Howmet Aerospace (HWM) 10-Q 23 Jul 09 2009 Q2 Quarterly report Financial data

Statement Of Income Alternative

Statement Of Income Alternative (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Sales (K)	$4,244	$7,245	$8,391	$14,243
Cost of goods sold (exclusive of expenses below)	3,966	5,723	8,109	11,250
Selling, general administrative, and other expenses	240	298	484	619
Research and development expenses	38	61	79	124
Provision for depreciation, depletion, and amortization	317	317	600	631
Restructuring and other charges (D)	82	0	151	38
Interest expense	115	87	229	186
Other income, net (J)	(89)	(96)	(59)	(38)
Total costs and expenses	4,669	6,390	9,593	12,810
(Loss) income from continuing operations before income taxes	(425)	855	(1,202)	1,433
(Benefit) provision for income taxes (N)	(108)	232	(415)	444
(Loss) income from continuing operations	(317)	623	(787)	989
Loss from discontinued operations (C)	(142)	(7)	(159)	(3)
Net (loss) income	(459)	616	(946)	986
Less: Net (loss) income attributable to noncontrolling interests	(5)	70	5	137
Net (loss) income	(454)	546	(951)	849
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS:
(Loss) income from continuing operations	(312)	553	(792)	852
Loss from discontinued operations	(142)	(7)	(159)	(3)
Net (loss) income	($454)	$546	($951)	$849
Basic:
(Loss) income from continuing operations	-0.32	0.68	-0.89	1.04
Loss from discontinued operations	-0.15	-0.01	-0.17	$0
Net (loss) income	-0.47	0.67	-1.06	1.04
Diluted:
(Loss) income from continuing operations	-0.32	0.67	-0.89	1.03
Loss from discontinued operations	-0.15	-0.01	-0.17	$0
Net (loss) income	-0.47	0.66	-1.06	1.03
Dividends paid per common share	0.03	0.17	0.2	0.34

Statement Of Financial Position

Statement Of Financial Position Classified (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$851	$762
Receivables from customers, less allowances of $72 in 2009 and $65 in 2008	1,611	1,883
Other receivables	1,246	708
Inventories (F)	2,493	3,238
Fair value of hedged aluminum	199	586
Prepaid expenses and other current assets	1,059	973
Total current assets	7,459	8,150
Properties, plants, and equipment	33,844	31,301
Less: accumulated depreciation, depletion, and amortization	14,811	13,846
Properties, plants, and equipment, net	19,033	17,455
Goodwill	5,032	4,981
Investments (E and G)	850	1,915
Deferred income taxes	2,572	2,688
Other assets	2,526	2,386
Assets held for sale (C)	176	247
Total assets	37,648	37,822
Current liabilities:
Short-term borrowings (H)	663	478
Commercial paper	100	1,535
Accounts payable, trade	1,838	2,518
Accrued compensation and retirement costs	825	866
Taxes, including income taxes	363	378
Fair value of derivative contracts (P)	199	461
Other current liabilities	952	987
Long-term debt due within one year	115	56
Total current liabilities	5,055	7,279
Long-term debt, less amount due within one year (H)	9,387	8,509
Accrued pension benefits	2,792	2,941
Accrued postretirement benefits	2,723	2,730
Other noncurrent liabilities and deferred credits	1,659	1,580
Deferred income taxes	387	321
Liabilities of operations held for sale (C)	64	130
Total liabilities	22,067	23,490
COMMITMENTS AND CONTINGENCIES (I)	0	0
Alcoa shareholders' equity:
Preferred stock	55	55
Common stock (L)	1,097	925
Additional capital (L)	6,601	5,850
Retained earnings	11,281	12,400
Treasury stock, at cost	(4,272)	(4,326)
Accumulated other comprehensive loss	(1,945)	(3,169)
Total Alcoa shareholders' equity	12,817	11,735
Noncontrolling interests	2,764	2,597
Total equity	15,581	14,332
Total liabilities and equity	$37,648	$37,822

1_Statement Of Financial Positi

Statement Of Financial Position Classified (Parenthetical) (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
Receivables from customers, allowances	$72	$65

