Alcoa 2003 Annual Report Download - page 54

Approximately 46% of total inventories at December 31, 2003 were
valued on a LIFO basis. If valued on an average-cost basis, total
inventories would have been $558 and $514 higher at the end of
2003 and 2002, respectively. During 2002,
LIFO inventory quantities
were reduced, whichresulted in a partial liquidation of the LIFO
basis. The impact of this liquidation increased netincome by $40
in 2002.
H. Properties, Plants, and Equipment, at Cost
December 31 2003 2002
Land and land rights, including mines $ 445 $ 424
Structures 5,805 5,271
Machinery and equipment 17,489 15,927
23,739 21,622
Less: accumulated depreciation and depletion 12,240 10,708
11,499 10,914
Construction work in progress 1,058 1,196
$12,557 $12,110
I. Other Assets
December 31 2003 2002
Equity investments $1,347 $1,333
Other investments 659 145
Intangibles, net of accumulated amortization
of $363 in 2003 and$349in2002 812 742
Deferred income taxes 1,343 1,013
Prepaid pension benefit 89 133
Deferred charges and other 1,066 1,072
$5,316 $4,438
Other investments are primarily comprised of Alcoa’s 8% interest
in Aluminum Corporation of China (Chalco). The increase in 2003
is primarily due to unrealized appreciation in value of the Chalco
investment which was recorded in accumulated other comprehensive
income.
J. Other Noncurrent Liabilities
and DeferredCredits
December 31 2003 2002
Deferred alumina sales revenue $ 187 $ 195
Deferred aluminum sales revenue 384 104
Environmental remediation 330 368
Deferred credits 108 89
Accrued pension benefit liability 1,580 1,547
Other noncurrent liabilities 800 564
$3,389 $2,867
In 2003, Alcoa received a partial advancepaymentof $440 (approxi-
mately $70 was classifiedascurrent) related to a long-term aluminum
supply contract with a customer. Each month for a six-year period,
the customer will purchase and Alcoa is required to deliver 7,500 tons
of aluminum at market prices. Alcoa has deposited $7 into a cash
collateral account to satisfy one month’s delivery obligation under
the aluminum supply contract.
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During 2002, Alcoa completed 15 acquisitions at a cost of $1,573,
of which $1,253 was paid in cash. The most significant of these
transactions were the acquisitions of Ivex in July 2002 and Fairchild
Fasteners (Fairchild) in December 2002.
The Ivex transaction was valued atapproximately $790, including
debt assumed of $320, and the purchase price allocation resulted
in goodwill of approximately $470. Ivex is part of Alcoa’s Packaging
and Consumer segment. Alcoa paid $650 in cashforFairchild, and
the purchase price allocation resulted in goodwill of approximately
$330. Fairchild is part of the Engineered Products segment. Pro
forma results of the company, assuming all acquisitions had been
made at the beginning of each period presented, would not have
been materially different from the results reported.
In connection with certain acquisitions made during 2002, Alcoa
could be required to make additional payments of approximately
$90 from 2004 through 2006 based upon the achievement of
various financial and operating targets.
During 2001, Alcoa completed nine acquisitions for $159 in
cash. None of these transactions had a material impact on Alcoa’s
financial statements.
In May of 2000, Alcoa completed a merger with Reynolds
Metals Company(Reynolds). As part of that merger, Alcoa divested
Reynolds’ interest in an alumina refinery in Sherwin, TX in 2000
andReynolds’ interests in alumina refineries in Worsley, Australia
andStade, Germany and its aluminum smelter in Longview, WA
during 2001. In accordance with the provisions of Emerging Issues
Ta s k Fo r c e 87-11 , ‘ ‘A l lo c ation of Purchase Price to Assets to be Sold,’’
there were no gains or losses on sales of these assets.
In November of 2001, Alcoa contributed net assets of approxi-
mately $200 of Reynolds Aluminum Supply Company
(RASCO) ,the
metals distributionbusinessacquired in theReynolds acquisition,
toajointventure in which Alcoa retains a 50% equity interest.
In April of 2001, Alcoa completedthesaleof Thiokol Propulsion
(Thiokol), a business acquired in the Cordant Technologies, Inc.
transaction, to Alliant Techsystems Inc. for net proceeds of $698 in
cash, whichincluded a working capital adjustment, and recognized
a$55 pretax gain that was included in other income.
G. Inventories
December 31 2003 2002
Finished goods $ 742 $ 735
Work in process 788 743
Bauxite and alumina 337 330
Purchased raw materials 448 431
Operating supplies 209 175
$2,524 $2,414