Alcoa 1997 Annual Report Download - page 44

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on op t ion s gra nted. Disclosu res requ ired w ith resp ect to a lte r nat ive
fa ir value m ea su rem ent an d recogn it ion m et h ods p rescr ibed by
St a t e m e n t o f Fin a n c ia l Acco u n t in g St a n d a rd
(SFAS) No. 123, ‘‘Accou n t -
in g fo r Stock-Ba se d Com p e n sat ion ,’’ a re p res ente d in Note O.
Foreign Currency. T he loca l cu r r en cy is t h e fu n ct ion al cu r r en cy for
Alcoa’ssignifica nt op erat ion s ou ts ide th e U.S., excep t in Bra zil, wh er e
th e U.S. dollar is u sed as t he fu nct ion al cu r rency. Th e deter m in at ion
of th e fu n ct ional cu r ren cy for Alcoa’s Bra zilian op erat ion s is m a d e
b as ed on t h e ap p rop r ia te e con om ic a n d m a n age m e nt in d icat or s a n d
is n ot dep en de nt on Bra zil’s s tat u s a s a h y pe r in fla t ion a r y e con o m y.
Recently Adopted Accounting Standards. Alco a h a s a dop t ed
SFAS
No. 128, ‘‘Ear n ings per Share,’’ is su e d in Febr u a r y 1997. T h is st at e m e n t
requ ires t he disclosu re of b asic an d d iluted ea r n ings p er sh ar e a nd
revises t h e m e th od r equ ire d to ca lcu la te t h es e a m ou n t s. T he a dop t ion
of th is st an dard did n ot im p act p reviou sly rep or ted ear n ings p er-
s h a r e a m o u n t s .
In Ju n e 1997,
SFAS No. 130, ‘‘Rep o r t in g Com p r eh e n s ive In com e,’’
was issued . Alcoa h as adopted th is st an dard wh ich requ ires t he
d isp lay of com p r eh en s ive in com e a n d it s com p on e n t s in t h e fin a n c ia l
st ate m en t s. In Alcoa’s ca s e , c om p r e h e n s ive in co m e in c lu d e s n e t
in com e a n d u n r ea liz ed ga in s a n d los se s fr om cu r r en c y t r a n slat ion ,
equ it y in vest m e nt s a n d p en s ion liab ilit y adju st m en t s.
Recently Issued Accounting Standards. A n ew accou n t in g r u le,
SFAS No. 131, ‘‘Dis clo su r es a bou t Segm e nt s of a n En te r p r ise a n d
Rela t e d In fo r m a t io n ,’’ wa s is su e d in Ju n e 1997. Th e im p le m e n t a t ion
of
SFAS No. 131 w ill r equ ire t h e d is closu r e of s egm e n t in for m at ion
on t h e sa m e b as is t h at is u s ed in te r n a lly fo r eva lu at in g s egm e nt
per for m an ce a nd a llocat ing resou rces to segm ent s. The com p any
is cu r r en t ly a ss es s in g t h e effe ct of t h is n ew st a n da rd ; h ow eve r,
it w ill n ot h ave a fin a n c ia l im p a ct on t h e co m p a n y. Im p le m e n t at ion
of th is new st an dard is r equ ired for cale ndar year 1998.
In Fe b r u a r y 1998,
SFAS No. 132, ‘‘Em p loye r s Dis clo su r es a bou t
Pen s ion s a n d Ot h e r Post r et ire m e n t Be n efit s,’’ was issued . Th e im ple-
m e n t a t ion o f
SFAS No. 132 w ill r ev is e ce r t a in foot n ot e d isclosu re
r equ ire m e n t s relat ed t o p en s ion a n d ot h e r r et ire e b e nefit s. Th e n ew
st a n da rd w ill n ot h ave a fin a n cia l im p ac t on t h e com p a n y. Im p le -
m e ntat ion is requ ired for cale ndar year 1998.
Reclassification. Cer t a in a m ou n ts in p rev iou sly is su e d fin a n c ia l
st ate m en t s were reclas sified to confor m to 1997 present at ion s.
B. Sp e cia l It em s
Special ite m s in 1997 resu lte d in a ga in of $95.5 ($43.9 aft er t a x a n d
m in or it y in terest s). Th e fou r t h qu ar ter sales of a m a jor it y int er est
in Alcoa’s Bra zilia n cable bu s in e ss a n d la n d in Ja pa n gen e ra te d ga in s
of $85.8. In add it ion , t he sale of equ it y s ecu r it ies resu lte d in a ga in
of $38.0, wh ile th e dive st itu re of n on core bu sin esses p rovided $25.0.