Statement Of Cash Flows Indirec

Statement Of Cash Flows Indirect (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
CASH FROM OPERATIONS
Net (loss) income	($946)	$986
Adjustments to reconcile net (loss) income to cash from operations:
Depreciation, depletion, and amortization	600	631
Deferred income taxes	(22)	(183)
Equity loss (income), net of dividends	16	(46)
Restructuring and other charges (D)	151	38
Gains from investing activities - asset sales (J)	(17)	(8)
Provision for doubtful accounts	9	4
Loss from discontinued operations (C)	159	3
Stock-based compensation	53	70
Excess tax benefits from stock-based payment arrangements	0	(15)
Other	105	2
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
Decrease (increase) in receivables	428	(209)
Decrease (increase) in inventories	942	(349)
Decrease (increase) in prepaid expenses and other current assets	114	(124)
(Decrease) increase in accounts payable, trade	(690)	210
(Decrease) in accrued expenses	(280)	(219)
(Decrease) increase in taxes, including income taxes	(479)	54
Pension contributions	(69)	(67)
(Increase) in noncurrent assets	(133)	(66)
Increase in noncurrent liabilities	112	9
Decrease (increase) in net assets held for sale (C)	14	(1)
CASH PROVIDED FROM CONTINUING OPERATIONS	67	720
CASH USED FOR DISCONTINUED OPERATIONS	(10)	(1)
CASH PROVIDED FROM OPERATIONS	57	719
FINANCING ACTIVITIES
Net change in short-term borrowings (H)	189	30
Net change in commercial paper	(1,435)	343
Additions to long-term debt (H)	905	432
Debt issuance costs (H)	(17)	(6)
Payments on long-term debt	(23)	(190)
Proceeds from exercise of employee stock options	0	176
Excess tax benefits from stock-based payment arrangements	0	15
Issuance of common stock (L)	876	0
Repurchase of common stock	0	(605)
Dividends paid to shareholders	(168)	(280)
Dividends paid to noncontrolling interests	(79)	(117)
Contributions from noncontrolling interests	253	299
CASH PROVIDED FROM FINANCING ACTIVITIES	501	97
INVESTING ACTIVITIES
Capital expenditures	(884)	(1,533)
Capital expenditures of discontinued operations	(5)	(11)
Acquisitions, net of cash acquired (E)	15	(276)
Acquisitions of noncontrolling interests	0	(94)
Proceeds from the sale of assets and businesses (E)	(78)	2,636
Additions to investments (I)	4	(1,237)
Sales of investments (G)	506	5
Net change in short-term investments and restricted cash	(50)	(2)
Other	(5)	(18)
CASH USED FOR INVESTING ACTIVITIES	(497)	(530)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	28	46
Net change in cash and cash equivalents	89	332
Cash and cash equivalents at beginning of year	762	483
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$851	$815

Statement Of Shareholders Equit

Statement Of Shareholders Equity And Other Comprehensive Income (USD $)
In Millions	Preferred Stock [Member]	Common stock	Additional capital	Retained earnings	Treasury stock	Accumulated other comprehensive (loss) income	Non-controlling interests	Total
Beginning Balance at Dec. 31, 2007	$55	$925	$5,774	$13,039	($3,440)	($337)	$2,460	$18,476
Net (loss) income				849			137	986
Other comprehensive income						477	149	626
Cash dividends:
Preferred @ $1.875 in 2009 and $1.875 in 2008 per share				(1)				(1)
Common @ $0.20 in 2009 and $0.34 in 2008 per share				(280)				(280)
Noncontrolling interests							(117)	(117)
Stock-based compensation			70					70
Common stock issued: compensation plans			(17)		193			176
Repurchase of common stock					(605)			(605)
Contributions							299	299
Purchase of equity from noncontrolling interest							(63)	(63)
Other							(6)	(6)
Ending Balance at Jun. 30, 2008	55	925	5,827	13,607	(3,852)	140	2,859	19,561
Beginning Balance at Mar. 31, 2008	55	925	5,782	13,063	(3,823)	(189)	2,692	18,505
Net (loss) income				546			70	616
Other comprehensive income						329	45	374
Cash dividends:
Adjustment to common dividends declared				(2)				(2)
Noncontrolling interests							(78)	(78)
Stock-based compensation			33					33
Common stock issued: compensation plans			12		146			158
Repurchase of common stock					(175)			(175)
Contributions							181	181
Purchase of equity from noncontrolling interest							(53)	(53)
Other							2	2
Ending Balance at Jun. 30, 2008	55	925
Beginning Balance at Dec. 31, 2008	55	925	5,850	12,400	(4,326)	(3,169)	2,597	14,332
Net (loss) income				(951)			5	(946)
Other comprehensive income						1,224	175	1,399
Cash dividends:
Preferred @ $1.875 in 2009 and $1.875 in 2008 per share				(1)				(1)
Common @ $0.20 in 2009 and $0.34 in 2008 per share				(168)				(168)
Noncontrolling interests							(79)	(79)
Beneficial conversion option on convertible notes (H)			66					66
Stock-based compensation			53					53
Common stock issued: compensation plans			(72)		54			(18)
Issuance of common stock (L)		172	704					876
Contributions							253	253
Purchase of equity from noncontrolling interest							(179)	(179)
Other				1			(8)	(7)
Ending Balance at Jun. 30, 2009	55	1,097	6,601	11,281	(4,272)	(1,945)	2,764	15,581
Beginning Balance at Mar. 31, 2009	55	1,097	6,579	11,734	(4,272)	(2,756)	2,500	14,937
Net (loss) income				(454)			(5)	(459)
Other comprehensive income						811	178	989
Cash dividends:
Noncontrolling interests							(2)	(2)
Stock-based compensation			27					27
Common stock issued: compensation plans			(5)					(5)
Contributions							94	94
Other				1			(1)	0
Ending Balance at Jun. 30, 2009	$55

2_Statement Of Shareholders Equ

Statement Of Shareholders Equity And Other Comprehensive Income (Parenthetical) (USD $)
	Retained earnings	Total
Preferred, per share	1.875	1.875
Common, per share	0.34	0.34
Preferred, per share	1.875	1.875
Common, per share	0.2	0.2

