Alcoa Logo 2 Quarter 2009 Earnings Conference July 8, 2009 Alcoa Logo Exhibit 99.2 nd |
2 Alcoa Logo Forward-Looking Statements Today’s discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Alcoa’s actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to Alcoa’s Form 10-K for the year ended December 31, 2008, Form 10-Q for the quarter ended March 31, 2009, and other reports filed with the Securities and Exchange Commission. |
Alcoa Logo Chuck McLane Executive Vice President and Chief Financial Officer |
4 Alcoa Logo 2nd Quarter 2009 Financial Overview Loss from continuing operations of $312 million, or $0.32 per share – Excluding restructuring, loss of $256 million or $0.26 per share Realized aluminum price of $1,667/MT – Increase of 6% sequentially Cash from operations of $328 million – Increase of $599 million sequentially Improved free cash flow – Increase of $652 million sequentially Breakeven EBITDA – Improvement of $281 million sequentially Debt-to-cap at 39.8%; down 80 basis points sequentially – Cash on hand of $851 million |
5 Alcoa Logo Sequential Income Statement Summary $ Millions 1Q’09 2Q’09 Change Sales $4,147 $4,244 $97 Cost of Goods Sold $4,143 $3,966 ($177) COGS % Sales 99.9% 93.4% (6.5 % pts.) Selling, General Administrative, Other $244 $240 ($4) SGA % Sales 5.9% 5.7% (0.2 % pts.) Restructuring and Other Charges $69 $82 $13 Effective Tax Rate 39.5% 25.4% (14.1 % pts.) Loss from Continuing Operations ($480) ($312) $168 Loss from Discontinued Operations ($17) ($142) ($125) |
6 Alcoa Logo 2Q 2009 vs. 1Q 2009 Earnings Bridge Loss from Continuing Operations excluding Restructuring & Other Special Items (in millions) See Appendix for Reconciliation ($477) $104 ($8) $27 ($22) $153 ($327) ($23) ($49) $39 ($256) 1Q09 Volume Price/Mix Currency Productivity LME Curtailment Taxes Other 2Q09 |
7 Alcoa Logo YTD 2009 vs. YTD 2008 Earnings Bridge Income (Loss) from Continuing Operations excluding Restructuring & Other Special Items (in millions) See Appendix for Reconciliation $902 ($1,810) ($442) ($149) $275 $599 $1,185 ($90) ($18) ($733) YTD 2008 Volume Price/Mix Currency Productivity LME Curtailments Other YTD 2009 |
8 Alcoa Logo Rapid Reduction in Headcount In 1H’09 Charges ($ Millions) 224 48 38 310 2009 cash savings of $320 million - Run rate savings of $520 million Headcount Reductions Announced by Quarter Completed Not Yet Completed 15,300 4,400 1,950 21,650 2H'08 Q1'09 Q2'09 Total |
9 Alcoa Logo 2Q 08 1Q 09 2Q 09 Production (kmt) 3,820 3,445 3,309 3 Party Shipments (kmt) 1,913 1,737 2,011 3 Party Revenue ($MM) 717 430 441 ATOI ($MM) 190 35 (7) Improved operations globally – including record production at Pinjarra Productivity and material cost improvements partially offset currency impacts Negative currency impact of $40 million Higher fuel oil costs of $7 million Commissioning of Juruti bauxite mine underway Alumina 2 Quarter Highlights 3 Quarter Outlook 2 Quarter Business Conditions Benefit from cost savings initiatives Lower caustic prices to be realized Current U.S. dollar and fuel oil costs would adversely affect results Start-up costs of Brazil projects will negatively impact results by $12 million Beginning ramp up of Sao Luis refinery expansion nd nd rd rd rd -$200 $0 $200 $400 $600 $800 $1,000 -$50 $0 $50 $100 $150 $200 $250 1Q 08 2Q 08 3Q08 4Q08 1Q09 2Q09 ATOI Third Party Revenue |
