SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/ x / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 /FEE REQUIRED/
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3610
ALUMINUM COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0317820
(State of incorporation) (I.R.S. Employer Identification No.)
425 Sixth Avenue, Alcoa Building, Pittsburgh, Pennsylvania 15219-1850
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number--area code 412
Investor Relations------------553-3042
Office of the Secretary------553-4707
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $1.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes / x / No .
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /
As of March 1, 1994 there were 88,808,611 shares of common stock,
par value $1.00, of the Registrant outstanding. The aggregate market
value of such shares, other than shares held by persons who may be
deemed affiliates of the Registrant, was approximately $6,609 million.
Documents incorporated by reference.
Parts I and II of this Form 10-K incorporate by reference certain
information from the registrant's 1993 Annual Report to Shareholders.
Part III of this Form 10-K incorporates by reference the registrant's
Proxy Statement dated March 4, 1994, except for the performance graph
and Compensation Committee Report.
ALUMINUM COMPANY OF AMERICA
Unless the context otherwise requires, Alcoa or the Company means
Aluminum Company of America and all subsidiaries consolidated for the
purposes of its financial statements.
PART I
Item 1. Business.
Alcoa is the world's largest integrated aluminum company, engaged
in the production and sale of primary aluminum and semi-fabricated and
finished aluminum products. It was formed in 1888 under the laws of
the Commonwealth of Pennsylvania. Alcoa produces and sells alumina and
alumina-based chemicals, a variety of other finished products, and
components and systems for a multitude of applications. These products
are used primarily by packaging, transportation (including aerospace,
automotive, rail and shipping), building and industrial customers
worldwide. Alcoa has operating and sales locations in over 20
countries.
Discussion of Alcoa's operations and properties by its three
business segments follows.
The Alumina and Chemicals segment includes the production and sale
of bauxite, alumina and alumina-based chemicals, and related
transportation services.
The Aluminum Processing segment includes the production and sale
of molten metal, ingot, and aluminum products that are flat-rolled,
engineered or finished. Also included are power, transportation and
other services.
The Non-Aluminum Products segment includes the production and sale
of electrical, ceramic, plastic, vinyl, and composite materials
products, manufacturing equipment, gold, magnesium and steel and
titanium forgings.
Most aluminum facilities located in the United States (U.S.) are
owned by the parent company. Alcoa of Australia Limited (AofA) and
Alcoa Aluminio S.A. (Aluminio) in Brazil are the two largest operating
subsidiaries.
Alcoa serves a variety of customers in a number of markets.
Consolidated revenues from these markets are:
<TABLE>
(dollars in millions)
Revenues by Market 1993 1992 1991
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Packaging $2,606 $2,803 $2,554
Alumina and Chemicals 1,437 1,422 1,496
Transportation 1,397 1,526 1,569
Building and Construction 1,299 1,190 1,167
Distributor and Other 1,274 1,215 1,356
Aluminum Ingot 1,042 1,336 1,742
------ ------ ------
Total Sales and Operating Revenues $9,055 $9,492 $9,884
====== ====== ======
</TABLE>
Segment and geographic area financial information are presented in
Note K to the Financial Statements.
Competition
The markets for most aluminum products are highly competitive.
Price, quality and service are the principal competitive factors in
most of these markets. Where aluminum products compete with other
materials, the diverse characteristics of aluminum are also a
significant factor, particularly its light weight and recyclability.
The competitive conditions are discussed later for each of the
Company's major product classes.
The Company is examining all aspects of its operations and
activities and is redesigning them where necessary to enhance
effectiveness and achieve cost reductions. Alcoa believes that its
competitive position is enhanced by its improved processes, extensive
facilities and willingness and ability to commit capital where
necessary to meet growth in important markets, and by the capability of
its employees. Research and development, and an increased emphasis on
internal technology transfer, has led to improved product quality,
enhanced production techniques, new product development and cost
control.
The dissolution of the Soviet Union and the lack of a mechanism to
successfully integrate its economy with market economies significantly
contributed to a global oversupply of aluminum in recent years. Prior
to 1991 former Soviet aluminum producers primarily served internal
markets. The internal market weakened substantially after the collapse
of the Soviet Union. To earn hard currency, former Soviet aluminum
producers began exporting significant quantities of aluminum. These
exports caused an imbalance in demand and supply and resulted in severe
downward pressure on aluminum prices.
In late 1993, discussions among the governments of six major
primary aluminum producing nations were initiated to address the global
aluminum supply situation. A multi-government accord was reached among
Australia, Canada, the European Union (EU), Norway, Russia and the U.S.
in late January 1994 under which the Russian industry will reduce its
annual aluminum exports by 500,000 metric tons per year for up to two
years, the EU will refrain from renewing import quotas on Russian ingot
when the quotas expire at the end of February 1994, and certain of the
participating governments will create a fund to assist in the
modernization of the Russian industry. The accord recognizes that
there is currently an excess of supply of between 1.5 and 2.0 million
metric tons of annual production.
In February 1994, Alcoa announced that it would reduce primary
aluminum production in its U.S. operations by an additional 100,000
metric tons per year. AofA separately announced a reduction of 25,000
metric tons at its Point Henry smelter in Geelong, Australia. Also,
the joint venture smelter in Portland, State of Victoria in which AofA
owns a 45% interest announced a reduction of 26,000 metric tons.
Suriname Aluminum Company (Suralco), a wholly-owned subsidiary,
announced a reduction of 3,000 metric tons that will continue until
world aluminum supply is in better balance with demand. These
reductions are in addition to Alcoa's indefinite curtailments during
1993 of 310,000 metric tons of U.S. smelting production.
Other Risk Factors
In addition to the risks inherent in the Company's business and
operations as described in this Form 10-K, the Company is exposed
generally to financial, market, political, business and economic risks
in connection with its worldwide operations.
Major Interests Outside the United States
Alcoa International Holdings Company (AIHC), a subsidiary, holds
most of the Company's investments in Australia, Hungary, India, Japan,
Mexico, the Netherlands and Norway, and several wholly owned
subsidiaries that act as sales representatives and distributors outside
the U.S. for products produced by various Alcoa operations. In 1988
AIHC issued $250 million of voting preferred stock which represents 25%
of its total voting stock. The preferred stock is held by unaffiliated
third parties.
AofA, owned 51% by AIHC, operates integrated aluminum facilities
in Australia, including mining, refining, smelting and fabricating
facilities. More than half of AofA's 1993 revenues were derived from
alumina, and the balance was derived principally from primary aluminum,
rigid container sheet (RCS) and gold.
Alcoa Brazil Holdings Company (ABHC), owned 79% by the Company,
holds Alcoa's interest in Aluminio, an integrated aluminum producer in
Brazil. Aluminio operates mining, refining, smelting and fabricating
facilities at various locations in Brazil. More than 20% of Aluminio's
1993 revenues were derived from primary aluminum, and exports accounted
for approximately one-third of its revenues. Aluminio is owned 75% by
ABHC; Alcoa's effective ownership in Aluminio is 59%.
Alumina and Chemicals Segment
Bauxite, aluminum's principal raw material, is refined into
alumina through a chemical process and is then smelted into primary
aluminum. Approximately half of the Company's alumina production in
1993 was sold to third parties. The Company sells alumina-based
chemicals to customers in a broad spectrum of industries for use in
refractories, ceramics, abrasives, chemicals processing and other
specialty applications.
Bauxite
Most of the bauxite mined and alumina produced by the Company,
except by AofA, is further processed into aluminum.
The Company has long-term contracts to purchase bauxite mined by a
partially-owned entity in the Republic of Guinea. The current
contracts expire in 1995. Alcoa is negotiating new agreements that are
expected to be completed in 1994. This bauxite services most of the
requirements of Alcoa's Point Comfort, Texas alumina refinery. Suralco
mines bauxite in Suriname under rights which expire after the year
2000. Suralco also holds a minority interest in a bauxite mining joint
venture managed by the majority owner, Billiton, an affiliate of the
Royal Dutch/Shell Group (Shell). Bauxite from both mining operations
serves Suralco's share of the refinery in Suriname referred to below.
AofA's bauxite mineral leases expire in 2003. Renewal options
allow AofA to extend the leases until 2045. The natural gas
requirements of the refineries are supplied primarily under a contract
with the State Energy Commission of Western Australia. The contract
expires in 2005 and imposes minimum purchase requirements.
Bauxite mining rights in Jamaica expire after the year 2020.
These rights are owned by the joint venture with the government of
Jamaica referred to in the next section.
Alumina
Alumina, a commodity, is sold by Alcoa principally from its
operations in Australia, Jamaica and Suriname. Most of the alumina
supply contracts are negotiated on the basis of agreed volumes over a
multi-year time period to assure a continuous supply of alumina to the
smelters which receive the alumina. Most alumina is sold under
contracts where prices are negotiated periodically or are based on
formulas related to aluminum ingot market prices or to production
costs. An imbalance of alumina demand and supply has resulted in
declining alumina prices.
AofA is the world's largest and one of the lowest cost producers
of alumina. Its three alumina plants, located in Kwinana, Pinjarra and
Wagerup in Western Australia, have in the aggregate an annual rated
capacity of approximately 6.1 million metric tons. Most of AofA's
alumina is sold under supply contracts to a number of customers
worldwide.
An Alcoa subsidiary owns 55% of the 1.6 million metric ton per
year alumina refinery in Paranam, Suriname and operates the plant.
Billiton holds the remaining 45%.
An Alcoa subsidiary and a corporation owned by the government of
Jamaica are equal participants in a joint venture, managed by the
subsidiary, that owns an alumina refinery in Clarendon Parish, Jamaica.
Annual alumina capacity at the Clarendon refinery will be increased
from 800,000 to approximately 1,000,000 metric tons in the next several
years.
Aluminio is the operator of the Alumar Consortium (Alumar), a cost-
sharing and production-sharing venture which owns a large refining and
smelting project near the northern coastal city of Sao Luis, Maranhao,
Brazil. The alumina refinery has an annual capacity of 1,000,000
metric tons, and is owned 54% by Aluminio, 36% by a Billiton affiliate
of Shell and 10% by an affiliate of Alcan Aluminium Limited (Alcan). A
majority of the alumina production is consumed at the smelter.
The sale of Shell's Billiton affiliates in Brazil and Suriname to
Gencor of South Africa is pending.
Aluminio holds a 13.2% interest in Mineracao Rio Do Norte S.A.
(MRN), a mining company which is jointly owned by affiliates of Alcan,
Billiton, Companhia Brasileira de Aluminio, Companhia Vale do Rio Doce,
Norsk Hydro and Reynolds Metals Company. Aluminio purchases bauxite
from MRN under a long-term supply contract.
At Pocos de Caldas, Minas Gerais, Brazil, Aluminio mines bauxite
and operates a refinery which produces alumina, primarily for its Pocos
de Caldas smelter.
Industrial Chemicals
Alcoa sells industrial chemicals to customers in a broad spectrum
of markets for use in refractories, ceramics, abrasive chemicals
processing and other specialty applications.
A variety of industrial chemicals, principally alumina-based
chemicals, are produced or processed at plants in Bauxite, Arkansas;
Ft. Meade, Florida; Dalton, Georgia; Lake Charles and Vidalia,
Louisiana; Nashville, Tennessee; Point Comfort, Texas; Kwinana,
Australia; Pocos de Caldas, Brazil; Ludwigshafen, Germany; Iwakuni and
Naoetsu, Japan; and Moerdijk and Rotterdam, in The Netherlands.
Aluminum fluoride, used in aluminum smelting, is produced from
fluorspar or fluosilicic acid at Point Comfort and Ft. Meade.
An expansion of facilities for drying alumina trihydrate at Point
Comfort was completed in 1993. Alumina trihydrate is used extensively
in petrochemical processing, water treatment and a variety of other
applications.
The Company and AofA are cooperating to market alumina-based and
other chemicals in Asia and other regional chemical markets. The
Company purchased a minority equity interest in Australian Fused
Materials, Ltd. (AFM) in 1993. AFM manufactures and markets fused
alumina as well as other chemicals for Australian, Asian and other
regional markets. Fused alumina is used in the manufacture of
refractories.
In 1993 the Company and The Associated Cement Companies Ltd. of
Bombay, India formed a joint venture to import, process and market
tabular alumina and alumina-based chemicals for the refractory and
ceramic industries in India. The venture plans to build a processing
plant in Falta, West Bengal which is scheduled for completion in 1994.
Aluminum Processing Segment
Revenues and shipments for the principal classes of products in
the aluminum processing segment are as follows:
<TABLE>
<CAPTION>
(dollars in millions)
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Revenues:
Aluminum ingot $1,042 $1,336 $1,742
Flat-rolled products 2,974 3,189 3,107
Engineered products 1,528 1,527 1,612
Other aluminum products 430 465 500
------ ------ ------
Total $5,974 $6,517 $6,961
====== ====== ======
(metric tons in thousands)
Shipments:
Aluminum ingot 841 1,023 1,179
Flat-rolled products 1,271 1,323 1,172
Engineered products 379 353 353
Other aluminum products 89 98 132
----- ----- -----
Total 2,580 2,797 2,836
===== ===== =====
</TABLE>
Aluminum Ingot
Primary aluminum ingot is a traded commodity and prices are
established by market forces of demand and supply, including available
levels of inventories. The Company's sales of primary aluminum to
third parties are generally made at prices determined by reference to
published trading prices adjusted for availability of the product.
Alcoa has a metal trading operation responsible for hedging
programs that are designed to minimize the effects of price volatility
on the Company and its customers for primary aluminum in the
international commodity markets as well as price exposure to aluminum
scrap, including used beverage cans.
The Company smelts primary aluminum from alumina obtained
principally from the alumina refineries discussed earlier. Smelters
are located at Warrick, Indiana; Massena, New York; Badin, North
Carolina; Alcoa, Tennessee; Rockdale, Texas; Wenatchee, Washington;
Point Henry and Portland, Australia; Pocos de Caldas and Sao Luis,
Brazil; and Paranam, Suriname. Alcoa's consolidated annual rated
primary aluminum capacity at these smelters is approximately 1.9
million metric tons. When operating at capacity, the Company's
smelters more than satisfy the primary aluminum requirements of the
Company's fabricating operations. Purchases of aluminum scrap
(principally used beverage cans), supplemented by purchases of ingot
when necessary, satisfy any additional aluminum requirements. Most of
the Company's primary aluminum production in 1993 was delivered to
other Alcoa operations for alloying and/or further fabricating.
The joint venture smelter at Portland, Victoria, with an annual
rated capacity of 320,000 metric tons, is owned 45% by AofA, 25% by the
State of Victoria, 10% by the First National Resource Trust, 10% by the
China International Trust and Investment Corporation, and 10% by
Marubeni Aluminium Australia Pty., Ltd. (Portland Smelter
Participants). A subsidiary of AofA operates the smelter. Each
participant is required to contribute to the cost of operations and
construction in proportion to its interests in the venture and is
entitled to its proportionate share of the output. Alumina is supplied
by AofA. The Portland site can accommodate additional smelting
capacity.
The Alumar Consortium aluminum smelter at Sao Luis, Brazil has an
annual rated capacity of 328,000 metric tons. Aluminio receives about
54% of the primary aluminum production.
During 1993 and early 1994, Alcoa indefinitely idled approximately
410,000 metric tons of annual rated primary aluminum capacity in the
U.S. Smelters located in Indiana, North Carolina, Tennessee, Texas and
Washington were affected. AofA separately announced a 25,000 metric
tons capacity reduction at its Point Henry smelter. The joint venture
smelter at Portland, in which AofA owns a 45% interest, announced a
26,000 metric tons production reduction. Suralco reduced annual
primary aluminum production by 3,000 metric tons. See "Competition"
above.
The Company utilizes electric power, natural gas and other forms
of energy in its refining, smelting and processing operations.
Aluminum is produced from alumina by an electrolytic process requiring
large amounts of electric power. Electric power accounts over time for
approximately 30% of the Company's primary aluminum costs. The Company
generates approximately 40% of the power used at its smelters
worldwide. Most firm power purchase contracts tie prices to aluminum
prices or to prices based on various indices.
Over 40% of the power for the Point Henry smelter is generated by
AofA using its extensive brown coal deposits. The balance of the
power, and power for the Portland, Victoria smelter, is available under
contracts with the State Electricity Commission of Victoria. Power
prices are tied by formula to aluminum prices. The State Government of
Victoria has announced its desire to renegotiate the power contract for
the Portland smelter. AofA and the Portland Smelter Participants have
informed the State that they are willing to discuss ways to improve the
operational aspects of the power contract.
Electric power for Alumar's Sao Luis smelter is purchased from the
government-controlled power grid in Brazil at a small discount from the
applicable industrial tariff price and is protected by a cap based on
the London Metal Exchange price of aluminum. Aluminio's Pocos de
Caldas smelter purchases firm and interruptible power from the
government-controlled electric utility. Aluminio has prepaid all of
the Pocos de Caldas facility's electricity requirements through
January 1, 1996.
Over 50% of the power requirements for Alcoa's U.S. smelters is
generated by the Company and the remainder is purchased from others
under long-term contracts. More than 10% of the self-generated power
results from the Company's entitlement to a fixed percentage of the
output from a hydroelectric power facility located in the northwestern
United States.
The Company generates substantially all of the power used at its
Warrick smelter using coal reserves near the smelter that should
satisfy requirements through the late 1990s. Lignite is used to
generate power for the Rockdale, Texas smelter. Company-owned
generating units supply about half of the total requirements and the
balance is purchased from a dedicated power plant under a contract
which expires not earlier than 2011. See "Environmental" below.
In connection with the electric power generated for the aluminum
smelters at Alcoa, Tennessee and Badin, North Carolina, two
subsidiaries of the Company own and operate hydroelectric facilities
subject to Federal Energy Regulatory Commission licenses effective
until 2005 and 2008, respectively. For the Tennessee plant, the
Company also purchases firm and interruptible power from the Tennessee
Valley Authority under a contract which expires in 2000. For the Badin
plant, the Company purchases additional power under an evergreen
contract providing for specified periods of notice before termination
by either party.
The purchased power contract for the Massena smelter expires not
earlier than 2003 but may be terminated by the Company with one year's
notice.
Alcoa has two principal power contracts for its Wenatchee smelter.
The contract from the power output entitlement referred to above
expires in 2011. The contract with Bonneville Power Administration
(BPA) expires in 2001 and includes 25% interruptible power. Power
restrictions may occur when precipitation is below normal. A BPA power
restriction resulted in the indefinite closure of one potline at
Wenatchee in early 1993. Alcoa chose not to restart the potline after
the restriction was lifted due to low ingot prices. Beginning in 1995,
a portion of the power supplied under the entitlement contract will be
replaced by power purchased from the local public utility district.
