FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1994 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)
Office of Investor Relations 412-553-3042
Office of the Secretary 412-553-4707
(Registrant's telephone number including area code)
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
As of November 8, 1994, 89,335,762 shares of common stock,
par value $1.00, of the Registrant were outstanding.
PART I - FINANCIAL INFORMATION
Alcoa and subsidiaries
Consolidated Balance Sheet
(in millions)
<TABLE>
<CAPTION>
(unaudited)
September 30 December 31
ASSETS 1994 1993
------------ -----------
<S> <C> <C>
Current assets:
Cash (a) $ 61.9 $ 58.0
Short-term investments, (all cash equivalents except
$8.3 in 1994 and $243.6 in 1993)(a) 261.3 597.3
Receivables from customers, less allowances:
1994-$41.9; 1993-$33.2 1,389.3 1,218.7
Other receivables 147.4 211.3
Inventories (b) 1,193.4 1,227.2
Prepaid expenses and other current assets 362.9 390.0
--------- ---------
Total current assets 3,416.2 3,702.5
--------- ---------
Properties, plants and equipment, at cost 14,175.6 13,600.7
Less, accumulated depreciation, depletion and
amortization 7,671.2 7,093.9
--------- ---------
Net properties, plants and equipment 6,504.4 6,506.8
--------- ---------
Other assets 1,402.9 1,387.6
--------- ---------
Total assets $11,323.5 $11,596.9
========= =========
LIABILITIES
Current liabilities:
Short-term borrowings $ 247.0 $ 362.5
Accounts payable, trade 694.1 596.3
Accrued compensation and retirement costs 357.0 288.0
Taxes, including taxes on income 308.0 364.3
Provision for layoffs and impairments 130.8 128.8
Other current liabilities 257.9 302.2
Long-term debt due within one year 154.8 50.8
--------- ---------
Total current liabilities 2,149.6 2,092.9
--------- ---------
Long-term debt, less amount due within one year 1,086.0 1,432.5
Accrued postretirement benefits 1,845.0 1,845.2
Other noncurrent liabilities and deferred credits 1,000.6 1,022.2
Deferred income taxes 261.0 231.1
--------- ---------
Total liabilities 6,342.2 6,623.9
--------- ---------
MINORITY INTERESTS 1,372.9 1,389.2
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock 55.8 55.8
Common stock 89.2 88.8
Additional capital 737.8 715.9
Translation adjustment (81.0) (188.5)
Retained earnings 2,810.4 2,946.1
Unfunded pension obligation (3.7) (7.0)
Treasury stock, at cost (.1) (27.3)
--------- ---------
Total shareholders' equity 3,608.4 3,583.8
--------- ---------
Total liabilities and shareholders equity $11,323.5 $11,596.9
========= =========
(see accompanying notes)
</TABLE>
Alcoa and subsidiaries
Statement of Consolidated Income (unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Third quarter Nine months
ended ended
September 30 September 30
-------------- ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $2,561.6 $2,230.2 $7,262.5 $6,745.1
Other income, principally interest 55.4 21.3 74.2 62.2
------- ------- ------- -------
2,617.0 2,251.5 7,336.7 6,807.3
------- ------- ------- -------
COSTS AND EXPENSES
Cost of goods sold and operating expenses 2,037.4 1,775.6 5,762.6 5,310.0
Selling, general administrative and other
expenses 160.6 143.8 458.3 432.1
Research and development expenses 29.6 30.2 90.7 97.6
Provision for depreciation, depletion and
amortization 167.0 175.0 499.9 515.8
Interest expense 28.5 23.0 81.5 65.0
Taxes other than payroll and severance
taxes 23.7 25.8 74.1 80.2
Special items (c) - 6.2 79.7 42.2
------- ------- ------- -------
2,446.8 2,179.6 7,046.8 6,542.9
------- ------- ------- -------
EARNINGS
Income before taxes on income 170.2 71.9 289.9 264.4
Provision for taxes on income (d) 48.9 (1.5) 88.4 16.9
------- ------- ------- -------
