Alcoa 2000 Annual Report Download

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Where’s
Alcoa?
ANNUAL REPORT 2000
In almost every facet of modern life,
Alcoa materials, products,
and technology play an essential
and growing role

Table of contents

  • Page 1
    s ' e r e ? h a W Alco ife, ern l d o m et of s, c a f l ry ct t eve ls, produ essentia s o m In al materia play an y a Alco chnolog le o te and rowing r g and 00 T 20 R O REP UAL ANN

  • Page 2
    ..., chemicals, sports and recreation, and a wide variety of industrial and consumer applications, including Alcoa's own consumer brands such as Alcoa® wheels, Reynolds Wrap® aluminum foil and Baco® household wraps. • Related businesses include packaging machinery, precision castings, vinyl siding...

  • Page 3
    ... earnings (before cumulative effect) Diluted earnings (after cumulative effect) Dividends paid Book value Return on average shareholders' equity Price/earnings (P/E) ratio Number of shareholders Average common shares outstanding (000) Number of employees 1.83 1.82 1.81 1.80 .500 13.13 16.8% 18...

  • Page 4
    ...rate per 200,000 work hours SAFETY 96 97 98 99 00 2 Our number one internal priority is that our people should be safe, and on that score Alcoans turned in a record year. This is difficult to track at a time when we are integrating major acquisitions, but Alcoa's core operations - the businesses...

  • Page 5
    ... new operations as profitable elements in Alcoa's ongoing business. This is made possible by the talent and enthusiasm of the people involved and by the Alcoa Business System, which gives us a common language and a framework for synergies in customer service, cost reduction, productivity, sharing...

  • Page 6
    ... point of view, we leverage our resources globally - our knowledge, technology, systems, and talents as well as hard assets and cash - to achieve sustainable, profitable growth. We strive to build, acquire, retain, and leverage resources like our alumina assets in Australia, energy resources...

  • Page 7
    Where'sAlcoa? Wherever people use materials, Alcoa's products - aluminum and otherwise - are likely to be found playing a central role. And that role is growing. In transporting people and products by land, sea, and air, in building homes and highrises, in sports and recreation, communication, ...

  • Page 8
    ..., Lighting Fixtures, Alumina for Toothpaste Whiteners and Pharmaceuticals Auto Engine, Wire Harness, Panels and Trim, Wheels, Structural Frame, Polishes, Spark Plugs, Catalyst Substrate Shutters and Screens Doors Gutters and Downspouts Roof Caps (Vents) Greenhouse Structures and Systems Wire...

  • Page 9
    ..., Lighting, Countertops, Household Cleaners Window Frames Beer, Soda, Juice and Water Cans, Food Cans, Drink Pouches, Juice Boxes, Metal Closures, Aluminum and Plastic Formed Containers, Cookware, Cooking Utensils, Aluminum and Plastic Foil, Film and Wrap Plastic Closures, Push-Pull Closures...

  • Page 10
    ...Rooms and Modular Buildings, Lighting Shelves and Scoops, Fire Retardant Wires and Cables, Cable Trays, Electrical Panels Skylight Systems, Atrium Applications, Architectural Windows, Window Hardware, Hurricane and Impact Resistant Products, Architectural Moldings, Integrated Solar Electric Curtain...

  • Page 11
    ...Studs), Wall Panels, Refractories, Catalyst Substrates Beer, Soda, Juice and Water Cans, Food Cans, Plastic Closures, Metal Closures, Push-Pull Closures Storefront Framing Systems, Thermal Framing Systems Aluminum Swing Entrances, Flush Doors, Thermal Entrances, Sliding Doors, Sliding Mall Fronts...

  • Page 12
    Fishing Reels, Archery Equipment, Gun Sights Horseshoes Canoes, Kayaks, Racing and Pleasure Craft Baseball and Softball Bats Hockey and Lacrosse Sticks Baseball and Softball Bats Spring Diving Boards 10

  • Page 13
    ..., Stadium Seating, Light Poles, Lighting Fixtures, Electrical and Fiber Optic Cables Javelins, Discuses Tennis Rackets, Exercise Equipment Outdoor Furniture Recreational Trailers, RVs, Horse Trailers, Motor Homes Golf Carts, Ceramic Inserts for Golf Clubs Bicycle Frames, Wheels, Components...

