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 Quarter Ended March 31, 1994 Commission File Number 33-23092
ALCOA INTERNATIONAL HOLDINGS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 25-1563111
(State of incorporation) (I.R.S. Employer Identification No.)
5 Burlington Square, Fourth Floor, Burlington, Vermont 05402-1491
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number 802-658-2726
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 May 10, 1994, 7,634 shares of common stock, par value
$1.00, of the Registrant were outstanding.
PART I - FINANCIAL INFORMATION
AIHC and subsidiaries
Consolidated Balance Sheet
(in millions, except share amounts)
(unaudited)
March 31 December 31
ASSETS 1994 1993
---- ----
Current assets:
Cash $ 22.2 $ 13.3
Short-term investments (all cash equivalents except $187.4 in 309.1 394.7
1994 and $243.6 in 1993)
Receivables from customers, less allowances 1994 - $8.5; 363.7 351.5
1993 - $11.3 (a):
Inventories (b) 334.1 333.0
Prepaid expenses and other current assets 26.1 19.3
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Total current assets 1,055.2 1,111.8
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Properties, plants and equipment, at cost 2,658.1 2,562.4
Less, accumulated depreciation, depletion and amortization 1,026.7 971.4
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Net properties, plants and equipment 1,631.4 1,591.0
Notes receivable - Aluminum Company of America (c) 897.3 914.8
Investments 156.0 155.0
Other assets and deferred charges 107.1 100.0
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Total assets $ 3,847.0 $ 3,872.6
LIABILITIES
Current liabilities:
Short-term borrowings (d) $ 76.4 $ 129.5
Accounts payable, trade (a) 166.9 197.8
Accrued compensation and retirement costs 26.7 30.1
Taxes, including taxes on income 100.2 167.8
Future taxes on income 14.5 14.1
Other current liabilities 23.2 32.4
Long-term debt due within one year 14.6 -
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Total current liabilities 422.5 571.7
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Long-term debt, less amount due within one year 307.1 302.1
Noncurrent liabilities and deferred credits 153.6 145.7
Deferred income taxes 235.7 224.0
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Total liabilities 1,118.9 1,243.5
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MINORITY INTERESTS 723.6 680.1
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SHAREHOLDERS' EQUITY
Preferred stock, $100 par value, 5,000,000 shares authorized
250.0 250.0
2,500,000 shares issued and outstanding
Common stock, $1 par value, 8,000 shares authorized;
- -
7,634 shares issued and outstanding
Additional capital 85.9 85.9
Translation adjustment (192.1) (214.7)
Retained earnings 1,860.7 1,827.8
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Total shareholders' equity 2,004.5 1,949.0
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Total liabilities and equity $ 3,847.0 $ 3,872.6
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(see accompanying notes)
AIHC and subsidiaries
Statements of Consolidated Income and Retained Earnings (unaudited)
(in millions)
Three months ended
March 31
------------------
1994 1993
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Statement of Consolidated Income
REVENUES
Sales and operating revenues $ 599.0 $ 473.8
Revenues from related parties 11.6 41.5
Other income, principally interest (a) 14.0 18.0
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624.6 533.3
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COSTS AND EXPENSES
Cost of goods sold and operating expenses (a) 472.9 379.3
Selling, general administrative and other expenses (a) 14.8 14.2
Provision for depreciation, depletion and amortization 30.2 26.9
Interest expense 4.8 5.9
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522.7 426.3
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EARNINGS
Income before taxes on income 101.9 107.0
Provision for taxes on income (e) 33.5 41.1
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Income from operations 68.4 65.9
Equity losses (4.9) (1.3)
Minority interests (27.7) (29.9)
NET INCOME $ 35.8 $ 34.7
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Statement of Consolidated
Retained Earnings
Retained earnings at beginning of period $1,827.8 $1,655.6
Net income for period 35.8 34.7
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1,863.6 1,690.3
Less: Preferred dividends declared 2.9 3.9
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Retained earnings at end of period $1,860.7 $1,686.4
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(see accompanying notes)
