Alcoa 2009 Annual Report Download - page 73

dates of 24 months or less. Certain purchase obligations contain variable pricing components, and, as a result, actual
cash payments may differ from the estimates provided in the preceding table. Operating leases represent multi-year
obligations for certain computer equipment, plant equipment, vehicles, and buildings.
Interest related to total debt is based on interest rates in effect as of December 31, 2009 and is calculated on debt with
maturities that extend to 2037. The effect of outstanding interest rate swaps, which are accounted for as fair value
hedges, are included in interest related to total debt. As of December 31, 2009, these hedges effectively convert the
interest rate from fixed to floating on $1,890 of debt through 2018. As the contractual interest rates for certain debt and
interest rate swaps are variable, actual cash payments may differ from the estimates provided in the preceding table.
Estimated minimum required pension funding and postretirement benefit payments are based on actuarial estimates
using current assumptions for discount rates, long-term rate of return on plan assets, rate of compensation increases,
and health care cost trend rates. The minimum required cash outlays for pension funding are estimated to be $100 for
2010 and $610 for 2011 (see Note Y to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K). The
increase in the projected funding is the result of a reduction in available pension funding credits from 2010 to 2011.
The funding estimate is $670 for 2012, $620 for 2013 and $530 for 2014. The expected pension contributions in 2010
and later reflect the impacts of the Pension Protection Act of 2006 and the Worker, Retiree, and Employer Recovery
Act of 2008. Pension contributions are expected to decline beginning in 2015 if all actuarial assumptions are realized
and remain the same in the future. Postretirement benefit payments are expected to approximate $300 annually, net of
the estimated subsidy receipts related to Medicare Part D, and are reflected in the preceding table through 2019. Alcoa
has determined that it is not practicable to present pension funding and postretirement benefit payments beyond 2014
and 2019, respectively.
Layoff and other restructuring payments primarily relate to severance costs and are expected to be paid within one
year. Amounts scheduled to be paid beyond one year are related to ongoing site remediation work, special termination
benefit payments, and lease termination costs.
Deferred revenue arrangements require Alcoa to deliver alumina over the specified contract period through 2027.
While these obligations are not expected to result in cash payments, they represent contractual obligations for which
the Company would be obligated if the specified product deliveries could not be made.
Uncertain tax positions taken or expected to be taken on an income tax return may result in additional payments to tax
authorities. The amount in the preceding table includes interest and penalties accrued related to such positions as of
December 31, 2009. The total amount of uncertain tax positions is included in the “Thereafter” column as the company
is not able to reasonably estimate the timing of potential future payments. If a tax authority agrees with the tax position
taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be
necessary.
Obligations for Financing Activities
Total debt amounts in the preceding table represent the principal amounts of all outstanding debt, including short-term
borrowings and long-term debt. Maturities for long-term debt extend to 2037.
Alcoa has historically paid quarterly dividends on its preferred and common stock. Including dividends on preferred
stock, Alcoa paid $228 in dividends to shareholders during 2009. Because all dividends are subject to approval by
Alcoa’s Board of Directors, amounts are not included in the preceding table until such authorization has occurred. As
of December 31, 2009, there were 974,378,820 and 546,024 shares of outstanding common stock and preferred stock,
respectively. The annual preferred stock dividend is at the rate of $3.75 per share. In March 2009, Alcoa decreased its
annual common stock dividend from $0.68 per share to $0.12 per share, which began with the dividend paid on
May 25, 2009, as part of a series of operational and financial actions taken to significantly improve Alcoa’s liquidity
position.
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