Alcoa 2015 Annual Report Download - page 97

tax assets ($34), and charges for separate environmental matters in both Norway and Italy ($15), somewhat
offset by a discrete income tax charge related to a tax rate change in both Brazil and Spain ($79) and higher
gains on various asset sales ($35).
The significant changes in the reconciling items between total segment ATOI and consolidated net income (loss)
attributable to Alcoa for 2014 compared with 2013 consisted of:
• a change in the Impact of LIFO, mostly due to higher prices for aluminum, driven by both higher base metal
prices (LME) and regional premiums (increase in price at December 31, 2014 indexed to December 31, 2013
compared to a decrease in price at December 31, 2013 indexed to December 31, 2012), and the absence of
significant reductions in LIFO inventory quantities, which caused a partial liquidation of the lower cost LIFO
inventory base in 2013 (income of $17 in 2013);
• a change in Metal price lag, the result of higher prices for aluminum;
• an increase in Interest expense, primarily the result of lower capitalized interest ($28) and fees paid
associated with the execution and termination of a 364-day senior unsecured bridge term loan facility related
to the then-planned acquisition of Firth Rixson ($8), partially offset by a 3% lower average debt level and
lower amortization of debt-related costs due to the conversion of convertible notes;
• a change in Noncontrolling interests, due to the change in the results of AWAC, mainly driven by
restructuring and other charges associated with both the permanent shutdown of the Point Henry smelter in
Australia and the divestiture of an ownership interest in a mining and refining joint venture in Jamaica and a
discrete income tax charge related to a tax rate change in both Brazil and Spain ($32 combined was
noncontrolling interest’s share), partially offset by improved operating results, the absence of a charge for a
legal matter ($17 was noncontrolling interest’s share), and a gain on the sale of a mining interest in Suriname
($11 was noncontrolling interest’s share);
• an increase in Corporate expense, mostly related to costs associated with the acquisition of Firth Rixson
($34), partially offset by decreases in various expenses;
• an increase in Restructuring and other charges, principally caused by higher costs related to decisions to
permanently shut down and/or temporarily curtail refinery, smelter and/or rolling mill capacity and a net loss
on the divestiture of four operations, partially offset by the absence of a charge for a legal matter ($322); and
• a change in Other, largely attributable to the absence of a discrete income tax charge for valuation allowances
on certain deferred tax assets in Spain and the United States ($372), slightly offset by a discrete income tax
charge related to a tax rate change in both Brazil and Spain ($79).
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 2015, as has
been the focus since 2008, management initiated actions to significantly improve Alcoa’s cost structure and liquidity,
providing the Company with the ability to operate effectively. 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 2016, 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 operational and business needs over the next 12 months. For an analysis of long-term liquidity, see
Contractual Obligations and Off-Balance Sheet Arrangements below.
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