10 Alcoa Logo 2 Quarter Highlights 2Q 08 1Q 09 2Q 09 Production (kmt) 1,030 880 906 3 Party Shipments (kmt) 750 683 779 3 Party Revenue ($MM) 2,437 844 1,146 3 Party Price ($/MT) 3,058 1,567 1,667 ATOI ($MM) 428 (212) (178) Primary Metals 3 Quarter Outlook 2 Quarter Business Conditions Realized pricing up 6% Increased production 3% due to full quarter of Norwegian smelters and record Iceland output, partially offset by Tennessee and Massena East curtailment Experienced adverse currency effects of $38 million Anglesea power station upgrade completed at $8 million cost, on time and under budget Benefit from cost savings initiatives, especially in labor and key raw materials Pricing will follow a 15-day lag on LME Current U.S. dollar would adversely affect results Completion of all announced production curtailments – current annual run rate ~ 3.5 million metric tonnes -$2,500 -$2,000 -$1,500 -$1,000 -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 -$500 -$250 $0 $250 $500 1Q 08 2Q 08 3Q08 4Q08 1Q09 2Q09 ATOI Third Party Revenue nd nd rd rd rd rd |
11 Alcoa Logo Flat-Rolled Products 3 Quarter Outlook 2 Quarter Business Conditions $ Millions 2Q 08 1Q 09 2Q 09 Flat-Rolled Products, excl Russia, China & Other 69 3 2 Russia, China & Other (21) (64) (37) Total 48 (61) (35) Realized productivity gains from procurement and headcount reduction – Year-to-date, reduced headcount by 3,000 of which 40% in Russia Experienced negative currency impact of $24 million Volume increases in automotive and packaging markets, all others weaker Cautious demand outlook for all end markets Benefit from cost savings initiatives Seasonal impact from summer plant slowdowns, especially in Europe 2 Quarter Highlights nd nd rd -$2,500 -$2,000 -$1,500 -$1,000 -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 -$150 -$100 -$50 $0 $50 $100 $150 1Q 08 2Q 08 3Q08 4Q08 1Q09 2Q09 ATOI Third Party Revenue |
12 Alcoa Logo Engineered Products and Solutions Productivity gains help partially offset weak market conditions Weaker Aerospace and Building and Construction demand Decline in pace of Commercial Transportation market slow down 2 Quarter Business Conditions 3 Quarter Outlook Benefit from cost savings initiatives Further weakness in Aerospace due to declining build rates Seasonal impact from summer shutdowns, especially in European locations Decline in Commercial Building and Construction demand The IGT market will remain stable $ Millions 2Q 08 1Q 09 2Q 09 Third Party Revenue 1,660 1,270 1,194 ATOI 172 95 88 ATOI% of Revenue 10.4 7.5 7.4 2 Quarter Highlights nd nd rd $0 $500 $1,000 $1,500 $2,000 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 1Q 08 2Q 08 3Q08 4Q08 1Q09 2Q09 ATOI Third Party Revenue |
13 Alcoa Logo ($ Millions) 2Q'08 1Q'09 2Q'09 Net Income (Loss) $546 ($497) ($454) DD&A 317 283 317 Change in Working Capital 233 351 329 Taxes (113) (363) (138) Pension Contributions (48) (34) (35) Other Adjustments 72 (11) 309 Cash From Operations $1,007 ($271) $328 Capital Expenditures (796) (471) (418) Free Cash Flow $211 ($742) ($90) Significant Improvement in Free Cash Flow Cash Flow Cash and Debt (in millions) Free Cash Flow (in millions) 8,630 10,125 10,578 10,205 10,265 815 831 762 1,131 851 0% 10% 20% 30% 40% 50% $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 Gross Debt Cash Debt to Cap -$1,000 -$800 -$600 -$400 -$200 $0 $200 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 |
14 Alcoa Logo Strengthened Capital Market Position Alcoa Debt & Equity Alcoa Credit Default Swaps Source: Bloomberg 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 17.00 12/31 1/15 1/30 2/14 3/1 3/16 3/31 4/15 4/30 5/15 5/30 6/14 6/29 Alcoa Share Price ($) Alcoa July 2013 Debt Yield (%) 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 12/31 1/15 1/30 2/14 3/1 3/16 3/31 4/15 4/30 5/15 5/30 6/14 6/29 Alcoa 5-Year CDS (basis points) |
