-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JFyapkRaMyNRN/5sS+9IG98ZqQ9fvAwekKVBdntA59HbiIopRlhzfGT3IfPVmFg6 byuazm7wOBH660lUD/Eo+w== 0000004281-95-000009.txt : 19951119 0000004281-95-000009.hdr.sgml : 19951119 ACCESSION NUMBER: 0000004281-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALUMINUM CO OF AMERICA CENTRAL INDEX KEY: 0000004281 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 250317820 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03610 FILM NUMBER: 95589567 BUSINESS ADDRESS: STREET 1: 1501 ALCOA BLDG CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4125532136 10-Q 1 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, 1995 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.) 425 Sixth Avenue - Alcoa Building, Pittsburgh, Pennsylvania 15219-1850 (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 10, 1995, 177,210,361 shares of common stock, par value $1.00, of the Registrant were outstanding. - 1 - PART I - FINANCIAL INFORMATION Alcoa and subsidiaries Consolidated Balance Sheet (in millions)
(unaudited) September 30, December 31 1995 1994 ASSETS ------------- ------------- Current assets: Cash and cash equivalents (includes cash of $93.4 in 1995 and $177.5 in 1994) $ 988.9 $ 619.2 Short-term investments 7.3 5.5 Accounts receivable from customers, less allowance: 1995-$45.4; 1994-$37.4 1,727.5 1,440.6 Receivable from Western Mining Corporation (WMC), net - 366.9 Other receivables 273.1 182.5 Inventories (b) 1,507.7 1,144.2 Deferred income taxes 407.1 235.6 Prepaid expenses and other current assets 156.2 158.7 -------- -------- Total current assets 5,067.8 4,153.2 -------- -------- Properties, plants and equipment, at cost 15,029.9 14,502.3 Less, accumulated depreciation, depletion and amortization 8,207.9 7,812.9 -------- -------- Net properties, plants and equipment 6,822.0 6,689.4 -------- -------- Other assets 1,805.8 1,510.6 -------- -------- Total assets $13,695.6 $12,353.2 ======== ======== LIABILITIES Current liabilities: Short-term borrowings $ 350.4 $ 261.9 Accounts payable, trade 792.5 739.3 Accrued compensation and retirement costs 384.9 363.9 Taxes, including taxes on income 346.2 393.0 Provision for layoffs and impairments 74.1 84.4 Other current liabilities 320.0 557.0 Long-term debt due within one year 161.6 154.0 -------- -------- Total current liabilities 2,429.7 2,553.5 -------- -------- Long-term debt, less amount due within one year 1,432.0 1,029.8 Accrued postretirement benefits 1,837.1 1,850.5 Other noncurrent liabilities and deferred credits 1,661.2 1,011.8 Deferred income taxes 309.4 220.6 -------- -------- Total liabilities 7,669.4 6,666.2 -------- -------- MINORITY INTERESTS 1,635.7 1,687.8 -------- -------- SHAREHOLDERS' EQUITY Preferred stock 55.8 55.8 Common stock 178.9 178.7 Additional capital 675.6 663.5 Translation adjustment (61.4) (68.6) Retained earnings 3,609.4 3,173.9 Unfunded pension obligation (10.7) (4.0) Treasury stock, at cost (57.1) (.1) -------- -------- Total shareholders' equity 4,390.5 3,999.2 -------- -------- Total liabilities and shareholders' equity $13,695.6 $12,353.2 ======== ======== (see accompanying notes)
-2- Alcoa and subsidiaries Statement of Consolidated Income (unaudited) (in millions, except per share amounts)
Third quarter Nine months ended ended September 30 September 30 ------------- ------------ 1995 1994 1995 1994 ---- ---- ---- ---- REVENUES Sales and operating revenues $3,264.8 $2,561.6 $9,391.9 $7,262.5 Other income, principally interest 61.3 55.4 118.9 74.2 ------- ------- ------- ------- 3,326.1 2,617.0 9,510.8 7,336.7 ------- ------- ------- ------- COSTS AND EXPENSES Cost of goods sold and operating expenses 2,434.4 2,037.4 6,926.1 5,762.6 Selling, general administrative and other expenses 182.4 160.6 519.7 458.3 Research and development expenses 34.1 29.6 98.2 90.7 Provision for depreciation, depletion and amortization 185.4 167.0 529.0 499.9 Interest expense 33.1 28.5 84.0 81.5 Taxes other than payroll and severance taxes 27.5 23.7 93.6 74.1 Special items (c) 9.4 - 9.4 79.7 ------- ------- ------- ------- 2,906.3 2,446.8 8,260.0 7,046.8 ------- ------- ------- ------- EARNINGS Income before taxes on income 419.8 170.2 1,250.8 289.9 Provision for taxes on income (d) 150.3 48.9 419.9 88.4 ------- ------- ------- ------- Income from operations 269.5 121.3 830.9 201.5 Less: Minority interests' share (43.1) (51.2) (191.3) (126.4) ------- ------- ------- ------- Income before extraordinary loss 226.4 70.1 639.6 75.1 Extraordinary loss on debt prepayment, net of $40.4 tax benefit (e) - - - (67.9) ------- ------- ------- ------- NET INCOME $ 226.4 $ 70.1 $ 639.6 $ 7.2 ======= ======= ======= ======= Earnings per common share: (f) Before extraordinary loss $ 1.27 $ .39 $ 3.58 $ .41 Extraordinary loss - - - (.38) ------- ------- ------- ------- Earnings per common share $ 1.27 $ .39 $ 3.58 $ .03 Dividends paid per common share $ .225 $ .20 $ .675 $ .60 ======= ======= ======= ======= (see accompanying notes)