  • Page 14
    Where's Alcoa? Shock Tower Instrument Panel Structures Engine Subframes Engine Blocks Fast Ferries Suspension Components Suspension Subframes 47' Aluminum U.S. Coast Guard Life Saving Boats Liquefied Natural Gas Tankers Brake Components 12

  • Page 15
    ... Compressor Structures Pistons Wheels Driveshafts Panels and Trim Frame Truck Cabs, Treadplates, Electrical Distribution Systems, Instrument Trailer Exterior Panels, Components, Panels Fasteners Bumper Systems Bus Wheels Catalytic Converter Substrate Heat Exchangers Seat Frames Road Signs 13

  • Page 16
    Where's Alcoa? Skin, Polishing Compounds Seat Tracks Doors Turbine Blades Leading Edges Fuselage Stringers D-nose Inlet Keel Beam Jetway Wire, Cable, Fiber Optics Air Cargo Pallets and Containers Lighting Ductwork Aircraft Service Vans and Movers People Movers, Courtesy Vehicles, Push ...

  • Page 17
    ... Ribs Lower Wing Stringers Lower Stringers Lower Wing Skin Elevators Bulkhead Forgings Bulkhead Cargo Door Wire, Cable, Fiber Optics Components, Propellants, Nose Cones, Forgings for Fuel Tanks Internal Railings and Panels Baggage Carousels Window Frames, Furniture Aluminum Train Body 15

  • Page 18
    ... of the world's best performing industrial companies - as measured in social and environmental responsibility, employee choice and financial performance; as measured in superior return on capital, growth in sales, and growth in earnings per share. What will it take? Expand into opportune businesses...

  • Page 19
    NEWS Known to America as "Pat & Betty," food experts Betty Morton and Pat Schweitzer work in The Reynolds Kitchens, where new Alcoa consumer product ideas are developed and tested. 17

  • Page 20
    ... point of AGSC development. The Innovation Factory. In 2000, Alcoa Mill Products started up its new Brazing Sheet Development Factory (BSDF) adjacent to Lancaster (Pa.) Operations. BSDF utilizes pilot-scale manufacturing equipment to simulate customer processing and end-product performance testing...

  • Page 21
    ... told investment analysts that Alcoa aspires to be one of the world's best-performing industrial companies. One of the keys to that performance, he said, is a new target of further reducing annual costs by $1.0 billion by December 2003. "The relentless application of the Alcoa Business System will...

  • Page 22
    ... the materials. Alcoa supplies aerospace alloys from North American and European facilities for primary structures on all Airbus aircraft. A Big Advance for Molders. An advanced aluminum alloy developed by Alcoa is creating a major stir in the plastics industry . Called QE-7® the new material is...

  • Page 23
    ... the chemicals and metals markets. Now a part of the Specialty Metals unit of Alcoa Primary Metals, the operation will continue to supply former C-KOE customers. Adding to Presto's Capacity. The plastic bag and wraps businesses of ConAgra, Inc.'s Arrow Industries Division have been acquired by Alcoa...

  • Page 24
    ... in May included Reynolds' 35% share in Latasa, Brazil's largest aluminum beverage can producer. Closures Technology. Two acquisitions in 2000 augmented the breadth of technology and market reach for Alcoa Closure Systems International (CSI). It acquired MCG Closures Ltd., with plants in England and...

  • Page 25
    ... employ 150 and is scheduled to open in November 2001. A study of the company's information systems facilities concluded that cost-efficiency and levels of service would be improved by consolidating staff and facilities into one North American data center. Its design incorporates redundant systems...

  • Page 26
    ..., and adding 300 employees. Plans include an engineering center for product design and development. Gains in Wire Harnesses. During 2000, AFL Automotive signed up a number of new customers for its electrical distribution system/wire harness products, including VW - North America for the Volkswagen...

  • Page 27
    ...competitive advantage to Alcoa customers. In 2000, these systems also provided a timely framework for rapid integration of acquired businesses. Derwin Coleman, Richmond, Virginia, USA Community Outreach. In June of 2000, Alcoans at Wagerup in Australia formed the Community Consultative Network (CCN...

  • Page 28
    .... Results: New anodizing lines and distribution centers are now integrated into extrusion production systems at Sorocaba, Tubarão, and Itapissuma. Extrusion costs at these plants show reductions of 21% to 49%. Order lead times, previously 6 to 14 days, now range from 1 to 5 days. Truck loading time...