Alcoa Logo Klaus Kleinfeld President and Chief Executive Officer |
16 Alcoa Logo Challenging Market Conditions in 2009 Source: Alcoa analysis Alcoa End Markets: Current Assessment of 2009 Conditions |
17 Alcoa Logo Global Demand -7%, Unchanged From Q1’09 Outlook 2008 Global Demand Growth Rate: -3% (2008 ex China: -8%) 2009 Global Demand Growth Rate: -7% (2009 ex China: -10%) Source: Alcoa analysis Brazil Russia Asia w/o China North America Europe China 2008 vs. 2009 Projected Growth Rates 2009 Projected Consumption 6.4 5.0 4.3 0% -15% -9% -15% -12% -12% -5% 13.1 9% 10% -5% -8% 0.9 5% Other* 4.0 -1% -2% * Other consists of: Middle East, India, Latin America ex Brazil and Rest of World 34.5 2008 Actual 2009 Forecast 0.8 2009 Projected Primary Aluminum Consumption by Region (in mmt) |
18 Alcoa Logo 0 10 20 30 40 50 60 70 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Days Global Reported Primary Inventories LME Shanghai Japan Port Producer Shifting Inventory Patterns – Metal Moving to LME 64 days of consumption Inventory Location Source: IAI, Bloomberg LME at 45 Days Non-LME at 19 Days |
19 Alcoa Logo 0 100 200 300 400 500 600 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Short Tons, Thousands U.S. Metal Service Center Inventory Product Inventories Have Seen Substantial Drawdown -51% Source: MSCI U.S. distributor stocks have declined 51% from October 2006 peak |
20 Alcoa Logo Painted Siding UBCs Food Containers Lithograph Oct-08 Jun-09 Premiums Responding to Tightness in the Supply Chain Scrap Prices Have Increased Regional Premiums Beginning to Improve +13% pts +6% pts +4% pts +5% pts Source: Alcoa Analysis Source: Metal Bulletin, Platts 2009 YTD Change +15% +87% +134% 0% 50% 100% 150% Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 % Change Midwest Japan Europe 55% 60% 65% 70% 75% 80% 85% Scrap Price % LME 0% |
21 Alcoa Logo China Western World Global Supply and Demand Comparisons: 2009 2009E Aluminum Supply / Demand Balance (in kmt) Deficit Surplus Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI Jan-May 09 Primary Production Run Rate (Annualized) 10,900 Announced Restarts to be implemented Jun - Dec 2009 1,300 Supply 12,200 Demand (0% YOY change) (13,100) Deficit (900) Imports from Western World 900 Net Deficit 0 Jan-May 09 Primary Production Run Rate (Annualized) 23,800 Announced net curtailments to be implemented Jun - Dec 2009 (300) Supply 23,500 Demand (-10% YOY change) (21,400) Surplus 2,100 Exports to China (900) Net Surplus 1,200 |
Alcoa Logo 2009E Alumina Supply / Demand Balance (in kmt) Source: Alcoa estimates, CRU, CNAI, IAI Alumina Market Reaches Equilibrium in 2009 Global Equilibrium Jan-Mar 09 Alumina Production Run Rate 19,000 Announced curtailments to be implemented 0 Supply 19,000 Demand (24,000) Deficit (5,000) Imports from Western World 5,000 Net Deficit 0 Jan-Mar 09 Alumina Production Run Rate 51,500 Announced curtailments to be implemented (1,400) Supply 50,100 Demand (45,100) Surplus 5,000 Exports to China (5,000) Net Surplus 0 China Western World 22 |
23 Alcoa Logo Procurement Efficiencies – Cost savings by 2010 Overhead Rationalizations – Cost savings by 2010 CapEx Reductions – Annual CapEx post 2009 Working Capital Initiatives – Cash Impact 2009 Asset Dispositions – Net proceeds Dividend Reduction – Annual cash savings Equity and Equity-Linked Financings – Gross proceeds Holistic Alcoa Approach: Improved Cost Structure and Balance Sheet $2,000M $400M $850M $800M Demonstrating Solid Execution of Holistic Approach $1,100M $430M $1,400M Operational Financial |
