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| July 6, 2001
Excluding Charges, Alcoa's Earnings Set New Record
PITTSBURGH--(BUSINESS WIRE)--July 6, 2001--Alcoa (NYSE:AA) today
reported record quarterly earnings of $429 million (49 cents per
diluted share), before special charges of $114 million (13 cents per
share) for the second quarter of 2001. After the special charges,
second quarter net income was $315 million (36 cents per share). For
the 2000 second quarter, net income was $377 million (47 cents per
share).
Earnings for the first half of 2001 were $833 million (95 cents
per share) before the special charges. With the charges, net income
was $719 million (82 cents per share). For the comparable 2000 period,
net income was $724 million (93 cents per share.)
"These are outstanding results, particularly in the face of lower
prices for alumina and aluminum ingot; continuing market weakness in
passenger automotive, truck trailer and industrial products in the
U.S.; and curtailment of smelting and refining production," said
Chairman and CEO Alain Belda.
"Helping to counter these negatives, Alcoa employees continue to
manage what is in their control, extract synergies from acquired
companies and stay focused on the future," said Mr. Belda. At the end
of the 2001 second quarter, the company had achieved $252 million in
annualized cost savings against it $1.0 billion 2003 target. The
quarterly run rate at the end of the quarter was $63 million, compared
with $31 million for the 2001 first quarter.
Revenues were $6.0 billion for the 2001 second quarter, versus
$5.6 billion in the year-ago quarter. For the first half of 2001,
revenues were $12.2 billion, compared with $10.1 billion in the 2000
period.
Alcoa noted that revenues from the sale of power continued to
cover the financial losses associated with the production curtailments
in the U.S. Pacific Northwest.
Proceeds from the sale of Thiokol Propulsion were used to lower
debt and repurchase common shares. Alcoa's debt to invested capital
ratio dropped from 38.6% at the end of 2000 to 34% at June 30, 2001.
Under the company's stock repurchase program, net shares were reduced
by seven million through the end of the 2001 second quarter. Total
outstanding shares at June 30 were 858 million. A gain of $38 million
(before tax) on the sale of Thiokol in the current quarter was
comparable to asset sales of $47 million (before tax) in the previous
quarter.
Return on shareholders' equity for the 2001 first half,
annualized, was 14.2%, before special items, compared with 17% in the
first half of 2000. After the special items, the return for the 2001
first half was 13.2%.
Second Quarter 2001 Special Charges
Alcoa stated that the special charges of $212 million (before tax)
taken in the second quarter are part of its ongoing segment review to
optimize assets and lower costs. Included in the special charges are
the following:
-- A charge of $179 million, before tax and minority interest, due
to actions Alcoa has taken in its Primary Products businesses (within
the Alumina and Chemical Segment and the Primary Metals Segment)
because of economic and competitive conditions. These actions include
the shutdown of the company's magnesium plant in Addy, Washington and
closing both the company's alumina refinery on St. Croix, U.S. Virgin
Islands and its smelter in Suriname. The refinery, which had a
capacity of 600,000 mtpy, has been idle since January 2001; the
smelter, which had a capacity of 30,000 mtpy, has been idle since
March 1999. In addition, the charge includes the closure of a chemical
plant located in Louisiana, which has been idle since December 2000.
The refinery, smelter and chemical plant are part of Alcoa World
Alumina and Chemicals, which is 60% owned by Alcoa;
-- A charge of $17 million, before tax, related to the closing of
MetalSpectrum which was previously announced; and
-- The remainder of the charge ($16 million before tax) for labor
reductions at various manufacturing facilities due to weak market
conditions mentioned above.
Quarterly Analysts' Meeting
Alcoa's quarterly analysts' meeting will be at 4:00 p.m. EDST on
Thursday, July 19, 2001. The meeting will be web cast via alcoa.com.
Alcoa is the world's leading producer of primary aluminum,
fabricated aluminum, and alumina and participates in all major aspects
of the industry: technology, mining, refining, smelting, fabricating,
and recycling. Alcoa serves customers worldwide in the packaging,
consumer, automotive, aerospace, construction and distribution
markets. The company has 142,000 employees in 37 countries.