  • Page 29
    ... quarter 2001. Its lightweight forged aluminum wheels will help customers to meet recent Japanese government and industry initiatives to save energy and lower emissions by reducing the weight of commercial vehicles. Customer Service Online. In 2000 Alcoa's Reynolds Aluminum Supply Company (RASCO...

  • Page 30
    ... Land Management Program." Pinjarra was also recognized for leadership in health and safety when it placed second at the Australian 2000 MINEX Awards for leadership in health and safety systems that foster employee involvement. Corporate Reputations. Alcoa headed the list of resources companies in...

  • Page 31
    ... Trends in Alcoa's Major Markets Worldwide Operations Selected Financial Data Financial Review Management's Report Independent Accountant's Report Consolidated Financial Statements Notes to Financial Statements Supplemental Financial Information 11-Year Financial Data Directors Officers Shareholder...

  • Page 32
    ... Revenues in this market are mainly from sales of aluminum extrusions, sheet, and plate to distributors and from three businesses added in 2000: Huck fasteners, Howmet super alloy castings, and RASCO - Alcoa's Reynolds Aluminum Supply Company . • "Other" includes magnesium, products and services...

  • Page 33
    ...Alcoa segments that sell products to this market: - Flat-Rolled Products - Engineered Products - Other • Alcoa's revenues in this market are from an array of fabricated aluminum products for commercial and residential applications, plus vinyl siding and trim for new homes and remodeling. • World...

  • Page 34
    ... 1 1 1 4 2 Chile 7 1 11 Uruguay 1 12 2 2 Argentina 1 3 3 India 1 Nigeria 1 Singapore 1 Australia 6 2 2 2 Bauxite, Alumina and Chemicals Primary Aluminum Fabricated Aluminum Products Packaging and Consumer Products Related Products Telecommunications Research and Development Corporate Center 32

  • Page 35
    ... Paid per Common Share* dollars 22.9 2.1 2.5 Alumina and Chemicals Building and Constructio Aluminum Ingot Packaging 0.500 0.403 0.375 0.333 0.125 0.108 0.028 Variable 15.3 13.1 1.9 1.5 1.5 3.3 2.2 2.7 16.3 3.7 1.8 2.2 4.6 2.2 3.2 5.0 2.9 4.0 5.0 Transportation Distribution and Other 13...

  • Page 36
    ... aluminum prices. 1,054 805 515 853 96 97 98 99 00 Segment Information Alcoa's operations consist of five worldwide segments: Alumina and Chemicals, Primary Metals, Flat-Rolled Products, Engineered Products and Packaging and Consumer. Alcoa businesses that are not reported to management...

  • Page 37
    ... 1998, as the divestiture of Alcoa Specialty Chemicals in 1998, lower prices and a lower value-added mix more than offset higher shipments. Segment ATOI in 2000 rose 91% over 1999 due to higher alumina prices, higher shipment volumes and continued cost reductions, partially offset by higher energy...

  • Page 38
    ...worldwide smelter system. The smelting operations of Reynolds have been added to this segment. Primary Metals receives alumina from the Alumina and Chemicals segment and produces aluminum ingot to be used by Alcoa's fabricating businesses, as well as sold to outside customers. Revenues from the sale...

  • Page 39
    ... fasteners, aluminum forgings and wheels. These products serve the transportation, construction and distributor markets. This segment includes the Reynolds wheel business, as well as the Huck fasteners and Howmet super-alloy castings businesses acquired as part of the Cordant acquisition. In 2000...

  • Page 40
    ... for the automotive industry; Thiokol Propulsion (Thiokol), a producer of solid rocket propulsion systems; Reynolds' metal distribution business (RASCO); the residential building products operations, Alcoa Building Products (ABP) and aluminum automotive engineering and parts businesses. Thiokol and...

  • Page 41
    ... of lower overall aluminum prices on revenues. Selling and General Administrative Expenses (S&GA) - S&GA expenses increased 30% to $1,108 in 2000. The increase was primarily due to acquisitions and higher personnel costs related to pay for performance, partially offset by cost-cutting improvements...

  • Page 42
    ... required to purchase aluminum to supplement its internal production. These purchases expose the company to the risk of higher aluminum prices. T o hedge this risk, Alcoa enters into long positions, principally using futures and options. Alcoa follows a stable pattern of purchasing metal; therefore...

