Alcoa 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 Alcoa annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 214

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214

ANNUAL REPORT 2014

Table of contents

  • Page 1
    ANNUAL REPORT 2014

  • Page 2
    ... in lightweight metals technology, engineering and manufacturing. Alcoa innovates multi-material solutions that advance our world. Our technologies enhance transportation, from automotive and commercial transport to air and space travel, and improve industrial and consumer electronics products. We...

  • Page 3

  • Page 4
    ...-rich businesses that serve high-growth end markets, and to increase the global competitiveness of our commodity portfolio by moving further down the alumina and aluminum cost curves. These goals draw on Alcoa's innovation strengths in our value-add businesses and proven cost management systems in...

  • Page 5
    ...the end of the manufacturing cycle, the new technology dramatically cut costs in our manufacturing process and improved on-time delivery to our customers. Peter's recruitment and development at Alcoa, and his opportunity as a newly-hired engineer to work on one of Alcoa's most sophisticated products...

  • Page 6
    ...$6.8 Global Rolled Products Primary Metals Engineered Products and Solutions Alumina Other BY GEOGRAPHIC AREA 7% 15% FINANCIAL AND OPERATING HIGHLIGHTS ($ in millions, except per-share amounts) 51% 2012 2014 2013 27% Sales Net income (loss) Per common share data: Basic Diluted Dividends paid...

  • Page 7
    ... from 2013. STRONG PERFORMANCE DRIVES EARNINGS GROWTH $ in millions 757 123 Currency 31 48 540 1,116 357 2013 16 LME 64 Volume 292 Price/Mix Productivity Energy Raw Materials Cost Increases/ Other 2014 +$107 MARKET +$1,113 PERFORMANCE -$461 COST HEADWINDS Through the power of Alcoa...

  • Page 8
    ... driven in large part by automotive growth and an ongoing robust aerospace market. GLOBAL PRIMARY PRODUCTS Our hard work optimizing our operations in the Global Primary Products business continued to pay off. In the fourth quarter of 2014, the combined Alumina and Primary Metals segments (referred...

  • Page 9
    ...-party revenues Adjusted EBITDA margin of 21.9% GLOBAL ROLLED PRODUCTS $7.4B in third-party revenues Adjusted EBITDA per metric ton of $339 © Floto + Warner/OTTO GLOBAL PRIMARY PRODUCTS $10.3B in third-party revenues Global alumina cost curve Global aluminum cost curve 25th percentile...

  • Page 10
    ... a globally competitive commodity business. The Company has invested in the midstream and downstream businesses and optimized our upstream portfolio-both with the aim of creating compelling sustainable value for our shareholders. This transformation is underpinned by the Alcoa Advantage. Every day...

  • Page 11
    ...quarter of 2015, will provide a global growth platform for titanium structural cast parts for the world's bestselling jet engines and airframe structures, while expanding Alcoa's aluminum casting capacity. In addition to acquisitions, Alcoa also announced organic aerospace investments and expansions...

  • Page 12
    ..., a manufacturing breakthrough technology to unlock the future of automotive aluminum products. By leveraging the Alcoa technology advantage, the Alcoa-patented MicromillTM process dramatically changes the microstructure of the metal, producing the most advanced aluminum sheet on the market. In...

  • Page 13
    1 2 3 4 ALCOA MICROMILL® MATERIAL: WORLD'S MOST ADVANCED ALUMINUM ALLOY FOR NEXT-GEN AUTOMOTIVE PRODUCTS More Formable Stronger Lighter 40% vs. ingot based AI 2x vs. HighStrength Steel + 30% vs. ingot based AI + 30% vs. HighStrength Steel Unique Alloy Micro Structure 11

  • Page 14
    1 2 3 12

  • Page 15
    ... long haul, with an estimated compound annual growth rate for Alcoa wheels sales of 17% from 2010 to 2018. Alcoa will bring the Ultra ONETM wheel to Europe in the second half of 2015. Our advanced aluminum solutions also protect loads on railways. Alcoa's technical experts in Russia developed a new...

  • Page 16
    ...Alcoa also uses efficient manufacturing solutions that are fully compatible with its customers' existing production lines. Using Alcoa's patented bottle technology-along with other proprietary technologies and materials-and working closely with Anheuser-Busch, the new Cool TwistTM 16-ounce aluminum...

  • Page 17
    ... population growth and consumer preference. (Source: Brazilian Aluminum Association). 4. Alcoa provided product support to the Anheuser-Busch innovations team, from package design through the launch of the new bottle. 2. Aluminum packaging solutions deliver freshness, convenience, and security for...

  • Page 18
    ... 2008, Global Primary Products has generated $3.9 billion in productivity savings, increasing Alcoa's overall profitability. Photo: Fjardaál smelter, Iceland. 3. The value-add product mix increased upstream margins by $1.3 billion from 2010 through 2014. 2. The Saudi joint venture alumina re...

  • Page 19
    ... as planned. In 2014, the smelter became fully operational and generated profits in the second half of the year, and the refinery produced its first alumina. 5% 2010 2011 2012 2013 2014 2015E 2016E SLAB CASTING SUPPORTING AUTOMOTIVE GROWTH 3 BILLET PRODUCTION SERVING GROWING EXTRUSIONS MARKETS...

  • Page 20
    ... Values-Integrity, Respect, Innovation, Excellence and Environment, Health and Safety-bring out the best in our employees and our Company. As Alcoa transforms, our Values serve as a bright beacon, continuing to guide how we work with our stakeholders and communities. Alcoa's Values and the shared...

  • Page 21
    ...No.) 390 Park Avenue, New York, New York 10022-4608 (Address of principal executive offices) (Zip code) Registrant's telephone numbers: Investor Relations 212) 836-2674 Office of the Secretary--------(212) 836-2732 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on...

  • Page 22
    .... Controls and Procedures ...Item 9B. Other Information ...Part III Item 10. Item 11. Item 12. Item 13. Item 14. Part IV Item 15. Exhibits, Financial Statement Schedules ...Signatures ...165 175 Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of...

  • Page 23
    ... Overview Alcoa is a global leader in lightweight metals engineering and manufacturing. Alcoa's innovative, multi-material products, which include aluminum, titanium, and nickel, are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas...

  • Page 24
    ... exchange rates and interest rates, affect the results of operations in these countries. Alcoa's operations consist of four worldwide reportable segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions. Description of the Business Information describing Alcoa...

  • Page 25
    ...low in relation to annual production levels, they are consistent with historical levels of reserves for the Company's mining locations. Given the Company's extensive bauxite resources, the abundant supply of bauxite globally and the length of the Company's rights to bauxite, it is not cost-effective...

  • Page 26
    ...of Saudi Arabia Al Ba'itha 2037 33.8 19.7 TAA12 49.4 TSiO212 8.7 0.2 1 2 3 4 This table shows only the AWAC and/or Alcoa share (proportion) of reserve and annual production tonnage. This entity is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited. Alum...

