Alcoa Strengthens Cash Position and Returns to Profitability in Third Quarter

October 7, 2009

Highlights:

  • Income from continuing operations of $73 million, or $0.07 per share
  • Excluding restructuring and special items, income of $39 million,
    or $0.04 per share
  • Revenues up 9 percent over second quarter 2009
  • Cash Sustainability initiatives exceeding targets
  • Actions offsetting negative currency and energy impacts
  • EBITDA of $454 million in third quarter 2009
  • Cash from operations of $184 million in third quarter 2009
  • Debt-to-capital at 38.3%, down 140 basis points sequentially
  • Cash on hand of $1.1 billion

NEW YORK–Alcoa (NYSE: AA) today announced third quarter 2009 income from
continuing operations of $73 million, or $0.07 per diluted share,
compared to a loss from continuing operations of $312 million, or $0.32
per share, in the second quarter 2009. Income from continuing operations
in the third quarter of 2008 was $306 million, or $0.37 per share.
Excluding restructuring and special items, income for the third quarter
2009 was $39 million, or $0.04 per share.

The third quarter of 2009 had net income of $77 million, or $0.08 per
share, compared with a net loss for the second quarter of 2009 of $454
million, or $0.47 per share. Net income in the third quarter of 2008 was
$268 million, or $0.33 per share. Discontinued operations for the third
quarter of 2009 had income of $4 million, or $0.01 per share. The second
quarter of 2009 had a loss of $142 million, or $0.15 per share.

Restructuring and special items in the quarter totaled $34 million, or
$0.03 per share. These items included a gain on the completion of a
transaction to acquire bauxite and alumina refining interests in
Suriname of $35 million and restructuring charges of $17 million before
tax ($1 million after tax and noncontrolling interests).

Revenues for the quarter were $4.6 billion compared with $4.2 billion in
the second quarter of 2009, a nine percent increase. Revenues were $7.0
billion in the third quarter of 2008. Sequentially, revenues were helped
by an increase in realized prices for primary aluminum to $1,972 per
metric ton from $1,667 per metric ton in the second quarter, as well as
stabilization in the end markets.

“The financial and operational measures we took in the first half of the
year are having a strong positive impact on our cash position and
profitability,” said Klaus Kleinfeld, Alcoa President and Chief
Executive Officer. “Despite unfavorable currency and energy headwinds,
our performance this quarter indicates that Alcoa is weathering the
economic storm and is in excellent shape to benefit when the market
recovers.”

The Company is exceeding all the targets of its Cash Sustainability
Program, which helped to offset negative currency and energy impacts in
the quarter of $89 million. Overhead savings are $375 million, 188
percent of the full year target for 2009, and procurement savings are
$1.61 billion, 107 percent of the full-year target. Reductions in
working capital have generated $780 million in cash, or 98 percent of
the 2009 target of $800 million.

Cash from operations in the quarter was $184 million compared with $328
million in the second quarter of 2009 as working capital reductions
continued, yet at a slower pace due to rising prices. Cash from
operations in the third quarter 2008 was a negative $93 million. EBITDA
in the quarter improved by $454 million from zero in the second quarter
of 2009.

During the quarter, the Company received the final $520 million of
proceeds from the exiting of the Shining Prospect venture and finished
the quarter with $1.1 billion of cash on hand. The Company’s
debt-to-capital ratio stood at 38.3 percent at the end of the quarter, a
140 basis point reduction from the second quarter of 2009.

Capital expenditures in the quarter were $370 million, on-target to
reach the 2009 goal of a nearly 50 percent reduction from 2008. In the
quarter, the Company commissioned its Juruti bauxite mine in Brazil and
new lithographic sheet operations in Bohai, China. This follows the
opening of a new end and tab line in Russia in late-June. These
investments will lower costs and position the Company well for growth as
economies improve in those important markets.

Revenues for the first nine months of 2009 were $13.0 billion, compared
to $21.2 billion in the first nine months of 2008. Income from
continuing operations for the first nine months of 2009 showed a loss of
$719 million, or $0.78 per share, compared with income of $1.2 billion,
or $1.40 per share, in the first nine months of 2008. The nine months of
2009 showed a net loss of $874 million, or $0.95 per share, compared to
net income of $1.1 billion, or $1.35 per share, in the first nine months
of 2008.

