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October 9, 2012
Cautionary Statement
Forward-Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements. Forwardlooking statements include those containing such words as anticipates, estimates, expects, forecasts, intends, outlook, plans, projects, should, targets, will, or other words of similar meaning. All statements that reflect Alcoas expectations, assumptions, or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, forecasts concerning global demand growth for aluminum, end-market conditions, supply/demand balances, and growth opportunities for aluminum in automotive, aerospace and other applications, trend projections, targeted financial results or operating performance, and statements about Alcoas strategies, outlook, and business and financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by Alcoa, including automotive and commercial transportation, aerospace, building and construction, distribution, packaging, defense, and industrial gas turbine; (d) the impact of changes in foreign currency exchange rates on costs and results, particularly the Australian dollar, Brazilian real, Canadian dollar, euro, and Norwegian kroner; (e) increases in energy costs, including electricity, natural gas, and fuel oil, or the unavailability or interruption of energy supplies; (f) increases in the costs of other raw materials, including calcined petroleum coke, caustic soda, and liquid pitch; (g) Alcoas inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations (including moving its alumina refining and aluminum smelting businesses down on the industry cost curves and increasing revenues in its Global Rolled Products and Engineered Products and Solutions segments) anticipated from its restructuring programs and productivity improvement, cash sustainability, and other initiatives; (h) Alcoa's inability to realize expected benefits, in each case as planned and by targeted completion dates, from sales of noncore assets, such as the announced sale of the Tapoco hydroelectric project, or from newly constructed, expanded, or acquired facilities, such as the upstream operations in Brazil and the investments in hydropower projects in Brazil, or from international joint ventures, including the joint venture in Saudi Arabia; (i) political, economic, and regulatory risks in the countries in which Alcoa operates or sells products, including unfavorable changes in laws and governmental policies, civil unrest, or other events beyond Alcoas control; (j) the outcome of contingencies, including legal proceedings, government investigations, and environmental remediation; (k) the business or financial condition of key customers, suppliers, and business partners; (l) adverse changes in tax rates or benefits; (m) adverse changes in discount rates or investment returns on pension assets; (n) the impact of cyber attacks and potential information technology or data security breaches; and (o) the other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2011 and other reports filed with the Securities and Exchange Commission. 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. Non-GAAP Financial Measures Some of the information included in this presentation is derived from Alcoas consolidated financial information but is not presented in Alcoas financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered non-GAAP financial measures under SEC rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most directly comparable GAAP financial measures and managements rationale for the use of the non-GAAP financial measures can be found in the Appendix to this presentation and on our website at www.alcoa.com under the Invest section. Any reference during the discussion today to EBITDA means adjusted EBITDA, for which we have provided calculations and reconciliations in the Appendix and on our website.
Chuck McLane
Executive Vice President and Chief Financial Officer
October 9, 2012
2
Loss from Continuing Operations of $143 million, or $0.13 per share; Excluding impact of restructuring and other special items: Income from continuing operations of $32 million, or $0.03 per share
Revenue at $5.8 billion Adjusted EBITDA of $282 million Upstream delivers significant sequential performance improvement Midstream and Downstream achieved record third quarter results Days Working Capital at 33 days, a record low third quarter
3Q11 Actual
$6,419 $5,290 82.4% $261
2Q12 Actual
$5,963 $5,154 86.4% $245
3Q12 Actual
$5,833 $5,266 90.3% $234
Sequential Change
($130) $112 3.9 % pts. ($11)
Sales Cost of Goods Sold COGS % Sales Selling, General Administrative, Other
SGA % Sales
Other Expenses (Income), Net Restructuring and Other Charges Effective Tax Rate Income (Loss) from Continuing Operations
4.1%
$31 $9 19.6% $172
4.1%
$22 $15 (216.7%) ($2)
4.0%
($2) $2 15.9% ($143)
(0.1 % pts.)