Statement Of Other Comprehensiv

Statement Of Other Comprehensive Income (USD $)
In Millions	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Net (loss) income	($454)	$546	($951)	$849
Other comprehensive income, net of tax:
Change in unrecognized losses and prior service cost related to pension and postretirement benefit plans	108	22	134	(89)
Foreign currency translation adjustments	885	208	798	774
Unrealized gains on available-for-sale securities:
Unrealized holding gains	1	100	49	9
Net amount reclassified to income	0	0	380	0
Net change in unrealized gains on available-for-sale securities	1	100	429	9
Unrecognized (losses) gains on derivatives (P):
Net change from periodic revaluations	(180)	(39)	(80)	(296)
Net amount reclassified to income	(3)	38	(57)	79
Net unrecognized (losses) gains on derivatives	(183)	(1)	(137)	(217)
Total Other comprehensive income, net of tax	811	329	1,224	477
Comprehensive income	357	875	273	1,326
Net (loss) income	(5)	70	5	137
Other comprehensive income, net of tax:
Change in unrecognized losses and prior service cost related to pension and postretirement benefit plans	1	0	2	0
Foreign currency translation adjustments	177	45	173	147
Unrealized gains on available-for-sale securities:
Unrealized holding gains	0	0	0	0
Net amount reclassified to income	0	0	0	0
Net change in unrealized gains on available-for-sale securities	0	0	0	0
Unrecognized (losses) gains on derivatives (P):
Net change from periodic revaluations	0	0	0	1
Net amount reclassified to income	0	0	0	1
Net unrecognized (losses) gains on derivatives	0	0	0	2
Total Other comprehensive income, net of tax	178	45	175	149
Comprehensive income	173	115	180	286
Net (loss) income	(459)	616	(946)	986
Other comprehensive income, net of tax:
Change in unrecognized losses and prior service cost related to pension and postretirement benefit plans	109	22	136	(89)
Foreign currency translation adjustments	1,062	253	971	921
Unrealized gains on available-for-sale securities:
Unrealized holding gains	1	100	49	9
Net amount reclassified to income	0	0	380	0
Net change in unrealized gains on available-for-sale securities	1	100	429	9
Unrecognized (losses) gains on derivatives (P):
Net change from periodic revaluations	(180)	(39)	(80)	(295)
Net amount reclassified to income	(3)	38	(57)	80
Net unrecognized (losses) gains on derivatives	(183)	(1)	(137)	(215)
Total Other comprehensive income, net of tax	989	374	1,399	626
Comprehensive income	$530	$990	$453	$1,612

