FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998 Commission File Number 1-3610
ALUMINUM COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0317820
(State of incorporation) (I.R.S. Employer Identification No.)
201 Isabella Street, Pittsburgh, Pennsylvania 15212-5858
(Address of principal executive offices) (Zip Code)
Office of Investor Relations 412-553-3042
Office of the Secretary 412-553-4707
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
As of November 2, 1998, 183,572,465 shares of common stock,
par value $1.00, of the Registrant were outstanding.
A07-15901
-1-
PART I - FINANCIAL INFORMATION
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
September 30 December 31
ASSETS 1998 1997
------------ -----------
Current assets:
Cash and cash equivalents (includes cash of $145.5 in
1998 and $100.8 in 1997) $ 521.1 $ 800.8
Short-term investments 63.4 105.6
Accounts receivable from customers, less allowances:
1998-$65.5; 1997-$36.6 2,299.7 1,581.2
Other receivables 169.9 216.4
Inventories (b) 1,877.4 1,312.6
Deferred income taxes 180.6 172.3
Prepaid expenses and other current assets 327.1 228.0
--------- ---------
Total current assets 5,439.2 4,416.9
--------- ---------
Properties, plants and equipment, at cost 17,894.8 15,254.0
Less, accumulated depreciation, depletion and
amortization 8,858.5 8,587.5
--------- ---------
Net properties, plants and equipment 9,036.3 6,666.5
--------- ---------
Goodwill, net of accumulated amortization 1,319.4 487.6
Other assets 2,098.4 1,499.6
--------- ---------
Total assets $17,893.3 $13,070.6
========= =========
LIABILITIES
Current liabilities:
Short-term borrowings $ 826.0 $ 347.7
Accounts payable, trade 1,040.6 811.7
Accrued compensation and retirement costs 653.9 436.0
Taxes, including taxes on income 415.2 334.2
Other current liabilities 785.2 375.7
Long-term debt due within one year 167.5 147.2
--------- ---------
Total current liabilities 3,888.4 2,452.5
--------- ---------
Long-term debt, less amount due within one year (c) 2,921.3 1,457.2
Accrued postretirement benefits 1,892.1 1,749.6
Other noncurrent liabilities and deferred credits 1,605.9 1,271.2
Deferred income taxes 307.0 281.0
--------- ---------
Total liabilities 10,614.7 7,211.5
MINORITY INTERESTS 1,453.3 1,439.7
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock 55.8 55.8
Common stock 197.3 178.9
Additional capital 1,875.0 578.1
Retained earnings 5,087.9 4,717.3
Treasury stock, at cost (1,015.4) (758.0)
Accumulated other comprehensive income (d) (375.3) (352.7)
--------- ---------
Total shareholders' equity 5,825.3 4,419.4
--------- ---------
Total liabilities and shareholders' equity $17,893.3 $13,070.6
========= =========
The accompanying notes are an integral part of the financial statements.
-2-
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per share amounts)
Third quarter Nine months
ended ended
September 30 September 30
------------- ------------
1998 1997 1998 1997
---- ---- ---- ----
REVENUES
Sales and operating revenues $4,108.9 $3,357.5 $11,141.0 $10,020.6
Other income 47.8 46.9 94.2 125.9
-------- -------- --------- ---------
4,156.7 3,404.4 11,235.2 10,146.5
-------- -------- --------- ---------
COSTS AND EXPENSES
Cost of goods sold and operating expenses 3,198.3 2,533.8 8,576.5 7,624.9
Selling, general administrative and other
expenses 214.2 161.4 522.2 480.9
Research and development expenses 28.8 33.8 81.2 104.1
Provision for depreciation, depletion and
amortization 233.2 185.8 604.1 549.5
Special items (e) - (18.0) - (22.6)
Interest expense 59.0 35.5 140.0 106.2
Taxes other than payroll taxes 41.1 30.9 103.2 98.6
-------- -------- --------- ---------
3,774.6 2,963.2 10,027.2 8,941.6
-------- -------- --------- ---------
EARNINGS
Income before taxes on income 382.1 441.2 1,208.0 1,204.9
Provision for taxes on income (f) 115.9 154.8 392.6 421.7
-------- -------- --------- ---------
Income from operations 266.2 286.4 815.4 783.2
Less: Minority interests' share (48.5) (58.3) (180.7) (188.4)
-------- -------- ---------- ---------
NET INCOME $ 217.7 $ 228.1 $ 634.7 $ 594.8
======== ======== ========= =========
EARNINGS PER SHARE (g)
Basic $ 1.22 $ 1.32 $ 3.68 $ 3.43
======== ======== ========= =========
Diluted $ 1.21 $ 1.29 $ 3.67 $ 3.38
======== ======== ========= =========
Dividends paid per common share $ .375 $ .25 $ 1.125 $ .725
======== ======== ========= =========
The accompanying notes are an integral part of the financial statements.
