Howmet Aerospace (HWM) 8-K AA - Q4 2009 ALCOA Inc Earnings Conference Call

[Alcoa Logo]

4

th

Quarter 2009 Earnings Conference

January 11, 2010

Exhibit 99.2

[Alcoa

Logo]

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, Forms 10-Q for the quarters ended March 31, 2009,

June 30, 2009, and September 30, 2009, and other reports filed with the

Securities and Exchange Commission.

2

Forward-Looking Statements

[Alcoa Logo]

Chuck McLane

Executive Vice President and Chief Financial Officer

3

[Alcoa

Logo]

4

th

Quarter 2009 Financial Overview

Cash Sustainability targets achieved

Cash from operations of $1.1 billion

Free cash flow of $761 million

Debt-to-cap

at

38.6%

down

390

basis

points

from

Q4’08

—

Total debt reduced by $759 million since 4Q’08

—

Cash on hand of $1.5 billion

Loss

from

continuing

operations

of

$266

million,

or

$0.27

per

share

—

Restructuring

and

special

items

total

$275

million,

or

$0.28

per

share

Negative

impact

from

currency

and

energy

of

$65

million

Continued

end-market

weakness

compounded

by

Aero

&

IGT

destocking

4

,

[Alcoa

Logo]

Revenue Change by Market

(3%)

25%

(4%)

8%

1%

(16%)

4%

11%

43%

39%

(21%)

(43%)

(30%)

(45%)

(36%)

(9%)

(21%)

(55%)

(26%)

(35%)

4Q’09 Third Party Revenue

Sequential

Change

Year-Over-Year

Change

5

12%

2%

6%

3%

4%

3%

15%

6%

14%

35%

Aerospace

Automotive

B&C

Comm. Transport

Industrial Products

IGT

Packaging

Distribution/Other

Alumina

Primary Metals

[Alcoa

Logo]

Sequential Income Statement Summary

6

$ Millions

3Q’09

4Q’09

Change

Sales

$4,615

$5,433

$818

Cost of Goods Sold

$3,888

$4,905

$1,017

COGS % Sales

84.2%

90.3%

6.1 % pts.

Selling,

General Administrative, Other

$234

$291

$57

SGA % Sales

5.1%

5.4%

0.3 % pts.

Restructuring and Other Charges

$17

$69

$52

Effective Tax Rate

(22.4%)

34.8%

N/A

Income (Loss) from Continuing Operations

$73

($266)

($339)

Income (Loss) from Discontinued Operations

$4

($11)

($15)

[Alcoa

Logo]

7

4

th

Quarter Restructuring and Special Items

$ Millions

Italy

Other

After-Tax & Non-

Controlling Interests

Earnings

Per Share

Income Statement

Classification

Segment

Restructuring

($15)

($34)

($49)

Restructuring

Corporate

Discrete Tax Items

($41)

$123

$82

Taxes

Corporate

Special Items:

Italy Power Drawback

($250)

($250)

Cost of Goods Sold

Primary Metals

Environmental Accrual

($15)

($15)

Cost of Goods Sold

Corporate

MRN Tax Settlement

($24)

($24)

COGS / Minority

Interest

Alumina /

Corporate

Intalco

Repowering

($19)

($19)

Other Income /

Expense

Corporate

Total

($321)

$46

($275)

($0.28)

[Alcoa

Logo]

Total Headcount Reduced By 38% Since Q2’08

8

Charges

($ Millions)

224

48

38

5

36

351

2009 cash

savings of $325

million -

Run

rate savings of

$600 million

Headcount Reductions Announced by Quarter

Completed

Not Yet Completed

15,300

4,400

1,950

550

2,400

24,600

2H'08

Q1'09

Q2'09

Q3'09

Q4'09

Total

[Alcoa

Logo]

4Q'09 vs. 3Q'09 Earnings Bridge

Income from Continuing Operations excluding Restructuring & Other Special Items ($ millions)

9

See appendix for reconciliation

$39

$5

($30)

($35)

$31

($37)

($18)

$126

($41)

($31)

$9

[Alcoa

Logo]

2009 vs. 2008 Earnings Bridge

Income

(Loss)

from

Continuing

Operations

excluding

Restructuring

&

Other

Special

Items

($

millions)

See appendix for reconciliation

10

$1,012

($2,298)

($706)