Additional power also may be purchased from the district.
Although not included in the revenues by market or revenues and
shipments tables above or in the rated primary aluminum capacity figure
above, the Company reports equity earnings from its interest in two
primary aluminum smelters in Norway. Elkem Aluminium ANS, 50% owned by
Norsk Alcoa A/S, a subsidiary, is a partnership that owns and operates
the smelters.
Flat-Rolled Products
The Company's flat-rolled products serve three principal markets:
light gauge sheet products serve principally the packaging market, and
sheet and plate products serve principally the transportation and
building and construction markets.
Alcoa employs its own sales force for most products sold in the
packaging market. Most of the packaging revenues in 1993 were derived
from rigid container sheet (RCS) sold to can companies to make beverage
and food cans, and can ends. The number of RCS customers in the U.S.
is relatively small, in part because the number of can companies has
been shrinking. Use of aluminum beverage cans continues to increase,
particularly in Asia, Europe and South America where per capita
consumption remains relatively low. Aluminum foil and non-RCS
packaging sheet are sold principally in the packaging markets.
Aluminum's diverse characteristics, particularly its light weight
and recyclability, are significant factors in packaging markets where
alternatives such as steel, plastic and glass are competitive
materials. Leadership in the packaging markets is maintained by
improving processes and facilities, as well as by providing research
and technical support to customers.
Light gauge aluminum sheet and foil products are manufactured at
several locations. RCS is produced at Warrick, Indiana; Alcoa,
Tennessee; Point Henry, Australia; Moka, Japan (a joint venture
facility); and Swansea, Wales. Light gauge sheet and foil are produced
at Lebanon, Pennsylvania and foil also is produced at Davenport, Iowa.
Light gauge sheet and foil products are manufactured by Aluminio at
Recife, Brazil. Can recycling or remelt facilities are located at or
near the Indiana, Tennessee and Wales plants.
In 1993 the Company recycled approximately 268,000 metric tons of
used aluminum beverage cans, which are an important source of metal for
RCS. The cost of used beverage cans declined in 1992 and 1993 as
primary aluminum prices dropped. Recycling aluminum conserves raw
materials, reduces litter and saves energy - about 95% of the energy
needed to produce aluminum from bauxite. Also, recycling capacity
costs much less than new primary aluminum capacity.
The Company has a joint venture with Kobe Steel, Ltd. (Kobe) in
Japan. The venture, KSL Alcoa Aluminum Company, Ltd. (KAAL), completed
construction of a cold rolling mill at Moka, Japan and began commercial
operations in 1993. It manufactures and sells RCS in Japan and other
Asian countries. AIHC holds a 50% interest in KAAL. Alcoa supplies
aluminum to the joint venture.
Sheet and plate products principally serve aerospace, automotive,
lithographic, railroad, ship building, building and construction,
defense and other industrial and consumer markets. The Company
maintains its own sales forces for most of these products.
Differentiation of material properties, price and service are
significant competitive factors. Aluminum's diverse characteristics
are important in these markets, where competitive materials include
steel and plastics for automotive and building applications; magnesium,
titanium, composites and plastics for aerospace and defense
applications; and wood and vinyl in building and construction
applications.
The Company's largest sheet and plate plant is located at
Davenport, Iowa. It produces products requiring special alloying, heat
treating and other processing, some of which are unique or proprietary.
A distribution center was opened in Paal, Belgium during late 1993 to
serve European sheet and plate markets.
Alcoa continues to develop alloys and products for aerospace
applications, such as new aluminum alloys for application in the Boeing
777 aircraft. A research and development effort also has resulted in
the commercial development of a series of aluminum and aluminum-lithium
alloys which offer significant weight savings over traditional
materials for aerospace and defense applications.
The Company participates in a joint venture with an affiliate of
Akzo N.V., a chemical company based in The Netherlands, to perform
research and development and to produce fiber-metal laminates made of
aluminum and resins reinforced with advanced fibers for the aircraft
industry.
The Company and Kobe also have established two additional joint
venture companies, one in the United States and one in Japan, to serve
the transportation industry. The initial emphasis of the new companies
is on expanding the use of aluminum sheet products in passenger cars
and light trucks.
In late 1992 AIHC acquired a 50.1% interest in Kofem Kft., a
subsidiary of the government-owned Hungarian Aluminium Industrial
Corporation (Hungalu). The new venture, Alcoa-Kofem Kft. (A-K),
produces common alloy flat and coiled sheet, soft alloy extrusions and
end products for the building, construction, food and agricultural
markets in central and western Europe. A-K will invest up to $146
million, including part of AIHC's initial investment, over the next
five years for product quality and environmental and safety upgrades at
the A-K facility. Alcoa is providing technological and operational
expertise to A-K.
Engineered Products
Engineered products principally include extrusion and tube, wire,
rod and bar, forgings, aluminum building products, aluminum memory disk
blanks and other products which are sold in a wide range of markets,
but principally in the transportation market.
Aluminum extrusions and tube are produced principally at six U.S.
locations. The Chandler, Arizona plant produces hard alloy extrusions
and tube; the Vernon, California plant produces hard alloy extrusions
and tube; the Lafayette, Indiana plant produces a broad range of common
and hard alloy extrusions and tube; the Baltimore, Maryland plant
produces large press extrusions; and plants at Tifton, Georgia and
Delhi, Louisiana produce common alloy extrusions.
In late 1993 Alcoa and VAW Aluminium AG (VAW) formed a joint
venture to produce and market high strength aluminum extrusions, tube
and rod to principally serve European transportation and defense
markets. An Alcoa subsidiary owns 60% and VAW owns 40% of the venture
which is called Alcoa VAW Hannover Presswerk GmbH & Co. KG and is
located in Hannover, Germany.
Alcoa's Delhi facility will supply Toyota Motor Company (Toyota)
with extruded aluminum front and rear bumpers for the 1995 Toyota
Avalon to be assembled at Georgetown, Kentucky. The bumpers were
jointly designed by Alcoa and Toyota.
A 50-50 limited partnership formed with Kobe in 1991 to
manufacture and market aluminum tube for photoreceptors for North
American markets will cease manufacturing operations in early 1994 and
is expected to be dissolved later in the year.
Alcoa Construction Products produces and markets residential
aluminum siding and other aluminum building products. These products
are sold principally to distributors and jobbers.
Aluminum forgings are produced at Cleveland, Ohio; Vernon,
California; and Bologne, France. Forgings are sold principally in the
aerospace, defense and transportation markets. Forged aluminum wheels
for truck, bus and automotive markets are produced at Cleveland, Ohio.
Mechanical-grade redraw rod, wire and cold-finished rod and bar
are produced at Massena and are sold to distributors and customers for
a variety of applications in the building and transportation markets.
Aluminum extruded products are manufactured by a subsidiary of
Aluminio in Argentina and at several Aluminio locations in Brazil.
Other Aluminum Products
Alcoa Automotive Structures GmbH was formed in 1991 to produce
aluminum components and sub-assemblies for aluminum automotive
spaceframes. Aluminum spaceframes represent a significant departure
from the traditional method and material used to manufacture primary
auto body structures. In 1993 Alcoa completed construction and began
operating a unique multi-million dollar plant in Soest, Germany to
supply aluminum spaceframe products to its first customer, Audi AG. In
1994 Audi will market its new A8 luxury sedan, the first automobile to
utilize a complete aluminum spaceframe body structure. The A8 is a
result of a 10 year development effort between Alcoa and Audi and is
constructed with spaceframes, components and sub-assemblies produced by
Alcoa. Alcoa continues to cooperate with several automobile
manufacturers in Europe, North America and Japan to develop new
aluminum products for automotive market applications.
Alcoa produces aluminum closures for bottles at Richmond, Indiana;
Worms, Germany; Tokyo, Japan; and near Barcelona, Spain.
The Company sells aluminum scrap and produces and markets aluminum
paste, particles, flakes and atomized powder.
Subsidiaries of Alcoa Nederland Holding B.V. (ANH) produce
extrusions, common alloy sheet products and certain finished products
such as automated greenhouse systems, as well as fabricated products
such as aluminum windows and aluminum ceiling systems. In early 1993
ANH acquired a 100% interest in Compri-Aluminium B.V. (Compri). Compri
manufactures, sells and installs aluminum and steel building products
in Belgium and The Netherlands.
Alutodo, S.A. de C.V., a subsidiary, buys and sells aluminum and
aluminum products through distribution centers at several locations in
Mexico.
Non-Aluminum Products Segment
Alcoa produces plastic closures for bottles at Crawfordsville,
Indiana; Olive Branch, Mississippi; Buenos Aires, Argentina; Sao Paulo,
Brazil; Santiago, Chile; Bogota, Colombia; Tellig, Germany; Tokyo,
Japan; Saltillo, Mexico; and near Barcelona, Spain. Alcoa participates
in a joint venture with Al Zayani Investments W.L.L. of Bahrain, known
as Gulf Closures W.L.L., to manufacture plastic beverage container
closures for markets in the Middle East. Production at Manama, Bahrain
began in 1993. Alcoa's worldwide closure businesses are coordinated
from Indianapolis, Indiana. The use of plastic closures has surpassed
that of aluminum closures for beverage containers in the U.S. and is
gaining momentum in other countries.
The Company manufactures packaging equipment and machinery,
principally for producing and decorating metal cans and can ends. In
addition, the Company manufactures a line of equipment for applying
plastic or aluminum closures to beverage containers. Alcoa also owns a
minority interest in a company which sells food packaging machinery
that fills and seals metal and multi-layered polymer and paper
containers.
Alcoa Fujikura Ltd. (AFL), owned 51% by Alcoa and 49% by Fujikura
Ltd. of Japan, produces and markets automotive electrical distribution
systems, as well as fiber optic products and systems for selected
electric utilities and telecommunications markets. AFL continues to be
a Q-1 supplier to Ford Motor Company and is now supplying electrical
distribution systems to Subaru (in the U.S.), Auto Alliance, Inc.
(Mazda-Ford joint venture) and PACCAR Inc. In 1993 AFL acquired the
remaining interest in the Stribel group of companies, which are
European manufacturers of electromechanical and electronic components
for the European automotive market.
Alcoa Construction Product's principal product for building and
construction markets is vinyl siding. Other non-aluminum building
products include vinyl windows, window lineal systems, shutters and
building accessories and wood windows and patio doors.
Norcold and Stolle Products Division manufactures recreational
vehicle refrigerators, and auto parts and appliance control panels.
A subsidiary, Alcoa Electronic Packaging, Inc. (AEP), produces
ceramic packages used to hold integrated circuits for electronic
equipment. During 1993 AEP increased shipments of several parts to a
key customer. AEP currently is working with several potential
customers to broaden its market base in 1994. Production capacity is
being increased to respond to these opportunities.
Alcoa Composites, Inc., a subsidiary, principally designs and
manufactures composite parts and structures for aerospace and
transportation applications.
Facilities to recover gold from AofA's mining leases in Western
Australia were constructed, and mined gold was first poured, in 1988.
Production has been declining since 1990, and the gold deposit is
expected to be depleted by 1997.
Magnesium is produced by the Company in Addy, Washington, from
minerals in the area owned by the Company. Alcoa uses magnesium for
certain aluminum alloys. Recycling is also a source of aluminum-
magnesium alloys. Due to world magnesium market conditions the Company
reduced magnesium production during 1993. Third party sales of
magnesium are continuing.
Titanium and steel forgings are produced at Cleveland, Ohio and
Bologne, France and are sold principally in aerospace markets.
Aluminio owns and operates a chain of retail construction
materials outlets in Brazil.
Alcoa's wholly owned subsidiaries own and develop luxury
residential/resort communities in South Carolina and Florida; the
remaining properties are being actively marketed.
Research and Development
The Company, a technological leader in the aluminum industry,
engages in research and development (R&D) programs which include basic
and applied research and process and product development. The research
activities are principally conducted at Alcoa Technical Center (ATC),
near Pittsburgh, Pennsylvania. Several subsidiaries and divisions
conduct their own R&D programs as do many plants. Expenditures for
such activities were $130 million in 1993, $212 million in 1992 and
$252 million in 1991. Most of the 1993 decrease was related to Alcoa
Electronic Packaging which moved to production status in 1993, and to
program reductions at ATC. Substantially all R&D activities are funded
by the Company and its various units. The Company's strategy has been
to focus its R&D expenditures on specific programs related to existing
businesses, and this will lead to lower R&D expenditures in 1994.
Environmental
Alcoa's Environmental Policy confirms its commitment to operate
worldwide in a manner which protects the environment and the health of
employees and of the citizens of the communities where the Company has
an impact.
The Company engages in a continuing effort to develop and
implement modern technology and policies to meet environmental
objectives. Approximately $76 million was spent during 1993 for new or
expanded facilities for environmental control. Capital expenditures
for such facilities will approximate $56 million in 1994. The costs of
operating these facilities are not included in these figures.
Remediation expenses being incurred by the Company at many of its
facilities and at certain sites involved in proceedings under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA or Superfund) and other sites are increasing. See
Environmental Matters on page 17 in the Annual Report to Shareholders,
and Item 3 - "Legal Proceedings" below.
Alcoa's operations, like those of others in manufacturing
industries, have in recent years become subject to increasingly
stringent legislation and regulations to protect human health and the
environment. This trend is expected to continue. Compliance with new
laws, regulations or policies could require substantial expenditures by
the Company in addition to those referenced above.
Environmental requirements also may affect the marketing of
certain products manufactured by the Company. For example, legislation
imposing deposits on beverage containers including aluminum cans has
been passed in a number of states and is being considered elsewhere.
Federal and state regulations, such as U.S. Food and Drug
Administration regulations and California Proposition 65 affect the
manufacture of materials to be used in food and beverage containers.
The Coalition of Northeastern Governors (CONEG) model law (as enacted
by several states) governing the use or presence of certain materials
may impact the manufacture of certain packages or packaging components
for foods and beverages. A proposed directive similar to the CONEG
legislation is under consideration by the Commission of the European
Union.
Environmental laws and regulations are important both to the
Company and to the communities where it operates. The Company supports
the use of sound scientific research and realistic risk criteria to
analyze environmental and human health effects and to develop effective
laws and regulations in all countries where it operates. Alcoa
recognizes that recycling and waste reduction offer real solutions to
the solid waste problem and it continues vigorously to pursue efforts
in these areas.
Employees
During 1993 the Company employed an average of approximately
63,400 people worldwide. New three-year labor agreements covering the
majority of the Company's U.S. production workers were ratified in mid-
1993. Major provisions included: an increase in base wages effective
in 1993 and an additional base wage increase in 1995; a managed health
care program; a pay for performance plan that aligns the variable pay
component with the location's goals and overall corporate financial
performance; and changes in the factor used to calculate pension
benefits. Also, agreement was reached on principles to guide joint
labor-management development of a location-specific, business-based
outsourcing process.
Wages for employees in Australia are covered by agreements which
are negotiated under guidelines established by a national industrial
relations authority.
Wages for both hourly and salaried employees in Brazil are
negotiated annually in compliance with government guidelines. Each
Aluminio location, however, has established a separate compensation
package for its employees which includes real wage increases and
certain employee welfare plans.
Item 2. Properties.
See "Item 1 - Business." Alcoa believes that its facilities,
substantially all of which are owned, are suitable and adequate for its
operations.
Item 3. Legal Proceedings.
In the ordinary course of its business, Alcoa is involved in a
number of lawsuits and claims, both actual and potential, including
some which it has asserted against others. While the amounts claimed
may be substantial, the ultimate liability cannot now be determined
because of the considerable uncertainties that exist. It is possible
that results of operations or liquidity in a particular period could be
materially affected by certain contingencies. Management believes,
however, that the disposition of matters that are pending or asserted
will not have a materially adverse effect on the financial position of
the Company
Environmental Matters
Alcoa is involved in proceedings under the Superfund or analogous
state provisions regarding the usage, disposal, storage or treatment of
hazardous substances at a number of sites in the U.S. The Company has
committed to participate, or is engaged in negotiations with Federal or
state authorities relative to its alleged liability for participation,
in clean-up efforts at several such sites.
In response to a unilateral order issued under Section 106 of
CERCLA by the U.S. Environmental Protection Agency (EPA) Region II
regarding releases of hazardous substances, including polychlorinated
biphenyls (PCBs) into the Grasse River near its Massena, New York
facility, Alcoa proposed during 1993 to EPA that it engage in certain
remedial activities in the Grasse River for the removal and appropriate
disposal of certain river sediments. EPA has accepted the proposal in
principle; however, it is deciding certain critical details, such as
how removed sediments will be managed.
Representatives of various Federal and state agencies and a Native
American tribe, acting in their capacities as trustees for natural
resources, have asserted that Alcoa may be liable for loss or damage to
such resources under Federal and state law based on Alcoa's operations
at its Massena, New York facility. While formal proceedings have not
been instituted, the Company is actively investigating these claims.
In June 1993 EPA published notice of its intent to include
portions of Lavaca Bay and Alcoa's Point Comfort Operations on the
Superfund National Priorities List (NPL). Alcoa provided comments to
that proposal in August 1993 as part of the administrative record. In
December 1993, Alcoa and EPA Region VI agreed to commence negotiations
for an administrative consent order under which Alcoa would implement a
comprehensive remedial investigation and feasibility study for the
proposed NPL site. These negotiations, which include Alcoa, EPA, the
State of Texas and certain Federal and state natural resources
trustees, are now ongoing. These Federal and state natural resources
trustees have served Alcoa with notice of their intent to file suit to
recover damages for alleged loss, injury or destruction of natural
resources in Lavaca Bay, adjacent to the Point Comfort Operations, and
to recover the costs for performing the assessment of such alleged
damages. Alcoa and representatives of the trustees have entered into a
series of agreements that provide for implementation of various studies
of Lavaca Bay and its resources. These same parties have entered into
several tolling agreements that suspend any applicable statute of
limitations period.
The Stolle Corporation (Stolle), a subsidiary, disclosed to the
Ohio Environmental Protection Agency that it had previously managed
hazardous waste at its Sidney, Ohio diversified products plant in a
manner which may not meet regulatory requirements then applicable. In
December 1993, the Ohio Attorney General contacted Stolle to discuss
potential resolution of alleged violations. Discussions are expected
to begin in late March or early April 1994.
In September 1993 EPA Region V issued an administrative complaint
to Alcoa's Cleveland, Ohio Works alleging improper use and disposal of
PCBs and failure to obtain an EPA identification number for PCB
disposal activities. The complaint cites the applicable maximum
statutory penalties for these alleged violations and assesses a fine of
$197,000. Settlement negotiations are ongoing.