24 Alcoa Logo $1 Billion Procurement Savings Realized to Date Procurement Efficiencies: Reduction Targets 2009E (millions) Reduction Targets by Spend Category Savings 2010E 15% 7% 6% 21% 34% 29% 5% 18% 2% 5% 4% 6% 2% 4% Strategic Raw Materials - Alumina and Primary Metals Strategic Raw Materials - Flat- Rolled Products Indirect - Services Indirect - Maintenance Repair & Overhaul Non-Smelter Energy Transportation Business Unit Metals $994 $1,500 $2,000 2009 YTD 2009 Savings Target vs. 2008 2010 Savings Target vs. 2008 2/3 of full year target |
25 Alcoa Logo 2H'08 Q2'09 Target Year- End 2009 Forecast Year- End 2009 2H'08 Q2'09 Target Year- End 2009 Forecast Year- End 2009 On Track for Carbon Products and Ahead on Caustic Alcoa Global Caustic Cost -34% -59% -26% -37% -62% Coke remains on target, slightly better than previous forecast Caustic continues to improve; significant reduction to previous forecast Strategic Raw Material Performance and Reduction Targets -58% Alcoa Global Coke Cost |
26 Alcoa Logo Alcoa Global Pitch Cost Creating Competitive Alternatives for Coal Tar Pitch Levers Specifications Supply Base Expansion Backward Integration Expanding specifications Deploying best practices to mitigate industry wide pitch quality deterioration Aggressively developing options for North America and Australia Aggressively developing global logistics infrastructure Expanding global supply base for imported pitch Developing regional logistics options to increase import capability Leveraging Best Practices to Achieve Procurement Savings Actions -17% -7% 2H’08 Q2’09 Forecast Year-End 2009 - |
27 Alcoa Logo Exceeded Full-Year Overhead Reduction Target in First Six Months *Includes: SG&A, R&D and Plant Administrative Expenses; excludes divestitures Overhead Rationalization: Reduction Targets and Savings $400M (millions) Overhead Savings Target Savings 134% of full year target 100% 80% 2008 A 2010 Target $268 $200 $400 2009 YTD 2009 Savings Target vs. 2008 2010 Savings Target vs. 2008 |
28 Alcoa Logo Year-to-date 2009 Capital Expenditures of $889 million - 48% -53% Capital Expenditure Reduction: Annual CapEx ($ millions) $1,800 Project Start-Date Juruti Q3'09 São Luis Q3'09 Estreito Q4'10 Growth Projects $3,438 $911 $850 2008 2009E 2010E |
29 Alcoa Logo $942 $680 $800 $428 ($690) Inventory Receivables Accounts Payable 2009 YTD Cash Generation 2009 Target Working Capital Days Reduction Targets -28% 2009 YTD Working Capital Change ($ millions) Working Capital Initiatives: Targets and Year-to-date Results Achieved 85% of Working Capital Target in 1H’09 85% of full year target 100% 72% Dec - 08 Dec - 09 Target $800M decrease in working capital in 2009 |
30 Alcoa Logo Benefits of Aluminum Can Over PET bottles & Recycling Lifecycles Aluminum is Infinitely Recyclable . Recycled aluminum requires 95% less energy and produces 95% less greenhouse gas emissions. Recyclability 100% Recyclable, Infinitely. Recycling Rate is 2X of PET bottles Only 3.5% of PET gets recycled back into PET bottles. Commercial Quick to Chill Superior Shelf Life Superior Space Utilization – economies of scale in freight & warehousing High Speed Manufacturing Aluminum Can vs. PET bottles Only 25% of bottles get recycled the bulk of which is in carpets & textiles Almost 8 billion pounds of plastic is put away in landfills every year! Down- Cycling Average Life of PET bottle in a landfill ~ several thousands of years Infinitely Recyclable ~75% of all aluminum ever made remains in use today 60 days 60 days 60 days 60 days |
