Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 19, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | AA | |
Entity Registrant Name | ALCOA INC | |
Entity Central Index Key | 0000004281 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,021,019,821 |
Statement of Consolidated Opera
Statement of Consolidated Operations (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Sales (J) | $4,887 | $4,147 |
Cost of goods sold (exclusive of expenses below) | 4,013 | 4,143 |
Selling, general administrative, and other expenses | 239 | 244 |
Research and development expenses | 39 | 41 |
Provision for depreciation, depletion, and amortization | 358 | 283 |
Restructuring and other charges (D) | 187 | 69 |
Interest expense | 118 | 114 |
Other expenses, net (I) | 21 | 30 |
Total costs and expenses | 4,975 | 4,924 |
Loss from continuing operations before income taxes | (88) | (777) |
Provision (benefit) for income taxes (M) | 84 | (307) |
Loss from continuing operations | (172) | (470) |
Loss from discontinued operations (C) | (7) | (17) |
Net loss | (179) | (487) |
Less: Net income attributable to noncontrolling interests | 22 | 10 |
NET LOSS ATTRIBUTABLE TO ALCOA | (201) | (497) |
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: | ||
Loss from continuing operations | (194) | (480) |
Loss from discontinued operations | (7) | (17) |
Net loss | ($201) | ($497) |
Basic: | ||
Loss from continuing operations | -0.19 | -0.59 |
Loss from discontinued operations | -0.01 | -0.02 |
Net loss | -0.2 | -0.61 |
Diluted: | ||
Loss from continuing operations | -0.19 | -0.59 |
Loss from discontinued operations | -0.01 | -0.02 |
Net loss | -0.2 | -0.61 |
Dividends paid per common share | 0.03 | 0.17 |
Consolidated Balance Sheet
Consolidated Balance Sheet (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | $1,292 | $1,481 |
Receivables from customers, less allowances of $61 in 2010 and $70 in 2009 | 1,647 | 1,529 |
Other receivables | 308 | 653 |
Inventories (F) | 2,394 | 2,328 |
Prepaid expenses and other current assets | 978 | 1,031 |
Total current assets | 6,619 | 7,022 |
Properties, plants, and equipment | 35,757 | 35,525 |
Less: accumulated depreciation, depletion, and amortization | 16,090 | 15,697 |
Properties, plants, and equipment, net | 19,667 | 19,828 |
Goodwill | 5,065 | 5,051 |
Investments | 1,058 | 1,061 |
Deferred income taxes | 2,918 | 2,958 |
Other noncurrent assets | 2,388 | 2,419 |
Assets held for sale (C) | 120 | 133 |
Total assets | 37,835 | 38,472 |
Current liabilities: | ||
Short-term borrowings | 166 | 176 |
Accounts payable, trade | 1,868 | 1,954 |
Accrued compensation and retirement costs | 799 | 925 |
Taxes, including income taxes | 371 | 345 |
Other current liabilities | 1,274 | 1,345 |
Long-term debt due within one year | 666 | 669 |
Total current liabilities | 5,144 | 5,414 |
Long-term debt, less amount due within one year | 8,925 | 8,974 |
Accrued pension benefits (O) | 2,547 | 3,163 |
Accrued postretirement benefits | 2,689 | 2,696 |
Other noncurrent liabilities and deferred credits | 2,631 | 2,605 |
Liabilities of operations held for sale (C) | 49 | 60 |
Total liabilities | 21,985 | 22,912 |
COMMITMENTS AND CONTINGENCIES (H) | ||
CONVERTIBLE SECURITIES OF SUBSIDIARY (G) | 40 | |
Alcoa shareholders' equity: | ||
Preferred stock | 55 | 55 |
Common stock (K) | 1,141 | 1,097 |
Additional capital (K) | 7,100 | 6,608 |
Retained earnings | 10,787 | 11,020 |
Treasury stock, at cost | (4,191) | (4,268) |
Accumulated other comprehensive loss | (2,223) | (2,092) |
Total Alcoa shareholders' equity | 12,669 | 12,420 |
Noncontrolling interests | 3,181 | 3,100 |
Total equity | 15,850 | 15,520 |
Total liabilities and equity | $37,835 | $38,472 |
Consolidated Balance Sheet (Par
Consolidated Balance Sheet (Parenthetical) (USD $) | ||
In Millions | Mar. 31, 2010
| Dec. 31, 2009
|
Receivables from customers, allowances | $61 | $70 |
Statement of Consolidated Cash
Statement of Consolidated Cash Flows (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
CASH FROM OPERATIONS | ||
Net loss | ($179) | ($487) |
Adjustments to reconcile net loss to cash from operations: | ||
Depreciation, depletion, and amortization | 358 | 283 |
Deferred income taxes | 68 | (24) |
Equity (income) loss, net of dividends | (15) | 27 |
Restructuring and other charges (D) | 187 | 69 |
Net gain from investing activities - asset sales (I) | (2) | (27) |
Loss from discontinued operations (C) | 7 | 17 |
Stock-based compensation | 25 | 26 |
Other | 65 | 37 |
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: | ||
(Increase) decrease in receivables | (176) | 302 |
(Increase) decrease in inventories | (105) | 523 |
Decrease in prepaid expenses and other current assets | 14 | 11 |
(Decrease) in accounts payable, trade | (55) | (474) |
(Decrease) in accrued expenses | (326) | (303) |
Increase (decrease) in taxes, including income taxes | 321 | (339) |