Certain statements relate to future events and expectations and as
such constitute forward-looking statements involving known and unknown
risks, uncertainties and other factors 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 other risk factors
summarized in Alcoa's SEC reports.
FINANCIAL REPORT
Alcoa and subsidiaries
(in millions except share and ton amounts)
(UNAUDITED)
Second quarter
--------------
For the period ended June 30 2001 2000
---- ----
Sales $ 5,991 $ 5,569
Cost of goods sold 4,607 4,216
Selling, general administrative
and other expenses 314 272
Research and development expenses 55 48
Provision for depreciation,
depletion and amortization 309 290
Interest expense 93 95
Special items 212 -
Other income,net (107) (52)
--------- ---------
5,483 4,869
Income from operations before taxes on income 508 700
Provision for taxes on income 161 238
--------- ---------
Income from operations 347 462
Less: Minority interests' share 32 85
--------- ---------
Income before cumulative effect 315 377
Cumulative effect of accounting
Change for revenue recognition - -
--------- ---------
NET INCOME $ 315 $ 377
Earnings per common share:
Basic $ 0.37 $ 0.47
Diluted $ 0.36 $ 0.47
Average number of shares used to compute:
Basic earnings per common share 861,633,715 796,962,243
Diluted earnings per common share 872,074,474 804,964,628
Translation and exchange adjustments
included in net income $ 26 $ 0
Shipments of aluminum products (metric tons) 1,292,000 1,361,000
FINANCIAL REPORT
Alcoa and subsidiaries
(in millions except share and ton amounts)
(UNAUDITED)
Six months ended
----------------
For the period ended June 30 2001 2000(a)
---- ----
Sales $ 12,167 $ 10,078
Cost of goods sold 9,320 7,530
Selling, general administrative
and other expenses 637 499
Research and development expenses 104 87
Provision for depreciation depletion
and amortization 630 515
Interest expense 208 146
Special items 212 -
Other income, net (199) (93)
--------- ---------
10,912 8,684
Income from operations before taxes on income 1,255 1,394
Provision for taxes on income 408 475
--------- ---------
Income from operations 847 919
Less: Minority interests' share 128 190
--------- ---------
Income before cumulative effect 719 729
Cumulative effect of accounting
Change for revenue recognition - (5)
--------- ---------
NET INCOME $ 719 $ 724
Earnings per common share:
Basic $ 0.83 $ 0.94
Diluted $ 0.82 $ 0.93
Average number of shares used to compute:
Basic earnings per common share 863,462,208 770,119,801
Diluted earnings per common share 873,156,282 780,233,133
Translation and exchange adjustments
included in net income $ 40 $ 3
Shipments of aluminum products (metric tons) 2,612,000 2,494,000
Return on average shareholders' equity 13.2% 17.0%
(a) The amounts have been restated for the effects of the change in
accounting for revenue recognition. Amounts originally reported were
as follows: Sales $10,100; Income from operations $1,398; Net income
$732; Earnings per share basic $.95 and diluted $.94
Alcoa and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
June 30 December 31
2001 2000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 439 $ 315
Short-term investments 13 56
Receivables from customers, less allowances:
$71 in 2001 and $69 in 2000 3,027 3,461
Other receivables 310 354
Inventories 2,790 2,703
Deferred income taxes 346 385
Prepaid expenses and other current assets 499 304
-------- --------
Total current assets 7,424 7,578
Properties, plants and equipment, at cost 22,028 22,600
Less, accumulated depreciation,
depletion and amortization 10,033 9,750
-------- --------
Net properties, plants and equipment 11,995 12,850
-------- --------
Goodwill, net of accumulated amortization of