($139)

$97

$246

$1,135

($133)

$101

($685)

[Alcoa

Logo]

Alumina

4

th

Quarter Highlights

1

st

Quarter Outlook

4

th

Quarter Business Conditions

11

4Q 08

3Q 09

4Q 09

Production (kmt)

3,776

3,614

3,897

3

rd

Party Shipments (kmt)

2,123

2,191

2,716

3

rd

Party Revenue ($MM)

722

530

760

ATOI ($MM)

162

65

19

Record quarterly production and third party

shipments on market demand and Sao Luis ramp

up

Realized 3

rd

party Alumina price up 15%

Negative currency impact of $30 million

Tax expense related to litigation of $30 million

Lower caustic costs and benefits from cash

sustainability initiatives

Ramp-up

costs

of

Juruti

bauxite

mine

$14

million

sequentially

Pricing to follow two month lag on LME

Continued benefit from cash sustainability

initiatives

Continued benefit of lower caustic cost

Higher depreciation on growth projects placed into

service

4

th

Quarter Performance Bridge

$ Millions

$65

($14)

$19

$66

$7

($30)

$17

($30)

($58)

($4)

[Alcoa

Logo]

Primary Metals

4

th

Quarter Highlights

4

th

Quarter Business Conditions

1

st

Quarter Outlook

12

4Q 08

3Q 09

4Q 09

Production (kmt)

971

881

897

3

rd

Party Shipments (kmt)

807

698

878

3

rd

Party Revenue ($MM)

1,580

1,362

1,900

3

rd

Party Price ($/MT)

2,125

1,972

2,155

ATOI ($MM)

(101)

(8)

(214)

Realized pricing up 9%

Smelter disruption and non-cash cost for Italy

power decision negatively affected quarter by

$273 million

Negative currency impact of $29 million

Lower carbon costs

Productivity gains

Pricing to follow 15 day lag

Continued benefit from cash sustainability

initiatives

Potential Italy curtailment

4

th

Quarter Performance Bridge

$ Millions

($8)

($214)

$82

$9

($29)

$12

($273)

($7)

[Alcoa

Logo]

Flat-Rolled Products

13

1

st

Quarter Outlook

4

th

Quarter Business Conditions

4

th

Quarter Highlights

ATOI  $ Millions

4Q 08

3Q 09

4Q 09

Flat-Rolled Products,

excl Russia, China & Other

(9)

37

63

Russia, China & Other

(97)

(27)

(26)

Total ATOI

(106)

10

37

Improved

mix

and

pricing

–

revenue

up

5%

Revenue increases in automotive and

commercial transportation, offsetting decline in

building & construction

Gains from cash sustainability initiatives

Year-to-date headcount reduction of 25%

Cautious demand outlook for aerospace

Expecting volume loss in North America can

sheet in return for longer-term profitability

Continued benefits from cash sustainability

initiatives

Higher energy costs expected

4

th

Quarter Performance Bridge

$ Millions

$10

$27

$4

($2)

($3)

$5

($4)

$37

[Alcoa

Logo]

Engineered Products and Solutions

4

th

Quarter Business Conditions

1

st

Quarter Outlook

4

th

Quarter Highlights

14

Continued destocking in Aerospace supply

chain and further decline in IGT sales

Improved performance in the Commercial

Transportation market

Seasonal impact from year-end holiday

shutdowns

Year over year ATOI % revenue flat with cash

sustainability initiatives mitigating a 21% decline

in sales

Weak market conditions

Continued destocking in aerospace fastener

and the turbine markets

Unfavorable product mix

Continued benefit from cash sustainability

initiatives

$ Millions

4Q 08

3Q 09

4Q 09

3

rd

Party Revenue

1,392

1,128

1,097

ATOI

73

75

57

ATOI % of Revenue

5.2%

6.6%

5.2%

4

th

Quarter Performance Bridge

$ Millions

$75

$3

($15)

($2)

($4)

$57

[Alcoa

Logo]

Q4’09 Cash From Operations of $1.1 Billion

Cash Flow

15

Best CFO

since Q2’07

FCF positive –

highest since

Q2’03

10 day decline

in DWC vs.