- 3 - Alcoa and subsidiaries Statement of Consolidated Cash Flows (unaudited) (in millions)
Nine months ended September 30 -------------- 1995 1994 -------- -------- CASH FROM OPERATIONS Net income $ 639.6 $ 7.2 Adjustments to reconcile net income to cash from operations: Depreciation, depletion and amortization 541.6 511.7 Reduction of assets to net realizable value - 32.8 Change in deferred income taxes (22.5) (141.6) Equity (income) losses before additional taxes, net of dividends (25.5) 7.1 Provision for special items 9.4 46.9 Losses from financing and investing activities (1.4) (2.5) Book value of asset disposals 11.3 34.3 Extraordinary loss - 67.9 Minority interests 191.3 126.4 Other 3.1 15.1 Increase in receivables (209.6) (90.5) (Increase) reduction in inventories (315.1) 53.5 Reduction in prepaid expenses and other current assets 3.1 109.8 Increase (reduction) in accounts payable and accrued expenses (262.6) 44.0 Reduction in taxes, including taxes on income (48.4) (9.5) Payment of amortized interest on deep discount bonds - (8.6) Net change in noncurrent assets and liabilities 562.0 (1.6) ------- ------- CASH FROM OPERATIONS 1,076.3 802.4 ------- ------- FINANCING ACTIVITIES Net changes in short-term borrowings 88.7 (119.5) Common stock issued and treasury stock sold 101.4 50.9 Repurchase of common stock (185.7) - Dividends paid to shareholders (121.6) (107.6) Dividends paid to minority interests (87.2) (95.8) Additions to long-term debt 532.0 493.7 Payments on long-term debt (136.3) (857.6) ------- ------- CASH FROM (USED FOR) FINANCING ACTIVITIES 191.3 (635.9) ------- ------- INVESTING ACTIVITIES Capital expenditures (547.1) (394.0) Additions to investments (8.1) (16.5) Net change in short-term investments, excluding cash equivalents (1.8) 237.9 Changes in minority interests (139.3) (95.0) Acquisition of subsidiaries, net of cash acquired (426.6) - Loan to WMC (121.8) - Net proceeds from Alcoa/WMC transaction 366.9 - Other - receipts 3.8 3.9 - payments (18.9) (17.4) ------- ------- CASH USED FOR INVESTING ACTIVITIES (892.9) (281.1) ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (5.0) 17.8 ------- ------- CHANGES IN CASH Net change in cash and cash equivalents 369.7 (96.8) Cash and cash equivalents at beginning of year 619.2 411.7 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 988.9 $ 314.9 ======= ======= (see accompanying notes)
- 4 - Notes to 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 14. (b) Inventories consisted of: September 30 December 31 1995 1994 -------------- ------------- Finished goods $ 351.3 $ 249.6 Work in process 522.1 456.1 Bauxite and alumina 255.0 195.2 Purchased raw materials 258.3 131.0 Operating supplies 121.0 112.3 ------- ------- $1,507.7 $1,144.2 ======= ======= Approximately 51.2% of total inventories at September 30, 1995 was valued on a LIFO basis. If valued on an average cost basis, total inventories would have been $789.4 and $691.9 higher at September 30, 1995 and December 31, 1994, respectively. (c) The special charge of $9.4 in the 1995 third quarter was comprised of $27.8 for salaried personnel layoffs, principally at U.S. smelters, offset by $18.4 related to insurance settlements on environmental claims. The special charge of $79.7 in the 1994 nine-month period was for closing part of a forgings and extrusion plant in Vernon, California. The charge included $32.8 for asset write-offs and $46.9 related mostly to severance costs. (d) The estimated effective tax rate for 1995 was raised to 33% from an earlier projection of 32.5%. The rate was calculated including the effects of a negative adjustment related to AofA. In the third quarter the Australian government passed legislation to increase the corporate income tax rate from 33% to 36% retroactive to the beginning of the year. As a result, AofA recorded a $27.2 increase in its taxes. Most of this amount relates to an adjustment of future taxes which were recorded at the lower rate. The difference