Alcoa 2015 Annual Report Download - page 215

Calculation of Financial Measures (unaudited)
(dollars in millions, except per metric ton amounts)
Reconciliation of Adjusted Income
Year ended
December 31,
2015 2014
Net (loss) income attributable to Alcoa $ (322) $ 268
Restructuring and other charges 836 703
Discrete tax items(1) 186 33
Other special items(2) 87 112
Net income attributable to Alcoa – as adjusted $ 787 $1,116
Net income attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is
meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and
other charges, discrete tax items, and other special items (collectively, “special items”). There can be no assurances that additional
special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to
consider both Net (loss) income attributable to Alcoa determined under GAAP as well as Net income attributable to Alcoa – as
adjusted.
(1) Discrete tax items include the following:
• for the year ended December 31, 2015, a charge for valuation allowances related to certain U.S. and Iceland deferred tax
assets ($190) and a net benefit for a number of small items ($4); and
• for the year ended December 31, 2014, a charge for the remeasurement of certain deferred tax assets of a subsidiary in
Brazil due to a tax rate change ($31), a charge for the remeasurement of certain deferred tax assets of a subsidiary in Spain
due to a tax rate change ($16), and a net benefit for a number of other items ($14).
(2) Other special items include the following:
• for the year ended December 31, 2015, costs associated with the planned separation of Alcoa and the acquisitions of RTI
International Metals and TITAL ($46), a gain on the sale of land in the United States and an equity investment in a China
rolling mill ($44), a write-down of inventory related to the permanent closure or temporary curtailment of various facilities
in Suriname, the United States, Brazil, and Australia ($43), an impairment of goodwill related to the soft alloy extrusions
business in Brazil ($25), and a net unfavorable change in certain mark-to-market energy derivative contracts ($17); and
• for the year ended December 31, 2014, a write-down of inventory related to the permanent closure of various facilities in
Italy, Australia, and the United States ($47), costs associated with the acquisition of Firth Rixson and the-then planned
acquisition of TITAL ($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 to a period of pot instability ($19), costs associated with preparation for and ratification of a new
labor agreement with the United Steelworkers ($11), a net unfavorable change in certain mark-to-market energy derivative
contracts ($6), and a loss on the write-down of an asset to fair value ($2).
Reconciliation of Free Cash Flow
Year ended
December 31,
2015 2014
Cash from operations $ 1,582 $ 1,674
Capital expenditures (1,180) (1,219)
Free cash flow $ 402 $ 455
Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because
management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that
these expenditures are considered necessary to maintain and expand Alcoa’s asset base and are expected to generate future cash
flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for
discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not
deducted from the measure.