In the second half of 2009, there are signs that key markets the Company
operates in are stabilizing. Due to low inventories at distributors and
rising shipments, regional premiums are improving and global aluminum
consumption is expected to increase 11 percent in the second half of
2009.

Segment Results

Alumina

After tax operating income (ATOI) was $65 million, a $72 million
improvement from the second quarter. Alumina production increased nine
percent or 305 thousand metric tons and average third-party realized
pricing improved 13 percent, helped by rising LME aluminum prices and
improved demand. A $58 million benefit from the Suriname acquisition was
partially offset by negative currency impacts of $28 million and higher
energy costs of $13 million. The Juruti mine was officially commissioned
this quarter and combined with the Sao Luis refining expansion, will
place Alcoa’s overall refining system in the top quartile on the global
cost curve in terms of low-cost production.

Primary Metals

ATOI improved $170 million sequentially to a loss of $8 million due
primarily to improved pricing. Smelting production decreased 25 thousand
metric tons and third-party realized pricing was up $305 per metric ton,
or 18 percent, as LME pricing and regional premiums continued to
improve. Results were negatively impacted by $29 million of currency
effects. The production run rate now stands at 3.5 million metric tons
with approximately 20 percent of primary production curtailed.

Flat-Rolled Products

ATOI improved $45 million from the second quarter of 2009 through
improved orders and significant cost reduction efforts. Shipments for
the quarter increased six percent sequentially and revenue increased
seven percent. Every key end market except aerospace saw revenue gains,
including automotive which increased 21 percent from the second quarter
of 2009. Improved shipments and cost reduction efforts more than offset
the impacts of product mix and currency effects in Australia. This
quarter the Bohai flat-rolled products facility in China was inaugurated
and it is already serving customers in the printing, transportation,
electronics, and packaging industries.

Engineered Products and Solutions

ATOI for the quarter of $75 million was 15 percent below the sequential
quarter results driven by continued aerospace destocking, industrial gas
turbine market declines, and normal seasonal impacts. This was partially
mitigated by improved demand in commercial transportation and strong
results from spend reduction efforts.

Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on
October 7, 2009 to present the quarter’s results. The meeting will be
webcast via alcoa.com. Call information and related details are
available at www.alcoa.com
under “Invest.”

About Alcoa

Alcoa is the world leader in the production and management of primary
aluminum, fabricated aluminum, and alumina combined, through its active
and growing participation in all major aspects of the industry. Alcoa
serves the aerospace, automotive, packaging, building and construction,
commercial transportation, and industrial markets, bringing design,
engineering, production, and other capabilities of Alcoa’s businesses to
customers. In addition to aluminum products and components, including
flat-rolled products, hard alloy extrusions, and forgings, Alcoa also
markets Alcoa® wheels, fastening systems, precision and investment
castings, and building systems. The Company has been named one of the
top most sustainable corporations in the world at the World Economic
Forum in Davos, Switzerland, and has been a member of the Dow Jones
Sustainability Index for seven consecutive years. Alcoa employs
approximately 63,000 people in 31 countries across the world. More
information can be found at www.alcoa.com.

Forward-Looking Statements

Certain statements in this release relate to future events and
expectations and, as such, constitute forward-looking statements
involving known and unknown risks and uncertainties that may cause
actual results, performance, or achievements of Alcoa to be different
from those expressed or implied in the forward-looking statements. Alcoa
disclaims any obligation to update publicly any forward-looking
statements, whether in response to new information, future events or
otherwise, except as required by applicable law. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements include: (a) material adverse changes in
economic or aluminum industry conditions generally, including global
supply and demand conditions and fluctuations in London Metal
Exchange-based prices for primary aluminum, alumina, and other products;
(b) material adverse changes in the markets served by Alcoa, including
automotive and commercial transportation, aerospace, building and
construction, distribution, packaging, industrial gas turbine, and other
markets; (c) Alcoa’s inability to mitigate impacts from energy supply
interruptions or from increased energy, transportation, and raw
materials costs or other cost inflation; (d) Alcoa’s inability to
achieve the level of cash generation, return on capital improvement,
cost savings, or earnings or revenue growth anticipated by management in
connection with its restructuring, portfolio streamlining, and liquidity
strengthening actions; (e) Alcoa’s inability to complete its growth
projects and portfolio streamlining projects or achieve efficiency
improvements at newly constructed or acquired facilities as planned and
by targeted completion dates; (f) unfavorable changes in laws,
governmental regulations or policies, foreign currency exchange rates or
competitive factors in the countries in which Alcoa operates; (g)
significant legal proceedings or investigations adverse to Alcoa,
including environmental, product liability, safety and health, and other
claims; and (h) the other risk factors summarized in Alcoa’s Form 10-K
for the year ended December 31, 2008, Forms 10-Q for the quarters ended
March 31, 2009 and June 30, 2009, and other reports filed with the
Securities and Exchange Commission.

