| | | |
64
| | |
Provision for depreciation, depletion, and amortization
| | |
338
| | | |
321
| | | |
316
| | |
Goodwill impairment charge
| | |
133
| | | | – | | | | – | | |
Restructuring and other charges
| | |
444
| | | |
2
| | | |
43
| | |
Interest expense
| | |
151
| | | |
87
| | | |
97
| | |
Other (income) expenses, net
| |
| (1,731 |
)
| |
| (97 |
)
| |
| 17 |
| |
Total costs and expenses
| | |
5,674
| | | |
6,773
| | | |
6,764
| | | | | | | |
| |
Income from continuing operations before taxes on income
| | |
1,713
| | | |
847
| | | |
470
| | |
Provision for taxes on income
| |
| 1,079 |
| |
| 231 |
| |
| 117 |
| |
Income from continuing operations before minority interests’
share
| | |
634
| | | |
616
| | | |
353
| | |
Less: Minority interests’ share
| |
| 76 |
| |
| 70 |
| |
| 84 |
| | | | | | |
| |
Income from continuing operations
| | |
558
| | | |
546
| | | |
269
| | | | | | | |
| |
Loss from discontinued operations
| |
| (3 |
)
| |
| – |
| |
| (1 |
)
| | | | | | |
| |
NET INCOME
| | $ | 555 |
| | $ | 546 |
| | $ | 268 |
| | | | | | |
| |
Earnings (loss) per common share:
| | | | | | | |
Basic:
| | | | | | | |
Income from continuing operations
| |
$
|
0.64
| | |
$
|
0.67
| | |
$
|
0.33
| | |
Loss from discontinued operations
| |
| – |
| |
| – |
| |
| – |
| |
Net income
| | $ | 0.64 |
| | $ | 0.67 |
| | $ | 0.33 |
| | | | | | |
| |
Diluted:
| | | | | | | |
Income from continuing operations
| |
$
|
0.64
| | |
$
|
0.66
| | |
$
|
0.33
| | |
Loss from discontinued operations
| |
| (0.01 |
)
| |
| – |
| |
| – |
| |
Net income
| | $ | 0.63 |
| | $ | 0.66 |
| | $ | 0.33 |
| | | | | | |
| |
Average number of shares used to compute:
| | | | | | | |
Basic earnings per common share
| | |
867,664,875
| | | |
815,990,095
| | | |
807,570,516
| | |
Diluted earnings per common share
| | |
877,700,035
| | | |
825,387,079
| | | |
815,207,909
| | | | | | | |
| |
Shipments of aluminum products (metric tons)
| | |
1,328,000
| | | |
1,407,000
| | | |
1,342,000
| |
| Alcoa and subsidiaries | | Statement of Consolidated Income (unaudited), continued | | (in millions, except per-share, share, and metric ton amounts) | |
| | | | Nine months ended | | | September 30, | | | 2007 |
| 2008 | |
Sales
| |
$
|
23,361
| | |
$
|
22,229
| | | | | |
| |
Cost of goods sold (exclusive of expenses below)
| | |
18,095
| | | |
17,926
| | |
Selling, general administrative, and other expenses
| | |
1,089
| | | |
917
| | |
Research and development expenses
| | |
171
| | | |
194
| | |
Provision for depreciation, depletion, and amortization
| | |
959
| | | |
956
| | |
Goodwill impairment charge
| | |
133
| | | | – | | |
Restructuring and other charges
| | |
413
| | | |
83
| | |
Interest expense
| | |
320
| | | |
283
| | |
Other income, net
| |
| (1,835 |
)
| |
| (22 |
)
| |
Total costs and expenses
| | |
19,345
| | | |
20,337
| | | | | |
| |
Income from continuing operations before taxes on income
| | |
4,016
| | | |
1,892
| | |
Provision for taxes on income
| |
| 1,768 |
| |
| 553 |
| |
Income from continuing operations before minority interests’
share
| | |