between the 1995 estimated effective tax rate of 33% and the U.S. statutory rate of 35% is primarily due to lower taxes on income earned outside of the U.S. (e) The extraordinary loss in the 1994 nine-month period of $67.9, or 38 cents per common share, resulted from the early redemption of $225 face value of 7% deep discount debentures due 2011. (f) The following formula is used to compute primary earnings per common share (EPS): EPS = Net income - preferred dividend requirements -------------------------------------------- Weighted average number of common shares outstanding for the period The average number of shares used to compute primary earnings per common share was 178,383,420 in 1995 and 177,637,568 in 1994. Fully diluted earnings per common share are not stated since the dilution is not material. Per share amounts for 1994 have been restated to reflect the two-for-one stock split which occurred in February 1995. - 5 - 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, 1994. The financial data required in this Form 10-Q by Rule 10-01 of Regulation S-X have been reviewed by Coopers & Lybrand L.L.P., the Company's independent certified public accountants, as described in their report on page 7. - 6 - Independent Auditor's Review Report To the Shareholders and Board of Directors Aluminum Company of America (Alcoa) We have reviewed the unaudited consolidated balance sheet of Alcoa and subsidiaries as of September 30, 1995, the unaudited statements of consolidated income for the three-month and nine-month periods ended September 30, 1995 and 1994, and consolidated cash flows for the nine-month periods ended September 30, 1995 and 1994, which are included in Alcoa's Form 10-Q for the period ended September 30, 1995. These financial statements are the responsibility of Alcoa's manage- ment. 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 finan- cial 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 Alcoa and subsidiaries as of December 31, 1994, 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 11, 1995, 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, 1994 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. Pittsburgh, Pennsylvania October 6, 1995 - 7 - 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 Nine months ended ended September 30 September 30 ------------ ------------ 1995 1994 1995 1994 ---- ---- ---- ---- Sales and operating revenues $ 3,264.8 $2,561.6 $9,391.9 $7,262.5 Income before extraordinary loss 226.4 70.1 639.6 75.1 Net income 226.4 70.1 639.6 7.2 Earnings per common share Before extraordinary loss 1.27 .39 3.58 .41 Net income 1.27 .39 3.58 .03 Shipments of aluminum products (1) 655 651 1,936 1,912 (1) in thousands of metric tons (mt)
Overview Alcoa had the best third quarter in its history, earning $226.4, or $1.27 per common share. For the comparable 1994 quarter, earnings were $70.1, or 39 cents per share. For the first nine months of 1995, earnings were $639.6, or $3.58 per share. In the comparable 1994 period, earnings were $125.1, or $.69 per share, before after-tax charges. After the one-time charges, Alcoa reported income of $7.2, or three cents per share. Included in the 1995 third quarter was a special after-tax charge of $5.4 which consisted of $16.9 ($27.8 pretax) for salaried personnel layoffs, principally at U.S. smelters, partially offset by $11.5($18.4 pretax) related to insurance settlements on environmental claims. The two charges included in the first nine months of 1994 were: a special charge of $50.0 ($79.7 pretax), or 28 cents per share, for closing part of a forgings and extrusion plant in Vernon, California; and an extraordinary loss of $67.9, or 38 cents per share, for the early redemption of $225 of 7% debentures due 2011 that carried an effective interest rate of 14.7%. Alcoa of Australia Limited's (AofA) pretax income from operations for the 1995 third quarter and year-to-date periods increased 19% and 52%, respectively, from the comparable 1994 periods. The increases were due primarily to higher prices for alumina, ingot and fabricated products. Additionally, 1995 third quarter and year-to-date periods were negatively affected by $27.2 resulting from an increase in the Australian tax rate from 33% to 36%. In Brazil, Alcoa Aluminio's (Aluminio) third quarter 1995 pretax income from operations was $18.3, a decrease of $3.4 from the 1994 third quarter, primarily due to higher foreign exchange gains during the 1994 quarter. Year-to-date, pretax