($24) ($13) 232.6 % pts. ($141)
$0.15
$0.00
($0.13)
($0.13)
4
2Q12
($2) $0.00
3Q12
($143) ($0.13) ($120) ($15) ($9) ($26) ($3) ($2) ($175) $32 $0.03
Segment
Loss from Continuing Ops Loss Per Diluted Share Environmental Reserve Litigation Reserve
($13)
($18) ($12) ($10)
COGS COGS
Corporate Corporate
Massena Fire
Discrete Tax Items Mark-to-Market Energy Contracts Restructuring-Related Special Items Income from Continuing Ops excl Special Items Income per Diluted Share excl Special Items
61
3
24
32
55 91
34 3 2Q 2012 LME Currency 3 Volume Price /Mix Productivity Raw Materials Cost Increases / Other 3Q 2012
-$94m
See appendix for Adjusted income reconciliation
+$86m
-$21m
6
Alumina
Alumina Q3 Results and Q4 Outlook
Higher shipments stemming from prior quarter shipping Price/mix driven by stable API pricing despite LME
decline
ATOI ($ Millions)
Performance
+$70m
$3 $23 -$91
2Q 2012 LME
-$4
-$9
$32
-$11 $16
Price Productivity Energy Raw Materials / Mix 3Q 2012 Currency Volume
Other pricing to follow two-month lag to LME 34% of LME sensitivity driven by alumina segment Caustic pricing expected to remain level API pricing has remained flat as LME has increased since early September
Primary Metals
Primary Metals Q3 Results and Q4 Outlook
2,689
110
2,329
(3)
2,222
(14)
Performance Performance
+$27m
Other
Pricing to follow 15 day lag to LME Curtailments continue with expected negative $15m
ATOI impact
-$14
-$3
-$1
$13
Price / Mix Productivity Energy
2Q 2012
LME
Currency Volume
3Q 2012
3Q Record ATOI and adjusted EBITDA per metric ton ATOI up 63% YOY quarter Demand increases in can stock, mainly in NA Continued strong demand in Aero and Auto Europe seasonal summer plant shutdowns and
weaker demand in NA Industrial
-$10
-$2
-$4
138
160
160
-$11
$160
Europe
Weaker global industrial market Share gains through innovation continue across all
market sectors
10
$225
$377 ($93) ($114) $94 $489
($19)
$364 ($147) ($139) $478 $537
($175)
$366 $88 ($163) $147 $263
Dividends to Shareholders
Change in Debt Distributions to Noncontrolling Interest Contributions from Noncontrolling Interest Other Financing Activities
($33)
$72 ($66) $8 ($8)
($33)
($143) ($44) $20 $2
($32)
($273) ($1) $22 $2 Debt-to-Cap at 36.1%; Net Debt-toCap at 32.4% DWC 5 Day reduction vs. 3Q 2011
($27)
($325) ($42)
($198)
($291) ($63)
($282)
($302) $40
($367)
($354)
($262)
See appendix for Free Cash Flow and Net Debt-to-Capital reconciliations
11
55 50 45 40 35 30 25 20
55 50 48 44 41 43 39 38 38
43
33 30 27
32
33
33
1Q12
10 days lower
3 days lower
3 days lower
3Q12
12
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
2Q12
1Q11
3Q11
2Q11
4Q11
39
101 139 96
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12
Cash on Hand
($ Millions)
10,578 10,205
42.5%
38.7%
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12
13
Delivering Results
Overhead
$50M
Working Capital
1.5 days
$1.7B
Maintain Debt-to-Capital
30-35%
14
Klaus Kleinfeld
Chairman and Chief Executive Officer
October 9, 2012
15
Aerospace
Automotive
Heavy Truck & Trailer Beverage Can Packaging Commercial Building and Construction
5% sales decline
8% sales decline
16
China
20.7
9%
4%
China
46.1 mmt
Source: Alcoa analysis
Average: 6%
Notes: (1) Other consists of: Middle East, Latin America ex Brazil and Rest of the World (ROW)
17
Surplus 400
Deficit (262)
Supply