-3-
Alcoa and subsidiaries
Condensed Statement of Consolidated Cash Flows (unaudited)
(in millions)
Nine months ended
September 30
------------
1998 1997
---- ----
CASH FROM OPERATIONS
Net income $ 634.7 $ 594.8
Adjustments to reconcile net income to cash from operations:
Depreciation, depletion and amortization 614.1 561.5
Change in deferred income taxes (2.5) 15.6
Equity income before additional taxes, net of dividends (18.0) (26.6)
Non-cash special items - (22.6)
Book value of asset disposals 30.9 28.8
Minority interests 180.7 188.4
Other 16.4 (12.1)
(Increase) reduction in receivables 8.4 (156.1)
Reduction in inventories 110.7 99.4
Increase in prepaid expenses and other current assets (75.2) (34.2)
Reduction in accounts payable and accrued expenses (18.1) (3.9)
Increase in taxes, including taxes on income 77.5 95.2
Cash received on long-term alumina supply contract - 240.0
Change in hedging activity (19.4) (126.8)
Net change in noncurrent assets and liabilities (136.3) (70.1)
-------- --------
CASH FROM OPERATIONS 1,403.9 1,371.3
-------- --------
FINANCING ACTIVITIES
Net changes in short-term borrowings 322.9 164.8
Common stock issued and treasury stock sold 30.5 199.7
Repurchase of common stock (293.5) (292.5)
Dividends paid to shareholders (193.2) (127.2)
Dividends paid and return of capital to minority interests (169.9) (290.5)
Additions to long-term debt 1,871.4 435.9
Payments on long-term debt (1,273.5) (555.9)
-------- --------
CASH FROM (USED FOR) FINANCING ACTIVITIES 294.7 (465.7)
-------- --------
INVESTING ACTIVITIES
Capital expenditures (594.7) (618.6)
Acquisitions, net of cash acquired (1352.7) -
Proceeds from the sale of assets - 193.2
Additions to investments (110.9) (.7)
Sale of subsidiaries 7.4 -
Sale of investments - 60.2
Net change in short-term investments 42.3 (62.9)
Changes in minority interests 37.8 14.0
Other (9.0) (8.6)
-------- --------
CASH USED FOR INVESTING ACTIVITIES (1,979.8) (423.4)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1.5 (10.5)
-------- --------
CHANGES IN CASH
Net change in cash and cash equivalents (279.7) 471.7
Cash and cash equivalents at beginning of year 800.8 598.1
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 521.1 $1,069.8
======== ========
The accompanying notes are an integral part of the financial statements.
-4-
Notes to Condensed Consolidated Financial Statements
(in millions, except share amounts)
Notes:
(a) Summarized consolidated financial data for Alcoa Aluminio S.A.
(Aluminio) and Alcoa of Australia Limited (AofA) begin on
page 20.
(b) Inventories consisted of:
September 30 December 31
1998 1997
------------ -----------
Finished goods $ 447.4 $ 314.9
Work in process 607.2 433.0
Bauxite and alumina 295.5 263.9
Purchased raw materials 384.3 197.3
Operating supplies 143.0 103.5
-------- --------
$1,877.4 $1,312.6
======== ========
Approximately 60.3% of total inventories at September 30,
1998 were valued on a LIFO basis. If valued on an average
cost basis, total inventories would have been $786.0 and
$769.8 higher at September 30, 1998 and December 31, 1997,
respectively.
(c) In January 1998, Alcoa issued $300 of 6.75% bonds due 2028.
The net proceeds were used for general corporate purposes.
In June 1998, Alcoa issued $200 of 6.125% bonds due in 2005,
$250 of 6.5% bonds due in 2018 and $675 of commercial paper.
The proceeds from the June offerings were used to fund the
Alumax transaction. In the third quarter, Alcoa issued an
additional $425 of commercial paper, the proceeds of which
were used to repay higher cost Alumax debt. See Note i for
additional detail.
(d) The calculation of comprehensive income is as follows:
Third quarter Nine months
ended ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Net income $217.7 $228.1 $634.7 $594.8
Other comprehensive income
(loss) 24.0 (59.9) (22.6) (196.8)
------ ------ ------ ------
Comprehensive income $241.7 $168.2 $612.1 $398.0
====== ====== ====== ======
(e) The 1997 third quarter included a gain of $18.0 ($12.3
after-tax) related to special items. The sale of equity
securities generated a gain of $38.0 ($24.7 after-tax)
that was partially offset by a $20.0 ($12.4 after-tax)
charge to increase environmental reserves. Special items
in the 1997 nine-month period include an additional $4.6
(a $1.1 loss after-tax) related to asset sales, increases
to environmental reserves and impairments.
(f) The income tax provision for the period is based on the
effective tax rate expected to be applicable for the full
year. The 1998 nine-month rate of 32.5% differs from the
statutory rate primarily because of taxes on foreign
income.
(g) Basic earnings per share (EPS) amounts are computed by
dividing earnings applicable to common stockholders by
the average number of common shares outstanding. Diluted
EPS amounts assume the issuance of common stock for all
potentially dilutive equivalents outstanding. Anti-
dilutive outstanding stock options have been excluded
-5-
from the diluted EPS calculation. The detail of basic
and diluted EPS follows:
Third quarter Nine months
ended ended
September 30 September 30
------------- ------------
1998 1997 1998 1997
---- ---- ---- ----
Net income $217.7 $228.1 $634.7 $594.8
Less: Preferred stock dividends .5 .5 1.5 1.5
------ ------ ------ ------
Income available to common stockholders $217.2 $227.6 $633.2 $593.3
Weighted average shares outstanding 178.7 173.1 171.9 173.1
Basic EPS $1.22 $1.32 $3.68 $3.43
====== ====== ====== ======
Effect of dilutive securities:
Add Shares issuable upon exercise
of outstanding stock options .7 2.4 .7 2.4
Diluted shares outstanding 179.4 175.5 172.6 175.5
Diluted EPS $1.21 $1.29 $3.67 $3.38
====== ====== ====== ======
(h) On February 6, 1998, Alcoa completed its acquisition of
Inespal, S.A. of Madrid, Spain. Alcoa paid approximately
$150 in cash and assumed $260 of debt and liabilities in
exchange for substantially all of Inespal's businesses.
Inespal is an integrated aluminum producer with 1997
revenues of $1,100. The acquisition included an alumina
refinery, three aluminum smelters, three aluminum rolling
facilities, two extrusion plants, an administrative center
and related sales offices in Europe.
(i) On March 9, 1998, Alcoa and Alumax Inc. (Alumax) announced
that they had entered into an agreement under which Alcoa
was to acquire all of the outstanding shares of Alumax for
a combination of cash and stock. On June 16, 1998, after
approval by the U.S. Department of Justice (DOJ) and other
regulatory agencies, Alcoa completed the first step of the
acquisition by purchasing approximately 51% of the
outstanding shares of Alumax at $50 per share. Following
approval by Alumax shareholders at a special meeting on
July 31, 1998, Alcoa completed the acquisition by exchanging
its common stock for the remaining shares of Alumax at a
ratio of .6975 share of Alcoa stock per share of Alumax
stock. The exchange resulted in Alcoa issuing
18,425,380 shares to Alumax shareholders. The transaction
was valued at approximately $3,800, including the assump-
tion of debt, and was accounted for using the purchase
method. The purchase price includes cash and stock paid
to Alumax shareholders as well as other direct costs of
the acquisition. The purchase price allocation is
preliminary; the final allocation is subject to valuation
and other studies that have not been completed. The
goodwill resulting from the acquisition will be amortized
over a forty-year period.
