Alcoa 2015 Annual Report Download - page 99

• 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
related to funding contributions under the Employee Retirement Income Security Act of 1974. Specifically, HATFA
modifies the interest rates that had been set in 2012 by the Moving Ahead for Progress in the 21st Century Act. This
relief had an immediate impact on the calculation of the then remaining funding contributions in 2014, resulting in a
reduction of $100 in minimum required pension funding.
In 2014, Alcoa World Alumina LLC, a majority-owned subsidiary of Alcoa, and Alcoa Inc. paid a combined $88 to the
United States government due to the resolution of a legal matter. Additionally, another $74 was paid in 2015 and will
be paid in each of the three subsequent years, 2016 (paid in January 2016) through 2018.
Financing Activities
Cash used for financing activities was $441 in 2015 compared with cash provided from financing activities of $2,250
in 2014 and cash used for financing activities of $679 in 2013.
The use of cash in 2015 was principally the result of $2,030 in payments on debt, mostly related to the repayment of
borrowings under certain revolving credit facilities (see below) and the repayment of convertible notes assumed in
conjunction with the acquisition of RTI (see below); $223 in dividends paid to shareholders; and $104 in net cash paid
to the noncontrolling interest in AWAC, Alumina Limited. These items were mostly offset by $1,901 in additions to
debt, virtually all of which was the result of borrowings under certain revolving credit facilities (see below).
The source of cash in 2014 was mostly driven by $2,878 in additions to debt, virtually all of which was the result of
$1,238 in net proceeds from the issuance of new senior debt securities used for the acquisition of Firth Rixson (see
below) and $1,640 in borrowings under certain revolving credit facilities (see below); net proceeds of $1,211 from the
issuance of mandatory convertible preferred stock related to the aforementioned acquisition; and $150 in proceeds
from employee exercises of 17.3 million stock options at a weighted average exercise price of $8.70 (not in millions).
These items were somewhat offset by $1,723 in payments on debt, mostly related to $1,640 for the repayment of
borrowings under certain revolving credit facilities (see below), and $161 in dividends paid to shareholders.
The use of cash in 2013 was primarily due to $2,317 in payments on debt, mainly related to $1,850 for the repayment
of borrowings under certain credit facilities (see below), a $422 early repayment of 6.00% 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 partially offset by $1,852 in additions to debt, virtually all of which was
the result of borrowings under certain credit facilities (see below).
In July 2015, through the acquisition of RTI (see Engineered Products and Solutions in Segment Information above),
Alcoa assumed the obligation to repay two tranches of convertible debt; one tranche was due and settled in cash on
December 1, 2015 (principal amount of $115) and the other tranche is due October 15, 2019 (principal amount of
$403), unless earlier converted or purchased by Alcoa at the holder’s option upon a fundamental change. Upon
conversion of the 2019 convertible notes in accordance with their terms, holders will receive, at Alcoa’s election, cash,
75