 

Alcoa and subsidiaries

Statement of Consolidated Operations (unaudited) (a)

(in millions, except per-share, share, and metric ton amounts)

  Quarter ended
September 30,   June 30,   September 30,
2008 (b) 2009 2009
Sales $ 6,970 $ 4,244 $ 4,615
 
Cost of goods sold (exclusive of expenses below) 5,648 3,966 3,888
Selling, general administrative, and other expenses 275 240 234
Research and development expenses 61 38 39
Provision for depreciation, depletion, and amortization 311 317 342
Restructuring and other charges 38 82 17
Interest expense 96 115 120
Other expenses (income), net   15     (89 )   (123 )
Total costs and expenses 6,444 4,669 4,517
 
Income (loss) from continuing operations before income taxes 526 (425 ) 98
Provision (benefit) for income taxes   136     (108 )   (22 )
 
Income (loss) from continuing operations 390 (317 ) 120
(Loss) income from discontinued operations   (38 )   (142 )   4  
 
Net income (loss) 352 (459 ) 124
 
Less: Net income (loss) attributable to noncontrolling interests   84     (5 )   47  
 
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA $ 268   $ (454 ) $ 77  
 
Amounts attributable to Alcoa common shareholders:
Income (loss) from continuing operations $ 306 $ (312 ) $ 73
(Loss) income from discontinued operations   (38 )   (142 )   4  
Net income (loss) $ 268   $ (454 ) $ 77  
 
Earnings (loss) per share attributable to Alcoa common

shareholders (c):

Basic:
Income (loss) from continuing operations $ 0.37 $ (0.32 ) $ 0.07
(Loss) income from discontinued operations   (0.04 )   (0.15 )   0.01  
Net income (loss) $ 0.33   $ (0.47 ) $ 0.08  
 
Diluted:
Income (loss) from continuing operations $ 0.37 $ (0.32 ) $ 0.07
(Loss) income from discontinued operations   (0.04 )   (0.15 )   0.01  
Net income (loss) $ 0.33   $ (0.47 ) $ 0.08  
 
Average number of shares used to compute:
Basic earnings per common share 807,570,516 974,279,655 974,353,242
Diluted earnings per common share 809,834,586 974,279,655 977,593,656
 
Shipments of aluminum products (metric tons) 1,342,000 1,288,000 1,230,000
(a)   On January 1, 2009, Alcoa adopted changes issued by the Financial
Accounting Standards Board to consolidation accounting and
reporting. These changes, among others, require that minority
interests be renamed noncontrolling interests and that a company
present a consolidated net income (loss) measure that includes the
amount attributable to such noncontrolling interests for all periods
presented.
 
(b) The Statement of Consolidated Operations for the quarter ended
September 30, 2008 was reclassified to reflect the movement of the
Electrical and Electronic Solutions business to discontinued
operations in the fourth quarter of 2008.
 

Alcoa and subsidiaries

Statement of Consolidated Operations (unaudited), continued (a)

(in millions, except per-share, share, and metric ton amounts)

  Nine months ended
September 30,
2008 (d)   2009
Sales $ 21,213 $ 13,006
 
Cost of goods sold (exclusive of expenses below) 16,898 11,997
Selling, general administrative, and other expenses 894 718
Research and development expenses 185 118
Provision for depreciation, depletion, and amortization 942 942
Restructuring and other charges 76 168
Interest expense 282 349
Other income, net   (23 )   (182 )
Total costs and expenses 19,254 14,110
 
Income (loss) from continuing operations before income taxes 1,959 (1,104 )
Provision (benefit) for income taxes   580     (437 )
 
Income (loss) from continuing operations 1,379 (667 )
Loss from discontinued operations   (41 )   (155 )
 
Net income (loss) 1,338 (822 )
 
Less: Net income attributable to noncontrolling interests   221     52  
 
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA $ 1,117   $ (874 )
 