  • Page 43
    ... A and S for information related to the accounting policies and fair market values of Alcoa's foreign exchange contracts at December 31, 2000 and 1999. Interest Rate Risks - Alcoa attempts to maintain a reasonable balance between fixed- and ï¬,oating-rate debt and uses interest rate swaps and caps...

  • Page 44
    ... 2000, Alcoa entered into a new $2,490 revolving-credit facility that expires in April 2001 and a $510 revolving-credit facility that expires in August 2005. The revolving-credit facilities are used to support Alcoa's commercial paper program. In 2000, Alcoa used $763 to repurchase 21,742,600 shares...

  • Page 45
    ... in 1999 and 1998, respectively. Of the total capital expenditures in 2000, 32% related to capacity expansion, including alumina production in Australia and automotive sheet production in the U.S. Also included are costs of new and expanded facilities for environmental control in ongoing operations...

  • Page 46
    ... business interests of its employees. The company maintains a systematic program to assess compliance with these policies. Report of Independent Accountants T o the Shareholders and Board of Directors Alcoa Inc. (Alcoa) In our opinion, the accompanying consolidated balance sheet and the related...

  • Page 47
    ...(in millions, except per-share amounts) For the year ended December 31 2000 Alcoa and subsidiaries 1999 1998 Revenues Sales (A and N) Other income Costs and Expenses Cost of goods sold Selling, general administrative and other expenses Research and development expenses Provision for depreciation...

  • Page 48
    ... (I) Contingent liabilities (K) Shareholders' Equity Preferred stock (M) Common stock (M) Additional capital Retained earnings Treasury stock, at cost Accumulated other comprehensive loss T otal shareholders' equity Total Liabilities and Equity The accompanying notes are an integral part of the...

  • Page 49
    ...issued for stock compensation plans Repurchase of common stock Dividends paid to shareholders Dividends paid and return of capital to minority interests Net change in commercial paper Additions to long-term debt Payments on long-term debt Cash provided from (used for) financing activities Investing...

  • Page 50
    ... Cash dividends: Preferred @ $3.75 per share Common @ $.500 per share Treasury shares purchased Stock issued: Reynolds acquisition Stock issued: compensation plans †Stock issued: two-for-one split Balance at end of 2000 Comprehensive income Preferred stock Common stock Additional capital...

  • Page 51
    ... for Stock-Based Compensation,'' are presented in Note M. Financial Instruments and Commodity Contracts. Alcoa enters into long-term contracts to supply fabricated aluminum products to a number of its customers. T o hedge the market risk of changing prices for purchases or sales of metal, Alcoa uses...

  • Page 52
    .... The repurchase of these notes was consistent with Alcoa's policy change regarding the manner in which large subsidiaries are capitalized and resulted in lower overall financing costs to the company. Recently Adopted Accounting Standards. In 2000, Alcoa changed its method of accounting for revenue...

  • Page 53
    ... and number of shares outstanding in this report have been restated for the stock split. C. Acquisitions In August 1999, Alcoa and Reynolds Metals Company (Reynolds) announced they had reached a definitive agreement to merge. On May 3, 2000, after approval by the U.S. Department of Justice (DOJ...

  • Page 54
    ...ï¬,ect any cost savings that might be achieved from the combined operations. On October 31, 2000, after approval by the European Union (EU), Alcoa completed the acquisition of Luxfer Holdings plc's aluminum plate, sheet and soft-alloy extrusion manufacturing operations and distribution businesses of...

  • Page 55
    ... in 2005 and carry a coupon rate of 7 .25%. In addition, Alcoa issued $3,711 of commercial paper. The proceeds from these borrowings were used to fund acquisitions, refinance debt and for general corporate purposes. In 2000, Alcoa entered into a new $2,490 revolving-credit facility that expires in...

  • Page 56
    ...granted, generally at not less than market prices on the dates of grant, except for the 12.5 cents per-share options issued as a payout of earned performance share awards. The stock option program includes a reload or stock continuation ownership feature. Stock options granted have a maximum term of...

  • Page 57
    ... from alumina. Primary Metals. This segment consists of Alcoa's worldwide smelter system. Primary Metals receives alumina from the Alumina and Chemicals segment and produces aluminum ingot to be used by Alcoa's fabricating business, as well as sold to outside customers. Results from internal hedging...