  • Page 27
    ...Alumina Company is a joint venture owned by Saudi Arabian Mining Company (Ma'aden) (74.9%) and AWA Saudi Limited (25.1%). AWA Saudi Limited is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited. Kingdom of Saudi Arabia-Al Ba'itha: Bauxite reserves and mine plans...

  • Page 28
    ...rail administrative offices and services; port control facilities with stockpiles and ship loader. Mine and port facilities are operating. Mine & Location Australia-Darling Range; Huntly and Willowdale. Means of Access Operator History Power Source Electrical energy from natural gas is supplied...

  • Page 29
    ...; power plant; and water supply. There is a company village with supporting facilities. Mining operations commenced in 2014. Kingdom of Saudi Arabia Joint Venture In December 2009, Alcoa and Saudi Arabian Mining Company (Ma'aden) entered into a joint venture to develop a fully integrated aluminum...

  • Page 30
    ...fourth quarter of 2013. The mine's first bauxite was shipped in the second quarter of 2014 and construction of the mine was 83% complete at year end. The refinery became fully operational and produced its first alumina from Saudi Arabia bauxite in the fourth quarter of 2014. Total capital investment...

  • Page 31
    ... term is commonly used when there is a hybrid or variant Bayer Process that will refine the bauxite. The total amount of silica contained in the bauxite. Alumina Refining Facilities and Capacity Alcoa is the world's leading producer of alumina. Alcoa's alumina refining facilities and its worldwide...

  • Page 32
    ... alumina from Saudi Arabia bauxite in the fourth quarter of 2014. For additional information regarding the joint venture, see the Equity Investments section of Note I to the Consolidated Financial Statements in Part II, Item 8. (Financial Statements and Supplementary Data). In November 2005, AWA LLC...

  • Page 33
    ..., 40% by AWAC and 9% by others. There were no material developments in 2014. Primary Aluminum Facilities and Capacity The Company's primary aluminum smelters and their respective capacities are shown in the following table: Alcoa Worldwide Smelting Capacity Alcoa Nameplate Consolidated Capacity1...

  • Page 34
    ...the highest-cost smelting capacity and those plants that have long-term risk due to factors such as energy costs or regulatory uncertainty. As part of this review during the remainder of 2013, management initiated the permanent shutdown of 146,000 mtpy of combined capacity at the Baie Comeau smelter...

  • Page 35
    ... excess capacity. In September 2014, Alcoa announced a long-term contract to supply aluminum sheet and plate products to Boeing, the world's largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems. The multiyear contract, valued at more than...

  • Page 36
    ...investment, and aluminum castings; fasteners; aluminum wheels; integrated aluminum structural systems; architectural extrusions; and forgings and hard alloy extrusions. These products, which are used in the aerospace, automotive, building and construction, commercial transportation, power generation...

  • Page 37
    ...to expand its wheel manufacturing plant in Europe, to meet growing demand for its lightweight, durable, low-maintenance aluminum truck wheels. Construction on the production line expansion began in January 2014, and was completed on schedule in January 2015. Alcoa and VSMPO-AVISMA Corporation signed...

  • Page 38
    ... Aerospace and Industrial Gas Turbine Castings and Forgings Forgings Aerospace and Industrial Gas Turbine Castings Architectural Products Aerospace Castings/Fasteners Forgings Fasteners Architectural Products Extrusions and Forgings Extrusions and Forgings Extrusions Architectural Products China...

  • Page 39
    ...Alcoa (100%) Alcoa (100%) Alcoa (100%) Alcoa (100%) United States Products Forgings Ingot Castings Aerospace and Industrial Gas Turbine Castings and Alloy Ingot Castings Ingot Castings Fasteners Forgings Forgings Fasteners Forgings Architectural Products Fasteners Architectural Products Extrusions...

  • Page 40
    ...2014 for each of the Company's reportable segments are listed below. Alumina Bauxite Caustic soda Electricity Fuel oil Lime (CaO) Natural gas Primary Metals Alloying materials Alumina Aluminum fluoride Calcined petroleum coke Cathode blocks Electricity Liquid pitch Natural gas Global Rolled Products...

  • Page 41
    ...of the Company's total alumina refining production costs. Electric power accounts for approximately 26% of the Company's primary aluminum production costs. Alcoa generates approximately 25% of the power used at its smelters worldwide and generally purchases the remainder under long-term arrangements...

  • Page 42
    ... to operate under annual licenses until a new Section 401 certification is issued and the FERC relicensing process is complete. Since the permanent closure of the Badin, North Carolina smelter, power generated from APGI's Yadkin system is largely being sold to an affiliate, Alcoa Power Marketing LLC...

  • Page 43
    ...its Rockdale, Texas smelter. Demolition and remediation activities related to these actions began in the first half of 2012 and were completed in 2013. On April 29, 2014, Luminant Generation LLC, Luminant Mining Company LLC, Sandow Power Company LLC and their affiliated debtors filed petitions under...

  • Page 44
    ... project in southern Brazil (Alumínio's share is 35%). Development of this concession has not yet begun. Europe - Electricity Alcoa's smelters at San Ciprián, La Coruña and Avilés, Spain purchase electricity under bilateral power contracts that commenced on January 1, 2013. The contracts for...

  • Page 45
    ... a pre-payment of certain other charges, and will be recoverable starting in 2018. In 2012, Iceland extended the energy consumption tax though 2015. Spain - Natural Gas In order to facilitate the full conversion of the San Ciprian, Spain alumina refinery from fuel oil to natural gas, in October 2013...

  • Page 46
    ... benefits. The Company also has a number of domestic and international registered trademarks that have significant recognition within the markets that are served. Examples include the name "Alcoa" and the Alcoa symbol for aluminum products, Howmet metal castings, Huck® fasteners, Kawneer® building...

  • Page 47
    ... wheel using the MagnaForceTM alloy. In the Global Rolled Products segment, the Company continued its progress leveraging new science and technologies in 2014. For example, the Company publicly disclosed the development of a high speed continuous casting and rolling technology for aluminum sheet...

  • Page 48
    ...position effective June 24, 2014. From July 2013 to June 2014, he was Chief Operating Officer for Global Primary Products, where he focused on the day-to-day operations of Alcoa's aluminum smelters, alumina refineries and bauxite mines worldwide. Prior to that, Mr. Harvey was Chief Financial Officer...

  • Page 49
    ... excellence director, chief financial officer and chief operating officer. As chief operating officer of Alcoa's Global Primary Products business from December 2011 to March 2013, Mr. Oplinger was responsible for the day-to-day operations of the business' global network of aluminum smelters...

  • Page 50
    ... is investing in its value-add manufacturing and engineering businesses to capture growth opportunities in strong end markets like automotive and aerospace. Alcoa is also building out its valueadd businesses, including by introducing innovative new products and technology solutions, and investing in...

  • Page 51
    ... on the industry cost curve. Other production cuts may be impeded by long-term contracts to buy power or raw materials. If industry overcapacity persists due to the disruption by such non-market forces on the market-driven balancing of the global supply and demand of aluminum, the resulting weak...