As part of the agreement with the DOJ and its related
approval of the Alumax transaction, Alcoa agreed to divest
its cast plate operations in Vernon, CA. Annual sales for
these operations are approximately $30 million. Alcoa does
not anticipate that this divestiture will have a material
impact on its operations.
The following presents pro forma information assuming that
the acquisition of 100% of Alumax by Alcoa had occurred at
the beginning of each respective year. Adjustments that
have been included to arrive at the pro forma totals
primarily include those related to acquisition financing,
the amortization of goodwill, the elimination of
transactions between Alcoa and Alumax and additional
depreciation related to the increase in basis that resulted
from the transaction. Tax effects from the pro forma
adjustments noted above also have been included at the 35%
statutory rate.
-6-
Nine months
ended
September 30
------------
1998 1997
---- ----
Sales $12,567.5 $11,977.4
Net income 657.8 528.0
Basic earnings per share 3.55 2.75
Diluted earnings per share 3.53 2.72
The pro forma results are not necessarily indicative of
what actually would have occurred if the transaction
had been in effect for the entire periods presented,
are not intended to be a projection of future results,
and do not reflect any cost savings that might be
achieved from the combined operations.
(j) In June 1998, the Financial Accounting Standards Board
issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities." The standard requires that
entities value all derivative instruments at fair value
and record the instruments on the balance sheet. The
standard also significantly changes the requirements for
hedge accounting. The standard is required to be adopted
by Alcoa for the first quarter of the year 2000. The
Company believes that SFAS 133 will have a material impact
on its financial statements as its current aluminum,
foreign exchange and interest rate derivative contracts as
well as certain underlying exposures will be recorded on
the balance sheet at fair value. Management is currently
assessing the details of how the standard will impact its
financial statements and is preparing a plan of
implementation.
-7-
In the opinion of the Company, the financial statements and
summarized financial data in this Form 10-Q report include all
adjustments, including those of a normal recurring nature,
necessary to fairly state the results for the periods. This
Form 10-Q report should be read in conjunction with the
Company's annual report on Form 10-K for the year ended
December 31, 1997.
The financial information required in this Form 10-Q by
Rule 10-01 of Regulation S-X has been subject to a review by
PricewaterhouseCoopers LLP, the Company's independent
certified public accountants, as described in their report
on page 9.
-8-
Independent Accountant's Review Report
To the Shareholders and Board of Directors
Aluminum Company of America (Alcoa)
We have reviewed the unaudited condensed consolidated
balance sheet of Alcoa and subsidiaries as of September 30,
1998, the unaudited condensed statements of consolidated
income for the three-month and nine-month periods ended
September 30, 1998 and 1997, and the unaudited condensed
statement of consolidated cash flows for the nine-month
periods ended September 30, 1998 and 1997, which are
included in Alcoa's Form 10-Q for the period ended
September 30, 1998. These financial statements are the
responsibility of Alcoa's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed
consolidated financial statements referred to above for them
to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet
of Alcoa and subsidiaries as of December 31, 1997, and the
related statements of consolidated income, shareholders'
equity, and cash flows for the year then ended (not presented
herein). In our report dated January 8, 1998, except for
Note V, for which the date is February 6, 1998, we expressed
an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of
December 31, 1997, is fairly stated, in all material respects,
in relation to the consolidated balance sheet from which it
has been derived.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
October 6, 1998
-9-
Management's Discussion and Analysis of the
Results of Operations and Financial Condition
(dollars in millions, except share amounts)
Results of Operations
Principal income and operating data follow.
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Sales $4,108.9 $3,357.5 $11,141.0 $10,020.6
Net income 217.7 228.1 634.7 594.8
Basic earnings per common share 1.22 1.32 3.68 3.43
Diluted earnings per common share 1.21 1.29 3.67 3.38
Shipments of aluminum products (1) 1,133 742 2,777 2,222
Shipments of alumina (1) 1,536 1,866 5,346 5,415
<FN>
(1) in thousands of metric tons (mt)
Overview
Alcoa earned $217.7 or $1.22 per common share for the third
quarter of 1998, compared with $228.1 or $1.32 per share, in the
1997 third quarter. Net income for the 1997 third quarter
included a special after-tax gain of $12.3, or 7 cents per share,
related to the sale of equity securities and charges to increase
environmental reserves. For the first nine months of 1998,
earnings were $634.7, or $3.68 per share, versus $594.8 or $3.43
per share in the 1997 period. The 1997 nine-month period
included special charges of $1.1 related to asset sales,
increases to environmental reserves and an impairment at a U.S.
manufacturing facility in addition to the $12.3 after-tax gain
mentioned above.
The improved earnings level for the 1998 year-to-date period was
due to higher aluminum shipments and revenues, resulting
primarily from the Alumax and Inespal acquisitions (the
acquisitions) and lower administrative costs. Gains from these
improvements were offset by lower aluminum prices, which have
fallen 14% on the London Metal Exchange (LME) since the beginning
of 1998. The Alumax acquisition was slightly accretive to 1998
third quarter earnings per share.
AofA's pretax income from operations for the 1998 third quarter
was down 28% from the comparable 1997 period. Lower realized
prices for alumina and aluminum, along with lower alumina
shipments, were the primary reasons for the decline.
In Brazil, Aluminio's third quarter 1998 pre-tax income from
operations decreased $19.2 from the comparable 1997 period.
Aluminio's results reflect the effect of divestitures, which
reduced revenues by $52.4 from the 1997 quarter. In addition,
higher volumes for ingot and extrusions were offset by lower
aluminum prices.
Consolidated revenues and shipment information by segment
follows.
Alumina and Chemicals Segment
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Alumina and chemicals revenues $ 379 $ 487 $ 1,353 $ 1,481
Alumina shipments (000 mt) 1,536 1,866 5,346 5,415
-10-
Total revenues for the Alumina and Chemicals segment in the 1998
third quarter fell 22% when compared with the 1997 third quarter.