Amounts attributable to Alcoa common shareholders:
Income (loss) from continuing operations $ 1,158 $ (719 )
Loss from discontinued operations   (41 )   (155 )
Net income (loss) $ 1,117   $ (874 )
 
Earnings (loss) per share attributable to Alcoa common shareholders
(c):
Basic:
Income (loss) from continuing operations $ 1.41 $ (0.78 )
Loss from discontinued operations   (0.05 )   (0.17 )
Net income (loss) $ 1.36   $ (0.95 )
 
Diluted:
Income (loss) from continuing operations $ 1.40 $ (0.78 )
Loss from discontinued operations   (0.05 )   (0.17 )
Net income (loss) $ 1.35   $ (0.95 )
 
Average number of shares used to compute:
Basic earnings per common share 813,550,439 922,347,792
Diluted earnings per common share 816,669,728 922,347,792
 
Common stock outstanding at the end of the period 800,317,368 974,376,883
 
Shipments of aluminum products (metric tons) 4,106,000 3,693,000
(c)   On January 1, 2009, Alcoa adopted changes issued by the Financial
Accounting Standards Board to the calculation of earnings per share.
These changes state that unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend equivalents
are participating securities and shall be included in the
computation of earnings per share pursuant to the two-class method
for all periods presented. As a result, certain prior period
earnings per share amounts were revised in accordance with this new
guidance.
 
(d) The Statement of Consolidated Operations for the nine months ended
September 30, 2008 was reclassified to reflect the movement of the
Electrical and Electronic Solutions business to discontinued
operations in the fourth quarter of 2008.
 

Alcoa and subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

   

 

December 31,

2008

September 30,

2009

ASSETS
Current assets:
Cash and cash equivalents $ 762 $ 1,066

Receivables from customers, less allowances of $65 in 2008 and $74
in 2009

1,883 1,723
Other receivables 708 651
Inventories 3,238 2,516
Fair value of hedged aluminum 586 31
Prepaid expenses and other current assets   973     1,045  
Total current assets   8,150     7,032  
 
Properties, plants, and equipment 31,301 34,932
Less: accumulated depreciation, depletion, and amortization   13,846     15,340  
Properties, plants, and equipment, net   17,455     19,592  
Goodwill 4,981 5,048
Investments 1,915 940
Deferred income taxes 2,688 2,642
Other assets 2,386 2,666
Assets held for sale   247     179  
Total assets $ 37,822   $ 38,099  
 
LIABILITIES
Current liabilities:
Short-term borrowings $ 478 $ 343
Commercial paper 1,535 –
Accounts payable, trade 2,518 1,850
Accrued compensation and retirement costs 866 885
Taxes, including income taxes 378 363
Fair value of derivative contracts 461 81
Other current liabilities 987 832
Long-term debt due within one year   56     663  
Total current liabilities   7,279     5,017  
Long-term debt, less amount due within one year 8,509 9,067
Accrued pension benefits 2,941 2,797
Accrued postretirement benefits 2,730 2,755
Other noncurrent liabilities and deferred credits 1,580 1,803
Deferred income taxes 321 366
Liabilities of operations held for sale   130     76  
Total liabilities   23,490     21,881  
 
EQUITY (e)
Alcoa shareholders’ equity:
Preferred stock 55 55
Common stock 925 1,097
Additional capital 5,850 6,612
Retained earnings 12,400 11,297
Treasury stock, at cost (4,326 ) (4,268 )
Accumulated other comprehensive loss   (3,169 )   (1,559 )
Total Alcoa shareholders’ equity   11,735     13,234  
Noncontrolling interests   2,597     2,984  
Total equity   14,332     16,218  
Total liabilities and equity $ 37,822   $ 38,099  
(e)   On January 1, 2009, Alcoa adopted changes issued by the Financial
Accounting Standards Board to consolidation accounting and
reporting. These changes, among others, require that minority
interests be renamed noncontrolling interests and that a company
present such noncontrolling interests as equity for all periods
presented.
 

