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April 4, 2003

Strong Cost Savings Help Offset Higher Energy Prices, Driving Alcoa's Income From Continuing Operations Higher Sequentially and Year-Over-Year

PITTSBURGH--(BUSINESS WIRE)--April 4, 2003--Alcoa (NYSE:AA)

Highlights of the quarter:

  • Income from continuing operations was $0.23 per diluted share versus a loss of $0.15 in the previous quarter and income of $0.22 in the year-ago quarter
  • Revenue was $5.11 billion, up from both the prior and year-ago quarters
  • Gross margin expanded sequentially from 19.2 percent to 20.3 percent
  • Cost savings were $52 million in the quarter, bringing the Company's annual run rate on savings to $808 million
  • Every segment of the business demonstrated improved sequential profitability except Packaging and Consumer, which experienced seasonal declines.


Alcoa today reported income from continuing operations in the first quarter of $195 million or $0.23 per diluted share compared to a loss from continuing operations of $125 million or $0.15 per diluted share in the previous quarter. The loss in the fourth quarter of 2002 included restructuring charges, goodwill impairment and losses on divestitures totaling $258 million. (See attached schedule.) Income from continuing operations was $184 million or $0.22 per diluted share in the first quarter of 2002.

"We are focused on managing what is under our control in a challenging business environment," said Alain Belda, Chairman and CEO of Alcoa. "Despite significantly higher energy prices which offset more favorable metal prices, we achieved solid cost savings results from the restructuring undertaken over the last two years as well as synergies from acquired businesses. Every segment of the business demonstrated improved profitability except for Packaging and Consumer, which experienced typical seasonal declines. Given the uncertain economic and geopolitical outlook today, we will keep our focus on controlling costs, improving productivity, and building closer connections to our customers."

Cost Savings

The company achieved $52 million in savings in the quarter. Consistent with Alcoa's approach since its first cost challenge in 1998, the savings number includes the effect of higher benefit costs, but excludes changes in energy prices due to volatility. Energy costs in the first quarter of 2003 were $75 million higher than the fourth quarter 2002 and $110 million higher than first quarter 2002. Benefit costs were $25 million higher than the previous quarter.

The cost savings were driven in large part by accelerating the benefits of prior years' restructurings and the continued implementation of the Alcoa Business System. Despite higher energy and raw material costs, the company's margin improved 110 basis points to 20.3% of sales in the quarter. Alcoa has now achieved $808 million toward its $1 billion cost savings goal by the end of 2003 and remains solidly on track to meet that challenge.

Markets

Sales were $5.11 billion up from $5.06 billion in the fourth quarter of last year - and up 4% from $4.9 billion in the first quarter of 2002. Sequentially, higher upstream pricing and the inclusion of Fairchild Fasteners revenues offset seasonal declines in the packaging and consumer markets. While the aerospace, industrial gas turbine and commercial building markets remain soft, the company benefited from aggressive cost cutting in businesses serving those markets. Automotive markets remained strong in the quarter while residential construction weakened due to severe winter weather in the U.S.

Acquisitions and Divestitures

Fairchild Fasteners, a part of Alcoa Fastening Systems since December 2002, has already achieved $19 million in annualized synergies. These savings are excluded from the $1 billion cost challenge. Alcoa continues to pursue the divestiture of non-core businesses announced earlier this year, and expects to use proceeds from those sales to pay down debt.

Customers

Alcoa continues to strengthen its performance by developing innovative products that add value for its customers. Introduced last summer, Reynolds Wrap(R) Release(R), an innovative new non-stick foil, has now established a strong presence in the North American market. Almost five million households throughout the United States have already tried Reynolds Wrap(R) Release(R) and almost 50% of these consumers have plans to come back for more -- twice the number of consumers who typically make a repeat purchase of a new product in this market.

Alcoa Dura-Bright(R) wheels continue to gain acceptance in the market and are on track to triple sales from the previous year. Dura-Bright(R) wheels have been used primarily in transit bus and motor home applications, and are now being rapidly adopted in trucks and trailers. They were named as one of the top 50 new products for 2002 by Heavy Duty Trucking magazine.

Alcoa was also selected to supply metallic solutions for regional and business jets to Bombardier.

Accounting Change and Other Items

In the first quarter of 2003, Alcoa adopted Financial Accounting Standard No. 143, "Accounting for Asset Retirement Obligations." The cumulative effect of adopting this standard was a one-time, non-cash charge of $47 million. Including this charge, Alcoa's net income for the quarter was $151 million. Net income in the first quarter of 2002 included a one time, non-cash gain of $34 million upon adoption of FAS No. 142.

Sequentially, the negative impact of foreign currency translation and lower non-operating income were partially offset by higher equity earnings.

About Alcoa

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, 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(R) foils and plastic wraps, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks. The company has 127,000 employees in 40 countries. More information can be found at www.alcoa.com

Alcoa Business System

The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.

