Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Contact | Media Contact | |
William F. Oplinger | Kevin G. Lowery | |
(212) 836-2674 | (412) 553-1424 |
Net Income Rises 135 Percent over Year-Ago Quarter;
Revenue Highest Since 2001
Highlights:
| • | Net income was $355 million, up 135% from first quarter of 2003. |
| • | Income from continuing operations was $350 million, up 79% from 2003. |
| • | $108 million in new annual savings toward third-straight $1 billion-plus cost challenge; 230 basis point decline in cost of goods to 77.9% of sales. |
| • | Debt to capital ratio at 34.9%, within the company’s targeted range. |
| • | Five of six segments showed double-digit increases in profitability year over year; engineered products up 88% and flat rolled products up 25%. |
| • | Substantial completion of divestiture program with sale of specialty chemicals and other businesses. |
New York, NY – April 6, 2004 —Alcoa today reported first quarter net income of $355 million, or $0.41 per diluted share, more than double the $151 million, or $0.17, in the first quarter of 2003, and up 22 percent from $291 million, or $0.33, in the previous quarter.
Income from continuing operations was $350 million, or $0.40, up 79 percent from the $195 million, or $0.23, in the first quarter of 2003, and higher than the $340 million, or $0.39, in the previous quarter. The previous quarter’s results included $105 million in pre-tax gains from insurance settlements and a lower effective tax rate. The first quarter benefits from a $58 million after-tax gain on the sale of the chemicals business, half of which was offset by higher costs from a customer bankruptcy, litigation settlements, and restructuring.
“In the quarter, our downstream aluminum businesses strengthened as end markets in Europe and the U.S. expanded,” said Alain Belda, Chairman and CEO of Alcoa. “Demand for aluminum fabricated products was the highest in three years, driving prices higher. In a stronger market, we achieved earnings growth by keeping our focus on both growth and costs, laying the groundwork for further improvements in profitability.”
Market Overview
Revenue in the quarter was $5.7 billion, the highest in almost three years, and up 11 percent year over year and 3 percent on a sequential basis. Higher aluminum prices and stronger shipments of engineered and flat-rolled products offset the seasonal decline in consumer packaging and lower third-party alumina sales as more alumina was dedicated to internal demand. The strong fabricated aluminum shipments were driven by double-digit increases in sales to the commercial vehicle, automotive, and aerospace markets.
“Looking forward, we expect that the recent, rapid increase in aluminum prices will have a greater impact in the second quarter and contribute to improved profitability,” said Belda. On a year-over-year basis, the alumina, aluminum, and flat-rolled products segments all benefited from more robust pricing.
Costs, Savings, and Management Actions
In the quarter, the company achieved $27 million in new sustainable savings — $108 million on an annualized basis — toward its $1.2 billion cost challenge. Those savings overcame higher employee benefit costs, and contributed to a 230 basis-point reduction in cost of goods sold to 77.9 percent of sales. In addition, energy costs were $40 million higher than in the fourth quarter.
On the sale of its specialty chemicals business, the company earned $58 million after-tax, half of which was offset in the quarter by costs associated with litigation settlements in the U.S., debt allowances for a bankrupt customer, and ongoing restructuring to reduce costs. The reduction of the effective tax rate was driven by the chemicals sale and is included in the $58 million gain figure.
Stronger Balance Sheet
The company’s debt-to-capital ratio declined to 34.9 percent, putting it within the company’s targeted range. The company has reduced its debt by approximately $1.5 billion in the past 12 months, lowering its debt-to-capital ratio by 850 basis points. In addition to the sale of the chemicals business, the company substantially completed its divestiture program by selling two foil mills, and the automotive fasteners and packaging equipment businesses.
The company continued to manage capital effectively as days of working capital decreased in the quarter. In the quarter, capital expenditures were $192 million, 69 percent of depreciation.
Positioning the Company for Future Growth
Alcoa continues to make long-term investments to improve its world-class refining position. Alcoa World Alumina and Chemicals, Alcoa’s global alliance with Alumina Ltd., received approval for an upgrade at its Pinjarra refinery. Along with a newly completed expansion at its Jamaica refinery and on-going expansion at its Suriname facility, that project will add 1.1 million metric tons per year to alumina capacity. The company is in varying stages of planning and designing alumina expansions in Brazil, Jamaica, and Australia. Final decisions on those projects are expected in the second half of the year.
Discussions on Brazilian and Canadian smelter projects continue, and infrastructure construction for the new smelter in Iceland is proceeding on schedule. The company also announced plans to build a new low-cost extrusion plant in Romania to serve the building and construction market in Europe.