AIHC and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
Three months ended
March 31
--------------------
1994 1993
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CASH FROM OPERATIONS
Net income $ 35.8 $ 34.7
Adjustments to reconcile net income to cash from
operations:
Depreciation, depletion and amortization 30.2 26.9
Increase (reduction) in deferred income taxes 4.5 (10.1)
Equity earnings before additional taxes, net of dividend 3.7 (.3)
Minority interests 27.7 29.9
Other 10.1 (2.6)
(Increase) reduction in receivables (5.7) 44.5
(Increase) reduction in inventories 6.0 (15.7)
(Increase) reduction in prepaid expenses and other current
assets (7.4) 11.2
Reduction in accounts payable and accrued expenses (48.3) (41.3)
Reduction in taxes, including taxes on income (72.1) (54.0)
Net change in noncurrent assets and liabilities (8.9) (3.4)
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CASH FROM OPERATIONS (24.4) 19.8
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FINANCING ACTIVITIES
Net changes in short-term borrowings (55.0) 43.2
Dividends paid to shareholders (2.1) (3.9)
Dividends paid to minority interests - (27.0)
Additions to long-term debt 11.0 -
Payments on long-term debt (.4) (3.8)
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CASH PROVIDED FROM (USED FOR) FINANCING (46.5) 8.5
ACTIVITIES ------ ------
INVESTING ACTIVITIES
Capital expenditures (32.8) (33.0)
Loans by finance subsidiary to related parties (6.2) (33.9)
Payments received on finance subsidiary loans 23.7 2.3
Net change in short-term investments, excluding cash 58.9 -
equivalents
Additions to investments (1.3) (8.8)
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CASH PROVIDED FROM (USED FOR) INVESTING 42.3 (73.4)
ACTIVITIES ------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 8.1 10.1
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CHANGES IN CASH
Net change in cash and cash equivalents (20.5) (35.0)
Cash and cash equivalents at beginning of year 164.4 379.4
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 143.9 $ 344.4
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(see accompanying notes)
<FN>
Notes to Consolidated Financial Statements
(in millions, except share amounts)
Notes:
(a) Alcoa International Holdings Company (AIHC) is controlled by
Aluminum Company of America and its subsidiaries (Alcoa).
AIHC's receivables from customers include amounts from Alcoa
totaling $5.3 at March 31, 1994 and $28.5 at December 31,
1993. Trade accounts payable include amounts owed to Alcoa
of $63.0 and $52.5 at the same respective dates.
Interest income from loans to Alcoa (see note c) follows.
1994 1993
---- ----
First quarter $ 8.8 $ 8.2
The costs of products purchased from Alcoa by AIHC's selling
companies follow. Terms for these transactions were
established by negotiations between the parties.
1994 1993
---- ----
First quarter $105.0 $105.3
(b) Inventories consisted of:
March 31 December 31
1994 1993
---- ----
Finished goods $ 78.9 $ 67.6
Work in process 52.8 39.2
Bauxite and alumina 59.6 91.5
Purchased raw materials 76.2 58.7
Operating supplies 66.6 76.0
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$334.1 $333.0
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(c) Alcoa International Finance Company, AIHC's finance
subsidiary, has loaned $897.3 to Aluminum Company of America
under notes detailed below. Since Alcoa controls AIHC and
currently intends to continue renewing these notes, they
have been classified as noncurrent.
Face amount Maturity date Interest rate
----------- ------------- -------------
$400.0 June 30, 1996 3.92%*
100.0 March 31, 1995 4.90%
50.0 September 30, 1994 4.46%
50.0 June 30, 1994 4.44%
297.3 On Demand 4.62%**
-----
$897.3
-----
* Effective rate as of March 31, 1994. Rate varies
quarterly based on market rates.
** Effective rate as of March 31, 1994. Rate varies monthly
based on market rates.
Notes to Consolidated Financial Statements
(in millions, except share amounts)
(d) Alcoa Nederland Finance B.V. (ANF), an Alcoa subsidiary, has
loan commitments to AIHC and its subsidiaries for 44 million
Dutch guilders, 11 million pounds sterling, and 25 million
Belgian francs. At March 31, 1994 ANF had loaned 39.5
million Dutch guilders at 5.73%, 6.7 million pounds sterling
at 5.7%, and 10 million Belgian francs at 7.31%; or the
equivalent of $33.5.
(e) The income tax provision for the period is based on the
effective tax rate expected to be applicable for the
full year. The difference between the 1994 estimated
effective tax rate of 32.9% and the U.S. statutory rate
of 35% is primarily due to taxes on foreign income.