Notes to Financial Statements

Notes to Financial Statements
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements [Abstract]
A. Basis of Presentation	A. Basis of Presentation The interim Consolidated Financial Statements (the Financial Statements) of Alcoa Inc. and its subsidiaries (Alcoa or the Company) are unaudited. The Financial Statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the results of operations, financial position, and cash flows. The results reported in these Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The 2008 year-end balance sheet data was derived from audited financial statements, which were revised in the current period to reflect changes in the presentation of minority interests (see Note B), but does not include all disclosures required by accounting principles generally accepted in the United States of America. This Form 10-Q report should be read in conjunction with Alcoas Annual Report on Form 10-K for the year ended December31, 2008, which includes all disclosures required by accounting principles generally accepted in the United States of America. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation.
B. Recently Adopted and Recently Issued Accounting Standards	B. Recently Adopted and Recently Issued Accounting Standards Adopted On June30, 2009, Alcoa adopted Statement of Financial Accounting Standards (SFAS) No.165, Subsequent Events, (SFAS 165). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of SFAS 165 had no impact on the Financial Statements as management already followed a similar approach prior to the adoption of this standard (see Note Q). On January1, 2009, Alcoa adopted SFAS No.157, Fair Value Measurements, (SFAS 157) as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least an annual basis. SFAS 157 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. The adoption of SFAS 157, as it relates to nonfinancial assets and nonfinancial liabilities, had no impact on the Financial Statements. The provisions of SFAS 157 will be applied at such time a fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of SFAS 157. On January1, 2009, Alcoa adopted SFAS No.161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No.133, (SFAS 161). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities, including (i)how and why an entity uses derivative instruments, (ii)how derivative instruments and related hedged items are accounted for under SFAS No.133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), and (iii)how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. Other than the required disclosures (see the Derivatives section of Note P), the adoption of SFAS 161 had no impact on the Financial Statements. On January1, 2009, Alcoa adopted SFAS No.160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No.51, (SFAS 160). SFAS 160 amends Accounting Research Bulletin No.51, Consolidated Financial Statements, to establish accounting and reporting standar
C. Discontinued Operations and Assets Held for Sale	C. Discontinued Operations and Assets Held for Sale For all periods presented in the accompanying Statement of Consolidated Operations, the Electrical and Electronic Solutions (EES) business was classified as discontinued operations. The following table details selected financial information for the EES business included within discontinued operations: Secondquarterended June30, Sixmonthsended June30, 2009 2008 2009 2008 Sales $ 118 $ 375 $ 273 $ 752 Loss from operations before income taxes $ (195 ) $ (11 ) $ (219 ) $ (5 ) Benefit for income taxes 53 4 60 2 Loss from discontinued operations $ (142 ) $ (7 ) $ (159 ) $ (3 ) In the 2009 second quarter and six-month period, the loss from discontinued operations was comprised of a $120 loss on the divestiture of the wire harness and electrical portion of the EES business (see Note E) and the remainder was the operational results of the EES business. In the 2008 second quarter and six-month period, the loss from discontinued operations represents the operational results of the EES business. For both periods presented in the accompanying Consolidated Balance Sheet, the assets and liabilities of operations classified as held for sale include the electronics portion of the EES business, the Global Foil business, the Transportation Products Europe business, and the Hawesville, KY automotive casting facility. Additionally, the wire harness and electrical portion of the EES Business, the wireless component of the previously divested telecommunications business, and a small automotive casting business in the U.K. were classified as held for sale as of December31, 2008. The major classes of assets and liabilities of operations held for sale are as follows: June30, 2009 December31, 2008 Assets: Receivables $ 75 $ 99 Inventories 40 102 Properties, plants, and equipment 36 30 Other assets 25 16 Assets held for sale $ 176 $ 247 Liabilities: Accounts payable, trade $ 43 $ 101 Accrued expenses 21 28 Other liabilities 1 Liabilities of operations held for sale $ 64 $ 130
D. Restructuring and Other Charges	D. Restructuring and Other Charges In the second quarter and six-month period of 2009, Alcoa recorded restructuring and other charges of $82 ($56 after-tax and noncontrolling interests) and $151 ($102 after-tax and noncontrolling interests), respectively. Restructuring and other charges in the 2009 second quarter include $42 ($30 after-tax and noncontrolling interests) for the layoff of approximately 1,560 employees (1,320 in the Flat-Rolled Products segment; 120 in the Alumina segment; 60 in the Primary Metals segment; and 60 in Corporate) to continue to address the impact of the global economic downturn on Alcoas businesses; $23 ($15 after-tax) in adjustments to the Global Foil and Transportation Products Europe businesses mainly due to unfavorable foreign currency movements; a $9 ($6 after-tax) curtailment charge due to the remeasurement of pension plans as a result of the workforce reductions (see NoteO); and $8 ($5 after-tax and noncontrolling interests) in net charges associated with previously approved restructuring programs. In the 2009 six-month period, restructuring and other charges include $90 ($62 after-tax and noncontrolling interests) for the layoff of approximately 4,060 employees (2,190 in the Engineered Products and Solutions segment; 1,380 in the Flat-Rolled Products segment; 220 in the Primary Metals segment; 120 in the Alumina segment; and 150 in Corporate) to continue to address the impact of the global economic downturn on Alcoas businesses; the previously mentioned $23 ($15 after-tax) in adjustments to businesses held for sale and the $9 ($6 after-tax) curtailment charge; $18 ($12 after-tax) for the write-off