Alcoa 2010 Annual Report Download - page 69

Cash from operations in 2009 was $1,365 compared with $1,234 in 2008, resulting in an increase of $131, or 11%. The
improvement of $131 was principally related to a $1,639 cash inflow associated with working capital, $395 in lower
pension contributions, and a positive change of $103 in noncurrent assets and noncurrent liabilities, all of which was
mostly offset by significantly lower earnings (including the effects of non-cash income and expenses) and $147 in cash
used for discontinued operations. The components of the change in working capital were as follows: a $443 decrease in
receivables, primarily as a result of lower sales across all businesses and heightened collection efforts; a $1,611
reduction in inventories, mostly due to lower levels of inventory on-hand in response to a significant drop in demand,
curtailed production at Alcoa’s refineries and smelters, and reduced costs for certain raw materials; a $223 decline in
prepaid expenses and other current assets; a $653 decrease in accounts payable, trade, principally the result of fewer
purchasing needs and declining commodity prices; a $187 increase in accrued expenses, mainly driven by a charge
related to a European Commission decision on electricity pricing for smelters; and a decline of $172 in taxes, including
income taxes, mostly due to the change from an operating income position to an operating loss position.
Financing Activities
Cash used for financing activities was $952 in 2010 compared with cash provided from financing activities of $37 in
2009 and $1,478 in 2008.
The use of cash in 2010 was primarily due to $1,757 in payments on long-term debt, mostly related to $511 for the
repayment of 7.375% Notes due 2010 as scheduled, $825 for the early retirement of all of the 6.50% Notes due 2011
and a portion of the 6.00% Notes due 2012 and 5.375% Notes due 2013, and $287 related to previous borrowings on
the loans supporting the São Luís refinery expansion and Juruti bauxite mine development in Brazil; $125 in dividends
paid to shareholders; net cash paid to noncontrolling interests of $94, all of which relates to Alumina Limited’s share of
AWAC; $66 in acquisitions of noncontrolling interests, mainly the result of the $60 paid to redeem the convertible
securities of a subsidiary that were held by Alcoa’s former partner related to the joint venture in Saudi Arabia; and a
change of $44 in short-term borrowings; partially offset by $1,126 in additions to long-term debt, $998 for the issuance
of 6.150% Notes due 2020 and $76 related to borrowings under the loans that support the Estreito hydroelectric power
project in Brazil.
The source of cash in 2009 was principally the result of $1,049 in additions to long-term debt, mainly driven by net
proceeds of $562 from the issuance of $575 in convertible notes and $394 in borrowings under loans that support the
São Luís refinery expansion, Juruti bauxite mine development, and Estreito hydroelectric power project in Brazil; net
proceeds of $876 from the issuance of 172.5 million shares of common stock; and net cash received from
noncontrolling interests of $340, principally related to Alumina Limited’s share of AWAC; all of which was mostly
offset by a $1,535 decrease in outstanding commercial paper, partly due to tightening in the credit markets and a
reduction in market availability as a result of the change in Alcoa’s credit ratings in early 2009; $228 in dividends paid
to shareholders; a $292 net change in short-term borrowings ($1,300 was borrowed and repaid under Alcoa’s $1,900
364-day senior unsecured revolving credit facility in early 2009 and $255 in new loans to support Alcoa Alumínio’s
export operations was borrowed and repaid during 2009), mostly the result of repayments of working capital loans in
Spain and Asia and a $155 decrease in accounts payable settlement arrangements; and payments on long-term debt of
$156, including $97 related to the loans in Brazil for growth projects.
The source of cash in 2008 was primarily due to $2,253 in additions to long-term debt, mainly driven by net proceeds
of $1,489 from the July 2008 public debt offering and $721 in borrowings under the loans in Brazil for growth projects;
a $679 increase in outstanding commercial paper to support operations and capital spending; net cash received from
noncontrolling interests of $348, principally related to Alumina Limited’s share of AWAC; and $177 in proceeds from
employees exercising their stock options; all of which was partially offset by $1,082 for the repurchase of common
stock; $556 in dividends paid to shareholders; payments on long-term debt of $204, mainly due to a repayment of $150
for 6.625% Notes due March 2008; and a $96 net change in short-term borrowings, mostly the result of a $78 decrease
in accounts payable settlement arrangements.
Alcoa maintains a Five-Year Revolving Credit Agreement, dated as of October 2, 2007 (the “Credit Agreement”), with
a syndicate of lenders and issuers named therein. The Credit Agreement provides for a senior unsecured revolving
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