Th es e ga in s w er e offset by ch a rge s of $53.3, rela te d p r im a r ily to
e nv iron m e nt a l a n d im p a ir m e n t m a tt er s.
Special ite m s in 1996 con s isted of a ch arge tot aling $198.9 ($122.3
a ft e r t a x a n d m in o r it y in t er es ts). A n et s eve ra n ce ch a rge of $95.5,
wh ich in clu de d p e n s ion a n d
OPEB cu r t a ilm e nt cr ed it s of $75.0, r elat es
to in cen t ive cost s for e m p loye es wh o volu n ta r ily le ft t h e com p a ny
a n d for p er m a n e nt layoff cost s. T h e sh u tdow n of Alcoa Ele ct r on ic
Packa gin g r esu lt ed in a n add it ion a l ch a rge of $65.4, r elat ed p r im a r ily
to a sset wr itedow n s. Im p air m en ts at var iou s m a nu fact u r ing
lo ca t io n s a d d e d a n ot h e r ch a rge of $38.0.
Sp ec ial it em s in 1995 t ot ale d $16.2 ($10.1 a ft er t a x a n d m in or it y
in t er est s). It in clu de d a ch a rge of $43.5 for s eve ra n ce cost s, p a r t ia lly
offs et by a n et cr ed it of $27.3, r elat ed to e nv iron m e nt al m at t er s.
C. In v en t or ie s
Decem b er 31 19 9 7 19 9 6
Fin ish ed good s $ 314.9 $ 403.1
Work in process 433.0 421.1
Bau x ite an d alu m ina 2 63.9 283.1
Pu rch a se d r aw m a te r ia ls 19 7.3 235.5
Operat ing su pplies 103.5 118.6
$1,312.6 $1,461.4
Ap proxim at ely 57% of t ot al inventor ies at Decem be r 31, 1997 were
va lu ed on a
LIFO basis. If valu ed on an average-cost basis, tot a l inven-
tor ies wou ld h ave been $769.8 a n d $753.7 h igh er at t h e en d of 1997
a n d 1996, r es p e ct ive ly.
D. Pr op e r t ie s , Pla n t s a n d Equ ip m e n t , a t Co s t
Decem b er 31 19 9 7 19 9 6
Lan d a n d lan d r ight s, inclu d in g m in es $ 221.2 $ 237.0
St r u ct u re s 3,8 98 .1 4,028.0
Mach in er y a nd equ ip m ent 10,482 .8 10,742.5
14,602.1 15,007.5
Les s: accu m u late d de preciat ion an d deplet ion 8,587.5 8,652.4
6,014.6 6,355.1
Con st r u ct ion w ork in p ro gr es s 6 51 .9 722.4
$ 6,666.5 $ 7,077.5
E. Ot h e r As s e t s
Decem b er 31 19 9 7 19 9 6
Inve st m e nt s, p r in cip ally e qu it y inve st m en ts $ 4 64 .7 $ 497.7
In t an gible s, n et of a ccu m u lat ed a m or t izat ion
of $257.5 in 1997 a n d $310.7 in 1996 607.4 571.1
No n cu r r e n t r e ce iva ble s 83.9 75.5
Defe r re d in com e t a xe s 3 87 .9 478.4
De fe r r e d ch a r ge s a n d o t h e r 443 .3 468.5
$1,987.2 $2,091.2
F. Ot h er Non cu r re n t Lia b ilit ie s a n d De fe r re d Cred it s
Decem b er 31 19 9 7 19 9 6
Defe r re d h e dg in g ga in s $ 1 01 .6 $ 218.9
Defe r re d a lu m in a sa le s reven u e 2 35 .9 —
On-site environ m ent al rem ed iat ion 17 0.3 216.9
Defe r re d cr ed it s 1 61 .3 181.0
Ot h er n on cu r r en t lia bilit ie s 6 02 .1 588.7
$1,271.2 $1,205.5
Th e d efe r re d h ed gin g ga in s a re a s sociat ed w it h m e ta l con t ract s
a n d w ill b e r efl ect ed in fu t u r e ea r n in gs con cu r r en t w it h t h e h ed ge d
reve nues or cost s.