2,248
| | | |
1,339
| | |
Less: Minority interests’ share
| |
| 301 |
| |
| 221 |
| | | | |
| |
Income from continuing operations
| | |
1,947
| | | |
1,118
| | | | | |
| |
Loss from discontinued operations
| |
| (15 |
)
| |
| (1 |
)
| | | | |
| |
NET INCOME
| | $ | 1,932 |
| | $ | 1,117 |
| | | | |
| |
Earnings (loss) per common share:
| | | | | |
Basic:
| | | | | |
Income from continuing operations
| |
$
|
2.24
| | |
$
|
1.37
| | |
Loss from discontinued operations
| |
| (0.02 |
)
| |
| – |
| |
Net income
| | $ | 2.22 |
| | $ | 1.37 |
| | | | |
| |
Diluted:
| | | | | |
Income from continuing operations
| |
$
|
2.22
| | |
$
|
1.36
| | |
Loss from discontinued operations
| |
| (0.02 |
)
| |
| – |
| |
Net income
| | $ | 2.20 |
| | $ | 1.36 |
| | | | |
| |
Average number of shares used to compute:
| | | | | |
Basic earnings per common share
| | |
869,245,090
| | | |
813,550,439
| | |
Diluted earnings per common share
| | |
877,964,737
| | | |
821,471,192
| | | | | |
| |
Common stock outstanding at the end of the period
| | |
852,046,355
| | | |
800,317,368
| | | | | |
| |
Shipments of aluminum products (metric tons)
| | |
4,057,000
| | | |
4,106,000
| |
| Alcoa and subsidiaries | | Consolidated Balance Sheet (unaudited) | | (in millions) | |
| |
| |
| | December 31,
2007
| | September 30,
2008
| |
ASSETS
| | | | | |
Current assets:
| | | | | |
Cash and cash equivalents
| |
$
|
483
| | |
$
|
831
| |
Receivables from customers, less allowances of $72 in 2007 and $57
in 2008
| | |
2,602
| | | |
2,700
| | |
Other receivables
| | |
451
| | | |
588
| | |
Inventories
| | |
3,326
| | | |
3,844
| | |
Prepaid expenses and other current assets
| |
| 1,224 |
| |
| 1,309 |
| |
Total current assets
| |
| 8,086 |
| |
| 9,272 |
| | | | |
| |
Properties, plants, and equipment
| | |
31,601
| | | |
32,877
| | |
Less: accumulated depreciation, depletion, and amortization
| |
| 14,722 |
| |
| 14,901 |
| |
Properties, plants, and equipment, net
| |
| 16,879 |
| |
| 17,976 |
| |
Goodwill
| | |
4,806
| | | |
5,084
| | |
Investments
| | |
2,038
| | | |
2,689
| | |
Other assets
| | |
4,046
| | | |
4,014
| | |
Assets held for sale
| |
| 2,948 |
| |
| 3 |
| |
Total assets
| | $ | 38,803 |
| | $ | 39,038 |
| | | | |
| |
LIABILITIES
| | | | | |
Current liabilities:
| | | | | |
Short-term borrowings
| |
$
|
569
| | |
$
|
498
| | |
Commercial paper
| | |
856
| | | |
1,207
| | |
Accounts payable, trade
| | |
2,787
| | | |
2,791
| | |
Accrued compensation and retirement costs
| | |
943
| | | |
896
| | |
Taxes, including taxes on income
| | |
644
| | | |
380
| | |
Other current liabilities
| | |
1,165
| | | |
1,217
| | |
Long-term debt due within one year
| |
| 202 |
| |
| 54 |
| |
Total current liabilities
| |
| 7,166 |
| |
| 7,043 |
| |
Long-term debt, less amount due within one year
| | |
6,371
| | | |
8,370
| | |
Accrued pension benefits
| | |
1,098
| | | |
858
| | |
Accrued postretirement benefits
| | |
2,753
| | | |
2,577
| | |
Other noncurrent liabilities and deferred credits
| | |
1,943
| | | |
1,852
| | |
Deferred income taxes
| | |
545
| | | |
532