Other Matters
Alcoa was named as one of several defendants in a number of
lawsuits filed as a result of the Sioux City, Iowa DC-10 plane crash in
1989. The plaintiffs claim that Alcoa fabricated the titanium fan disk
involved in the alleged engine failure of the plane from a titanium
forging supplied by a third party. Twenty-two of the 117 cases are
still pending; the other 95 have been settled without participation by
Alcoa. While Alcoa is covered by the releases given by the plaintiffs
in the settled cases, Alcoa remains subject to claims for contribution
from the defendants who have actually paid the settlements. In some of
the cases, punitive damages of $5 million are sought from each
defendant.
Alcoa and a subsidiary were notified in September 1991 by the
Department of Justice (DOJ) of its investigation regarding criminal
violations of antitrust laws in the small press, hard alloy extrusion
industry. On March 5, 1993, Alcoa and the subsidiary received an
antitrust grand jury Investigation subpoena requiring production of
documents relating to pricing of small press, hard alloy extrusions.
Alcoa and its subsidiary have provided the documentation requested.
Employees of Alcoa and the subsidiary have been called to testify
before the grand jury.
In February 1992 Alcoa received a Civil Investigative Demand (CID)
from the DOJ to determine whether there might be a violation of the
Sherman Act or the Clayton Act as a result of Alcoa's acquisition from
Halethorpe Extrusions, Inc. of assets relating to the production of
extruded aluminum products. The DOJ also advised Alcoa that it
intended to issue a CID to Pimalco, Inc., a wholly owned subsidiary, in
connection with the same acquisition. The investigation was concluded
in early 1993, and no charges were brought against the Company.
Aura Systems, Inc. has filed suit against Alcoa and Alcoa
Packaging Machinery, Inc. and various other defendants alleging
violations of the federal antitrust laws. The suit, which seeks an
unspecified amount of damages, was transferred to the U.S. District
Court for the District of Colorado in the third quarter. The suit was
dismissed in December 1993.
In October 1992 Alcoa Composites, Inc. was served with a subpoena
requiring the production of certain documentary material to the U.S.
government in connection with an investigation to determine whether
criminal violations of federal defense procurement laws or regulations
occurred with respect to the subsidiary's subcontract to manufacture
helicopter blades for the U.S. Army. The subsidiary is responding to
the subpoena. The Company does not have sufficient information at this
time to ascertain whether any violations may have taken place or
whether any grounds exist for naming the subsidiary in any proceeding
which may be initiated as a result of the investigation. The Company
continues to provide information to the U.S. government.
In December 1992 Alcoa initiated a lawsuit against nearly one-
hundred different insurance carriers that provided Alcoa with insurance
coverage for various periods between the years 1956 and 1985. The suit
asks the court to declare that these insurance companies are required,
under the terms of the policies issued, to reimburse monies spent by
Alcoa in the past or future for environmental liabilities that have
arisen in recent years.
On December 21, 1992, Alcoa was named as a defendant in KML
Leasing v. Rockwell Standard Corporation filed in the U.S. District
Court for the District of Oklahoma on behalf of 7,317 Aero Commander,
Rockwell Commander and Gulfstream Commander aircraft owners. The
complaint alleges defects in certain wingspars manufactured by Alcoa.
Alcoa's aircraft builders products liability insurance carrier has
assumed defense of the matter. In May 1993, Alcoa received a
reservation of rights letter from its insurance carrier which purports
to reserve its rights with respect to a majority of the types of
damages claimed. Alcoa is challenging the reservation.
In December 1993 Alcoa was served with a subpoena from the
Antitrust Division of the DOJ to produce documents to a Federal grand
jury sitting in Philadelphia. The grand jury is investigating pricing
practices in the used beverage container and aluminum scrap markets.
The Company is cooperating with the DOJ.
Alcoa and Alcoa Specialty Chemicals, Inc., a subsidiary, are
defendants in a case filed by Aluminum Chemicals, Inc., et al. in the
District Court of Harris County, Texas. In an Eighth Amended Petition
filed in December 1993, the plaintiffs allege claims for breach of
fiduciary duty, fraud, interference with contractual and business
relations, breach of contract, conversion, misappropriation of trade
secrets, deceptive trade practices and civil conspiracy in connection
with a former partnership, Alcoa-Coastal Chemicals. The plaintiffs are
seeking lost profits and other compensatory damages in excess of $100
million, and punitive damages. The court already has granted several
motions, including motions for partial summary judgment in favor of
defendants. Additional motions are pending or contemplated. Alcoa and
its subsidiary intend to file a counterclaim seeking damages. The case
is currently scheduled for trial in July 1994.
In late 1993, Alcoa Fujikura, Ltd. (AFL), a subsidiary, was
notified by the U.S. Customs Service (USCS) that it is the subject of
an investigation regarding the proper marking of country of origin on
wire harnesses produced in Mexico from 1986 to 1989. The USCS
investigation focuses on AFL's administration of an approved waiver
process pertaining to parts for production as well as importation of
wire harnesses for sale as repair parts through 1993. AFL is
cooperating with USCS.
In December 1993, the European Union Competition Office and German
Cartel Office began an investigation of the competitive practices of
Alcoa Chemie, GmbH., a subsidiary, in the tabular alumina business in
Germany. The subsidiary is cooperating with the investigation.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of 1993.
Item 4A. Executive Officers of the Registrant.
The names, ages, positions and areas of responsibility of the
executive officers of the Registrant as of March 1, 1994 are listed
below.
Paul H. O'Neill, 58, Chairman of the Board and Chief Executive
Officer. Mr. O'Neill became a director of Alcoa in 1986 and was
elected Chairman of the Board and Chief Executive Officer effective in
June 1987. Before joining Alcoa, Mr. O'Neill had been an officer since
1977 and President and a director since 1985 of International Paper
Company.
Alain J. P. Belda, 50, Executive Vice President (effective March
15, 1994). Mr. Belda was President of Alcoa Aluminio S.A. in Brazil
from 1979 to March 1994. He was elected Vice President of Alcoa in
1982 and, in 1989, was given responsibility for all of Latin America
(other than Suriname). In August 1991 he was named President - Latin
America for the Company. In his new assignment Mr. Belda will work
with 10 Alcoa business unit presidents.
George E. Bergeron, 52, Vice President and President - Rigid
Packaging Division. Mr. Bergeron was named President - Alcoa Closure
Systems International in 1982 and was elected Vice President and
General Manager - Rigid Packaging Division in July 1990. He assumed
his current responsibilities in August 1991.
Peter R. Bridenbaugh, 53, Executive Vice President - Science,
Technology, Engineering, Environment, Safety and Health. Dr.
Bridenbaugh became Director, Alcoa Laboratories in 1983. He was
elected Vice President Research and Development in 1984. He assumed
his current responsibilities in 1991.
John L. Diederich, 57, Executive Vice President - Chairman's
Counsel. Mr. Diederich was elected Managing Director of Alcoa of
Australia Limited and Vice President of Alcoa in 1982. He was named
Vice President - Metals and Chemicals in July 1986 and was elected a
Group Vice President in October 1986. He assumed his current
responsibilities in 1991.
Richard L. Fischer, 57, Executive Vice President - Chairman's
Counsel. Mr. Fischer was elected Vice President and General Counsel in
1983 and became a Senior Vice President in 1984. From 1985 through
1989 he also had responsibility for Government and Public Affairs. He
was given additional responsibilities in 1986 for Corporate Development
and in 1989 for the Company's expansion activities in Europe and Asia.
He assumed his current responsibilities in 1991.
Ronald R. Hoffman, 59, Executive Vice President - Human Resources,
Quality, and Communications. Mr. Hoffman, an officer since 1975, was
named Vice President - Flat Rolled Products in 1979. He was elected a
Group Vice President in 1984 and was given responsibility for the
Company's Packaging Systems group in 1986. He assumed his current
responsibilities in 1991.
R. Lee Holz, 58, Vice President and General Counsel. Mr. Holz, an
attorney with the Company since 1960, was named Assistant General
Counsel in 1974 and Senior Assistant General Counsel in 1983. He was
elected to his current position in 1991.
Jan H. M. Hommen, 50, Executive Vice President and Chief Financial
Officer. Mr. Hommen was Financial Director of Alcoa Nederland until
1979 when he was elected Assistant Treasurer - Corporate Finance of
Alcoa. He was elected Treasurer in August 1986 and Vice President and
Treasurer in December 1986. He was elected to his current position in
1991.
Robert F. Slagle, 53, Vice President and Managing Director - Alcoa
of Australia Limited. Mr. Slagle was elected Treasurer in 1982 and
Vice President in 1984. In 1986, he was named Vice President -
Industrial Chemicals and, in 1987, was named Vice President -
Industrial Chemicals and U.S. Alumina Operations. Mr. Slagle was named
Vice President - Raw Materials, Alumina and Industrial Chemicals in
1989 and Managing Director - Alcoa of Australia Limited in 1991.
G. Keith Turnbull, 58, Executive Vice President - Strategic
Analysis/Planning and Information. Dr. Turnbull was appointed
Assistant Director of Alcoa Laboratories in 1980. He was named
Director - Technology Planning in 1982 and Vice President - Technology
Planning in 1986. In 1991 he was elected to his current position.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Dividend per share data, high and low prices per share and the
principal exchanges on which the Company's common stock is traded are
set forth on page 34 of the 1993 Annual Report to Shareholders (the
Annual Report) and are incorporated herein by reference.
At February 7, 1994 (the record date for the Company's 1994 annual
shareholders meeting) there were approximately 55,000 Alcoa
shareholders, including both record holders and an estimate of the
number of individual participants in security position listings.
Item 6. Selected Financial Data.
The comparative columnar table showing selected financial data for
the Company is set forth on page 15 of the Annual Report and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Management's review and comments on the consolidated financial
statements are set forth on pages 14 through 17 of the Annual Report
and are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The Company's consolidated financial statements, the notes thereto
and the report of the independent public accountants are set forth on
pages 18 through 27 of the Annual Report and are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding Directors is contained under the caption
"Board of Directors" on pages 4 through 6 of the Registrant's
definitive Proxy Statement dated March 4, 1994 (the Proxy Statement)
and is incorporated herein by reference.
The information regarding executive officers is set forth in Part
I, Item 4A under "Executive Officers of the Registrant."
The information with respect to this item required by Item 405 of
Regulation S-K is incorporated by reference from the Company's 1994
Proxy Statement.
Item 11. Executive Compensation.
This information is contained under the caption "Compensation of
executive officers" on pages 8 through 12 of the Proxy Statement. The
performance graph and Compensation Committee Report shall not be deemed
to be "filed".
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
This information is contained under the caption "Security
ownership" on page 8 of the Proxy Statement and is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions.
This information is contained under the caption "Certain
relationships and related transactions" on page 7 of the Proxy
Statement and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) The Company's consolidated financial statements, the notes
thereto and the report of the independent public accountants are set
forth on pages 18 through 27 of the Annual Report and are incorporated
herein by reference.
With the exception of the aforementioned information and the
information incorporated by reference in Part II hereof, the Annual
Report is not to be deemed filed as part of this report.
The following report and additional financial data should be read
in conjunction with the Company's consolidated financial statements in
the Annual Report:
Independent Accountant's Report of Coopers & Lybrand dated January
11, 1994, except for Note U for which the date is February 7,
1994, on the Company's consolidated financial statement schedules
filed as a part hereof for the fiscal years ended December 31,
1993, 1992 and 1991 and related consent dated March 9, 1994.
Schedules V, VI, VIII, IX and X for the fiscal years ended
December 31, 1993, 1992 and 1991 and Schedule VII as of December
31, 1993:
Schedule No. Schedule Title
V Properties, Plants and Equipment
VI Accumulated Depreciation, Depletion and Amortization
of Properties, Plants and Equipment
VII Guarantees of Securities of Other Issuers
VIII Valuation and Qualifying Accounts
IX Short-Term Borrowings
X Supplementary Income Statement Information
Schedules other than those referred to above are omitted because
they are not required or the information is included in the notes to
financial statements.
(b) Reports filed on Form 8-K. None was filed in the fourth
quarter of 1993.
(c) Exhibits.
Exhibit
Number Description*
3(i). Articles of the Registrant as amended, incorporated by
reference to exhibit 3(a) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993.
3(ii). By-Laws of the Registrant, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991.
10(a). Amended Long Term Stock Incentive Plan, effective January 1,
1992, incorporated by reference to exhibit 10(a) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10(b). Employees' Excess Benefit Plan, Plan A, incorporated by
reference to exhibit 10(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1980.
10(c). Incentive Compensation Plan, as amended effective January 1,
1993, incorporated by reference to exhibit 10(c) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(d). Employees' Excess Benefit Plan, Plan C, as amended and
restated effective January 1, 1989, incorporated by reference
to exhibit 10(d) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10(e). Employees' Excess Benefit Plan, Plan D, as amended effective
October 30, 1992, incorporated by reference to exhibit 10(e)
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10(f). Employment Agreement of Paul H. O'Neill, as amended through
February 25, 1993, incorporated by reference to exhibit 10(h)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 and exhibit 10(g) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990, and
exhibit 10(f)(2) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10(g). Deferred Fee Plan for Directors, as amended effective
November 1, 1992, incorporated by reference to exhibit 10(h)
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10(h). Stock Plan for Non-Employee Directors, as amended effective
July 17, 1992, incorporated by reference to exhibit 10(i) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(i). Fee Continuation Plan for Non-Employee Directors,
incorporated by reference to exhibit 10(k) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1989.
10(j). Deferred Compensation Plan, as amended effective October 30,
1992, incorporated by reference to exhibit 10(k) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(k). 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 for the
year ended December 31, 1990.
10(l). Form of Indemnity Agreement between the Company and
individual directors or officers, incorporated by reference
to exhibit 10(j) to the Company's Annual Report on Form
10-K for the year ended December 31, 1987.
11. Computation of Earnings per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
13. Portions of Alcoa's 1993 Annual Report to Shareholders.
21. Subsidiaries and Equity Entities of the Registrant.
23. Consent of Independent Certified Public Accountants.
24. Power of Attorney for certain directors.
*Exhibit Nos. 10(a) through 10(d) are management contracts
or compensatory plans required to be filed as Exhibits to this Form
10-K.
Amendments and modifications to other Exhibits previously filed
have been omitted when in the opinion of the Registrant such Exhibits
as amended or modified are no longer material or, in certain instances,
are no longer required to be filed as Exhibits.
No other instruments defining the rights of holders of long-term
debt of the Registrant or its subsidiaries have been filed as exhibits
because no such instruments met the threshold materiality requirements
under Regulation S-K. The Registrant agrees, however, to furnish a
copy of any such instruments to the Commission upon request.
(d) Financial Statement Schedules.
To the Shareholders and Board of Directors
Aluminum Company of America
Our report on the consolidated financial statements of Aluminum
Company of America has been incorporated by reference in this Form 10-K
from page 18 of the 1993 Annual Report to Shareholders of Aluminum
Company of America. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedules listed under Item 14 of this Form 10-K.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the
information required to be included therein.
/s/Coopers & Lybrand
COOPERS & LYBRAND
600 Grant Street
Pittsburgh, Pennsylvania
January 11, 1994, except for Note U
for which the date is February 7, 1994
SCHEDULE V - PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31
(In millions)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
Balance at Other Balance
beginning Additions changes at end
Classification of period at cost Retirements add(deduct) of period
- -------------- ---------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year 1993:
Land and land rights,
including mines $ 228.8 $ 2.2 $ 5.2 $ 2.1 (C) $ 229.0
1.1 (D)
Structures 3,476.5 119.2 25.5 50.7 (C) 3,603.4
(17.5)(D)
Machinery and equipment 8,990.9 526.9 217.0 78.5 (C) 9,317.7
(61.6)(D)
Construction work in
progress 391.2 98.3 (B) .7 1.3 (C) 450.6
(39.5)(D)
--------- ------ ------ ------- ---------
$13,087.4 $746.6 $248.4 $ 15.1 $13,600.7
========= ====== ====== ======= =========
Year 1992:
Land and land rights,
including mines $ 226.2 $ 4.5 $ .3 $ (1.6)(D) $ 228.8
Structures 3,448.4 128.7 14.5 (18.7)(C) 3,476.5
(67.4)(D)
Machinery and equipment 8,689.0 719.4 248.5 (22.9)(C) 8,990.9
(146.1)(D)
Construction work in
progress 541.4 (72.1)(B) 1.2 (.8)(C) 391.2
(75.9)(D)
(.2)(E)
--------- ------ ------ ------- ---------
$12,905.0 $780.5 $264.5 $(333.6) $13,087.4
========= ====== ====== ======= =========
Year 1991:
Land and land rights,
including mines $ 235.6 $ 3.2 $ 1.1 $ (1.0)(C) $ 226.2
(10.5)(D)
Structures 3,537.9 110.6 12.2 (8.4)(C) 3,448.4
(179.5)(D)
Machinery and equipment 8,676.8 568.4 215.6 (24.4)(C) 8,689.0
(316.8)(D)
.6 (E)
Construction work in
progress 469.1 159.0(B) 17.2 .4 (C) 541.4
(68.0)(D)
(1.9)(E)
--------- ------ ------ ------- ---------
$12,919.4 $841.2 $246.1 $(609.5) $12,905.0
========= ====== ====== ======= =========
<FN>
NOTES: (A) Depreciation is recorded principally on the straight-
line method at rates ranging from 1% to 33%
(B) Net increase (decrease) during the period
(C) Sales or acquisition of subsidiaries
(D) Transfers and foreign currency translation adjustments
(E) Adjustments to net realizable value
</TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTIES, PLANTS AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31
(In millions)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
Additions
Balance at charged to Other Balance
beginning costs and changes at end
Classification of period expenses Retirements add(deduct) of period
- -------------- ---------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Year 1993:
Land and land rights,
including mines $ 31.4 $ 2.2 $ - $ - $ 33.6
Structures 1,775.4 121.6 22.0 2.9 (A) 1,866.0
(6.0)(B)
(5.9)(C)
Machinery and equipment 4,864.8 546.1 205.2 13.9 (A) 5,194.3
3.2 (B)
(28.5)(C)
-------- ------ ------ ------- --------
$6,671.6 $669.9(D) $227.2 $ (20.4) $7,093.9
======== ====== ====== ======= ========
Year 1992:
Land and land rights,
including mines $ 29.3 $ 2.2 $ - $ .5 (B) $ 31.4
(.6)(C)
Structures 1,688.6 121.7 13.8 (4.8)(A) 1,775.4
17.9 (B)
(34.2)(C)
Machinery and equipment 4,601.0 556.3 235.0 (6.0)(A) 4,864.8
27.0 (B)
(78.5)(C)
-------- ------ ------ ------- --------
$6,318.9 $680.2 (D) $248.8 $ (78.7) $6,671.6
======== ====== ====== ======== ========
Year 1991:
Land and land rights,
including mines $ 28.9 $ 2.4 $ .1 $ (1.9)(C) $ 29.3
Structures 1,676.8 124.7 9.9 (3.6)(A) 1,688.6
(92.6)(C)
(6.8)(B)
Machinery and equipment 4,466.7 570.0 202.4 (7.4)(A) 4,601.0
(224.3)(C)
(1.6)(B)
-------- ------ ------ ------- --------
$6,172.4 $697.1 (D) $212.4 $(338.2) $6,318.9
======== ====== ====== ======= ========
<FN>
NOTES: (A) Sale or acquisition of subsidiaries
(B) Adjustment to net realizable value
(C) Transfers and foreign currency translation adjustments
(D) A reconciliation to depreciation expense in the Income
Statement follows
1993 1992 1991
Schedule VI depreciation expense $669.9 $680.2 $697.1
Amortization of intangibles 35.0 25.2 22.8
Depreciation included in research and
development expense (12.2) (23.0) (22.0)
Income Statement depreciation expense $692.7 $682.4 $697.9
</TABLE>
SCHEDULE VII - GUARANTEES OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1993
(In millions)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F Col. G
------ ------ ------ ------ ------ ------ ------
Nature of any default
Name of issuer Amount owned by issuer of securities
of securities Total by person Amount in guaranteed in
guaranteed by Title of issue amount or persons treasury principal, interest,
person for of each class guaranteed for which of issuer of sinking fund or
which statement of securities and statement securities Nature of redemption provisions,
is filed guaranteed outstanding is filed guaranteed guarantee or payment of dividends
- --------------- -------------- ----------- ------------ ------------ --------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Various Mortgages $2.7 None None Principal None
employees payable and interest
Entities Loans and notes 1.9 None None Principal None
previously and interest
owned
Others Loans and notes 1.6 None None Principal None
---- and interest
$6.2
====
<FN>
NOTE: (A) The amount of interest guaranteed does not exceed $1 per
year.
</TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31
(In millions)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
Balance at Charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts Deductions of period
----------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
1993 $ 17.7 $ 19.2 $ (0.2)(A) $ 3.5(B) $ 33.2
1992 $ 17.3 $ 6.8 $ (3.1)(A) $ 3.3(B) $ 17.7
1991 $ 14.9 $ 13.3 $ 1.5 (A) $ 12.4(B) $ 17.3
Deferred income tax valuation allowance:
1993 $ 157.3 $ 52.7 - $ 38.6(D) $ 171.4
1992 $ 156.1(C) $ 1.2 - - $ 157.3
<FN>
NOTES: (A) Collections on accounts previously written off,
acquisition of subsidiaries and foreign currency
translation adjustment
(B) Uncollectible accounts written off
(C) Represents the implementation of SFAS 109 effective
January 1, 1992
(D) Related primarily to utilization of tax loss carry forwards.
</TABLE>
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEAR ENDED DECEMBER 31
(In millions)
<TABLE>
<CAPTION>
Col. A Col. B
------ ------
Charged to costs
Item and expenses
---- ----------------
<S> <C> <C>
Maintenance and repairs:
1993 $908.2
1992 $913.8
1991 $925.1
Taxes, other than payroll and income taxes:
1993 1992 1991
---- ---- ----
Real estate and personal property taxes $ 52.0 $ 51.3 $ 52.4
Other taxes 45.0 61.0 58.8
------ ------ ------
$ 97.0 $112.3 $111.2
====== ====== ======
</TABLE>
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEAR ENDED DECEMBER 31
(In millions)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------ ------ ------ ------ ------ ------
Maximum Average Weighted
Category of Weighted amount amount average
aggregate Balance at average outstanding outstanding interest
short-term end of interest during the during the rate during
borrowings (A) period rate period period (B) the period(C)
- -------------- ---------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year 1993:
Payable to banks $286.6 (F) $286.6 $178.9 (F)
Commercial paper (D) 75.9 3.4% 365.2 198.4 3.2%
------
$362.5
======
Year 1992:
Payable to banks $171.5 (G) $190.3 $162.6 (G)
Commercial paper (D) 242.7 3.4% 381.0 114.5 3.6%
------
$414.2
======
Year 1991:
Payable to banks $129.9 (H) $209.7 $132.2 (H)
Commercial paper (E) 40.3 12.5% 64.7 22.9 9.6%
------
$170.2
======
<FN>
NOTES: (A) Terms range from demand to 270 days
(B) Computed by calculating an arithmetical average of
month-end borrowings during the year
(C) Computed by dividing interest expense applicable to the
debt by average borrowings outstanding
(D) Aluminum Company of America and Alcoa of Australia
short-term borrowings
(E) Alcoa of Australia short-term borrowings
(F) Individual rates ranged from 3.7% to 23.5%, with a
weighted average of 5.5% for the period and 5.8% at
year-end
(G) Individual rates ranged from 3.9% to 10.9%, with a
weighted average of 6.6% for the period and 5.7% at
year-end
(H) Individual rates ranged from less than 1% to 12.3%, with
a weighted average of 7.8% for the period and 7.4% at
year-end
</TABLE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALUMINUM COMPANY OF AMERICA
March 11, 1994 By /s/Earnest J. Edwards
Earnest J. Edwards
Vice President and Controller
(Also signing as Principal
Accounting Officer)
Pursuant to the requirements of the 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
/s/Paul H. O'Neill Chairman of the Board March 11, 1994
Paul H. O'Neill and Chief Executive Officer
(Principal Executive Officer
and Director)
/s/Jan H. M. Hommen Executive Vice President and March 11,1994
Jan H. M. Hommen Chief Financial Officer
(Principal Financial Officer)
Kenneth W. Dam, John P. Diesel, Joseph T. Gorman, Judith M. Gueron,
John P. Mulroney, Sir Arvi Parbo, Forrest N. Shumway and Franklin A.
Thomas, each as a Director, on March 11, 1994, by Barbara S. Jeremiah,
their Attorney-in-Fact.*
*By /s/Barbara S. Jeremiah
Barbara S. Jeremiah
Attorney-in-Fact
EXHIBIT INDEX
Exhibit
Number Description
3(i). Articles of the Registrant as amended, incorporated by
reference to exhibit 3(a) to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993.
3(ii). By-Laws of the Registrant, incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991.
10(a). Amended Long Term Stock Incentive Plan, effective January 1,
1992, incorporated by reference to exhibit 10(a) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
10(b). Employees' Excess Benefit Plan, Plan A, incorporated by
reference to exhibit 10(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1980.
10(c). Incentive Compensation Plan, as amended effective January 1,
1993, incorporated by reference to exhibit 10(c) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(d). Employees' Excess Benefit Plan, Plan C, as amended and
restated effective January 1, 1989, incorporated by reference
to exhibit 10(d) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10(e). Employees' Excess Benefit Plan, Plan D, as amended effective
October 30, 1992, incorporated by reference to exhibit 10(e)
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10(f). Employment Agreement of Paul H. O'Neill, as amended through
February 25, 1993, incorporated by reference to exhibit 10(h)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 and exhibit 10(g) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990, and
exhibit 10(f)(2) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.
10(g). Deferred Fee Plan for Directors, as amended effective
November 1, 1992, incorporated by reference to exhibit 10(h)
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10(h). Stock Plan for Non-Employee Directors, as amended effective
July 17, 1992, incorporated by reference to exhibit 10(i) to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(i). Fee Continuation Plan for Non-Employee Directors,
incorporated by reference to exhibit 10(k) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1989.
10(j). Deferred Compensation Plan, as amended effective October 30,
1992, incorporated by reference to exhibit 10(k) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(k). 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 for the
year ended December 31, 1990.
10(l). Form of Indemnity Agreement between the Company and
individual directors or officers, incorporated by reference
to exhibit 10(j) to the Company's Annual Report on Form
10-K for the year ended December 31, 1987.
11. Computation of Earnings per Common Share.
12. Computation of Ratio of Earnings to Fixed Charges.
13. Portions of Alcoa's 1993 Annual Report to Shareholders.
21. Subsidiaries and Equity Entities of the Registrant.
23. Consent of Independent Certified Public Accountants.
24. Power of Attorney for certain directors.
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE YEAR ENDED DECEMBER 31
(In millions, except share and per share amounts)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C> <C>
1. Income applicable to common stock before
extraordinary loss and accounting changes* $ 2.7 $ 20.3 $60.6
2. Net income (loss) applicable to
common stock* $ 2.7 ($1,141.3) $60.6
3. Average number of common shares
outstandingat the beginning of the year
and the end of each month during the year 87,673,141 85,474,089 84,983,749
4. Primary earnings per common share before
extraordinary loss and accounting changes
(1 divided by 3) $ .03 $ .24 $ .71
5. Primary earnings (loss) per common
share (shares for accounting changes
calculations = 85,082,319) $ .03 ($ 13.41) $ .71
6. Interest on 6-1/4% convertible subordinated
amortization of related debt discount and
expenses, net of applicable taxes on income - $ 6.3 $ 6.3
7. Fully diluted earnings before extraordinary
loss and accounting changes (1 + 6) $ 2.7 $ 26.6 $66.9
8. Fully diluted earnings (loss)(2 + 6) $ 2.7 ($1,135.0) $66.9
9. Shares issuable upon full conversion
of convertible subordinated debentures - 2,403,226 2,419,354
10. Shares issuable under stock
incentive plans (treasury stock method) 8,675 41,441 93,745
11. Shares issuable upon exercise of
dilutive outstanding stock options
(treasury stock method) 202,531 363,266 496,825
12. Fully diluted shares (3 + 9 + 10 + 11) 87,884,347 88,282,022 87,993,673
13. Fully diluted earnings per common share
before extraordinary loss and accounting
changes (7 divided by 12) $ .03 $ .30 $ .76
14. Fully diluted earnings (loss) per
common share (shares for accounting
change calculations = 88,092,243) $ .03 ($ 12.88) $ .76
<FN>
*After preferred dividend requirement
</TABLE>
Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEAR ENDED DECEMBER 31
(In millions, except ratios)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Earnings:
Income before taxes on income and
before extraordinary loss and
accounting changes $191.1 $298.6 $411.5 $1,057.4 $2,197.1
Minority interests' share of earnings
of majority-owned subsidiaries
without fixed charges (5.9) (5.7) (7.7) - -
Less equity (earnings) losses 13.0 12.2 5.2 3.0 (30.8)
Fixed charges added to net income 110.1 133.5 193.1 217.8 211.5
Proportionate share of income (loss)
of 50% owned persons (11.5) (11.2) (.5) (7.4) 25.6
Distributed income of less than 50%
owned persons - - 4.6 - 2.1
Amortization of capitalized interest:
Consolidated 20.6 20.0 19.6 18.5 17.0
Proportionate share of 50%
owned persons .8 1.0 .4 .9 .5
Total earnings $318.2 $448.4 $626.2 $1,290.2 $2,423.0
Fixed charges:
Interest expense:
Consolidated $ 87.8 $105.4 $153.2 $ 184.7 $ 178.3
Proportionate share of 50%
owned persons 5.5 7.0 17.8 9.7 15.1
93.3 112.4 171.0 194.4 193.4
Amount representative of the interest
factor in rent:
Consolidated 16.4 20.7 21.3 23.1 17.7
Proportionate share of 50%
owned persons .4 .4 .8 .3 .4
16.8 21.1 22.1 23.4 18.1
Fixed charges added to net income 110.1 133.5 193.1 217.8 211.5
Interest capitalized:
Consolidated 3.5 11.1 12.7 20.5 18.5
Proportionate share of 50%
owned persons - - - - -
3.5 11.1 12.7 20.5 18.5
Preferred stock dividend requirements
of majority-owned subsidiaries 29.6 62.4 69.0 65.1 64.1
Total fixed charges $143.2 $207.0 $274.8 $ 303.4 $ 294.1
Ratio 2.22 2.17 2.28 4.25 8.24
</TABLE>
Exhibit 13
SELECT PORTIONS OF
1993 ANNUAL REPORT TO SHAREHOLDERS
ALUMINUM COMPANY OF AMERICA
FINANCIAL REVIEW
(dollars in millions, except share amounts and ingot prices)
Results of Operations
The Global Oversupply of Aluminum
In 1993 Alcoa took 310,000 metric tons (mt) of annual primary
aluminum capacity out of production indefinitely. The cutbacks
were partly due to a lack of any mechanism to deal with the
economic consequences of the dissolution of the former Soviet
Union. Prior to 1991 the Russian aluminum industry was largely
self-contained and metal produced in the country was consumed by
internal market needs. Since its collapse, Russia's internal
market has weakened substantially. To help generate hard
currencies, it began selling significant quantities of metal on
world markets. It is estimated that nearly 1.5 million mt were
sold in Western markets in 1993.
Consequently, world aluminum inventories reached a high 109-
day supply at the end of 1993 compared with a 42-day supply in
the 1988-90 timeframe. As a result, metal prices fell to an eight-
year low of 47 cents per pound on the London Metal Exchange (LME)
in November 1993.
In late 1993, discussions began among the governments of six
major aluminum-producing nations to solve the oversupply
situation. A multigovernment accord was reached in January 1994
which recognized an annual surplus of 1.5 to 2 million mt. Moscow
committed to curb its annual output by 500,000 mt, while the U.S.
and the European Union (EU) agreed not to take trade actions
against Russian producers. Several nations, including Australia,
Canada, the U.S. and the EU, promised to aid in the restructuring
of the Russian aluminum industry.
Summary of Earnings
Against this backdrop of oversupply and low prices, Alcoa has
taken actions within its control to remain profitable by cutting
costs at every level. The following table summarizes Alcoa's
results, adjusted for special charges, accounting changes and
extraordinary items.
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------
<S> <C> <C> <C>
Reported net income (loss) $ 4.8 $(1,139.2) $ 62.7
Adjusted for:
Special charges 74.5 173.9 217.0
Accounting changes - 1,111.4 -
Extraordinary loss - 50.2 -
- -------------------------------------------------------------
Adjusted net income $79.3 $ 196.3 $279.7
- -------------------------------------------------------------
</TABLE>
Operations by Geographic Area
Operating profit for 1993 was $351 compared with $533 in 1992 and
$797 in 1991. Operating profit consists of all revenues less
operating expenses, excluding interest expense, non-operating
income, income taxes and minority interests. The year-to-year
comparisons in this discussion also exclude special items. See
Note K to the financial statements for additional information.
USA - Revenues from U.S. operations were down 7% from 1992. Lower
revenues from ingot sales accounted for just over 50% of the
decline. Although Alcoa's average unit price for ingot fell two
cents per pound, most of the revenue decline was due to lower
shipments and reflects production cutbacks mentioned earlier.
Rigid container sheet (RCS) accounted for about 40% of the
decrease in revenues with both lower shipments and prices. These
factors had a significant effect on results in the U.S. as
evidenced by a $193 operating loss in 1993. In 1992 and 1991
there were operating profits of $55 and $98, respectively. The
1992 period also reflected deteriorating prices for most aluminum
products.
Total exports from the U.S. in 1993 were $896 compared with
$993 in 1992 and $967 in 1991.
Pacific - The Pacific area principally reflects the activities of
Alcoa of Australia (AofA). Revenues from the Pacific were up 2%
from 1992 with higher shipments of alumina, aluminum ingot and
rolled products, partially offset by lower prices. Operating
profit from the Pacific was $399 compared with $298 in 1992 and
$479 in 1991. The higher profit in 1993 was partly due to lower
costs at AofA and greater efficiencies from its Wagerup refinery
expansion. The profit decline in 1992 compared with 1991
primarily reflects the drop in prices for both alumina and ingot.
Other Americas - Revenues from this region fell 10% from a year
ago, mostly because of lower shipments by the Jamaica, Suriname
and selling subsidiaries which were partially offset with higher
shipments by Alcoa Aluminio (Aluminio) in Brazil. Operating
profit in 1993 was $139 compared with $91 in 1992 and $125 in
1991. The higher profit in 1993 was primarily due to lower costs
at Aluminio, favorable exchange adjustments in Suriname that
provided lower U.S. dollar costs, and better performance by
closures operations in Mexico.
Europe - Virtually all markets served by the European companies
experienced unfavorable economic conditions in the region during
1993. Slightly higher revenues than in 1992 were mainly due to
the 50.1% acquisition of Alcoa-Kofem, an Alcoa subsidiary in
Hungary. Operating profit in 1993 was $6 compared with $90 in
1992 and $96 in 1991. The decline in 1993 reflects start-up
losses at Alcoa-Kofem and an Alcoa Fujikura subsidiary in
Germany. Lower prices and shipments for RCS at Alcoa
Manufacturing in Great Britain, and for closures and alumina-
based chemicals, also contributed to the lower profit.
Operations by Segment
Alcoa's integrated operations consist of three segments: Alumina
and Chemicals, Aluminum Processing, and Non-Aluminum Products.
I. Alumina and Chemicals Segment
This segment generated 16% of Alcoa's total revenues in 1993.
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------
<S> <C> <C> <C>
Revenues $1,437 $1,422 $1,496
</TABLE>
Of the total revenues from this segment, two-thirds are from the
sale of alumina. Alumina shipments in 1993, most of which were by
AofA, rose 8% from 1992, following a 12% rise in 1992 from 1991.
An imbalance of alumina supply and demand during 1992 continued
into 1993. Average unit prices for alumina fell 16% in 1992 but
declined only slightly from 1992 to 1993. Revenues in 1993 were
up 8% from 1992; the increase was volume-driven. The oversupply
of alumina is expected to continue well into 1995, and there is
little expectation of improvement in alumina prices for the near
term.
Revenues from alumina-based chemical products fell 10% from
1992. This followed a 3% decline from 1991 to 1992. Lower demand
and prices in the U.S., and increased pressure on prices in
European markets were the principal reasons for the declines.
Operating profit for this segment was $373 in 1993 compared
with $278 in 1992 and $566 in 1991. The increase from 1992 was
mostly related to alumina and driven by higher volume.
II. Aluminum Processing Segment
Revenues from this segment were 66% of Alcoa's total revenues in 1993.
<TABLE>
<CAPTION>
Product classes 1993 1992 1991
- -------------------------------------------------------
<S> <C> <C> <C>
Shipments (000 metric tons)
Flat-rolled products 1,271 1,323 1,172
Engineered products 379 353 353
Aluminum ingot 841 1,023 1,179
Other aluminum products 89 98 132
- -------------------------------------------------------
Total 2,580 2,797 2,836
- -------------------------------------------------------
Revenues
Flat-rolled products $2,974 $3,189 $3,107
Engineered products 1,528 1,527 1,612
Aluminum ingot 1,042 1,336 1,742
Other aluminum products 430 465 500
- -------------------------------------------------------
Total $5,974 $6,517 $6,961
</TABLE>
Total shipments of aluminum products were 8% lower than in 1992.