Income from operations 121.3 73.4 201.5 247.5
Less: Minority interests' share (51.2) (44.6) (126.4) (155.8)
------- ------- ------- -------
Income before extraordinary loss 70.1 28.8 75.1 91.7
Extraordinary loss on debt prepayment,
net of $40.4 tax benefit (e) - - (67.9) -
------- ------- ------- -------
NET INCOME $ 70.1 $ 28.8 $ 7.2 $ 91.7
======= ======= ======= =======
Earnings per common share: (f)
Before extraordinary loss $ .79 $ .32 $ .83 $ 1.03
Extraordinary loss - - (.76) -
------- ------- ------- -------
Earnings per common share $ .79 $ .32 $ .07 $ 1.03
Dividends paid per common share $ .40 $ .40 $ 1.20 $ 1.20
======= ======= ======= =======
(see accompanying notes)
</TABLE>
Alcoa and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
<TABLE>
<CAPTION>
Nine months ended
September 30
------------
1994 1993
---------- ---------
<S> <C> <C>
CASH FROM OPERATIONS
Net income $ 7.2 $ 91.7
Adjustments to reconcile net income to cash from
operations:
Depreciation, depletion and amortization 511.7 531.0
Reduction of assets to net realizable value 32.8 -
Change in deferred income taxes (141.6) (78.5)
Equity income (losses) before additional taxes, net of
dividends 7.1 (2.1)
Provision for special items 46.9 42.2
Losses from financing and investing activities (2.5) (.8)
Book value of asset disposals 34.3 11.9
Extraordinary loss 67.9 -
Minority interests 126.4 155.8
Other 15.1 (7.8)
(Increase) reduction in receivables (90.5) 79.5
(Increase) reduction in inventories 53.5 (265.9)
(Increase) reduction in prepaid expenses and other
current assets 109.8 (59.1)
Increase (reduction) in accounts payable and accrued
expenses 44.0 (136.7)
Reduction in taxes, including taxes on income (9.5) (107.1)
Payment of amortized interest on deep discount bonds (8.6) -
Net change in noncurrent assets and liabilities (1.6) 82.2
------- -------
CASH FROM OPERATIONS 802.4 336.3
------- -------
FINANCING ACTIVITIES
Net changes in short-term borrowings (119.5) (80.4)
Common stock issued and treasury stock sold 50.9 7.8
Changes in minority interests (95.0) (10.6)
Dividends paid to shareholders (107.6) (105.9)
Dividends paid to minority interests (95.8) (126.2)
Additions to long-term debt 493.7 705.3
Payments on long-term debt (857.6) (57.5)
------- -------
CASH FROM (USED FOR) FINANCING ACTIVITIES (730.9) 332.5
------- -------
INVESTING ACTIVITIES
Capital expenditures (394.0) (510.9)
Additions to investments (16.5) (9.1)
Net change in short-term investments, excluding cash
equivalents 237.9 .3
Other - receipts 3.9 4.6
- payments (17.4) (18.5)
------- -------
CASH USED FOR INVESTING ACTIVITIES (186.1) (533.6)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 17.8 (27.4)
------- -------
CHANGES IN CASH
Net change in cash and cash equivalents (96.8) 107.8
Cash and cash equivalents at beginning of year 411.7 548.2
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 314.9 $ 656.0
======= =======
(see accompanying notes)
</TABLE>
Notes to Consolidated Financial Statements
(in millions, except share amounts)
Notes:
(a) Summarized consolidated financial data for Alcoa
Aluminio S.A. and Alcoa of Australia Limited (AofA) begin on
page 13.
(b) Inventories consisted of:
September 30 December 31
1994 1993
-------------- -------------
Finished goods $ 265.0 $ 317.3
Work in process 480.0 415.7
Bauxite and alumina 190.8 165.9
Purchased raw materials 139.4 188.2
Operating supplies 118.2 140.1
$1,193.4 $1,227.2
Approximately 56.0% of total inventories at September 30,
1994 was valued on a LIFO basis. If valued on an average
cost basis, total inventories would have been $638.8 and
$623.9 higher at September 30, 1994 and December 31, 1993,
respectively.