  • Page 52
    ...2016, driving the alumina business further down the industry cost curve into the 21st percentile; by 2016, driving the aluminum business further down the industry cost curve into the 38th percentile; by 2016, increasing the revenues of the Global Rolled Products segment, while improving margins that...

  • Page 53
    ... or cash collateral, and the cost of issuance of new public debt and commercial paper has increased. For more information regarding the effects of the Moody's downgrade on the Company's liquidity, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity...

  • Page 54
    ..., Alcoa formed a joint venture with Ma'aden, the Saudi Arabian Mining Company, to develop a fully integrated aluminum complex (including a bauxite mine, alumina refinery, aluminum smelter and rolling mill) in the Kingdom of Saudi Arabia. Although the Company has, in connection with the Saudi Arabia...

  • Page 55
    ...'s business, financial condition, operating results or cash flows. Alcoa has operations or activities in numerous countries and regions outside the United States, including Brazil, China, Europe, Guinea, Russia, and the Kingdom of Saudi Arabia. The Company's global operations are subject to a number...

  • Page 56
    ... in the discount rate or lowerthan-expected investment returns on plan assets could have a material negative effect on the Company's cash flows. Adverse capital market conditions could result in reductions in the fair value of plan assets and increase the Company's liabilities related to such...

  • Page 57
    .... Alcoa is working on new developments for a number of strategic projects in all business segments, including advanced smelting process technologies such as inert anode and carbothermic technology, alloy development, engineered finishes and product design, high speed continuous casting and rolling...

  • Page 58
    ...energy target in Australia, Québec's transition to a "cap and trade" system with compliance required beginning 2013, the European Union Emissions Trading Scheme and the United States' clean power plan for existing power plants, proposed on June 18, 2014. Alcoa will likely see changes in the margins...

  • Page 59
    .... These effects may adversely impact the cost, production and financial performance of Alcoa's operations. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Alcoa's principal office is located at 390 Park Avenue, New York, New York 10022-4608. Alcoa's corporate center is located at 201...

  • Page 60
    ... Alcoa, Alcoa World Alumina LLC ("AWA"), Victor Phillip Dahdaleh, and others, and the subsequent investigation of Alcoa by the U.S. Department of Justice ("DOJ") and the Securities and Exchange Commission ("SEC") with respect to Alba's claims. See Note N to the Consolidated Financial Statements...

  • Page 61
    ... November 19, 2009 (Alcoa had been incurring higher power costs at its smelters in Italy subsequent to the tariff end date through the end of 2012). The extension was originally through 2010, but the date was changed by legislation adopted by the Italian Parliament effective on August 15, 2009...

  • Page 62
    ... timing of such payment, Alcoa paid the requested amount in five quarterly installments of $69 million (â,¬50 million) beginning in October 2012 through December 2013. Notwithstanding the payments made, Alcoa's estimate of the most probable loss of the ultimate outcome of this matter and the low end...

  • Page 63
    ...that their medical condition is attributable to exposure to materials at the Squaw Creek Mine but no further information is available due to the discovery stay. As previously reported, in 1996, Alcoa acquired the Fusina, Italy smelter and rolling operations and the Portovesme, Italy smelter (both of...

  • Page 64
    ... suspending the operating license and ordering payment of compensation. On April 14, 2010, the court denied plaintiffs' request. AWAB presented its defense in March 2011, on grounds that it was in compliance with the terms and conditions of its operating license, which included plans to mitigate...

  • Page 65
    ... Alcoa Global Fasteners, Inc. also filed a separate brief on two of the questions arguing that the court should determine that it is neither a cause of ground water contamination nor a cause of plaintiffs' incurred costs. Remaining in the case at this time are common law trespass and nuisance claims...

  • Page 66
    ... District Court for the District of the Virgin Islands. Alcoa's share of the settlement is fully insured. On March 23, 2012, plaintiffs filed a notice of appeal of numerous non-settled matters, including but not limited to discovery orders, Daubert rulings, summary judgment rulings, as more clearly...

  • Page 67
    ...Alcoa or Reynolds Metals Company and spouses and dependents of such retirees alleging violation of the Employee Retirement Income Security Act (ERISA) and the Labor-Management Relations Act by requiring plaintiffs, beginning January 1, 2007, to pay health insurance premiums and increased co-payments...

  • Page 68
    ... reported, on August 2, 2013, the State of North Carolina, by and through its agency, the North Carolina Department of Administration, filed a lawsuit against Alcoa Power Generating, Inc. in Superior Court, Wake County, North Carolina (Docket No. 13-CVS-10477). The lawsuit asserts ownership...

  • Page 69
    ... available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the financial position of the Company. Item 4. Mine Safety Disclosures. The information concerning mine safety...

  • Page 70
    ... Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company's common stock is listed on the New York Stock Exchange where it trades under the symbol AA. The Company's quarterly high and low trading stock prices and dividends per common share for 2014 and 2013 are...

  • Page 71
    ... in the "materials" market sector. Such information shall not be deemed to be "filed." FIVE-YEAR CUMULATIVE TOTAL RETURN Based upon an initial investment of $100 on December 31, 2009 with dividends reinvested $250 $200 $150 $100 $50 $0 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Alcoa Inc. S&P 500...

  • Page 72
    ... quarter ended December 31, 2014 (a) This column includes the deemed surrender of existing shares of Alcoa common stock to the Company by stock-based compensation plan participants to satisfy the exercise price of employee stock options at the time of exercise. These surrendered shares are not part...

  • Page 73
    ... Overview Our Business Alcoa is a global leader in lightweight metals engineering and manufacturing. Alcoa's innovative, multi-material products, which include aluminum, titanium, and nickel, are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction...

  • Page 74
    ... States and Europe generated 51% and 27%, respectively, of Alcoa's sales in 2014. In addition, Alcoa has investments and operating activities in, among others, Australia, Brazil, China, Guinea, Iceland, Russia, and Saudi Arabia, all of which present opportunities for substantial growth. Governmental...

  • Page 75
    ... in China, as well as other parts of the world. Management also anticipates improved market conditions for value-added products in the aerospace, automotive, building and construction, packaging, and industrial gas turbine global end markets, despite declines in certain regions, while the commercial...

  • Page 76
    ... demand for both Alcoa's fasteners and jet engine components products from the commercial aerospace end market and Alcoa's aluminum wheels in the commercial transportation end market. Beyond the improvement in 2014, revenue growth for both the midstream and downstream operations is expected from...

  • Page 77
    ... the absence of costs related to a planned maintenance outage in 2013 at a power plant in Australia. These items were partially offset by higher costs for bauxite, energy, and labor, write-offs of inventory related to the decisions to permanently shut down certain smelter and rolling mill capacity...

  • Page 78
    ... an aerospace business in November 2014 (see Engineered Products and Solutions in Segment Information below) and assets placed into service in January 2014 related to the completed automotive expansion at the Davenport, IA plant. The provision for DD&A was $1,421 in 2013 compared with $1,460 in 2012...

