Alcoa 2003 Annual Report Download - page 50

During 2003, there were a number ofchangesinthe classification
of businesses to be divested:
●In the third quarter of2003,theprotective packaging business,
apartoftheIvexPackaging Corporation (Ivex) acquisition, was
reclassified from discontinued operations to assets held and used as
management discontinued the plan of sale due to market conditions.
The results of operations of the protective packaging business have
been reclassifiedand areincluded in income from continuing opera-
tions and in the Packaging and Consumer segment results beginning
in July 2002 (date of the Ivex acquisition).
●In the fourth quarter of 2003, the Magnolia, AR and Plant City,
FL fabricating businesses were reclassified from discontinued opera-
tions toassetsheld and used as management discontinued the plan
of sale due to market conditions. The results of operations and
$18 of losses (reflected in Special Items) in 2002 associated with
adjustments to estimated fair values were reclassifiedtoincome
from continuing operations. The results of operations, excluding
theadjustments reflectedinSpecial Items, are included in the
Engineered Products segment.
●In the fourth quarter of 2003, Alcoa’s packaging equipment
business was reclassified from assets heldandusedto discontinued
operations. The sale of this business was completed in January of
2004. The results of operations of this business are reported as
discontinued operationsintheStatement of Consolidated Income
for all periods presented. Packaging and Consumer segment results
do not include the results of operations of the packaging equipment
business.
●In the fourth quarter of 2003, the specialty chemicals business
was reclassified from assets held and used to assets held for sale.
Thesaleofthe specialty chemicals business is expected to close
in the first quarter of 2004. The change in classification did not
impact the Statement of Consolidated Income, and the results of
thespecialty chemicals business are included in the Alumina and
Chemicals segment results.
The Statement of Consolidated Income in 2003 reflects charges
of $45 (after tax) in discontinued operations related to a reduction
in the estimated fair value of the automotive fastener business and
$33 of net favorable adjustments in Special Items related to businesses
classified as assets held for sale. The 2003 activity on assets held
for sale, including income of $53 and losses of $20, is primarily
comprised of:
●Reversal of estimated loss and recognition of a gain in the second
and fourth quarters of 2003 on the sale of the Latin America PET
business; and
●Recognition of losses in the second and fourth quarters of 2003
related to reductions in the estimated fair values ofbusinesses
included in assets held for sale.
The Statement of Consolidated Income in 2002 reflects charges
of $232 in special items related to businesses classified as assets
held for sale and charges of $59 (after tax) included in discontinued
operations related to unfavorable adjustments to the estimated fair
values on businesses to be divested.
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Recently Issued and Adopted Accounting Standards.
Effective December 31,2003,Alcoa adopted SFAS No. 132 (revised
2003), ‘‘Employers’ Disclosures about Pensions and Other Post-
retirement Benefits – an amendment of
FASB Statements No. 87, 8 8,
and 106.’’ This standard requires additional disclosures about an
employer’spension plans andpostretirementbenefit plans such as:
the types of plan assets, investment strategy, measurement date,
plan obligations, cash flows, and components of net periodic benefit
cost recognized during interim periods. See Note V for additional
information.
Effective December 31,2003,Alcoa adopted Financial Accounting
StandardsBoard
(FASB) Interpretation No. 46 (revised December
2003), ‘‘ConsolidationofVariable Interest Entities – an Interpretation
of ARB51.’’ Interpretation No. 46 addresses consolidation and
disclosure by business enterprises of variable interest entities. This
standard has no impact on Alcoa’s financial statements.
Reclassification. Certain amounts in previously issued financial
statements were reclassified to conform to 2003 presentations. See
Note B for further information.
B. Discontinued Operations
and Assets Held for Sale
Alcoa’s financial statements in both 2003 and 2002 were significantly
impacted by activities relating to the planned divestiture of a
number of Alcoa’s businesses.
During the fourth quarter of 2002, Alcoa performed a portfolio
review of its businesses and the markets they serve. As a result of
this review, Alcoa committed to a plan to divest certain noncore
businesses that did not meet internal growth and return measures.
In accordance with the accounting requirements, these businesses
are classified as either discontinued operations or assets held for sale.
See Note A for further information on these classifications.
At the end of 2003,businesses classified as discontinued opera-
tions included Alcoa’s commodity automotive fasteners business,
apackagingbusiness in South America, and Alcoa’s packaging
equipmentbusiness, whichare expected to be sold by mid-2004.
The following table details selected financial information for the
businesses included within discontinued operations.
2003 2002 2001
Sales $224 $ 268 $283
(Loss) income from operations (6) (48) 8
Loss from impairment (69) (91) —
Pretax (loss) income (75) (139) 8
Benefit (provision) for taxes 26 49 (4)
(Loss) income from discontinued
operations $ (49) $ (90) $ 4
At the end of 2003,businesses classified as assets held for sale
included Alcoa’s specialty chemicals business, certain architectural
products businesses in North America, an extrusion facility in
Europe, certain extrusion facilities in Latin America, and foil facilities
in St.Louis,MOand Russellville,AR. Thesebusinessesare expected
to be sold by mid-2004.