Pension contributions | (22) | (34) |
(Increase) decrease in noncurrent assets | (9) | 30 |
Increase in noncurrent liabilities | 53 | 98 |
(Increase) decrease in net assets held for sale (C) | (17) | 1 |
CASH PROVIDED FROM (USED FOR) CONTINUING OPERATIONS | 192 | (264) |
CASH PROVIDED FROM (USED FOR) DISCONTINUED OPERATIONS | 7 | (7) |
CASH PROVIDED FROM (USED FOR) OPERATIONS | 199 | (271) |
FINANCING ACTIVITIES | ||
Net change in short-term borrowings | (9) | 209 |
Net change in commercial paper | (1,202) | |
Additions to long-term debt | 53 | 689 |
Debt issuance costs | (13) | |
Payments on long-term debt | (86) | (1) |
Proceeds from exercise of employee stock options | 5 | |
Issuance of common stock (L) | 876 | |
Dividends paid to shareholders | (32) | (137) |
Dividends paid to noncontrolling interests | (72) | (77) |
Contributions from noncontrolling interests | 27 | 159 |
Acquisitions of noncontrolling interests (G) | (66) | |
CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES | (180) | 503 |
INVESTING ACTIVITIES | ||
Capital expenditures | (221) | (468) |
Capital expenditures of discontinued operations | (3) | |
Acquisitions, net of cash acquired | 5 | 18 |
Proceeds from the sale of assets and businesses | 116 | |
Additions to investments | (129) | (29) |
Sales of investments | 137 | 506 |
Other | (4) | |
CASH (USED FOR) PROVIDED FROM INVESTING ACTIVITIES | (208) | 136 |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 1 | |
Net change in cash and cash equivalents | (189) | 369 |
Cash and cash equivalents at beginning of year | 1,481 | 762 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $1,292 | $1,131 |
Statement of Changes in Consoli
Statement of Changes in Consolidated Equity (USD $) | ||||||||
In Millions | Preferred stock
| Common stock
| Additional capital
| Retained earnings
| Treasury stock
| Accumulated other comprehensive loss
| Non-controlling interests
| Total
|
Beginning Balance at Dec. 31, 2008 | $55 | $925 | $5,850 | $12,400 | ($4,326) | ($3,169) | $2,597 | $14,332 |
Net (loss) income | (497) | 10 | (487) | |||||
Other comprehensive (loss) income | 413 | (3) | 410 | |||||
Cash dividends declared: | ||||||||
Preferred @ $0.9375 in 2010 and $1.875 in 2009 per share | (1) | (1) | ||||||
Common @ $0.03 in 2010 and $0.20 in 2009 per share | (168) | (168) | ||||||
Noncontrolling interests | (77) | (77) | ||||||
Beneficial conversion option on convertible notes | 66 | 66 | ||||||
Stock-based compensation | 26 | 26 | ||||||
Common stock issued: compensation plans | (67) | 54 | (13) | |||||
Issuance of common stock (K) | 172 | 704 | 876 | |||||
Contributions | 159 | 159 | ||||||
Purchase of equity from noncontrolling interest | (179) | (179) | ||||||
Other | (7) | (7) | ||||||
Ending Balance at Mar. 31, 2009 | 55 | 1,097 | 6,579 | 11,734 | (4,272) | (2,756) | 2,500 | 14,937 |
Beginning Balance at Dec. 31, 2009 | 55 | 1,097 | 6,608 | 11,020 | (4,268) | (2,092) | 3,100 | 15,520 |
Net (loss) income | (201) | 22 | (179) | |||||
Other comprehensive (loss) income | (131) | 107 | (24) | |||||
Cash dividends declared: | ||||||||
Preferred @ $0.9375 in 2010 and $1.875 in 2009 per share | (1) | (1) | ||||||
Common @ $0.03 in 2010 and $0.20 in 2009 per share | (31) | (31) | ||||||
Noncontrolling interests | (72) | (72) | ||||||
Stock-based compensation | 25 | 25 | ||||||
Common stock issued: compensation plans | (67) | 77 | 10 | |||||
Issuance of common stock (K) | 44 | 556 | 600 | |||||
Contributions | 27 | 27 | ||||||
Purchase of equity from noncontrolling interest | (2) | (4) | (6) | |||||
Other | (20) | 1 | (19) | |||||
Ending Balance at Mar. 31, 2010 | $55 | $1,141 | $7,100 | $10,787 | ($4,191) | ($2,223) | $3,181 | $15,850 |
1_Statement of Changes in Conso
Statement of Changes in Consolidated Equity (Parenthetical) (USD $) | ||
3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |
Preferred, per share | 0.9375 | 1.875 |
Common, per share | 0.03 | 0.2 |
Statement of Consolidated Compr
Statement of Consolidated Comprehensive (Loss) Income (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Net (loss) income | ($179) | ($487) |
Other comprehensive (loss) income, net of tax: | ||
Change in unrecognized losses and prior service cost related to pension and postretirement benefit plans | 30 | 27 |
Foreign currency translation adjustments (A) | 2 | (91) |
Unrealized (losses) gains on available-for-sale securities: | ||
Unrealized holding (losses) gains | (3) | 48 |
Net amount reclassified to earnings | 2 | 380 |
Net change in unrealized (losses) gains on available-for-sale securities | (1) | 428 |
Unrecognized (losses) gains on derivatives (P): | ||
Net change from periodic revaluations | (73) | 100 |
Net amount reclassified to earnings | 18 | (54) |
Net unrecognized (losses) gains on derivatives | (55) | 46 |
Total Other comprehensive (loss) income, net of tax | (24) | 410 |
Comprehensive (loss) income | (203) | (77) |