Most of the decline was from aluminum ingot, which fell 18%,
reflecting the shutdown of 25% of the company's U.S. smelting
capacity in mid-1993. Flat-rolled products, which represented 49%
of total shipments in 1993, fell 4% from the 1992 level.
Total revenues from this segment dropped $543, or 8%, from
1992. The decline was mostly due to low prices that began falling
in 1991 and continued into 1993. This segment had an operating
loss in 1993 of $21 compared with operating profits of $289 and
$355 for 1992 and 1991, respectively. The decline in 1993, which
was mainly in the packaging and aerospace markets and from
aluminum ingot operations, is more fully discussed in the product
classes below.
Market circumstances in 1993 were such that Alcoa entered
into considerably more long-term aluminum products contracts with
certain of its customers and has hedged certain costs on those
contracts.
Flat-Rolled Products - A substantial portion of flat-rolled
products shipments and revenues is derived from sales of RCS.
Shipments of RCS in 1993 were down 10% from 1992, reflecting
weaker demand and slower growth in the U.S. market. Severe
competition for market share brought RCS prices down 9% in 1993.
Shipments of RCS in 1992 rose 13% from 1991, but revenues
were only 3% higher due to pressure on prices. The higher
shipments were mostly in the U.S. as the company gained back
market share it had lost.
Sheet and plate shipments were down slightly from 1992, but
revenues fell 11%. Low demand for products in the weak aerospace
market was offset by higher commercial products shipments.
However, the latter products carried lower unit prices, which
accounted for part of the decline in revenues.
Engineered Products - These products include extrusions used in
the transportation and construction markets; aluminum forgings
and wheels; wire, rod and bar; and automobile bumpers. Total
shipments in 1993 were up 7% from 1992, but most of the increase
was due to the addition of Alcoa-Kofem. Revenues for engineered
products were even with the prior year, reflecting lower prices
on all products in this category, except forged aluminum wheels.
Revenues in 1992 were 5% lower than in 1991 due to the weakened
aerospace market.
Shipments of extrusions were down 12% and revenues fell 19%,
reflecting conditions in the aerospace market and declining
prices. Shipments of building products in the Netherlands were 5%
lower than the year earlier, and due to severe competition,
prices fell 18%. Shipments of wheels were up 27% from 1992 and
revenues climbed 31% due to higher demand.
Aluminum Ingot - Shipments of ingot fell 18% from 1992, partly
because of the smelting capacity that was temporarily idled.
Total revenues were 22% lower than a year ago, reflecting both
lower shipments and prices due to excess metal in LME warehouses
and excess capacity in the industry. Alcoa's average realized
price for ingot was 56 cents per pound in 1993 compared with 59
cents in 1992 and 67 cents in 1991.
Other Aluminum Products _ Shipments of other aluminum products
were 9% lower than those in 1992; revenues declined 8%. Shipments
of aluminum closures were down 15% and revenues fell 12%.
Aluminum closures have been steadily losing market share to
plastic closures, which Alcoa also produces. Scrap shipments were
off 3%, but due to the oversupply of metal and its negative
effect on prices, revenues dropped 12%.
III. Non-Aluminum Products Segment
This segment's revenues represented 18% of Alcoa's total revenues in
1993.
<TABLE>
<CAPTION>
1993 1992 1991
- -----------------------------------------------------
<S> <C> <C> <C>
Revenues $1,646 $1,553 $1,427
</TABLE>
Revenues from this segment rose 6% from the year earlier. Alcoa
Fujikura, which manufactures wire harnesses and electrical
components for the automotive industry, had a 7% increase in its
sales. Sales of vinyl windows, siding and other products to the
construction industry were up 12% from 1992. Revenues from
plastic closures jumped 47% from the year-ago period with strong
sales in Brazilian and other Latin American markets. Revenues in
1993 also included those generated by Alcoa Electronic Packaging
(AEP), which moved from research and development to manufacturing
status.
This segment's operating profit for 1993 was $5 compared
with operating losses of $31 in 1992 and $134 in 1991. The
improvement is principally from a significant reduction of losses
by AEP and better results from closures, building products and
magnesium products.
Unusual and Extraordinary Items
Special Charges - Included in 1993 after-tax earnings was a net
charge of $74.5 consisting of:
* a charge of $87.2 for severance costs associated with permanent
reductions of hourly and salaried employees, mainly in U.S.
aluminum operations;
* a charge of $10.8 associated with closing certain activities at
several plants, including the manufacture of aluminum rod at
Alcoa's Rockdale, Texas plant;
* a charge of $11.9 related to new three-year labor agreements
with three unions covering employees at Alcoa's U.S. operations;
* a credit of $26.3 in June due to a change in Australia's income
tax rate from 39% to 33%; and
* a credit of $9.1 in July due to a change in the U.S. tax rate
related to Alcoa's deferred tax assets in the U.S.
After-tax special charges in 1992 consisted of $70.5 for
permanent employment reductions and $103.4 for disposition of
assets. Special charges in 1991 of $217 consisted of $160 for
environmental matters and $57 for restructuring costs in several
businesses.
Accounting Changes - There were two accounting changes
implemented in 1992 consisting of:
* a one-time charge of $1,166.4 due to a new accounting rule for
postretirement benefits other than pensions. The rule requires
accruing benefits over the period an employee provides services
to the company; and
* a credit of $55 related to the new rule on accounting for
income taxes. This one-time credit was principally due to
adjusting deferred taxes that were accrued at various rates in
previous years to the current tax rates in the countries where
Alcoa operates.
Cash flows were not affected by these changes.
Extraordinary Loss - The extraordinary loss of $50.2 in 1992
resulted from early payment of 7% discount debentures that
carried an effective interest rate through maturity in 1996 of
14.7%. The loss was the unamortized portion of the original
discount that would have been paid at maturity. The early payment
substantially reduces Alcoa's future interest costs.
Costs and Other Income
Cost of Goods Sold - These expenses were $152 lower than in 1992.
The major elements contributing to the lower costs in 1993 were:
<TABLE>
<S> <C>
* lower volume $275
* better operating performance and efficiencies 110
* lower purchased metal costs 57
Partially offset by:
* the addition of new subsidiaries in 1993 181
* LIFO inventory profits in 1992 76
</TABLE>
Cost of goods sold in 1992 were $106 lower than in 1991, due
partly to lower purchased metal costs, better plant utilization
and performance, and the inventory profits. The 1992 costs also
included $78 of additional health care costs accrued under the
new accounting rule for postretirement benefits.
Selling and General Administrative Expenses _ These expenses rose
3% from 1992 despite staff reductions at corporate headquarters
and other locations. Most of the increase was due to the addition
of subsidiaries in 1993, particularly Alcoa-Kofem. Selling and
general administrative expenses in 1992 were slightly higher than
those in 1991 and included $7 of additional health care costs.
Research and Development Expenses - These expenses declined $82
from 1992 principally because of AEP's move to production status
in 1993 and program reductions at Alcoa Technical Center (ATC).
The $40 million decline in 1992 from 1991 was mostly from
employee reductions at AEP and ATC.
Interest Expense - Despite higher debt levels in 1993, interest
expense was reduced by $18 from 1992 - after a $48 reduction in
1992. These declines reflect lower interest rates and the early
payment of the high-cost debentures in 1992.
Taxes - The accrual for income taxes in 1993 resulted in a tax
credit of $10 compared with a tax cost of $132 in 1992. Besides a
lower level of pretax income, the difference included the effects
of a change in Australia's tax rate from 39% to 33% in 1993. This
resulted in a $65 reduction to AofA's taxes and primarily related
to adjusting future taxes initially recorded at the higher rate.
Taxes on income from outside the U.S. were also lower than in
1992 by $47. In addition, the U.S. tax rate increased from 34% to
35% in 1993. Although the rate increased, Alcoa benefited by a
one-time credit of $10 because of its net deferred tax assets in
the U.S.
Total income, payroll, property and other taxes were $224 in
1993, $392 in 1992 and $448 in 1991.
Other Income - Other income was down only $4 from a year ago, but
there were significant offsetting items. Interest income fell $31
primarily because of less cash to invest in short-term
investments. Translation and exchange adjustments were favorable
by $41. There was also a favorable insurance settlement at AofA
in 1992.
Foreign Currency - The translation and exchange gains (losses),
after tax and minority interests, were $9.0 in 1993, $(11.1) in
1992 and $1.6 in 1991. The favorable change from 1992 was mainly
at AofA, where the exchange rate moved from 78 cents in 1992 to
68 cents, and at Suralco, which had a significant devaluation of
the Suriname guilder in 1993.
Environmental Matters
Alcoa continues to participate in environmental assessments and
cleanups at a number of locations, including operating facilities
and adjoining property, at previously owned or operated
facilities and at Superfund and other waste sites. Alcoa records
a liability for environmental remediation costs or damages when a
cleanup program becomes probable and the costs or damages can be
reasonably estimated. (See footnote A, page 23.)
As assessments and cleanups proceed, the liability is
adjusted based on progress in determining the extent of remedial
actions and related costs and damages. The liability can change
substantially due to factors such as the nature and extent of
contamination, changes in remedial requirements and technological
changes.
For example, there are certain matters, including several
related to alleged natural resource damage or alleged off-site
contaminated sediments, where investigations are ongoing. It is
not possible to determine the outcomes or to estimate with any
degree of certainty the ranges of potential costs for these
matters.
Alcoa's remediation reserve balance at the end of 1993 was
$414 and reflects the most probable costs to remediate identified
environmental conditions for which costs can be reasonably
estimated. About 38% of this balance relates to Alcoa's Massena,
N.Y. plant site. Remediation expenditures charged to the reserve
were $71 in 1993, $102 in 1992 and $57 in 1991. They include
expenditures currently mandated as well as those not required by
any regulatory authority or third parties.
Included in ongoing operating expenses are the recurring
costs of managing hazardous substances and pollution. These costs
are estimated to be about 1.5% of cost of goods sold in each of
the last three years and are expected to be the same in 1994.
Liquidity and Capital Resources
Cash From Operations
Cash generated from operations in 1993 was $535
compared with $1,208 in 1992. The major items causing the
difference include:
* a lower level of income in 1993, after excluding non-cash items
in both years;
* increases in inventories and other current assets due to
changing business conditions;
* a decrease in customer receivables due to lower sales volume;
and
* a deferred interest payment in 1992 related to the discount
debentures that were retired early.
Cash outlays for the 1993 and 1992 special charges related
to severance costs consist of salary continuation payments for up
to two years, and pension and medical costs to be paid over the
lives of the employees. The latter represents about 45% of the
total charges.
Financing Activities
Financing activities in 1993 provided a cash inflow of $372. In
1992 there was a cash outflow from these activities of $367. The
$739 variance was mostly due to changes in long-term debt. In
1993 there was a net addition to long-term debt of $611 compared
with a net reduction of $349 in 1992. There was also a $176
reduction in short-term borrowings.
Borrowings in 1993 included issuance by Alcoa of $175 of
4-5/8% Notes due 1996 and $180 by Aluminio of floating rate Secured
Export Notes due 1994-1998. The proceeds from both notes were
used to repay short-term borrowings and for general corporate
purposes. In addition, Alcoa issued commercial paper of which
$337 was outstanding at the end of the year.
In July Alcoa entered into two Revolving Credit Agreements
of $375 each with a group of international banks. One of the
agreements may be renewed for one year after July 1994. The other
agreement matures in July 1997. The agreements stipulate that
while advances are outstanding, debt cannot exceed 150% of
consolidated net worth and that secured borrowings are generally
limited to 10% of consolidated net tangible assets.
The Revolving Credit Agreements are used to back up the
commercial paper, and therefore up to $375 of such paper will be
classified as long-term debt.
In a non-cash transaction early in 1993, $149 of Alcoa's
6-1/4% Convertible Subordinated Debentures due 2002 were converted
to common stock with the issuance of 2.3 million shares of
treasury stock.
In 1992 payments on debt exceeded borrowings by $349 and
included the early payment of the 7% debentures. Alcoa also paid
off its remaining three sinking fund debentures that totaled
$110.
Debt as a percent of invested capital was 22% at the end of
1993 and 15% at the end of 1992 and 1991.
Dividends paid to shareholders were $142 in 1993 compared
with $139 in 1992 and $153 in 1991. The 1991 dividends included
$14 of profit-sharing dividends based on 1990 profits in excess
of $6.00 per share, as provided for under Alcoa's dividend
policy.
Dividends paid to minority interests of $159 in 1993
included $126 paid by AofA and $18 paid by Aluminio. In 1992
dividends of $141 to minority interests included $93 paid by AofA
and $18 by Aluminio.
Investing Activities
Capital expenditures of $757 were down $32 from 1992.
Approximately 75% of the 1993 expenditures were for sustaining
projects primarily in the aluminum processing segment. Alcoa
continues to focus on improving its manufacturing processes with
a minimum of capital spending. Geographically, expenditures were
54% of the total in the U.S., 21% in the Pacific, 14% in the
Other Americas and 11% in Europe.
Capital expenditures for new or expanded facilities for
environmental control in ongoing operations were $76 in 1993, $75
in 1992 and $85 in 1991.
Acquisitions in 1993 included a joint venture in Germany to
manufacture and sell aluminum extrusions and tube for the
aircraft, automotive and defense industries in Europe, and an
Alcoa Nederland subsidiary, with operations in Belgium and the
Netherlands, that produces aluminum and steel products for the
building and construction markets.
Alcoa's off-shore subsidiaries, particularly AofA, had
investments of $244 in short-term securities with maturities
greater than 90 days at the end of 1993.
Cash investments and acquisitions in 1992 of $135 included
an interest in a bauxite mine in Brazil and capital funding for
Alcoa-Kofem and the Alcoa-Kobe packaging and engineered products
joint ventures. Alcoa also sold its 44% interest in a Mexican
affiliate and its investments in Venezuela.
Subsequent Events
In February 1994, Alcoa issued $250 of 5-3/4% Notes due 2001. The
proceeds were used to redeem $225 of its 7% debentures due 2011,
which carried an effective yield of 14.7%. The early payment will
result in an extraordinary loss in the 1994 first quarter of
$67.9.
In February 1994, Alcoa announced that it would reduce
primary aluminum production in its U.S. operations by 100,000 mt
per year. Alcoa of Australia separately announced reductions of
25,000 mt at its Point Henry smelter in Geelong, Australia and
26,000 mt at the Portland, Australia smelter. Alcoa of Australia
has a 45% interest in the Portland smelter.
Five-Year Selected Financial Data
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------
(dollars in millions, except
share amounts and ingot prices)
<S> <C> <C> <C> <C> <C>
Sales and operating revenues $ 9,055.9 $ 9,491.5 $ 9,884.1 $10,710.2 $10,910.0
Income before extraordinary loss and
accounting changes* 4.8 22.4 62.7 295.2 944.9
Extraordinary loss and accounting changes - (1,161.6) - - -
Net income (loss)* 4.8 (1,139.2) 62.7 295.2 944.9
Per common share
Before extraordinary loss and
accounting changes .03 .24 .71 3.40 10.67
Net income .03 (13.41) .71 3.40 10.67
- -----------------------------------------------------------------------------------------------
Alcoa's average realized price per pound
for aluminum ingot .56 .59 .67 .75 .92
Average U.S. market price per pound
for aluminum ingot (Metals Week) .53 .58 .59 .74 .88
- -----------------------------------------------------------------------------------------------
Cash dividends declared per common share 1.60 1.60 1.78 3.05 2.72
Total assets 11,596.9 1,023.1 11,178.4 11,413.2 11,540.6
Long-term debt (noncurrent) 1,432.5 855.3 1,130.8 1,295.3 1,316.3
- -----------------------------------------------------------------------------------------------
<FN>
*After special charges of $74.5, or 85 cents per common share, in
1993, $173.9, or $2.03 per share, in 1992, $217.0, or $2.56 per
share, in 1991 and $275.0, or $3.19 per share, in 1990
</TABLE>
(Graph 1 omitted)
(Graph 2 omitted)
(Graph 3 omitted)
(Graph 4 omitted)
Financial Reports
Management's Report to Alcoa Shareholders
The accompanying financial statements of Alcoa and consolidated
subsidiaries were prepared by management, which is responsible
for their integrity and objectivity. The statements were prepared
in accordance with generally accepted accounting principles and
include amounts that are based on management's best judgments and
estimates. The other financial information included in this
annual report is consistent with that in the financial
statements.
The company maintains a system of internal controls,
including accounting controls, and a strong program of internal
auditing. The system of controls provides for appropriate
procedures that are consistent with high standards of accounting
and administration. The company believes that its system of
internal controls provides reasonable assurance that assets are
safeguarded against losses from unauthorized use or disposition
and that financial records are reliable for use in preparing
financial statements.
Management also recognizes its responsibility for conducting
the company's affairs according to the highest standards of
personal and corporate conduct. This responsibility is
characterized and reflected in key policy statements issued from
time to time regarding, among other things, conduct of its
business activities within the laws of the host countries in
which the company operates and potentially conflicting outside
business interests of its employees. The company maintains a
systematic program to assess compliance with these policies.
/s/Paul H. O'Neill
Paul H. O'Neill
Chairman of the Board and Chief Executive Officer
/s/Jan H. M. Hommen
Jan H. M. Hommen
Executive Vice President and Chief Financial Officer
Audit Committee Report
The Audit Committee of the Board of Directors, which is composed
of four independent directors, met six times in 1993.
The Audit Committee oversees Alcoa's financial reporting
process on behalf of the Board of Directors. In fulfilling its
responsibility, the committee recommended to the board the
reappointment of Coopers & Lybrand as the company's independent
public accountants. The Audit Committee reviewed with the
Director-Internal Audit and the independent accountants the
overall scope and specific plans for their respective audits. The
committee reviewed with management Alcoa's annual and quarterly
reporting process, and the adequacy of the company's internal
controls. Without management present, the committee met
separately with the Director-Internal Audit and the independent
accountants to review the results of their examinations, their
evaluations of the company's internal controls, and the overall
quality of Alcoa's financial reporting.
/s/Franklin A. Thomas
Franklin A. Thomas
Chairman, Audit Committee
Independent Auditor's Report
To the Shareholders and Board of Directors Aluminum Company of
America (Alcoa)
We have audited the accompanying consolidated balance sheet of
Alcoa as of December 31, 1993 and 1992, and the related
statements of consolidated income, shareholders' equity and
consolidated cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the
responsibility of Alcoa's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Alcoa at December 31, 1993 and 1992, and
the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Notes A, P and S to the consolidated
financial statements, Alcoa changed its methods of accounting for
income taxes and postretirement benefits other than pensions in 1992.
