Alcoa 2004 Annual Report Download - page 53

Other investments are primarily comprised of Alcoa’s 8%
interest in Aluminum Corporation of China (Chalco). The
Chalco investment is classified as an available-for-sale security
and is carried at fair value. The decrease in other investments
in 2004 was primarily due to a revaluation of the Chalco
investment with the offset recorded in accumulated other
comprehensive income, slightly offset by an additional
investment in Chalco of $32.
J. Other Assets
December 31 2004 2003
Intangibles (E) $ 852 $ 788
Deferred income taxes 1,606 1,343
Prepaid pension benefit (W) 83 108
Deferred charges and other 1,166 1,049
$3,707 $3,288
K. Debt
December 31 2004 2003
Floating-rate notes, due 2004
(1.5% average rate) $— $ 467
6.125% Bonds, due 2005 —200
7.25% Notes, due 2005 —500
5.875% No t e s , d u e 2 00 6 —500
4.25% Notes, due 2007 800 800
6.625% Notes, due 2008 150 150
7.375% Note s , due 2010 1,000 1,000
6.5% Notes, due 2011 1,000 1,000
6% Notes, due 2012 1,000 1,000
5.375 % No t e s , d u e 2 013 600 600
6.5% Bonds, due 2018 250 250
6.75% Bonds, due 2028 300 300
Tax-exempt revenue bonds ranging from
5.7% to 5.9%, due 2007–2031 28 49
Medium-term notes, due 2005–2013
(8.2% and 7.6% average rates) 142 176
Alcoa Aluminio
7.5% Export notes, due 2005–2008 74 89
Fair value adjustments 33 104
Other 26 31
5,403 7,216
Less: amount due within one year 57 523
$5,346 $6,693
The amount of long-term debt maturing in each of the next
five years is $57 in 2005, $69 in 2006, $863 in 2007, $204 in
2008, and $33 in 2009.
In 2004, Alcoa retired early $1,200 of debt securities,
consisting of the following: $200 of 6.125% Bonds due in
2005,$500of7.25%Notesduein2005,and$500of5.875%
Notes due in 2006. These debt securities were retired primarily
with proceeds from commercial paper borrowings and cash
provided from operations. Alcoa recognized a net gain of $58
in other income on the early retirement of long-term debt and
the associated settlement of interest rate swaps. The net gain
of $58 is comprised of the following:
●a premium paid for early retirement of debt and related
expenses of $67;
●a gain of $48 from previously settled interest rate swaps that
hedged the retired debt and was reflected as an increase in
its carrying value; and
in connection with the achievement of certain 2003 operating
targets. Fairchild is part of the Engineered Products segment.
In connection with certain acquisitions made during 2002,
Alcoa could be required to make additional payments of
approximately $67 from 2005 through 2006 based upon the
achievement of various financial and operating targets.
Pro forma results of the company, assuming all acquisitions
had been made at the beginning of each period presented, would
not have been materially different from the results reported.
G. Inventories
December 31 2004 2003
Finished goods $ 913 $ 742
Work in process 909 787
Bauxite and alumina 456 337
Purchased raw materials 472 429
Operating supplies 218 210
$2,968 $2,505
Approximately 45% of total inventories at December 31, 2004
were valued on a LIFO basis. If valued on an average-cost basis,
total inventories would have been $700 and $558 higher at the
end of 2004 and 2003, respectively.
H. Properties, Plants, and Equipment, at Cost
December 31 2004 2003
Land and land rights, including mines $ 462 $ 445
Structures 6,177 5,834
Machinery and equipment 18,004 17,436
24,643 23,715
Less: accumulated depreciation and depletion 13,273 12,275
11,370 11,440
Construction work in progress * 1,222 1,060
$12,592 $12,500
*Project costs associated with EBS are included in this balance, and
at December 31, 2004 and 2003, totaled $231 and $233, respectively.
Upon completion, these software costs are capitalized and recorded
as intangible assets.
I. Investments
December 31 2004 2003
Equity investments $1,517 $1,346
Other investments 549 659
$2,066 $2,005
Equity investments represent investments in affiliates in which
Alcoa has a noncontrolling ownership interest between twenty
and fifty percent and are comprised of the following: 46.5%
investment in Elkem ASA (Elkem), a Norwegian producer of
aluminum; 50% investment in Elkem Aluminium ANS, a joint
venture between Alcoa and Elkem that owns and operates two
aluminum smelters in Norway; 50% interest in Integris Metals,
Inc., a metals distribution joint venture with BHP Billiton
(which was subsequently sold in January 2005); and investments
in several hydroelectric power construction projects in Brazil.
See Note N for additional information.
The increase in equity investments in 2004 was attributed
to higher earnings at Elkem and favorable foreign currency
exchange movements.
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