income was $71.4, up 97% from the 1994 nine-month period. Revenues grew 24% and 45% from the respective 1994 periods, due to higher prices for ingot and mill products, and strong sales of packaging products. - 8 - Alcoa's operations, divided into three segments, follow: 1. Alumina and Chemicals Segment Total revenues for the Alumina and Chemicals segment were $477 in the 1995 third quarter, up 31% from the comparable 1994 quarter. Year-to-date, revenues were $1,286, up 18% from the 1994 period. Although shipments of alumina were down slightly from the 1994 quarter and 6% from the year-to-date period, revenues were up 34% and 13%, respectively. Alumina chemicals revenues rose 29% from both the 1994 quarter and year-to-date levels, princi- pally due to higher shipments and a higher value-added product mix. In December 1994, Alcoa and Western Mining Corporation Limited (WMC) entered into a transaction to combine ownership of their respective worldwide bauxite, alumina and inorganic chemicals businesses into a group of companies (AWA) owned 60% by Alcoa and 40% by WMC. As part of the agreement, Alcoa acquired an additional 9% interest in AofA, bringing its total interest to 60%. During the 1995 third quarter, AWA produced 2,553 mt of alumina, shipping 1,661 to third-party customers. 2. Aluminum Processing Segment
Third quarter ended Nine months ended ------------------- ----------------- September 30 September 30 ------------ ------------ Product classes 1995 1994 1995 1994 --------------- ---- ---- ---- ---- Revenues Flat-rolled products $ 1,046 $ 801 $ 3,255 $ 2,340 Engineered products 568 487 1,752 1,335 Aluminum ingot 331 260 832 704 Other aluminum products 99 121 280 345 ------ ------ ------ ------ Total $ 2,044 $ 1,669 $ 6,119 $ 4,724 Shipments (000 metric tons) Flat-rolled products 346 345 1,076 1,020 Engineered products 109 115 345 321 Aluminum ingot 177 172 459 517 Other aluminum products 23 19 56 54 ------ ------ ------ ------ Total 655 651 1,936 1,912
Flat-rolled products - The majority of revenues and shipments for flat-rolled products are derived from rigid container sheet (RCS). Shipments of RCS in the 1995 third quarter were up 4% over the 1994 quarter and 9% over the 1994 year-to-date period. Revenues from RCS increased 45% and 53% from the respective periods. Sheet and plate shipments in the 1995 third quarter were down 3% from 1994 levels. However, revenues for the quarter were up 20%. Shipments were up 5% in the 1995 year-to-date period and, combined with higher prices, generated a 28% increase in revenues over the 1994 period. Aluminum ingot - Ingot shipments for the 1995 third quarter were up 3% from the 1994 quarter on the strength of higher U.S. shipments. Year-to-date, shipments were 11% lower than those in the 1994 period, reflecting the lower production levels brought about by the 450,000 mt of idle smelting capacity. Realized ingot prices in 1995 increased 33% from 1994. - 9 - Engineered products - These products include extrusions used in the transportation and construction markets, forged aluminum wheels, and wire, rod and bar. Revenues from the sale of engineered products increased 17% in the 1995 third quarter because of higher prices. Year-to-date, revenues and shipments were up 31% and 8%, respectively. On September 11, 1995, A-CMI, a partnership between Alcoa and CMI International, announced plans to build its first European manufacturing plant in Lista, Norway. The plant will develop and produce aluminum chassis, suspension, brake and powertrain components and systems. The plant represents a total invest- ment of approximately $40, and will be built in close proximity to an Elkem Aluminum ANS plant which will deliver molten aluminum to the new car parts factory. Other aluminum products - Shipments of other aluminum products during the 1995 nine-month period increased 2% from 1994, while prices fell 21%, mainly due to a drop in aluminum closure prices. Third quarter 1995 revenues were down 17% because of these lower prices. 