Providing Solutions to Customers
The company leveraged its technology and manufacturing excellence to provide innovative solutions for customers in transportation markets. In the automotive market, Alcoa worked in partnership with General Motors to commercialize GM’s new forming process for aluminum body and closure panels featured on the lift gate for the 2004 Chevrolet Malibu Maxx. This advance will help extend luxury, aluminum styling to higher-volume vehicles, accelerating the deployment of aluminum in automotive applications.
Alcoa Fastening Systems signed new three-year agreements with Mitsubishi and Kawasaki to supply the Japanese manufacturers with over 350 different fasteners for various commercial aircraft programs.
Alcoa Wheels and Forged Products signed a 3-year contract with Heil Trailer, makers of tankers and trailers, to supply 12,000 to 15,000 wheels per year to its factories in the U.S., U.K., Argentina and Thailand. In the Australian and New Zealand markets, AFL Automotive was named the full service electrical distribution supplier for Sterling Trucks.
Quarterly Analyst Workshop
Alcoa’s quarterly analyst workshop will be at 4:00 p.m. EDT on Thursday, April 22, 2004. The meeting will be web cast via alcoa.com. Call information and related details will be available atwww.alcoa.com under “Invest.”
About Alcoa
Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum and alumina. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing its expertise in design, engineering, and production to customers. Alcoa also markets consumer brands including Reynolds Wrap® foils and plastic wraps, Alcoa® wheels, and Baco® household wraps. Among its other businesses are vinyl siding, closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. Alcoa has been a member of the Dow Jones Industrial Average for 45 years and the Dow Jones Sustainability Indices since 2001. The company has 120,000 employees in 41 countries. More information can be found atwww.alcoa.com
Alcoa Business System
The Alcoa Business System, or ABS, is an integrated set of principles and tools used to manage Alcoa businesses, based on three principles: make to use; eliminate waste; and people linchpin the system. ABS begins with an understanding of customers’ requirements, identifies what is needed to meet them, and then empowers employees to eliminate waste and solve problems through continuous improvements in costs, quality and speed.
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) the company’s inability to complete or to complete in the anticipated timeframe pending divestitures, acquisitions or expansion projects or to realize the projected amount of proceeds from divestitures, (b) the company’s inability to achieve the level of cost savings or productivity improvements anticipated by management, (c) unexpected changes in global economic, business, competitive, market and regulatory factors, and (d) the other risk factors summarized in Alcoa’s 2003 Form 10-K Report and other SEC reports.
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share, and metric ton amounts)
| Quarter ended | ||||||||||||
March 31 2004 | March 31 2003 | December 31 2003 | ||||||||||
Sales | $ | 5,696 | $ | 5,140 | $ | 5,532 | ||||||
Cost of goods sold | 4,438 | 4,098 | 4,435 | |||||||||
Selling, general administrative, and other expenses | 344 | 297 | 346 | |||||||||
Research and development expenses | 45 | 50 | 47 | |||||||||
Provision for depreciation, depletion, and amortization | 303 | 285 | 312 | |||||||||
Restructuring and other charges | (31 | ) | (4 | ) | (26 | ) | ||||||
Interest expense | 64 | 88 | 71 | |||||||||
Other income, net | (22 | ) | (36 | ) | (139 | ) | ||||||
| 5,141 | 4,778 | 5,046 | ||||||||||
Income from continuing operations before taxes on income | 555 | 362 | 486 | |||||||||