Year-to-date, revenues decreased 9% from the 1997 period.
Alumina revenues for the 1998 third quarter were down 33% as
realized prices fell 19% and shipments fell 18%. Year-to-date,
revenues decreased 14% as realized prices declined 13% and
shipments fell 1% over the 1997 nine-month period. The decline
in shipments during the third quarter is almost entirely due to
the Alumax acquisition. Previously, Alcoa recorded shipments to
Alumax smelters as third party revenues; these shipments are now
recorded as inter-company revenues, which are eliminated on a
consolidated basis.
Revenues from chemical products were flat when compared with the
1997 third quarter and nine-month periods. Increased revenues
from Europe and Australia were offset by lower revenues from Asia
and the impact of divestitures.
The entities jointly owned by Alcoa and WMC Limited of Australia
(WMC), known as Alcoa World Alumina and Chemicals (AWAC),
produced 9,152 mt of alumina during the 1998 nine-month period,
compared with 7,751 mt in the comparable 1997 period. Of the
1998 nine-month amount, 5,346 mt was shipped to third-party
customers.
Aluminum Processing Segment
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
Product classes 1998 1997 1998 1997
--------------- ---- ---- ---- ----
Revenues
Flat-rolled products $ 1,276 $ 1,035 $ 3,486 $ 2,983
Engineered products 1,044 619 2,357 1,863
Aluminum ingot 563 367 1,399 1,126
Other aluminum products 88 71 227 220
------- ------- ------- -------
Total $ 2,971 $ 2,092 $ 7,469 $ 6,192
Shipments (000 mt)
Flat-rolled products 463 360 1,216 1,058
Engineered products 263 140 558 426
Aluminum ingot 382 221 929 678
Other aluminum products 25 21 74 60
------- ------- ------- -------
Total 1,133 742 2,777 2,222
Flat-rolled products - Total flat-rolled products revenue rose
23% from the 1997 third quarter and 17% from the 1997 year-to-
date period. The increases were due primarily to higher
shipments resulting from the acquisitions. Flat-rolled products
revenue per pound rose 2% from the 1997 nine-month period as
product mix shifted towards a higher proportion of aerospace
products.
Approximately one-half of revenues and shipments for flat-rolled
products are derived from rigid container sheet (RCS), which is
used to produce aluminum beverage can bodies and can ends. RCS
revenues were unchanged from the 1997 nine-month period, but
declined 9% when compared with the 1997 third quarter. In the
1998 third quarter, shipments fell 7% and prices were down
slightly; in the 1998 nine-month period, realized prices
increased 2% while shipments fell by a similar amount.
Sheet and plate revenues in the 1998 third quarter were up 73%
compared with the 1997 quarter and 42% on a year-to-date basis.
The increases were primarily due to higher shipments, which
resulted from the acquisitions. Overall average realized prices
for sheet and plate fell 18% from the 1997 third quarter and 5%
from the 1997 year-to-date period as the additional shipments
noted above represent a lower value-added mix.
-11-
Engineered products - These products include hard and soft alloy
extrusions used in the transportation, construction and
distributor markets, aluminum forgings and wire, rod and bar.
Revenues from the sale of engineered products increased 69% in
the 1998 third quarter as shipments rose 88%. Year-to-date,
revenues and shipments were up 27% and 31%, respectively.
Average realized prices for engineered products for the 1998 nine-
month period fell 3% to $1.92 per pound, primarily due to the
addition of the Alumax extrusion businesses in the 1998 third
quarter. These businesses produce primarily soft alloy
extrusions, which have a lower value-added, resulting in a
reduction in average realized prices.
Revenues for extruded products were higher by 112% and 43% from
the 1997 third quarter and nine-month periods. Shipments rose
144% and 49% over the same periods, while prices fell 13% and 4%,
respectively. The Alumax acquisition was the primary factor
behind the shipment increases. Without the impact of Alumax,
shipments were up slightly, primarily in Alcoa's European
operations.
Forgings revenues increased 13% and 19% from the 1997 quarter and
nine-month periods. The increases were primarily a result of
higher shipments of wheels, due primarily to Alcoa's new European
wheels facility, which began operations in the 1997 second
quarter.
Aluminum ingot - Revenues for this product were up 54% in the
1998 quarter and 24% in the 1998 nine-month period. The
increases were due to higher shipments, with the 1998 quarter
rising 73% and the year-to-date period increasing 37%. Lower
shipments from AofA and Aluminio were more than offset by
increased shipments from Alcoa's European smelters and the
addition of Alumax. In the aluminum ingot market, LME ingot
inventories have decreased 18% this year at the same time that
the 3-month LME ingot price has fallen 14%.
Other aluminum products - Revenues from sales of other aluminum
products for the 1998 year-to-date period were 3% higher than
those in the 1997 period. Higher revenues from the sale of scrap
and the addition of Alumax were partially offset by lower sales
of aluminum closures. Aluminum closure revenues fell 28% from
the 1997 year-to-date period due to the 1997 sale of Alcoa's
Richmond, Indiana closure facility.
Nonaluminum Segment
Revenues for the Nonaluminum Segment were $759 in the 1998 third
quarter, down 2% from the 1997 third quarter. For the year-to-
date period, revenues of $2,319 fell 1% from the 1997 period.
Results from the nine-month period included a 7% increase in
revenues at Alcoa Fujikura Limited (AFL), as auto and truck
production remained strong, and a 12% increase in revenues in the
plastic closures business. These gains were offset by lower
revenues from U.S. building products and the cables business in
Brazil, which were both impacted by divestitures.
Cost of Goods Sold
Cost of goods sold increased $664.5, or 26%, from the 1997 third
quarter. Year-to-date, the increase was $951.6, or 12%. The
increases reflect the effect of the acquisitions and higher
volumes partially offset by the impact of divestitures. Cost of
goods sold as a percentage of revenues was 77.0%, or .9 points
higher than in the 1997 year-to-date period. The decline in this
measure of performance was due to lower aluminum prices in
addition to the factors mentioned above.
