Alcoa 2012 Annual Report Download - page 3

ALCOA 2012 Annual Report 1
s a young boy growing up in a harbor town not far from the North
Sea coast, Iwas intrigued by adventure stories about sea captains and
explorers. Stormy seas, dangerous currents and stubborn headwinds
seemed to be part of their daily lives. Uncertain what the next day would
bring, they always had to be ready to respond quickly and confi dently.
No matter how bad things were, the call from the ship’s bridge, “Steady
as she goes!” kept the crew focused on their work as they dealt with the
dangers and uncertainties of their voyage.
That image of plowing through stormy seas came to mind as I thought of
the theme for this year’s shareholder report. For Alcoa in 2012, “steady
as she goes” was the call to action as we worked to keep the Company
on course in the face of major headwinds and market turbulence. We
succeeded because we had a strong team of Alcoans that had been
tested in the economic crisis of 2009. We succeeded because our
businesses leveraged Alcoa’s unique strengths and staying power to
gain advantages that none of their competitors enjoy. We succeeded
because we stayed focused on what we do best: create value for our
customers and manage well those operational and fi nancial factors we
can control.
Despite exceeding our 2012 goals and outperforming many of our peers,
it is disappointing that factors we cannot control resulted in barely any
appreciation in our stock price. The threat of the U.S. fi scal cliff, the worry over defaults in several European countries, and a once-
in-a-century leadership change in China all created tremendous business uncertainty. It’s not surprising that economic and political
volatility had a major impact on an industry that provides a metal that is vital to so many other industries. It also created volatility in the
price of aluminum, which trades as a commodity on the London Metal Exchange (LME) and which has become a proxy for uncertainty
in the world economy. Building on the sharp decline in the LME price in 2011, the average LME price dropped 16% further in 2012
and had several swings of more than 30%. That aluminum price volatility and decline had a $1 billion negative impact on Alcoa’s 2012
results, created signifi cant headwinds for our businesses and had a major impact on the stock price of Alcoa and our aluminum peers.
“
STEADY PROGRESS
IN VOLATILE TIMES
Income from continuing operations of $191 million, or $0.18
per share
Excluding impact of special items, income from continuing
operations of $262 million, or $0.24 per share
Revenue of $23.7 billion, despite lower metal prices
Adjusted EBITDA of $2.0 billion
Cash from operations of $1.5 billion; free cash  ow of
$236 million
Days working capital an all-time record low of 24 days
Debt-to-capital of 34.8%
Strong cash on hand of $1.9 billion
Reduced net debt more than $450 million; year-end balance
29% lower than 2008
Achieved cash sustainability targets for the fourth consecutive
year
Each of our four business segments contributed to our 2012
 nancial performance and made substantial progress toward
their long-term organic growth and pro tability goals.
YEAR END FINANCIAL RESULTS*
* See Calculation of Financial Measures, at the end of this report for reconciliations
of certain non-GAAP financial measures (adjusted income, adjusted EBITDA, free
cash flow, and net debt amounts) presented in this letter.
Klaus Kleinfeld
Chairman of the Board
and Chief Executive Offi cer
A