Alcoa Logo Alcoa: One Stop Shop for Consumer Electronics Solutions Colors Durability & Recycling Heat Dissipation Customer Needs Differentiation Infinitely Recyclable Alcoa Thermal Management Customer Needs & Alcoa Offerings & Points of Differentiation Bold palette Longer lasting colors Dent & scratch resistant Reduced landfill waste Increased recycled content 4X superior cooling effect Improved system lifetime Superior look & feel vs. Magnesium or Plastic options Finish versatility Leather Wood Flower Texture Textures Alcoa Offerings Brushed and Anodized 31 |
Alcoa Logo Alcoa Solutions for the Oshkosh M-ATV New Forged Suspensions Components - light weight and rugged for off road capability Armor Plate – Ballistic armor plate including the new CR56 best in class weldable alloy. Fasteners – In rugged chassis applications 2,244 Oshkosh M-ATV’s on contract, with more orders expected High Strength Forged Suspension Components, Fasteners and CR56 Armor: Customer Insight: “Our M-ATV design combines the crew protection war fighters have come to expect in MRAP vehicles with the extreme mobility and durability needed to negotiate mountainous off-road terrain,” said Robert G. Bohn, Oshkosh Corporation Chairman and CEO Maneuverability – on rugged terrain Blast Protection – against Improvised Explosive Devices (IED) and Explosively Formed Penetrators (EFP). Lightweight – to afford better protection, payload and performance Repairability – easy to weld surfaces for field repair Durability – superior corrosion resistance needed Original MRAP – Unsuitable for rugged terrain Oshkosh M-ATV – Designed specifically for rugged terrain Customer Needs Alcoa Solutions |
Alcoa Logo Key end-markets stabilizing off 1Q’09 lows Automotive better in 2H’09 versus 1H’09 Metal price above recent lows Regional premiums are rising in response to pockets of tightness Signs of Stabilization Emerge From Near-term Catalysts Supply / demand balance Urban construction +32% Light vehicles sales +14% Unsustainable levels Rapid drawdown of inventories when economy rebounds Alternative fuel efficient buses New construction Transmission lines for grid Continued execution of announced curtailments Near-Term Catalysts China Curtailment Stimulus Programs De-Stocking Signs of Stabilization Catalysts for Aluminum Industry Growth 33 |
Alcoa Logo Matthew E. Garth Director, Investor Relations Alcoa 390 Park Avenue New York, NY 10022-4608 Telephone: (212) 836-2674 www.alcoa.com For Additional Information, Contact: |
35 Alcoa Logo |
36 Alcoa Logo Announced Industry Curtailments Nearly Complete Aluminum Supply: Curtailment Announcements by Producer (annualized kmt) Curtailment % of Production Executed Not executed 687 Note: As of 6/22/09 Source: Production – CRU. Curtailments – Alcoa Analysis, Reuters, Bloomberg, Company Statements, Mitsui Bussan, Platts. Other ROW UC Rusal Other China Alcoa Rio Tinto Alcan Chalco Hydro 38,759 11,352 10,788 4,494 4,049 3,990 2,317 1,769 0% 570 246 852 513 513 124 570 852 20% 5% 364 2,128 30% 25% 2,128 Average = 17% 15% 10% 1,460 1,096 560 122 127 |
