Alcoa 1997 Annual Report Download - page 50

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T. Incom e Taxes
Th e com p on ents of incom e before t a xes on in com e were:
1997 19 9 6 19 9 5
U. S. $ 707.5 $ 419.0 $ 556.5
Fo r e ig n 894.2 662.7 913.7
$1,601.7 $1,081.7 $1,470.2
Th e p rov ision for t a xe s on in com e con s iste d of:
1997 19 9 6 19 9 5
Cu r r e n t :
U.S. federa l* $172.1 $ 3.5 $246.4
Fo r e ig n 273.8 217.0 204.0
St a t e a n d lo ca l (.4) 19.9 31.7
445.5 240.4 482.1
Defe r re d:
U.S. federa l* 81.7 143.1 (55.3)
Fo r e ig n (3.5) (34.8) 34.8
St a t e a n d lo ca l 5.0 12.0 (15.7)
83.2 120.3 (36.2)
Tot al $528.7 $360.7 $445.9
*Inclu de s U.S. t a xe s relate d to fore ign in com e
Defer red ta xes in 1995 in clude d charges of $66.5 for u t ilizat ion of a
U.S. t a x los s ca r r yfo r wa rd a n d for st at u t or y ra te ch a n ge s of $21.9 in
Au st r alia a n d $14.4 in Br azil .
Re con ciliat ion of t h e U.S. fe de ra l st at u tor y rate to Alco a’s effe ct ive
t a x rat e follow s.
1997 19 9 6 19 9 5
U.S. federal st atu tor y rat e 35.0% 35.0% 35.0%
Ta xe s on fore ign in com e (.2) (3.0) (5.5)
St ate t a xe s n e t of fe de ra l b en e fit (.2) 1.7 .6
Ta x r at e ch a n ge s — — 2.5
Adju st m e n ts t o p r ior ye ar s’ accr u a ls .1 .3 (1.3)
Ot h er (1.7) (.7) (1.0)
Effe ct ive t a x r ate 33.0% 33.3% 30.3%
Th e com p on e n ts of n et defe r re d t a x a ss et s a n d liab ilit ie s follow.
Decem b er 31
1997
Deferred
tax
as sets
Deferred
tax
liabilities
19 9 6
Defe r re d
t a x
ass et s
Defe r re d
t a x
liabilit ies
Dep reciat ion — $ 840.4 — $ 921.5
Em ploye e be nefits $ 789.5 — $ 780.9 —
Loss p rovis ion s 186.3 — 197.1 —
Defe r re d in com e 128.9 113.0 176.1 120.6
Ta x lo ss c a r r y fo r w a rd s 156.0 — 155.1 —
Ta x cr ed it ca r r yfor wa rd s ——48.2 —
Ot h er 72.6 51.1 66.7 39.4
1,333.3 1,004.5 1,424.1 1,081.5
Va lu a t io n a llow a n ce (103.5) — (110.0) —
$1,229.8 $1,004.5 $1,314.1 $1,081.5
Of t h e tot a l t a x lo ss ca r r yfo r wa rd s, $42.6 ex pir es ove r t h e n ex t 10
yea rs an d $113.4 is u n lim ite d. A su bst a nt ia l p or t ion of t h e va lu at ion
a llowa n ce is fo r t h es e ca r r yfor wa rd s be cau s e t h e ab ilit y t o u t iliz e
a p or t ion of t h e m is u n ce r t ain .
Th e cu m u la t ive am ou n t of Alcoa’s sh ar e of u n dist r ibu ted ea r n-
in gs for wh ich n o defe r red t a xe s h ave b e en p rov ided wa s $1,389.1
at De ce m b er 31, 1997. Ma na gem e nt h a s n o p la n s t o d ist r ib ut e s u ch
ear n in gs in t h e fores eeable fu t u re. It is not pract ica l to deter m in e
t h e defe r red t a x liab ilit y on t h es e ea r n in gs.