of previously capitalized third-party costs related to potential business acquisitions due to the adoption of SFAS 141(R) (see Note B); and $11 ($7 after-tax and noncontrolling interests) in net charges associated with previously approved restructuring programs. In the second quarter and six-month period of 2008, Alcoa recorded restructuring and other charges of less than $1 and $38 ($31 after-tax and noncontrolling interests), respectively. Restructuring and other charges include $5 ($3 after-tax) and $41 ($31 after-tax) in the 2008 second quarter and six-month period, respectively, as a result of the loss recognized on the sale of the businesses within the former Packaging and Consumer segment. The $5 was offset by a net credit of $5 ($3 after-tax and noncontrolling interests) in the 2008 second quarter, primarily as a result of adjustments to severance reserves associated with previously approved restructuring programs due to changes in facts and circumstances. The $41 was slightly offset by a net credit in the 2008 six-month period, primarily as a result of the previously mentioned adjustments partially offset by severance and other exit costs associated with previously approved restructuring programs. Alcoa does not include restructuring and other charges in the segment results. The pretax impact of allocating restructuring and other charges to the segment results would have been as follows: Secondquarterended June30, Sixmonthsended June30, 2009 2008 2009
E. Acquisitions and Divestitures	E. Acquisitions and Divestitures On June15, 2009, Alcoa completed the divestiture of the wire harness and electrical portion of the EES business to Platinum Equity effective June1, 2009. Alcoa paid $193 upon consummation of the transaction and recognized a loss of $120 in discontinued operations (see Note C) on the accompanying Statement of Consolidated Operations. The cash payment was comprised of the agreed upon transaction price of $175 and a working capital adjustment of $18 based on the provisions of the purchase agreement. This transaction is subject to certain post-closing adjustments as defined in the purchase agreement. Proceeds from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows include this payment as a cash outflow. The wire harness and electrical portion of the EES business generated sales of $1,114 in 2008 and, at the time of divestiture, had operations in 13 countries employing approximately 16,200 employees. On March31, 2009, Alcoa completed the non-cash exchange of its 45.45% stake in the Sapa AB joint venture for Orkla ASAs (Orkla) 50% stake in the Elkem Aluminium ANS joint venture (Elkem). Alcoa now owns 100% of Elkem and Orkla now owns 100% of Sapa AB. Prior to the completion of the exchange transaction, Alcoa accounted for its investments in Sapa AB and Elkem on the equity method and the carrying values were $475 and $435, respectively, at December31, 2008. Elkem includes aluminum smelters in Lista and Mosjen, Norway with a combined output of 282 kmt (thousand metric tons) and the anode plant in Mosjen in which Alcoa already holds an 82% stake. These three facilities employ approximately 700 workers combined. The individual assets and liabilities of Elkem were included in the Primary Metals segment at March31, 2009 (the final amounts to be recorded will be based on valuation and other studies that have not yet been completed) and Elkems results of operations were reflected in this segment starting on April1, 2009. The exchange transaction resulted in the recognition of a $188 gain ($133 after-tax), comprised of a $156 adjustment to the carrying value of Alcoas existing 50% interest in Elkem in accordance with the fair value measurement provisions of SFAS 141(R) and a $32 adjustment for the finalization of the estimated fair value of the Sapa AB joint venture. The $188 gain was reflected in Other expenses, net on the accompanying Statement of Consolidated Operations, of which $156 ($112 after-tax) was reflected in the Primary Metals segment and $32 ($21 after-tax) was reflected in Corporate. The portion of the gain reflected in Corporate was because the original write-down of the 45.45% Sapa AB investment to its estimated fair value in December 2008 was reflected in Corporate. At the time the exchange transaction was completed, Elkem had $18 in cash, which was reflected in the accompanying Statement of Consolidated Cash Flows on the acquisitions line.
F. Inventories	F. Inventories June30, 2009 December31, 2008 Finished goods $ 494 $ 747 Work-in-process 678 960 Bauxite and alumina 601 724 Purchased raw materials 464 575 Operating supplies 256 232 $ 2,493 $ 3,238 At June30, 2009 and December31, 2008, 35% and 39% of total inventories, respectively, were valued on a last in, first out (LIFO) basis. If valued on an average-cost basis, total inventories would have been $974 and $1,078 higher at June30, 2009 and December31, 2008, respectively.
G. Investments	G. Investments On February12, 2009, Alcoa and the Aluminum Corporation of China (Chinalco) entered into an agreement in which Chinalco redeemed the convertible senior secured note (the note) that was previously issued by a special purpose vehicle called Shining Prospect Pte. Ltd., which is a private limited liability company created solely for the purpose of acquiring shares of Rio Tinto plc (RTP). Alcoa had joined with Chinalco on February1, 2008 to acquire 12% of the U.K. common stock of RTP for approximately $14,000. Alcoa had contributed $1,200 of the $14,000 through the purchase of the note. Under the agreement executed on February12, 2009, Alcoa will receive $1,021 in cash in three installments over a six-month period ending July31, 2009, of which $501 was received through June30, 2009 and is reflected in Sales of investments on the accompanying Statement of Consolidated Cash Flows. The remaining $520 was included in Other receivables on the accompanying Consolidated Balance Sheet and was not reflected in the accompanying Statement of Consolidated Cash Flows as it represents a non-cash activity. As a result of this transaction, Alcoa realized a loss of $182 ($118 after-tax), which is reflected in Other expenses, net on the accompanying Statement of Consolidated Operations, and reversed the unrealized loss that had been recognized in Accumulated other comprehensive loss on the accompanying Consolidated Balance Sheet since the initial investment was made.
