Alcoa 1998 Annual Report Download - page 47

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G. Long-Term Debt
December 31 1998 1997
Commercial paper, variable rate,
(5.4% average rate) $ 745.2 —
5.75% Notes payable, due 2001 244.1 $ 248.8
6.125% Bonds, due 2005 200.0 —
6.50% Bonds, due 2018 250.0 —
6.75% Bonds, due 2028 300.0 —
Bank loans, 7.5 billion yen, due 1999,
(4.4% fixed rate) 78.0 78.0
Tax-exempt revenue bonds ranging from
3.4% to 6.6%, due 2000–2012 152.5 130.5
Alcoa Fujikura Ltd.
Variable-rate term loan, due 1999–2002
(5.5% and 6.1% average rate) 230.0 250.0
Alcoa Aluminio
7.5% Notes, due 2008 387.7 395.2
Variable-rate notes, due 1999–2001
(6.6% and 6.9% average rates) 40.5 97.3
Alcoa of Australia
Euro-commercial paper, variable rate,
(5.4% and 5.7% average rates) 250.0 225.3
Other subsidiaries 180.1 179.3
3,058.1 1,604.4
Less: amount due within one year 181.1 147.2
$2,877.0 $1,457.2
The amount of long-term debt maturing in each of the next five
yearsis$181.1in1999,$72.0in2000,$368.2in2001,$229.8in2002
and$1,029.6in2003.
In 1998, Alcoa issued $300 of thirty-year bonds due in 2028, $250
of term debt due in 2018 and $200 of term debt due in 2005. Alcoa
also issued $1,100 of commercial paper, a portion of which has since
been repaid. The proceeds from these borrowings were used to
fund acquisitions and for general corporate purposes.
In 1998, Alcoa entered into a new $2.0 billion revolving-credit
facility, which expires in equal amounts in August 1999 and
August 2003. Under this agreement, certain levels of consolidated
net worth must be maintained while commercial paper balances
are outstanding.
In 1997, Alcoa Fujikura issued a $250 term loan and entered
into a five-year, $250 revolving-credit agreement. The proceeds of
the term loan were used to repay existing debt. These agreements
require Alcoa Fujikura to maintain certain financial ratios.
In 1996, Alcoa Aluminio (Aluminio) issued $400 of export notes.
The agreement requires Aluminio to maintain certain financial
ratios.
A portion of the commercial paper issued by Alcoa and the
Euro-commercial paper issued by Alcoa of Australia (AofA) is
classified as long-term debt because it is backed by the revolving-
credit facility noted above.
Alcoa’s acquisitions have been accounted for using the purchase
method. The purchase price has been allocated to the assets acquired
and liabilities assumed based on their estimated fair market values.
Any excess purchase price over the fair market value of the net
assets acquired has been recorded as goodwill. In the case of the
Alumax acquisition, the allocation of the purchase price resulted
in goodwill of approximately $945, which will be amortized over
a forty-year period. Operating results have been included in the
statement of consolidated income since the dates of the acquisitions.
Had the Inespal acquisition, and those made in 1996, occurred at the
beginning of each respective year, net income for the year would not
have been materially different.
D. Special Items
Special items in 1997 resulted in a gain of $95.5 ($43.9, or 13 cents
per basic share, after tax and minority interests). The fourth quarter
sales of a majority interest in Alcoa’s Brazilian cable business and
land in Japan generated gains of $85.8. In addition, the sale of
equity securities resulted in a gain of $38.0, while the divestiture
of noncore businesses provided $25.0. These gains were partially
offset by charges of $53.3, related primarily to environmental
and impairment matters.
Special items in 1996 consisted of a charge totaling $198.9 ($122.3,
or 35 cents per share, after tax and minority interests). A net sever-
ance charge of $95.5, which includes pension and
OPEB curtailment
credits of $75.0, relates to incentive costs for employees who volun-
tarily left the company and for permanent layoff costs. The shutdown
of Alcoa Electronic Packaging resulted in an additional charge of
$65.4, related primarily to asset writedowns. Impairments at various
manufacturing locations added another charge of $38.0.
E. Inventories
December 31 1998 1997
Finished goods $ 418.2 $ 314.9
Work in process 591.7 433.0
Bauxite and alumina 346.5 263.9
Purchased raw materials 361.1 197.3
Operating supplies 163.0 103.5
$1,880.5 $1,312.6
Approximately 55% of total inventories at December 31, 1998 were
valued on a
LIFO basis. If valued on an average-cost basis, total
inventories would have been $702.8 and $769.8 higher at the end of
1998 and 1997, respectively.
F. Properties, Plants and Equipment, at Cost
December 31 1998 1997
Land and land rights, including mines $ 283.7 $ 221.2
Structures 4,560.5 3,898.1
Machinery and equipment 12,649.3 10,482.8
17,493.5 14,602.1
Less: accumulated depreciation and depletion 9,091.0 8,587.5
8,402.5 6,014.6
Construction work in progress 731.0 651.9
$ 9,133.5 $ 6,666.5