3. Non-aluminum Segment Revenues for the non-aluminum segment were $744 in the 1995 third quarter, up 40% from $527 in the 1994 quarter. Year- to-date, this segment had revenues of $1,987, compared with $1,451 in 1994. The increases are largely due to the acquisition of Electro-Wire Products (EWP) by Alcoa Fujikura (AFL), along with increased sales of plastic closures, particularly in Brazil. Alcoa Electronic Packaging also recorded a 42% increase in sales over the 1994 third quarter on the strength of higher shipments. Cost of Goods Sold Cost of goods sold increased $397, or 19%, from the 1994 third quarter. Year-to-date, the increase was $1,164, or 20%. The increases reflect improved volume along with higher purchased metal and raw material costs. Cost of goods sold as a percentage of revenues in the 1995 year-to-date period was 73.7%, or 5.6 percentage points lower than the 1994 ratio. The lower ratio in 1995 is primarily due to higher prices for nearly all aluminum products and improved cost performance. Other Income & Expenses Other income was up $45 from the year ago nine-month period primarily because of increased equity earnings and higher interest income. Selling, general and administrative expenses increased $22 and $61 from the year-ago quarter and nine-month periods largely because of higher salaries, higher accruals for variable compensation and the acquisition of EWP. The estimated effective tax rate for 1995 was raised to 33% from an earlier projection of 32.5%. The rate was calculated including the effects of a negative adjustment related to AofA. In the third quarter the Australian government passed legislation to increase the corporate income tax rate from 33% to 36% retroactive to the beginning of the year. As a result, AofA recorded a $27.2 increase in its taxes. Most of this amount relates to an adjustment of future taxes which were initially recorded at the lower rate. The difference between the 1995 estimated effective tax rate of 33% and the U.S. statutory rate of 35% is primarily due to lower taxes on income earned outside of the U.S. Minority interests' share of income from operations declined 16% from the 1994 third quarter and increased 51% year-to-date. The third quarter decrease is due primarily to lower earnings at Aluminio, AFL and Alcoa-Kofem. Year-to-date results reflect higher earnings by Aluminio, AofA and Alcoa-Kofem. - 10 - Commodity Risks In 1994, Alcoa entered into longer-term contracts with a variety of customers in the U.S. for the supply of approxi- mately 1.5 million mt of aluminum products over the next several years. As a hedge against the economic risk asso- ciated with these contracts, Alcoa entered into long positions using principally futures and options contracts. At December 31, 1994 these contracts totaled approximately 1.4 million mt. At September 30, 1995, such contracts totaled 1.2 million mt. These contracts limit the unfavorable effect of price increases on metal purchases and likewise limit the favorable effect from price declines. The futures and options contracts are with creditworthy counter- parties and are further supported by cash, treasury bills, or irrevocable letters of credit issued by carefully chosen banks, as appropriate. In addition, Alcoa had 14,000 mt of London Metal Exchange contracts outstanding at year-end 1994 that cover fixed-price commitments to supply customers with metal from internal sources. At September 30, 1995, such contracts totaled 255,000 mt. Accounting convention requires that these contracts be marked to market. Alcoa purchases other commodities, such as natural gas and copper, for its operations and enters into forward contracts to eliminate volatility in the prices of such products. None of these contracts are material. Environmental Matters Alcoa continues to participate in environmental assessments and cleanups at a number of locations, including operating facilities and their adjoining property; at previously owned or operated facilities; and at Superfund and other waste sites. Alcoa records a liability for environmental remediation costs and/or damages when a cleanup program or liability becomes probable and the costs/damages can be reasonably estimated. As assessments and cleanups proceed, these liabilities are adjusted based on progress in determining the extent of remedial actions and the related costs and damages. The liability can change substantially due to factors such as the nature or extent of contamination, changes in remedial requirements and technological improvements. 