$433 in 2001 and $344 in 2000 5,763 6,003
Other assets, including assets held for sale 3,303 5,260
-------- --------
Total assets $ 28,485 $ 31,691
======== ========
LIABILITIES
Current liabilities:
Short-term borrowings $ 101 $ 2,719
Accounts payable, trade 1,648 1,876
Accrued compensation and retirement costs 749 928
Taxes, including taxes on income 689 702
Other current liabilities 1,329 1,302
Long-term debt due within one year 217 427
-------- --------
Total current liabilities 4,733 7,954
Long-term debt, less amount due within one year 6,031 4,987
Accrued postretirement benefits 2,561 2,719
Other noncurrent liabilities
and deferred credits 2,111 2,126
Deferred income taxes 748 969
-------- --------
Total liabilities 16,184 18,755
-------- --------
MINORITY INTERESTS 1,251 1,514
-------- --------
CONTINGENT LIABILITIES - -
SHAREHOLDERS' EQUITY
Preferred stock 56 56
Common stock 925 925
Additional capital 6,109 5,927
Retained earnings 7,541 7,127
Treasury stock, at cost (2,341) (1,717)
Accumulated other comprehensive loss (1,240) (896)
-------- --------
Total shareholders' equity 11,050 11,422
-------- --------
Total liabilities and shareholders' equity $ 28,485 $ 31,691
======== ========
Consolidated Third-Party Revenues
1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 540 515 529 524 2,108 547 490
Primary Metals 611 852 1,049 1,244 3,756 967 972
Flat-Rolled Products 1,404 1,394 1,361 1,287 5,446 1,343 1,255
Engineered Products 1,053 1,296 1,586 1,536 5,471 1,593 1,582
Packaging and Consumer 203 524 631 726 2,084 646 701
Other 698 988 1,142 1,243 4,071 1,080 991
----- ----- ----- ----- ----- ----- -----
Total 4,509 5,569 6,298 6,560 22,936 6,176 5,991
Consolidated Intersegment Revenues
1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 250 274 294 286 1,104 283 275
Primary Metals 850 832 936 886 3,504 867 887
Flat-Rolled Products 13 29 29 26 97 16 15
Engineered Products 13 15 18 16 62 9 8
Packaging and Consumer 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 0
Total 1,126 1,150 1,277 1,214 4,767 1,175 1,185
Consolidated Third-Party Shipments (KMT's)
1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 1,833 1,801 1,893 1,945 7,472 2,031 1,730
Primary Metals 339 493 574 665 2,071 476 494
Flat-Rolled Products 507 504 492 457 1,960 470 450
Engineered Products 266 282 258 255 1,061 254 242
Packaging and Consumer 2 32 37 48 119 42 41
Other 19 50 58 60 187 78 65
----- ----- ----- ----- ----- ----- -----
Total Aluminum 1,133 1,361 1,419 1,485 5,398 1,320 1,292
Average realized price
-Primary 0.79 0.74 0.77 0.77 0.77 0.77 0.73
After-Tax Operating Income
1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 155 140 146 144 585 166 130
Primary Metals 227 225 254 294 1,000 294 272
Flat-Rolled Products 73 74 83 69 299 65 74
Engineered Products 53 62 49 46 210 40 60
Packaging and Consumer 17 35 38 41 131 43 47
Other 30 46 39 49 164 50 45
----- ----- ----- ----- ----- ----- -----
Total 555 582 609 643 2,389 658 628
Reconciliation of after-tax
operating income to consolidated
net income: After-Tax Operating Income
1Q00 2Q00 3Q00 4Q00 2000 1Q01 2Q01
---- ---- ---- ---- ---- ---- ----
Total after-tax
operating income 555 582 609 643 2,389 658 628
Elimination of
intersegment (profit)
loss 19 (10) 7 8 24 4 (8)
Unallocated amounts
(net of tax) Interest
income 7 19 4 10 40 8 12
Interest expense (33) (69) (85) (91) (278) (75) (61)
Minority interest (105) (85) (90) (100) (380) (96) (32)
Corporate expense (56) (51) (66) (54) (227) (66) (66)
Special items - - - - - - (148)
Other (40) (9) (11) (24) (84) (29) (10)
----- ----- ----- ----- ----- ----- -----
Consolidated
net income 347 377 368 392 1,484 404 315
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