Alcoa 1998 Annual Report Download - page 37

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94 95 96 97 98
1,394
1,713
1,279
1,888
2,197
Cash from Operations
millions of dollars
94 95 96 97 98
20.3
24.0
25.5 25.0
31.7
Debt as a Percent of
Invested Capital
35
for environmental remediation costs or damages when a cleanup
program becomes probable and the costs or damages can be
reasonably estimated. For additional information, see Notes A
and U to the financial statements.
As assessments and cleanups proceed, the liability is adjusted
based on progress in determining the extent of remedial actions
and related costs and damages. The liability can change substan-
tially due to factors such as the nature and extent of contamination,
changes in remedial requirements and technological changes.
Therefore, it is not possible to determine the outcomes or to estimate
with any degree of accuracy the ranges of potential costs for certain
matters. For example, there are issues related to Alcoa’s Massena,
New York, and Pt. Comfort, Texas plant sites that allege natural
resource damage or off-site contaminated sediments, where investi-
gations are ongoing. Based on these facts, it is possible that results
of operations in a particular period could be materially affected
by certain of these matters. However, based on facts currently
available, management believes that the disposition of these matters
will not have a materially adverse effect on the financial position or
liquidity of the company.
Alcoa’s remediation reserve balance at the end of 1998 was $217.0,
of which $84.6 was classified as a current liability, and reflects the
most probable costs to remediate identified environmental conditions
for which costs can be reasonably estimated. About 20% of this
balance relates to Alcoa’s Massena, New York plant site and 16%
relates to Alcoa’s Pt. Comfort, Texas plant site. Remediation
expenses charged to the reserve were $63 in 1998, $64 in 1997 and
$72 in 1996. These include expenditures currently mandated, as well
as those not required by any regulatory authority or third party.
Included in annual operating expenses are the recurring costs
of managing hazardous substances and environmental programs.
These costs are estimated to be about 2% of cost of goods sold.
Liquidity and Capital Resources
(dollars in millions, except share amounts)
Cash from Operations
Cash from operations rose 16% in 1998 to $2,197, versus $1,888 in
1997. The increase was primarily the result of higher earnings,
a reduction in deferred hedging gains and lower working capital
requirements. Partially offsetting these items was $240 of cash
received in 1997 related to a long-term alumina supply agreement.
Lower working capital requirements for 1998 provided net cash
inflowsof$269,whichwas$175higherthan1997.Thedecrease
in working capital requirements was essentially due to lower levels
of receivables and inventories, partially offset by a decrease in
accounts payable and accrued expenses.
Financing Activities
Financing activities used $280 of cash in 1998, versus $989 in the
1997 period. The primary reason for the lower use of funds was the
issuance of debt to fund acquisitions. In 1998, Alcoa issued $1,100