Other Income & Expenses
Other income totaled $47.8 for the 1998 third quarter, an increase
of $.9 from the 1997 period. Losses from mark-to-market metal
trading activities versus gains in the 1997 quarter were more than
offset by higher equity income and the positive impact of foreign
exchange. For the 1998 year-to-date period, other income fell to
-12-
$94.2 from $125.9, again due to losses from mark-to-market versus
gains in 1997. Partially mitigating the mark-to-market losses
were higher equity and interest income, and the effects of foreign
exchange.
Selling, general and administrative expenses increased $52.8 and
$41.3 from the year-ago quarter and nine-month periods. The
increases were primarily due to the acquisitions, partially
offset by lower administrative costs and the impact of 1997
divestitures.
Interest expense was up $33.8 from the 1997 nine-month period.
The increase is due to higher debt resulting from the
acquisitions.
The income tax provision for the period is based on the effective
tax rate expected to be applicable for the full year. The 1998
nine-month rate of 32.5% differs from the statutory rate
primarily because of taxes on foreign income.
Minority interests' share of income from operations decreased 4%
from the 1997 nine-month period, primarily due to lower earnings
at Aluminio and AofA, partially offset by an increase in earnings
at AFL.
-13-
Commodity Risks
Alcoa is a leading global producer of aluminum ingot and aluminum
fabricated products. Aluminum ingot is an internationally
priced, sourced and traded commodity. The principal trading
market for ingot is the LME. Alcoa participates in this market
by buying and selling forward portions of its aluminum
requirements and output.
In the normal course of business, Alcoa enters into long-term
contracts with a number of its fabricated products customers. At
December 31, 1997, such contracts totaled approximately 2,093,000
mt. Alcoa may enter into similar arrangements in the future.
In order to hedge the risk of higher prices for the anticipated
metal purchases required to fulfill these long-term customer
contracts, Alcoa enters into long positions, principally using
futures and options. Alcoa follows a stable pattern of
purchasing metal; therefore it is highly likely that anticipated
metal requirements will be met. At September 30, 1998 and
December 31, 1997, these contracts totaled approximately 875,000
mt and 1,084,000 mt, respectively.
The futures and options contracts limit the unfavorable effect of
price increases on metal purchases and likewise limit the
favorable effect from price declines. The contracts are with
creditworthy counterparties and are further supported by cash,
treasury bills or irrevocable letters of credit issued by
carefully chosen banks.
For financial accounting purposes, the gains and losses on the
hedging contracts are reflected in earnings concurrent with the
hedged costs. Alcoa intends to close out the hedging positions
at the time it purchases the metal from third parties, thus
creating the right economic match both in time and price. The
cash flows from these contracts are classified in a manner
consistent with the underlying nature of the transactions.
In addition, Alcoa had 30,000 mt and 259,000 mt of LME contracts
outstanding at September 30, 1998 and December 31, 1997,
respectively, that cover long-term, fixed-price commitments to
supply customers with metal from internal sources. Accounting
convention requires that these contracts be marked-to-market,
which resulted in after-tax losses of $2.7 and gains of $2.6 for
the 1998 and 1997 third quarters, respectively.
Alcoa also purchases certain other commodities, such as gas and
copper, for its operations and enters into futures contracts to
eliminate volatility in the prices of such products. None of
these contracts are material.
Financial Risk
Alcoa is subject to significant exposure from fluctuations in
foreign currencies. As a matter of company policy, foreign
currency exchange contracts, including forwards and options, are
used to manage transactional exposure to changes in currency
exchange rates. The forward contracts principally cover firm
commitments. Options generally are used to hedge anticipated
transactions.
Alcoa also attempts to maintain a reasonable balance between
fixed and floating rate debt and uses interest rate swaps and
caps to keep financing costs as low as possible.
Risk Management
All of the aluminum and other commodity contracts, as well as the
various types of financial instruments, are straightforward.
They are used primarily to mitigate uncertainty and volatility,
and principally cover underlying exposures.
Alcoa's commodity and derivative activities are subject to the
management, direction and control of the Strategic Risk
Management Committee (SRMC). It is composed of the chief
executive officer, the president, the chief financial officer and
-14-
other officers and employees as the chief executive officer may
select from time to time. SRMC reports to the Board of Directors
at each of its scheduled meetings on the scope of its derivatives
activities.
Environmental Matters
Alcoa continues to participate in environmental assessments
and cleanups at a number of locations, including at operating
facilities and adjoining properties, at previously owned or
operated facilities and at Superfund and other waste sites. A
liability is recorded for environmental remediation costs or
damages when a cleanup program becomes probable and the costs
or damages can be reasonably estimated.
As assessments and cleanups proceed, the liability is
adjusted based on progress in determining the extent of
remedial actions and related costs and damages. The
liability can change substantially due to factors such as the
nature and extent of contamination, changes in remedial
requirements and technological changes. For example, there
are certain matters, including several related to alleged
natural resource damage or alleged off-site contaminated
sediments, where investigations are ongoing. It is not
possible to determine the outcomes or to estimate with any
degree of certainty the ranges of potential costs for these
matters. However, with the exception of the Massena/Grasse
River and Pt. Comfort/Lavaca Bay locations described below,
based upon available information and current reserves,
management of Alcoa does not believe that it is reasonably
possible that the results of operation could be materially
affected by existing environmental contingencies.
Massena/Grasse River - Sediments and fish in the Grasse River
adjacent to Alcoa's Massena, New York plant site contain
varying levels of polychlorinated biphenyl (PCB). Alcoa has
been identified by the US Environmental Protection Agency
(EPA) as potentially responsible for this contamination and,
since 1989, has been conducting investigations and studies of
the river under order from the EPA issued under the
Comprehensive Environmental Response, Compensation and
Liability Act. By the end of 1998, Alcoa expects to submit
the results of its studies and recommendations of feasible
remedial alternatives. The costs to complete a remedy
currently cannot be estimated since they will depend on the
remedial method chosen. Alcoa is also aware of a natural
resource damage claim that may be asserted by certain
federal, state and tribal natural resource trustees at this
location.
