Alcoa 2010 Annual Report Download - page 183

Reconciliation of Free Cash Flow
Quarter ended Year 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
December 31,
2010
December 31,
2009
Cash provided from
operations $1,370 $ 392 $ 300 $ 199 $1,124 $ 184 $ 328 $(271) $ 608 $ 2,261 $ 1,365
Capital expenditures (365) (216) (213) (221) (363) (370) (418) (471) (1,017) (1,015) (1,622)
Free cash flow $1,005 $ 176 $ 87 $ (22) $ 761 $(186) $ (90) $(742) $ (409) $ 1,246 $ (257)
Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows
generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and
expand Alcoa’s asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual
cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from
the measure.
Reconciliation of Adjusted EBITDA
Year ended
December 31,
2010
December 31,
2009
Net income (loss) attributable to Alcoa $ 254 $ (1,151)
Add:
Net income attributable to noncontrolling interests 138 61
Loss from discontinued operations 8 166
Provision (benefit) for income taxes 148 (574)
Other expenses (income), net 5 (161)
Interest expense 494 470
Restructuring and other charges 207 237
Provision for depreciation, depletion, and amortization 1,450 1,311
Adjusted EBITDA $ 2,704 $ 359
Sales $21,013 $18,439
Adjusted EBITDA Margin 12.9% 1.9%
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion,
and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and
development expenses; and Provision for depreciation, depletion, and amortization. Adjusted EBITDA is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the
Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
Days Working Capital
Working Capital Components Calculation
Month ended Quarter ended
October 31,
2010
November 30,
2010
December 31,
2010
December 31,
2010
Receivables from customers, less allowances $2,104 $2,111 $1,565 $1,927
Less: Accounts receivable programs* 200 226 - 142
Receivables from customers, less allowances, as adjusted 1,904 1,885 1,565 1,785
Add: Inventories 2,570 2,477 2,562 2,536
Less: Accounts payable, trade 2,186 2,185 2,322 2,231
Working Capital $2,288 $2,177 $1,805 $2,090
Sales $5,652
Days Working Capital 34.0
Days Working Capital = Working Capital (average of three month-end amounts) divided by (Sales/number of days in the quarter)
* During the fourth quarter of 2009, each of the monthly balances of Receivables from customers reflected the sale of $250 million under the Company’s accounts
receivable securitization program, which was terminated in the first quarter of 2010. In calculating the average Receivables from customers balance for the fourth
quarter of 2010, the balances for October and November were reduced on a pro forma basis by the estimated impact of the accounts receivable programs
implemented during the fourth quarter of 2010 to ensure all three months were comparable with the fourth quarter of 2009 for purposes of this calculation.