/s/Coopers & Lybrand
600 Grant St., Pittsburgh, Pa.
January 11, 1994, except for Note U,
for which the date is February 7, 1994
Statement of Consolidated Income
<TABLE>
<CAPTION>
For the year ended December 31 1993 1992 1991
- ---------------------------------------------------------------------------------------
(in millions, except share amounts)
<S> <C> <C> <C>
Revenues
Sales and operating revenues (K and U) $ 9,055.9 $ 9,491.5 $9,884.1
Other income, principally interest 93.0 96.9 97.1
- ---------------------------------------------------------------------------------------
9,148.9 9,588.4 9,981.2
- ---------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold and operating expenses 7,187.0 7,339.1 7,444.8
Selling, general administrative and other expenses 603.6 586.8 579.8
Research and development expenses 130.4 212.2 251.9
Provision for depreciation, depletion and amortization 692.6 682.4 697.9
Interest expense (N) 87.8 105.4 153.2
Taxes other than payroll and severance taxes 105.6 112.3 111.2
Special items (B) 150.8 251.6 330.9
- ---------------------------------------------------------------------------------------
8,957.8 9,289.8 9,569.7
- ---------------------------------------------------------------------------------------
Earnings
Income before taxes on income 191.1 298.6 411.5
Provision (credit) for taxes on income (P) (10.3) 132.3 192.8
- ---------------------------------------------------------------------------------------
Income from operations 201.4 166.3 218.7
Minority interests (H) (196.6) (143.9) (156.0)
- ---------------------------------------------------------------------------------------
Income before extraordinary loss and accounting changes 4.8 22.4 62.7
Extraordinary loss on debt prepayments, net of $25.8
tax benefit - (50.2) -
Cumulative effect of accounting changes for:
Postretirement benefits, net of $667.2 tax benefit
(A and S) - (1,166.4) -
Income taxes (A and P) - 55.0 -
- ---------------------------------------------------------------------------------------
Net Income (Loss) $ 4.8 $(1,139.2) $ 62.7
- ---------------------------------------------------------------------------------------
Earnings (Loss) per Common Share: (I)
Before extraordinary loss and accounting changes $ .03 $ .24 $ .71
Extraordinary loss - (.59) -
Accounting changes:
Postretirement benefits - (13.71) -
Income taxes - .65 -
- ---------------------------------------------------------------------------------------
Earnings (Loss) per common share $ .03 (13.41) $ .71
- ---------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial
statements.
</TABLE>
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31 1993 1992
- --------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C>
Assets
Current assets:
Cash $ 58.0 $ 71.8
Short-term investments (all cash equivalents except $243.6 in 1993) (T) 597.3 476.4
Receivables from customers, less allowances: 1993-$33.2; 1992-$17.7 1,218.7 1,250.1
Other receivables 211.3 160.1
Inventories (C) 1,227.2 1,040.4
Prepaid expenses and other current assets 390.0 249.5
- --------------------------------------------------------------------------------------------------
Total current assets 3,702.5 3,248.3
Properties, plants and equipment (D) 6,506.8 6,415.8
Other assets (E) 1,387.6 1,359.0
- --------------------------------------------------------------------------------------------------
Total Assets $11,596.9 $11,023.1
- --------------------------------------------------------------------------------------------------
Liabilities
Current liabilities:
Short-term borrowings $ 362.5 $ 414.2
Accounts payable, trade 596.3 617.3
Accrued compensation and retirement costs 288.0 343.2
Taxes, including taxes on income 364.3 371.5
Provision for layoffs and impairments (B) 128.8 93.1
Other current liabilities 302.2 282.1
Long-term debt due within one year 50.8 43.9
- --------------------------------------------------------------------------------------------------
Total current liabilities 2,092.9 2,165.3
Long-term debt, less amount due within one year (F and U) 1,432.5 855.3
Accrued postretirement benefits (S) 1,845.2 1,820.6
Other noncurrent liabilities and deferred credits (G) 1,022.2 990.6
Deferred income taxes 231.1 281.4
- --------------------------------------------------------------------------------------------------
Total liabilities 6,623.9 6,113.2
- --------------------------------------------------------------------------------------------------
Minority Interests (A and H) 1,389.2 1,305.6
- --------------------------------------------------------------------------------------------------
Contingent liabilities (O) - -
Shareholders' Equity
Preferred stock (J) 55.8 55.8
Common stock (J) 88.8 88.8
Additional capital 715.9 715.0
Translation adjustment (A) (188.5) (148.0)
Retained earnings 2,946.1 3,089.3
Unfunded pension obligation (7.0) -
Treasury stock, at cost (27.3) (196.6)
Total shareholders' equity 3,583.8 3,604.3
- --------------------------------------------------------------------------------------------------
Total Liabilities and Equity $11,596.9 $11,023.1
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
Statement of Consolidated Cash Flows
<TABLE>
<CAPTION>
For the year ended December 31 1993 1992 1991
- --------------------------------------------------------------------------------------------------------
(in millions)
<S> <C> <C> <C>
Cash from Operations
Net income (loss) $ 4.8 $(1,139.2) $ 62.7
Adjustments to reconcile net income (loss) to cash from operations:
Depreciation, depletion and amortization 711.1 710.1 731.6
Reduction of assets to net realizable value 16.7 144.3 31.2
Increase (reduction) in deferred income taxes (124.5) (88.0) 13.8
Equity earnings before additional taxes, net of dividends 11.7 14.8 8.0
Provision for special items 134. 107.4 302.6
(Gains) losses from financing and investing activities (1.3) (7.2) 3.1
Book value of asset disposals 20.8 15.3 30.5
Accounting changes - 1,111.4 -
Extraordinary loss - 50.2 -
Minority interests 196.6 143.9 156.0
Other (11.4) 53.9 6.0
Reduction in receivables 15.6 84.5 93.1
(Increase) reduction in inventories (130.2) 166.7 143.3
(Increase) reduction in prepaid expenses and other current assets (152.2) 70.8 14.6
Reduction in accounts payable and accrued expenses (202.8) (248.7) (42.5)
Reduction in taxes, including taxes on income (6.0) (.6) (194.5)
Payment of amortized interest on deep discount debt - (63.8) -
Net change in noncurrent assets and liabilities 52.0 82.3 66.8
- --------------------------------------------------------------------------------------------------------
Cash from operations 535.0 1,208.1 1,426.3
- --------------------------------------------------------------------------------------------------------
Financing Activities
Net additions to short-term borrowings 67.5 244.0 37.7
Common stock issued and treasury stock sold 17.7 36.2 13.4
Reductions in minority interests (14.2) (18.4) (126.3)
Dividends paid to shareholders (142.3) (138.9) (153.3)
Dividends paid to minority interests (159.3) (140.9) (205.8)
Additions to long-term debt 748.0 338.4 630.6
Payments on long-term debt (145.8) (687.1) (704.3)
- --------------------------------------------------------------------------------------------------------
Cash from (used for) financing activities 371.6 (366.7) (508.0)
- --------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (757.0) (788.8) (849.7)
Acquisitions of subsidiaries, net of cash acquired (16.3) (7.7) (31.4)
Sales of subsidiaries - 12.6 1.0
Additions to investments (5.9) (127.1) (30.8)
Sales of investments .3 50.5 -
Short-term investments, excluding cash equivalents (243.6) - -
Other receipts 5.8 7.6 3.6
Other payments (19.5) (21.4) (11.7)
- --------------------------------------------------------------------------------------------------------
Cash (used for) investing activities (1,036.2) (874.3) (919.0)
- --------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (6.9) (44.7) (9.6)
- --------------------------------------------------------------------------------------------------------
Changes in Cash
Net change in cash and cash equivalents (136.5) (77.6) (10.3)
Cash and cash equivalents at beginning of year 548.2 625.8 636.1
- --------------------------------------------------------------------------------------------------------
Cash and cash equivalents at year-end $ 411.7 $ 548.2 $ 625.8
- --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Unfunded
Preferred Common Additional Translation Retained pension Treasury Shareholders'
December 31 stock stock capital adjustment earnings obligation stock equity
- --------------------------------------------------------------------------------------------------------------------------------
(in millions, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of 1990 $ 55.8 $88.8 $713.5 $ 92.9 $ 4,473.1 - $(260.8) $ 5,163.3
Net income-1991 62.7 62.7
Cash dividends:
Preferred @ $3.75 per share (2.1) (2.1)
Common @ $1.78 per share (151.2) (151.2)
Stock issued: compensation plans .3 (4.4) 17.5 13.4
Translation adjustments (148.7) (148.7)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1991 55.8 88.8 713.8 (55.8) 4,378.1 - (243.3) 4,937.4
Net loss-1992 (1,139.2) (1,139.2)
Cash dividends:
Preferred @ $3.75 per share (2.1) (2.1)
Common @ $1.60 per share (136.8) (136.8)
Stock issued: compensation plans 1.2 (10.7) 45.7 36.2
Stock issued: debt conversions 1.0 1.0
Translation adjustments (92.2) (92.2)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1992 55.8 88.8 715.0 (148.0) 3,089.3 - (196.6) 3,604.3
Net income-1993 4.8 4.8
Cash dividends:
Preferred @ $3.75 per share (2.1) (2.1)
Common @ $1.60 per share (140.2) (140.2)
Stock issued: debt conversions (2.7) 149.5 146.8
Stock issued: compensation plans .9 (3.0) 19.8 17.7
Minimum pension liability adjustments (7.0) (7.0)
Translation adjustments (40.5) (40.5)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1993 $55.8 $88.8 $715.9 $(188.5) $ 2,946.1 $(7.0) $ (27.3) $ 3,583.8
- --------------------------------------------------------------------------------------------------------------------------------
Share Activity Common stock
-----------------------------------------------------------
Preferred stock Issued Treasury Net outstanding
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1990 557,769 88,804,220 (3,961,870) 84,842,350
Stock issued: compensation plans 239,969 239,969
Shares retired (120)
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1991 557,649 88,804,220 (3,721,901) 85,082,319
Stock issued: compensation plans 631,137 631,137
Stock issued: debt conversions 16,128 16,128
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1992 557,649 88,804,220 (3,074,636) 85,729,584
Stock issued: compensation plans 305,226 305,226
Stock issued: debt conversions 2,326,468 2,326,468
- --------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1993 557,649 88,804,220 (442,942) 88,361,278
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
Notes to Consolidated Financial Statements
(dollars in millions, except share amounts)
A. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial
statements include the accounts of Alcoa and companies more than
50% owned. Also included are joint ventures in which Alcoa has an
undivided interest. Investments in other entities are accounted
for principally on an equity basis.
Inventory Valuation. Inventories are carried at the lower of cost
or market, with cost for a substantial portion of U.S.
inventories determined under the last-in, first-out (LIFO)
method. The cost of other inventories is principally determined
under the average cost method.
Depreciation, Depletion and Amortization. Depreciation is
recorded principally on the straight-line method at rates based
on the estimated useful lives of the assets. The book value of
obsolete assets is charged to depreciation expense when they are
scrapped. Profits or losses from the sale of assets are included
in other income. Repairs and maintenance are charged to expense
as incurred.
Depletion is taken over the periods the estimated mineral
reserves are extracted. Intangibles, such as goodwill and
patents, are amortized over their estimated lives.
Environmental Expenditures. Expenditures that relate to current
operations are expensed or capitalized, as appropriate.
Expenditures that relate to an existing condition caused by past
operations, and which do not contribute to future revenues, are
expensed. Liabilities are recorded when remedial efforts are
probable and the costs can be reasonably estimated. The liability
for remediation expenditures may include, as appropriate,
elements of costs such as site investigations, consultants' fees,
feasibility studies, outside contractor expenses and monitoring
expenses. Estimates are not discounted, nor are claims for
recovery recognized. The estimates also include costs apportioned
to other potentially responsible parties to the extent that Alcoa
has reason to believe such parties will not fully pay their
proportionate share. The liability is periodically reviewed and
adjusted to reflect current remediation progress, prospective
estimates of required activity, and other factors that may be
relevant, including changes in technology or regulations.
Interest Costs. Interest related to construction of qualifying
assets is capitalized as part of construction costs.
Futures Contracts. Alcoa enters into forward and futures
contracts for foreign exchange, interest rate and commodities that
are primarily accounted for as hedges of its committed and, in some
cases, anticipated revenues and costs. The gains and losses on
these contracts are reflected in earnings concurrently with the
hedged revenues or costs. The cash flows from these contracts are
classified in a manner consistent with the underlying nature of
the transactions.
Income Taxes. Effective January 1992 Alcoa adopted SFAS 109 on
accounting for income taxes. A tax credit of $55.0, or $.65 per
share, was recorded as a cumulative effect of an accounting
change for the net decrease to the deferred tax liability. See
Note P.
Postretirement Benefit Plans Other Than Pensions. Effective
January 1992 Alcoa adopted accounting for these benefits as
prescribed by SFAS 106. An after-tax charge of $1,166.4, or
$13.71 per share, was recorded as a cumulative effect of an
accounting change. Net income was also reduced by $59.0, or
69 cents per share, for additional 1992 expenses resulting
from the change. See Note S.
Foreign Currency. The local currency is the functional currency
for Alcoa's significant operations outside the U.S., except in
Brazil. As of January 1, 1991, Alcoa adopted the Australian
dollar as the functional currency for translating financial
statements of Alcoa of Australia. The change had the effect of
reducing Alcoa's consolidated shareholders' equity at January 1
by $133 and minority interests by $128.
Reclassification. Certain amounts in previously issued financial
statements were reclassified to conform to 1993 presentations.
B. Special Items
Special items of $150.8 in 1993 ($98.0 after tax and minority
interests) include $134.1 for severance costs associated with
permanent reductions of hourly paid and salaried employees,
mainly in the company's U.S. aluminum operations. The remaining
$16.7 is associated with closing certain businesses at several
plants, including the manufacture of aluminum rod at the
Rockdale, Texas plant.
Special items in 1992 totaling $251.6 ($173.9 after tax and
minority interests) consisted of $95.7 for redundancies and
$155.9 for asset dispositions. The dispositions included the
shutdown of a facility in South Bend, Ind. and impairment of
Alcoa Composites, Inc.
The 1991 special items of $333.8 ($217.0 after tax and
minority interests) included $257.9 for costs associated with
environmental matters at several operating locations worldwide.
The largest single provision was for the smelting and fabricating
plant in Massena, N.Y. The remaining $75.9 was for restructuring
costs in several business units. Of this amount, $2.9 relates to
an equity entity and is reported in Other Income.
C. Inventories
<TABLE>
<CAPTION>
December 31 1993 1992
- --------------------------------------------------
<S> <C> <C>
Finished goods $ 317.3 $ 262.6
Work in process 415.7 350.4
Bauxite and alumina 165.9 160.1
Purchased raw materials 188.2 153.7
Operating supplies 140.1 113.6
- --------------------------------------------------
$1,227.2 $1,040.4
</TABLE>
Approximately 58% of total inventories at December 31, 1993 were
valued on a LIFO basis. If valued on an average cost basis, total
inventories would have been $623.9 and $660.2 higher at the end
of 1993 and 1992, respectively. During 1992 certain LIFO
inventory quantities were reduced and flowed through cost of
goods sold at prior years' lower costs rather than at current
costs. The effect of these reductions increased income from
operations by $49.9.
D. Properties, Plants and Equipment, at Cost
<TABLE>
<CAPTION>
December 31 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C>
Land and land rights, including mines $ 229.0 $ 228.8
Structures 3,603.4 3,476.5
Machinery and equipment 9,317.7 8,990.9
- -----------------------------------------------------------------------
13,150.1 12,696.2
Less, accumulated depreciation and depletion 7,093.9 6,671.6
- -----------------------------------------------------------------------
6,056.2 6,024.6
Construction work in progress 450.6 391.2
- -----------------------------------------------------------------------
$ 6,506.8 $ 6,415.8
</TABLE>
E. Other Assets
<TABLE>
<CAPTION>
December 31 1993 1992
- ----------------------------------------------------------------------
<S> <C> <C>
Investments $ 322.2 $ 368.9
Intangibles, net of accumulated amortization
of $189.8 in 1993 and $173.5 in 1992 179.2 183.6
Noncurrent receivables 218.9 151.5
Deferred income taxes 431.5 351.3
Deferred charges and other 235.8 303.7
- ----------------------------------------------------------------------
$1,387.6 $1,359.0
</TABLE>
F. Long-Term Debt
<TABLE>
<CAPTION>
December 31 1993 1992
- -----------------------------------------------------------------------------------
<S> <C> <C>
U.S.
4.625% Notes payable, due 1996 $ 175.0 -
Convertible subordinated debentures
6-1/4%, due 2002, convertible @ $62/share - $149.0
Discount debentures (see Note U)
7%, $225 face amount, due 2011 (14.7% effective yield) 117.3 116.0
Commercial paper (3.6% average rate) 337.3 -
Tax-exempt revenue bonds ranging
from 5-3/4% to 7. 5%, due 2000-2012 133.5 134.0
Alcoa Aluminio
Variable rate note due 1994-1997 (5.8% and 6.2% average rates) 328.7 150.2
Alcoa of Australia
Euro-commercial paper, variable rates, due
1996-1997 (3.4% and 3.7% average rates) 302.0 304.0
Other 89.5 46.0
- -----------------------------------------------------------------------------------
1,483.3 899.2
Less, amount due within one year 50.8 43.9
- -----------------------------------------------------------------------------------
$1,432.5 $855.3
</TABLE>
The amount of long-term debt maturing in each of the next five
years is $50.8 in 1994, $107.0 in 1995, $375.6 in 1996, $603.7 in
1997 and $55.1 in 1998.
Alcoa has two Revolving Credit Agreements of $375 each with
a group of international banks. One agreement may be renewed for
one year after July 1994 and the other matures in July 1997.
While commercial paper balances are outstanding, certain levels
of consolidated net worth and working capital must be maintained.
Up to $375 of commercial paper issued by Alcoa and the Euro-
commercial paper issued by Alcoa of Australia are classified as
long-term debt since they are backed by long-term revolving
credit agreements.
In 1992 outstanding commercial paper was classified as short-
term borrowings because the multiple-option loan facility that
backed the commercial paper expired in September 1993. The
commercial paper outstanding at December 31, 1992 was $209.6.