Parent | ||
Net (loss) income | (201) | (497) |
Other comprehensive (loss) income, net of tax: | ||
Change in unrecognized losses and prior service cost related to pension and postretirement benefit plans | 29 | 26 |
Foreign currency translation adjustments (A) | (103) | (87) |
Unrealized (losses) gains on available-for-sale securities: | ||
Unrealized holding (losses) gains | (3) | 48 |
Net amount reclassified to earnings | 2 | 380 |
Net change in unrealized (losses) gains on available-for-sale securities | (1) | 428 |
Unrecognized (losses) gains on derivatives (P): | ||
Net change from periodic revaluations | (74) | 100 |
Net amount reclassified to earnings | 18 | (54) |
Net unrecognized (losses) gains on derivatives | (56) | 46 |
Total Other comprehensive (loss) income, net of tax | (131) | 413 |
Comprehensive (loss) income | (332) | (84) |
Non-controlling interests | ||
Net (loss) income | 22 | 10 |
Other comprehensive (loss) income, net of tax: | ||
Change in unrecognized losses and prior service cost related to pension and postretirement benefit plans | 1 | 1 |
Foreign currency translation adjustments (A) | 105 | (4) |
Unrecognized (losses) gains on derivatives (P): | ||
Net change from periodic revaluations | 1 | |
Net unrecognized (losses) gains on derivatives | 1 | |
Total Other comprehensive (loss) income, net of tax | 107 | (3) |
Comprehensive (loss) income | $129 | $7 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation | A. Basis of Presentation The interim Consolidated Financial Statements of Alcoa Inc. and its subsidiaries (Alcoa or the Company) are unaudited. The Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, considered necessary by management to fairly state the Companys results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The 2009 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). This Form 10-Q report should be read in conjunction with Alcoas Annual Report on Form 10-K for the year ended December31, 2009, which includes all disclosures required by GAAP. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation. Effective January1, 2010, the functional currency of a subsidiary located in Brazil (that is part of Alcoa World Alumina and Chemicals, which is 60% owned by Alcoa and 40% owned by Alumina Limited) was changed from the U.S. dollar to the Brazilian real (BRL). This change was made as a result of changes in the operations of the business following the completion of the So Lus refinery expansion and Juruti bauxite mine development in the second half of 2009. In connection with this change, on January1, 2010, an adjustment of $300 was recorded as an increase to the net nonmonetary assets of this subsidiary (primarily properties, plants, and equipment) with a corresponding adjustment to the foreign currency translation component of Accumulated other comprehensive loss. The functional currency of all of Alcoas Brazilian operations is now BRL. |
Recently Adopted and Recently I
Recently Adopted and Recently Issued Accounting Guidance | |
3 Months Ended
Mar. 31, 2010 | |
Recently Adopted and Recently Issued Accounting Guidance | B. Recently Adopted and Recently Issued Accounting Guidance Adopted On January1, 2010, Alcoa adopted changes issued by the Financial Accounting Standards Board (FASB) to accounting for variable interest entities. These changes require an enterprise to perform an analysis to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; to eliminate the solely quantitative approach previously required for determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entitys economic performance; and to require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity. The adoption of these changes had no impact on the Consolidated Financial Statements. On January1, 2010, Alcoa adopted changes issued by the FASB to accounting for transfers of financial assets. These changes remove the concept of a qualifying special-purpose entity and remove the exception from the application of variable interest accounting to variable interest entities that are qualifying special-purpose entities; limit the circumstances in which a transferor derecognizes a portion or component of a financial asset; define a participating interest; require a transferor to recognize and initially measure at fair value all assets obtained and liabilities incurred as a result of a transfer accounted for as a sale; and require enhanced disclosure. The adoption of these changes had no impact on the Consolidated Financial Statements. In March 2010, management terminated the Companys accounts receivable securitization program (see Note N); had this program not been terminated, the adoption of these changes would have resulted in a $250 increase to both Receivables from customers and Short-term borrowings on the Consolidated Balance Sheet. Effective January1, 2010, Alcoa adopted changes issued by the FASB on January6, 2010, for a scope clarification to the FASBs previously-issued guidance on accounting for noncontrolling interests in consolidated financial statements. These changes clarify the accounting and reporting guidance for noncontrolling interests and changes in ownership interests of a consolidated subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. The gain or loss includes any gain or loss associated with the difference between the fair value of the |