Q4’08

See appendix for free cash flow reconciliation

($ Millions)

4Q'08

3Q'09

4Q'09

Net (Loss) Income

($1,191)

$124

($268)

DD&A

291

342

369

Change in Working Capital

610

100

522

Taxes

(250)

(69)

(170)

Pension Contributions

(38)

(33)

(26)

Other Adjustments

1,186

(280)

697

Cash From Operations

$608

$184

$1,124

    Capital Expenditures

(1,017)

(370)

(363)

Free Cash Flow

($409)

($186)

$761

[Alcoa

Logo]

Undeniably Strong Response To Severe Recession

16

Drove Cash Sustainability savings

to the bottom line…

…efficiently managed cash flows

and capex…

…strengthened the balance sheet

Adjusted (Loss) Income ($ Millions)

Free Cash Flow ($ Millions)

Debt ($ Millions) Debt-to-Capital %

…improved liquidity…

Cash on Hand ($ Millions)

See appendix for  reconciliations of adjusted income (loss) and free cash flow

($221)

($477)

($256)

$39

$9

4Q'08

1Q'09

2Q'09

3Q'09

4Q'09

($409)

($742)

($90)

($186)

$761

4Q'08

1Q'09

2Q'09

3Q'09

4Q'09

$762

$1,131

$851

$1,066

$1,481

4Q'08

1Q'09

2Q'09

3Q'09

4Q'09

$10,578

$10,205

$10,265

$10,073

$9,819

42.5%

38.6%

4Q'08

1Q'09

2Q'09

3Q'09

4Q'09

Gross Debt

Debt to Cap

[Alcoa Logo]

Klaus Kleinfeld

President and Chief Executive Officer

17

[Alcoa

Logo]

2009 In Review

18

Market

Conditions in 2009

Source: Alcoa analysis

Alcoa End Markets: Current Assessment of 2009 Conditions

Challenging Environment

Alcoa Takes Action…

…And Delivers

Equaled best ever

safety performance

Exceeded

cash

sustainability

targets

Continued growth

projects and improved

portfolio

Repowered

globally

competitive

smelters

FCF positive

in

4Q’09

Strengthened liquidity

Historic Price Decline

Broad-based Demand

Destruction

Holistic Solution:

Operational

&

Financial Actions

[Alcoa

Logo]

Alcoa Lives Its Values Every Day

19

Total Recordable Incident Rate

Lost Workday Incident Rate

Strengthened Reputation

Continued Sustainable Growth

Established Carbon Leadership

8

th

Consecutive

Year

Safety Incident Rate History and Significant Accreditations in 2009

Founding Member

Best Ever Safety Performance

3.86

3.57

2.26

2.03

1.85

1.47

1.39

1.47

1.40

1.27

0.29

0.32

0.19

0.19

0.13

0.13

0.11

0.14

0.14

0.13

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

[Alcoa

Logo]

Achieved 2010 Procurement Spending Target

Procurement Efficiencies: Reduction Targets

2009E

(millions)

Reduction Targets by Spend Category

Savings

2010E

20

2010

Target

Achieved

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

$1,998

$1,500

$2,000

2009

2009 Savings

Target vs. 2008

2010 Savings

Target vs. 2008

[Alcoa

Logo]

Surpassed 2010 Overhead Savings Target

Overhead includes SG&A, R&D and Plant Administrative Expenses; excludes divestitures

Overhead Rationalization: Reduction Targets and Savings

$400M

(millions)

Overhead Savings Target

Savings

21

2010

Target

Achieved

100%

80%

2008

2010  Target

$412

$200

$400

2009

2009 Savings

Target vs. 2008

2010 Savings

Target vs. 2008

[Alcoa

Logo]

$3,438

$1,800 Target

$1,250

2008

2009

2010E

Capital Expenditures of $1.6B, Down 52% Vs. 2008

-53%

-23%

Capital Expenditure Reduction: Annual CapEx ($ millions)

$1,622

22

Surpassed

2009

Target

Growth

Sustaining

[Alcoa

Logo]

100%

72%

Dec-08

Dec-09 Target

Working Capital

Days Reduction Targets

-28%

2009 YTD Working Capital

Change ($ millions)

$800M decrease

in working

capital in 2009

Working Capital Initiatives: Targets and Year-to-date Results

Reduced Working Capital By $1.3 Billion

23

Surpassed

2009

Target

$1,258

$1,302

$800

$676

($632)

Inventory

Receivables

Accounts

Payable

2009 Cash

Generation

2009 Target

[Alcoa

Logo]