G. Other Noncurrent Liabilities and Deferred Credits
<TABLE>
<CAPTION>
December 31 1993 1992
- -----------------------------------------------------------------
<S> <C> <C>
On-site environmental remediation $ 348.0 $444.5
Other noncurrent liabilities 437.1 321.6
Deferred credits 237.1 224.5
- -----------------------------------------------------------------
$1,022.2 $990.6
</TABLE>
H. Minority Interests
The following table summarizes the minority shareholders'
interests in the equity of subsidiaries that are more than 50%
owned by Alcoa.
<TABLE>
<CAPTION>
December 31 1993 1992
- -----------------------------------------------------------------
<S> <C> <C>
Alcoa of Australia $ 616.1 $ 599.8
Alcoa International Holdings Company (AIHC) 250.0 250.0
Alcoa Aluminio 164.9 159.5
Alcoa Brazil Holdings Company 102.1 95.8
Other majority-owned companies 256.1 200.5
- -----------------------------------------------------------------
$1,389.2 $1,305.6
</TABLE>
AIHC's minority interests consist of four series of preferred
stock with a weighted average annual dividend rate of 5.1% for
1993, 6.7% for 1992 and 7.7% for 1991.
Alcoa Aluminio's minority interests include $214.7 of
convertible preferred stock with an annual dividend of $18.4.
I. Earnings per Common Share
Primary earnings per common share are computed by subtracting
annual preferred dividend requirements from net income, and
dividing that amount by the weighted average number of common
shares outstanding during each year. The average number of shares
used to compute primary earnings per common share was 87,673,141
in 1993, 85,474,089 in 1992 and 84,983,749 in 1991. Fully diluted
earnings per common share are not stated since the dilution is
not material.
J. Preferred and Common Stock
Preferred Stock. Alcoa has two classes of preferred stock. Serial
preferred stock has 557,740 shares authorized, with a par value
per share of $100 and an annual $3.75 cumulative dividend
preference per share. Class B serial preferred stock has 10
million shares authorized (none issued) and a par value of $1 per
share.
Common Stock. There are 300 million shares authorized at a par
value of $1 per share. As of December 31, 1993, shares of common
stock reserved for issuance were:
<TABLE>
<CAPTION>
Number of shares
- ---------------------------------------------------
<S> <C>
Long-term stock incentive plan 6,519,522
Employees' savings plans 2,048,766
Incentive compensation plan 84,614
- --------------------------------------------------
8,652,902
</TABLE>
Stock options under the long-term stock incentive plan have been
and may be granted, generally at not less than market prices on
the dates of grant, except for the $1 per share options issued as
a payout of earned performance share awards. At December 31,1993,
options for 2,164,857 shares were exercisable.
The transactions for shares under option were:
<TABLE>
<CAPTION>
1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding, beginning of year:
Number 3,286,052 3,014,031 2,470,548
Price $1.00-80.13 $1.00-76.88 $1.00-76.88
Granted:
Number 1,481,729 1,584,002 934,485
Price $1.00-77.13 $1.00-80.13 $1.00-72.38
Exercised:
Number (676,546) (1,300,081) (371,702)
Price $1.00-73.13 $1.00-80.13 $1.00-64.63
Expired or canceled (74,809) (11,900) (19,300)
- --------------------------------------------------------------------------
Outstanding, end of year:
Number 4,016,426 3,286,052 3,014,031
Price $1.00-80.13 $1.00-80.13 $1.00-76.88
- --------------------------------------------------------------------------
Shares reserved for future options
at end of year 2,503,096 3,679,620 896,025
</TABLE>
K. Segment and Geographic Area Information
Alcoa is primarily an integrated producer of aluminum products.
Alcoa's operations consist of three segments: Alumina and
Chemicals, Aluminum Processing, and Non-Aluminum Products.
The Alumina and Chemicals segment includes the production
and sale of bauxite, alumina, alumina chemicals and
transportation services.
The Aluminum Processing segment comprises the production and
sale of molten metal, ingot, and aluminum products that are flat-
rolled, engineered or finished. Also included are power,
transportation and other services.
The Non-Aluminum Products segment includes the production
and sale of electrical, ceramic, plastic and composite materials
products, manufacturing equipment, gold, magnesium products, and
steel and titanium forgings.
<TABLE>
<CAPTION>
Segment information 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to customers:
Alumina and chemicals $ 1,436.5 $ 1,421.6 $ 1,496.3
Aluminum processing 5,973.6 6,516.9 6,960.7
Non-aluminum products 1,645.8 1,553.0 1,427.1
Intersegment sales: (1)
Alumina and chemicals 649.3 671.8 912.4
Aluminum processing 13.6 22.0 3.1
Non-aluminum products 72.9 61.5 78.8
Eliminations (735.8) (755.3) (994.3)
- ------------------------------------------------------------------------------
Total sales and operating revenues $ 9,055.9 $ 9,491.5 $ 9,884.1
- ------------------------------------------------------------------------------
Operating profit (loss) before special items:
Alumina and chemicals $ 372.7 $ 278.2 $ 566.3
Aluminum processing (21.2) 288.5 354.5
Non-aluminum products 5.0 (31.0) (133.6)
Unallocated (5.1) (2.5) 10.0
- ------------------------------------------------------------------------------
Total $ 351.4 $ 533.2 $ 797.2
- ------------------------------------------------------------------------------
Operating profit (loss) after special items:
Alumina and chemicals $ 365.6 $ 273.5 $ 534.7
Aluminum processing (155.0) 181.9 84.4
Non-aluminum products (4.9) (171.3) (162.8)
Unallocated (5.1) (2.5) 10.0
- ------------------------------------------------------------------------------
Total operating profit 200.6 281.6 466.3
Other income 78.3 122.4 98.4
Interest expense 87.8 105.4 153.2
- ------------------------------------------------------------------------------
Income before taxes on income $ 191.1 $ 298.6 $ 411.5
- ------------------------------------------------------------------------------
Identifiable assets:
Alumina and chemicals $ 2,854.3 $ 2,685.5 $ 2,689.8
Aluminum processing 6,929.1 6,640.1 6,838.6
Non-aluminum products 1,483.7 1,313.6 1,298.0
- ------------------------------------------------------------------------------
Total identifiable assets 11,267.1 10,639.2 10,826.4
Investments 322.2 368.9 240.0
Corporate assets 7.6 15.0 112.0
- ------------------------------------------------------------------------------
Total assets $11,596.9 $11,023.1 $11,178.4
- ------------------------------------------------------------------------------
Depreciation and depletion:
Alumina and chemicals $ 144.5 $ 137.6 $ 146.6
Aluminum processing 475.3 483.0 481.3
Non-aluminum products 85.1 84.8 92.0
- ------------------------------------------------------------------------------
Total depreciation and depletion (2) $ 704.9 $ 705.4 $ 719.9
- ------------------------------------------------------------------------------
Capital expenditures:
Alumina and chemicals $ 232.6 $ 234.5 $ 285.3
Aluminum processing 423.7 462.1 480.4
Non-aluminum products 100.7 92.2 84.0
- ------------------------------------------------------------------------------
Total capital expenditures $ 757.0 $ 788.8 $ 849.7
- ------------------------------------------------------------------------------
(Notes to this table follow geographic area information)
</TABLE>
<TABLE>
<CAPTION>
Geographic area information 1993 1992 1991
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to customers:
USA $ 5,279.4 $ 5,658.6 $ 5,705.5
Other Americas 948.2 1,055.9 1,112.0
Pacific 1,752.5 1,710.2 1,954.6
Europe 1,075.8 1,066.8 1,112.0
Transfers between geographic areas: (1)
USA 832.9 1,001.6 948.6
Other Americas 342.6 253.6 287.7
Pacific 36.1 54.3 121.7
Europe 28.3 65.1 52.6
Eliminations (1,239.9) (1,374.6) (1,410.6)
- ---------------------------------------------------------------------------------
Total sales and operating revenues $ 9,055.9 $ 9,491.5 $ 9,884.1
- ---------------------------------------------------------------------------------
Operating profit (loss) before special items:
USA $ (193.1) $ 55.0 $ 97.5
Other Americas 139.5 90.9 125.4
Pacific 399.2 297.6 478.6
Europe 5.8 89.7 95.7
- ---------------------------------------------------------------------------------
Total $ 351.4 $ 533.2 $ 797.2
- ---------------------------------------------------------------------------------
Operating profit (loss) after special items:
USA $ (340.7) $ (176.5) $ (179.0)
Other Americas 139.5 87.0 104.8
Pacific 399.2 297.6 450.2
Europe 2.6 73.5 90.3
- ---------------------------------------------------------------------------------
Total operating profit $ 200.6 $ 281.6 $ 466.3
- ---------------------------------------------------------------------------------
Identifiable assets:
USA $ 6,270.9 $ 6,092.3 $ 6,044.2
Other Americas 1,691.4 1,441.9 1,391.7
Pacific 2,384.2 2,345.6 2,571.9
Europe 920.6 759.4 818.6
- ---------------------------------------------------------------------------------
Total identifiable assets 11,267.1 10,639.2 10,826.4
Investments 322.2 368.9 240.0
Corporate assets 7.6 15.0 112.0
- ---------------------------------------------------------------------------------
Total assets $11,596.9 $11,023.1 $11,178.4
- ---------------------------------------------------------------------------------
Capital expenditures:
USA $ 405.0 $ 457.6 $ 509.0
Other Americas 105.0 75.1 60.5
Pacific 162.7 184.5 228.9
Europe 84.3 71.6 51.3
- ---------------------------------------------------------------------------------
Total capital expenditures $ 757.0 $ 788.8 $ 849.7
<FN>
(1) Transfers between segments and geographic areas are based on
generally prevailing market prices.
(2) Includes depreciation of $12.3 in 1993, $23 in 1992 and $22
in 1991 reported as research and development expenses in the
income statement.
</TABLE>
Total exports from the U.S. in 1993 were $896 compared with $993
in 1992 and $967 in 1991.
L. Majority-Owned Subsidiaries
The condensed financial statements of Alcoa's principal majority-
owned subsidiaries follow.
Alcoa Aluminio S.A.-a 59%-owned Brazilian subsidiary:
<TABLE>
<CAPTION>
December 31 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Cash and short-term investments $ 160.2 $ 54.5
Other current assets 283.7 214.7
Properties, plants and equipment, net 870.8 846.6
Other assets 207.8 156.7
- ------------------------------------------------------------
Total assets 1,522.5 1,272.5
- ------------------------------------------------------------
Current liabilities 372.7 337.4
Long-term debt* 322.5 137.6
Other liabilities 35.9 36.9
- ------------------------------------------------------------
Total liabilities 731.1 511.9
- ------------------------------------------------------------
Net assets $ 791.4 $ 760.6
<FN>
*Held by Alcoa Brazil Holdings Company-$22.5
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
- --------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 685.8 $ 659.0 $ 648.0
Costs and expenses* (625.3) (634.8) (699.0)
Translation and exchange adjustments (10.7) (9.2) (8.7)
Income tax expense (.6) 5.6 (2.4)
- --------------------------------------------------------------------
Net income* $ 49.2 $ 20.6 $ (62.1)
- --------------------------------------------------------------------
<FN>
*Includes a special charge of $18.8 in 1991 for environmental and
restructuring charges
</TABLE>
Alcoa of Australia Limited-a 51%-owned subsidiary of Alcoa
International Holdings Company:
<TABLE>
<CAPTION>
December 31 1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Cash and short-term investments $ 350.3 $ 354.4
Other current assets 425.7 429.5
Properties, plants and equipment, net 1,430.1 1,381.4
Other assets 85.7 80.4
- ------------------------------------------------------------
Total assets 2,291.8 2,245.7
- ------------------------------------------------------------
Current liabilities 399.7 383.4
Long-term debt 302.0 304.0
Other liabilities 332.7 334.3
- ------------------------------------------------------------
Total liabilities 1,034.4 1,021.7
- ------------------------------------------------------------
Net assets $1,257.4 $1,224.0
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues* $ 1,660.9 $ 1,661.7 $ 2,001.5
Costs and expenses** (1,264.6) (1,297.7) (1,500.4)
Translation and exchange adjustments 5.2 (13.8) (2.6)
Income tax expense** (88.1) (132.0) (183.0)
Accounting changes*** - 33.6 -
- -------------------------------------------------------------------------
Net income** $ 313.4 $ 251.8 $ 315.5
- -------------------------------------------------------------------------
<FN>
* Revenues from Alcoa were $50.3 in 1993, $60.6 in 1992 and
$142.3 in 1991. The terms of the transactions were established by
negotiation between the parties.
** Includes a special charge of $11.8 ($7.2 after tax) in 1991 for
environmental charges
*** Consists of $37 for income taxes and $(3.4) for postretirement
benefits
</TABLE>
M. Financial Instruments
Under a power contract that expires no earlier than 2011, Alcoa
is entitled to a fixed percentage of the annual output from a
Northwest U.S. hydroelectric facility. Alcoa makes minimum annual
payments of $8 whether or not it receives power. Alcoa could be
required to increase its participation if other parties to the
contract default. If all other parties had defaulted as of
December 31, 1993, Alcoa's maximum liability would have been
about $190. There is no reason to believe the other parties will
default or that power will not be provided.
At December 31, 1993, Alcoa had open currency exchange
commitments consisting of purchase contracts of $516 and sell
contracts of $1,089. These contracts are part of a worldwide
program to minimize volatility in foreign exchange operating
income and balance sheet exposure. The contracts generally mature
within 12 months and are principally unsecured forward exchange
contracts with selected banks.
The methods used to estimate the fair value of certain
financial instruments follow.
Cash and Short-Term Investments. The carrying amount approximates
fair value because of the short maturity of the instruments.
Investments and Noncurrent Receivables. The majority of Alcoa's
investments represent equity interests in various companies and
joint ventures for which there is no quoted market price. To
estimate the fair value of these investments, Alcoa would have
had to incur excessive costs. The fair value of noncurrent
receivables is based on anticipated cash flows.
Long-Term Debt. The fair value of long-term debt is based on
interest rates that are currently available to Alcoa for issuance
of debt with similar terms and remaining maturities.
The fair value of recorded financial instruments, excluding
investments, does not materially differ from the values reflected
on the books.
N. Interest Cost Components
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------
<S> <C> <C> <C>
Amount charged to expense $87.8 $105.4 $153.2
Amount capitalized 3.5 11.1 12.6
- ---------------------------------------------------------
$91.3 $116.5 $165.8
</TABLE>
O. Contingent Liabilities
Various lawsuits and claims and proceedings have been or may be
instituted or asserted against Alcoa, including those pertaining
to environmental, product liability, and safety and health
matters. While the amounts claimed may be substantial, the
ultimate liability cannot now be determined because of the
considerable uncertainties that exist. Therefore, it is possible
that results of operations or liquidity in a particular period
could be materially affected by certain contingencies. Management
believes, however, that the disposition of matters that are
pending or asserted will not have a materially adverse effect on
the financial position of the company.
P. Income Taxes
As discussed in Note A, Alcoa implemented SFAS 109 as of January
1, 1992 and the cumulative effect of this change is reported in
1992 earnings. Prior years' financial statements have not been
restated. The components of income before taxes on income were:
<TABLE>
<CAPTION>
1993 1992 1991
- --------------------------------------------------------
<S> <C> <C> <C>
U.S. $(359.4) $(241.5) $(230.4)
Foreign 550.5 540.1 641.9
- --------------------------------------------------------
$ 191.1 $ 298.6 $ 411.5
</TABLE>
The provision for taxes on income consisted of:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. federal* $ (53.6) $ 46.9 $(50.0)
Foreign 163.0 174.1 217.9
State and local 4.8 (.7) 11.1
- -------------------------------------------------------
114.2 220.3 179.0
- -------------------------------------------------------
Deferred:
U.S. federal* (80.2) (71.2) (11.3)
Foreign (47.2) (11.7) 25.1
State and local 2.9 (5.1) -
- -------------------------------------------------------
(124.5) (88.0) 13.8
- -------------------------------------------------------
Total $ (10.3) $132.3 $192.8
<FN>
*Includes U.S. taxes related to foreign income
</TABLE>
Deferred taxes in 1993 included credits of $130.4 for a U.S. tax
loss carryforward and statutory tax rate change adjustments of
$9.9 in the U.S. and $41.6 in Australia.
Reconciliation of the effective tax rate to the U.S.
statutory rate follows.
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory rate (%) 35.0 34.0 34.0
Taxes on foreign income (9.2) 10.0 12.4
State taxes net of federal benefit 2.1 (1.3) 1.8
Tax rate changes (26.9) - -
Adjustments to prior years' accruals (3.0) (1.5) 1.3
Other (3.4) 3.1 (2.6)
- ----------------------------------------------------------------
Effective tax rate (%) (5.4) 44.3 46.9
</TABLE>
The components of net deferred tax assets and liabilities follow.
<TABLE>
<CAPTION>
1993 1992
--------------------------- ---------------------------
Deferred tax Deferred tax Deferred tax Deferred tax
December 31 assets liabilities assets liabilities
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation - $864.4 - $ 929.9
Employee benefits $ 781.5 - $ 755.5 -
Loss provisions 264.9 - 255.7 -
Deferred income 38.4 84.1 70.2 75.8
Tax loss carryforwards 291.2 - 158.5 -
Tax credit carryforwards 20.1 - 85.7 -
Other 41.0 21.2 31.0 33.3
- ------------------------------------------------------------------------------------
1,437.1 969.7 1,356.6 1,039.0
Valuation allowance (171.4) - (157.3) -
- ------------------------------------------------------------------------------------
$1,265.7 $969.7 $1,199.3 $1,039.0
</TABLE>
Of the total tax loss carryforwards, $32.0 expires over the next
two years, $51.2 expires over the next 10 years, $130.4 expires
over the next 15 years and $77.6 is unlimited. A substantial
portion of the valuation allowance is for these carryforwards
because the ability to utilize a portion of them is uncertain.
There is no limit on utilization of the tax credit carryforwards.
Deferred income taxes provided for timing differences in the
recognition of revenue and expense for tax and financial
statement purposes prior to the new accounting rules follow.
<TABLE>
<CAPTION>
1991
- -----------------------------------------------
<S> <C>
Depreciation $57.1
Employee benefits 9.3
Loss provisions not currently deductible (57.9)
Deferred income 3.8
Other 1.5
- -----------------------------------------------
$13.8
</TABLE>
The cumulative amount of Alcoa's share of undistributed earnings
for which no deferred taxes have been provided was $1,499.8 at
December 31, 1993. Management has no plans to distribute such
earnings in the foreseeable future. It is not practicable to
determine the deferred tax liability on these earnings.
Q. Lease Expense
Certain equipment, warehousing and office space, and oceangoing
vessels are under operating lease agreements. Total expense for
all leases was $73.7 in 1993, $74.8 in 1992 and $77.7 in 1991.