(000 mt) Aug 2012 Annualized Rate 2012 Production to be added 2012 Capacity to be curtailed Imports/(Exports) Total Supply Demand Net Balance China 37,400 300 (1,000) 4,100 40,800 (40,200) 600
Demand
Rest of World 54,300 300 (50) (4,100) 50,450 (50,650) (200)
Supply
(000 mt) Aug 2012 Annualized Rate 2012 Production to be added 2012 Capacity to be curtailed Total Supply Demand Net Balance China 19,824 1,296 (320) 20,800 (20,700) 100
Demand
Rest of World 24,763 295 (55) 25,003 (25,365) (362)
18
$300
Region End of Q312 $290/MT Europe
$300
$250
Japan
Midwest USA
$255/MT
$243/MT
$250
$200
$200
$150
$150
$100
$100
$50
$50
$0
$0
Source: Alcoa estimates, LME, SHFE, IAI, Marubeni, Platts Metals Week and Metal Bulletin
19
100 90 80
70 60 50
40 30 20 10 0 $2,450 $2,250 $2,050 $1,850
$1,650
$1,450 $1,250
Off Exchange
Producer
Japan Port
China ex SRB
LME On Warrant
Cancelled Warrants
LME 3 Mon
20
Source: Alcoa estimates, LME, SHFE, IAI, Marubeni, Platts Metals Week and Metal Bulletin
DECOUPLED
Supply/ Demand
$3,400 $3,200 $3,000 $2,800 $2,600 $2,400 $2,200 $2,000 300 $1,800 $1,600 $1,400 $1,200 100 (100) (300)
S U R P L U S
Supply-Demand Balance
$1,000
LME Cash
(500)
D E F I C I T
21
Sept 12th
2,350
Sept 13th
2,250
2,150
Sept 7th
2,050
1,950
1,850
1,750
Source: Bloomberg
22
$300
Europe Japan Midwest USA
$300
$250
$250
Surplus 400
Deficit (262)
$200
$200
$150
$150
Supply
(000 mt) Aug 2012 Annualized Rate 2012 Production to be added 2012 Capacity to be curtailed Imports/(Exports) Total Supply Demand Net Balance China 37,400 300 (1,000) 4,100 40,800 (40,200) 600
Demand
Rest of World 54,300 300 (50) (4,100) 50,450 (50,650) (200)
Supply
(000 mt) Aug 2012 Annualized Rate 2012 Production to be added
2012 Capacity to be curtailed
Demand
China 19,824 1,296
(320)
$100
$100
$50
$50
$0
$0
Inventories Down
Global Inventories vs. LME Price over time
Days of Consumption
100
90 80
$3,250 $3,050
$2,850
2,350
Sept 12th
Sept 13th
$2,650 70 60 50 40 30 20
10 0
2,250
$2,450
$2,250
2,150
Sept 7th
$2,050
2,050
$1,850
$1,650 $1,450
1,950
1,850
$1,250
1,750
Of f Exchange
Producer
Japan Port
China ex SRB
LME On Warrant
Cancelled Warrants
LME 3 Mon
23
2,641
2,572 2,173
1,664
110 44 48 68 75
104 81 47 20 70 29
2011 YTD 2012
200 100 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12est
2002
2003
2004
2005
2006
2007
2008
2009
2010
LME
Adj. EBITDA/MT
Avg.
30th
Curtailments complete: 390kmt curtailed Productivity gains : $320m since 2010 Driving to API Pricing: ~40% tied to spot or
index-based pricing by the end of 2012
-8 days DWC from Q3 2010: ~$115m in cash Saudi Arabia project: on schedule and budget
24
2,398 2,025
1,719
1,350 1,433
1,900 784
626 392
-159
Foundry
320 301 126
Rod
321
336
418
398
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
YTD 2012
LME
Adj. EBITDA/MT
Avg.
Billet
Slab
T-Bar
51st
Curtailments: Italy more than 70% curtailed Productivity gains : $385m since 2010 Improving our cost of power: USA (Intalco and
Mt. Holly), Australia and Brazil
-9 days DWC from Q3 2010: ~$240m in cash Saudi Arabia project: on schedule and budget
Strategy Executed
Notes: See appendix for Adjusted EBITDA reconciliations
* Margin refers to incremental valued added product margin over P1020 primary aluminum
25
314
327
85% Utilization
273
253
249
108
119
Aerospace 14%
Packaging
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Adj. EBITDA/MT
Avg.
