Alcoa 2015 Annual Report Download - page 166

In September 2014, Alcoa completed a public offering under its shelf registration statement for $1,250 of 25 million
depositary shares, each of which represents a 1/10th interest in a share of Alcoa’s 5.375% Class B Mandatory
Convertible Preferred Stock, Series 1, par value $1 per share, liquidation preference $500 per share (the “Mandatory
Convertible Preferred Stock”). The 25 million depositary shares are equivalent to 2.5 million shares of Mandatory
Convertible Preferred Stock. Each depositary share entitles the holder, through the depositary, to a proportional
fractional interest in the rights and preferences of a share of Mandatory Convertible Preferred Stock, including
conversion, dividend, liquidation, and voting rights, subject to terms of the deposit agreement. Alcoa received $1,213
in net proceeds from the public offering reflecting an underwriting discount. The net proceeds were used, together with
the net proceeds of issued debt (see Note K), to finance the cash portion of the acquisition of Firth Rixson (see Note F).
The underwriting discount was recorded as a decrease to Additional capital on the accompanying Consolidated Balance
Sheet.
The Mandatory Convertible Preferred Stock constitutes a series of Alcoa’s Class B Serial Preferred Stock, which ranks
senior to Alcoa’s common stock and junior to Alcoa’s Class A Preferred Stock and existing and future indebtedness.
Dividends on the Mandatory Convertible Preferred Stock are cumulative in nature and are paid at the rate of $26.8750
per annum per share, which commenced January 1, 2015 (paid on December 30, 2014). Holders of the Mandatory
Convertible Preferred Stock generally have no voting rights.
On the mandatory conversion date, October 1, 2017, all outstanding shares of Mandatory Convertible Preferred Stock
will automatically convert into shares of Alcoa’s common stock. Based on the Applicable Market Value (as defined in
the terms of the Mandatory Convertible Preferred Stock) of Alcoa’s common stock on the mandatory conversion date,
each share of Mandatory Convertible Preferred Stock will be convertible into not more than 30.9406 shares of common
stock and not less than 25.7838 shares of common stock, subject to certain anti-dilution and other adjustments as
described in the terms of the Mandatory Convertible Preferred Stock. At any time prior to October 1, 2017, a holder
may elect to convert shares of Mandatory Convertible Preferred Stock, in whole or in part (but in no event less than
one share of Mandatory Convertible Preferred Stock), at the minimum conversion rate of 25.7838 shares of common
stock, subject to certain anti-dilution and other adjustments as described in the terms of the Mandatory Convertible
Preferred Stock. Alcoa does not have the right to redeem the Mandatory Convertible Preferred Stock.
If Alcoa undergoes a fundamental change, as defined in the terms of the Mandatory Convertible Preferred Stock,
holders may elect to convert their Mandatory Convertible Preferred Stock, in whole or in part (but in no event less than
one share of Mandatory Convertible Preferred Stock), into shares of Alcoa’s common stock. The per share conversion
rate under a fundamental change is not less than 25.2994 shares of common stock and not more than 30.9406 shares of
common stock. Holders who elect to convert will also receive any accumulated and unpaid dividends and a
Fundamental Change Dividend Make-whole Amount (as defined in the terms of the Mandatory Convertible Preferred
Stock) equal to the present value of all remaining dividend payments on the Mandatory Convertible Preferred Stock.
Common Stock. There are 1.8 billion shares authorized at a par value of $1 per share, and 1,391,211,244 and
1,303,813,830 shares, respectively, were issued at December 31, 2015 and 2014. The current dividend yield as
authorized by Alcoa’s Board of Directors is $0.12 per annum or $0.03 per quarter.
In July 2015, Alcoa issued 87 million shares of common stock as consideration paid to acquire RTI (see Note F).
In early 2014, Alcoa issued 89 million shares of common stock under the terms of Alcoa’s 5.25% Convertible Notes
due March 15, 2014 (see Note K). Also, in November 2014, Alcoa issued 37 million shares of common stock as part of
the consideration paid to acquire an aerospace business, Firth Rixson (see Note F).
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