Alcoa and subsidiaries

Statement of Consolidated Cash Flows (unaudited) (f)

(in millions)

  Nine months ended

September 30,

2008 (g)   2009
CASH FROM OPERATIONS
Net income (loss) $ 1,338 $ (822 )
Adjustments to reconcile net income (loss) to cash from operations:
Depreciation, depletion, and amortization 943 942
Deferred income taxes (10 ) (55 )
Equity (income) loss, net of dividends (66 ) 4
Restructuring and other charges 76 168
Gains from investing activities – asset sales (30 ) (104 )
Provision for doubtful accounts 8 13
Loss from discontinued operations 41 155
Stock-based compensation 85 69
Excess tax benefits from stock-based payment arrangements (15 ) –
Other (44 ) 124
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments:
(Increase) decrease in receivables (164 ) 463
(Increase) decrease in inventories (621 ) 1,053
(Increase) decrease in prepaid expenses and other current assets (74 ) 94
Increase (decrease) in accounts payable, trade 76 (736 )
(Decrease) in accrued expenses (374 ) (430 )
Increase (decrease) in taxes, including income taxes 27 (515 )
Pension contributions (485 ) (102 )
(Increase) in noncurrent assets (91 ) (223 )
Increase in noncurrent liabilities 30 141
(Increase) decrease in net assets held for sale   (22 )   11  
CASH PROVIDED FROM CONTINUING OPERATIONS 628 250
CASH USED FOR DISCONTINUED OPERATIONS   (2 )   (9 )
CASH PROVIDED FROM OPERATIONS   626     241  
 
FINANCING ACTIVITIES
Net change in short-term borrowings (76 ) (125 )
Net change in commercial paper 351 (1,535 )
Additions to long-term debt 2,105 1,043
Debt issuance costs (13 ) (17 )
Payments on long-term debt (192 ) (31 )
Proceeds from exercise of employee stock options 177 –
Excess tax benefits from stock-based payment arrangements 15 –
Issuance of common stock – 876
Repurchase of common stock (1,082 ) –
Dividends paid to shareholders (420 ) (198 )
Dividends paid to noncontrolling interests (193 ) (93 )
Contributions from noncontrolling interests   429     327  
CASH PROVIDED FROM FINANCING ACTIVITIES   1,101     247  
 
INVESTING ACTIVITIES
Capital expenditures (2,405 ) (1,254 )
Capital expenditures of discontinued operations (16 ) (5 )
Acquisitions, net of cash acquired (h) (276 ) 112
Acquisitions of noncontrolling interests (141 ) –
Proceeds from the sale of assets and businesses (i) 2,684 (73 )
Additions to investments (j) (1,276 ) (26 )
Sales of investments 72 1,026
Net change in short-term investments and restricted cash (2 ) 8
Other   (27 )   (9 )
CASH USED FOR INVESTING ACTIVITIES   (1,387 )   (221 )
 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

8

   

37

 
Net change in cash and cash equivalents 348 304
Cash and cash equivalents at beginning of year   483     762  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 831   $ 1,066  
(f)   On January 1, 2009, Alcoa adopted changes issued by the Financial
Accounting Standards Board to consolidation accounting and
reporting. These changes, among others, require that minority
interests be renamed noncontrolling interests for all periods
presented.
 
(g) The Statement of Consolidated Cash Flows for the nine months ended
September 30, 2008 was reclassified to reflect the movement of the
Electrical and Electronic Solutions business to held for sale and
discontinued operations and the Global Foil and Transportation
Products Europe businesses to held for sale, all of which occurred
in the fourth quarter of 2008.
 
(h) Acquisitions, net of cash acquired for the nine months ended
September 30, 2009 was a cash inflow as this line item includes cash
acquired in the exchange of Alcoa’s 45.45% stake in the Sapa AB
joint venture for Orkla ASA’s 50% stake in the Elkem Aluminium ANS
joint venture, which was completed on March 31, 2009, and cash
received in the acquisition of a BHP Billiton subsidiary that holds
interests in four bauxite mines and one refining facility in the
Republic of Suriname, which was completed on July 31, 2009.
 
(i) Proceeds from the sale of assets and businesses for the nine months
ended September 30, 2009 was a cash outflow as this line item
includes cash paid to Platinum Equity related to the divestiture of
the Electrical and Electronic Solutions’ wire harness and electrical
distribution business, which was completed on June 15, 2009 with an
effective date of June 1, 2009.
 
(j) Additions to investments for the nine months ended September 30,
2009 includes a cash inflow for the return of a portion of the
contributions made in prior periods related to one of Alcoa
Alumínio’s hydroelectric power projects. All contributions related
to this project were originally presented as cash outflows in
Additions to investments in the appropriate periods.
 