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. Alcoa's remediation reserve balance at the end of the 1995 third quarter was $339 and reflects Alcoa's most probable cost to remediate identified environmental conditions for which costs can be reasonably estimated. About a third of the reserve relates to Alcoa's Massena, New York plant site. Remediation expenditures charged to the reserve during the 1995 nine-month period were $58. Expenditures included those currently mandated as well as those not required by any regulatory authority or third party. During the period Alcoa settled claims with several insurance companies related to environmental liabilities. Alcoa has received $91.8 during the 1995 nine-month period in settlement of such claims, of which $73.4 was used to increase existing environmental reserves and $18.4 was taken into income as stated earlier. Additions to environmental reserves include costs to perform further investigation and feasibility studies at the Pt. Comfort, Texas plant site. Included in ongoing operating expenses are the recurring costs of managing hazardous substances and pollution. Alcoa estimates that these costs will be about 2% of cost of goods sold in 1995. - 11 - Liquidity and Capital Resources Cash from Operations Cash from operations during the 1995 nine-month period was $1,076, $274 higher than in the 1994 period. The higher cash was generated primarily by improved earnings, partly offset by net increases in working capital components. The increase in noncurrent liabilities is primarily due to cash received from settlements of metal hedging activities. The gains and losses associated with these metal contracts are reflected in earnings concurrently with the hedged revenues or costs. Financing Activities Financing activities generated $191 of cash during the first nine months of 1995. These included $89 in short-term borrowing and $101 for employee stock options. Additional long-term borrowings net of debt payments generated $396, as AFL borrowed $304 to finance the EWP acquisition. Aluminio also borrowed $186 during the period to fund future investments. During the period, Alcoa used $186 to repurchase 2,749,200 shares of its common stock. Dividends paid to shareholders were $122 in the 1995 year-to-date period, an increase of $14 from 1994 as Alcoa increased its quarterly dividend from 20 cents to 22.5 cents per share beginning in the 1995 first quarter. Dividends paid to minority interests totaled $87. Investing Activities Capital expenditures for the 1995 period were $547, up from $394 in the 1994 period. Most of the 1995 expenditures were for sustaining operations. Alcoa also spent $427 during the period to acquire three new subsidiaries, EWP, St. Croix Alumina and Discovery Alumina. With the formation of AWA, WMC paid Alcoa a net amount of $367 in January 1995. Alcoa in turn loaned WMC $122 in January 1995. The loan is due on demand and carries an interest rate of LIBOR plus 10 basis points. The $129 reduction in minority interests relates primarily to the redemption of all of the outstanding preferred stock of Alcoa International Holdings Company. - 12 - Alcoa and subsidiaries Summarized consolidated financial data for Aluminio, a Brazilian subsidiary effectively owned 59% by Alcoa, follow.
(unaudited) September 30 December 31 ------------ ----------- 1995 1994 ---- ---- Cash and short-term investments $ 294.7 $ 34.5 Other current assets 328.1 376.4 Properties, plants and equipment, net (1) 836.6 929.0 Other assets 176.2 161.8 ------- ------- Total assets 1,635.6 1,501.7 ------- ------- Current liabilities 352.2 415.2 Long-term debt (2) 341.6 222.2 Other liabilities 88.3 33.3 ------- ------- Total liabilities 782.1 670.7 ------- ------- Net assets $ 853.5 $ 831.0 ======= ======= (unaudited) (unaudited) Third quarter ended Nine months ended September 30 September 30 ------------ ------------ 1995 1994 1995 1994 ---- ---- ---- ---- Revenues $ 298.6 $ 240.3 $ 892.1 $ 615.3 Costs and expenses (264.0) (205.8) (758.6) (538.1) Translation and exchange adjustments 0.7 12.3 4.0 (3.0) Income tax expense (4.3) (10.1) (16.5) (12.6) ------- ------- ------- ------- Net income $ 31.0 $ 36.7 $ 121.0 $ 61.6 ======= ======= ======= ======= Alcoa's share of net income $ 18.3 $ 21.7 $ 71.4 $ 36.3 ======= ======= ======= ======= (1) Effective January 1, 1995, the portion of Aluminio's operations included in the WMC transaction was transferred to a new Alcoa subsidiary which is not included in Aluminio's consolidated financials. Likewise, Aluminio's closure operations outside of Brazil were transferred to another Alcoa subsidiary effective March 1, 1995. (2) Held by Alcoa Brazil Holdings Company - $22.5
- 13 - Alcoa and subsidiaries Summarized consolidated financial data for AofA, an Australian subsidiary, follow. At January 1, 1995, Alcoa's ownership interest in AofA increased from 51% to 60%.
