Alcoa 2007 Annual Report Download - page 68

P. Cash Flow Information
Cash payments for interest and income taxes are as follows:
2007 2006 2005
Interest, net of amount capitalized* $ 359 $423 $328
Income taxes, net of amount refunded 1,376 695 413
* The amounts for 2006 and 2005 have been revised from the prior
year presentation to reflect interest amounts capitalized.
The details related to acquisitions are as follows:
2007 2006 2005
Fair value of assets acquired $19 $ 84 $ 373
Liabilities assumed (3) (91) (102)
Minority interests acquired 3— 190
Cash paid (received) 19 (7) 461
Less: cash acquired 1——
Net cash paid (received) $18 $ (7) $ 461
In 2007, Alcoa sold its Three Oaks Mine for $140, which
consisted of $70 in cash and a $70 note receivable. The $70 in
cash is reflected in the Proceeds from the sale of assets and busi-
nesses on the accompanying Statement of Consolidated Cash
Flows. The $70 note receivable is not reflected in the accom-
panying Statement of Consolidated Cash Flows as it represents a
non-cash activity.
Q. Segment and Geographic Area Information
Alcoa is primarily a producer of aluminum products. Aluminum
and alumina represent approximately three-fourths of Alcoa’s
revenues. Nonaluminum products include precision castings,
industrial fasteners, consumer products, food service and flexible
packaging products, plastic closures, and electrical distribution
systems for cars and trucks. Alcoa’s segments are organized by
product on a worldwide basis. Alcoa’s management reporting
system evaluates performance based on a number of factors;
however, the primary measure of performance is the after-tax
operating income (ATOI) of each segment. Certain items such as
interest income, interest expense, foreign currency translation
gains/losses, certain effects of LIFO inventory accounting,
minority interests, restructuring and other charges, discontinued
operations, and accounting changes are excluded from segment
ATOI. In addition, certain expenses, such as corporate general
administrative and selling expenses and depreciation and amor-
tization on corporate assets, are not included in segment ATOI.
Segment assets exclude cash, cash equivalents, short-term invest-
ments, and deferred taxes. Segment assets also exclude items such
as corporate fixed assets, LIFO reserves, goodwill allocated to
corporate, assets held for sale, and other amounts.
The accounting policies of the segments are the same as those
described in the Summary of Significant Accounting Policies (see
Note A). Transactions among segments are established based on
negotiation among the parties. Differences between segment totals
and Alcoa’s consolidated totals for line items not reconciled are in
Corporate.
Alcoa’s products are used worldwide in packaging, consumer
products, transportation (including aerospace, automotive, truck
trailer, rail, and shipping), building and construction, and
industrial applications. Total exports from the U.S. from
continuing operations were $3,120 in 2007, $2,588 in 2006, and
$2,021 in 2005.
Alcoa’s reportable segments are as follows:
Alumina. This segment consists of Alcoa’s worldwide alumina
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 products. Slightly more than half of Alcoa’s alumina
production is sold under supply contracts to third parties world-
wide, while the remainder is used internally.
Primary Metals. This segment consists of Alcoa’s worldwide
smelter system. Primary Metals receives alumina, primarily from
the Alumina segment, and produces primary aluminum to be used
by Alcoa’s fabricating businesses, as well as sold to external
customers, aluminum traders, and commodity markets. Results
from the sale of aluminum powder, scrap, and excess power are
also included in this segment, as well as the results of aluminum
derivative contracts. Primary aluminum produced by Alcoa and
used internally is transferred to other segments at prevailing
market prices. The sale of primary aluminum represents at least
90% of this segment’s third-party sales.
Flat-Rolled Products. This segment’s principal business is the
production and sale of aluminum plate, sheet, and foil. This
segment includes rigid container sheet (RCS), which is sold
directly to customers in the packaging and consumer market and is
used to produce aluminum beverage cans. Seasonal increases in
RCS sales are generally experienced in the second and third quar-
ters of the year. This segment also includes sheet and plate used in
the transportation, building and construction, and distribution
markets (mainly used in the production of machinery and equip-
ment and consumer durables), which is sold directly to customers
and through distributors. Approximately two-thirds of the third-
party sales in this segment are derived from sheet and plate, and
foil used in industrial markets, while the remaining one-third of
third-party sales consists of RCS. While the customer base for flat-
rolled products is large, a significant amount of sales of RCS, sheet,
and plate is to a relatively small number of customers.
Extruded and End Products. This segment consists of
extruded products, some of which are further fabricated into a
variety of end products, and includes hard alloy extrusions and
architectural extrusions. These products primarily serve the
building and construction, distribution, aerospace, automotive, and
commercial transportation markets. These products are sold
directly to customers and through distributors. Prior to June 2007,
this segment included a soft alloy extrusion business. In June
2007, Alcoa contributed its soft alloy extrusion business to a
newly-formed joint venture in exchange for an equity investment
in the joint venture. As such, this segment’s results now include
equity income of the joint venture instead of separate revenues and
costs of its former soft alloy extrusion business.
Engineered Solutions. This segment includes titanium,
aluminum, and super alloy investment castings; forgings and
fasteners; electrical distribution systems; aluminum wheels; and
integrated aluminum structural systems used in the aerospace,
automotive, commercial transportation, and power generation
markets. These products are sold directly to customers and
through distributors.
Packaging and Consumer. This segment includes consumer,
foodservice, and flexible packaging products; food and beverage
closures; and plastic sheet and film for the packaging industry.
The principal products in this segment include aluminum foil;
plastic wraps and bags; plastic beverage and food closures;
flexible packaging products; thermoformed plastic containers; and
extruded plastic sheet and film. Consumer products are marketed
under brands including Reynolds Wrap®, Diamond®, Baco®, and
Cut-Rite®. Seasonal increases generally occur in the second and
fourth quarters of the year for such products as consumer foil and
plastic wraps and bags, while seasonal slowdowns for closures
generally occur in the fourth quarter of the year. Products are
generally sold directly to customers, consisting of supermarkets,
beverage companies, food processors, retail chains, and commer-
cial foodservice distributors. In December 2007, Alcoa announced
it has agreed to sell the businesses within this segment to Rank for
$2,700 in cash (see Note F for additional information).
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