Discontinued Operations and Ass
Discontinued Operations and Assets Held for Sale | |
3 Months Ended
Mar. 31, 2010 | |
Discontinued Operations and Assets Held for Sale | C. Discontinued Operations and Assets Held for Sale For the first quarter ended March31, 2010, there were no active businesses classified as discontinued operations. The Electrical and Electronic Solutions (EES) business (parts of which were sold in June 2009 and December 2009) was included in discontinued operations for the first quarter ended March31, 2009. The following table details selected financial information of discontinued operations: Firstquarterended March 31, 2010 2009 Sales $ $ 155 Loss from operations before income taxes $ (12 ) $ (24 ) Benefit for income taxes 5 7 Loss from discontinued operations $ (7 ) $ (17 ) In the 2010 first quarter, discontinued operations included an additional loss for the wire harness and electrical portion of the EES business sold in June 2009 as a result of a contract settlement with a former customer of this business (see Note E). In the 2009 first quarter, loss from discontinued operations was comprised of 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 included the Global Foil business (one remaining plant located in Brazil), the Transportation Products Europe business, and the Hawesville, KY automotive casting facility. The major classes of assets and liabilities of operations held for sale were as follows: March31, 2010 December31, 2009 Assets: Receivables $ 46 $ 41 Inventories 29 26 Properties, plants, and equipment 29 45 Other assets 16 21 Assets held for sale $ 120 $ 133 Liabilities: Accounts payable, trade $ 22 $ 25 Accrued expenses 27 35 Liabilities of operations held for sale $ 49 $ 60 |
Restructuring and Other Charges
Restructuring and Other Charges | |
3 Months Ended
Mar. 31, 2010 | |
Restructuring and Other Charges | D. Restructuring and Other Charges In the first quarter of 2010, Alcoa recorded Restructuring and other charges of $187 ($119 after-tax and noncontrolling interests), which were comprised of the following components: $129 ($81 after-tax and noncontrolling interests) in asset impairments and $46 ($29 after-tax and noncontrolling interests) in other exit costs related to the permanent shutdown and planned demolition of certain idled structures at five U.S. locations and $12 ($9 after-tax and noncontrolling interests) in net charges for various other restructuring activities, including charges for the layoff of approximately 220 employees. In the 2010 first quarter, management approved the permanent shutdown and demolition of the following structures, each of which was previously temporarily idled for different reasons: the Eastalco smelter located in Frederick, MD (capacity of 195 kmt-per-year), the smelter located in Badin, NC (capacity of 60 kmt-per-year), an aluminum fluoride plant in Point Comfort, TX, a paste plant and cast house in Massena, NY, and one potline at the smelter in Warrick, IN (capacity of 40 kmt-per-year). This decision was made after a comprehensive strategic analysis was performed to determine the best course of action for each facility. Factors leading to this decision included current market fundamentals, cost competitiveness, other existing idle capacity, required future capital investment, and restart costs, as well as the elimination of ongoing holding costs. The asset impairments of $129 represent the write off of the remaining book value of properties, plants, and equipment related to these facilities. Additionally, remaining inventories, mostly operating supplies, were written down to their net realizable value resulting in a charge of $8 ($5 after-tax and noncontrolling interests), which was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. The other exit costs of $46 represent $30 ($19 after-tax and noncontrolling interests) in asset retirement obligations and $14 ($9 after-tax) in environmental remediation, both triggered by the decision to permanently shutdown and demolish these structures, and $2 ($1 after-tax and noncontrolling interests) in other related costs. In the first quarter of 2009, Alcoa recorded Restructuring and other charges of $69 ($46 after-tax and noncontrolling interests), which were comprised of the following components: $48 ($32 after-tax and noncontrolling interests) for the layoff of approximately 2,500 employees (2,190 in the Engineered Products and Solutions segment, 160 in the Primary Metals segment, 60 in the Flat-Rolled Products segment, and 90 in Corporate) to address the impact of the global economic downturn on Alcoas businesses; $18 ($12 after-tax) for the write-off of previously capitalized third-party costs related to potential business acquisitions due to the adoption of changes to accounting for business combinations; and $3 ($2 after-tax and noncontrolling interests) in net charges associated with previously approved restructuring programs. Alcoa does not include Restructuring and other charges in the results of its reportab |