Pt. Comfort/Lavaca Bay - In 1990, Alcoa began discussions
with certain state and federal natural resource trustees
concerning alleged releases of mercury from its Point
Comfort, Texas, facility to the adjacent Lavaca Bay. In
March 1994, EPA listed the "Alcoa (Point Comfort)/Lavaca Bay
Site" on the National Priorities List and, shortly
thereafter, Alcoa and EPA entered into an administrative
order on consent under which Alcoa is obligated to conduct
certain remedial investigations and feasibility studies. By
the end of 1998, Alcoa expects to submit certain studies,
including a remedial investigation, a baseline risk
assessment and a feasibility study. Alcoa has proposed and
recently has received approval from EPA to fortify an
offshore dredge disposal island, potentially including the
removal of certain mercury contaminated sediments adjacent to
Alcoa's plant in and near routinely dredged navigation
channels. The probable and estimable costs of these actions
are fully reserved. Additional costs to complete a remedy
currently cannot be estimated due to the inability to
determine whether and where additional amounts of material
might require removal. Since the order with EPA, Alcoa and
the natural resource trustees have continued efforts to
understand natural resource injury and ascertain appropriate
restoration alternatives. That process is expected to be
completed within the next 12 to 24 months.
Alcoa's remediation reserve balance at the end of the 1998
third quarter was $238.2 (of which $83.8 was classified as a
current liability) and reflects the most probable costs to
remediate identified environmental conditions for which costs
-15-
can be reasonably estimated. The reserve balance increased
from the 1998 second quarter as a result of the Alumax
acquisition in the 1998 third quarter. About 21% of the
reserve relates to Alcoa's Massena, New York plant site and
17% relates to Alcoa's Pt. Comfort, Texas plant site.
Remediation expenses charged to the reserve during the 1998
third quarter were $14.4. They include expenditures
currently mandated as well as those not required by any
regulatory authority or third party.
Included in annual operating expenses are the recurring costs
of managing hazardous substances and environmental programs.
These costs are estimated to be about 2% of cost of goods
sold.
Liquidity and Capital Resources
Cash from Operations
Cash from operations during the 1998 nine-month period was
$1,403.9, a $32.6 increase from the comparable 1997 period. The
primary factors behind the increase were higher earnings, lower
working capital requirements and changes in deferred hedging
contracts. These increases were partially offset by a decrease
related to a $240.0 cash payment on a long-term alumina supply
contract that was received in 1997.
Financing Activities
Financing activities generated $294.7 of cash during the first
nine months of 1998, versus cash used of $465.7 in the comparable
1997 period. The primary reason for the increase in cash
generated was the issuance of debt to fund the acquisitions. In
the 1998 nine-month period, Alcoa issued $1,100 of commercial
paper, $250 of term debt due in 2018, $200 of term debt due in
2005 and $300 of thirty year bonds due in 2028. In the 1998
third quarter, Alcoa entered into a new $2.0 billion revolving
credit facility. The facility is comprised of a 364-day $1.0
billion facility and a five year $1.0 billion facility. The
revolving credit facilities will be used to support Alcoa's and
AofA's commercial paper programs.
Alcoa used $293.5 to repurchase 3,962,300 shares of the Company's
common stock in the first nine months of 1998. Dividends paid to
shareholders were $193.2 in the 1998 nine-month period, an
increase of $66.0 over the 1997 period. The increase was
primarily due to Alcoa's bonus dividend program, which paid out
12.5 cents in the 1998 first, second and third quarters in
addition to the base dividend of 25 cents. There was no bonus
dividend in 1997. Dividends paid and return of capital to
minority interests totaled $169.9 in the 1998 nine-month period
versus $290.5 in the comparable 1997 period. In the 1997 period,
AWAC and AofA returned funds to their investors, resulting in the
decline.
Investing Activities
Investing activities used $1,979.8 during the 1998 nine-month
period, compared with $423.4 in the 1997 period. Alcoa's
purchase of Alumax was the primary use of funds in the nine-month
period. Alcoa also added $110.9 in the 1998 year-to-date period
to its investments, including a stake in the Norwegian metals
producer, Elkem. Capital expenditures totaled $594.7 for 1998,
down $23.9 from the 1997 period. The 1997 nine-month period
included $193.2 of proceeds from the sale of Alcoa's Caradco,
Arctek, Alcoa Composites, Norcold, Dayton Technologies and
Richmond, Indiana facilities.
Accounting Rule Change
A new accounting rule was issued by the American Institute of
CPA's in April 1998. The rule, "Reporting on the Costs of Start-
Up Activities," requires that costs incurred to open a new
facility, introduce a new product, commence a new operation or
other similar activities be expensed as incurred. Management
does not believe that this standard, which will be adopted for
1999, will have a material impact on Alcoa's financial
statements.
-16-
In June 1998, the Financial Accounting Standards Board issued
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities." The standard requires that entities value all
derivative instruments at fair value and record the instruments
on the balance sheet. The standard also significantly changes
the requirements for hedge accounting. The standard is required
to be adopted by Alcoa for the first quarter of the year 2000.
The Company believes that SFAS 133 will have a material impact on
its financial statements as its current aluminum, foreign
exchange and interest rate derivative contracts as well as
certain underlying exposures will be recorded on the balance
sheet at fair value. Management is currently assessing the
details of how the standard will impact its financial statements
and is preparing a plan of implementation.
-17-
Year 2000 Issue
The Company, like other businesses, is facing the Year 2000
issue. The Year 2000 issue arises from the past practice of
utilizing two digits (as opposed to four) to represent the year
in some computer programs and software. This could result in
computational or operational errors as dates are compared across
the century boundary.
As a basic materials supplier, the vast majority of the products
produced and sold by the Company are unaffected by Year 2000
issues in use or operation since they contain no microprocessors
or similar electronic components.
