Alcoa 2010 Annual Report Download - page 65

In July 2010, Alcoa completed an acquisition of the commercial building and construction business of a privately-held
company, Traco, for $77. This business, located in Cranberry, Pennsylvania, employing 650 people, is a premier
manufacturer of windows and doors for the commercial building and construction market and generated sales of
approximately $100 in 2009. The assets and liabilities of this business were included in the Engineered Products and
Solutions segment as of the end of July 2010 and this business’ results of operations were included in this segment
since the beginning of August 2010.
Third-party sales for the Engineered Products and Solutions segment decreased 2% in 2010 compared with 2009,
primarily due to unfavorable pricing and mix across all businesses; lower volumes for the fasteners, power and
propulsion, and building and construction businesses; the absence of sales related to the divestiture of the
Transportation Products Europe business in April 2010 (decrease of $50); and unfavorable foreign currency
movements due to a weaker euro. These negative impacts were mostly offset by higher volumes in the wheels and
forgings businesses and sales from the newly acquired business mentioned above ($37). Third-party sales for this
segment declined 24% in 2009 compared with 2008, mostly due to lower volumes (aluminum and nonaluminum)
across all businesses because of weak end markets, lower pricing in the building and construction sector, and
unfavorable foreign currency movements due to a weaker euro.
ATOI for the Engineered Products and Solutions segment climbed 32% in 2010 compared with 2009, mainly due to
productivity improvements and cost reduction initiatives across all businesses, partially offset by unfavorable pricing
and mix. ATOI for this segment fell 41% in 2009 compared with 2008, principally the result of lower volumes across
all businesses and lower pricing, partially offset by procurement and overhead cost savings realized in all businesses.
In 2011, improvements in key end markets, such as aerospace and commercial transportation, are anticipated, while
productivity improvements are expected to continue.
Packaging and Consumer
2010 2009 2008
Third-party aluminum shipments (kmt) - - 19
Third-party sales $ - $ - $516
ATOI $- $-$11
The businesses within this segment were sold to Rank Group Limited in 2008; therefore, this segment no longer
contains any operations. Prior to the sale of these businesses, this segment included 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 included 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 were
marketed under brands including Reynolds Wrap®, Diamond®, Baco®, and Cut-Rite®. Seasonal increases generally
occurred 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 occurred in the fourth quarter of the year. Products were generally
sold directly to customers, consisting of supermarkets, beverage companies, food processors, retail chains, and
commercial foodservice distributors.
Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa
Items required to reconcile total segment ATOI to consolidated net income (loss) attributable to Alcoa include: the
impact of LIFO inventory accounting; interest expense; noncontrolling interests; corporate expense (general
administrative and selling expenses of operating the corporate headquarters and other global administrative facilities,
along with depreciation and amortization on corporate-owned assets); restructuring and other charges; discontinued
operations; and other items, including intersegment profit eliminations and other metal adjustments, differences
between tax rates applicable to the segments and the consolidated effective tax rate, the results of the soft alloy
extrusions business in Brazil, and other nonoperating items such as foreign currency transaction gains/losses and
interest income.
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