U. Environm ental Matters
Alcoa con t inu es to pa r t icip ate in environ m en tal assessm en ts a nd
clea nu ps at a nu m ber of locat ion s, includin g at op erat ing facilit ies
an d adjoin ing p rop er t ies, at p reviou sly ow n ed or ope rated facilit ies
a n d at Su p er fu n d a n d ot h e r w a ste s ite s. A liab ilit y is recor de d for
environ m en t al r em ediat ion cost s or dam ages when a clea n u p program
b ecom e s p r ob able a n d t h e co st s o r da m a ge s ca n b e r ea s on ably
est im ate d. See Note A for addit ion al in for m at ion .
As a s se ss m e n t s a n d cle an u ps p roce e d, t h e lia bilit y is a dju st ed
b as ed on p r ogr es s in dete r m in in g t h e ext en t of rem e dia l act ion s a n d
r ela te d co st s a n d da m a ge s. T h e liab ilit y ca n ch a n ge su b st a nt ia lly du e
to fa ct or s su ch a s t h e n at u r e a n d ex te n t of con t a m in at ion , ch a n ge s
in r em e dia l r equ ire m e n t s a n d t ech n olo gica l ch a n ge s.
Fo r e xa m p le, t h e r e a r e ce r t a in m a t t e r s, in c lu d in g s eve r a l r ela te d
to a lleged n at u ra l r esou rce d am a ge or alle ged off-s ite con ta m in at ed
sedim ent s, wh ere invest igat ion s are ongoin g. It is not p ossible to
de te r m in e t h e ou tcom e s or t o est im at e w it h a ny de gr ee of ce r t a in t y
t h e r an ge s of p ot en t ia l co st s for t h e se m a tte rs.
Alcoa’s rem e d iat ion res er ve ba la n ce at t h e end of 1997 an d 1996
wa s $243 a n d $271, r esp e ct ive ly, a n d r efl ect s t h e m o st p r ob able co st s
to r em ed iate ident ified environ m en tal con dit ion s for wh ich cost s
ca n b e r ea son ably est im at ed . Ab ou t 24% of t h e 1997 b ala n ce r elat es
to Alcoa’s Massena , New York plan t s ite a n d 23% of t h e 1997 balance
rela te s to Alco a’s Pt . Com for t , Texa s pla nt site. Rem ed iat ion e xp en se s
ch arged to t h e rese r ve were $64 in 1997, $72 in 1996 a n d $62 in 1995.
Th ey in clu de expen ditu res cu r rent ly m an dated as well as t h os e n ot
requ ire d by a ny regu lat or y au th or it y or th ird pa r t y.
In clu de d in an n u a l op e rat in g e xp e n se s ar e t h e r ecu r r in g co st s
of m a n a gin g h a za rd ou s su bst a nce s a n d e nv iron m e n ta l p rogr am s.
Th es e cost s are e st im ated to be abou t 2% of cost of good s sold .
V. Subsequent Events
In Ja n u a r y 1998, Alco a is s u e d $ 300 of 6.75% b o n d s d u e 2028. T h e n e t
p rocee ds w er e u s ed for ge n er al cor p orat e p u r p os es.
On Febr u a r y 6, 1998, Alcoa com p let ed it s acqu isit ion of In es pa l,
S.A. of Ma dr id , Sp a in . Alco a p a id $210 in ca sh a n d a ssu m e d $200 of
debt in exch a n ge fo r su bst an t ia lly a ll of In e sp al’s bu s in e ss es. In esp a l
is an int egrate d a lu m in u m p rodu ce r w ith 1997 reve nu e s of $1,100.
Th e acqu isit ion in clu de d a n a lu m in a refin er y, t h re e a lu m in u m
sm elte rs, t h re e a lu m in u m r ollin g facilit ies, t w o e xt r u s ion p lan ts,
a n a dm in ist rat ive ce nte r a n d r elat ed sa les office s in Eu r op e.