Acquisitions and Divestitures
Acquisitions and Divestitures | |
3 Months Ended
Mar. 31, 2010 | |
Acquisitions and Divestitures | E. Acquisitions and Divestitures On March31, 2009, Alcoa completed a non-cash exchange of its 45.45% stake in the Sapa AB joint venture for Orkla ASAs 50% stake in the Elkem Aluminium ANS joint venture. The exchange transaction resulted in the recognition of a $188 gain ($133 after-tax) in the first quarter of 2009. In the 2010 first quarter, the purchase price allocation was finalized based on the completion of a valuation study resulting in goodwill of $48, half of which is deductible for U.S. income tax purposes, and a corresponding reduction in properties, plants, and equipment. There was no change to the gain recognized on the transaction in 2009. Under business combination accounting, prior periods, beginning with the period of acquisition, are required to be revised to reflect changes to the original purchase price allocation; however, this $48 was deemed immaterial for this purpose. 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 recognized a loss of $129 ($168 pretax) in discontinued operations in 2009 for this transaction. In the 2010 first quarter, Alcoa recognized an additional loss of $6 ($9 pretax) in discontinued operations as a result of a contract settlement with a former customer of this business (see Note C). |
Inventories
Inventories | |
3 Months Ended
Mar. 31, 2010 | |
Inventories | F. Inventories March31, 2010 December 31, 2009 Finished goods $ 460 $ 441 Work-in-process 726 680 Bauxite and alumina 638 593 Purchased raw materials 331 359 Operating supplies 239 255 $ 2,394 $ 2,328 At March31, 2010 and December31, 2009, the total amount of inventories valued on a last in, first out (LIFO) basis was 35%. If valued on an average-cost basis, total inventories would have been $738 and $717 higher at March31, 2010 and December31, 2009, respectively. |
Investments
Investments | |
3 Months Ended
Mar. 31, 2010 | |
Investments | G. Investments In December 2009, Alcoa and Saudi Arabian Mining Company (known as Maaden) entered into a 30-year joint venture shareholders agreement setting forth the terms for the development, construction, ownership, and operation of an integrated bauxite mine, alumina refinery, aluminum smelter, and rolling mill, in Saudi Arabia. The joint venture was to be owned 60% by Maaden with the other 40% being controlled by Alcoa through a special-purpose vehicle (SPV). Through this SPV arrangement, Alcoa and Aluminum Financing Limited would each have a 20% economic interest in the joint venture. Aluminum Financing Limiteds investment was in the form of subordinated, participating convertible notes issued by the SPV (the Notes), which had common equity rights in the SPV and were to be converted into permanent equity at a future date based on certain conditions as defined in the underlying SPV agreement. In March 2010, Alcoa and Maaden executed a supplement to the shareholders agreement and modified the ownership structure such that the joint venture now will be owned 74.9% by Maaden and 25.1% by Alcoa. Maaden and Alcoa will have put and call options, respectively, whereby Maaden can require Alcoa to purchase from Maaden, or Alcoa can require Maaden to sell to Alcoa, a 14.9% interest in the joint venture at the then fair value. These options may only be exercised in a six-month window that opens five years after the Commercial Production Date (as defined in the shareholders agreement) and, if exercised, must be exercised for the full 14.9% interest. In addition, Alcoa will pay $34 (rather than the previously-disclosed $55) to Maaden, representing Alcoas pro rata share of certain agreed upon pre-incorporation costs incurred by Maaden before formation of the joint venture; this payment is due on August1, 2010. The Alcoa affiliate that will hold Alcoas interests in the smelting company and the rolling mill company will be wholly owned by Alcoa, and the Alcoa affiliate that will hold Alcoas interests in the mining and refining company will be owned 60% (or more) by Alcoa and 40% by Alumina Limited. Except in limited circumstances, Alcoa may not sell, transfer or otherwise dispose of or encumber or enter into any agreement in respect of the votes or other rights attached to its