Alcoa 2010 Annual Report Download - page 182

Calculation of Financial Measures (unaudited)
(dollars in millions)
The following information provides the details of the financial measures presented in the letter to shareholders in the front of
this Annual Report:
Reconciliation of Adjusted Income
Quarter ended
December 31,
2010
September 30,
2010
June 30,
2010
March 31,
2010
December 31,
2009
September 30,
2009
June 30,
2009
March 31,
2009
December 31,
2008
Net income (loss) attributable to
Alcoa $258 $ 61 $136 $(201) $(277) $ 77 $(454) $(497) $(1,191)
(Loss) income from discontinued
operations - - (1) (7) (11) 4 (142) (17) (262)
Income (loss) from continuing
operations attributable to
Alcoa 258 61 137 (194) (266) 73 (312) (480) (929)
Restructuring and other charges (8) (1) 20 119 49 1 56 46 614
Discrete tax items* (18) (38) (16) 112 (82) - - (28) 65
Special items** (9) 74 (2) 64 308 (35) - (15) 29
Income (loss) from continuing
operations attributable to
Alcoa — as adjusted $223 $ 96 $139 $ 101 $ 9 $ 39 $(256) $(477) $ (221)
Income (loss) from continuing operations attributable to Alcoa — as adjusted is a non-GAAP financial measure. Management believes that this measure is
meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax
items, and special items. There can be no assurances that additional restructuring and other charges, discrete tax items, and special items will not occur in
future periods. To compensate for this limitation, management believes that it is appropriate to consider both Income (loss) from continuing operations
attributable to Alcoa determined under GAAP as well as Income (loss) from continuing operations attributable to Alcoa — as adjusted.
* Discrete tax items include the following:
• for the quarter ended December 31, 2010, a benefit for the reversal of the remaining valuation allowance related to net operating losses of an
international subsidiary ($16) (a portion was initially reversed in the quarter ended September 30, 2010) and a net benefit for other small items ($2);
• for the quarter ended September 30, 2010, a benefit for the reversal of a valuation allowance related to net operating losses of an international subsidiary
that are now realizable due to a settlement with a tax authority ($41), a charge for a tax rate change in Brazil ($11), and a benefit for the recovery of a
portion of the unfavorable impact included in the quarter ended March 31, 2010 related to unbenefitted losses in Russia, China, and Italy ($8);
• for the quarter ended June 30, 2010, a benefit for a change in a Canadian provincial tax law permitting tax returns to be filed in U.S. dollars ($24), a
charge based on settlement discussions of several matters with international taxing authorities ($18), and a benefit for the recovery of a portion of the
unfavorable impact included in the quarter ended March 31, 2010 related to unbenefitted losses in Russia, China, and Italy ($10);
• for the quarter ended March 31, 2010, charges for a change in the tax treatment of federal subsidies received related to prescription drug benefits
provided under certain retiree health benefit plans ($79), unbenefitted losses in Russia, China, and Italy ($22), interest due to the IRS related to a
previously deferred gain associated with the 2007 formation of the former soft alloy extrusions joint venture ($6), and a change in the anticipated sale
structure of the Transportation Products Europe business ($5);
• for the quarter ended December 31, 2009, a benefit for the reorganization of an equity investment in Canada ($71), a charge for the write-off of deferred
tax assets related to operations in Italy ($41), a benefit for a tax rate change in Iceland ($31), and a benefit for the reversal of a valuation allowance on
net operating losses in Norway ($21);
• for the quarter ended March 31, 2009, a benefit for a change in a Canadian national tax law permitting tax returns to be filed in U.S. dollars; and,
• for the quarter ended December 31, 2008, a charge for non-cash tax on repatriated earnings.
**Special items include the following:
• for the quarter ended December 31, 2010, favorable mark-to-market changes in derivative contracts;
• for the quarter ended September 30, 2010, unfavorable mark-to-market changes in derivative contracts ($29), recovery costs associated with the São
Luís, Brazil facility due to a power outage and failure of a ship unloader in the first half of 2010 ($23), restart costs and lost volumes related to a June
2010 flood at the Avilés smelter in Spain ($13), and a net charge for the early repayment of Notes set to mature in 2011 through 2013 due to the
premiums paid under the tender offers and call option (partially offset by gains from the termination of related “in-the-money” interest rate swaps) ($9);
• for the quarter ended June 30, 2010, favorable mark-to-market changes in derivative contracts ($22), a charge for costs associated with the potential
strike and successful execution of a new agreement with the USW ($13), and a charge related to an unfavorable decision in Alcoa’s lawsuit against
Luminant related to the Rockdale, TX facility ($7);
• for the quarter ended March 31, 2010, charges related to unfavorable mark-to-market changes in derivative contracts ($31), power outages at the
Rockdale, TX and São Luís, Brazil facilities ($17), an additional environmental accrual for the Grasse River remediation in Massena, NY ($11), and the
write off of inventory related to the permanent closures of certain U.S. facilities ($5);
• for the quarter ended December 31, 2009, charges related to the European Commission’s ruling on electricity pricing for smelters in Italy ($250), a tax
settlement related to an equity investment in Brazil ($24), an estimated loss on excess power at the Intalco smelter ($19), and an environmental accrual for
smelters in Italy ($15);
• for the quarter ended September 30, 2009, a gain on an acquisition in Suriname;
• for the quarter ended March 31, 2009, a gain on the Elkem/SAPA AB swap ($133) and a loss on the sale of Shining Prospect ($118); and,
• for the quarter ended December 31, 2008, charges for environmental reserve ($26), obsolete inventory ($16), and accounts receivable reserve ($11), and
a refund of an indemnification payment ($24).