Alcoa 2014 Annual Report Download - page 93

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 2014, as in the
prior five years, management initiated actions to significantly improve Alcoa’s cost structure and liquidity, providing
the Company with the ability to operate effectively. 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 2015, this approach will continue with the ultimate goal of generating cash
from operations that exceeds capital expenditures by a minimum of $500.
Along with the foregoing actions, cash provided from operations and financing activities is expected to be adequate to
cover Alcoa’s operational and business needs over the next 12 months. For an analysis of long-term liquidity, see
Contractual Obligations and Off-Balance Sheet Arrangements below.
At December 31, 2014, cash and cash equivalents of Alcoa were $1,877, of which $800 was held outside the United
States. 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 United States. As such, management does not have a current
expectation of repatriating cash held in foreign jurisdictions.
Cash from Operations
Cash provided from operations in 2014 was $1,674 compared with $1,578 in 2013. The increase of $96, or 6%, was
due to higher operating results (net income plus net add-back for noncash transactions in earnings) and a positive
change in noncurrent assets of $134, mostly offset by a negative change associated with working capital of $620, a
negative change in noncurrent liabilities of $251, and higher pension contributions of $39.
The components of the negative change in working capital were as follows:
• an unfavorable change of $171 in receivables, primarily related to higher customer sales;
• a negative change of $380 in inventories, largely attributable to inventory build for the ramp-up of
automotive production at the Davenport, IA plant and customer requirements related to smelters that have
been curtailed or shut down in 2014;
• an unfavorable change of $16 in prepaid expenses and other current assets;
• a negative change of $70 in accounts payable, trade, principally the result of timing of payments;
• an unfavorable change of $33 in accrued expenses, mainly caused by $139 in higher payments for layoff and
other exit costs associated with restructuring actions and an $88 payment to the United States government
due to the resolution of a legal matter (see below), partially offset by the absence of $148 (€109) in payments
to the Italian government related to a November 2009 European Commission decision on electricity pricing
for certain energy-intensive industries; and
• a positive change of $50 in taxes, including income taxes, mostly driven by higher pretax income.
The higher pension contributions of $39 were principally driven by special termination benefits of $86 for employees
affected by the 2013 shutdown of capacity at a smelter in Canada.
On August 8, 2014, the Highway and Transportation Funding Act (HATFA) was signed into law by the United States
government. HATFA, in part, provides temporary relief for employers who sponsor defined benefit pension plans
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