Alcoa 2012 Annual Report Download - page 136

In 2011 and 2010, Alcoa issued $600 in common stock to satisfy a portion of its accrued pension benefits liability (see
Notes R and W).
Q. Segment and Geographic Area Information
Alcoa is primarily a producer of aluminum products. Aluminum and alumina represent more than 80% of Alcoa’s
revenues. Nonaluminum products include precision castings and aerospace and industrial fasteners. Alcoa’s segments
are organized by product on a worldwide basis. Segment performance under Alcoa’s management reporting system is
evaluated based on a number of factors; however, the primary measure of performance is the after-tax operating
income (ATOI) of each segment. Certain items such as the impact of LIFO inventory accounting; interest expense;
noncontrolling interests; corporate expense (general administrative and selling expenses of operating the corporate
headquarters and other global administrative facilities, along with depreciation and amortization on corporate-owned
assets); restructuring and other charges; discontinued operations; and other items, including intersegment profit
eliminations and other metal adjustments, differences between tax rates applicable to the segments and the consolidated
effective tax rate, the results of the soft alloy extrusions business in Brazil, and other nonoperating items such as
foreign currency transaction gains/losses and interest income are excluded from segment ATOI. Segment assets
exclude, among others, cash and cash equivalents; deferred income taxes; goodwill not allocated to businesses for
segment reporting purposes; corporate fixed assets; LIFO reserves; and other items, including the assets of the soft
alloy extrusions business in Brazil and assets classified as held for sale related to discontinued operations.
The accounting policies of the segments are the same as those described in the Summary of Significant Accounting
Policies (see Note A). Transactions among segments are established based on negotiation among the parties.
Differences between segment totals and Alcoa’s consolidated totals for line items not reconciled are in Corporate.
Alcoa’s products are used worldwide in transportation (including aerospace, automotive, truck, trailer, rail, and
shipping), packaging, building and construction, oil and gas, defense, and industrial applications. Total export sales
from the U.S. included in continuing operations were $2,107 in 2012, $1,988 in 2011, and $1,543 in 2010.
Alcoa’s operations consist of four worldwide reportable segments as follows:
Alumina. This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s worldwide
refinery system, including the mining of bauxite, which is then refined into alumina. Alumina is mainly sold directly to
internal and external smelter customers worldwide or is sold to customers who process it into industrial chemical
products. A portion of this segment’s third-party sales are completed through the use of agents, alumina traders, and
distributors. Slightly more than half of Alcoa’s alumina production is sold under supply contracts to third parties
worldwide, while the remainder is used internally by the Primary Metals segment.
Primary Metals. This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s
worldwide smelter system. Primary Metals receives alumina, mostly from the Alumina segment, and produces primary
aluminum used by Alcoa’s fabricating businesses, as well as sold to external customers, aluminum traders, and
commodity markets. Results from the sale of aluminum powder, scrap, and excess power are also included in this
segment, as well as the results of aluminum derivative contracts and buy/resell activity. Primary aluminum produced
by Alcoa and used internally is transferred to other segments at prevailing market prices. The sale of primary
aluminum represents more than 90% of this segment’s third-party sales. Buy/resell activity refers to when this segment
purchases metal from external or internal sources and resells such metal to external customers or the midstream and
downstream segments in order to maximize smelting system efficiency and to meet customer requirements.
Global Rolled Products. This segment represents Alcoa’s midstream operations, whose principal business is the
production and sale of aluminum plate and sheet. A small portion of this segment’s operations relate to foil produced at
one plant in Brazil. This segment includes rigid container sheet (RCS), which is sold directly to customers in the
packaging and consumer market and is used to produce aluminum beverage cans. Seasonal increases in RCS sales are
generally experienced in the second and third quarters of the year. This segment also includes sheet and plate used in
the aerospace, automotive, commercial transportation, and building and construction markets (mainly used in the
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