| | |
Liabilities of operations held for sale
| |
| 451 |
| |
| 1 |
| |
Total liabilities
| |
| 20,327 |
| |
| 21,233 |
| | | | |
| |
MINORITY INTERESTS
| |
| 2,460 |
| |
| 2,740 |
| | | | |
| |
SHAREHOLDERS' EQUITY
| | | | | |
Preferred stock
| | |
55
| | | |
55
| | |
Common stock
| | |
925
| | | |
925
| | |
Additional capital
| | |
5,774
| | | |
5,842
| | |
Retained earnings
| | |
13,039
| | | |
13,600
| | |
Treasury stock, at cost
| | |
(3,440
|
)
| | |
(4,326
|
)
| |
Accumulated other comprehensive loss
| |
| (337 |
)
| |
| (1,031 |
)
| |
Total shareholders' equity
| |
| 16,016 |
| |
| 15,065 |
| |
Total liabilities and equity
| | $ | 38,803 |
| | $ | 39,038 |
|
| Alcoa and subsidiaries | | Statement of Consolidated Cash Flows (unaudited) | | (in millions) | |
| | Nine months ended
September 30,
| | 2007 |
| 2008 | |
CASH FROM OPERATIONS
| | | | |
Net income
|
$
|
1,932
| | |
$
|
1,117
| | |
Adjustments to reconcile net income to cash from operations:
| | | | |
Depreciation, depletion, and amortization
| |
959
| | | |
957
| | |
Deferred income taxes
| |
518
| | | |
(15
|
)
| |
Equity income, net of dividends
| |
(79
|
)
| | |
(66
|
)
| |
Goodwill impairment charge
| |
133
| | | | – | | |
Restructuring and other charges
| |
413
| | | |
83
| | |
Gains from investing activities – asset
sales
| |
(1,772
|
)
| | |
(30
|
)
| |
Provision for doubtful accounts
| |
13
| | | |
8
| | |
Loss from discontinued operations
| |
15
| | | |
1
| | |
Minority interests
| |
301
| | | |
221
| | |
Stock-based compensation
| |
83
| | | |
85
| | |
Excess tax benefits from stock-based payment arrangements
| |
(77
|
)
| | |
(15
|
)
| |
Other
| |
(33
|
)
| | |
(32
|
)
| |
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments:
| | | | |
Decrease (increase) in receivables
| |
224
| | | |
(213
|
)
| |
Decrease (increase) in inventories
| |
184
| | | |
(595
|
)
| |
(Increase) in prepaid expenses and other current assets
| |
(100
|
)
| | |
(73
|
)
| |
Increase in accounts payable, trade
| |
28
| | | |
56
| | |
(Decrease) in accrued expenses
| |
(173
|
)
| | |
(369
|
)
| |
Increase in taxes, including taxes on income
| |
341
| | | |
4
| | |
Cash received on long-term aluminum supply contract
| |
93
| | | | – | | |
Pension contributions
| |
(297
|
)
| | |
(485
|
)
| |
Net change in noncurrent assets and liabilities
| |
(188
|
)
| | |
(16
|
)
| |
(Increase) decrease in net assets held for sale
|
| (49 |
)
| |
| 4 |
| |
CASH PROVIDED FROM CONTINUING OPERATIONS
| |
2,469
| | | |
627
| | |
CASH USED FOR DISCONTINUED OPERATIONS
|
| (1 |
)
| |
| (1 |
)
| |
CASH PROVIDED FROM OPERATIONS
|
| 2,468 |
| |
| 626 |
| | | |
| |
FINANCING ACTIVITIES
| | | | |
Net change in short-term borrowings
| |
102
| | | |
(76
|
)
| |
Net change in commercial paper
| |
(1,116
|
)
| | |
351
| | |
Additions to long-term debt
| |
2,049
| | | |
2,105
| | |
Debt issuance costs
| |
(126
|
)
| | |
(13
|
)
| |
Payments on long-term debt
| |
(848
|
)
| | |
(192
|
)
| |
Common stock issued for stock compensation plans
| |
819
| | | |
177
| | |
Excess tax benefits from stock-based payment arrangements