Strengthened Alcoa’s Strategic Position In The Downturn

24

Growth:  Improved

Competitive Position

Re-Powering:  Secured LT

Power for 40% of System

Portfolio:  Optimized For

Liquidity and Growth 

Quebec –

1 MMT

Spain –

500 KMT

Massena –

300 KMT

Intalco

–

184 KMT

Shining Prospect JV

AEES Divestiture

Norway Smelter

Asset Exchange

Suriname Refinery

Minority Position

Acquisition

Exceptional

Bauxite in Juruti

Low-cost Refining

in Sao Luis

Bohai

-

One of a

Kind Asset in China

Samara –

Unmatched

Opportunity

85% of

System

Powered

Through

2025

[Alcoa

Logo]

[Alcoa

Logo]

Unparalleled

Growth

Opportunity

with

Ma’aden

JV

Forms

the

lowest

cost

aluminum

production

complex

in

the

world

Creates

the

world’s

most

efficient

integrated

aluminum

complex

Utilizes fully developed infrastructure, including low-cost natural gas power

Lowers Alcoa’s refining and smelting

position

on the global cost curve

Offers

flexibility

for

expansion

Establishes

strategic

footprint

in

fast

growing

region

25

[Alcoa Logo]

[Alcoa

Logo]

Ma’aden

JV Capitalizes on Region’s Significant Resources

26

Refinery

Smelter

Bauxite Mine

The largest, most efficient vertically integrated aluminum complex in the world

Al Ba’itha

mine

4 MMT annually

30+ years of

reserves

Direct rail line to

refinery

Operational 2014

Located at Ras

Az

Zawr

1.8 MMT annually

Designed for

expansion

Operational 2014

Co-located with

Refinery at Ras

Az

Zawr

740 KMT annually

Designed for

expansion

Operational 2013

Co-located with

Smelter at Ras

Az

Zawr

Up to 460 KMT hot

mill

Body, end and tab

stock for aluminum

cans

Operational 2013

Rolling Mill

[Alcoa

Logo]

$10,578

$10,205

$10,265

$10,073

$9,819

$762

$1,131

$851

$1,066

$1,481

42.5%

38.6%

4Q'08

1Q'09

2Q'09

3Q'09

4Q'09

Gross Debt

Cash

Debt to Cap

FCF Improved and Balance Sheet Strengthened

Cash and Debt (in millions)

Free Cash Flow (in millions)

FCF Positive

in Q4’09

Debt-to-

Cap Down

3.9% pts

27

($409)

($742)

($90)

($186)

$761

4Q'08

1Q'09

2Q'09

3Q'09

4Q'09

[Alcoa

Logo]

Market Conditions in 2010

Source: Alcoa analysis

Alcoa End Markets: Current Assessment of 2010 vs. 2009 Conditions

28

[Alcoa

Logo]

6%

2010 Projected Primary Aluminum Consumption by Region (in mmt)

Projecting 10%

Consumption Growth in 2010

Brazil

Russia

Asia w/o China

North America

Europe

China

2009 vs. 2010

Projected Growth Rates

2010 Estimated

Consumption

-15%

-15%

-5%

16.1

4%

-15%

-5%

0.9

6%

Other*

4.2

7%

-2%

*Other consists of: Middle East, India, Latin America ex Brazil and Rest of World

38.5

2009

Actual

2010

Forecast

0.8

18%

29

Source: Alcoa analysis

5%

2009 Global Demand Growth

Rate:  -6%

2010 Global Demand Growth

Rate 10%

(2010 ex China:  5%)

3%

3%

[Alcoa

Logo]

China

Western World

2010 Global Primary Metal Balance

2010E Primary Metal Supply / Demand Balance (in kmt)

Surplus

Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI

30

Surplus

2010 Annualized Run Rate

16,100

2010 Restarts or Curtailments

0

2010 Brown//Greenfield Expansion

200

Total Supply

16,300

Demand

(16,100)

Imports from West

105

(Deficit) / Surplus

305

2010  Annualized Run Rate

23,150

2010  Restarts or Curtailments

(365)

2010 Brown/Greenfield Expansion

745

Total Supply

23,530

Demand

(22,500)

Exports to China

(105)

(Deficit) / Surplus

925

[Alcoa

Logo]

