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| October 4, 2001
Alcoa Posts $339 Million in Earnings, Overcoming Lower Prices, Weak Markets and Reduced Production
PITTSBURGH--(BUSINESS WIRE)--Oct. 4, 2001--Alcoa today reported
net income of $339 million (39 cents per diluted share) for the third
quarter of 2001 compared with net income of $368 million (42 cents per
share) for the 2000 third quarter.
For the first nine months of 2001, net income was $1,050 million
($1.21 per share). Before special charges of $114 million (13 cents
per share), net income was $1,164 million ($1.34 per share). For the
comparable 2000 period, net income was $1,092 million ($1.35 per
share).
Revenues for the 2001 third quarter were $5.5 billion compared
with $6.3 billion for the 2000 third quarter. Revenues for the first
nine months of 2001 were $17.7 billion compared with $16.4 billion for
the first nine months of 2000.
"Alcoa's continuing success in reducing costs and managing what is
in our control helped to lessen the combined negative impact of lower
prices, weak end markets in the U.S. and Europe, and production
cutbacks in refining and smelting," said Chairman and Chief Executive
Officer Alain Belda.
The three-month LME price for primary aluminum fell five cents a
pound, or 7%, during the third quarter. Compared with the third
quarter of 2000, the LME three-month average skidded eight cents a
pound, or 11%.
In Europe, Alcoa's revenues declined more than 15% from the second
quarter as a result of softness in several end markets --
transportation, building and construction, and industrial products --
while U.S. markets did not recover from their second quarter weakness.
From second quarter levels, total alumina shipments dipped 3% and
total primary aluminum shipments dropped 11% as a result of recent
capacity curtailments. Alcoa currently has 710,000 metric tons of idle
capacity in its smelting operations, mainly related to energy
shortages in the Northwest U.S. and Brazil. Alcoa's total worldwide
smelting capacity is 4.1 million metric tons per year (mtpy); its
total worldwide alumina capacity is 13.6 mtpy.
"We are on target to meet our 2003 cost-cutting goal, which is
helping us to partially offset the negative impact of lower demand and
prices," continued Mr. Belda. "We are confident that we will achieve
the $1.0 billion in cost savings." At the end of the 2001 third
quarter, the company had achieved $348 million in annualized cost
savings towards its 2003 target. The quarterly run rate at the end of
the quarter was $87 million, compared with $63 million for the 2001
second quarter
"We expect market weakness to continue in the fourth quarter,"
noted Mr. Belda. "The tragic events in the U.S. last month and their
potential impact on Alcoa's businesses are of particular concern.
While the total effect on our markets and prices remains uncertain, we
are dedicated to managing the company for profitability and growth,
and we will continue to rigorously control costs, capital expenditures
and working capital through the Alcoa Business System."
Alcoa said that it has been active in its stock repurchase
program, buying back 9.7 million shares in the third quarter.
Year-to-date, Alcoa has repurchased 36.1 million shares, offsetting
share issuances for employee benefit programs, for a net decrease of
15.7 million shares. The stock repurchase authorization of 50 million
shares currently has 40.7 million shares remaining.
Return on shareholders' equity for the 2001 nine-month period,
annualized, was 12.6% compared with 17% for the year-ago period.
Quarterly Analyst Meeting; Facility Tour
Alcoa's quarterly analyst meeting will be at 4:00 p.m. EDST on
Tuesday, October 16, 2001. The meeting will be webcast via alcoa.com.
On November 1 and 2, analysts and media will tour the company's
Howmet casting facility in Hampton, Virginia. At that time,
presentations will be posted on alcoa.com.
Founded in 1888, Alcoa is the world's leading producer of aluminum
and alumina, and a major participant in all segments of the industry:
mining, refining, smelting, fabricating and recycling. Alcoa serves
customers worldwide in the packaging, consumer, automotive, aerospace,
construction and other markets with a great variety of fabricated and
finished products. The company has 142,000 employees in 37 countries.
Alcoa (NYSE: AA)
Alcoa financial and operating data follow.
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 the company's
inability to achieve the level of cost savings or productivity
improvements anticipated by management, including possible increases
in the cost of doing business resulting from war or terrorist
activities; and other risk factors summarized in Alcoa's SEC reports.