YTD 2012
Industrial Products
24%
Delivering Results
Project module #2
Project module #3
Aero and Auto driving profitable growth Productivity gains: $218m since 2010 -3 days DWC from Q3 2010: ~$60m in cash
Project module #4
26
Other
3%
6%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
YTD 2012
18% B&C
Sharklet
Record YTD adjusted EBITDA margins Productivity gains: $350 million since 2010 Continued strength in global aerospace
market driving profitable growth
27
Drive Substitution
Global Auto Body Sheet Consumption (KMT)
+100%
54.5
+31%
35.5 27.2
83% 54%
800
200
2011
2016
2025
2008
2011
2011
2016
2020
28
Source: Consumer Reports, The Aluminum Association, Ducker Research, Alcoa Analysis
Delivering Results
Surplus 400
Deficit (262)
Supply
(000 mt) Aug 2012 Annualized Rate 2012 Production to be added 2012 Capacity to be curtailed Imports/(Exports) Total Supply Demand Net Balance China 37,400 300 (1,000) 4,100 40,800 (40,200) 600
Demand
Rest of World 54,300 300 (50) (4,100) 50,450 (50,650) (200)
Supply
(000 mt) Aug 2012 Annualized Rate 2012 Production to be added
2012 Capacity to be curtailed
Demand
China 19,824 1,296
(320)
Record YTD ATOI and adjusted EBITDA of $405 per metric ton
Engineered Products and Solutions: Highest quarterly adjusted EBITDA Margin ever of 20.3%
200
Sept 12th
2,350
Sept 13th
2011
2016
2020
Necessary to Meet Market Demands 37% of consumers rank fuel economy as the #1 factor in buying decision
2,250
2,150
Sept 7th
2,050
1,950
1,850
1,750
29
30
30 30
Additional Information
Kelly Pasterick Director, Investor Relations Alcoa 390 Park Avenue New York, NY 10022-4608 Telephone: (212) 836-2674 www.alcoa.com
31
+/- $11 million +/- $ 3 million +/- $ 2 million +/- $ 5 million +/- $ 5 million
per 0.01 change in USD / AUD per 0.01 change in BRL / USD per 0.01 change in USD / EUR per 0.01 change in CAD / USD per 0.10 change in NOK / USD
32
(16%)
(1%)
(6%)
(19%)
2%
(13%)
(16%)
Primary Metals
33
(in millions)
1Q11 Total segment ATOI Unallocated amounts (net of tax): Impact of LIFO Interest expense Noncontrolling interests Corporate expense Restructuring and other charges Discontinued operations Other Consolidated net income (loss) attributable to Alcoa $ 555 (24) (72) (58) (67) (6) (1) (19) $ 308
2Q11 $ 635 (27) (106) (55) (76) (22) (4) (23) $ 322
2011 $ 1,893 (38) (340) (194) (290) (196) (3) (221) 611
(2) $
34
September 30, 2011 Net income (loss) attributable to Alcoa Loss from discontinued operations Income (loss) from continuing operations attributable to Alcoa Restructuring and other charges Discrete tax items* Other special items** Income from continuing operations attributable to Alcoa as adjusted $ 172
172
(2)
(143)
0.15
(0.13)
5 (10) (2)
10 10 43
2 26 147
165
61
32
0.15
0.06
0.03
Income from continuing operations attributable to Alcoa as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special items (collectively, special items). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Income (loss) from continuing operations attributable to Alcoa determined under GAAP as well as Income from continuing operations attributable to Alcoa as adjusted.
* Discrete tax items include the following: for the quarter ended September 30, 2012, unbenefitted losses in Italy, China, and Suriname ($35), a benefit as a result of including the anticipated gain from the sale of the Tapoco Hydroelectric Project in the calculation of the estimated annual effective tax rate ($12), and a net charge for other miscellaneous items ($3); for the quarter ended June 30, 2012, a charge related to prior year U.S. taxes on certain depletable assets ($8) and a net charge for other miscellaneous items ($2); and for the quarter ended September 30, 2011, a net benefit for adjustments made related to the filing of 2010 tax returns in various jurisdictions ($5) and a net benefit for other miscellaneous items ($5). ** Other special items include the following: for the quarter ended September 30, 2012, an increase in the environmental reserve mostly related to the Grasse River remediation in Massena, NY and two new remediation projects at the smelter sites in Baie Comeau, Canada and Mosjen, Norway ($120), a litigation reserve ($15), uninsured losses related to fire damage to the cast house at the Massena, NY location ($9), and a net unfavorable change in certain mark-to-market energy derivative contracts ($3); for the quarter ended June 30, 2012, a litigation reserve ($18), uninsured losses related to fire damage to the cast house at the Massena, NY location ($12), and a net increase in the environmental reserve related to the Grasse River remediation in Massena, NY and remediation at two former locations, East St. Louis, IL and Sherwin, TX ($13); and for the quarter ended September 30, 2011, a net favorable mark-to-market change in certain energy derivative contracts ($13) and uninsured losses, including costs related to flood damage to a plant in Pennsylvania caused by Hurricane Irene, ($11).