2010E Alumina Supply / Demand Balance (in kmt)

Source: Alcoa estimates, CRU, CNIA, IAI, as of 11/24/09

Balanced

2010 Global Alumina Balance

China

Western World

31

2010 Annualized Run Rate

25,900

Imports from Western World

5,000

Supply

30,900

Demand

(30,900)

(Deficit) / Surplus

0

2010 Annualized Run Rate

50,750

Exports to China

(5,000)

Supply

45,750

Demand 

(45,000)

(Deficit) / Surplus

750

[Alcoa

Logo]

Source: Bloomberg, IAI

65 days of

consumption

Non-LME at

17 days

LME at

48days

Global

Inventories

Leveling

Off

Europe

+250%

Japan

+79%

Midwest -

US

+30%

Global inventory days of consumption and regional premiums

Regional Premiums

YTD 2009 Change

32

Tight Physical Conditions Driving Regional Premiums

[Alcoa

Logo]

33

18-month Forward

+$145

Return =

Price

Forward

–

Price

Spot

–

Storage –

Insurance

Price

Spot

Aluminum Forward Curve

Return Mechanics

Financial Participants Responding to Strong Forward  Curve

Percentage Change in Forward Curves

18-month Forwards vs. Spot

Total Value of LME Inventories

$ Billions

Source: Bloomberg

6.6%

3.9%

3.1%

1.1%

Aluminum

Zinc

Lead

Copper

10.2

3.7

1.2

0.4

Aluminum

Copper

Zinc

Lead

2,000

2,100

2,200

2,300

2,400

2,500

[Alcoa

Logo]

Original 2010

Target

New 2010

Target

Aggressively Pursuing 2010 Operational Targets

34

$2,000

$2,500

Procurement

Overhead

$400

$500

Sustaining Capex

$850

$850

Working Capital

$0

$200

2010 Cash Sustainability Operational Targets and Actual Performance

$ Millions

Locking-in

Savings

Overcoming

Headwinds

Net

Additional

$500M

Locking-in

Savings

Net

Additional

$100M

Overcoming

Headwinds

Locking-in

Savings

Additional 2

Days WC

Additional

$200M

Original 2010

Target

New 2010

Target

Original 2010

Target

New 2010

Target

Original 2010

Target

New 2010

Target

[Alcoa

Logo]

Conditions Improve in 2010 –

We Maintain Aggressive Stance

Market Environment

Key end-markets

improve

vs.

2009;

absolute levels still

low

Aluminum market in

modest surplus

Currency and energy

cost headwinds

persist

Alcoa Actions

Aggressively

pursuing 2010

operational

targets

Focusing

on

balance

sheet strength

Optimizing

businesses

for

improved market

conditions

35

2010 Commitments

Free Cash Flow Positive

[Alcoa

Logo]

[Alcoa

Logo]

Matthew E. Garth

Director, Investor Relations

390 Park Avenue

New York, NY 10022-4608

Telephone:  (212) 836-2674

www.alcoa.com

Additional Information

36

[Alcoa Logo]

[Alcoa

Logo]

Effective Tax Rate

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.

38

$ Millions

1Q’09

2Q’09

3Q’09

4Q’09

2009

(Loss) income from continuing operations before income taxes

($777)

($425)

$98

($394)

($1,498)

Benefit for income taxes

($307)

($108)

($22)

($137)

($574)

Effective tax rate as reported

39.5%

25.4%

(22.4%)

34.8%

38.3%

Discrete tax (benefits)

provisions:

Discrete items

($28)

($82)

($110)

Nondeductible Italian losses

$98

$98

After-tax restructuring items

($11)

($8)

($19)

Subtotal -

Discrete tax (benefits) provisions

($39)

$0

($8)

$16

($31)

Benefit for income taxes excluding discrete tax (benefits) provisions

($268)

($108)

($14)

($153)

($543)

Effective tax rate excluding discrete tax (benefits) provisions

34.5%

25.4%

(14.3%)

38.8%

36.2%

Charge (benefit) for adjustments to year-to-date effective tax rate

N/A

$25

($48)

($10)

($34)

[Alcoa

Logo]

Reconciliation of ATOI to Consolidated Net (Loss) Income

Attributable to Alcoa

39

(in millions)

4Q08

2008

1Q09

2Q09

3Q09

4Q09

2009

   Total segment ATOI

$       28

$  2,199

$   

(143)

