Alcoa 2010 Annual Report Download - page 35

providing the committed credit facility were to default on its obligation to fund its commitment, the portion of the
committed facility provided by such defaulting financial institution would not be available to the company.
Alcoa may not be able to realize expected benefits from the change to index pricing of alumina.
Alcoa has announced its intention to move to a pricing mechanism for alumina based on an index of alumina prices
rather than a percentage of the LME-based aluminum price. Alcoa believes that this change, expected to affect
approximately 20% of annual contracts coming up for renewal each year, will more fairly reflect the fundamentals of
alumina including raw materials and other input costs involved. There can be no assurance that such index pricing will
be accepted or that such index pricing will result in consistently greater profitability from sales of alumina.
Alcoa’s global operations are exposed to political and economic risks, commercial instability and events beyond
its control in the countries in which it operates.
Alcoa has operations or activities in numerous countries outside the U.S. having varying degrees of political and
economic risk, including China, Guinea, Russia, and Saudi Arabia, among others. Risks include those associated with
political instability, civil unrest, expropriation, nationalization, renegotiation or nullification of existing agreements,
mining leases and permits, commercial instability caused by corruption, and changes in local government laws,
regulations and policies, including those related to tariffs and trade barriers, taxation, exchange controls, employment
regulations and repatriation of earnings. While the impact of these factors is difficult to predict, any one or more of
them could adversely affect Alcoa’s business, financial condition or operating results.
Alcoa could be adversely affected by changes in the business or financial condition of a significant customer or
customers.
A significant downturn or further deterioration in the business or financial condition of a key customer or customers
supplied by Alcoa could affect Alcoa’s results of operations in a particular period. Alcoa’s customers may experience
delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their
products, or other difficulties in their businesses. If Alcoa is not successful in replacing business lost from such
customers, profitability may be adversely affected.
Alcoa may be exposed to significant legal proceedings, investigations or changes in U.S. federal, state or foreign
law, regulation or policy.
Alcoa’s results of operations or liquidity in a particular period could be affected by new or increasingly stringent laws,
regulatory requirements or interpretations, or outcomes of significant legal proceedings or investigations adverse to
Alcoa. The company may experience a change in effective tax rates or become subject to unexpected or rising costs
associated with business operations or provision of health or welfare benefits to employees due to changes in laws,
regulations or policies. The company is also subject to a variety of legal compliance risks. These risks include, among
other things, potential claims relating to product liability, health and safety, environmental matters, intellectual
property rights, government contracts, taxes, and compliance with U.S. and foreign export laws, anti-bribery laws,
competition laws and sales and trading practices. Alcoa could be subject to fines, penalties, damages (in certain cases,
treble damages), or suspension or debarment from government contracts. While Alcoa believes it has adopted
appropriate risk management and compliance programs to address and reduce these risks, the global and diverse nature
of its operations means that these risks will continue to exist and additional legal proceedings and contingencies may
arise from time to time. In addition, various factors or developments can lead the company to change current estimates
of liabilities or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant
judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law.
A future adverse ruling or settlement or unfavorable changes in laws, regulations or policies, or other contingencies
that the company cannot predict with certainty could have a material adverse effect on the company’s results of
operations or cash flows in a particular period. For additional information regarding the legal proceedings involving the
company, see the discussion in Part I, Item 3. (Legal Proceedings), of this report and in Note N to the Consolidated
Financial Statements in Part II, Item 8. (Financial Statements and Supplementary Data).
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