35
March 31, 2011 Net income (loss) attributable to Alcoa (Loss) income from discontinued operations Income (loss) from continuing operations attributable to Alcoa Restructuring and other charges Discrete tax items* Other special items** Income (loss) from continuing operations attributable to Alcoa as adjusted $ 308
(1)
(4)
309
326
172
(193)
94
5 3
16 22
5 (10) (2)
155 12 (8)
7 4
317
364
165
(34)
105
Income (loss) from continuing operations attributable to Alcoa as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special items (collectively, special items). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Income (loss) from continuing operations attributable to Alcoa determined under GAAP as well as Income (loss) from continuing operations attributable to Alcoa as adjusted.
* Discrete tax items include the following: for the quarter ended December 31, 2011, charges for a tax rate change in Hungary and a tax law change regarding the utilization of net operating losses in Italy ($8), a charge related to the 2010 change in the tax treatment of federal subsidies received related to prescription drug benefits provided under certain retiree health benefit plans ($7), and a net benefit for other miscellaneous items ($3); and, for the quarter ended September 30, 2011, a net benefit for adjustments made related to the filing of 2010 tax returns in various jurisdictions ($5) and a net benefit for other miscellaneous items ($5). ** Other special items include the following: for the quarter ended March 31, 2012, a net unfavorable change in certain mark-to-market energy derivative contracts; for the quarter ended December 31, 2011, a gain on the sale of land in Australia ($18), uninsured losses, including costs related to flood damage to a plant in Pennsylvania caused by Hurricane Irene, ($14), a net favorable change in certain mark-to-market energy derivative contracts ($8), and the write off of inventory related to the permanent closure of a smelter in the U.S ($4); for the quarter ended September 30, 2011, a net favorable mark-to-market change in certain energy derivative contracts ($13) and uninsured losses, including costs related to flood damage to a plant in Pennsylvania caused by Hurricane Irene, ($11); for the quarter ended June 30, 2011, a net charge comprised of expenses for the early repayment of Notes set to mature in 2013 due to the premiums paid under the tender offers and call option and gains from the termination of related in-the-money interest rate swaps ($32) and a net favorable mark-to-market change in certain energy derivative contracts ($10); and, for the quarter ended March 31, 2011, costs related to acquisitions of the aerospace fastener business of TransDigm Group Inc. and full ownership of carbothermic smelting technology from ORKLA ASA ($8) and a net favorable mark-to-market change in certain energy derivative contracts ($5).
36
December 31, 2008 Net (loss) income attributable to Alcoa (Loss) income from discontinued operations (Loss) income from continuing operations attributable to Alcoa Restructuring and other charges Discrete tax items* Other special items** (Loss) income from continuing operations attributable to Alcoa as adjusted $ (1,191)
(262)
(17)
(142)
(11)
(7)
(1)
(929)
(480)
(312)
73
(266)
(194)
137
61
258
614 65 29
46 (28) (15)
56
1 (35)
49 (82) 308
119 112 64
20 (16) (2)
(1) (38) 74
(221)
(477)
(256)
39
101
139
96
223
Income (loss) from continuing operations attributable to Alcoa as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special items (collectively, special items). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Income (loss) from continuing operations attributable to Alcoa determined under GAAP as well as Income (loss) from continuing operations attributable to Alcoa as adjusted.