| |
77
| | | |
15
| | |
Repurchase of common stock
| |
(1,548
|
)
| | |
(1,082
|
)
| |
Dividends paid to shareholders
| |
(447
|
)
| | |
(420
|
)
| |
Dividends paid to minority interests
| |
(310
|
)
| | |
(193
|
)
| |
Contributions from minority interests
|
| 369 |
| |
| 429 |
| |
CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES
|
| (979 |
)
| |
| 1,101 |
| | | |
| |
INVESTING ACTIVITIES
| | | | |
Capital expenditures
| |
(2,615
|
)
| | |
(2,421
|
)
| |
Acquisitions, net of cash acquired
| |
(15
|
)
| | |
(276
|
)
| |
Acquisitions of minority interests
| | – | | | |
(141
|
)
| |
Proceeds from the sale of assets and businesses
| |
87
| | | |
2,684
| | |
Additions to investments
| |
(123
|
)
| | |
(1,276
|
)
| |
Sales of investments
| |
1,981
| | | |
72
| | |
Net change in short-term investments and restricted cash
| |
(23
|
)
| | |
(2
|
)
| |
Other
|
| 2 |
| |
| (27 |
)
| |
CASH USED FOR INVESTING ACTIVITIES
|
| (706 |
)
| |
| (1,387 |
)
| | | |
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
| 25
|
| |
| 8
|
| |
Net change in cash and cash equivalents
| |
808
| | | |
348
| | |
Cash and cash equivalents at beginning of year
|
| 506 |
| |
| 483 |
| |
CASH AND CASH EQUIVALENTS AT END OF PERIOD
| $ | 1,314 |
| | $ | 831 |
|
Alcoa and subsidiaries
Segment Information (unaudited) (1)
(dollars in millions, except realized prices; production and
shipments in thousands of metric tons [kmt])
| |
| |
| |
| |
| |
| |
| |
| |
| | | | 1Q07 | | 2Q07 | | 3Q07 | | 4Q07 | |
| 2007 | | 1Q08 | | 2Q08 | | 3Q08 | | Alumina: | | | | | | | | | | | | | | | | | |
Alumina production (kmt)
| | |
3,655
| | |
3,799
| | |
3,775
| | | |
3,855
| | | |
15,084
| | |
3,870
| | |
3,820
| | |
3,790
|
Third-party alumina
shipments (kmt)
| | |
1,877
| | |
1,990
| | |
1,937
| | | |
2,030
| | | |
7,834
| | |
1,995
| | |
1,913
| | |
2,010
| |
Third-party sales
| |
$
|
645
| |
$
|
712
| |
$
|
664
| | |
$
|
688
| | |
$
|
2,709
| |
$
|
680
| |
$
|
717
| |
$
|
805
| |
Intersegment sales
| |
$
|
579
| |
$
|
587
| |
$
|
631
| | |
$
|
651
| | |
$
|
2,448
| |
$
|
667
| |
$
|
766
| |
$
|
730
| |
Equity income (loss)
| |
$
|
1
| |
$
| – | |
$
|
(1
|
)
| |
$
|
1
| | |
$
|
1
| |
$
|
2
| |
$
|
2
| |
$
|
2
| |
Depreciation, depletion, and amortization
| |
$
|
56
| |
$
|
62
| |
$
|
76
| | |
$
|
73
| | |
$
|
267
| |
$
|
74
| |
$
|
67
| |
$
|
68
| |
Income taxes
| |
$
|
100
| |
$
|
102
| |
$
|
89
| | |
$
|
49
| | |
$
|
340
| |
$
|
57
| |
$
|
67
| |
$
|
91
| |
After-tax operating income (ATOI)
|
|
$
|
260
|
|
$
|
276
|
|
$
|
215
|
|
|
$
|
205
|
|
|
$
|
956
|
|
$
|
169
|
|
$
|
190
|
|
$
|
206
| | | | | | | | | | | | | | | | |
| | Primary Metals: | | | | | | | | | | | | | | | | | |
Aluminum production (kmt)
| | |
899
| | |
901
| | |
934
| | | |
959
| | | |
3,693
| | |
995
| | |
1,030
| | |
1,011
| |
Third-party aluminum shipments (kmt)
| | |
518
| | |
565
| | |
584
| | | |
624
| | | |
2,291
| | |
665
| | |
750
| | |
704
| |
Alcoa’s average realized price per metric
ton of aluminum
| |
$
|
2,902
| |
$
|
2,879
| |
$
|
2,734
| | |
$
|
2,646
| | |
$
|
2,784