Under long-term leases, minimum annual rentals are $35.7 in 1994,
$27.9 in 1995, $21.8 in 1996, $15.5 in 1997, $12.5 in 1998 and a
total of $25.4 for 1999 and thereafter.
R. Pension Plans
Alcoa maintains pension plans covering most U.S. employees and
certain other employees. Pension benefits generally depend upon
length of service, job grade and remuneration. Substantially all
benefits are paid through pension trusts that are sufficiently
funded to ensure that all plans can pay benefits to retirees as
they become due.
Pension costs include the following components that were
calculated as of January 1 of each year.
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned $102.4 $ 92.2 $ 82.6
Interest accrued on projected
benefit obligation 253.9 250.7 240.9
Net amortization 59.8 29.7 21.2
416.1 372.6 344.7
Less: expected return on plan assets* 268.1 259.2 249.0
$148.0 $ 113.4 $ 95.7
<FN>
*The actual returns were higher than the expected returns by
$324.2 in 1993, $82.4 in 1992 and $253.9 in 1991 and were
deferred as actuarial gains.
</TABLE>
The status of the pension plans follows.
<TABLE>
<CAPTION>
Assets exceed Accumulated benefit
accumulated obligation
benefit obligation exceeds assets
---------------------- -----------------------
December 31 1993 1992 1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets, primarily
stocks and bonds
at market $3,688.4 $1,702.1 $ 90.6 $1,662.1
- ---------------------------------------------------------------------------------
Present value of obligation:
Vested 3,154.8 1,450.0 197.1 1,697.7
Non-vested 310.9 147.8 17.3 161.2
- ---------------------------------------------------------------------------------
Accumulated benefit obligation 3,465.7 1,597.8 214.4 1,858.9
Effect of assumed
salary increases 328.1 60.3 20.0 236.7
- ---------------------------------------------------------------------------------
Projected benefit obligation $3,793.8 $1,658.1 $ 234.4 $2,095.6
- ---------------------------------------------------------------------------------
Plan assets greater (less than)
projected benefit obligation $ (105.4) $ 44.0 $ (143.8) $ (433.5)
Unrecognized:
Transition (assets) obligation 7.7 (49.3) 10.8 67.2
Prior service costs 138.6 27.0 53.8 43.6
Actuarial (gains) losses, net (113.3) 56.0 (4.1) 200.8
Minimum liability adjustment - - (43.4) (78.5)
- ---------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ (72.4) $ 77.7 $ (126.7) $ (200.4)
- ---------------------------------------------------------------------------------
</TABLE>
Assumptions used to determine plan liabilities and expenses follow.
<TABLE>
<CAPTION>
December 31 1993 1992 1991
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Settlement discount rate 6.75% 6.75% 7.25%
Long-term rate for compensation increases 5.5 5.5 5.5
Long-term rate of return on plan assets 9.0 9.0 9.0
- ----------------------------------------------------------------------
</TABLE>
Supplemental information related only to Alcoa's U.S. pension
plans partially insured by the Pension Benefit Guarantee
Corporation follow.
<TABLE>
<CAPTION>
Assets exceed Accumulated benefit
accumulated obligation
benefit obligation exceeds assets
----------------------- ----------------------
December 31 1993 1992 1993 1992
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair market value $ 3,270.5 $ 1,359.5 $ 21.7 $ 1,601.3
Accumulated benefit obligation (3,115.6) (1,284.0) (23.9) (1,691.8)
- ------------------------------------------------------------------------------------
$ 154.9 $ 75.5 $ (2.2) $ (90.5)
- ------------------------------------------------------------------------------------
</TABLE>
Alcoa also sponsors a number of defined contribution pension
plans. Expenses were $34.5 in 1993, $23.9 in 1992 and $22.1 in
1991.
S. Postretirement Benefits
Alcoa maintains health care and life insurance benefit plans
covering most eligible U.S. retired employees and certain other
retirees. Generally, the medical plans pay a stated percentage of
medical expenses reduced by deductibles and other coverages. These
plans are generally unfunded, except for certain benefits funded
through a trust. Life benefits are generally provided by
insurance contracts. Alcoa retains the right, subject to existing
agreements, to change or eliminate these benefits.
In 1993 changes made to certain medical plans may require
contributions by future retirees to help offset medical cost
increases. The changes reduced Alcoa's benefit expense and prior
service costs.
Alcoa implemented the new accounting rule on postretirement
benefits effective January 1, 1992. These benefits are now
accrued over the period the employee provides services to the
company. Prior to the change, costs were charged to expense when
paid. The accounting change resulted in a one-time charge to
earnings of $1,166.4, net of taxes of $667.2.
The components of postretirement benefit expense follow.
<TABLE>
<CAPTION>
1993 1992
- ------------------------------------------------------------
<S> <C> <C>
Service cost of benefits earned $ 29.9 $ 42.9
Interest cost on liability 110.2 135.9
Net amortization (32.4) -
Return on plan assets (5.2) (3.7)
- ------------------------------------------------------------
Accrued postretirement benefit costs $102.5 $175.1
</TABLE>
The status of the postretirement benefit plans was:
<TABLE>
<CAPTION>
December 31 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C>
Retirees $1,070.4 $1,023.6
Fully eligible active plan participants 142.9 224.9
Other active participants 378.6 757.1
- ------------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO) 1,591.9 2,005.6
Plan assets, primarily stocks and bonds at market 53.4 57.6
- ------------------------------------------------------------------------
APBO in excess of plan assets 1,538.5 1,948.0
Unrecognized net:
Reduction in prior service costs 469.4 35.7
Actuarial losses (78.8) (87.9)
- ------------------------------------------------------------------------
Accrued postretirement benefit liability $1,929.1 $1,895.8
</TABLE>
For measuring the liability and expense, a 10.5% annual rate of
increase in the per capita claims cost was assumed for 1994,
declining gradually to 4.75% by the year 2001 and thereafter. For
both years the discount rate was 6.75%, and the rates for
compensation increases and return on plan assets were 5.5% and
9%, respectively. For 1993 a 1% increase in the trend rate for
health care costs would have increased the APBO by 10% and
service and interest costs by 12%.
Cash payments for postretirement benefits were $80.4 in
1993, $76.6 in 1992 and $71.1 in 1991.
T. Cash Flow Information
Alcoa considers all investments purchased with a maturity of
three months or less to be cash equivalents.
Cash payments for interest and income taxes follows.
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------
<S> <C> <C> <C>
Interest $101.2 $193.9* $154.9
Income taxes 193.6 264.4 426.1
- -------------------------------------------------------
<FN>
*Includes $63.8 of amortized interest on the 7% debentures
retired early.
</TABLE>
In a non-cash transaction early in 1993, $149 of 6-1/4
Convertible Subordinated Debentures due 2002 were converted to
common stock by issuing 2.3 million shares of treasury stock.
Cash flows in 1992 were not affected by the accounting
changes for postretirement benefits and income taxes.
U. Subsequent Events
In February 1994, Alcoa issued $250 of 5-3/4% Notes due 2001. The
net proceeds were used to redeem $225 of Alcoa's 7% Debentures
due 2011. These debentures carried an effective yield of 14.7%.
The early payment of the debentures will result in an
extraordinary loss in the 1994 first quarter of $67.9.
In February 1994, Alcoa announced that it would reduce
primary aluminum production in its U.S. operations by 100,000
metric tons (mt) per year. Alcoa of Australia separately
announced reductions of 25,000 mt at its Point Henry smelter in
Geelong, Australia and 26,000 mt at the Portland, Australia
smelter. Alcoa of Australia has a 45% interest in the Portland
smelter.
Supplemental Financial
Information
Quarterly Data (unaudited)
(dollars in millions, except share amounts)
<TABLE>
<CAPTION>
1993 First Second Third Fourth Year
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales and operating revenues $2,109.6 $2,405.3 $2,230.2 $2,310.8 $9,055.9
Income from operations 64.5 109.6 73.4 (46.1) 201.4
Net income (loss) *# 27.6 35.3 28.8 (86.9) 4.8
Per common share .31 .40 .32 (1.00) .03
- ---------------------------------------------------------------------------------
<FN>
*After special items of $23.8, or 27 cents per share, in the
second quarter, $4.0, or five cents per share, in the third
quarter and $70.2, or 85 cents per share, in the fourth quarter
#Net income for the second quarter includes a credit of $26.3
from a reduction in Australia's corporate tax rate from 39% to
33% and a $9.1 credit in the third quarter from the change in the
U.S. tax rate.
</TABLE>
<TABLE>
<CAPTION>
1992 First Second Third Fourth Year
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales and operating revenues $ 2,251.4 $2,406.1 $2,381.7 $2,452.3 $ 9,491.5
Income from operations 95.7 45.7 82.2 (57.3) 166.3
Extraordinary loss - (50.2) - - (50.2)
Accounting changes (1,111.4) - - - (1,111.4)
Net income (loss) *# (1,056.3) (48.2) 45.3 (80.0) (1,139.2)
Per common share:
Extraordinary loss - (.59) - - (.59)
Accounting changes (13.06) - - - (13.06)
Net income (loss) * (12.42) (.57) .52 (.94) (13.41)
- ------------------------------------------------------------------------------------
<FN>
*After special items of $44.9, or 52 cents per share, in the second
quarter and $129.0, or $1.51 per share, in the fourth quarter
#The net loss for the year includes $49.9 LIFO inventory profits
of which $37.2 were recorded in the fourth quarter.
</TABLE>
Average Number of Employees (unaudited)
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------
<S> <C> <C> <C>
USA 31,700 34,200 36,300
Other Americas 16,600 17,000 16,800
Pacific 6,700 6,200 6,400
Europe 8,400 6,200 6,100
- ------------------------------------------------------
63,400 63,600 65,600
</TABLE>
GRAPHICS APPENDIX LIST
The following graphs, together with the accompanying text set forth
below, appear on the same pages as the Financial Review (Management's
Discussion and Analysis) Section in the Annual Report but are not
part of the Financial Review.
Page Where
Graphic Appears Description of Graphic or Cross-Reference
page 14 Graph 1, a line graph, depicts percentage improvement
Graph 1 change per annum from the base year 1989 (1989=0) in the
life of smelting cells. The graph shows improvement
changes of approximately 30% in 1990; 70% in 1991; 85%
in 1992; and 93% in 1993.
The following text accompanies Graph 1:
Quantum Leap:
Improvements in the life of smelting cells
The smelting cells in which primary aluminum is made
have carbon linings that may last up to eight years.
The number of cells with linings reaching full life
expectancy is an indicator of the quality of relining
materials and methods and the proficiency of cell
operation. For Alcoa's six U.S. smelting locations,
which together have 3,632 cells, the number of cell
linings reaching full life expectancy has increased
93% since 1989. Overall improvements in cell life are
expected to yield annual savings of more than $22 million.
page 15 Graph 2, a bar chart, depicts percentage decrease per
Graph 2 annum from the base year 1990 (1990=100%) in aluminum can
sheet inventory. The bar chart shows that inventory of
can sheet decreased to approximately 75% of 1990 levels
in 1991; 40% of such levels in 1992; and 37% of such
levels in 1993.
The following text accompanies Graph 2:
Quantum Leap:
Reduction in can sheet inventory
Alcoa's largest single category of product is aluminum
sheet for beverage cans. The competitive demands of this
high-volume product require stringent controls to limit
working capital, which includes inventories, while still
meeting exacting customer delivery requirements. Since
1990 Alcoa has reduced its total can sheet inventories
64%. During the same time, working capital was slashed
56% and on-time delivery performance to customers has
never been better.
page 16 Graph 3, a bar chart, depicts the reduction in number of
Graph 3 workdays to calculate corporate earnings at four points
in time (October 1991, May 1992, October 1992 and
February 1993). The bar chart shows that the number of
workdays required to calculate such earnings was 8 in
October 1991; 5 in May 1992; 4 in October 1992; and 3 in
February 1993.
The following text accompanies Graph 3:
Quantum Leap:
Workdays to calculate
corporate earnings
Alcoa operates at 164 plants in 24 countries. Each
location's financial performance is calculated monthly
to determine corporate earnings which are reported
publicly every three months. The entire process
involves hundreds of Alcoa accounting employees around
the world and previously took eight days to complete.
In 1991 a goal was set to complete the process in
three days. The goal was achieved in 1993 and has
resulted in more timely financial information and
annual cost savings of about $7 million.
page 17 Graph 4, a line graph, depicts the "material throughput"
Graph 4 ratio calculated by Alcoa Fujikura Ltd., a subsidiary,
for the years 1991, 1992 and 1993. The ratio measures
material costs reimbursed by customers to payments made
to material suppliers. The graph shows that in 1991,
92% of payments made to material suppliers were
reimbursed by customers; in 1992, this ratio improved to
approximately 93%; and in 1993, the ratio was 95.9%.
The following text accompanies Graph 4:
Quantum Leap:
Recovery of material costs
Alcoa Fujikura Ltd. (AFL) makes wiring harnesses for
cars and trucks. They are made of wire, connectors,
terminals and coverings. To improve material usage and
reduce costs, AFL began to measure "material throughput,"
which compares material costs reimbursed by customers
to payments made to materials suppliers. This enabled
AFL to reduce material costs associated with
obsolescence, freight and handling losses, overproduc-
tion and scrap. Throughput increased to 95.9% for
savings of $6.6 million.
Exhibit 21
SUBSIDIARIES AND EQUITY ENTITIES OF THE COMPANY
(As of December 31, 1993)
State or
country of
Name organization
Alcoa Brazil Holdings Company Delaware
Alcoa Aluminio S.A. Brazil
Alcoa Composites, Inc.* Delaware
Alcoa Generating Corporation Indiana
Alcoa International Holdings Company Delaware
Alcoa Inter-America, Inc. Delaware
Alcoa International Finance Company Delaware
Alcoa International, S.A. Switzerland
Alcoa Japan Limited Japan
Alcoa-Kofem Kft. Hungary
Alcoa Nederland Holding B.V. The Netherlands
Alcoa Nederland B.V. The Netherlands
Alcoa of Australia Limited Australia
A.F.P. Pty. Limited Australia
Hedges Gold Pty. Ltd. Australia
Alcoa of Australia (Asia) Limited Hong Kong
Alutodo, S.A. de C.V. Mexico
Kobe Alcoa Transportation Products, Ltd. Japan
Norsk Alcoa A/S Norway
Alcoa Kasei Limited Japan
Alcoa Manufacturing (G.B.) Limited England
Alcoa Minerals of Jamaica, Inc. Delaware
Alcoa Nederland Finance B.V. The Netherlands
Alcoa Automotive Structures GmbH Germany
Alcoa Chemie Nederland B.V. The Netherlands
Alcoa Properties, Inc. Delaware
Alcoa South Carolina, Inc. Delaware
Jonathan's Landing, Inc. Delaware
Alcoa Recycling Company, Inc. Delaware
Alcoa Securities Corporation Delaware
Alcoa Brite Products, Inc. Delaware
Alcoa Chemie GmbH Germany
Alcoa Deutschland GmbH Germany
Alcoa Electronic Packaging, Inc. Delaware
Alcoa Fujikura Ltd. Delaware
Alcoa Kobe Transportation Products, Inc. Delaware
Alcoa Packaging Machinery, Inc. Delaware
Alcoa Steamship Company, Inc. New York
B & C Research, Inc. Ohio
Forges de Bologne S.A. France
Lib-Ore Steamship Company, Inc. Liberia
H-C Industries de Mexico, S.A. de C.V. Mexico
Halco (Mining) Inc. Delaware
Compagnie des Bauxites de Guinee Delaware
Northwest Alloys, Inc. Delaware
Pimalco, Inc. Arizona
Three Rivers Insurance Company Vermont
Tifton Aluminum Company, Inc. Delaware
Capsulas Metalicas, S.A. Spain
Gulf Closures W.L.L. Bahrain
H-C Industries, Inc. Delaware
Moralco Limited Japan
Shibazaki Seisakusho Limited Japan
The Stolle Corporation** Ohio
Suriname Aluminum Company Delaware
Tapoco, Inc. Tennessee
Yadkin, Inc. North Carolina
The names of certain subsidiaries and equity entities which,
considered in the aggregate, would not constitute a significant
subsidiary, have been omitted from the above list.
* Registered to do business in Utah under the names of Fiber
Technology and Fibertek.
** Registered to do business in Nevada under the name of Alcoa
Building Products, Inc. Also registered to do business in
California under the name of Stolle-Norcold Company.
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Aluminum Company of America on Form S-8 (Registration
Nos. 33-22346, 33-24846 and 33-49109) and Form S-3 (Registration
Nos. 33-877 and 33-49997) of our reports dated January 11, 1994 on our
audits of the consolidated financial statements and financial statement
schedules of Aluminum Company of America and consolidated subsidiaries
as of December 31, 1993 and 1992 and for each of the three years in
the period ended December 31, 1993, which reports are incorporated by
reference or included in this Form 10-K.
/s/Coopers & Lybrand
COOPERS & LYBRAND
600 Grant Street
Pittsburgh, Pennsylvania
March 9, 1994
Exhibit 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
Directors of Aluminum Company of America (the "Company") hereby
constitute and appoint JAN H. M. HOMMEN, MARY L. AMBROSE, EARNEST
J. EDWARDS and BARBARA S. JEREMIAH, or any of them, their true
and lawful attorneys and agents to do any and all acts and things
and execute any and all instruments which said attorneys and
agents, or any of them, may deem necessary or advisable or may be
required to enable the Company to comply with the Securities Act
of 1934, as amended, and any rules, regulations or requirements
of the Securities and Exchange Commission in respect thereof, in
connection with the registration under said Act of the Company's
Annual Report on Form 10-K for 1993, including specifically, but
without limiting the generality of the foregoing, power and
authority to sign the name of the undersigned Directors of the
Company to the Company's Annual Report on Form 10-K for 1993 to
be filed with the Securities and Exchange Commission and to any
instruments or documents filed as part of or in connection with
any such Form 10-K; and the undersigned hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these
presents on the date set opposite their names below.
/s/KENNETH W. DAM January 14, 1994
Kenneth W. Dam
/s/JOHN P. DIESEL January 14, 1994
John P. Diesel
/s/JUDITH M. GUERON January 14, 1994
Judith M. Gueron
/s/JOSEPH T. GORMAN March 11, 1994
Joseph T. Gorman
/s/JOHN P. MULRONEY January 14, 1994
John P. Mulroney
/s/SIR ARVI PARBO January 14, 1994
Sir Arvi Parbo
/s/FORREST N. SHUMWAY January 14, 1994
Forrest N. Shumway
/s/FRANKLIN A. THOMAS January 14, 1994
Franklin A. Thomas