Provision for taxes on income | 155 | 108 | 103 | |||||||||
Income from continuing operations before minority interests’ share | 400 | 254 | 383 | |||||||||
Less: Minority interests’ share | 50 | 59 | 43 | |||||||||
Income from continuing operations | 350 | 195 | 340 | |||||||||
Income (loss) from discontinued operations | 5 | 3 | (49 | ) | ||||||||
Cumulative effect of accounting change | — | (47 | ) | — | ||||||||
NET INCOME | $ | 355 | $ | 151 | $ | 291 | ||||||
Earnings (loss) per common share: | ||||||||||||
Basic: | ||||||||||||
Income from continuing operations | $ | .40 | $ | .23 | $ | .39 | ||||||
Income (loss) from discontinued operations | .01 | — | (.06 | ) | ||||||||
Cumulative effect of accounting change | — | (.06 | ) | — | ||||||||
Net income | $ | .41 | $ | .17 | $ | .33 | ||||||
Diluted: | ||||||||||||
Income from continuing operations | $ | .40 | $ | .23 | $ | .39 | ||||||
Income (loss) from discontinued operations | .01 | — | (.06 | ) | ||||||||
Cumulative effect of accounting change | — | (.06 | ) | — | ||||||||
Net income | $ | .41 | $ | .17 | $ | .33 | ||||||
Average number of shares used to compute: | ||||||||||||
Basic earnings per common share | 869,402,685 | 845,065,093 | 866,243,592 | |||||||||
Diluted earnings per common share | 878,755,125 | 846,328,622 | 871,969,592 | |||||||||
Common stock outstanding at the end of the period | 869,356,569 | 845,157,381 | 868,490,686 | |||||||||
Shipments of aluminum products (metric tons) | 1,312,000 | 1,198,000 | 1,320,000 | |||||||||
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(in millions)
March 31 2004 | December 31 2003 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 459 | $ | 576 | ||||
Receivables from customers, less allowances: $116 in 2004 and $105 in 2003 | 2,854 | 2,521 | ||||||
Other receivables | 275 | 350 | ||||||
Inventories | 2,816 | 2,524 | ||||||
Deferred income taxes | 240 | 267 | ||||||
Prepaid expenses and other current assets | 656 | 502 | ||||||
Total current assets | 7,300 | 6,740 | ||||||
Properties, plants, and equipment, at cost | 24,930 | 24,797 | ||||||
Less: accumulated depreciation, depletion, and amortization | 12,459 | 12,240 | ||||||
Net properties, plants, and equipment | 12,471 | 12,557 | ||||||
Goodwill | 6,567 | 6,549 | ||||||
Other assets | 5,563 | 5,316 | ||||||
Assets held for sale | 198 | 549 | ||||||
Total assets | $ | 32,099 | $ | 31,711 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Short-term borrowings | $ | 38 | $ | 56 | ||||
Accounts payable, trade | 2,230 | 1,976 | ||||||
Accrued compensation and retirement costs | 953 | 948 | ||||||
Taxes, including taxes on income | 680 | 703 | ||||||
Other current liabilities | 923 | 878 | ||||||
Long-term debt due within one year | 490 | 523 | ||||||
Total current liabilities | 5,314 | 5,084 | ||||||
Long-term debt, less amount due within one year | 6,782 | 6,692 | ||||||
Accrued postretirement benefits | 2,213 | 2,220 | ||||||
Other noncurrent liabilities and deferred credits | 3,249 | 3,389 | ||||||
Deferred income taxes | 851 | 804 | ||||||
Liabilities of operations held for sale | 39 | 107 | ||||||
Total liabilities | 18,448 | 18,296 | ||||||
MINORITY INTERESTS | 1,357 | 1,340 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred stock | 55 | 55 | ||||||
Common stock | 925 | 925 | ||||||
Additional capital | 5,792 | 5,831 | ||||||
Retained earnings | 8,074 | 7,850 | ||||||
Treasury stock, at cost | (1,986 | ) | (2,017 | ) | ||||
Accumulated other comprehensive loss | (566 | ) | (569 | ) | ||||
Total shareholders’ equity | 12,294 | 12,075 | ||||||
Total liabilities and equity | $ | 32,099 | $ | 31,711 | ||||
Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except metric ton amounts and realized prices)
| 1Q03 | 2Q03 | 3Q03 | 4Q03 | 2003 | 1Q04 | |||||||||||||||||||
Consolidated Third-Party Revenues: | ||||||||||||||||||||||||