(c) The special charge of $79.7 in the 1994 nine-month period
was for closing a forgings and extrusion plant in Vernon,
California. The charge included $32.9 for asset write-
offs and $46.8 related mostly to severance costs.
(d) The income tax provision for the period is based on
the effective tax rate expected to be applicable
for the full year. The difference between the 1994
estimated effective tax rate of 30.5% and the U.S.
statutory rate of 35% is primarily due to lower
taxes on income earned outside of the U.S.
(e) The extraordinary loss in the 1994 nine-month period of
$67.9, or 76 cents per common share, resulted from the
early redemption of $225 face value of 7% deep discount
debentures due 2011.
(f) The following formula is used to compute primary earnings
per common share (EPS):
EPS = Net income - preferred dividend requirements
--------------------------------------------
Weighted average number of common shares
outstanding for the period
The average number of shares used to compute primary
earnings per common share was 88,818,784 in 1994 and
87,470,006 in 1993. Fully diluted earnings per common
share are not stated since the dilution is not material.
In the opinion of the Company, the financial statements
and summarized financial data in this Form 10-Q report
include all adjustments, including those of a normal
recurring nature, necessary to fairly state the results
for the periods. This Form 10-Q report should be read
in conjunction with the Company's annual report on Form
10-K for the year ended December 31, 1993.
The financial data required in this Form 10-Q by Rule
10-01 of Regulation S-X have been reviewed by Coopers &
Lybrand L.L.P., the Company's independent certified
public accountants, as described in their report on
page 7.
Independent Auditor's Review Report
To the Shareholders and Board of Directors
Aluminum Company of America (Alcoa)
We have reviewed the unaudited consolidated balance
sheet of Alcoa and subsidiaries as of September 30, 1994,
the unaudited statements of consolidated income for the
three-month and nine-month periods ended September 30,
1994 and 1993, and consolidated cash flows for the nine-
month periods ended September 30, 1994 and 1993, which
are included in Alcoa's Form 10-Q for the period ended
September 30, 1994. These financial statements are the
responsibility of Alcoa's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information
consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with
generally accepted auditing standards, the consolidated
balance sheet of Alcoa and subsidiaries as of December 31,
1993, and the related statements of consolidated income,
shareholders' equity, and cash flows for the year then
ended (not presented herein). In our report dated January 11,
1994, except for Note U for which the date is February 7, 1994,
we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance
sheet as of December 31, 1993 is fairly stated, in all
material respects, in relation to the consolidated balance
sheet from which it has been derived.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Pittsburgh, Pennsylvania
October 7, 1994
Management's Discussion and Analysis of the
Results of Operations and Financial Condition
(dollars in millions, except share amounts)
Results of Operations
Principal income and operating data follow.
<TABLE>
<CAPTION>
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales and operating revenues $2,561.6 $2,230.2 $7,262.5 $6,745.1
Income before extraordinary loss 70.1 28.8 75.1 91.7
Net income 70.1 28.8 7.2 91.7
Earnings per common share
Before extraordinary loss .79 .32 .83 1.03
Net income .79 .32 .07 1.03
Shipments of aluminum products (1) 651 605 1,912 1,885
<FN>
(1) in thousands of metric tons
</TABLE>
Overview
Alcoa earned $70.1, or 79 cents per common share, for the third
quarter of 1994. For the comparable 1993 quarter, earnings were
$28.8, or 32 cents per share.
For the first nine months of 1994, earnings were $125.1 million,
or $1.39 per share, before after-tax charges. After the one-time
charges, income of $7.2 million, or seven cents per share, was
reported.