  • Page 58
    ... services for the telecommunications industry; Thiokol, a producer of solid rocket propulsion systems; Alumina and Chemicals Primary Metals Reynolds' metal distribution business (RASCO); the residential building products operations, Alcoa Building Products (ABP); and aluminum automotive engineering...

  • Page 59
    ... of employee stock options generated a tax benefit of $108 in 2000 and $145 in 1999. This amount was credited to (378) additional capital and reduced current taxes payable. Reconciliation of the U.S. federal statutory rate to Alcoa's effective 381 tax rate follows. U.S. federal statutory rate Taxes...

  • Page 60
    ... on plan assets Acquisitions (principally Reynolds and Cordant) Employer contributions Participants' contributions Benefits paid Administrative expenses Exchange rate Fair value of plan assets at end of year Funded status Unrecognized net actuarial gain Unrecognized net prior service cost (credit...

  • Page 61
    ...types of foreign exchange contracts Alcoa uses to manage its foreign exchange risk. 2000 Notional Market amount value $2,342 $(166) - - 1999 Notional Market amount value $1,499 $60 28 3 For measurement purposes, an 8.5% annual rate of increase in the per capita cost of covered health care benefits...

  • Page 62
    ... cannot be estimated at this time. Alcoa expects to submit a revised Analysis of Alternatives report during 2001. In 1988, Reynolds discovered that soils in the area of the heat transfer medium system at its primary aluminum production plant in Massena, New York were contaminated with PCB and other...

  • Page 63
    ... all necessary corporate approvals of both companies, is subject to customary regulatory approvals. It is expected to close by the end of the second quarter of 2001. Supplemental Financial Information Quarterly Data (unaudited) (dollars in millions, except per-share amounts) 2000 Sales Income from...

  • Page 64
    ...per share* .500 Dividends declared Book value (based on year-end outstanding shares) 13.13 43 5⁄8 Price range: High Low 23 1⁄8 Shareholders (number) 265,300 814,229 Average shares outstanding (thousands) Alumina shipments Operating Data 7,472 (thousands of metric tons) Aluminum product shipments...

  • Page 65
    Name /alcoa/4500...86 2 160 2,090 6,930 (1,750) 13,643 1,216 1,609 4,445 1.11 1.10 .225 6.23 15 1⁄16 9 7⁄32 83,600 712,072 6,407 673 1,909 2,582 1,905 ...067 $612 60,200 7.9 9.9 9.3 1993 $ 9,056 93 7,264 633 130 692 151 88 (10) 201 196 - 5 .56 .53 2 140 1,610 6,507 (1,711) 11,597 1,433 1,389 3,584 ....

  • Page 66
    ... Ford Foundation 1979-1996; president and chief executive officer of Bedford Stuyvesant Restoration Corporation 1967-1977 . Director of Alcoa since 1977 . Sir Ronald Hampel, 68, chairman of United Business Media, a U.K.based media company, since 1999; chairman of Imperial Chemical Industries plc...

  • Page 67
    ..., Health & Safety, Audit and Compliance Brenda A. Hart Assistant Secretary and Chief Securities and Finance Counsel L. Patrick Hassey Executive Vice President - Alcoa and Group President, Alcoa Industrial Components William J. O'Rourke, Jr. Vice President - Alcoa Business Support Services...

  • Page 68
    ... on Alcoa's environmental, health and safety performance, write Alcoa EHS Department at the corporate center address. Dividends Alcoa's objective is to pay common stock dividends at rates competitive with other investments of equal risk and consistent with the need to reinvest earnings for long-term...

  • Page 69
    ..., or 2,204.6 pounds. Micromill Alcoa Micromill technology uses fully continuous casting and rolling processes to produce aluminum sheet with reduced capital investment, lower operating costs, and - for some products - superior metallurgical properties. Mill products Metal that has been fabricated...

  • Page 70
    ..., plants and equipment 49, 52, 62 Publications 66 Q Quarterly data 61, 66 R Realized prices for aluminum ingot 33, 36, 62 Reconciliation of ATOI to consolidated net income 38 Research and development 39 Return on average invested capital 62 Return on average shareholders' equity 1, 34*, 62 Revenue...

  • Page 71
    If you liked the book, you'll love the web site! Come to www.alcoa.com for current information on an ongoing basis

  • Page 72