| |
$
|
2,801
| |
$
|
3,058
| |
$
|
2,945
| |
Third-party sales
| |
$
|
1,633
| |
$
|
1,746
| |
$
|
1,600
| | |
$
|
1,597
| | |
$
|
6,576
| |
$
|
1,877
| |
$
|
2,437
| |
$
|
2,127
| |
Intersegment sales
| |
$
|
1,477
| |
$
|
1,283
| |
$
|
1,171
| | |
$
|
1,063
| | |
$
|
4,994
| |
$
|
1,105
| |
$
|
1,108
| |
$
|
1,078
| |
Equity income
| |
$
|
22
| |
$
|
18
| |
$
|
11
| | |
$
|
6
| | |
$
|
57
| |
$
|
9
| |
$
|
10
| |
$
|
1
| |
Depreciation, depletion, and amortization
| |
$
|
95
| |
$
|
102
| |
$
|
102
| | |
$
|
111
| | |
$
|
410
| |
$
|
124
| |
$
|
128
| |
$
|
131
| |
Income taxes
| |
$
|
214
| |
$
|
196
| |
$
|
80
| | |
$
|
52
| | |
$
|
542
| |
$
|
116
| |
$
|
131
| |
$
|
29
| |
ATOI
|
|
$
|
504
|
|
$
|
462
|
|
$
|
283
|
|
|
$
|
196
|
|
|
$
|
1,445
|
|
$
|
307
|
|
$
|
428
|
|
$
|
297
| | | | | | | | | | | | | | | | |
| | Flat-Rolled Products: | | | | | | | | | | | | | | | | | |
Third-party aluminum shipments (kmt)
| | |
597
| | |
612
| | |
632
| | | |
600
| | | |
2,441
| | |
610
| | |
591
| | |
580
| |
Third-party sales
| |
$
|
2,467
| |
$
|
2,535
| |
$
|
2,494
| | |
$
|
2,436
| | |
$
|
9,932
| |
$
|
2,492
| |
$
|
2,525
| |
$
|
2,488
| |
Intersegment sales
| |
$
|
65
| |
$
|
77
| |
$
|
70
| | |
$
|
71
| | |
$
|
283
| |
$
|
77
| |
$
|
77
| |
$
|
58
| |
Depreciation, depletion, and amortization
| |
$
|
60
| |
$
|
61
| |
$
|
64
| | |
$
|
59
| | |
$
|
244
| |
$
|
60
| |
$
|
63
| |
$
|
54
| |
Income taxes
| |
$
|
31
| |
$
|
37
| |
$
|
32
| | |
$
|
7
| | |
$
|
107
| |
$
|
22
| |
$
|
23
| |
$
|
21
| |
ATOI
|
|
$
|
60
|
|
$
|
97
|
|
$
|
62
|
|
|
$
|
(15
|
)
|
|
$
|
204
|
|
$
|
41
|
|
$
|
55
|
|
$
|
29
| | | | | | | | | | | | | | | | |
| | Engineered Products and Solutions: | | | | | | | | | | | | | | | | | |
Third-party aluminum shipments (kmt)
| | |
55
| | |
52
| | |
51
| | | |
49
| | | |
207
| | |
48
| | |
49
| | |
45
| |
Third-party sales
| |
$
|
1,676
| |
$
|
1,715
| |
$
|
1,662
| | |
$
|
1,666
| | |
$
|
6,719
| |
$
|
1,772
| |
$
|
1,873
| |
$
|
1,716
| |
Depreciation, depletion, and amortization
| |
$
|
41
| |
$
|
41
| |
$
|
44
| | |
$
|
45
| | |
$
|
171
| |
$
|
42
| |
$
|
42
| |
$
|
42
| |
Income taxes
| |
$
|
49
| |
$
|
52
| |
$
|
46
| | |
$
|
17
| | |
$
|
164
| |
$
|
56
| |
$
|
70
| |
$
|
42
| |
ATOI
|
|
$
|
105
|
|
$
|
119
|
|
$
|
82
|
|
|
$
|
76
|
|
|
$
|
382
|
|
$
|
138
|
|
$
|
157
|
|
$
|
101
| | | | | | | | | | | | | | | | |
| | Packaging and Consumer (2): | | | | | | | | | | | | | | | | | |
Third-party aluminum shipments (kmt)
| | |
35
| | |
40
| | |
37
| | | |
45
| | | |
157
| | |
19
| | | – | | | – | |
Third-party sales
| |
$
|
736
| |
$
|
837
| |
$
|
828
| | |
$
|
887
| | |
$
|
3,288
| |
$
|
497
| |
$
|
19
| |
$
| – | |
Depreciation, depletion, and amortization
| |
$
|
30
| |
$
|
30
| |
$
|
29
| | |
$
| – | | |
$
|
89
| |
$
| – | |
$
| – | |
$
| – | |
Income taxes
| |
$
|
7
| |
$
|
17
| |
$
|
17
| | |
$
|
27
| | |
$
|
68
| |
$
|
10
| |
$
| – | |
$
| – | |
ATOI
|
|
$
|
19
|
|
$
|
37
|
|
$
|
36
|
|
|
$
|
56
|
|
|
$
|
148
|
|
$
|
11
|
|
$
| – |
|
$
| – |
Alcoa and subsidiaries
Segment Information (unaudited), continued