The two charges included in the first nine months of 1994 were: a
special charge of $50.0 ($79.7 pretax), or 56 cents per share,
for closing a forgings and extrusion plant in Vernon, California;
and an extraordinary loss of $67.9, or 76 cents per share, for
the early redemption of $225 of 7% debentures due 2011 that
carried an effective interest rate of 14.7%. The Vernon charge
included $20.6 for asset write-offs; most of the remaining $29.4
was for severance costs. The closure was necessary because Alcoa
could not obtain union contract concessions to offset financial
losses caused by a deteriorating competitive position and by
competitors with lower total compensation costs. Estimated
annual after tax savings from the closure are $8.
For the first nine months of 1993, Alcoa had net income of $96.0,
or $1.08 per share, excluding special charges and favorable
adjustments resulting from changes in U.S. and Australian
corporate tax rates. After adjustments, income was $91.7, or
$1.03 per share.
Alcoa of Australia Limited's (AofA) pretax income from operations
for both the 1994 third quarter and year-to-date periods dropped
34% from the comparable 1993 periods. The reduced profit was due
primarily to lower U.S. dollar prices for all products and a
stronger Australian currency. These factors were partially
offset by higher sales volumes for alumina and chemicals and
lower production costs for all products except gold where lower
ore grades increased unit costs.
In Brazil, Alcoa Aluminio's (Aluminio) third quarter 1994 pretax
income from operations was $46.8, an increase of $32.9 over the
1993 third quarter. Year-to-date pretax income was $74.2, up
$38.7 from the 1993 nine-month period. Revenues grew 35% and
23%, respectively, from the 1993 third quarter and nine-month
periods. The increased revenues were due to higher shipments and
prices for extrusions and ingot. Foreign exchange gains in the
1994 quarter also had a significant impact on Aluminio's
earnings. These factors, along with better operating performance
and higher interest income, contributed to increased pretax
income during the 1994 periods. Additionally, the monthly
inflation rate recorded in Brazil during September 1994 (.8%) was
the lowest recorded since 1973. This is a result of the
Brazilian government's change in monetary policies and its
current anti-inflation program.
Alcoa's operations, divided into three segments, follow:
1. Alumina and Chemicals Segment
Total revenues for the Alumina and Chemicals segment were $365 in
the 1994 third quarter, down 3% from the comparable 1993 quarter.
Year-to-date, revenues were $1,087, unchanged from the 1993
period.
Alumina shipments for the 1994 quarter and nine months were 6%
and 14% higher than those for the respective 1993 periods.
However, alumina revenues declined 8% and 2% from the respective
1993 periods, due to a 15% drop in prices. The price decline is
primarily due to an oversupply of alumina brought on by aluminum
production curtailments. Chemicals revenues rose 15% and 5%,
respectively, from 1993 quarter and year-to-date levels,
principally due to higher shipments in Europe and the Far East.
2. Aluminum Processing Segment
<TABLE>
<CAPTION>
Third quarter ended Nine months ended
------------------- -----------------
September 30 September 30
------------ ------------
Product classes 1994 1993 1994 1993
- --------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Flat-rolled products $ 801 $ 742 $ 2,340 $ 2,215
Aluminum ingot 260 202 704 757
Engineered products 487 386 1,335 1,143
Other aluminum products 121 110 345 326
------ ------ ------ ------
Total $ 1,669 $ 1,440 $ 4,724 $ 4,441
Shipments (000 metric tons)
Flat-rolled products 345 319 1,020 933
Aluminum ingot 172 163 517 608
Engineered products 115 96 321 282
Other aluminum products 19 27 54 62
------ ------ ------ ------
Total 651 605 1,912 1,885
</TABLE>
Flat-rolled products - The majority of revenues and shipments for
flat-rolled products are derived from rigid container sheet
(RCS). Shipments of RCS in the 1994 third quarter were
comparable to the 1993 quarter. This level of shipments is in
contrast to the second quarter 1994 when shipments grew 7%
compared to the 1993 second quarter. Third quarter 1994
shipments were adversely affected by a fire at Alcoa's Warrick
Operations on July 8. The mill resumed operations on August 12.