* Discrete tax items include the following: for the quarter ended December 31, 2010, a benefit for the reversal of the remaining valuation allowance related to net operating losses of an international subsidiary ($16) (a portion was initially reversed in the quarter ended September 30, 2010) and a net benefit for other small items ($2); for the quarter ended September 30, 2010, a benefit for the reversal of a valuation allowance related to net operating losses of an international subsidiary that are now realizable due to a settlement with a tax authority ($41), a charge for a tax rate change in Brazil ($11), and a benefit for the recovery of a portion of the unfavorable impact included in the quarter ended March 31, 2010 related to unbenefitted losses in Russia, China, and Italy ($8); for the quarter ended June 30, 2010, a benefit for a change in a Canadian provincial tax law permitting tax returns to be filed in U.S. dollars ($24), a charge based on settlement discussions of several matters with international taxing authorities ($18), and a benefit for the recovery of a portion of the unfavorable impact included in the quarter ended March 31, 2010 related to unbenefitted losses in Russia, China, and Italy ($10); for the quarter ended March 31, 2010, charges for a change in the tax treatment of federal subsidies received related to prescription drug benefits provided under certain retiree health benefit plans ($79), unbenefitted losses in Russia, China, and Italy ($22), interest due to the IRS related to a previously deferred gain associated with the 2007 formation of the former soft alloy extrusions joint venture ($6), and a change in the anticipated sale structure of the Transportation Products Europe business ($5); for the quarter ended December 31, 2009, a benefit for the reorganization of an equity investment in Canada ($71), a charge for the write-off of deferred tax assets related to operations in Italy ($41), a benefit for a tax rate change in Iceland ($31), and a benefit for the reversal of a valuation allowance on net operating losses in Norway ($21); for the quarter ended March 31, 2009, a benefit for a change in a Canadian national tax law permitting tax returns to be filed in U.S. dollars; and, for the quarter ended December 31, 2008, a charge for non-cash tax on repatriated earnings. ** Other special items include the following: for the quarter ended December 31, 2010, a net favorable mark-to-market change in certain energy derivative contracts; for the quarter ended September 30, 2010, a net unfavorable mark-to-market change in certain energy derivative contracts ($29), recovery costs associated with the So Lus, Brazil facility due to a power outage and failure of a ship unloader in the first half of 2010 ($23), restart costs and lost volumes related to a June 2010 flood at the Avils smelter in Spain ($13), and a net charge comprised of expenses for the early repayment of Notes set to mature in 2011 through 2013 due to the premiums paid under the tender offers and call option and gains from the termination of related in-the-money interest rate swaps ($9); for the quarter ended June 30, 2010, a net favorable mark-to-market change in certain energy derivative contracts ($22), a charge for costs associated with the potential strike and successful execution of a new agreement with the United Steelworkers ($13), and a charge related to an unfavorable decision in Alcoas lawsuit against Luminant related to the Rockdale, TX facility ($7); for the quarter ended March 31, 2010, charges related to unfavorable mark-to-market changes in certain energy derivative contracts ($31), power outages at the Rockdale, TX and So Lus, Brazil facilities ($17), an additional environmental accrual for the Grasse River remediation in Massena, NY ($11), and the write off of inventory related to the permanent closures of certain U.S. facilities ($5); for the quarter ended December 31, 2009, charges related to the European Commissions ruling on electricity pricing for smelters in Italy ($250), a tax settlement related to an equity investment in Brazil ($24), an estimated loss on excess power at the Intalco smelter ($19), and an environmental accrual for smelters in Italy ($15); for the quarter ended September 30, 2009, a gain on an acquisition in Suriname; for the quarter ended March 31, 2009, a gain on the Elkem/SAPA AB swap ($133) and a loss on the sale of Shining Prospect ($118); and, for the quarter ended December 31, 2008, charges for environmental reserve ($26), obsolete inventory ($16), and accounts receivable reserve ($11), and a refund of an indemnification payment ($24).
37
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q11
2Q12
3Q12
Net income (loss) attributable to Alcoa Add: Net income (loss) attributable to noncontrolling interests Cumulative effect of accounting changes Loss (income) from discontinued operations Provision (benefit) for income taxes Other (income) expenses, net Interest expense Restructuring and other charges Provision for depreciation, depletion, and amortization Adjusted EBITDA
420
938
$ 1,310
$ 1,233
$ 2,248
$ 2,564
(74)
$ (1,151)
254
611
172
(2)
(143)
181
212
259
53 55 31 125 9
(17) 13 22 123 15
1,037 $ 2,585
1,110 $ 2,682
1,142 $ 3,234
1,227 $ 3,362
1,252 $ 5,422
1,244 $ 4,795
1,234 $ 3,313 $
1,311 359
1,450 $ 2,704
1,479 $ 3,260 $
376 821 $
363 517 $
366 282
$17,691
$18,879
$21,370
$24,149
$28,950
$29,280