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 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 Supplemental 
Net Income and EPS Information (unaudited) 
(in millions, except per-share amounts)

                              Net Income            Diluted EPS
                         --------------------- -----------------------
                          1Q03   4Q02   1Q02    1Q03    4Q02    1Q02
---------------------------------------------- -----------------------
GAAP Net income (loss)     $151  $(223)  $218   $0.17   $(.27)   $.26
  Cumulative effect of
   accounting change         47      -    (34)   0.06       -    (.04)
  Discontinued operations
   - operating (income) 
   loss                      (3)    20      -       -     .03       -
  Discontinued operations
   - loss on Divestitures     -     78      -       -     .09       -
----------------------------------------------------------------------
GAAP Income (loss) from
 continuing operations     $195  $(125)  $184   $0.23   $(.15)   $.22
----------------------------------------------------------------------

  One-time charges:
   Special items -
    restructurings           (3)    95      -
   Special items - loss
    on divestitures           -    143      -
   Goodwill impairment        -     20      -
----------------------------------------------------------------------
Income from continuing
 operations excluding 
 one-time charges (1)     $ 192  $ 133  $ 184  $ 0.23  $ 0.16  $ 0.22
======================================================================

Average diluted shares
 outstanding                                      846     844     854

(1) Alcoa believes that presenting income from continuing operations
excluding one-time charges is an additional measure of performance
that investors can use to compare operating results between reporting
periods. The schedule above allows for ease of analysis in reviewing
Alcoa's earnings performance using these measures. Income from
continuing operations excluding one-time charges can provide a more
relevant view of a company's performance.


Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)

                                         Quarter ended
                              March 31      March 31     December 31
                                2003          2002           2002
                           -------------- ------------- -------------
Sales                             $5,112        $4,900        $5,061

Cost of goods sold                 4,073         3,968         4,088
Selling, general administrative
 and other expenses                  294           273           339
Research and development
 expenses                             50            51            58
Provision for depreciation,
 depletion and amortization          285           259           297
Impairment of goodwill                 -             -            44
Special items                         (4)            -           368
Interest expense                      88            75            97
Other income, net                    (37)          (55)          (67)
                           -------------- ------------- -------------
                                   4,749         4,571         5,224

Income (loss) from
 continuing operations
 before taxes on income              363           329          (163)
(Provision) benefit for
 taxes on income                    (109)         (104)           36
                           -------------- ------------- -------------
Income (loss) from
 continuing operations
 before minority
 interests' share                    254           225          (127)
Less:  Minority interests'
 share                                59            41            (2)
                           -------------- ------------- -------------

Income (loss) from
 continuing operations               195           184          (125)

Income (loss) from
 discontinued operations               3             -           (98)

Cumulative effect of
 accounting change                   (47)           34             -
                           -------------- ------------- -------------

NET INCOME (LOSS)                   $151          $218         $(223)
                           ============== ============= =============

Earnings (loss) per common
 share:
   Basic:
    Income (loss) from
     continuing operations          $.23          $.22         $(.15)
    Loss from discontinued
     operations                        -             -          (.12)
    Cumulative effect of
     accounting change              (.06)          .04             -
                           -------------- ------------- -------------
        Net income (loss)           $.17          $.26         $(.27)
                           ============== ============= =============

   Diluted:
    Income (loss) from
     continuing operations          $.23          $.22         $(.15)
    Loss from discontinued
     operations                        -             -          (.12)
    Cumulative effect of
     accounting change              (.06)          .04             -
                           -------------- ------------- -------------
        Net income (loss)           $.17          $.26         $(.27)
                           ============== ============= =============

Average number of shares
 used to compute:
   Basic earnings per
    common share             845,065,093   847,105,553   844,456,673
   Diluted earnings per
    common share             846,328,622   854,151,135   844,456,673

Common stock outstanding
 at the end of the period    845,157,381   846,809,997   844,819,462

Currency translation
 adjustments included in
  net income                       $ (13)           $2           $ 2

Shipments of aluminum
 products (metric tons)        1,192,000     1,251,000     1,320,000



Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)

                                                (unaudited)
                                                  March 31    Dec. 31
                                                   2003         2002
                                               -----------------------
ASSETS
Current assets:
  Cash and cash equivalents                          $370        $344
  Receivables from customers, less allowances:
   $127 in 2003 and $120 in 2002                    2,611       2,378
  Other receivables                                   253         174
  Inventories                                       2,557       2,441
  Deferred income taxes                               457         468
  Prepaid expenses and other current assets           437         508
                                               -----------------------
     Total current assets                           6,685       6,313
                                               -----------------------

Properties, plants and equipment, at cost          23,606      23,120
Less: accumulated depreciation, depletion and
  amortization                                     11,420      11,009
                                               -----------------------
Net properties, plants and equipment               12,186      12,111
                                               -----------------------

Goodwill                                            6,365       6,365
Other assets                                        4,511       4,446
Assets held for sale                                  609         575
                                               -----------------------
     Total assets                                 $30,356     $29,810
                                               =======================

