Alcoa 2001 Annual Report Download - page 38

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Foreign exchange losses included in other income were $11 in
2001, $82 in 2000 and $19 in 1999.
Effective July 1, 1999, the Brazilian real became the functional
currency for translating the financial statements of Alcoa’s 59%-
owned Brazilian subsidiary, Alcoa Aluminio S.A. (Aluminio). As a
result of the change, Alcoa’s accumulated other comprehensive loss
(unrealized translation adjustments) and minority interests accounts
were reduced by $156 and $108, respectively. These amounts were
driven principally by a reduction in fixed assets and resulted in
decreases in Aluminio’s depreciation expense of $30 in 2001 and
2000 and $15 in 1999.
Income Taxes — Alcoa’s effective tax rate was 32% in 2001 and
33.5% in 2000, which differed from the statutory rate of 35%,
primarily due to lower taxes on foreign income. Alcoa’s effective tax
rate in 1999 was 29.9%, primarily driven by lower taxes on foreign
income including a reduction in the Australian corporate income tax
rate. In the 1999 fourth quarter, Australia reduced its corporate
incometaxratefrom36%to34%for2000andto30%for2001.
Minority Interests — Minority interests’ share of income from oper-
ations decreased $173 to $208 in 2001. The decrease was primarily
due to lower earnings at
AFL , Alcoa World Alumina and Chemicals
(AWAC) and Aluminio, as well as the impact of special charges of
$42. In 2000, minority interests’ share of income from operations
increased $139 from 1999 to $381. The increase was due to higher
earnings at Alcoa of Australia, AFL and Aluminio.
Segment Information
Alcoa’s operations consist of five worldwide segments: Alumina and
Chemicals, Primary Metals, Flat-Rolled Products, Engineered Prod-
ucts and Packaging and Consumer. Alcoa businesses that are not
reported to management as part of one of these five segments are
aggregated and reported as ‘‘Other.’’ Alcoa’s management reporting
system measures the after-tax operating income
(ATOI) of each
segment. Nonoperating items, such as interest income, interest
expense, foreign exchange gains/losses, the effects of last-in, first-out
(LIFO) inventory accounting, minority interests and special items are
excluded from segment ATOI . In addition, certain expenses, such
as corporate general administrative expenses, and depreciation and
amortization on corporate assets, are not included in segment ATOI .
Segment assets exclude cash, cash equivalents, short-term investments
and all deferred taxes. Segment assets also exclude items such as
corporate fixed assets, LIFO reserves, goodwill allocated to corporate
and other amounts.
ATOI for all segments totaled $2,043 in 2001, compared with
$2,389 in 2000 and $1,489 in 1999. See Note L to the financial state-
ments for additional information. The following discussion provides
shipment, revenue and ATOI data for each segment for the years 1999
through 2001.
Alumina and Chemicals
2001 2000 1999
Alumina production (mt) 12,527 13,968 13,273
Third-party alumina shipments (mt) 7,217 7,472 7,054
Third-party sales $1,908 $2,108 $1,842
Intersegment sales 1,021 1,104 925
Total sales $2,929 $3,212 $2,767
After-tax operating income $ 471 $ 585 $ 307
This segment consists of Alcoa’s worldwide alumina and chemicals
system, that includes the mining of bauxite, which is then refined
into alumina. Alumina is sold directly to internal and external smelter
customers worldwide or is processed into industrial chemical prod-
ucts. The industrial chemical products are sold to a broad spectrum
of markets including refractories, ceramics, abrasives, chemicals
processing and other specialty applications. Slightly more than half
of Alcoa’s alumina production is sold under supply contracts to third
parties worldwide, while the remainder is used internally. Alumina
comprises approximately two-thirds of total third-party sales.
In 2001, third-party sales of alumina decreased 13% compared with
2000, primarily due to a decrease in shipments of 3% and a decrease
in realized prices of 10%. In 2000, third-party sales of alumina
increased 19% compared with 1999 as a result of a 6% increase in
shipments along with a 13% increase in prices. The increased shipments
were driven by increased production with the completion of the
440,000-mt expansion of Alcoa’s Wagerup, Australia alumina refinery
as well as increased production levels at Kwinana and Pinjarra, also
in Australia, and San Cipria´n, Spain.
Third-party sales of alumina-based chemical products were down
31% in 2001 compared with 2000, primarily due to lower volumes.
In 2000, third-party sales of alumina-based chemical products were
up 2% compared with 1999, primarily attributable to increased
volume in Alcoa’s Latin American chemical operations.
Segment
ATOI in 2001 fell 20% from 2000 to $471 due to lower
volumes, resulting from production curtailments at Point Comfort
0100999897
Alumina Production
thousands of metric tons
1
1,048
12,938 13,273
13,968
12,527