Alumina and Chemicals | $ | 449 | $ | 491 | $ | 526 | $ | 536 | $ | 2,002 | $ | 463 | ||||||||||||
Primary Metals | 732 | 805 | 816 | 876 | 3,229 | 878 | ||||||||||||||||||
Flat-Rolled Products | 1,152 | 1,200 | 1,176 | 1,287 | 4,815 | 1,450 | ||||||||||||||||||
Engineered Products | 1,390 | 1,455 | 1,369 | 1,375 | 5,589 | 1,523 | ||||||||||||||||||
Packaging and Consumer | 749 | 836 | 812 | 818 | 3,215 | 744 | ||||||||||||||||||
Other | 668 | 710 | 636 | 640 | 2,654 | 638 | ||||||||||||||||||
Total | $ | 5,140 | $ | 5,497 | $ | 5,335 | $ | 5,532 | $ | 21,504 | $ | 5,696 | ||||||||||||
| 1Q03 | 2Q03 | 3Q03 | 4Q03 | 2003 | 1Q04 | |||||||||||||||||||
Consolidated Intersegment Revenues: | ||||||||||||||||||||||||
Alumina and Chemicals | $ | 240 | $ | 248 | $ | 258 | $ | 275 | $ | 1,021 | $ | 338 | ||||||||||||
Primary Metals | 840 | 690 | 740 | 828 | 3,098 | 1,038 | ||||||||||||||||||
Flat-Rolled Products | 20 | 15 | 17 | 14 | 66 | 23 | ||||||||||||||||||
Engineered Products | 9 | 5 | 5 | 5 | 24 | 4 | ||||||||||||||||||
Packaging and Consumer | — | — | — | — | — | — | ||||||||||||||||||
Other | — | — | — | — | — | — | ||||||||||||||||||
Total | $ | 1,109 | $ | 958 | $ | 1,020 | $ | 1,122 | $ | 4,209 | $ | 1,403 | ||||||||||||
| 1Q03 | 2Q03 | 3Q03 | 4Q03 | 2003 | 1Q04 | |||||||||||||||||||
Consolidated Third-Party Shipments (Kmt): | ||||||||||||||||||||||||
Alumina and Chemicals | 1,794 | 1,939 | 1,982 | 1,956 | 7,671 | 1,718 | ||||||||||||||||||
Primary Metals | 453 | 495 | 488 | 516 | 1,952 | 469 | ||||||||||||||||||
Flat-Rolled Products | 434 | 453 | 450 | 482 | 1,819 | 515 | ||||||||||||||||||
Engineered Products | 223 | 221 | 222 | 213 | 879 | 234 | ||||||||||||||||||
Packaging and Consumer | 36 | 42 | 40 | 49 | 167 | 38 | ||||||||||||||||||
Other | 52 | 56 | 62 | 60 | 230 | 56 | ||||||||||||||||||
Total Aluminum | 1,198 | 1,267 | 1,262 | 1,320 | 5,047 | 1,312 | ||||||||||||||||||
Alcoa’s average realized price-Primary | $ | 0.69 | $ | 0.68 | $ | 0.71 | $ | 0.73 | $ | 0.70 | $ | 0.79 | ||||||||||||
| 1Q03 | 2Q03 | 3Q03 | 4Q03 | 2003 | 1Q04 | |||||||||||||||||||
After-Tax Operating Income (ATOI): | ||||||||||||||||||||||||
Alumina and Chemicals | $ | 91 | $ | 89 | $ | 113 | $ | 122 | $ | 415 | 127 | |||||||||||||
Primary Metals | 166 | 162 | 163 | 166 | 657 | 192 | ||||||||||||||||||
Flat-Rolled Products | 53 | 56 | 59 | 53 | 221 | 66 | ||||||||||||||||||
Engineered Products | 29 | 46 | 47 | 33 | 155 | 62 | ||||||||||||||||||
Packaging and Consumer | 53 | 57 | 52 | 52 | 214 | 35 | ||||||||||||||||||
Other | 9 | 17 | 8 | 17 | 51 | 18 | ||||||||||||||||||
Total | $ | 401 | $ | 427 | $ | 442 | $ | 443 | $ | 1,713 | $ | 500 | ||||||||||||
| 1Q03 | 2Q03 | 3Q03 | 4Q03 | 2003 | 1Q04 | |||||||||||||||||||
Reconciliation of ATOI to consolidated net income: | ||||||||||||||||||||||||
Total ATOI | $ | 401 | $ | 427 | $ | 442 | $ | 443 | $ | 1,713 | $ | 500 | ||||||||||||
Impact of intersegment profit adjustments | 7 | (4 | ) | 2 | 4 | 9 | 23 | |||||||||||||||||
Unallocated amounts (net of tax): | ||||||||||||||||||||||||
Interest income | 5 | 6 | 7 | 6 | 24 | 7 | ||||||||||||||||||
Interest expense | (57 | ) | (52 | ) | (49 | ) | (46 | ) | (204 | ) | (41 | ) | ||||||||||||
Minority interests | (59 | ) | (75 | ) | (54 | ) | (43 | ) | (231 | ) | (50 | ) | ||||||||||||
Corporate expense | (57 | ) | (81 | ) | (65 | ) | (84 | ) | (287 | ) | (74 | ) | ||||||||||||
Restructuring and other charges | 4 | (2 | ) | (1 | ) | 25 | 26 | 31 | ||||||||||||||||
Discontinued operations | 3 | (1 | ) | (2 | ) | (49 | ) | (49 | ) | 5 | ||||||||||||||
Accounting change | (47 | ) | — | — | — | (47 | ) | — | ||||||||||||||||
Other | (49 | ) | (2 | ) | — | 35 | (16 | ) | (46 | ) | ||||||||||||||
Consolidated net income | $ | 151 | $ | 216 | $ | 280 | $ | 291 | $ | 938 | $ | 355 | ||||||||||||