Alcoa Logo 37 Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa (in millions) 1Q08 2Q08 3Q08 4Q08 2008 1Q09 2Q09 Total segment ATOI $ 668 $ 838 $ 665 $ 28 $ 2,199 $ (143) $ (132) Unallocated amounts (net of tax): Impact of LIFO (31) (44) (5) 73 (7) 29 39 Interest income 9 12 10 4 35 1 8 Interest expense (64) (57) (63) (81) (265) (74) (75) Noncontrolling interests (1) (67) (70) (84) – (221) (10) 5 Corporate expense (82) (91) (77) (78) (328) (71) (70) Restructuring and other charges (30) (1) (25) (637) (693) (46) (56) Discontinued operations 4 (7) (38) (262) (303) (17) (142) Other (104) (34) (115) (238) (491) (166) (31) Consolidated net income (loss) attributable to Alcoa $ 303 $ 546 $ 268 $ (1,191) $ (74) $ (497) $ (454) Prior period information was reclassified to reflect the movement of the Electrical and Electronic Solutions business to discontinued operations in the fourth quarter of 2008. (1) On January 1, 2009, Alcoa adopted Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51,” the provisions of which, among others, requires that minority interests be renamed noncontrolling interests for all periods presented. |
Alcoa Logo 38 Reconciliation of Segment Information (aluminum shipments in thousands of metric tons; dollars in millions) Flat-Rolled Products 1Q08 2Q08 3Q08 4Q08 2008 1Q09 Third-party aluminum shipments: As previously reported 610 591 580 515 2,296 455 Less: Global Hard Alloy Extrusions 21 20 18 16 75 13 As reported 589 571 562 499 2,221 442 Third-party sales: As previously reported $ 2,492 $ 2,525 $ 2,488 $ 2,058 $ 9,563 $ 1,622 Less: Global Hard Alloy Extrusions 156 162 145 134 597 112 As reported $ 2,336 $ 2,363 $ 2,343 $ 1,924 $ 8,966 $ 1,510 ATOI: As previously reported $ 41 $ 55 $ 29 $ (98) $ 27 $ (62) Less: Global Hard Alloy Extrusions 8 7 7 8 30 (1) As reported $ 33 $ 48 $ 22 $ (106) $ (3) $ (61) Engineered Products and Solutions 1Q08 2Q08 3Q08 4Q08 2008 1Q09 Third-party aluminum shipments: As previously reported 48 49 45 40 182 28 Add: Global Hard Alloy Extrusions 21 20 18 16 75 13 As reported 69 69 63 56 257 41 Third-party sales: As previously reported $ 1,395 $ 1,498 $ 1,451 $ 1,258 $ 5,602 $ 1,158 Add: Global Hard Alloy Extrusions 156 162 145 134 597 112 As reported $ 1,551 $ 1,660 $ 1,596 $ 1,392 $ 6,199 $ 1,270 ATOI: As previously reported $ 140 $ 165 $ 133 $ 65 $ 503 $ 96 Add: Global Hard Alloy Extrusions 8 7 7 8 30 (1) As reported $ 148 $ 172 $ 140 $ 73 $ 533 $ 95 In the second quarter of 2009, management approved the movement of Alcoa’s hard alloy extrusions business from the Flat-Rolled Products segment to the Engineered Products and Solutions segment. This move was made to capture market, customer, and manufacturer synergies through the combination of the hard alloy extrusions business with the power and propulsion forgings business. Prior period amounts were reclassified to reflect this change. |
Alcoa Logo 39 Reconciliation of Adjusted (Loss) Income (in millions, except per share amounts) (Loss) Income (Loss) Income per Share Quarter ended Six months ended Quarter ended Six months ended March 31, 2009 June 30, 2009 June 30, 2008 * June 30, 2009 March 31, 2009 June 30, 2009 June 30, 2008* June 30, 2009 Net (loss) income attributable to Alcoa $ (497) $ (454) $ 849 $ (951) $ (0.61) $ (0.47) $ 1.03 $ (1.06) Loss from discontinued operations (17) (142) (3) (159) (Loss) income from continuing operations attributable to Alcoa (480) (312) 852 (792) (0.59) (0.32) 1.03 (0.89) Restructuring and other charges 46 56 31 102 Other special items** (43) – 19 (43) (Loss) income from continuing operations attributable to Alcoa – as adjusted $ (477 ) $ (256 ) $ 902 $ (733 ) (0.58) (0.26) 1.09 (0.82) (Loss) income from continuing operations attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges and other special items. There can be no assurances that additional restructuring and other charges and other special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both (Loss) income from continuing operations attributable to Alcoa determined under GAAP as well as (Loss) income from continuing operations attributable to