Q. Segment and Geographic Area Information

Alcoa is primarily a producer of aluminum products. Aluminum and alumina represent more than 80% of Alcoa’s revenues. Nonaluminum products include precision castings and aerospace and industrial fasteners. Alcoa’s segments are organized by product on a worldwide basis. Segment performance under Alcoa’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is the after-tax operating income (ATOI) of each segment. Certain items such as the impact of LIFO inventory accounting; interest expense; noncontrolling interests; corporate expense (general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities, along with depreciation and amortization on corporate-owned assets); restructuring and other charges; discontinued operations; and other items, including intersegment profit eliminations and other metal adjustments, differences between tax rates applicable to the segments and the consolidated effective tax rate, the results of the soft alloy extrusions business in Brazil, and other nonoperating items such as foreign currency transaction gains/losses and interest income are excluded from segment ATOI. Segment assets exclude, among others, cash and cash equivalents; deferred income taxes; goodwill not allocated to businesses for segment reporting purposes; corporate fixed assets; LIFO reserves; and other items, including the assets of the soft alloy extrusions business in Brazil and assets classified as held for sale related to discontinued operations.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note A). Transactions among segments are established based on negotiation among the parties. Differences between segment totals and Alcoa’s consolidated totals for line items not reconciled are in Corporate.

Alcoa’s products are used worldwide in transportation (including aerospace, automotive, truck, trailer, rail, and shipping), packaging, building and construction, oil and gas, defense, and industrial applications. Total export sales from the U.S. included in continuing operations were $2,107 in 2012, $1,988 in 2011, and $1,543 in 2010.

Alcoa’s operations consist of four worldwide reportable segments as follows:

Alumina. This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s worldwide refinery system, including the mining of bauxite, which is then refined into alumina. Alumina is mainly sold directly to internal and external smelter customers worldwide or is sold to customers who process it into industrial chemical products. A portion of this segment’s third-party sales are completed through the use of agents, alumina traders, and distributors. Slightly more than half of Alcoa’s alumina production is sold under supply contracts to third parties worldwide, while the remainder is used internally by the Primary Metals segment.

Primary Metals. This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s worldwide smelter system. Primary Metals receives alumina, mostly from the Alumina segment, and produces primary aluminum used by Alcoa’s fabricating businesses, as well as sold to external customers, aluminum traders, and commodity markets. Results from the sale of aluminum powder, scrap, and excess power are also included in this segment, as well as the results of aluminum derivative contracts and buy/resell activity. Primary aluminum produced by Alcoa and used internally is transferred to other segments at prevailing market prices. The sale of primary aluminum represents more than 90% of this segment’s third-party sales. Buy/resell activity refers to when this segment purchases metal from external or internal sources and resells such metal to external customers or the midstream and downstream segments in order to maximize smelting system efficiency and to meet customer requirements.

Global Rolled Products. This segment represents Alcoa’s midstream operations, whose principal business is the production and sale of aluminum plate and sheet. A small portion of this segment’s operations relate to foil produced at one plant in Brazil. This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used to produce aluminum beverage cans. Seasonal increases in RCS sales are generally experienced in the second and third quarters of the year. This segment also includes sheet and plate used in the aerospace, automotive, commercial transportation, and building and construction markets (mainly used in the production of machinery and equipment and consumer durables), which is sold directly to customers and through distributors. Approximately one-half of the third-party sales in this segment consist of RCS, while the other one-half of third-party sales are derived from sheet and plate and foil used in industrial markets. While the customer base for flat-rolled products is large, a significant amount of sales of RCS, sheet, and plate is to a relatively small number of customers.

Engineered Products and Solutions. This segment represents Alcoa’s downstream operations and includes titanium, aluminum, and super alloy investment castings; forgings and fasteners; aluminum wheels; integrated aluminum structural systems; and architectural extrusions used in the aerospace, automotive, building and construction, commercial transportation, and power generation markets. These products are sold directly to customers and through distributors. Additionally, hard alloy extrusions products, which are also sold directly to customers and through distributors, serve the aerospace, automotive, commercial transportation, and industrial products markets.

The operating results and assets of Alcoa’s reportable segments were as follows:


