Alcoa 2012 Annual Report Download - page 75

Third-party sales for the Engineered Products and Solutions segment increased 3% in 2012 compared with 2011,
primarily due to higher volumes, slightly offset by unfavorable foreign currency movements due to a weaker euro. The
higher volumes were mostly related to the aerospace, industrial gas turbine, and commercial transportation end
markets, slightly offset by lower volumes from the building and construction end market. Third-party sales for this
segment climbed 17% in 2011 compared with 2010, largely attributable to higher volumes across all businesses,
especially related to the aerospace and commercial transportation end markets. Additionally, sales from the acquired
fastener business ($58) and from the acquired building and construction business (increase of $40) and favorable
foreign currency movements due to a stronger euro were positive impacts. Slightly offsetting the positive contributions
was the absence of sales related to the April 2010 divestiture of the Transportation Products Europe business ($28).
ATOI for the Engineered Products and Solutions segment climbed $73 in 2012 compared with 2011, mainly due to net
productivity improvements in four of the five businesses and the previously mentioned higher volumes. ATOI for this
segment rose $124 in 2011 compared with 2010, principally the result of the previously mentioned volume impacts and
net productivity improvements across most businesses, somewhat offset by unfavorable price/product mix.
In 2013, the aerospace end market is expected to remain strong, while the commercial transportation and building and
construction end markets are expected to weaken. Also, continued net productivity improvements are anticipated.
Reconciliation of ATOI to Consolidated Net Income Attributable to Alcoa
Items required to reconcile total segment ATOI to consolidated net income attributable to Alcoa include: 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.
The following table reconciles total segment ATOI to consolidated net income attributable to Alcoa:
2012 2011 2010
Total segment ATOI $1,369 $1,893 $1,424
Unallocated amounts (net of tax):
Impact of LIFO 20 (38) (16)
Interest expense (319) (340) (321)
Noncontrolling interests 29 (194) (138)
Corporate expense (282) (290) (291)
Restructuring and other charges (75) (196) (134)
Discontinued operations - (3) (8)
Other (551) (221) (262)
Consolidated net income attributable to Alcoa $ 191 $ 611 $ 254
The significant changes in the reconciling items between total segment ATOI and consolidated net income attributable
to Alcoa for 2012 compared with 2011 consisted of:
• a change in the Impact of LIFO, due to lower prices for alumina and metal, both of which were driven by a
decline in LME prices, and lower costs for calcined coke;
• a decrease in Interest expense, primarily due to the absence of a $27 net charge related to the early retirement
of various outstanding notes (see below), somewhat offset by lower capitalized interest ($6);
• a change in Noncontrolling interests, mainly the result of lower earnings at AWAC, principally driven by
lower realized prices, due to a decrease in contractual LME-based pricing, higher input costs, particularly
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