  • Page 79
    ...the Engineered Products and Solutions segment, 45 in the Global Rolled Products segment, 60 in the Alumina and Primary Metals segments combined, and 465 in Corporate); $34 ($26 after-tax) for asset impairments related to prior capitalized costs for a modernization project at a smelter in Canada that...

  • Page 80
    ...for layoff costs, including the separation of approximately 1,110 employees (340 in the Primary Metals segment, 260 in the Engineered Products and Solutions segment, 250 in the Global Rolled Products segment, 85 in the Alumina segment, and 175 in Corporate), of which 590 relates to a global overhead...

  • Page 81
    ... progress completed at the aluminum complex in Saudi Arabia, and fees paid associated with the execution and termination of a 364-day senior unsecured bridge term loan facility related to the acquisition of an aerospace business ($13-see Engineered Products and Solutions in Segment Information below...

  • Page 82
    ... in 2012. The change of $316 was mainly the result of the absence of a gain on the sale of U.S. hydroelectric power assets ($320: see Primary Metals in Segment Information below). Also, a higher equity loss ($40) related to Alcoa's share of the joint venture in Saudi Arabia due to start-up costs and...

  • Page 83
    ...$34 related to this legal matter in 2013 and 2012, respectively. Segment Information Alcoa's operations consist of four worldwide reportable segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions. Segment performance under Alcoa's management reporting system...

  • Page 84
    ...well as certain production, realized price, and average cost data, for each of the three years in the period ended December 31, 2014. See Note Q to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information. Alumina 2014 2013 2012 Alumina production (kmt) 16...

  • Page 85
    ... at the refinery from fuel oil to natural gas. Furthermore, the refinery in Saudi Arabia is expected to produce 1,100 kmt (276 kmt is Alcoa's share) of alumina, as it became fully operational at the end of 2014. Primary Metals 2014 2013 2012 Aluminum production (kmt) 3,125 3,550 3,742 Third-party...

  • Page 86
    ... rod plant generated sales of approximately $200 in 2013 and, at the time of divestiture, had approximately 60 employees. See Restructuring and Other Charges in Results of Operations above. In December 2014, Alcoa completed the sale of its 50.33% ownership stake in the Mt. Holly smelter located in...

  • Page 87
    ... review, in June 2013, management decided to permanently close the Fusina smelter as the underlying conditions that led to the idling of the smelter in 2010 had not fundamentally changed, including low aluminum prices and the lack of an economically viable, long-term power solution. In August 2014...

  • Page 88
    ...plus the absence of business interruption and repair costs that occurred in 2012) related to the March 2012 fire at the Massena West cast house ($36). In 2015, aluminum production will be approximately 270 kmt lower due to the sale of the ownership stake in the Mt. Holly smelter and the shutdown and...

  • Page 89
    ... business is the production and sale of aluminum plate and sheet. A small portion of this segment's operations relate to foil produced at one plant in Brazil. This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used...

  • Page 90
    ..., power generation, and industrial products end markets, are sold directly to customers and through distributors. On November 19, 2014, after satisfying all customary closing conditions and receiving the required regulatory approvals, Alcoa completed the acquisition of Firth Rixson, a global leader...

  • Page 91
    ... for the Engineered Products and Solutions segment increased 5% in 2014 compared with 2013, primarily due to higher volumes and the acquisition of Firth Rixson (see above). The higher volumes were mostly related to the commercial transportation and aerospace (commercial) end markets, somewhat offset...

  • Page 92
    ... the Point Henry smelter in Australia and the divestiture of an ownership interest in a mining and refining joint venture in Jamaica and a discrete income tax charge related to a tax rate change in both Brazil and Spain ($32 combined), partially offset by improved operating results and the absence...

  • Page 93
    ... 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 2014, as in the prior five years, management initiated actions to significantly improve Alcoa's cost...

  • Page 94
    ... in deferred mining costs in Australia and the absence of value-added tax receipts in Brazil. The negative change in noncurrent liabilities was largely attributable to the absence of a net increase in the environmental reserve of $194 related to five remediation matters. In June 2012, Alcoa received...

  • Page 95
    ...% Notes due July 2013, and $27 for previous borrowings on the loans supporting the Estreito hydroelectric power project in Brazil; $132 in dividends paid to shareholders; and net cash paid to noncontrolling interests of $97, most of which relates to Alumina Limited's share of AWAC. These items were...

  • Page 96
    ... used to finance the cash portion of the acquisition of Firth Rixson (see Engineered Products and Solutions in Segment Information above). Alcoa's cost of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short- and long-term debt ratings...

  • Page 97
    ... aerospace business (see Engineered Products and Solutions in Segment Information above); $1,219 in capital expenditures (includes costs related to environmental control in new and expanded facilities of $129), 40% of which related to growth projects, including the automotive expansions at the Alcoa...

  • Page 98
    ... and an equity investment in a China rolling mill. The use of cash in 2013 was primarily due to $1,193 in capital expenditures (includes costs related to environmental control in new and expanded facilities of $143), 34% of which related to growth projects, including the automotive expansion at the...

  • Page 99
    ... restructuring payments Deferred revenue arrangements Uncertain tax positions Financing activities: Total debt Dividends to shareholders Investing activities: Capital projects Equity contributions Payments related to acquisitions Totals Obligations for Operating Activities Energy-related purchase...

  • Page 100
    ... represent Alcoa's committed investment related to a joint venture in Saudi Arabia. Alcoa is a participant in a joint venture to develop a new aluminum complex in Saudi Arabia, comprised of a bauxite mine, alumina refinery, aluminum smelter, and rolling mill, which requires the Company to...

  • Page 101
    ... investments, and properties, plants, and equipment for impairment; estimating fair value of businesses to be divested; pension plans and other postretirement benefits obligations; stock-based compensation; and income taxes. Management uses historical experience and all available information to...

  • Page 102
    ...regulated waste materials related to the demolition of certain power facilities. The fair values of these AROs are recorded on a discounted basis, at the time the obligation is incurred, and accreted over time for the change in present value. Additionally, Alcoa capitalizes asset retirement costs by...

  • Page 103
    ...four reporting units are the Alumina segment, the Primary Metals segment (all goodwill was impaired in 2013 - see below), the Global Rolled Products segment, and the soft alloy extrusions business in Brazil (hereafter "SAE"), which is included in Corporate. More than 80% of Alcoa's total goodwill is...

  • Page 104
    ... markets and market share, sales volumes and prices, production costs, tax rates, capital spending, discount rate, and working capital changes. Most of these assumptions vary significantly among the reporting units. Cash flow forecasts are generally based on approved business unit operating plans...

  • Page 105
    ... long-term rate of return on plan assets, and several assumptions relating to the employee workforce (salary increases, health care cost trend rates, retirement age, and mortality). The interest rate used to discount future estimated liabilities is determined using a Company-specific yield curve...

  • Page 106
    The expected long-term rate of return on plan assets is generally applied to a five-year market-related value of plan assets (a four-year average or the fair value at the plan measurement date is used for certain non-U.S. plans). The process used by management to develop this assumption is one that ...