	Alumina			Primary Metals			Global Rolled Products			Engineered Products and Solutions		Total
2012
Sales:
Third-party sales	$	3,092		$	7,432		$	7,378		$	5,525	$	23,427
Intersegment sales		2,310			2,877			163			-		5,350
Total sales	$	5,402		$	10,309		$	7,541		$	5,525	$	28,777
Profit and loss:
Equity income (loss)	$	5		$	(27	)	$	(6	)	$	-	$	(28	)
Depreciation, depletion, and amortization		455			532			229			158		1,374
Income taxes		(27	)		106			167			297		543
ATOI		90			309			358			612		1,369
2011
Sales:
Third-party sales	$	3,462		$	8,240		$	7,642		$	5,345	$	24,689
Intersegment sales		2,727			3,192			218			-		6,137
Total sales	$	6,189		$	11,432		$	7,860		$	5,345	$	30,826
Profit and loss:
Equity income (loss)	$	25		$	(7	)	$	(3	)	$	1	$	16
Depreciation, depletion, and amortization		444			556			237			158		1,395
Income taxes		179			92			104			260		635
ATOI		607			481			266			539		1,893
2010
Sales:
Third-party sales	$	2,815		$	7,070		$	6,277		$	4,584	$	20,746
Intersegment sales		2,212			2,597			180			-		4,989
Total sales	$	5,027		$	9,667		$	6,457		$	4,584	$	25,735
Profit and loss:
Equity income	$	10		$	1		$	-		$	2	$	13
Depreciation, depletion, and amortization		406			571			238			154		1,369
Income taxes		60			96			92			195		443
ATOI		301			488			220			415		1,424
2012
Assets:
Capital expenditures	$	374		$	318		$	258		$	200	$	1,150
Equity investments		658			917			188			-		1,763
Goodwill		10			997			214			2,677		3,898
Total assets		9,709			11,709			4,603			5,891		31,912
2011
Assets:
Capital expenditures	$	371		$	463		$	157		$	173	$	1,164
Equity investments		450			925			123			-		1,498
Goodwill		11			991			208			2,666		3,876
Total assets		9,782			11,867			4,559			5,831		32,039

The following tables reconcile certain segment information to consolidated totals:


	2012			2011			2010
Sales:
Total segment sales	$	28,777		$	30,826		$	25,735
Elimination of intersegment sales		(5,350	)		(6,137	)		(4,989	)
Corporate*		273			262			267
Consolidated sales	$	23,700		$	24,951		$	21,013

*	For all periods presented, the Corporate amount includes third-party sales of three soft alloy extrusion facilities located in Brazil.


	2012			2011			2010
Net income attributable to Alcoa:
Total segment ATOI	$	1,369		$	1,893		$	1,424
Unallocated amounts (net of tax):
Impact of LIFO		20			(38	)		(16	)
Interest expense		(319	)		(340	)		(321	)
Noncontrolling interests		29			(194	)		(138	)
Corporate expense		(282	)		(290	)		(291	)
Restructuring and other charges		(75	)		(196	)		(134	)
Discontinued operations		-			(3	)		(8	)
Other		(551	)		(221	)		(262	)
Consolidated net income attributable to Alcoa	$	191		$	611		$	254


December 31,	2012			2011
Assets:
Total segment assets	$	31,912		$	32,039
Elimination of intersegment receivables		(444	)		(483	)
Unallocated amounts:
Cash and cash equivalents		1,861			1,939
Deferred income taxes		4,061			3,738
Corporate goodwill		1,272			1,281
Corporate fixed assets, net		961			935
LIFO reserve		(770	)		(801	)
Other		1,326			1,472
Consolidated assets	$	40,179		$	40,120

Sales by major product grouping were as follows:


	2012		2011		2010
Sales:
Alumina	$	2,962	$	3,350	$	2,740
Primary aluminum		7,121		7,907		6,842
Flat-rolled aluminum		7,378		7,642		6,277
Investment castings		1,747		1,700		1,521
Fastening systems		1,414		1,313		1,070
Architectural aluminum systems		970		973		884
Aluminum wheels		692		656		475
Other extruded aluminum and forged products		955		1,010		930
Other		461		400		274
	$	23,700	$	24,951	$	21,013

Geographic information for sales was as follows (based upon the country where the point of sale occurred):


	2012		2011		2010
Sales:
U.S.*	$	12,361	$	12,295	$	10,560
Australia		3,222		3,587		2,842
Brazil		1,244		1,371		1,182
Spain		1,203		1,487		1,234
Netherlands**		949		1,025		940
Norway		820		927		809
France		807		825		662
Russia		713		761		584
Hungary		492		665		505
United Kingdom		438		412		331
Italy		379		537		418
China		326		283		188
Germany		216		229		231
Other		530		547		527
	$	23,700	$	24,951	$	21,013

*	Sales that occurred in the U.S. include a portion of alumina from Alcoa’s refineries in Suriname, Brazil, Australia, and Jamaica and aluminum from the Company’s smelters in Canada.

**	Sales that occurred in the Netherlands include aluminum from Alcoa’s smelter in Iceland.

Geographic information for long-lived assets was as follows (based upon the physical location of the assets):


December 31,	2012		2011
Long-lived assets:
U.S.	$	4,621	$	4,439
Brazil		4,318		4,844
Australia		3,548		3,390
Iceland		1,571		1,615
Canada		1,399		1,447
Norway		898		894
Russia		494		531
Spain		445		451
Jamaica		414		417
China		395		424
Other		844		830
	$	18,947	$	19,282