(in millions)
| |
| |
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | | | | | | |
| Reconciliation of ATOI to consolidated net income:
| | 1Q07 | | 2Q07 | | 3Q07 | | 4Q07 | | 2007 | | 1Q08 | | 2Q08 | | 3Q08 | |
Total segment ATOI
| |
$
|
948
| | |
$
|
991
| | |
$
|
678
| | |
$
|
518
| | |
$
|
3,135
| | |
$
|
666
| | |
$
|
830
| | |
$
|
633
| | |
Unallocated amounts (net of tax):
| | | | | | | | | | | | | | | | | |
Impact of LIFO
| | |
(27
|
)
| | |
(16
|
)
| | |
10
| | | |
9
| | | |
(24
|
)
| | |
(31
|
)
| | |
(44
|
)
| | |
(5
|
)
| |
Interest income
| | |
11
| | | |
9
| | | |
10
| | | |
10
| | | |
40
| | | |
9
| | | |
12
| | | |
10
| | |
Interest expense
| | |
(54
|
)
| | |
(56
|
)
| | |
(98
|
)
| | |
(53
|
)
| | |
(261
|
)
| | |
(64
|
)
| | |
(57
|
)
| | |
(63
|
)
| |
Minority interests
| | |
(115
|
)
| | |
(110
|
)
| | |
(76
|
)
| | |
(64
|
)
| | |
(365
|
)
| | |
(67
|
)
| | |
(70
|
)
| | |
(84
|
)
| |
Corporate expense
| | |
(86
|
)
| | |
(101
|
)
| | |
(101
|
)
| | |
(100
|
)
| | |
(388
|
)
| | |
(82
|
)
| | |
(91
|
)
| | |
(77
|
)
| |
Restructuring and other charges
| | |
(18
|
)
| | |
21
| | | |
(311
|
)
| | |
1
| | | |
(307
|
)
| | |
(30
|
)
| | |
(2
|
)
| | |
(29
|
)
| |
Discontinued operations
| | |
(11
|
)
| | |
(1
|
)
| | |
(3
|
)
| | |
8
| | | |
(7
|
)
| | | – | | | | – | | | |
(1
|
)
| |
Other
|
|
|
14
|
|
|
|
(22
|
)
|
|
|
446
|
|
|
|
303
|
|
|
|
741
|
|
|
|
(98
|
)
|
|
|
(32
|
)
|
|
|
(116
|
)
| |
Consolidated net income
|
|
$
|
662
|
|
|
$
|
715
|
|
|
$
|
555
|
|
|
$
|
632
|
|
|
$
|
2,564
|
|
|
$
|
303
|
|
|
$
|
546
|
|
|
$
|
268
|
|
The difference between certain segment totals and consolidated
amounts
is in Corporate.
| |
|
(1) In the first quarter of 2008, management approved a
realignment of
Alcoa's reportable segments to better
reflect the core businesses
in which Alcoa operates and
how it is managed. This realignment
consisted of
eliminating the Extruded and End Products segment and
realigning its component businesses as follows: the building and
construction systems business is reported in the Engineered
Products and Solutions segment; the hard alloy extrusions business
and the Russian extrusions business are reported in the Flat-
Rolled
Products segment; and the remaining segment components,
consisting primarily of the equity investment/income of Alcoa's
interest in the Sapa AB joint venture, and the Latin American
extrusions business, are reported in Corporate. Additionally, the
Russian forgings business was moved from the Engineered Products
and Solutions segment to the Flat-Rolled Products segment, where
all Russian operations are now reported. Prior period amounts were
reclassified to reflect the new segment structure. Also, the
Engineered Solutions segment was renamed the Engineered Products
and Solutions segment.
| |
|
(2) On February 29, 2008, Alcoa completed the sale of its packaging
and consumer businesses to Rank Group Limited. In the 2008 second
quarter, Alcoa received regulatory and other approvals for a small
number of locations that did not close in the 2008 first quarter.