Alcoa and subsidiaries

Segment Information (unaudited)

(dollars in millions, except realized prices; production and
shipments in thousands of metric tons [kmt])

 

1Q08

 

2Q08

 

3Q08

 

4Q08

 

2008

 

1Q09

 

2Q09

 

3Q09

Alumina:

Alumina production (kmt) 3,870 3,820 3,790 3,776 15,256 3,445 3,309 3,614
Third-party alumina shipments (kmt) 1,995 1,913 2,010 2,123 8,041 1,737 2,011 2,191
Third-party sales $ 680 $ 717 $ 805 $ 722 $ 2,924 $ 430 $ 441 $ 530
Intersegment sales $ 667 $ 766 $ 730 $ 640 $ 2,803 $ 384 $ 306 $ 432
Equity income $ 2 $ 2 $ 2 $ 1 $ 7 $ 2 $ 1 $ 2
Depreciation, depletion, and amortization $ 74 $ 67 $ 68 $ 59 $ 268 $ 55 $ 67 $ 81
Income taxes $ 57 $ 67 $ 91 $ 62 $ 277 $ (1 ) $ (21 ) $ 13
After-tax operating income (ATOI)   $ 169   $ 190   $ 206   $ 162     $ 727     $ 35     $ (7 )   $ 65  
 
Primary Metals:
Aluminum production (kmt) 995 1,030 1,011 971 4,007 880 906 881
Third-party aluminum shipments (kmt) 665 750 704 807 2,926 683 779 698
Alcoa’s average realized price per metric ton of aluminum

$

2,801

$

3,058

$

2,945

$

2,125

$

2,714

$

1,567

$

1,667

$

1,972

Third-party sales $ 1,877 $ 2,437 $ 2,127 $ 1,580 $ 8,021 $ 844 $ 1,146 $ 1,362
Intersegment sales $ 1,105 $ 1,108 $ 1,078 $ 636 $ 3,927 $ 393 $ 349 $ 537
Equity income (loss) $ 9 $ 10 $ 1 $ (18 ) $ 2 $ (30 ) $ 4 $ –
Depreciation, depletion, and amortization $ 124 $ 128 $ 131 $ 120 $ 503 $ 122 $ 139 $ 143
Income taxes $ 116 $ 131 $ 29 $ (104 ) $ 172 $ (147 ) $ (119 ) $ (52 )
ATOI   $ 307   $ 428   $ 297   $ (101 )   $ 931     $ (212 )   $ (178 )   $ (8 )
 
Flat-Rolled Products (1):
Third-party aluminum shipments (kmt) 589 571 562 499 2,221 442 448 476
Third-party sales $ 2,336 $ 2,363 $ 2,343 $ 1,924 $ 8,966 $ 1,510 $ 1,427 $ 1,529
Intersegment sales $ 66 $ 65 $ 52 $ 35 $ 218 $ 26 $ 23 $ 34
Depreciation, depletion, and amortization $ 55 $ 59 $ 51 $ 51 $ 216 $ 52 $ 55 $ 60
Income taxes $ 18 $ 20 $ 18 $ (21 ) $ 35 $ – $ (1 ) $ 17
ATOI   $ 33   $ 48   $ 22   $ (106 )   $ (3 )   $ (61 )   $ (35 )   $ 10  
 
Engineered Products and Solutions (1), (2):
Third-party aluminum shipments (kmt) 69 69 63 56 257 41 50 43
Third-party sales $ 1,551 $ 1,660 $ 1,596 $ 1,392 $ 6,199 $ 1,270 $ 1,194 $ 1,128
Equity income – – – – – – – 1
Depreciation, depletion, and amortization $ 42 $ 41 $ 41 $ 41 $ 165 $ 40 $ 46 $ 41
Income taxes $ 60 $ 75 $ 60 $ 27 $ 222 $ 46 $ 40 $ 33
ATOI   $ 148   $ 172   $ 140   $ 73     $ 533     $ 95     $ 88     $ 75  
 
Packaging and Consumer (3):
Third-party aluminum shipments (kmt) 19 – – – 19 – – –
Third-party sales $ 497 $ 19 $ – $ – $ 516 $ – $ – $ –
Depreciation, depletion, and amortization $ – $ – $ – $ – $ – $ – $ – $ –
Income taxes $ 10 $ – $ – $ – $ 10 $ – $ – $ –
ATOI   $ 11   $ –   $ –   $ –     $ 11     $ –     $ –     $ –  
 

Alcoa and subsidiaries

Segment Information (unaudited), continued

(in millions)