interests in the joint venture without Maadens prior written consent. Concurrent with modifying the shareholders agreement with Maaden, Alcoa entered into an agreement with Aluminum Financing Limited under which Alcoa redeemed the $40 in Notes, and Aluminum Financing Limited terminated all of its current and future interests in the SPV, for a payment of $60. This $60 was included in Acquisitions of noncontrolling interests on the accompanying Statement of Consolidated Cash Flows. The difference between the redemption amount and the carrying value of the Notes was reflected as a reduction in Additional capital on the accompanying Consolidated Balance Sheet. As a result of the changes in the ownership structure described above, Alcoas capital investment in the joint venture will be approximately $1,100 over a four-year period, and Alcoa will be responsible for its |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies | H. 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 veste |
Other Expenses, Net
Other Expenses, Net | |
3 Months Ended
Mar. 31, 2010 | |
Other Expenses, Net | I. Other Expenses, Net Firstquarterended March 31, 2010 2009 Equity (income) loss $ (3 ) $ 23 Interest income (4 ) (1 ) Foreign currency (gains) losses, net (6 ) 14 Net gain from asset sales (2 ) (27 ) Other, net 36 21 $ 21 $ 30 |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information | J. Segment Information The operating results of Alcoas reportable segments were as follows (differences between segment totals and consolidated totals are in Corporate): First quarter ended March31, 2010 Alumina Primary Metals Flat- Rolled Products Engineered Products and Solutions Total Sales: Third-party sales $ 638 $ 1,702 $ 1,435 $ 1,074 $ 4,849 Intersegment sales 591 623 46 1,260 Total sales $ 1,229 $ 2,325 $ 1,481 $ 1,074 $ 6,109 Profit and loss: Equity income $ 2 $ $ $ 1 $ 3 Depreciation, depletion, and amortization 92 147 59 41 339 Income taxes 27 18 18 31 94 After-tax operating income (ATOI) 72 123 30 81 306 First quarter ended March31, 2009 Sales: Third-party sales $ 430 $ 844 $ 1,510 $ 1,270 $ 4,054 Intersegment sales 384 393 26 803 Total sales $ 814 $ 1,237 $ 1,536 $ 1,270 $ 4,857 Profit and loss: Equity income (loss) $ 2 $ (30 ) $ $ $ (28 ) Depreciation, depletion, and amortization 55 122 52 40 269 Income taxes (1 ) (147 ) 46 (102 ) ATOI 35 (212 ) (61 ) 95 (143 ) The following table reconciles total segment ATOI to consolidated net loss attributable to Alcoa: Firstquarterended March 31, 2010 2009 Total segment ATOI $ 306 $ (143 ) Unallocated amounts (net of tax): Impact of LIFO (14 ) 29 Interest income 3 1 Interest expense (77 ) (74 ) Noncontrolling interests (22 ) (10 ) Corporate expense (67 ) (71 ) Restructuring and other charges (122 ) (46 ) Discontinued operations (7 ) (17 ) Other (201 ) (166 ) Consolidated net loss attributable to Alcoa $ (201 ) $ (497 ) Items required to reconcile segment ATOI to consolidated net loss attributable to Alcoa include: the impact of LIFO inventory accounting; interest income and expense; noncontrolling interests; corporate expense (general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities, along with depreciation and amortization on corporate-owned assets); restructuring and other charges; discontinued operations; and other items, including intersegment profit eliminations and other metal adjustments, differences between tax rates applicable to the segments and the consolidated effective tax rate, the results of |
Preferred and Common Stock
Preferred and Common Stock | |
3 Months Ended
Mar. 31, 2010 | |
Preferred and Common Stock | K. Preferred and Common Stock On January26, 2010, Alcoa contributed 44,313,146 newly issued shares of its common stock to a master trust that holds the assets of certain U.S. defined benefit pension plans in a private placement transaction. These shares were valued at $13.54 per share (the closing price of Alcoas common stock on January26, 2010), or $600 in the aggregate, and were issued to satisfy a portion of Alcoas future funding obligations to these plans, including a portion of the estimated minimum required funding for 2011. On January27, 2010, the 44,313,146 shares were registered under Alcoas current shelf registration statement dated March10, 2008 for resale by the master trust, as selling stockholder. Alcoa is authorized to issue up to 1.8 billion shares of common stock. As of March31, 2010, there were 1,141,387,684 common shares issued and 1,020,819,182 common shares outstanding. |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share | L. Earnings Per Share Basic earnings per share (EPS) amounts are computed by dividing earnings, after the deduction of preferred stock dividends declared and dividends and undistributed earnings allocated to participating securities, by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding not classified as participating