Alcoa 2012 Annual Report Download - page 47

that we may acquire in the future. Alcoa’s results of operations or liquidity in a particular period could be affected by
certain health, safety or environmental matters, including remediation costs and damages related to certain sites.
Additionally, evolving regulatory standards and expectations can result in increased litigation and/or increased costs,
all of which can have a material and adverse effect on earnings and cash flows.
Climate change, climate change legislation or regulations and greenhouse effects may adversely impact Alcoa’s
operations and markets.
Energy is a significant input in a number of Alcoa’s operations. There is growing recognition that consumption of
energy derived from fossil fuels is a contributor to global warming.
A number of governments or governmental bodies have introduced or are contemplating legislative and regulatory change
in response to the potential impacts of climate change. There is also current and emerging regulation, such as the
mandatory renewable energy target in Australia, Australia’s carbon pricing mechanism introduced in 2012, Quebec’s
transition to a “cap and trade” system with compliance required in 2013 and European direct emission regulations
expected by 2013. Alcoa will likely see changes in the margins of greenhouse gas-intensive assets and energy-intensive
assets as a result of regulatory impacts in the countries in which the Company operates. These regulatory mechanisms
may be either voluntary or legislated and may impact Alcoa’s operations directly or indirectly through customers or
Alcoa’s supply chain. Inconsistency of regulations may also change the attractiveness of the locations of some of the
Company’s assets. Assessments of the potential impact of future climate change legislation, regulation and international
treaties and accords are uncertain, given the wide scope of potential regulatory change in countries in which Alcoa
operates. The Company may realize increased capital expenditures resulting from required compliance with revised or
new legislation or regulations, costs to purchase or profits from sales of, allowances or credits under a “cap and trade”
system, increased insurance premiums and deductibles as new actuarial tables are developed to reshape coverage, a
change in competitive position relative to industry peers and changes to profit or loss arising from increased or decreased
demand for goods produced by the Company and indirectly, from changes in costs of goods sold.
The potential physical impacts of climate change on the Company’s operations are highly uncertain, and will be
particular to the geographic circumstances. These may include changes in rainfall patterns, shortages of water or other
natural resources, changing sea levels, changing storm patterns and intensities, and changing temperature levels. These
effects may adversely impact the cost, production and financial performance of Alcoa’s operations.
Additional tax expense or additional tax exposures could affect Alcoa’s future profitability.
Alcoa is subject to income taxes in both the United States and various non-U.S. jurisdictions, and its domestic and
international tax liabilities are dependent upon the distribution of income among these different jurisdictions. Alcoa’s
tax expense includes estimates of additional tax which may be incurred for tax exposures and reflects various estimates
and assumptions, including assessments of future earnings of the Company that could impact the valuation of its
deferred tax assets. The Company’s future results of operations could be adversely affected by changes in the effective
tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the
overall profitability of the Company, changes in tax legislation and rates, changes in generally accepted accounting
principles, changes in the valuation of deferred tax assets and liabilities, the results of audits and examinations of
previously filed tax returns and continuing assessments of its tax exposures. Corporate tax reform and tax law changes
continue to be analyzed in the United States and in many other jurisdictions. Significant changes to the U.S. corporate
tax system in particular could have a substantial impact, positive and negative, on Alcoa’s effective tax rate, cash tax
expenditures, and deferred tax assets and liabilities.
Adverse changes in discount rates, lower-than-expected investment return on pension assets and other factors
could affect Alcoa’s results of operations or level of pension funding contributions in future periods.
Alcoa’s results of operations may be negatively affected by the amount of expense Alcoa records for its pension and
other postretirement benefit plans, reductions in the fair value of plan assets and other factors. U.S. generally accepted
accounting principles (GAAP) require that Alcoa calculate income or expense for the plans using actuarial valuations.
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