(f) Certain amounts in previously issued financial
statements were reclassified to conform to 1994
presentations.
In the opinion of AIHC, the financial statements in this
Form 10-Q report include all adjustments, including those of
a normal and recurring nature, necessary to fairly state the
results for the periods presented. 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, 1993.
The financial data required in this Form 10-Q by Rule 10-01
of Regulation S-X have been reviewed by Coopers & Lybrand,
the company's independent certified public accountants, as
described in their report on page 7.
Independent Auditor's Review Report
- -----------------------------------
To the Shareholders and Board of Directors
Alcoa International Holdings Company (AIHC)
We have reviewed the unaudited consolidated balance sheet of
AIHC and subsidiaries as of March 31, 1994 and the unaudited
statements of consolidated income and retained earnings for the
three-month periods ended March 31, 1994 and 1993, and
consolidated cash flows for the three-month periods ended March
31, 1994 and 1993, which are included in AIHC's Form 10-Q for the
period ended March 31, 1994. These financial statements are the
responsibility of AIHC'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 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
AIHC and subsidiaries as of December 31, 1993, and the related
statements of consolidated income and retained earnings, and cash
flows for the year then ended (not presented herein). In our
report dated January 11, 1994, except for Note P for which the
date is February 7, 1994, 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, 1993 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
Pittsburgh, Pennsylvania
April 8, 1994
Management's Discussion and Analysis of the
- -------------------------------------------
Results of Operations and Financial Condition
- ---------------------------------------------
(in millions, except as noted)
Results of Operations
- ---------------------
First Quarter
ended March 31
--------------
1994 1993
---- ----
Sales and operating revenues by segment:
Alumina $ 238.1 $ 227.8
Aluminum 230.3 166.4
Sales and Distribution 142.2 121.1
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Total $ 610.6 $ 515.3
Net Income $ 35.8 $ 34.7
Overview
Alcoa International Holding Company's (AIHC) 1994 first
quarter earnings increased $1.1 from the 1993 first quarter.
Lower prices on products within the Alumina segment and
higher equity losses kept the 1994 profit close to the 1993
level. Revenues increased 18%. The increase was primarily
due to Alcoa-Kofem, Kft. (Kofem) for which no activity was
reflected in the 1993 period. Kofem was fully integrated
into AIHC's financial records during the second quarter of
1993. Kofem's first quarter 1994 revenues were $52.
Alumina segment
Revenues from the Alumina segment increased $10.3, or 5%,
from the 1993 first quarter.
Alumina shipments in the 1994 first quarter increased 15%
from the year-ago quarter reflecting full operations of the
AofA's Wagerup refinery expansion which was completed in late
1992. However, revenues were only up 5% because of a 9%
decline in prices. The oversupply of alumina is expected to
continue well into 1995, and there is little expectation of
improvement of alumina prices in the near term.
Alumina-based chemicals revenues increased 38%. About 12% of
the revenue increase is attributable to shipments by ACAP
Australia which began operations in the 1993 fourth quarter.
The remainder of the increase results from higher AofA
shipments, up 43% in the 1994 first quarter, partly offset by
a 12% decline in prices.
Revenues from gold operations for the 1994 three-month period
were down 12% from the year-ago period due to lower shipments
and an 8% reduction in prices.
Aluminum segment
Revenues from the Aluminum segment were up 38% from the 1993
first quarter. The increase was primarily due to Kofem.
Excluding the impact of Kofem, revenues for this segment were
up 9% from the 1993 first quarter.
Primary aluminum shipments were down 3% from the 1993 first
quarter but revenues increased 2% due to slightly higher
prices. AofA reduced production by 25,000 metric tons (mt)
at its Point Henry smelter in Geelong, Australia and 26,000
mt at the Portland, Australia smelter. AofA has a 45%
interest in the Portland smelter.
Revenues from the sale of rigid container sheet (RCS) by AofA
increased 6% from the 1993 first quarter. Volume and price
increases had equal impacts on revenue. Volume and price
were up 3% and 2%, respectively.
Revenues from Alcoa Nederland Holding Company (ANH) rose 12%
from the 1993 quarter. The increase is primarily due to
higher shipments of extrusions and flat-rolled products, up
12% from the 1993 first quarter, partially offset by an 8%
decline in sales of building, agricultural and other
fabricated products.