securities. The information used to compute basic and diluted EPS on loss from continuing operations attributable to Alcoa common shareholders was as follows (shares in millions): Firstquarterended March 31, 2010 2009 Loss from continuing operations attributable to Alcoa common shareholders $ (194 ) $ (480 ) Less: preferred stock dividends declared 1 1 Loss from continuing operations available to common equity (195 ) (481 ) Less: dividends and undistributed earnings allocated to participating securities Loss from continuing operations available to Alcoa common shareholders $ (195 ) $ (481 ) Average shares outstanding basic 1,007 817 Effect of dilutive securities: Stock options Stock and performance awards Convertible notes Average shares outstanding diluted 1,007 817 Participating securities are defined as unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) and are included in the computation of earnings per share pursuant to the two-class method. Prior to January1, 2010, certain employees were granted stock and performance awards, which entitle those employees to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of Alcoas common stock. As such, these unvested stock and performance awards met the definition of a participating security. Under the two-class method, all earnings, whether distributed or undistributed, are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. At March31, 2010 and 2009, there were 5million and 7million such participating securities outstanding. However, none of the loss from continuing operations in either period was allocated to these participating securities because these awards do not share in any loss generated by Alcoa. Effective January1, 2010, new grants of stock and performance awards do not contain a nonforfeitable right to dividends during the vesting period. As a result, an employee will forfeit the right to dividends accrued on unvested awards if that person does not fulfill their service requirement during the vesting period. As such, these awards are not treated as participating securities in the EPS calculation as the employees no longer have equivalent dividend rights as common shareholders. These awards are included in the EPS calculation utilizing the treasury stock method similar |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | M. Income Taxes The effective tax rate for the first quarter of 2010 and 2009 was 95.5% (provision on a loss) and 39.5% (benefit on a loss), respectively. The rate for the 2010 first quarter differs by 130.5% from the U.S. federal statutory rate of 35% primarily due to a $79 discrete income tax charge as a result of a change in the tax treatment of federal subsidies received related to prescription drug benefits provided under certain retiree health care benefit plans that were determined to be actuarially equivalent to Medicare Part D (see Note O), a $22 impact for operational losses in certain foreign jurisdictions that are excluded from the estimated annual effective tax rate calculation (impact is expected to reverse by the end of 2010), and $11 in discrete income tax charges for interest paid to the Internal Revenue Service on a previously deferred gain associated with the 2007 formation of the former soft alloy extrusions joint venture and a change in the anticipated structure of the potential sale of the Transportation Products Europe business. The rate for the 2009 first quarter differs from the U.S. federal statutory rate of 35% primarily due to a $28 discrete income tax benefit related to a Canadian tax law change allowing a tax return to be filed in U.S dollars, an $11 discrete income tax benefit related to the Elkem/Sapa AB exchange transaction, and a $15 impact for operational losses that are excluded from the estimated annual effective tax rate calculation. |
Accounts Receivable Securitizat
Accounts Receivable Securitizations | |
3 Months Ended
Mar. 31, 2010 | |
Accounts Receivable Securitizations | N. Accounts Receivable Securitizations On March26, 2010, Alcoa terminated its accounts receivable securitization program, under which Alcoa sold a senior undivided interest in certain customer receivables, without recourse, on a continuous basis to a third-party for cash. Alcoa repaid the $250 upon termination. In light of the adoption of accounting changes related to the transfer of financial assets, had the securitization program not been terminated, it would have resulted in a $250 increase in both Receivables from customers and Short-term borrowings on the accompanying Consolidated Balance Sheet (see Note B). Also on March26, 2010, Alcoa entered into two arrangements with third parties to sell certain customer receivables outright without recourse. Under these agreements, $177 of receivables were sold for cash in March 2010. Alcoa is servicing the customer receivables for the third parties at market rates; therefore, no servicing asset or liability was recorded. |