FINANCIAL REPORT
Alcoa and subsidiaries
(in millions, except share and ton amounts)
(UNAUDITED)
Third quarter
For the period ended September 30 2001 2000
------- -------
Sales $ 5,511 $ 6,298
------- -------
Cost of goods sold 4,228 4,798
Selling, general administrative
and other expenses 273 314
Research and development expenses 47 47
Provision for depreciation, depletion
and amortization 309 350
Special items - -
Interest expense 85 141
Other expense (income),net 3 (46)
------- -------
4,945 5,604
Income from operations before
taxes on income 566 694
Provision for taxes on income 175 235
------- -------
Income from operations 391 459
Less: Minority interests' share 52 91
------- -------
Income before cumulative effect 339 368
Cumulative effect of accounting
change for revenue recognition - -
------- -------
NET INCOME $ 339 $ 368
Earnings per common share:
Basic $ 0.40 $ 0.42
Diluted $ 0.39 $ 0.42
Average number of shares used to compute:
Basic earnings per common share 855,782,046 866,117,400
Diluted earnings per common share 864,386,294 874,231,221
Translation and exchange adjustments
included in net income $ (31) $ (18)
Shipments of aluminum
products (metric tons) 1,212,000 1,419,000
FINANCIAL REPORT
Alcoa and subsidiaries
(in millions, except share and ton amounts)
(UNAUDITED)
Nine months ended
For the period ended September 30 2001 2000(a)
------- -------
Sales $17,678 $16,376
------- -------
Cost of goods sold 13,548 12,328
Selling, general administrative
and other expenses 922 813
Research and development expenses 151 134
Provision for depreciation depletion
and amortization 939 865
Special items 212 -
Interest expense 293 287
Other income,net (196) (139)
------- -------
15,869 14,288
Income from operations before
taxes on income 1,809 2,088
Provision for taxes on income 579 710
------- -------
Income from operations 1,230 1,378
Less: Minority interests' share 180 281
------- -------
Income before cumulative effect 1,050 1,097
Cumulative effect of accounting
change for revenue recognition - (5)
------- -------
NET INCOME $ 1,050 $ 1,092
Earnings per common share:
Basic $ 1.22 $ 1.36
Diluted $ 1.21 $ 1.35
Average number of shares
used to compute:
Basic earnings per common share 860,901,124 799,000,417
Diluted earnings per common share 870,105,171 808,485,161
Translation and exchange adjustments
included in net income $ 9 $ (15)
Shipments of aluminum
products (metric tons) 3,824,000 3,913,000
Return on average shareholders' equity 12.6% 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 $16,398; Income from operations $1,381; Net
income $1,100; Earnings per share basic $1.37 and diluted $1.36
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
September 30 December 31
2001 2000
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 472 $ 315
Short-term investments 12 56
Receivables from customers,
less allowances:
$90 in 2001 and $69 in 2000 2,905 3,461
Other receivables 300 354
Inventories 2,847 2,703
Deferred income taxes 370 385
Prepaid expenses and other
current assets 587 304
------- -------
Total current assets 7,493 7,578
Properties, plants and
equipment, at cost 22,165 22,600
Less, accumulated depreciation,
depletion and amortization 10,150 9,750
------- -------
Net properties, plants and equipment 12,015 12,850
------- -------
Goodwill, net of accumulated
amortization of $478 in
2001 and $344 in 2000 5,754 6,003
Other assets, including assets
held for sale 3,407 5,260
------- -------
Total assets $28,669 $31,691
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings $ 87 $ 2,719
Accounts payable, trade 1,626 1,876
Accrued compensation and
retirement costs 808 928
Taxes, including taxes on income 747 702
Other current liabilities 1,500 1,302
Long-term debt due within one year 216 427
------ ------
Total current liabilities 4,984
Long-term debt, less amount due
within one year 6,114 4,987
Accrued postretirement benefits 2,532 2,719
Other noncurrent liabilities and
deferred credits 2,176 2,126
Deferred income taxes 780 969
------ ------
Total liabilities 16,586 18,755
------ ------
MINORITY INTERESTS 1,265 1,514
