Alcoa 2012 Annual Report Download - page 74

equipment and consumer durables), which is sold directly to customers and through distributors. Approximately one-
half of the third-party sales in this segment consist of RCS, while the other one-half of third-party sales are derived
from sheet and plate and foil used in industrial markets. While the customer base for flat-rolled products is large, a
significant amount of sales of RCS, sheet, and plate is to a relatively small number of customers.
Third-party sales for the Global Rolled Products segment decreased 3% in 2012 compared with 2011, principally
caused by unfavorable pricing, due to a decrease in metal prices, and unfavorable foreign currency movements, mostly
due to a weaker euro, somewhat offset by higher volumes and favorable product mix. The higher volumes were largely
attributable to the packaging, automotive, building and construction, and aerospace end markets, slightly offset by the
industrial products end market. Third-party sales for this segment climbed 22% in 2011 compared with 2010, primarily
driven by better pricing; higher volumes across most businesses, particularly related to the packaging, aerospace, and
commercial transportation end markets; favorable foreign currency movements, mainly due to a stronger euro; and
favorable product mix.
ATOI for the Global Rolled Products segment improved $92 in 2012 compared with 2011, mainly the result of net
productivity improvements across all businesses, favorable product mix, and the previously mentioned higher volumes,
somewhat offset by higher input costs, particularly labor and transportation. ATOI for this segment rose $46 in 2011
compared with 2010, primarily attributable to the previously mentioned positive pricing, volume, and product mix
impacts, partially offset by higher input costs and charges for anticipated customer credit losses.
In 2013, demand in the aerospace and automotive markets is expected to remain strong. European and North American
industrial markets are uncertain; beverage can packaging markets are expected to remain mixed (by region). Continued
net productivity improvements are anticipated.
Engineered Products and Solutions
2012 2011 2010
Third-party aluminum shipments (kmt) 222 221 197
Third-party sales $5,525 $5,345 $4,584
ATOI $ 612 $ 539 $ 415
This segment represents Alcoa’s downstream operations and includes titanium, aluminum, and super alloy investment
castings; forgings and fasteners; aluminum wheels; integrated aluminum structural systems; and architectural
extrusions used in the aerospace, automotive, building and construction, commercial transportation, and power
generation markets. These products are sold directly to customers and through distributors. Additionally, hard alloy
extrusions products, which are also sold directly to customers and through distributors, serve the aerospace,
automotive, commercial transportation, and industrial products markets.
On March 9, 2011, Alcoa completed an acquisition of the aerospace fastener business of TransDigm Group Inc. for
$240. This business is a leading global designer, producer, and supplier of highly engineered aircraft components, with
three locations (one in the state of California and two in the United Kingdom) that employ a combined 400 people (at
time of acquisition). Specifically, this business provides a wide variety of high-strength, high temperature nickel alloy
specialty engine fasteners, airframe bolts, and slotted entry bearings. In 2010, this business generated sales of $61. The
assets and liabilities of this business were included in the Engineered Products and Solutions segment as of March 31,
2011; this business’ results of operations were included in this segment beginning March 9, 2011.
In July 2010, Alcoa completed an acquisition of the commercial building and construction business of a privately-held
company, Traco, for $77. This business, located in Cranberry, Pennsylvania, employing 650 people (at time of
acquisition), is a premier manufacturer of windows and doors for the commercial building and construction market and
generated sales of approximately $100 in 2009. The assets and liabilities of this business were included in the
Engineered Products and Solutions segment as of the end of July 2010 and this business’ results of operations were
included in this segment since the beginning of August 2010.
63