Alcoa 2013 Annual Report Download - page 83

• a decrease in Interest expense, primarily due to the absence of a $27 net charge related to the early retirement
of various outstanding notes ($48 in purchase premiums paid partially offset by a $21 gain for “in-the-
money” interest rate swaps), somewhat offset by lower capitalized interest ($6);
• a change in Noncontrolling interests, mainly the result of lower earnings of AWAC, principally driven by
lower realized prices, due to a decrease in contractual LME-based pricing, higher input costs, particularly
caustic and fuel oil, and a charge for the civil portion of a legal matter ($34 is noncontrolling interest’s
share), somewhat offset by net productivity improvements and net favorable foreign currency movements
due to a stronger U.S. dollar;
• a decrease in Restructuring and other charges, principally caused by fewer asset impairments and a lower
number of employee separations, partially offset by a charge for the civil portion of a legal matter ($67); and
• a change in Other, largely attributable to a net charge for five environmental remediation matters ($129), a
charge for the write-off of goodwill and capitalized interest related to the sale of U.S. hydroelectric power
assets that were not included in the assets of the Primary Metals segment ($102), and a net unfavorable
change in mark-to-market derivative contracts ($24).
Environmental Matters
See the Environmental Matters section of Note N to the Consolidated Financial Statements in Part II Item 8 of this
Form 10-K.
Liquidity and Capital Resources
Alcoa maintains a disciplined approach to cash management and strengthening of its balance sheet. In 2013, as in the
prior four years, management initiated actions to significantly improve Alcoa’s cost structure and liquidity, providing
the Company with the ability to operate effectively as the global economy continues to recover from the economic
downturn that began in 2008. Such actions include procurement efficiencies and overhead rationalization to reduce
costs, working capital initiatives to yield significant cash improvements, and maintaining a sustainable level of capital
expenditures. In 2014, this approach will continue with the ultimate goal of generating cash from operations that
exceeds capital expenditures.
Along with the foregoing actions, cash provided from operations and financing activities is expected to be adequate to
cover Alcoa’s current operational and business needs. For an analysis of long-term liquidity, see Contractual
Obligations and Off-Balance Sheet Arrangements below.
At December 31, 2013, cash and cash equivalents of Alcoa were $1,437, of which $544 was held outside the U.S.
Alcoa has a number of commitments and obligations related to the Company’s growth strategy in foreign jurisdictions,
resulting in the need for cash outside the U.S. As such, management does not have a current expectation of repatriating
cash held in foreign jurisdictions.
Cash from Operations
Cash from operations in 2013 was $1,578 compared with $1,497 in 2012. The increase of $81, or 5%, was largely
attributable to higher operating results (net loss plus net add back for noncash impacts to earnings) and lower pension
contributions of $99, mostly offset by a negative change associated with all of the following: working capital of $235,
noncurrent assets of $162, and noncurrent liabilities of $128.
The lower pension contributions were principally driven by a change in minimum funding obligations for U.S. pension
plans due to enacted legislation in 2012 (see below).
The major components of the negative change in working capital were as follows: an unfavorable change of $245 in
receivables; a negative change of $71 in inventories, principally due to a lower LIFO reserve; a favorable change of
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