Alcoa 2012 Annual Report Download - page 76

caustic and fuel oil, and a charge for a litigation reserve ($34), somewhat offset by net productivity
improvements and net favorable foreign currency movements due to a stronger U.S. dollar;
• a decrease in Restructuring and other charges, principally caused by fewer asset impairments and a lower
number of employee separations; and
• a change in Other, largely attributable to a net charge for adjustments to certain environmental reserves
($129), a charge for the write-off of goodwill and capitalized interest related to the sale of Tapoco that were
not included in the assets of the Primary Metals segment ($102), a charge for a litigation reserve ($67), and a
net unfavorable change in mark-to-market derivative contracts ($24).
The significant changes in the reconciling items between total segment ATOI and consolidated net income attributable
to Alcoa for 2011 compared with 2010 consisted of:
• a change in the Impact of LIFO, due to higher prices for alumina and metal, both of which were driven by an
increase in LME prices and higher input costs, particularly coke, energy, and caustic soda;
• an increase in Interest expense, principally caused by a $27 net charge related to the early retirement of
various outstanding notes ($48 in purchase premiums paid partially offset by a $21 gain for “in-the-money”
interest rate swaps), somewhat offset by the absence of a $9 net charge related to the early retirement of
various outstanding notes ($27 in purchase premiums paid partially offset by an $18 gain for “in-the-money”
interest rate swaps);
• an increase in Noncontrolling interests, mainly due to higher earnings at AWAC, principally driven by higher
realized prices, partially offset by higher input costs and net unfavorable foreign currency movements due to
a weaker U.S. dollar;
• an increase in Restructuring and other charges, mostly due to higher layoff costs, largely attributable to
Alcoa’s plans to curtail three smelters in Europe; and
• a change in Other, primarily due to a net favorable change of $57 in mark-to-market derivative contracts and
the difference between the consolidated effective tax rate and the estimated tax rates applicable to the
segments, partially offset by a decrease in the cash surrender value of company-owned life insurance.
Environmental Matters
See the Environmental Matters section of Note N to the Consolidated Financial Statements in Part II Item 8 of this
Form 10-K.
Liquidity and Capital Resources
Alcoa maintains a disciplined approach to cash management and strengthening of its balance sheet. In 2012, as in the
prior three years, management initiated actions to significantly improve Alcoa’s cost structure and liquidity, providing
the Company with the ability to operate effectively as the global economy continues to recover from the economic
downturn that began in 2008. Such actions include procurement efficiencies and overhead rationalization to reduce
costs, working capital initiatives to yield significant cash improvements, and maintaining a sustainable level of capital
expenditures. In 2013, this approach will continue with the ultimate goal of generating cash from operations that
exceeds capital expenditures.
Along with the foregoing actions, cash provided from operations and financing activities is expected to be adequate to
cover Alcoa’s current operational and business needs. For an analysis of long-term liquidity, see Contractual
Obligations and Off-Balance Sheet Arrangements.
At December 31, 2012, cash and cash equivalents of Alcoa was $1,861, of which $659 was held outside the U.S. Alcoa
has a number of commitments and obligations related to the Company’s growth strategy in foreign jurisdictions,
resulting in the need for cash outside the U.S. As such, management does not have a current expectation of repatriating
cash held in foreign jurisdictions.
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