  • Page 107
    ...the Spanish consolidated tax group. During 2014, the underlying value of the deferred tax assets decreased due to a remeasurement as a result of the enactment of new tax rates in Spain beginning in 2015 (see Income Taxes in Earnings Summary under Results of Operations above), the sale of a member of...

  • Page 108
    ... are recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized. Related Party Transactions Alcoa buys products from and sells...

  • Page 109
    ... reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or...

  • Page 110
    ... reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or...

  • Page 111
    Alcoa and subsidiaries Statement of Consolidated Operations (in millions, except per-share amounts) For the year ended December 31, Sales (Q) Cost of goods sold (exclusive of expenses below) Selling, general administrative, and other expenses Research and development expenses Provision for ...

  • Page 112
    ... 191 Noncontrolling Interests 2014 2013 2012 2014 $ (91) $ 41 $ (29) $ 177 Total 2013 2012 $(2,244) $ 162 For the year ended December 31, Net income (loss) Other comprehensive loss, net of tax (B): Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other...

  • Page 113
    ... (H) Goodwill (A & E) Investments (I) Deferred income taxes (T) Other noncurrent assets (J) Total Assets Liabilities Current liabilities: Short-term borrowings (K & X) Accounts payable, trade Accrued compensation and retirement costs Taxes, including income taxes Other current liabilities Long-term...

  • Page 114
    ... cash from operations: Depreciation, depletion, and amortization Deferred income taxes (T) Equity income, net of dividends Impairment of goodwill (A & E) Restructuring and other charges (D) Net gain from investing activities-asset sales (O) Stock-based compensation (R) Excess tax benefits from stock...

  • Page 115
    ... Total stock stock stock capital earnings stock hensive loss interests equity Balance at December 31, 2011 Net income (loss) Other comprehensive loss Cash dividends declared: Preferred @ $3.75 per share Common @ $0.12 per share Stock-based compensation (R) Common stock issued: compensation plans...

  • Page 116
    ... details the weighted-average useful lives of structures and machinery and equipment by reporting segment (numbers in years): Segment Alumina: Alumina refining Bauxite mining Primary Metals: Aluminum smelting Power generation Global Rolled Products Engineered Products and Solutions Structures 31 32...

  • Page 117
    ... four reporting units are the Alumina segment, the Primary Metals segment (all goodwill was impaired in 2013-see below), the Global Rolled Products segment, and the soft alloy extrusions business in Brazil (hereafter "SAE"), which is included in Corporate. More than 80% of Alcoa's total goodwill is...

  • Page 118
    ... markets and market share, sales volumes and prices, production costs, tax rates, capital spending, discount rate, and working capital changes. Most of these assumptions vary significantly among the reporting units. Cash flow forecasts are generally based on approved business unit operating plans...

  • Page 119
    ... terms. The shipping terms vary across all businesses and depend on the product, the country of origin, and the type of transportation (truck, train, or vessel). Alcoa periodically enters into long-term supply contracts with alumina and aluminum customers and receives advance payments for product...

  • Page 120
    ... value. Additionally, Alcoa capitalizes asset retirement costs by increasing the carrying amount of the related long-lived assets and depreciating these assets over their remaining useful life. Certain conditional asset retirement obligations (CAROs) related to alumina refineries, aluminum smelters...

  • Page 121
    ... that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized. Stock-Based Compensation. Alcoa recognizes compensation expense for employee equity grants using the nonsubstantive vesting period approach, in which the expense...

  • Page 122
    ... in the Statement of Consolidated Operations from the date of the acquisition. Discontinued Operations and Assets Held For Sale. For those businesses where management has committed to a plan to divest, each business is valued at the lower of its carrying amount or estimated fair value less cost to...

  • Page 123
    ... changes require an entity to present an unrecognized tax benefit as a liability in the financial statements if (i) a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle...

  • Page 124
    ... an entity, whether or not the threshold for reporting as a discontinued operation is met, related to profit or loss information and/or asset and liability information of the component. These changes become effective for Alcoa on January 1, 2015. Management has determined that the adoption of these...

  • Page 125
    ... to earnings: Aluminum contracts(5) Foreign exchange contracts(5) Interest rate contracts(6) Sub-total Tax (expense) benefit(2) Total amount reclassified from Accumulated other comprehensive loss, net of tax(7) Total Other comprehensive income (loss) Balance at end of period (1) 2012 $(3,532...

  • Page 126
    ... 6. C. Asset Retirement Obligations Alcoa has recorded AROs related to legal obligations associated with the normal operations of bauxite mining, alumina refining, and aluminum smelting facilities. These AROs consist primarily of costs associated with spent pot lining disposal, closure of bauxite...

  • Page 127
    ... the Engineered Products and Solutions segment, 45 in the Global Rolled Products segment, 60 in the Alumina and Primary Metals segments combined, and 465 in Corporate); $34 ($26 aftertax) for asset impairments related to prior capitalized costs for a modernization project at a smelter in Canada that...

  • Page 128
    ... the Portovesme smelter will begin in 2015 and are expected to be completed by the end of 2019. In 2014, costs related to the shutdown and curtailment actions included $208 for the layoff of approximately 1,790 employees (1,210 in the Primary Metals segment, 470 in the Global Rolled Products segment...

  • Page 129
    ...approximately 800 employees (390 in the Engineered Products and Solutions segment, 250 in the Primary Metals segment, 85 in the Alumina segment, and 75 in Corporate), including $10 ($7 after-tax) for the layoff of an additional 170 employees related to the previously reported smelter curtailments in...

  • Page 130
    ...$1,168 $782 $172 Alumina Primary Metals Global Rolled Products Engineered Products and Solutions Segment total Corporate Total restructuring and other charges Activity and reserve balances for restructuring charges were as follows: Reserve balances at December 31, 2011 2012: Cash payments (44) (13...

  • Page 131
    ... of December 31, 2014, $485 of the amount reflected in Corporate is allocated to three of Alcoa's four reportable segments ($152 to Alumina, $61 to Global Rolled Products, and $272 to Engineered Products and Solutions) included in the table above for purposes of impairment testing (see Note A). This...

  • Page 132
    ... to finance the acquisition. Firth Rixson manufactures rings, forgings, and metal products for the aerospace end market, as well as other markets requiring highly engineered material applications. This business has 13 operating facilities in the United States, United Kingdom, Europe, and Asia...

  • Page 133
    ... 2014, Alcoa signed a definitive agreement to acquire TITAL, a privately held company with approximately 650 employees based in Germany, for $235 (â,¬194) in cash. TITAL's business is composed primarily of aluminum and titanium investment casting products for the aerospace and defense end markets...

  • Page 134
    ... Products to supply molten aluminum for the rod plant. The aluminum rod plant generated sales of approximately $200 in 2013 and, at the time of divestiture, had approximately 60 employees. In December 2014, Alcoa's majority-owned subsidiary (60%), Alcoa World Alumina and Chemicals (AWAC), completed...