H. Debt	H. Debt On March24, 2009, Alcoa issued $575 of 5.25% convertible notes due 2014 (the convertible notes). The issuance of the convertible notes includes $75 related to the exercise of an over-allotment option by the underwriters. The underwriting discount and third-party expenses for the issuance of the convertible notes was $13 and will be amortized to interest expense over the five-year term of the convertible notes. The convertible notes were issued under Alcoas shelf registration statement dated March10, 2008. Interest on the convertible notes is payable semi-annually in arrears on March15th and September15th each year, commencing on September15, 2009. If there is an event of default under the convertible notes, the principal amount of the convertible notes, plus accrued and unpaid interest, may be declared immediately due and payable. These amounts automatically become due and payable if an event of default relating to certain events of bankruptcy, insolvency, or reorganization occurs. Alcoa does not have the right to redeem the convertible notes prior to the stated maturity date. Holders of the convertible notes have the option to convert their notes into shares of Alcoas common stock at any time prior to the close of business on the second scheduled trading day (March 13, 2014) immediately preceding the stated maturity date (March 15, 2014). The initial conversion rate for the convertible notes is 155.4908 shares of Alcoas common stock per $1,000 (in whole dollars) principal amount of notes (89,407,210 shares), equivalent to a conversion price of approximately $6.43 per share, subject to adjustment, as defined in the convertible notes. Other than receiving cash in lieu of fractional shares, holders do not have the option to receive cash instead of shares of common stock upon conversion. Accrued and unpaid interest that exists upon conversion of a note will be deemed paid by the delivery of shares of Alcoas common stock and no cash payment or additional shares will be given to holders. On the issuance date of the convertible notes, the market price of Alcoas common stock was above the stated conversion price of $6.43 creating a beneficial conversion option to the holders, as the convertible notes were in-the-money. The beneficial conversion option is defined as a benefit provided to the holders in the form of non-cash interest expense to the Company. As a result, Alcoa recorded a $66 increase to additional capital and a corresponding decrease in the carrying value of the convertible notes representing the intrinsic value of the beneficial conversion option. The $66 decrease will be amortized to interest expense over the five-year term of the convertible notes effectively accreting the carrying value of the convertible notes to $575 by the stated maturity date. If Alcoa undergoes a fundamental change, as defined in the convertible notes, holders may require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest up to, but excluding, the repurchase date. Such a repurchase will be made in cash. The convert
I. Commitments and Contingencies	I. Commitments and Contingencies Litigation On February27, 2008, Alcoa Inc. received notice that Aluminium Bahrain B.S.C. (Alba) had filed suit against Alcoa Inc. and Alcoa World Alumina LLC (collectively, Alcoa), and others, in the U.S. District Court for the Western District of Pennsylvania (the Court), Civil Action number 08-299, styled Aluminium Bahrain B.S.C. v. Alcoa Inc., Alcoa World Alumina LLC, William Rice, and Victor Phillip Dahdaleh. The complaint alleges that certain Alcoa entities and their agents, including Victor Phillip Dahdaleh, have engaged in a conspiracy over a period of 15 years to defraud Alba. The complaint further alleges that Alcoa and its employees or agents (1)illegally bribed officials of the government of Bahrain and (or) officers of Alba in order to force Alba to purchase alumina at excessively high prices, (2)illegally bribed officials of the government of Bahrain and (or) officers of Alba and issued threats in order to pressure Alba to enter into an agreement by which Alcoa would purchase an equity interest in Alba, and (3)assigned portions of existing supply contracts between Alcoa and Alba for the sole purpose of facilitating alleged bribes and unlawful commissions. The complaint alleges that Alcoa and the other defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed fraud. Albas complaint seeks compensatory, consequential, exemplary, and punitive damages, rescission of the 2005 alumina supply contract, and attorneys fees and costs. Alba seeks treble damages with respect to its RICO claims. On February26, 2008, Alcoa Inc. had advised the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) that it had recently become aware of these claims, had already begun an internal investigation, and intended to cooperate fully in any investigation that the DOJ or the SEC may commence. On March17, 2008, the DOJ notified Alcoa that it had opened a formal investigation and Alcoa has been cooperating with the government. In response to a motion filed by the DOJ on March27, 2008, the Court ordered the suit filed by Alba to be administratively closed and that all discovery be stayed to allow the DOJ to fully conduct an investigation without the interference and distraction of ongoing civil litigation. The Court further ordered that the case will be reopened at the close of the DOJs investigation. The Company is unable to reasonably predict an outcome or to estimate a range of reasonably possible loss. In November 2006, in Curtis v. Alcoa Inc., Civil Action No.3:06cv448 (E.D. Tenn.), a class action was filed by plaintiffs representing approximately 13,000 retired former employees of Alcoa or Reynolds Metals Company and spouses and dependents of such retirees alleging violation of the Employee Retirement Income Security Act (ERISA) and the Labor-Management Relations Act by requiring plaintiffs, beginning January1, 2007, to pay health insurance premiums and increased co-payments and co-insurance for certain medical procedures and prescription drugs. Plaintiffs allege these changes to their retiree health care plans violate their rights to vested
J. Other Income, Net	J. Other Income, Net Secondquarterended June30, Sixmonthsended June30, 2009 2008 2009 2008 Equity (income) loss $ (1 ) $ (22 ) $ 22 $ (50 ) Interest income (13 ) (18 ) (14 ) (32 ) Foreign currency gains, net (60 ) (67 ) (46 ) (20 ) Losses (gains) from asset sales 10 (9 ) (17 ) (8 ) Other, net (25 ) 20 (4 ) 72 $ (89 ) $ (96 ) $ (59 ) $ (38 ) In the 2009 six-month period, Losses (gains) from asset sales include a $188 gain related to the Elkem/Sapa AB exchange transaction (see Note E) and a $182 loss on the sale of the Shining Prospect investment (see Note G).