Also, in the 2008 third quarter, one final remaining location was
transferred to Rank. The Packaging and Consumer segment no longer
contains any operations.
|
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions)
| |
| | Bloomberg Return on Capital (1)
| | Bloomberg Return on Capital, Excluding Growth Investments (1)
| | | | | |
| | | Twelve months ended | | | Twelve months ended | | September 30, | | | September 30, | | 2007 |
| 2008 | | | 2007
| | 2008 | | | | | | | | |
| |
Net income
|
$
|
2,291
| | |
$
|
1,749
| | |
Net income
|
$
|
2,291
| | |
$
|
1,749
| | | | | | | | | |
|
Minority
interests
| |
399
| | | |
285
| | |
Minority
interests
| |
399
| | | |
285
| | | | | | | | | |
|
Interest
expense
| | | | |
Interest
expense
| | | | |
(after tax)
|
| 246 |
| |
| 312 |
| |
(after tax)
|
| 246 |
| |
| 312 |
| | | | | | | | |
| |
Numerator
| $ | 2,936 |
| | $ | 2,346 |
| |
Numerator
| |
2,936
| | | |
2,346
| | | | | | | | | |
| | | | | |
Net losses of
growth
investments
(3)
|
| 57 |
| |
| 132 |
| | | | | | | | |
| | | | | | Adjusted numerator | $ | 2,993 |
| | $ | 2,478 |
| | | | | | | | |
| Average
Balances
| | | | | Average
Balances
| | | |
Short-term
borrowings
|
$
|
497
| | |
$
|
537
| | |
Short-term
borrowings
|
$
|
497
| | |
$
|
537
| |
Short-term
debt
| |
525
| | | |
126
| | |
Short-term
debt
| |
525
| | | |
126
| |
Commercial
paper
| |
1,275
| | | |
782
| | |
Commercial
paper
| |
1,275
| | | |
782
| |
Long-term
debt
| |
5,390
| | | |
7,351
| | |
Long-term
debt
| |
5,390
| | | |
7,351
| |
Preferred
stock
| |
55
| | | |
55
| | |
Preferred
stock
| |
55
| | | |
55
| |
Minority
interests
| |
1,927
| | | |
2,532
| | |
Minority
interests
| |
1,927
| | | |
2,532
| |
Common
equity (2)
|
| 15,255 |
| |
| 15,435 |
| |
Common
equity (2)
|
| 15,255 |
| |
| 15,435 |
| | | | | | | | |
| |
Denominator
| $ | 24,924 |
| | $ | 26,818 |
| |
Denominator
| |
24,924
| | | |
26,818
| | | | | | | | | |
| | | | | |
Capital
projects in
progress and
capital
base
of growth
investments
(3)
|
| (4,430 |
)
| |
| (5,244 |
)
| | | | | | | | |
| | | | | | Adjusted
denominator
| $ | 20,494 |
| | $ | 21,574 |
| | | | | | | | |
| Return on capital
| |
11.8
|
%
| | |
8.7
|
%
| | Return on
capital,
excluding
growth
investments
| |
14.6
|
%
| | |
11.5
|
%
|
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 (September 2008
ending balance + September 2007 ending balance) divided by 2 for
the twelve months ended September 30, 2008, and (September 2007
ending balance + September 2006 ending balance) divided by 2 for
the twelve months ended September 30, 2007.
| |
(2) Calculated as total shareholders' equity less preferred stock.
|
(3) For all periods presented, growth investments include Russia,
Bohai, and Kunshan.
|
| Alcoa and subsidiaries | | Calculation of Financial Measures (unaudited), continued | | (in millions) | |
| | Third-party Sales | | | Quarter ended | | September 30, 2007
|
| September 30, 2008
| | | |
| |
Alcoa
|
$
|
7,387
| |
$
|
7,234
| | | |
| |
Divested businesses (a)
|
| 885 | |
| – | | | |
| | | |
| |
Alcoa, excluding divested businesses
| $
| 6,502
| | $
| 7,234
|
Third-party sales excluding divested businesses is a non-GAAP
financial
measure. Management believes that this measure is meaningful
to
investors because management reviews the operating results of Alcoa
excluding
divested businesses since they are no longer reflective of
Alcoa's
continuing operations.
| |
|
(a) Divested businesses include the businesses within the Packaging
and Consumer segment, certain U.S. locations of the Soft Alloy
Extrusions business that were not contributed to the Sapa AB joint
venture, and the Automotive Castings business.
|
| | |
