Alcoa 2009 Annual Report Download - page 74

Obligations for Investing Activities
Capital projects in the preceding table only include amounts approved by management as of December 31, 2009.
Funding levels may vary in future years based on anticipated construction schedules of the projects. It is anticipated
that significant expansion projects will be funded through various sources, including cash provided from operations.
Total capital expenditures are anticipated to be approximately $1,000 in 2010.
In December 2009, Alcoa signed an agreement to enter into a joint venture to develop a new industrial complex in the
Kingdom of Saudi Arabia, comprised of a bauxite mine, alumina refinery, aluminum smelter, and rolling mill, which
will require the Company to spend approximately $900 over a four-year period (2010 through 2013). This amount is
not reflected in the preceding table, as estimates of amounts per year are still being determined.
Payments related to acquisitions are based on provisions in certain acquisition agreements that state additional funds
are due to the seller from Alcoa if the businesses acquired achieve stated financial and operational thresholds. Amounts
are only presented in the preceding table if it is has been determined that payment is more likely than not to occur. In
connection with the 2005 acquisition of two fabricating facilities in Russia, Alcoa could be required to make additional
contingent payments of approximately $85 through 2015, but are not included in the preceding table as they have not
met such standard.
Off-Balance Sheet Arrangements. As of December 31, 2009, Alcoa has maximum potential future payments for
guarantees issued on behalf of certain third parties of $378. These guarantees expire in 2015 through 2027 and relate to
project financing for hydroelectric power projects in Brazil. Alcoa also has outstanding bank guarantees related to
legal, customs duties, and leasing obligations, among others, which expire at various dates, that total $490 at
December 31, 2009.
Alcoa has outstanding letters of credit in the amount of $273 as of December 31, 2009. These letters of credit relate
primarily to workers’ compensation, derivative contracts, and leasing obligations, and expire at various dates, mostly in
2010. Alcoa also has outstanding surety bonds primarily related to customs duties, self-insurance, and legal
obligations. The total amount committed under these bonds, which automatically renew or expire at various dates,
mostly in 2010, was $140 at December 31, 2009.
Alcoa has a program to sell a senior undivided interest in certain customer receivables, without recourse, on a
continuous basis to a third-party for cash. This program was renewed on October 29, 2009 and expires on October 28,
2010. In August 2008, Alcoa increased the capacity of this program from $100 to $250. As of December 31, 2009 and
2008, Alcoa derecognized $250 in Receivables from customers on the accompanying Consolidated Balance Sheet
under this program. Alcoa services the customer receivables for the third-party at market rates; therefore, no servicing
asset or liability was recorded.
Alcoa had an existing program with a different third-party to sell certain customer receivables. The sale of receivables
under this program was conducted through a qualifying special purpose entity (QSPE) that was bankruptcy remote,
and, therefore, was not consolidated by Alcoa. Effective August 31, 2008, Alcoa terminated this program and all
outstanding customer receivables were collected by the QSPE through the end of 2008.
Critical Accounting Policies and Estimates
The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted
in the United States of America requires management to make certain judgments, estimates, and assumptions regarding
uncertainties that affect the amounts reported in the Consolidated Financial Statements and disclosed in the
accompanying Notes. Areas that require significant judgments, estimates, and assumptions include accounting for
derivatives and hedging activities; environmental and litigation matters; asset retirement obligations; the testing of
goodwill, equity investments, and properties, plants, and equipment for impairment; estimating fair value of businesses
to be divested; pension plans and other postretirement benefits obligations; stock-based compensation; and income
taxes.
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