Alcoa 2003 Annual Report Download - page 41

pension funding credits are projectedtobefullyusedduring 2006.
Postretirement benefit payments are expected to range from $350 to
$450 annually. See Note V to the Consolidated Financial Statements
for additional information.
Deferred revenue arrangements require Alcoa to deliver aluminum
and alumina over the specified contract period. While these obliga-
tionsare notexpected to result in cash payments, they represent
contractual obligations for whichthecompany would be obligated
if the specified product deliveries could not be made.
Obligations for Financing Activities
Cash outlays for financing activities consist primarily of long-term
debt repayments anddividendpaymentstoshareholders. The
companyhas historically paid quarterly dividends to shareholders.
Shareholder dividends are subject to quarterly approval by
thecompany’s Board of Directors and are currently at a rate
of $515 annually.
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Obligations for Operating Activities
The table above provides a summary of the type or nature of the
company’s obligations associated with operating activities that exceed
$5 annually or $10intotaloverthecontractlife. Unconditional
purchase obligations represent long-term contracts that require the
purchase of electricity, natural gas, or other utilities. Long-term
purchase obligations are principally for raw materials and utilities.
Amajority of the raw material purchase obligations will be completed
in 12 to 24 months. Purchase obligations for utilities are generally
longer term in nature, with expiration dates ranging from 12 months
to 17 years. Operating leases represent multi-year obligations for
rental of facilities and equipment.
Estimatedpension fundingand postretirement benefit payments
are based on actuarial estimates using current assumptions for
discount rates, expected return on long-term assets, rate of compen-
sation increases, and health care cost trend rates. Cash outlays for
pension funding are estimated to be $100 for 2004 and 2005 and
$150 in 2006. In 2007 and 2008, pension funding requirements
are estimated to range between $500 to $600 in each year as prior
Contractual Obligations and Off-Balance Sheet Arrangements
The company is obligated to make future payments under variouscontracts such as long-term purchase obligations, debt agreements, lease
agreements, and unconditional purchase obligations and has certain contingent commitments such as debt guarantees. The company has
grouped these contractual obligations and off-balance sheet arrangements into operating activities, financing activities, and investing activities
in the same manner as they are classified in the Statement of Consolidated Cash Flows in order to provide a better understanding of the nature
of the obligations and arrangements and to provide a basis for comparison to historical information. The table below provides a summary of
contractual obligations and off-balance sheet arrangements as of December 31, 2003:
Contractual obligations Total 2004 2005 –2006 2007–2008 Thereafter
Operating activities:
Unconditionalpurchaseobligations $4,052 $ 565 $ 872 $ 555 $2,060
Long-term purchase obligations 3,840 300 322 234 2,984
Operating leases
(1)
1,037 180 279 186 392
Estimated pension funding
(2)
100 250 1,100
(2)
Postretirement benefit payments
(2)
360 800 875
(2)
Layoff and impairment payments
(3)
101 51 50 — —
Deferred revenue arrangements 746 135 219 168 224
Financing activities:
Long-term debt
(4)
7,215 523 1,382 1,078 4,232
Dividends to shareholders
(5)
Investing activities:
Capital projects
(6)
3,950 600 1,350 1,100 900
Other:
Standby letters of credit
(7)
258 253 3 — 2
Guarantees
(7)
127 — 9 12 106
To tal contractual obligations $3,067 $5,536 $5,308
(1)
See NoteTtotheConsolidatedFinancial Statements for further details on operating leases.
(2)
Annual payments and funding are expected to continue into the foreseeable future at the amounts or ranges noted in the discussion below.
(3)
See NoteDtotheConsolidatedFinancial Statements for further details on layoff and impairment payments.
(4)
See NoteKtotheConsolidatedFinancial Statements for further details on long-term debt.
(5)
See discussion below under Obligations for Financing Activities.
(6)
See discussion below under Obligations for Investing Activities.
(7)
See NoteMtotheConsolidated Financial Statements for further details on standby letters of credit and guarantees.