$   

(132)

$    

142 

$    (101)

$   

(234)

   Unallocated amounts (net of tax):

      Impact of LIFO

73

(7)

29

39

80

87

235

      Interest income

4

35

1

8

(1)

4

12

      Interest expense

(81)

(265)

(74)

(75)

(78)

(79)

(306)

      Noncontrolling interests (1)

–

(221)

(10)

5

(47)

(9)

(61)

      Corporate expense

(78)

(328)

(71)

(70)

(71)

(92)

(304)

      Restructuring and other charges

(637)

(693)

(46)

(56)

(3)

(50)

(155)

      Discontinued operations

(262)

(303)

(17)

(142)

4

(11)

(166)

      Other

(238)

(491)

(166)

(31)

51

(26)

(172)

   Consolidated net (loss) income attributable to

Alcoa

$ (1,191)

$      (74)

$    (497)

$    (454)

$       77

$    (277)

$ (1,151)

(1)

On January 1, 2009, Alcoa adopted changes issued by the Financial Accounting Standards Board to consolidation accounting and reporting.              

These changes, among others, require that minority interests be renamed noncontrolling interests for all periods presented.

[Alcoa

Logo]

Reconciliation of Adjusted (Loss) Income

40

(in millions)

Quarter ended

Year

ended

December 31,

2008

March 31,

2009

June 30,

2009

September

30,

2009

December 31,

2009

December 31,

2008

December 31,

2009

Net (loss) income

attributable to Alcoa

$ (1,191)     

$    (497)     

$    (454)     

$       77

$    (277)     

$      (74)     

$ (1,151)     

(Loss) income

from

discontinued

operations

(262)

(17)

(142)

4

(11)

(303)

(166)

(Loss) income from

continuing

operations

attributable to Alcoa

(929)

(480)

(312)

73

(266)

229

(985)

Restructuring and

other charges

614

46

56

1

49

670

152

Discrete tax items*

65

(28)

–

–

(82)

84

(110)

Special items**

29

(15)

–

(35)

308

29

258

(Loss) income from

continuing

operations

attributable to Alcoa

–

as adjusted

$    (221)

$    (477)

$    (256)

$   

39

$   

9

$  1,012

$    (685)

Discrete tax items include the following: a benefit for the reorganization of an equity investment in Canada (-$71), a charge for the write-off of deferred tax assets related to operations in Italy ($41),

a

benefit

for

a

tax

rate

change

in

Iceland

(-$31),

and

a

benefit

for

the

reversal

of

a

valuation

allowance

on

net

operating

losses

in

Norway

(-$21)

for

the

quarter

ended

December

31,

2009;

a

benefit for a tax law change in Canada for the quarter ended March 31, 2009; a charge for non-cash tax on repatriated earnings for the quarter ended December 31, 2008; and, the previously

mentioned item for the quarter ended December 31, 2008 and a charge related to the sale of the Packaging and Consumer businesses for the year ended December 31, 2008.

Special

items

include

the

following:

charges

related

to

a

recent

European

Commission’s

ruling

on

electricity

pricing

for

smelters

in

Italy

($250),

a

tax

settlement

related

to

an

equity

investment

in

Brazil

($24),

an

estimated

loss

on

excess

power

at

our

Intalco

smelter

($19),

and

an

environmental

accrual

for

smelters

in

Italy

($15)

for

the

quarter

ended

December

31,

2009;

a

gain

on

an

acquisition

in Suriname for the quarter ended September 30, 2009; a gain on the Elkem/SAPA swap (-$133) and a loss on the sale of Shining Prospect ($118) for the quarter ended March 31, 2009; and, charges

for environmental reserve ($26), obsolete inventory ($16), and accounts receivable reserve ($11), and a refund of an indemnification payment (-$24) for the quarter ended December 31, 2008.

**

(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, discrete tax items, and special items. 

There can be no assurances that additional restructuring and other charges, discrete tax items, and 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.

*

[Alcoa

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Reconciliation of Free Cash Flow

41

(in millions)

Quarter ended

December 31,

2008

March 31,

2009

June 30,

2009

September

30,

2009

December 31,

2009

Cash provided from operations

$    608

$   (271)

$

328

$    184

$ 1,124

Capital expenditures*

(1,017)

(471)

(418)

(370)

(363)

Free cash flow

$

(409)

$

(742

)

$

(90)

$

(186)

$

761

discontinued operations.