------ ------
CONTINGENT LIABILITIES - -
SHAREHOLDERS' EQUITY
Preferred stock 56 56
Common stock 925 925
Additional capital 6,116 5,927
Retained earnings 7,658 7,127
Treasury stock, at cost (2,618) (1,717)
Accumulated other comprehensive loss (1,319) (896)
------- -------
Total shareholders' equity 10,818 11,422
------- -------
Total liabilities and equity $28,669 $31,691
======= =======
Consolidated Third-Party
Revenues 1Q00 2Q00 3Q00 4Q00
---- ---- ---- ----
Alumina and Chemicals 540 515 529 524
Primary Metals 611 852 1,049 1,244
Flat-Rolled Products 1,404 1,394 1,361 1,287
Engineered Products 1,053 1,296 1,586 1,536
Packaging and Consume 203 524 631 726
Other 698 988 1,142 1,243
--- --- ----- -----
Total 4,509 5,569 6,298 6,560
Consolidated Third-Party
Revenues 2000 1Q01 2Q01 3Q01
---- ---- ---- ----
Alumina and Chemicals 2,108 547 490 454
Primary Metals 3,756 967 972 808
Flat-Rolled Products 5,446 1,343 1,255 1,219
Engineered Products 5,471 1,593 1,582 1,514
Packaging and Consume 2,084 646 701 671
Other 4,071 1,080 991 845
----- ------ --- ---
Total 22,936 6,176 5,991 5,511
Consolidated Intersegment
Revenues 1Q00 2Q00 3Q00 4Q00
---- ---- ---- ----
Alumina and Chemicals 250 274 294 286
Primary Metals 850 832 936 886
Flat-Rolled Products 13 29 29 26
Engineered Products 13 15 18 16
Packaging and Consumer 0 0 0 0
Other 0 0 0 0
- - - -
Total 1,126 1,150 1,277 1,214
Consolidated Intersegment
Revenues 2000 1Q01 2Q01 3Q01
---- ---- ---- ----
Alumina and Chemicals 1,104 283 275 246
Primary Metals 3,504 867 887 839
Flat-Rolled Products 97 16 15 20
Engineered Products 62 9 8 9
Packaging and Consumer 0 0 0 0
Other 0 0 0 0
- - - -
Total 4,767 1,175 1,185 1,114
Consolidated Third-Party
Shipments (KMT's) 1Q00 2Q00 3Q00 4Q00
---- ---- ---- ----
Alumina and Chemicals 1,833 1,801 1,893 1,945
Primary Metals 339 493 574 665
Flat-Rolled Products 507 504 492 457
Engineered Products 266 282 258 255
Packaging and Consumer 2 32 37 48
Other 19 50 58 60
-- -- -- --
Total Aluminum 1,133 1,361 1,419 1,485
Average realized price
-Primary 0.79 0.74 0.77 0.77
Consolidated Third-Party
Shipments (KMT's) 2000 1Q01 2Q01 3Q01
---- ---- ---- ----
Alumina and Chemicals 7,472 2,031 1,730 1,789
Primary Metals 2,071 476 494 448
Flat-Rolled Products 1,960 470 450 442
Engineered Products 1,061 254 242 232
Packaging and Consumer 119 42 41 33
Other 187 78 65 57
--- -- -- --
Total Aluminum 5,398 1,320 1,292 1,212
Average realized price
-Primary 0.77 0.77 0.73 0.71
After-Tax Operating Income 1Q00 2Q00 3Q00 4Q00
---- ---- ---- ----
Alumina and Chemicals 155 140 146 144
Primary Metals 227 225 254 294
Flat-Rolled Products 73 74 83 69
Engineered Products 53 62 49 46
Packaging and Consumer 17 35 38 41
Other 30 46 39 49
-- -- -- --
Total 555 582 609 643
After-Tax Operating Income 2000 1Q01 2Q01 3Q01
---- ---- ---- ----
Alumina and Chemicals 585 166 130 115
Primary Metals 1,000 294 264 216
Flat-Rolled Products 299 65 74 59
Engineered Products 210 40 60 62
Packaging and Consumer 131 43 47 47
Other 164 50 45 4
--- -- -- -
Total 2,389 658 620 503
Reconciliation of after-tax
operating income to
consolidated net income 1Q00 2Q00 3Q00 4Q00
---- ---- ---- ----
Total after-tax
operating income 555 582 609 643
Elimination of
intersegment (profit) loss 19 (10) 7 8
Unallocated amounts
(net of tax)
Interest income 7 19 4 10
Interest expense (33) (69) (85) (91)
Minority interest (105) (85) (90) (100)
Corporate expense (56) (51) (66) (54)
Special items - - - -
Other (40) (9) (11) (24)
---- ---- ---- ----
Consolidated net income 347 377 368 392
Reconciliation of after-tax
operating income to
consolidated net income 2000 1Q01 2Q01 3Q01
---- ---- ---- ----
Total after-tax
operating income 2,389 658 620 503
Elimination of
intersegment (profit) loss 24 4 (8) (14)
Unallocated amounts
(net of tax)
Interest income 40 8 12 10
Interest expense (278) (75) (61) (55)
Minority interest (380) (96) (32) (52)
Corporate expense (227) (66) (66) (45)
Special items - - (148) -
Other (84) (29) (10) (8)
---- ----- ----- ----
Consolidated net income 1,484 404 307 339
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