  • Page 135
    ...-tax) in 2013 and $1 ($1 after-tax) in 2012. H. Properties, Plants, and Equipment, Net December 31, Land and land rights, including mines* Structures: Alumina: Alumina refining Bauxite mining Primary Metals: Aluminum smelting Power generation Global Rolled Products Engineered Products and Solutions...

  • Page 136
    ...wholly-owned subsidiaries of Alcoa World Alumina and Chemicals (AWAC), which is owned 60% by Alcoa and 40% by Alumina Limited. In 2014, 2013, and 2012, Alcoa received $86, $89, and $101, respectively, in dividends from its equity investments. Alcoa and Saudi Arabian Mining Company (known as "Ma'aden...

  • Page 137
    ... construction of the fully-integrated aluminum complex. At December 31, 2014 and 2013, Alcoa had an outstanding receivable of $30 and $31, respectively, from the smelting, rolling mill, and refining and mining companies for labor and other employee-related expenses. Capital investment in the project...

  • Page 138
    ... Cash surrender value of life insurance Prepaid gas transmission contract (N) Value-added tax receivable Deferred mining costs, net Fair value of derivative contracts (X) Advance related to European Commission Matter in Italy (N) Unamortized debt expense Prepaid pension benefit (W) Other 2014 2013...

  • Page 139
    ...value of the issued shares increased Additional capital on the accompanying Consolidated Balance Sheet. This transaction was not reflected in the accompanying Statement of Consolidated Cash Flows as it represents a noncash financing activity. In September 2014, Alcoa completed a public debt offering...

  • Page 140
    ... (the "Credit Facility"), the proceeds of which are to be used to provide working capital or for other general corporate purposes of Alcoa. Subject to the terms and conditions of the Credit Agreement, Alcoa may from time to time request increases in lender commitments under the Credit Facility, not...

  • Page 141
    ... and Alcoa makes payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its vendors. Alcoa records imputed interest related to these arrangements in Interest expense on the accompanying Statement of Consolidated Operations. During 2013...

  • Page 142
    ... in its aluminum brazing sheet venture in Kunshan City, China (see Note F). In 2014, 2013, and 2012, Alcoa received $43, $9, and $171, respectively, in contributions from the noncontrolling shareholder (Alumina Limited) of Alcoa World Alumina and Chemicals. In 2013 and 2012, Noncontrolling interests...

  • Page 143
    ... quarters of 2015-2018 (the second installment was paid on January 9, 2015). The DOJ is bringing no case against Alcoa Inc. Effective January 9, 2014, the Company also settled civil charges filed by the SEC in an administrative proceeding relating to the anti-bribery, internal controls, and books...

  • Page 144
    ...Alcoa World Alumina and Chemicals ("AWAC") company organized under the laws of Delaware that owns, directly or indirectly, alumina refineries and bauxite mines in the Atlantic region. AWAC is an unincorporated global bauxite mining and alumina refining venture between Alcoa and Alumina Limited. AWAC...

  • Page 145
    ...By order dated June 26, 2014, the trial court denied plaintiff's petition for award of attorneys' fees and expenses. Thereafter, the plaintiffs and Alcoa agreed to dismiss their respective petitions for fees and costs. This case has been fully resolved. Before 2002, Alcoa purchased power in Italy in...

  • Page 146
    ... November 19, 2009 (Alcoa had been incurring higher power costs at its smelters in Italy subsequent to the tariff end date through the end of 2012). The extension was originally through 2010, but the date was changed by legislation adopted by the Italian Parliament effective on August 15, 2009...

  • Page 147
    ... At the end of 2011, as part of a restructuring of Alcoa's global smelting system, management decided to curtail operations at the Portovesme smelter during 2012 due to the uncertain prospects for viable, long-term power, along with rising raw materials costs and falling global aluminum prices (mid...

  • Page 148
    ... with a number of other sites. Of the changes to the remediation reserve in 2014 and 2013, $47 and $12, respectively was recorded in Restructuring and other charges, while the remainder was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. Payments related to...

  • Page 149
    ..., Alcoa's share of all costs and payments is $17 (â,¬12), of which $9 (â,¬6) related to the damages will be paid annually over a 10-year period, which began in April 2014, and was previously fully reserved. Separately, in 2009, due to additional information derived from the site investigations...

  • Page 150
    ... this time, the Company is unable to reasonably predict an outcome for this matter. In March 2013, Alcoa's subsidiary, Alcoa World Alumina Brasil (AWAB), was notified by the Brazilian Federal Revenue Office (RFB) that approximately $110 (R$220) of value added tax credits previously claimed are being...

  • Page 151
    ...the Company. Commitments Investments. Alumínio, a wholly-owned subsidiary of Alcoa, is a participant in four consortia that each owns a hydroelectric power project in Brazil. The purpose of Alumínio's participation is to increase its energy self-sufficiency and provide a long-term, low-cost source...

  • Page 152
    ... other purchase commitments for energy, raw materials, and other goods and services, which total $3,951 in 2015, $2,013 in 2016, $1,903 in 2017, $1,802 in 2018, $1,698 in 2019, and $11,063 thereafter. Operating Leases. Certain land and buildings, alumina refinery process control technology, plant...

  • Page 153
    ...the sale of a mining interest in Suriname and an equity investment in a China rolling mill, respectively. In 2012, Net gain from asset sales included a $320 gain related to the sale of the Tapoco Hydroelectric Project (see Note F). P. Cash Flow Information Cash paid for interest and income taxes was...

  • Page 154
    ... of the Company's worldwide smelter system. Primary Metals receives alumina, mostly from the Alumina segment, and produces primary aluminum used by Alcoa's fabricating businesses, as well as sold to external customers and traders. Results from the sale of aluminum powder, scrap, and excess power are...

  • Page 155
    ..., commercial transportation, power generation, and industrial products end markets, are sold directly to customers and through distributors. The operating results and assets of Alcoa's reportable segments were as follows: Global Rolled Products Engineered Products and Solutions Alumina 2014 Sales...

  • Page 156
    ...410 518 879 (691) 1,327 $35,742 Sales by major product grouping were as follows: 2014 Sales: Alumina Primary aluminum Flat-rolled aluminum Investment castings Fastening systems Architectural aluminum systems Aluminum wheels Other extruded aluminum and forged products Other $ 3,401 6,011 7,351 1,784...

  • Page 157
    ... 2013, Sales of the aluminum from Alcoa's smelter in Iceland occurred in both Spain and the Netherlands. Geographic information for long-lived assets was as follows (based upon the physical location of the assets): December 31, Long-lived assets: United States Brazil Australia Iceland Canada Norway...

  • Page 158
    ..., respectively, were issued at December 31, 2014 and 2013. The current dividend yield as authorized by Alcoa's Board of Directors is $0.12 per annum or $0.03 per quarter. In early 2014, Alcoa issued 89 million shares of common stock under the terms of Alcoa's 5.25% Convertible Notes due March 15...

  • Page 159
    ... which generated a result of $2.84, $2.24, and $3.11 per option in 2014, 2013, and 2012, respectively. The lattice-pricing model uses a number of assumptions to estimate the fair value of a stock option, including an average risk-free interest rate, dividend yield, volatility, annual forfeiture rate...