(in millions)

Two month

period

ended

Ten month

period ended

Year ended

February 28,

2009

December 31,

2009

December 31,

2009

Cash provided from operations

$   (708)

$ 2,073

$ 1,365

Capital expenditures**

(298)

(1,324)

(1,622)

Free cash flow

$

749

$

(257)

** Capital expenditures for the two-month period ended February 28, 2009 and the ten-month ended period December 31, 2009, include $2 and $3,

respectively, related to discontinued operations.

*

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.

(1,006)

* Capital expenditures for the quarters ended December 31, 2008, March 31, 2009, and June 30, 2009, include $9, $3, and $2, respectively, related to

[Alcoa

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Other Reconciliations

42

Net Debt

(in millions)

Year ended

December 31,

2008

December 31,

2009

Change

Total debt

1

$ 10,578

$   9,819

$     (759)

Less: Cash and cash equivalents

762

1,481

719

Net Debt

$

9,816

$

8,338

$

(1,478)

Debt-to-Capital

($ in millions)

As of December 31, 2009

Debt-to-Capital

Hypothetical

debt

repayment

Adjusted

Debt-to-Capital

Total debt

1

$   9,819

$   1,000

$   8,819

Capital:

Total debt

$   9,819

$   1,000

$   8,819

Convertible securities of

subsidiary

40

–

40

Total equity

15,552

–

15,552

Sub-total

$ 25,411

$   1,000

$ 24,411

Debt-to-Capital

38.6%

36.1%

1

2

Net Debt and Debt-to-Capital are non-GAAP financial measures. Management believes that these

measures are meaningful to investors because they provide further insight to Alcoa’s liquidity and leverage

position. Management also believes that it is appropriate to consider both Total debt and Debt-to-Capital

prior to any adjustment as well as Net Debt and Debt-to-Capital after adjustments.

2

Total debt includes short-term borrowings, commercial paper, long-term debt due within one year, and Long-

term debt, less amount due within one year from the Consolidated Balance Sheet as of December 31, 2009

and 2008. 

Hypothetical debt repayment is based on cash and cash equivalent of $1,481 millions as of December 31,

2009. 

[Alcoa

Logo]

Other Reconciliations

43

Days Working Capital

($ in millions)

Quarter

ended

December 31,

2008

December 31,

2009

Change

Receivables from customers, less

allowances

$   1,883

$   1,529

Add: Inventories

3,238

2,328

Less: Accounts payable, trade

2,518

1,954

Working Capital

$   2,603

$   1,903

Sales

$   5,688

$   5,433

Less: businesses classified as held for

sale

69

64

Adjusted Sales

1

$   5,619

$   5,369

Days Working Capital

42.6

32.6

(10.0)

Days

Working Capital = Working Capital divided by (Adjusted Sales/number of days in the quarter)

1

Cost of Goods

Sold % Sales

($ in millions)

Quarter ended

December 31,

2009

Cost of goods sold (COGS)

$   4,905

Less: Special items and buy/resell

activity²

714

Adjusted Cost of goods sold³

$   4,191

Sales

$   5,433

Less: buy/resell activity²

419

Adjusted Sales³

$   5,014

COGS % Sales

83.6%

2

3

-

Adjusted Sales is a non-GAAP financial measure and is being used to calculate Days Working Capital to be consistent

with the fact that the working capital components of the businesses classified as held for sale (the Global Foil and

Transportation Products Europe businesses) are not included in the Working Capital amounts above under accounting

principles generally accepted in the U.S.

Adjusted Cost of goods sold and Adjusted Sales are non-GAAP financial measures and are being used to calculate

COGS

%

Sales

because

management

reviews

the

operating

results

of

Alcoa

excluding

the

impacts

of

special

items,

among others, and the aluminum buy/sell activity affects both components by the same amount. There can be no

assurances that special items will not occur in future periods.

Special

items

include

the

following:

charges

related

to

a

recent

European

Commission’s

ruling

on

electricity

pricing

for

smelters in Italy ($250), a tax settlement related to an equity investment in Brazil ($30), and an environmental accrual for

smelters in Italy ($15). The buy/sell activity relates to Alcoa’s Primary Metals segment.