Internally, the Company is addressing the Year 2000 issue through
a formal program that reports to the Company's Chief Information
Officer. Ongoing leadership is provided by a Global Program
Office, which is directly linked into the Company's Business
Units and Resource Units, including the newly acquired Alumax
facilities. The Global Program Office provides processes and
tools to the Business Units and monitors progress through
systematic reporting and on-site verification reviews in
cooperation with the Company's internal auditors. Progress is
reported regularly to the Company's senior executives and to the
Audit Committee of the Company's Board of Directors.
Computer and microprocessor based systems such as mainframe,
minicomputer and personal computer systems and the software they
utilize have been assessed and, where necessary, remediation has
been scheduled. Operational support, process control, facilities
infrastructure and mechanical systems are being addressed as
well. These systems assist in the control of the Company's
operations by performing such functions as maintaining
manufacturing parameters, monitoring environmental conditions and
assisting with facilities management and security. Many of these
systems contain one or more microprocessors or other embedded
electronic components that could be affected by Year 2000
compliance issues. Failure of some of these systems could result
in significant business disruptions for the Company. Many of
these systems are common across operating locations, resulting in
information sharing and efficiencies in assessment and
remediation. Priority for any required remediation efforts is
assigned based on the criticality to the Company of the business
process affected. The Company expects that remediation of most
of its critical systems will be completed by December 31, 1998.
Any exceptions providing for later completion have been approved
by Business Unit and Resource Unit Management and reviewed by the
Company's Year 2000 Global Program Office and the Chief
Information Officer.
The Company relies on numerous third-party vendors and suppliers
for a wide variety of goods and services, including raw
materials, telecommunications and utilities such as water and
electricity. Many of the Company's operating locations would be
adversely affected if these supplies and services were curtailed
as a result of a supplier's Year 2000 noncompliance. The
Company's vendor and supplier base is currently being surveyed.
Vendors and suppliers have received questionnaires and, based on
the response and significance to the Company's operations, may
receive face-to-face verification follow up. Widespread
disruption of certain utilities such as electricity would result
in a temporary closure of affected facilities and potential
damage to production equipment.
The Company and certain of its trading partners utilize
Electronic Data Interchange or EDI to effect business
communications. The Company's EDI system software is being
upgraded to support transactions in a Year 2000 compliant format
with completion scheduled during the 4th quarter of 1998.
Migration of EDI transactions to this new format will occur as
existing EDI transaction formats are modified by the Company and
its EDI trading partners on a case by case basis. Certain of the
Company's customers have indicated that they will not modify EDI
transaction sets but will rely on other techniques such as data
windowing to achieve Year 2000 capability.
-18-
The Company's Year 2000 program utilizes on-site verification of
Year 2000 efforts at its various operating locations. Using
audit-like techniques, the Year 2000 Global Program Office
verifies that Business and Resource Units have followed the
prescribed processes and methodologies and also samples local
Year 2000 readiness.
The Company is engaging in a Year 2000 business continuity
planning process that will identify and evaluate potential worst
case business disruption scenarios. Business Units, with the
assistance of the Year 2000 Program Office, will develop
strategies and contingency plans based on their identified risks.
The Company currently estimates that the direct costs of its
Year 2000 program for 1998 will not differ materially from its
previously disclosed estimate of $50 to $75. The Company is
currently in the process of assessing the implementation plan on
its 1999 operations. Accordingly, a cost estimate beyond 1998 is
not available at this time.
Euro Conversion
A single currency, the Euro, will be introduced in Europe on
January 1, 1999. Of the fifteen member countries of the European
Union, eleven have agreed to adopt the Euro as their legal
currency on that date. Fixed conversion rates between the
existing currencies of these eleven countries and the Euro will
be established as of that date. The existing currencies are
scheduled to remain legal tender as denominations of the Euro
until at least January 1, 2002. During this transition period,
parties may settle transactions using either the Euro or a
participating country's legal currency. At the current time, the
Company does not believe that the conversion to the Euro will
have a material impact on its business or its financial
statements.
The foregoing discussion of the Company's Year 2000 and Euro
conversion programs contains forward looking statements regarding
anticipated costs, projections of risks, descriptions of expected
outcomes and results and other matters that are not historical
facts. These statements are subject to risks, uncertainties and
unanticipated events, including, with respect to the Year 2000
program, those that could arise from Year 2000 actions and plans
of entities that do business with the Company and the continued
availability of qualified personnel. As a consequence, actual
results and costs may differ materially from those expressed
above. In addition, actual results may differ as a result of
other factors not enumerated above as well as changes in current
circumstances that are impossible to predict at this time.
-19-
Alcoa and subsidiaries
Summarized unaudited consolidated financial data for Aluminio, a
Brazilian subsidiary effectively owned 59% by Alcoa, follow.
September 30 December 31
------------ -----------
1998 1997
---- ----
Cash and short-term investments $ 264.7 $ 305.8
Other current assets 361.1 389.8
Properties, plants and equipment, net 800.0 825.4
Other assets 259.6 233.1
-------- --------
Total assets 1,685.3 1,754.1
-------- --------
Current liabilities 263.6 316.8
Long-term debt 393.5 403.2
Other liabilities 88.2 88.5
-------- --------
Total liabilities 745.3 808.5
-------- --------
Net assets $ 940.0 $ 945.6
======== ========
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues (1) $ 254.9 $ 306.8 $ 748.3 $ 911.3
Costs and expenses (254.3) (286.1) (716.4) (845.4)
Translation and exchange
adjustments 0.5 (0.4) 1.5 (0.5)
Income tax expense (.1) (4.1) (3.0) (13.1)
------- ------- ------- -------
Net income $ 1.0 $ 16.2 $ 30.4 $ 52.3
======= ======= ======= =======
Alcoa's share of net income $ .6 $ 9.6 $ 17.9 $ 30.9
======= ======= ======= =======
<FN>
<1> Revenues from Alcoa and its subsidiaries, the terms of which were
established by negotiations between the parties, follow.
Third quarter ended September 30: 1998 - $3.1, 1997 - $9.2
Nine months ended September 30: 1998 - $8.6, 1997 - $14.1
-20-
Alcoa and subsidiaries
Summarized unaudited consolidated financial data for AofA, an
Australian subsidiary, 60% owned by Alcoa, follow.