LIABILITIES
Current liabilities:
  Short-term borrowings                               $32         $37
  Accounts payable, trade                           1,762       1,618
  Accrued compensation and retirement costs           846         933
  Taxes, including taxes on income                    817         818
  Other current liabilities                           865         970
  Long-term debt due within one year                   75          85
                                               -----------------------
     Total current liabilities                      4,397       4,461
                                               -----------------------
Long-term debt, less amount due within one year     8,672       8,365
Accrued postretirement benefits                     2,304       2,320
Other noncurrent liabilities and deferred
 credits                                            2,931       2,878
Deferred income taxes                                 509         502
Liabilities of operations held for sale                90          64
                                               -----------------------
     Total liabilities                             18,903      18,590
                                               -----------------------

MINORITY INTERESTS                                  1,370       1,293
                                               -----------------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock                                        55          55
Common stock                                          925         925
Additional capital                                  6,098       6,101
Retained earnings                                   7,451       7,428
Treasury stock, at cost                            (2,819)     (2,828)
Accumulated other comprehensive loss               (1,627)     (1,754)
                                               -----------------------
     Total shareholders' equity                    10,083       9,927
                                               -----------------------
     Total liabilities and equity                 $30,356     $29,810
                                               =======================


Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)

Consolidated Third-Party      1Q02   2Q02   3Q02   4Q02   2002   1Q03
 Revenues:
                            ------------------------------------------
  Alumina and Chemicals        425    419    469    430  1,743    449
  Primary Metals               764    788    792    830  3,174    732
  Flat-Rolled Products       1,156  1,192  1,162  1,130  4,640  1,152
  Engineered Products        1,319  1,330  1,238  1,131  5,018  1,361
  Packaging and Consumer       618    672    752    840  2,882    750
  Other                        618    757    731    700  2,806    668
----------------------------------------------------------------------
    Total                    4,900  5,158  5,144  5,061 20,263  5,112
======================================================================

Consolidated Intersegment
 Revenues:                    1Q02   2Q02   3Q02   4Q02   2002   1Q03
                            ------------------------------------------
  Alumina and Chemicals        229    233    235    258    955    240
  Primary Metals               629    770    637    619  2,655    840
  Flat-Rolled Products          15     18     21     14     68     20
  Engineered Products            8     10      8      8     34      9
  Packaging and Consumer         -      -      -      -      -      -
  Other                          -      -      -      -      -      -
----------------------------------------------------------------------
    Total                      881  1,031    901    899  3,712  1,109
======================================================================

Consolidated Third-Party
 Shipments (KMT's):           1Q02   2Q02   3Q02   4Q02   2002   1Q03
                            ------------------------------------------
  Alumina and Chemicals      1,825  1,796  1,939  1,926  7,486  1,794

  Primary Metals               503    507    517    546  2,073    453
  Flat-Rolled Products         439    456    446    433  1,774    434
  Engineered Products          221    244    223    203    891    217
  Packaging and Consumer        30     31     46     55    162     36
  Other                         58     87     80     83    308     52
----------------------------------------------------------------------
    Total Aluminum           1,251  1,325  1,312  1,320  5,208  1,192
======================================================================

Average realized price
-Primary                      0.66   0.67   0.66   0.66   0.66   0.69
======================================================================

After-Tax Operating Income    1Q02   2Q02   3Q02   4Q02   2002   1Q03
 (ATOI):
                            ------------------------------------------
  Alumina and Chemicals         65     73     93     84    315     91
  Primary Metals               143    175    175    157    650    166
  Flat-Rolled Products          61     66     46     47    220     53
  Engineered Products           58     44     33    (28)   107     29
  Packaging and Consumer        28     55     51     64    198     53
  Other                          7     19      8    (43)    (9)     9
----------------------------------------------------------------------
    Total                      362    432    406    281  1,481    401
======================================================================

Reconciliation of ATOI to
 Consolidated Net Income:     1Q02   2Q02   3Q02   4Q02   2002  1Q03
                            ------------------------------------------
  Total ATOI                   362    432    406    281  1,481    401
  Impact of intersegment
   profit eliminations          (3)    (1)    (5)     3     (6)     7
  Unallocated amounts (net
   of tax):
    Interest income             10      9      7      5     31      5
    Interest expense           (49)   (54)   (62)   (62)  (227)   (57)
    Minority interests         (41)   (47)   (49)     2   (135)   (59)
    Corporate expense          (58)   (53)   (40)   (83)  (234)   (57)
    Special items                -      -    (25)  (261)  (286)     4
    Discontinued operations      -     (5)    (9)   (98)  (112)     3
    Accounting change           34      -      -      -     34    (47)
    Other                      (37)   (49)   (30)   (10)  (126)   (49)
----------------------------------------------------------------------
  Consolidated net income      218    232    193   (223)   420    151
======================================================================