Alcoa – as adjusted. * Financial information for the six months ended June 30, 2008 was reclassified to reflect the movement of the Electrical and Electronic Solutions business to discontinued operations in the fourth quarter of 2008. ** Other special items include the following: a gain on the Elkem/SAPA swap (-$133), a loss on the sale of Shining Prospect ($118), and a discrete income tax benefit related to a tax law change in Canada (-$28) for both the quarter ended March 31, 2009 and six months ended June 30, 2009; and a net discrete income tax charge related to the sale of the Packaging and Consumer businesses for the six months ended June 30, 2008. |
Alcoa Logo 40 Reconciliation of Free Cash Flow (in millions) Quarter ended June 30, 2008 September 30, 2008 December 31, 2008 March 31, 2009 June 30, 2009 Cash from operations $ 1,007 $ (93) $ 608 $ (271) $ 328 Total capital expenditures (796) (877) (1,017) (471) (418) Free cash flow 211 $ (970) $ ( 409) $ (742) ) $ $ (90 Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand Alcoa’s asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. |
Alcoa Logo Other Reconciliations (in millions) Earnings before interest, taxes, depreciation, and amortization (EBITDA)* Quarter ended March 31, 2009 June 30, 2009 Change Net loss attributable to Alcoa $ (497) $ (454) $ 43 Add: Noncontrolling interests 10 (5) (15) Loss from discontinued operations 17 142 125 Benefit for income taxes (307) (108) 199 Other expenses (income), net 30 (89) (119) Interest expense 114 115 1 Restructuring and other charges 69 82 13 Provision for depreciation, depletion, and amortization 283 317 34 Sub-total 216 454 238 EBITDA $ (281) $ – $ 281 * Alcoa’s definition of EBITDA is net margin excluding depreciation, depletion, and amortization. Net margin is equivalent to sales minus the following items: cost of goods sold; selling, general administrative, and other expenses; and research and development expenses. EBITDA is a non-GAAP financial measure and should not be considered a substitute for any income or cash flow measure prepared in accordance with U.S. GAAP. Management believes that EBITDA is meaningful to investors because it provides additional information with respect to Alcoa’s financial performance. Because the calculation of EBITDA may vary among companies, the EBITDA presented by Alcoa may not be comparable to similarly titled measures of other companies. Effective Tax Rate Quarter ended March 31, 2009 June 30, 2009 Change Benefit for income taxes $ (307) $ (108) Loss from continuing operations before income taxes $ (777) $ (425) Effective tax rate 39.5% 25.4% (14.1)% Less: Discrete tax items** 5.0% – (5.0)% Effective tax rate, excluding discrete tax items 34.5% 25.4% (9.1)% * The discrete tax items in the quarter ended March 31, 2009 were income tax benefits of $28 (3.6%) related to a tax law change in Canada and $11 (1.4%) related to the Elkem/SAPA swap. Effective tax rate, excluding discrete tax items is a non-GAAP financial measure. Management believes that the Effective tax rate, excluding discrete tax items is meaningful to investors because it provides a view of Alcoa’s operational tax rate. Primary Metals Adjusted ATOI Quarter ended March 31, 2009 June 30, 2009 Change ATOI $ (212) $ (178) $ 34 Less: Gain on Elkem/SAPA swap 112 – (112) ATOI – as adjusted $ (324) $ (178) $ 146 ATOI – as adjusted is a non-GAAP financial measure. Management believes that ATOI – as adjusted is meaningful to investors because it provides better insight to the operational results and performance of the segment. 41 |