               
Reconciliation of ATOI to consolidated net income (loss)
attributable to Alcoa:

1Q08

2Q08

3Q08

4Q08

2008

1Q09

2Q09

3Q09

Total segment ATOI $ 668 $ 838 $ 665 $ 28 $ 2,199 $ (143 ) $ (132 ) $ 142
Unallocated amounts (net of tax):
Impact of LIFO (31 ) (44 ) (5 ) 73 (7 ) 29 39 80
Interest income 9 12 10 4 35 1 8 (1 )
Interest expense (64 ) (57 ) (63 ) (81 ) (265 ) (74 ) (75 ) (78 )
Noncontrolling interests (4) (67 ) (70 ) (84 ) – (221 ) (10 ) 5 (47 )
Corporate expense (82 ) (91 ) (77 ) (78 ) (328 ) (71 ) (70 ) (71 )
Restructuring and other charges (30 ) (1 ) (25 ) (637 ) (693 ) (46 ) (56 ) (3 )
Discontinued operations 4 (7 ) (38 ) (262 ) (303 ) (17 ) (142 ) 4
Other     (104 )     (34 )     (115 )     (238 )     (491 )     (166 )     (31 )     51  
Consolidated net income (loss) attributable to Alcoa  

$

303

   

$

546

   

$

268

   

$

(1,191

)

 

$

(74

)

 

$

(497

)

 

$

(454

)

 

$

77

 

The difference between certain segment totals and consolidated
amounts is in Corporate.

 
(1)   In the second quarter of 2009, management approved the movement of
Alcoa’s hard alloy extrusions business from the Flat-Rolled Products
segment to the Engineered Products and Solutions segment. This move
was made to capture market, customer, and manufacturer synergies
through the combination of the hard alloy extrusions business with
the power and propulsion forgings business. Prior period amounts
were reclassified to reflect this change.
 
(2) Prior period segment information for Engineered Products and
Solutions was reclassified to reflect the movement of the Electrical
and Electronic Solutions business to discontinued operations in the
fourth quarter of 2008.
 
(3) On February 29, 2008, Alcoa completed the sale of its packaging and
consumer businesses to Rank Group Limited. The Packaging and
Consumer segment no longer contains any operations.
 
(4) On January 1, 2009, Alcoa adopted changes issued by the Financial
Accounting Standards Board to consolidation accounting and
reporting. These changes, among others, require that minority
interests be renamed noncontrolling interests for all periods
presented.
 

Alcoa and subsidiaries

Calculation of Financial Measures (unaudited)

(in millions, except per-share amounts)

 
Adjusted Income

Quarter ended

September 30, 2009

Income

 

Earnings per
share

 
Net income attributable to Alcoa $ 77 $ 0.08
 
Income from discontinued operations   4  
 
Income from continuing operations attributable to Alcoa 73 0.07
 
Gain on acquisition in Suriname (35 )
 
Restructuring and other charges   1  
 
Income from continuing operations attributable to Alcoa – as adjusted

$

39

 

0.04

Income from continuing operations attributable to Alcoa – as
adjusted is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management reviews
the operating results of Alcoa excluding the impacts of
restructuring and other charges and transaction impacts from
acquisitions and divestitures. There can be no assurances that
similar items will not occur in future periods. To compensate for
this limitation, management believes that it is appropriate to
consider both Income from continuing operations attributable to
Alcoa determined under GAAP as well as Income from continuing
operations attributable to Alcoa – as adjusted.
 

Alcoa and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in millions)

 
EBITDA      
Quarter ended
June 30,

2009

September 30,
2009

Change

 
(Loss) income from continuing operations

$

(317

)

$

120

$

437

 
Benefit for income taxes (108 ) (22 ) 86
Other income, net (89 ) (123 ) (34 )
Interest expense 115 120 5
Restructuring and other charges   82     17     (65 )
 
Net margin (317 ) 112 429
Provision for depreciation, depletion, and amortization  

317

   

342

   

25

 
 
 
Earnings before interest, taxes, depreciation, and amortization

$

–

 

$

454

 

$

454

 
Alcoa’s definition of EBITDA is net margin plus depreciation,
depletion, and amortization. Net margin is equivalent to Sales minus
the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. EBITDA is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because EBITDA
provides additional information with respect to Alcoa’s operating
performance and the Company’s ability to meet its financial
obligations.