Year-to-date, RCS shipments were up 1% over the 1993 period.
Revenues from RCS declined 4% and 2%, respectively, from the 1993
third quarter and nine-month periods, reflecting the impact of
lower prices.
Sheet and plate shipments in the 1994 third quarter and year-to-
date periods rose 41% and 30%, respectively, from the 1993
periods. Business remains strong in the commercial and
distribution markets, particularly those related to plate
products. Revenues grew by 40% and 18% over the respective 1993
periods due primarily to the volume growth.
Revenues from other flat-rolled products, including sheet and
foil used in a variety of industrial applications, rose 37% from
the first nine months of 1993. Most of the increase relates to
Alcoa-Kofem Kft., which experienced an 84% increase in shipments
and 86% higher revenues.
Aluminum ingot - Ingot shipments for the 1994 third quarter were
up 6% from the 1993 quarter on the strength of higher shipments
by Aluminio. Year-to-date, shipments were 15% lower than those
in the 1993 period, reflecting the lower production levels
brought about by idled capacity. Realized ingot prices in 1994
increased 9% from 1993 but the impact was more than offset by
lower volumes. Aluminum ingot prices continue to rise due to
increasing demand for aluminum and reductions in aluminum
production worldwide.
Engineered products - These products include extrusions used in
the transportation and construction markets, aluminum forgings,
and wire, rod and bar. Revenues from the sale of engineered
products increased 26% in the 1994 third quarter on a 20%
increase in shipments. Average prices increased approximately 5%
for the quarter. Year-to-date, revenues and shipments were up
17% and 14%, respectively.
Shipments of wheels for both trucks and automobiles continued at
record levels with an increase of 40% over the 1993 periods.
Wheel shipments and revenues were positively affected by strong
consumer demand for automobiles and trucks. Revenues were up 36%
from the 1993 third quarter and 37% year-to-date. Realized
prices in 1994 were down slightly from those in 1993. Current
data indicates that shipment growth is slowing from these record
levels.
Sales of extruded products continued to improve with a 23%
increase in shipments and a 10% increase in prices from the 1993
quarter. Revenues were up 36% from the 1993 quarter.
Wire, rod and bar revenues increased 32% and 16%, respectively,
from the 1993 quarter and nine-month period. The increase in the
quarter was due to a 27% rise in shipments, and a 4% increase in
prices. Shipments in the nine-month period were up 14% from the
1993 period while prices increased 2%.
Other aluminum products - Shipments of other aluminum products
during the 1994 nine-month period decreased 11% from 1993. This
is the result of a 49% decline in scrap shipments in the 1994
third quarter. Revenues rose 9% and 6% in the 1994 third quarter
and nine-month periods, due primarily to a 25% increase in
aluminum powder revenues.
3. Non-Aluminum Segment
Revenues for the Non-Aluminum segment were $527 in the 1994 third
quarter, up 28% from $413 in the 1993 quarter. Year-to-date, this
segment had revenues of $1,451 compared to $1,218 in 1993. The
increases are largely due to growth in sales of wire harnesses
and fiber optic products, computer components manufactured by
Alcoa Electronic Packaging, building materials and plastic
closures.
Cost of Goods Sold
Cost of goods sold increased $261.8, or 15%, from the 1993 third
quarter. Year-to-date, the increase was $452.6, or 9%. The
increases reflect higher volumes for most products, particularly
flat-rolled and engineered products, partly offset by improved
cost performance. Cost of goods sold as a percentage of revenues
in the 1994 third quarter was comparable to the 1993 ratio. Year-
to-date, the 1994 ratio was 79.3% or .6 percentage points higher
than in 1993. The higher ratio in 1994 is primarily due to lower
prices and changes in product mix.
Cost of goods sold in the 1994 third quarter and year-to-date
periods included $21.1 of additional LIFO inventory costs due to
an increase in the projected LIFO index for the year. The
increase is principally due to higher purchased metal costs, and
was partially offset by LIFO inventory profits of $16.6.
