Alcoa 1998 Annual Report Download - page 38

94 95 96 97 98
1.09 1.12
.79
1.13
.63
Free Cash Flow to
Debt Coverage times covered
Capital Expenditures
and Depreciation millions of dollars
612
887
996
912 932
671
713 747 735
842
94 95 96 97 98
Capital Expenditures
Depreciation
36
of commercial paper, $250 of term debt due in 2018, $200 of term
debtduein2005and$300ofthirty-yearbondsduein2028.Partially
offsetting these borrowings were net payments of $350 on com-
mercial paper and the repayment of $950 of Alumax debt. In the
1998 third quarter, Alcoa entered into a new $2,000 revolving-credit
facility. The facility is comprised of a 364-day $1,000 facility and a
five-year $1,000 facility. The revolving-credit facilities are used to
support the Alcoa and AofA commercial paper programs.
Alcoa used $365 of cash in 1998 to repurchase 9,774,600 shares
of the company’s common stock at an average price of $37.35 per
share. In 1997, Alcoa used $604 to repurchase 16,154,534 shares of
common stock. Stock purchases in 1998 and 1997 were partially
offset by $87 and $203, respectively, of stock issued for employee
stock option plans.
Dividends paid to shareholders were $265 in 1998, an increase of
$95 over 1997. The difference was due to Alcoa’s variable dividend
program, which paid out 25 cents per share in addition to the
base dividend of 50 cents per share in 1998. There was no variable
dividend in 1997. In early January 1999, Alcoa’s board of directors
increased the base dividend and the threshold for payment of the
variable dividend by 50%, to 75 cents per share and $2.25 per share,
respectively. This will result in a quarterly dividend of 20.125 cents
per share for 1999, a 7% increase from the 1998 quarterly dividend
of 18.75 cents per share. Alcoa’s variable dividend program provides
for the distribution in the following year of 30% of Alcoa’s annual
earnings in excess of $2.25 per share.
Dividends paid and return of capital to minority interests totaled
$222 in 1998, a decline of $121 from the prior year. The decrease is
aresultof
AWAC and AofA returning funds to their investors in 1997.
Of the $343 cash outflow in 1997, $206 relates to payments made
by AofA, while a payment of $96 was made by
AWAC .
Payments on long-term debt during 1997 exceeded additions by
$218. During the 1997 fourth quarter,
AFL issued a $250 five-year
term loan and entered into a $250 five-year, revolving-credit facility.
Higher short-term borrowings in 1997 relative to 1996 were a result
of higher borrowings at Alcoa Italia.
Debt as a percentage of invested capital was 31.7% at the end
of 1998, compared with 25.0% for 1997 and 25.5% for 1996.
Investing Activities
Cash used for investing activities during 1998 totaled $2,377,
compared with $679 in 1997. Capital expenditures totaled $932,
compared with $912 in 1997 and $996 in 1996. Of the total expendi-
tures in 1998, 29% related to capacity expansion, including alumina
production in Australia and automotive sheet production in the
U.S. Also included are costs of new and expanded facilities for
environmental control in ongoing operations totaling $105 in 1998,
$94 in 1997 and $68 in 1996.
Alcoa used $1,463 in 1998 for acquisitions, notably the Alumax
and Inespal transactions. Alcoa also added $126 to its investments
in 1998, primarily to acquire a stake in the Norwegian metals
producer, Elkem. Acquisitions accounted for $302 of investing cash