Pension Plans and Other Postret
Pension Plans and Other Postretirement Benefits | |
3 Months Ended
Mar. 31, 2010 | |
Pension Plans and Other Postretirement Benefits | O. Pension Plans and Other Postretirement Benefits The components of net periodic benefit cost were as follows: Pension benefits Postretirementbenefits First quarter ended March31, 2010 2009 2010 2009 Service cost $ 37 $ 35 $ 5 $ 5 Interest cost 170 167 44 46 Expected return on plan assets (196 ) (191 ) (2 ) (3 ) Amortization of prior service cost (benefit) 4 4 (4 ) (3 ) Recognized actuarial loss 44 28 8 11 Net periodic benefit cost $ 59 $ 43 $ 51 $ 56 On January26, 2010, Alcoa contributed newly issued shares (see Note K) of its common stock (valued at $600) to a master trust that holds the assets of certain U.S. defined benefit pension plans in a private placement transaction. These shares were issued to satisfy a portion of Alcoas future funding obligations to these plans, including a portion of the estimated minimum required funding for 2011. On March23, 2010, the Patient Protection and Affordable Care Act (the PPACA) was signed into law, and, on March30, 2010, the Health Care and Education Reconciliation Act of 2010 (the HCERA and, together with PPACA, the Acts), which makes various amendments to certain aspects of the PPACA, was signed into law. The Acts effectively change the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at least actuarially equivalent to the corresponding benefits provided under Medicare Part D. The federal subsidy paid to employers was introduced as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the MPDIMA). Alcoa has been receiving the federal subsidy since the 2006 tax year related to certain retiree prescription drug plans that were determined to be actuarially equivalent to the benefit provided under Medicare Part D. Under the MPDIMA, the federal subsidy does not reduce an employers income tax deduction for the costs of providing such prescription drug plans nor is it subject to income tax individually. Under the Acts, beginning in 2013, an employers income tax deduction for the costs of providing Medicare Part D-equivalent prescription drug benefits to retirees will be reduced by the amount of the federal subsidy. Under GAAP, any impact from a change in tax law must be recognized in earnings in the period enacted regardless of the effective date. As a result, Alcoa recognized a noncash charge of $79 in the first quarter ended March31, 2010 for the elimination of a related deferred tax asset to reflect the change in the tax treatment of the federal subsidy (see Note M). |
Derivatives and Other Financial
Derivatives and Other Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
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. Alcoa is not involved in trading activities for energy, weather derivatives, or other nonexchange commodity trading activities. The fair values of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet were as follows: Asset Derivatives Balance Sheet Location March31, 2010 December31, 2009 Derivatives designated as hedging instruments: Aluminum contracts Prepaid expenses and other current assets $ 46 $ 59 Interest rate contracts Prepaid expenses and other current assets 38 34 Foreign exchange contracts Prepaid expenses and other current assets 5 7 Energy contracts Prepaid expenses and other current assets 7 Aluminum contracts Other noncurrent assets 28 22 Interest rate contracts Other noncurrent assets 73 73 Foreign exchange contracts Other noncurrent assets 3 5 Energy contracts Other noncurrent assets 1 Total derivatives designated as hedging instruments $ 194 $ 207 Derivatives not designated as hedging instruments*: Aluminum contracts Prepaid expenses and other current assets $ 4 $ 6 Energy contracts Prepaid expenses and other current assets 1 Freight contracts Prepaid expenses and other current assets 1 Aluminum contracts Other noncurrent assets 1 3 Total derivatives not designated as hedging instruments $ 6 $ 10 Less margin held: Interest rate contracts Prepaid expenses and other current assets $ 13 $ 19 Aluminum contracts Prepaid expenses and other current assets 16 22 Energy contracts Prepaid expenses and other current assets 1 Interest rate contracts Other noncurrent assets 11 18 Sub-total $ 40 $ 60 Total Asset Derivatives $ 160 $ 157 * See the Other section within Note P for additional information on |
Subsequent Events
Subsequent Events | |
3 Months Ended
Mar. 31, 2010 | |
Subsequent Events | Q. Subsequent Events Management evaluated all activity of Alcoa and concluded that no subsequent events have occurred that would require recognition in the Consolidated Financial Statements or disclosure in the Notes to the Consolidated Financial Statements, except as disclosed in the European Commission Matters section of Note H related to a matter in Italy. |