K. Segment Information	K. Segment Information In May 2009, management approved the movement of Alcoas 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. Alcoas reportable segments, reclassified to exclude discontinued operations and assets held for sale (see NoteC), are as follows (differences between segment totals and consolidated totals are in Corporate): Alumina Primary Metals Flat- Rolled Products Engineered Products and Solutions Packaging and Consumer Total Second quarter ended June30, 2009 Sales: Third-party sales $ 441 $ 1,146 $ 1,427 $ 1,194 $ $ 4,208 Intersegment sales 306 349 23 678 Total sales $ 747 $ 1,495 $ 1,450 $ 1,194 $ $ 4,886 Profit and loss: Equity income $ 1 $ 4 $ $ $ $ 5 Depreciation, depletion, and amortization 67 139 55 46 307 Income taxes (21 ) (119 ) (1 ) 40 (101 ) After-tax operating income (ATOI) (7 ) (178 ) (35 ) 88 (132 ) Second quarter ended June30, 2008 Sales: Third-party sales $ 717 $ 2,437 $ 2,363 $ 1,660 $ 19 $ 7,196 Intersegment sales 766 1,108 65 1,939 Total sales $ 1,483 $ 3,545 $ 2,428 $ 1,660 $ 19 $ 9,135 Profit and loss: Equity income $ 2 $ 10 $ $ $ $ 12 Depreciation, depletion, and amortization 67 128 59 41 295 Income taxes 67 131 20 75 293 ATOI 190 428 48 172 838 Alumina Primary Metals Flat- Rolled Products Engineered Products and Solutions Packaging and Consumer Total Six months ended June30, 2009 Sales: Third-party sales $ 871 $ 1,990 $ 2,937 $ 2,464 $ $ 8,262 Intersegment sales 690 742 49 1,481 Total sales $ 1,561 $ 2,732 $ 2,986 $ 2,464 $ $ 9,743 Profit and loss: Equity income (loss) $ 3 $ (26 ) $ $ $ $ (23 ) Deprecia
L. Preferred and Common Stock	L. Preferred and Common Stock On March24, 2009, Alcoa issued 172.5million shares of common stock (par value of $1 per share) at a price of $5.25 per share. The issuance of common stock includes 22.5million shares related to the exercise of an over-allotment option by the underwriters. The underwriting discount and third-party expenses for the issuance of the common stock was $30 and was recorded as a decrease to additional capital. The common stock was issued under Alcoas shelf registration statement dated March10, 2008. Alcoa is authorized to issue up to 1.8 billion shares of common stock. As of June30, 2009, there were 1,097,074,538 common shares issued and 974,286,776 common shares outstanding. The net proceeds from the issuance of common stock ($876) and the convertible notes (see Note H) were used to prepay the $1,300 outstanding under Alcoas 364-day revolving credit facility (see Note H). The remaining net proceeds were used for general corporate purposes. In March 2009, the quarterly common stock dividend was reduced from $0.17 per share to $0.03 per share in connection with a series of financial actions initiated to improve liquidity.
M. Earnings Per Share	M. Earnings Per Share Basic earnings per share (EPS) amounts are computed by dividing earnings after the deduction of preferred stock dividends by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding. The information used to compute basic and diluted EPS on (loss) income from continuing operations attributable to Alcoa common shareholders is as follows (shares in millions): Secondquarterended June30, Sixmonthsended June30, 2009 2008 2009 2008 (Loss) income from continuing operations attributable to Alcoa common shareholders $ (312 ) $ 553 $ (792 ) $ 852 Less: preferred stock dividends 1 1 (Loss) income from continuing operations available to Alcoa common shareholders $ (312 ) $ 553 $ (791 ) $ 851 Average shares outstanding basic 974 816 896 817 Effect of dilutive securities: Potential shares of common stock, attributable to stock options, stock awards, and performance awards 9 9 Average shares outstanding diluted 974 825 896 826 In the 2009 second quarter and six-month period, basic average shares outstanding and diluted average shares outstanding were the same because the effect of dilutive securities was anti-dilutive since Alcoa generated a loss from continuing operations. As a result, 27million stock options, 7million stock and performance awards, and 89million share equivalents related to the convertible notes were not included in the computation of diluted EPS. Had Alcoa generated income from continuing operations in the 2009 second quarter and six-month period, 94million and 53million, respectively, potential shares of common stock related to the stock options, stock and performance awards, and convertible notes would have been included in diluted average shares outstanding. Options to purchase 40million and 30million shares of common stock at a weighted average exercise price of $35.27 and $39.57 per share were outstanding as of June30, 2009 and 2008, respectively, but were not included in the computation of diluted EPS because they were anti-dilutive, as the options exercise price was greater than the average market price of Alcoas common stock.
N. Income Taxes	N. Income Taxes The effective tax rate for the second quarter of 2009 and 2008 was 25.4% (benefit on a loss) and 27.1% (provision on income), respectively. The rate for the 2009 second quarter differs from the U.S. federal statutory rate of 35% primarily due to lower tax rates in foreign jurisdictions, a $21 tax charge for unbenefitted operational losses that are excluded from the estimated annual effective tax rate calculation, and a $5 discrete income tax charge related to the Elkem/Sapa AB exchange transaction. The rate for the 2008 second quarter differs from the U.S. federal statutory rate of 35% primarily due to foreign income being taxed in lower rate jurisdictions and a $9 discrete income tax benefit associated with the sale of the businesses within the former Packaging and Consumer segment, mainly as a result of changes in tax assumptions surrounding transaction costs and the finalization of the divestiture of certain foreign locations. The effective tax rate for the 2009 and 2008 six-month periods was 34.5% (benefit on a loss) and 31.0% (provision on income), respectively. The rate for the 2009 six-month period differs from the U.S. federal statutory rate of 35% primarily due to lower tax rates in foreign jurisdictions and a $6 tax charge for unbenefitted operational losses that are excluded from the estimated annual effective tax rate calculation, both of which were mostly offset by a $28 discrete income tax benefit related to a Canadian tax law change allowing a tax return to be filed in U.S. dollars and a $6 discrete income tax benefit related to the Elkem/Sapa AB exchange transaction. The rate for the 2008 six-month period differs from the U.S. federal statutory rate of 35% primarily due to foreign income being taxed in lower rate jurisdictions and the $9 discrete income tax benefit mentioned above, partially offset by a $28 discrete income tax charge related to the allocation of the sale proceeds of the businesses within the former Packaging and Consumer segment to higher tax rate jurisdictions as opposed to the allocation previously contemplated. Alcoa has recorded deferred tax assets associated with tax loss carryforwards and tax credit carryforwards. As of December31, 2008, deferred tax assets related to tax loss carryforwards and tax credit carryforwards were $1,017 and $320, respectively. These deferred tax asset amounts increased during the 2009 six-month period as a result of Alcoas current operating loss position. Alcoa has recorded a valuation allowance against a portion of the tax loss carryforwards but has not recorded a valuation allowance against the tax credit carryforwards. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Deferred tax assets for which no valuation allowance is recorded may not be realized if sufficient income is not generated in the future in certain jurisdictions.