September 30 December 31
------------ -----------
1998 1997
---- ----
Cash and short-term investments $ 8.8 $ 9.5
Other current assets 351.1 386.1
Properties, plants and equipment, net 1,299.2 1,385.9
Other assets 69.7 86.2
-------- --------
Total assets 1,728.8 1,867.7
-------- --------
Current liabilities 274.2 304.1
Long-term debt 221.3 225.3
Other liabilities 344.6 361.6
-------- --------
Total liabilities 840.1 891.0
-------- --------
Net assets $ 888.7 $ 976.7
======== ========
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues (1) $ 387.5 $ 495.7 $1,240.5 $1,491.9
Costs and expenses (306.1) (383.2) (960.9) (1,130.9)
Income tax expense (29.7) (40.6) (102.9) (130.2)
-------- -------- -------- --------
Net income $ 51.7 $ 71.9 $ 176.7 $ 230.8
======== ======== ======== ========
Alcoa's share of net income $ 31.0 $ 43.1 $ 106.0 $ 138.5
======== ======== ======== ========
<FN>
(1) Revenues from Alcoa and its subsidiaries, the terms of which were
established by negotiations between the parties, follow.
Third quarter ended September 30: 1998 - $89.2, 1997 - $22.7
Nine months ended September 30: 1998 - $117.6, 1997 - $50.3
-21-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported, on May 13, 1998, an action was filed
in the Superior Court of Riverside County, California allegedly
on behalf of more than 500 plaintiffs who currently live, or
formerly lived, in the Glen Avon, California area, who claim to
have suffered personal injuries, both physical and emotional, as
well as property damage, as a result of air and water
contamination due to the escape of toxic wastes from the
Stringfellow disposal site. The complaint, which names Alcoa and
Alumax Inc. and more than 130 other companies as defendants, was
served on Alcoa and Alumax in early October. The company is
preparing its response.
As previously reported, on August 17, 1995, Alumax filed
suit in the United States District Court for the Eastern District
of Arkansas against Hot Metal Molding, Inc. alleging infringement
of a process patent held by Alumax that is used in semi-solid
forming applications. The litigation was expanded by order of
the Court to include Ormet Primary Aluminum Corporation
("Ormet"), the exclusive North American licensee of Pechiney
Corporation's technology for casting thixotropic billet, and by
Alumax's motion to add certain subsidiaries and affiliates of
Buhler AG, a Swiss manufacturer of die casting machines, as
defendants in the action. Ormet filed counterclaims alleging
that the patent is invalid, void and unenforceable and seeking a
declaratory judgment that the patent would not be infringed by
the use of Ormet's billet in any diecasting application. On
October 3, 1997, certain defendants filed counterclaims against
Alumax, alleging violations of the Sherman and Clayton Acts for
which they seek injunctive relief and treble damages in an
unspecified amount. The Court granted all parties leave to amend
their pleadings in January 1998, and trial was scheduled to begin
in early July 1998. On May 14, 1998, Alumax and Hot Metal
Molding entered into a settlement agreement whereby Hot Metal
Molding was granted a non-exclusive license, retroactively to
January 1, 1992, in respect of the patent and certain other
Alumax patents. On June 14, 1998, Alumax entered into a similar
agreement with Buhler AG. Hot Metal Molding and Buhler AG
dismissed all claims and counterclaims. Alumax voluntarily
dismissed its contributory infringement claim against Ormet and
moved to challenge Ormet's standing to pursue antitrust
counterclaims against Alumax, which was denied at a hearing on
June 26, 1998. A trial date has been set for August 9, 1999, and
discovery is underway.
On October 5, 1998, the West Chicago facility of Alumax
Extrusions, Inc. received an order for compliance and an
administrative complaint and proposed assessment of a Class II
administrative penalty from Region V of the U.S. Environmental
Protection Agency (EPA). The complaint alleges discharges in
excess of the limits imposed by the facility's wastewater permit
and the pretreatment standards for chromium, hexavalent chromium,
zinc and oil and grease. The facility will comply with the order
and review its rights with respect to the administrative
complaint and proposed penalty of $125,000.
As previously reported, in June 1995, Alcoa was served with
a class action complaint in the matter of John P. Cooper, et al.
v. Aluminum Company of America, Case Number 3-95-CV-10074,
pending in the United States District Court for the Southern
District of Iowa. The named plaintiffs alleged violation of
Federal and state civil rights laws prohibiting discrimination on
the basis of race and gender. In June 1997, the court approved a
settlement agreement that provided for complete settlement of all
class-wide claims for injunctive relief in consideration for
$212,000 and implementation of certain structural changes. The
settlement also provided for mediation of certain remaining
individual claims for damages due to a hostile work environment
or wrongful termination. All other claims were released under
the terms of the agreement. All claims have now been mediated
and the claimants have executed releases of all their claims
against Alcoa.
-22-
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10(n). Revolving Credit Agreement (364-Day), dated as of
August 14, 1998
10(o). Revolving Credit Agreement (Five-Year), dated as
of August 14, 1998
12. Computation of Ratio of Earnings to Fixed Charges
15. Independent Accountants' letter regarding unaudited
financial information
27. Financial Data Schedule
(b) Alcoa filed a Form 8-K report, dated July 31, 1998, that
announced the approval by Alumax Inc. stockholders of the merger
with Alcoa and the immediate effectiveness of the merger.
-23-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ALUMINUM COMPANY OF AMERICA
November 3, 1998 By /s/ RICHARD B. KELSON
- - ---------------- ----------------------
Date Richard B. Kelson
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
November 3, 1998 By /s/ EARNEST J. EDWARDS
- - ---------------- -----------------------
Date Earnest J. Edwards
Senior Vice President and Controller
(Chief Accounting Officer)
-24-
EXHIBITS
--------
Page
----
10(n). Revolving Credit Agreement (364-Day), dated
as of August 14, 1998
10(o). Revolving Credit Agreement (Five-Year), dated
as of August 14, 1998
12. Computation of Ratio of Earnings to Fixed
Charges 26
15. Independent Accountants' letter regarding
unaudited financial information 27
27. Financial Data Schedule
-25-