$26,901
$18,439
$21,013
$24,951
$ 6,419
$ 5,963
$ 5,833
15%
14%
15%
14%
19%
16%
12%
2%
13%
13%
13%
9%
5%
Alcoas definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for 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. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoas operating performance and the Companys ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
38
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q11
2Q12
3Q12
3Q12 YTD
After-tax operating income (ATOI) Add: Depreciation, depletion, and amortization Equity (income) loss Income taxes Other Adjusted EBITDA Production (thousand metric tons) (kmt) Adjusted EBITDA/Production ($ per metric ton)
315
415
632
682
$ 1,050
956
727
112
301
607
154
23
(9)
49
13,027
13,841
14,343
14,598
15,128
15,084
15,256
14,265
15,922
16,486
4,140
4,033
4,077
12,263
44
48
68
75
110
104
81
20
47
70
75
31
21
29
Alcoas definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for 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. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoas operating performance and the Companys ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
39
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q11
2Q12
3Q12
3Q12 YTD
After-tax operating income (ATOI) Add: Depreciation, depletion, and amortization Equity (income) loss Income taxes Other Adjusted EBITDA Production (thousand metric tons) (kmt) Adjusted EBITDA/Production ($ per metric ton)
650
657
808
822
$ 1,760
$ 1,445
931
(612)
488
481
110
(3)
(14)
(7)
556 7 92 2 $ 1,138 $
137 4 21 272 $
3,500
3,508
3,376
3,554
3,552
3,693
4,007
3,564
3,586
3,775
964
941
938
2,830
321
336
418
398
784
626
392
(159)
320
301
282
126
111
126
Alcoas definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for 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. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoas operating performance and the Companys ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
40
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q11
2Q12
3Q12
3Q11 YTD
3Q12 YTD
After-tax operating income (ATOI) Add: Depreciation, depletion, and amortization Equity loss Income taxes Other Adjusted EBITDA Total shipments (thousand metric tons) (kmt) Adjusted EBITDA/Total shipments ($ per metric ton)
225
222
254
278
233
178
(3)
(49)
220
266
60
95
98
240
289
200 1 75 1 531 $
223 2 58 20 536 $
227 92 1 498 $
216 35 6 254 $
238 92 1 551 $
61 26 147 $
57 2 43 197 $
57 1 44 (2) 198 $
179 94 513 $
1,814
1,893
2,136
2,250
2,376
2,482
2,361
1,888
1,755
1,866
469
505
501
1,430
1,478
273
253
249
276
226
201
108
119
314
327
313
390
395
359
405
Alcoas definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for 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. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoas operating performance and the Companys ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
41
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
3Q11
2Q12
3Q12
3Q11 YTD
3Q12 YTD
After-tax operating income (ATOI) Add: Depreciation, depletion, and amortization Equity loss (income) Income taxes Other Adjusted EBITDA
63
124
156
271
365
435
533
315
415
539
138
160
160
417
475
150 39 35 $ 287 $
166 55 11 356 $
40 67 245 $
39 77 276 $
39 79 (1) 277 $
Total sales
$ 3,492
$ 3,905
$ 4,283
$ 4,773
$ 5,428
$ 5,834
$ 6,199
$ 4,689
$ 4,584
$ 5,345
$ 1,373
$ 1,420
$ 1,367
$ 3,990
$ 4,177
8%
9%
12%
11%
12%
13%
15%
13%
17%
18%
18%
19%
20%
18%
20%
Alcoas definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for 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. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoas operating performance and the Companys ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
42
(204)
(272)
(325)
(486)
(270)
(291)
(302)
$ (440)
526
164
656
$ (506)
246
(39)
Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand Alcoas asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.
43
(1,017)
(471)
(418)
(370)
(363)
(221)
(213)
(216)
(365)
$ (409)
$ (742)
(90)
$ (186)
761
(22)
87
176
$ 1,005
Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand Alcoas asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.
44
($ in millions)
September 30, 2011 Receivables from customers, less allowances * Add: Deferred purchase price receivable Receivables from customers, less allowances, as adjusted Add: Inventories Less: Accounts payable, trade Working Capital Sales Days Working Capital $ 1,943 1,943 3,194 2,488 $ 2,649 $ 6,419 38
Quarter ended June 30, 2012 $ 1,575 141 1,716 3,051 2,633 $ 2,134 $ 5,963 33
Days Working Capital = Working Capital divided by (Sales/number of days in the quarter). * The deferred purchase price receivable relates to an arrangement to sell certain customer receivables to a financial institution on a recurring basis. Alcoa is adding back this receivable for the purposes of the Days Working Capital calculation.
45
($ in millions)
Quarter ended September 30, 2012 Cash and Cash Net Debt-toDebt-to-Capital Equivalents Capital Total Debt Short-term borrowings Commercial paper Long-term debt due within one year Long-term debt, less amount due within one year Numerator Total Capital Total debt Total equity Denominator
1,432
8,092
1,432
$ 24,946
Ratio
36.1%
32.4%
Net debt-to-capital is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management assesses Alcoas leverage position after factoring in available cash that could be used to repay outstanding debt.
46