(unaudited) September 30 December 31 ------------ ----------- 1995 1994 ---- ---- Cash and short-term investments $ 76.0 $ 88.2 Other current assets 543.2 484.9 Properties, plants and equipment net 1,583.9 1,645.3 Other assets 102.9 102.5 ------- ------- Total assets 2,306.0 2,320.9 ------- ------- Current liabilities 335.0 317.9 Long-term debt 145.9 150.2 Other liabilities 414.4 382.6 ------- ------- Total liabilities 895.3 850.7 ------- ------- Net assets $ 1,410.7 $ 1,470.2 ======= ======= (unaudited) (unaudited) Third quarter Nine months ended September 30 September 30 ------------ ------------ 1995 1994 1995 1994 ---- ---- ---- ---- Revenues (1) $ 480.8 $ 390.6 $1,313.3 $1,100.8 Costs and expenses (354.5) (321.2) (987.4) (896.1) Translation and exchange adjustments - 0.2 - 2.2 Income tax expense(2) (70.9) (14.8) (134.8) (59.0) ------- ------- ------- ------- Net income $ 55.4 $ 54.8 $ 191.1 $ 147.9 ======= ======= ======= ======= Alcoa's share of net income $ 33.2 $ 27.9 $ 114.7 $ 75.4 ======= ======= ======= ======= (1) Revenues from Alcoa and its subsidiaries, the terms of which were established by negotiations between the parties, follow. Third quarter ended September 30: 1995 - $12.6, 1994 - $10.0 Nine months ended September 30: 1995 - $37.4, 1994 - $23.7 (2) The 1995 nine-month period includes a $27.2 tax charge associated with a change in the Australian corporate tax rate from 33% to 36%.
- 14 - PART II - OTHER INFORMATION Item 1. Legal Proceedings As previously reported, on June 13, 1995, the company 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 allege violation of federal and state civil rights laws prohibiting discrimination on the basis of race and gender. Plaintiffs seek class action status for five classes of employees or prospective employees of Alcoa at its Davenport, Iowa facility. Plaintiffs seek a permanent injunction against allegedly discriminatory practices, restitution of claimed benefits and income, and unspecified compensatory and punitive damages. Alcoa has answered the complaint and denied all alleged violations of federal or state law. Alcoa also has filed a motion to dismiss certain of the plaintiffs' claims. Discovery is underway. As previously reported, on December 21, 1992, Alcoa was named as a defendant in KML Leasing v. Rockwell Standard Corpora- tion, filed in the U.S. District Court for the District of Oklahoma on behalf of 7,317 Aero Commander, Rockwell Commander and Gulfstream Commander aircraft owners. The complaint alleges defects in certain wingspars manufactured by Alcoa. Alcoa's aircraft builder's product liability insurance carrier has assumed defense of the matter. In May 1993, Alcoa received a reservation of rights letter from its insurance carrier which purports to reserve its rights with respect to a majority of the types of damages claimed. Alcoa continues to challenge the reservation. In May 1995, the court granted Alcoa's motion for summary judgment to dismiss the action. The plaintiffs have appealed. As previously reported, Alcoa was named as one of several defendants in a number of lawsuits filed as a result of the Sioux City, Iowa DC-10 plane crash in 1989. The plaintiffs claim that Alcoa fabricated the titanium fan disk involved in the alleged engine failure of the plane from a titanium forging supplied by a third party. Sixteen of the 22 cases which were pending at year end 1994 have been settled. As previously reported, Alcoa initiated a lawsuit in King County, Washington in December 1992 against nearly one hundred different insurance companies that provided insurance coverage to the company for periods between the years 1956 and 1985. In the 1995 third quarter, two summary judgment motions made by certain of the defendants were ruled upon in Alcoa's favor. During 1995, the company settled claims against several of the defendants. Trial in this proceeding is expected to commence in the 1996 first quarter. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 11. Computation of Earnings per Common Share 12. Computation of Ratio of Earnings to Fixed Charges 15. Independent Accountants' letter regarding unaudited financial information 27. Financial Data Schedule (b) No reports on Form 8-K were filed by Alcoa during the quarter covered by this report. - 15 - 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 13, 1995 By /s/ JAN H. M. HOMMEN Date Jan H. M. Hommen Executive Vice President and Chief Financial Officer (Principal Financial Officer) November 13, 1995 By /s/ EARNEST J. EDWARDS Date Earnest J. Edwards Vice President and Controller (Chief Accounting Officer) - 16 - EXHIBITS Page 11. Computation of Earnings per Common Share 18 12. Computation of Ratio of Earnings to Fixed Charges 19 15. Independent Accountants' letter regarding 20 unaudited financial information 27. Financial Data Schedule - 17 - EX-11 2 Alcoa and subsidiaries EXHIBIT 11
Computation of Earnings per Common Share For the nine months ended September 30 (in millions, except share amounts) 1995 1994 ------------ ------------ 1. Income applicable to common stock before extraordinary loss * $ 638.0 $ 73.6 2. Weighted average number of common shares outstanding during the period 178,383,420 177,637,568 3. Primary earnings per common share before extraordinary loss (1 divided by 2) $3.58 $.41 4. Fully diluted earnings before extraordinary loss (1) $638.0 $73.6 5. Shares issuable under compensation plans 1,694 17,164 6. Shares issuable upon exercise of dilutive outstanding stock options (treasury stock method) 577,404 1,109,562 7. Fully diluted shares (2 + 5 + 6) 178,962,518 178,764,294 8. Fully diluted earnings (loss) per common share before extraordinary loss (4 divided by 7) $3.57 $.41 Per share amounts for 1994 have been restated to reflect the two-for-one stock split which occurred in February 1995. * After preferred dividend requirement
EX-12 3 Alcoa and subsidiaries EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges For the nine months ended September 30, 1995 (in millions, except ratio) 1995 ---- Earnings: Income before taxes on income $1,251.0 Minority interests' share of earnings of majority- owned subsidiaries without fixed charges 1.0 Equity income (48.2) Fixed charges 107.4 Proportionate share of income (loss) of 50%-owned persons 48.2 Distributed income of less than 50%-owned persons - Amortization of capitalized interest 18.0 ------- Total earnings $1,377.4 Fixed Charges: Interest expense: Consolidated $ 84.0 Proportionate share of 50%-owned persons 5.5 ------- 89.5 ------- Amount representative of the interest factor in rents: Consolidated 17.7 Proportionate share of 50%-owned persons .2 ------- 17.9 ------- Fixed charges added to earnings 107.4 ------- Interest capitalized: Consolidated 1.4 Proportionate share of 50%-owned persons - ------- 1.4 ------- Preferred stock dividend requirements of majority-owned subsidiaries 5.1 ------- Total fixed charges $ 113.9 ======= Ratio of earnings to fixed charges 12.1 =======
EX-15 4 EXHIBIT 15 October 6, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 RE: Aluminum Company of America 1. Form S-8 (Registration No. 33-24846) Alcoa Savings Plan for Salaried Employees 2. Form S-8 (Registration No. 33-60305) Long Term Stock Incentive Plan 3. Form S-3 (Registration No. 33-49997) and Form S-3 (Registration No. 33-60045) Debt Securities and Warrants to Purchase Debt Securities, Preferred Stock and Common Stock We are aware that our report dated October 6, 1995, accompanying interim financial information of Aluminum Company of America (Alcoa) and subsidiaries for the three- month period ended September 30, 1995, is incorporated by reference in the registration statements referred to above. Pursuant to Rule 436 (c) under the Securities Act of 1933, this report should not be considered as part of a registration statement prepared or certified by us within the meaning of Sections 7 and 11 of that Act. Very truly yours, /s/ COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. EX-27 5
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 988,900 7,300 1,727,500 45,400 1,507,700 5,067,800 15,029,900 8,207,900 13,695,600 2,429,700 1,593,600 178,900 0 55,800 4,155,800 13,695,600 9,391,900 9,510,800 6,926,100 6,926,100 529,000 0 84,000 1,250,800 419,900 639,600 0 0 0 639,600 3.58 3.57
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