Sales and Distribution Segment
Revenues from the Sales and Distribution segment, which
includes sales of alumina-based chemicals and aluminum
products, grew by 17% from the 1993 quarter. Higher sales of
RCS to customers in Mexico and the Far East accounted for the
major share of the increase, partly offset by lower sales of
various products into Venezuela. The higher sales in Mexico,
the major area of improvement, reflects new business. Sales
to the Far East will likely decline as sourcing of product is
transferred to KSL Alcoa Aluminum Company, Ltd. (KAAL), a 50%
owned AIHC venture in Japan that produces RCS.
Cost of Goods Sold
Cost of goods sold increased 4 percentage points to 77.4% of
sales in the 1994 quarter. The 1994 ratio was unfavorably
impacted by low margins on Kofem products.
Other Income and Expense Items
Other income was $14.0, down 22% from the 1993 first quarter.
The decrease resulted from lower exchange adjustments and
lower interest income on AofA's short-term investments.
Depreciation, depletion and amortization expense increased
$3.3 to $30.2 in the 1994 first quarter. The increase
reflects depreciation expense from Kofem and amortization of
goodwill resulting from the purchase of European sales
subsidiaries from Alcoa.
Interest expense declined $1.1 from the 1993 three-month
period primarily due to lower interest rates.
AIHC's estimated effective tax rate is a weighted average of
the statutory rates in the countries where AIHC operates,
primarily Australia and the U.S. The estimated effective tax
rate for 1994 is 32.9% The difference between this rate and
the U. S. statutory rate of 35% is primarily due to taxes on
foreign income.
AIHC's equity losses grew to $4.9 in the 1994 first quarter
from $1.3 in 1993. The higher losses were from KAAL, partly
offset by improved results from Elkem Aluminium ANS, AIHC's
smelting partnership in Norway. The KAAL losses are
attributable to low RCS prices.
AIHC continues to participate in environmental assessments
and cleanups at a number of locations, including operating
facilities and adjoining properties; at previously owned and
operated facilities; and at other waste sites. AIHC records
a liability for environmental remediation costs or damages
when a cleanup program becomes probable and the costs can be
reasonably estimated. As assessments and cleanups proceed,
these liabilities are adjusted based on progress in
determining the extent of remedial actions and related costs
and damages. The liabilities can change substantially due to
factors such as the nature and extent of contamination,
changes in remedial requirements and technological changes.
AIHC's environmental remediation reserve balance at March 31,
1994 was $36 and reflects AIHC's most probable cost to
remediate identified environmental conditions.
Liquidity and Capital Resources
Cash and cash equivalents of $143.8 were $20.5 less than at
year-end 1993. Cash from operations resulted in the
consumption of $24.4 during the first quarter of 1994
compared to $19.8 generated in the 1993 first quarter. Cash
provided from investing activities almost offset cash used
for financing activities during the 1994 three-month period.
Dividends to preferred shareholders in the 1994 three-month
period were $2.1 compared to $3.9 during the year-ago period.
The decline reflects lower dividend rates, most of which are
set by auction from time to time. AofA paid no dividends
during the first quarter of 1994 compared to $54.8 in the
comparable 1993 period. A dividend of $42.3, normally paid
during the first quarter, was not paid until April 1994.
AIHC received $21.6, representing its 51% share of the
dividend.
In April 1994, AIHC redeemed all 500,000 outstanding shares
of its Voting Preferred Stock, Series I.
At March 31, 1994, AIHC's debt as a percentage of invested
capital was 10.1%, compared to 10.3% at year-end 1993.
Higher minority interests and shareholders' equity caused the
percentage to decrease.
Investing activities included capital expenditures of $32.8
and $33 in the first quarters of 1994 and 1993, respectively.
Capital expenditures were mainly for maintaining and
improving the productive efficiency of plants. Other
investing activities included receipts on finance subsidiary
loans and a liquidation of short-term investments, excluding
cash equivalents, that generated $79.8 in the 1994 first
quarter.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
12. Computation of Earnings to Fixed Charges
(b) No reports on Form 8-K were filed by AIHC during the
quarter covered by this report.
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.
ALCOA INTERNATIONAL HOLDINGS COMPANY
May 12, 1994 By /s/ JAN. H. M. HOMMEN
Date Jan H. M. Hommen
Executive Vice President
(Principal Financial Officer
and Chief Financial Officer)