  • Page 160
    ... cash received from stock option exercises was $150, $13, and $12 and the total tax benefit realized from these exercises was $28, $1, and $1, respectively. The total intrinsic value of stock options exercised during 2014, 2013, and 2012 was $84, $2, and $2, respectively. S. Earnings Per Share Basic...

  • Page 161
    ...not included in the computation of diluted EPS. Had Alcoa generated sufficient income from continuing operations in 2013, 89 million, 9 million, and 2 million potential shares of common stock related to the convertible notes, stock awards, and stock options, respectively, would have been included in...

  • Page 162
    ... $320 $428 $ 162 The exercise of employee stock options generated a tax benefit of $9 in 2014 and a tax charge of $1 in both 2013 and 2012, representing only the difference between compensation expense recognized for financial reporting and tax purposes. These amounts decreased equity and increased...

  • Page 163
    ...have annual limitations on utilization. Other represents deferred tax assets whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount of Other relates to employee benefits that will become deductible for tax purposes over an extended period of time...

  • Page 164
    ..., 2014. Alcoa has a number of commitments and obligations related to the Company's growth strategy in foreign jurisdictions. As such, management has no plans to distribute such earnings in the foreseeable future, and, therefore, has determined it is not practicable to determine the related deferred...

  • Page 165
    ...the annual effective tax rate for 2014, 2013, and 2012 would be approximately 4%, (1)%, and 6%, respectively, of pretax book income (loss). Alcoa does not anticipate that changes in its unrecognized tax benefits will have a material impact on the Statement of Consolidated Operations during 2015 (see...

  • Page 166
    ..., 2014. In 2014, as a result of the preparation for and ratification of the new agreement, Alcoa recognized $18 ($12 after-tax) in Cost of goods sold on the accompanying Statement of Consolidated Operations for, among other items, business contingency costs and a onetime signing bonus for employees...

  • Page 167
    ... U.S. employees that retire on or after April 1, 2008 are not eligible for postretirement life insurance benefits. Effective January 1, 2015, Alcoa will no longer offer postretirement health care benefits to Medicare-eligible, primarily non-bargaining, U.S. retirees through Company-sponsored plans...

  • Page 168
    ...) Amortization of accumulated net actuarial loss Prior service cost Amortization of prior service (cost) benefit Total, before tax effect Less: Amounts attributed to joint venture partners Net amount recognized, before tax effect Other postretirement benefits 2014 2013 $ 2,592 15 114 (111) 16 (10...

  • Page 169
    ... cost for U.S pension plans was $335, $391, and $288, respectively. In 2014, 2013, and 2012, net periodic benefit cost for other postretirement benefits reflects a reduction of $38, $55, and $64, respectively, related to the recognition of the federal subsidy awarded under Medicare Part D. In 2014...

  • Page 170
    ... discount rates presented. The expected long-term rate of return on plan assets is generally applied to a five-year market-related value of plan assets (a four-year average or the fair value at the plan measurement date is used for certain non-U.S. plans). The process used by management to develop...

  • Page 171
    ... 2014 2013 2012 5.5% 5.5% 6.0% 4.5% 4.5% 4.5% 2018 2017 2017 The assumed health care cost trend rate is used to measure the expected cost of gross eligible charges covered by Alcoa's other postretirement benefit plans. For 2015, a 5.5% trend rate will be used, reflecting management's best estimate...

  • Page 172
    ... These securities consist of: (i) direct investments in the stock of publicly traded U.S. and non-U.S. companies and are valued based on the closing price reported in an active market on which the individual securities are traded (generally classified in Level 1); (ii) the plans' share of commingled...

  • Page 173
    ..., which represents assets related to divested businesses (see Note F) to be transferred to the buyers' pension plans less securities sold not yet settled plus interest and dividends earned on various investments. **As of December 31, 2013, the total fair value of pension plans' assets excludes a net...

  • Page 174
    ... 2013, and $146 in 2012. In the United States, employees may contribute a portion of their compensation to the plans, and Alcoa matches a portion of these contributions in equivalent form of the investments elected by the employee. Prior to January 1, 2014, Alcoa's match was mostly in company stock...

  • Page 175
    ..., the chief financial officer, and other officers and employees that the chief executive officer selects. The SRMC meets on a periodic basis to review derivative positions and strategy and reports to Alcoa's Board of Directors on the scope of its activities. The aluminum, energy, interest rate, and...

  • Page 176
    ... with another smelter and rolling mill combined; however, the contract and related derivative instrument matured in July 2014. Additionally, Alcoa has a natural gas supply contract, which has an LME-linked ceiling. This embedded derivative is valued using probabilities of future LME aluminum prices...

  • Page 177
    ... losses will be recorded in Cost of goods sold as electricity purchases are made under the power contract. Alcoa had a similar contract related to another smelter once the prior existing contract expired in 2014, but elected to terminate the new contract in early 2013. This election was available to...

  • Page 178
    ...following table presents quantitative information related to the significant unobservable inputs described above for Level 3 derivative contracts: Fair value at December 31, 2014 Assets: Embedded aluminum derivative $168 Unobservable input Range ($ in full amounts) Embedded aluminum derivatives 77...

  • Page 179
    ... X for additional information on Alcoa's purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies. The following table shows the net fair values of the Level 3 derivative instruments at December 31, 2014 and the effect on these amounts...

  • Page 180
    ...2014: Sales $ $ $ $ Cost of goods sold Other expenses, net (15) (2) * In November 2014, three new embedded derivatives were contained within renewed power contracts; however, there was no amount included for issuances as the fair value on the date of issuance was zero. There were no purchases, sales...

  • Page 181
    ...assessment of hedge effectiveness. There was no ineffectiveness related to these five derivative instruments in 2014, 2013, and 2012. Energy contract. Alcoa has a derivative contract that will hedge the anticipated power requirements at one of its smelters once the existing power contract expires in...

  • Page 182
    ... The carrying values and fair values of Alcoa's other financial instruments were as follows: 2014 December 31, Cash and cash equivalents Restricted cash Noncurrent receivables Available-for-sale securities Short-term borrowings Commercial paper Long-term debt due within one year Long-term debt, less...

  • Page 183
    ... Financial Information (unaudited) Quarterly Data (in millions, except per-share amounts) First 2014 Sales Net (loss) income attributable to Alcoa common shareholders Earnings per share attributable to Alcoa common shareholders**: Basic Diluted 2013 Sales Net income (loss) attributable to Alcoa...

  • Page 184
    ... Disclosure Controls and Procedures Alcoa's Chief Executive Officer and Chief Financial Officer have evaluated the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and...

  • Page 185
    ... "filed") is incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table gives information about Alcoa's common stock that could be issued under the company's equity compensation plans as of December 31, 2014...

  • Page 186
    ... "Alcoa Stock Ownership- Stock Ownership of Certain Beneficial Owners" and "-Stock Ownership of Directors and Executive Officers" of the Proxy Statement and is incorporated by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required...

