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 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. 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, 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.

On January 1, 2013, management revised the inventory-costing method used by certain locations within the Global Rolled Products and Engineered Products and Solutions segments, which affects the determination of the respective segment’s profitability measure, ATOI. Management made the change in order to improve internal consistency and enhance industry comparability. This revision does not impact the consolidated results of Alcoa. Segment information for all prior periods presented was revised to reflect this change.

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 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 and traders. 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. Approximately one-half of the third-party sales in this segment consist of RCS. This segment also includes sheet and plate used in the aerospace, automotive, commercial transportation, building and construction, and industrial products (mainly used in the production of machinery and equipment and consumer durables) end markets, which is sold directly to customers and through distributors. 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; fasteners; aluminum wheels; integrated aluminum structural systems; architectural extrusions; and forgings and hard alloy extrusions. These products, which are used in the aerospace, automotive, building and construction, commercial transportation, power generation, and industrial products end markets, are sold directly to customers and through distributors.

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


	Alumina			Primary Metals			Global Rolled Products			Engineered Products and Solutions		Total
2013
Sales:
Third-party sales	$	3,326		$	6,596		$	7,106		$	5,733	$	22,761
Intersegment sales		2,235			2,621			178			-		5,034
Total sales	$	5,561		$	9,217		$	7,284		$	5,733	$	27,795
Profit and loss:
Equity loss	$	(4	)	$	(51	)	$	(13	)	$	-	$	(68	)
Depreciation, depletion, and amortization		426			526			226			159		1,337
Income taxes		66			(74	)		108			348		448
ATOI		259			(20	)		252			726		1,217
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			159			297		535
ATOI		90			309			346			612		1,357
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			98			258		627
ATOI		607			481			260			537		1,885
2013
Assets:
Capital expenditures	$	322		$	224		$	335		$	224	$	1,105
Equity investments		628			947			200			-		1,775
Goodwill		9			-			218			2,670		2,897
Total assets		8,248			10,341			4,647			6,011		29,247
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

The following tables reconcile certain segment information to consolidated totals:


	2013			2012			2011
Sales:
Total segment sales	$	27,795		$	28,777		$	30,826
Elimination of intersegment sales		(5,034	)		(5,350	)		(6,137	)
Corporate*		271			273			262
Consolidated sales	$	23,032		$	23,700		$	24,951

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


	2013			2012			2011
Net (loss) income attributable to Alcoa:
Total segment ATOI	$	1,217		$	1,357		$	1,885
Unallocated amounts (net of tax):
Impact of LIFO		52			20			(38	)
Interest expense		(294	)		(319	)		(340	)
Noncontrolling interests		(41	)		29			(194	)
Corporate expense		(284	)		(282	)		(290	)
Impairment of goodwill		(1,731	)		-			-
Restructuring and other charges		(607	)		(142	)		(196	)
Discontinued operations		-			-			(3	)
Other		(597	)		(472	)		(213	)
Consolidated net (loss) income attributable to Alcoa	$	(2,285	)	$	191		$	611


December 31,	2013			2012
Assets:
Total segment assets	$	29,247		$	31,912
Elimination of intersegment receivables		(385	)		(444	)
Unallocated amounts:
Cash and cash equivalents		1,437			1,861
Deferred income taxes		3,410			4,052
Corporate goodwill		518			1,272
Corporate fixed assets, net		879			961
LIFO reserve		(691	)		(770	)
Other		1,327			1,335
Consolidated assets	$	35,742		$	40,179

Sales by major product grouping were as follows:


	2013		2012		2011
Sales:
Alumina	$	3,151	$	2,962	$	3,350
Primary aluminum		6,194		7,121		7,907
Flat-rolled aluminum		7,106		7,378		7,642
Investment castings		1,807		1,747		1,700
Fastening systems		1,505		1,414		1,313
Architectural aluminum systems		977		970		973
Aluminum wheels		702		692		656
Other extruded aluminum and forged products		1,015		955		1,010
Other		575		461		400
	$	23,032	$	23,700	$	24,951

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


	2013		2012		2011
Sales:
U.S.⁽¹⁾	$	11,766	$	12,361	$	12,295
Australia		3,240		3,222		3,587
Spain⁽²⁾		2,282		1,203		1,487
Brazil		1,221		1,244		1,371
France		862		807		825
Russia		683		713		761
Hungary		555		492		665
Netherlands⁽³⁾		524		949		1,025
United Kingdom		475		438		412
Norway⁽²⁾		283		820		927
China		259		326		283
Germany		230		216		229
Italy		157		379		537
Other		495		530		547
	$	23,032	$	23,700	$	24,951

⁽¹⁾	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 Alcoa’s smelters in Canada.

⁽²⁾	In 2013, Sales that occurred in Spain include aluminum from Alcoa’s smelters in Iceland and Norway.

⁽³⁾	In 2012 and 2011, 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,	2013		2012
Long-lived assets:
U.S.	$	4,760	$	4,621
Brazil		3,746		4,318
Australia		3,024		3,548
Iceland		1,518		1,571
Canada		1,302		1,399
Norway		762		898
Russia		471		494
Spain		446		445
Jamaica		393		414
China		388		395
Other		829		844
	$	17,639	$	18,947