O. Pension Plans and Other Postretirement Benefits	O. Pension Plans and Other Postretirement Benefits The components of net periodic benefit cost are as follows: Secondquarterended June30, Sixmonthsended June30, Pension benefits 2009 2008 2009 2008 Service cost $ 35 $ 42 $ 70 $ 87 Interest cost 170 171 337 343 Expected return on plan assets (192 ) (203 ) (383 ) (409 ) Amortization of prior service cost 4 5 8 9 Recognized actuarial loss 28 26 56 49 Curtailments 4 4 2 Settlements 3 14 Net periodic benefit cost $ 49 $ 44 $ 92 $ 95 Secondquarterended June30, Sixmonthsended June30, Postretirement benefits 2009 2008 2009 2008 Service cost $ 6 $ 6 $ 11 $ 13 Interest cost 46 48 92 96 Expected return on plan assets (3 ) (5 ) (6 ) (9 ) Amortization of prior service benefit (3 ) (2 ) (6 ) (5 ) Recognized actuarial loss 10 11 21 23 Curtailments (1 ) (1 ) 3 Net periodic benefit cost $ 55 $ 58 $ 111 $ 121 During the second quarter of 2009, Alcoa completed the divestiture of the wire harness and electrical portion of the EES business to Platinum Equity (see Note E) and continued to execute its global workforce reduction plan (see NoteD). As a result, certain pension and postretirement benefit plans were remeasured and Alcoa recognized curtailment gains and losses due to the significant reduction in the expected aggregate years of future service of the employees of the EES business and the employees subject to the global workforce reduction plan, respectively. In the second quarter of 2009, Alcoa recorded curtailment gains of $5 and $1 related to the pension and postretirement benefit plans, respectively, that include the EES employees in Loss from discontinued operations and curtailment losses of $9 related to the pension plans that include the employees subject to the global workforce reduction plan in Restructuring and other charges on the accompanying Statement of Consolidated Operations. The curtailment gains and losses include recognition of the change in the projected benefit obligation (PBO) or accumulated postretirement benefit obligation (APBO) and a portion of the previously unrecognized prior service cost reflecting the reduction in expected future service. The remeasurement of these pension plans generated a net increase in 2009 annual net periodic benefit cost of $9 of which $1 was recognized in the 2009 second quarter and the remainder will be recognized ratably over the second half of 2009. The remeasurement of these postretirement benefit plans generated a decrease in 2009 annual net periodic benefit cost of less than $1. Also, the pension plans PBO and plan assets decreased by $197 and $74, res
P. Derivatives and Other Financial Instruments	P. Derivatives and Other Financial Instruments Derivatives Alcoa is exposed to certain risks relating to its ongoing business operations, including financial, market, political, and economic risks. The following discussion provides information regarding Alcoas exposure to the risks of changing commodity prices, interest rates, and foreign currency exchange rates. Alcoas commodity and derivative activities are subject to the management, direction, and control of the Strategic Risk Management Committee (SRMC). The SRMC is composed of the chief executive officer, the chief financial officer, and other officers and employees that the chief executive officer selects. The SRMC reports to the Board of Directors on the scope of its activities. The aluminum, energy, interest rate, and foreign exchange contracts are held for purposes other than trading. They are used primarily to mitigate uncertainty and volatility, and to cover underlying exposures. The Company is not involved in trading activities for energy, weather derivatives, or other nonexchange commodity trading activities. The fair value of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet were as follows: Asset Derivatives Balance Sheet Location June30, 2009 December31, 2008 Derivatives designated as hedging instruments under SFAS 133: Aluminum contracts Prepaid expenses and other current assets $ 70 $ Interest rate contracts Prepaid expenses and other current assets 23 14 Foreign exchange contracts Prepaid expenses and other current assets 6 Aluminum contracts Other assets 68 26 Interest rate contracts Other assets 90 146 Foreign exchange contracts Other assets 6 Total derivatives designated as hedging instruments under SFAS 133 $ 263 $ 186 Derivatives not designated as hedging instruments under SFAS 133*: Aluminum contracts Prepaid expenses and other current assets $ 11 $ 35 Energy contracts Prepaid expenses and other current assets 4 17 Energy contracts Other assets 1 Total derivatives not designated as hedging instruments under SFAS 133 $ 15 $ 53 Less margin held: Interest rate contracts Prepaid expenses and other current assets $ 17 $ 3 Aluminum contracts Prepaid expenses and other current assets 2 Interest rate contracts Other assets 37 64 Sub-total $ 56 $ 67 Total Asset Derivatives $ 222 $ 172 * See the Other section within Note P for additional information on Alcoas purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies. The fair value of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet were as follows: Liability Derivatives Balance Sheet Location
Q. Subsequent Events	Q. Subsequent Events Management evaluated all activity of Alcoa through July23, 2009 (the issue date of the Financial Statements) and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.

Document Information

Document Information
	6 Months Ended Jun. 30, 2009 USD / shares
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	2009-06-30

Entity Information

Entity Information (USD $)
	6 Months Ended Jun. 30, 2009	Jul. 20, 2009	Jun. 30, 2008
Entity [Text Block]
Trading Symbol	AA
Entity Registrant Name	ALCOA INC
Entity Central Index Key	0000004281
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		974,372,426
Entity Public Float			$29,000,000,000