  • Page 187
    ... information is included in the consolidated financial statements or notes thereto. (3) Exhibits. Exhibit Number 2. Description* Share Purchase Agreement, dated as of June 25, 2014, by and among Alcoa Inc., Alcoa IH Limited, FR Acquisition Corporation (US), Inc., FR Acquisitions Corporation (Europe...

  • Page 188
    ...exhibit 4.5 to the Company's Current Report on Form 8-K dated September 22, 2014. Alcoa Retirement Savings Plan for Fastener Systems Employees, incorporated by reference to exhibit 4(e) to the Company's Form S-8 Registration Statement dated July 27, 2012. Alcoa Retirement Savings Plan for Bargaining...

  • Page 189
    ...December 31, 2013. Securities and Exchange Commission Order dated January 9, 2014, incorporated by reference to exhibit 10(n) to the Company's Annual Report on Form 10-K for the year ended December 31, 2013. Alcoa Internal Revenue Code Section 162(m) Compliant Annual Cash Incentive Compensation Plan...

  • Page 190
    ... the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010. Summary of 2013 Non-Employee Director Compensation and Stock Ownership Guidelines, incorporated by reference to exhibit 10(mm) to the Company's Annual Report on Form 10-K for the year ended December 31, 2012. 10...

  • Page 191
    ... ended December 31, 1995. Second Amendment to the Fee Continuation Plan for Non-Employee Directors, effective September 15, 2006, incorporated by reference to exhibit 10.2 to the Company's Current Report on Form 8-K (Commission file number 1-3610) dated September 20, 2006. Deferred Compensation Plan...

  • Page 192
    ...31, 2012. Summary of the Executive Split Dollar Life Insurance Plan, dated November 1990, incorporated by reference to exhibit 10(m) to the Company's Annual Report on Form 10-K (Commission file number 1-3610) for the year ended December 31, 1990. Amended and Restated Dividend Equivalent Compensation...

  • Page 193
    ...the quarter ended September 30, 2014. Deferred Fee Estate Enhancement Plan for Directors, effective July 10, 1998, incorporated by reference to exhibit 10(r) to the Company's Annual Report on Form 10-K (Commission file number 1-3610) for the year ended December 31, 1998. Alcoa Inc. Change in Control...

  • Page 194
    ...effective December 8, 2008, between Alcoa Inc. and Klaus Kleinfeld, incorporated by reference to exhibit 10(gg) to the Company's Annual Report on Form 10-K (Commission file number 1-3610) for the year ended December 31, 2008. Form of Executive Severance Agreement between the Company and new officers...

  • Page 195
    .... Amendment to Reynolds Metals Company Benefit Restoration Plan for New Retirement Program, effective September 1, 2014, incorporated by reference to exhibit 10(e) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014. Global Expatriate Employee Policy (pre-January...

  • Page 196
    ... the Company's Annual Report on Form 10-K (Commission file number 1-3610) for the year ended December 31, 2009. 2013 Alcoa Stock Incentive Plan, incorporated by reference to exhibit 10(a) to the Company's Current Report on Form 8-K dated May 8, 2013. Alcoa Inc. Terms and Conditions for Stock Option...

  • Page 197
    ... Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date Chairman and Chief Executive Officer (Principal Executive Officer and Director) Klaus Kleinfeld Executive...

  • Page 198
    ...For the year ended December 31, 2014 2013 2012 2011 2010 Earnings: Income (loss) from continuing operations before income taxes Noncontrolling interests' share of earnings of majority-owned subsidiaries without fixed charges Equity loss (income) Fixed charges added to earnings Distributed income of...

  • Page 199
    ...Securities Corporation Howmet International Inc. Howmet Holdings Corporation Howmet Corporation Howmet Castings & Services, Inc. Alcoa International Holdings Company Alcoa Australian Holdings Pty Ltd Alcoa of Australia Limited1 Alcoa Australia Rolled Products Pty Ltd Alcoa (China) Investment Company...

  • Page 200
    ...-182899, and 333-189882) of Alcoa Inc. and its subsidiaries of our report dated February 19, 2015 relating to the Alcoa Inc. consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. PricewaterhouseCoopers LLP Pittsburgh...

  • Page 201
    ...financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 19, 2015 3. 4. Name: Klaus Kleinfeld Title: Chairman and Chief Executive Officer...

  • Page 202
    ...'s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 19, 2015 3. 4. Name: William...

  • Page 203
    ...Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: February 19, 2015 Name: Klaus Kleinfeld Title: Chairman and Chief Executive Officer Dated: February 19, 2015...

  • Page 204

  • Page 205
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 206
    ... Book value per share(7) 9.07 9.84 12.32 Price range: High 17.75 10.77 10.92 Low 9.82 7.63 7.97 Other Data Number of employees 59,000 60,000 61,000 (1) Reflects the cumulative effect of the accounting change for conditional asset retirement obligations in 2005. (2) Primary aluminum product shipments...

  • Page 207
    ... of February 20, 2015 (the record date for the 2015 annual shareholders' meeting). Represents earnings per share on net income (loss) attributable to Alcoa common shareholders. Book value per share = (Total shareholders' equity minus Preferred stock) divided by Common stock outstanding, end of year.

  • Page 208
    ... and future acquisitions of aerospace businesses ($47), a gain on the sale of both a mining interest in Suriname and an equity investment in a China rolling mill ($20), an unfavorable impact related to the restart of one potline at the joint venture in Saudi Arabia that was previously shut down due...

  • Page 209
    ...of Working Capital for each period presented represent the average of the ending balances in each of the three months during the respective quarter. Reconciliation of Net Debt December 31, 2014 2013 2012 2011 2010 2009 2008 Short-term borrowings $ 54 $ 57 $ 53 $ 62 $ 92 $ 176 $ 478 Commercial paper...

  • Page 210
    ... EBITDA of Engineered Products and Solutions includes $81 and $(10), respectively, related to the acquisition of an aerospace business, Firth Rixson. Excluding these amounts, EBITDA Margin was 22.3% for the year ended December 31, 2014. The Adjusted EBITDA Margin for the year ended December 31, 2013...

  • Page 211
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 212
    ... Group President, Global Primary Products Robert S. Collins Vice President and Controller Raymond J. Kilmer Executive Vice President Chief Technology Officer Kenneth P. Wisnoski Vice President President, International Project Development and Asset Management Printed in USA © 2015 Alcoa Klaus...

  • Page 213
    ...390 Park Avenue, New York, NY 10022-4608, call 1.212.836.2732, or e-mail [email protected]. Dividends Alcoa's objective is to pay common stock dividends at rates competitive with other investments of equal risk and consistent with the need to reinvest earnings for long-term growth. Cash...

  • Page 214
    Alcoa Corporate Center 201 Isabella Street Pittsburgh, PA 15212-5858 Tel: 1.412.553.4545 Fax: 1.412.553.4498 www.alcoa.com Alcoa Inc. is incorporated in the Commonwealth of Pennsylvania