Other Income & Expenses
Other income was up $34.1 and $12.0 from the year-ago quarter and
nine-month periods primarily because of favorable exchange
adjustments and higher interest income. Exchange gains and
interest income increased $10.1 and $15.1, respectively, in the
1994 quarter. Both of these items were affected by the issuance
of the real, Brazil's new currency, which is a significant part
of Brazil's anti-inflation program.
Selling, general and administrative expenses increased $16.8 and
$26.2 from the year-ago quarter and nine-month periods largely
because of higher selling and employee benefit expenses at
Aluminio.
Interest expense was up $5.5 from the 1993 third quarter and
$16.5 year-to-date, primarily due to higher borrowings by
Aluminio, higher short-term interest rates and higher average
commercial paper borrowings outstanding during the 1994 periods.
Capitalized interest for the 1994 nine-month period was $1.1
compared to $2.6 in 1993.
The estimated effective tax rate for 1994 is 30.5%. The
difference between this rate and the U.S. statutory rate of 35%
is primarily due to taxes on foreign income.
Minority interests' share of income from operations rose 15% from
the 1993 third quarter and declined 19% year-to-date. The
increase is due primarily to improvements at Aluminio. Year-to-
date results reflect the lower earnings by AofA.
Environmental Matters
Alcoa continues to participate in environmental assessments
and cleanups at a number of locations, including operating
facilities and their adjoining property; at previously owned
or operated facilities; and at Superfund and other waste
sites. Alcoa records a liability for environmental
remediation costs and/or damages when a cleanup program or
liability becomes probable and the costs/damages can be
reasonably estimated.
As assessments and cleanups proceed, these liabilities are
adjusted based on progress in determining the extent of
remedial actions and the related costs and damages. The
liability can change substantially due to factors such as the
nature or extent of contamination, changes in remedial
requirements and technological improvements.
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 the 1994
third quarter was $341 and reflects Alcoa's most probable
cost to remediate identified environmental conditions for
which costs can be reasonably estimated. About a third of
the reserve relates to Alcoa's Massena, N.Y. plant site.
Remediation expenditures charged to the reserve during the
1994 nine-month period were $60. Expenditures included those
currently mandated as well as those not required by any
regulatory authority or third party.
Included in ongoing operating expenses are the recurring
costs of managing hazardous substances and pollution. Alcoa
estimates that these costs will be about 2% of cost of goods
sold in 1994.
Liquidity and Capital Resources
Cash from Operations
Cash from operations during the 1994 nine-month period was
$802.4, $466 higher than in the 1993 period. The higher cash was
generated primarily by a decrease in working capital,
particularly inventory and prepaid expenses. A reduction in tax
liabilities also increased cash from operations.
Financing Activities
The reduction in minority interests in the 1994 nine-month period
consists primarily of a $50 redemption of preferred stock of
Alcoa International Holdings Company (AIHC) and $39 for the
acquisition of a minority partner's interest in a production
facility.
Payments on long-term debt in the first nine months of 1994
exceeded additions by $364. The net decrease in long-term debt
is primarily due to reductions in U.S. commercial paper
borrowings and liquidation of AofA's short-term investments with
the proceeds used to pay down its commercial paper. In the 1994
first quarter, Alcoa issued $250 of 5.75% notes due 2001 and
redeemed $225 face value of discounted debentures. The
unamortized discount was $108 at the time of redemption. Debt as
a percentage of invested capital was 18% at September 30, 1994
compared with 22% at year-end 1993.
Alcoa entered into a one billion dollar five-year Revolving
Credit Facility on July 1, 1994. This replaced the previous $750
Revolving Credit Facility. The new facility will be used to back
Alcoa's commercial paper program.
Investing Activities
Investing activities during the 1994 nine-month period consisted
primarily of capital expenditures and a reduction in short-term
investments, excluding cash equivalents. Capital expenditures
for the 1994 nine-month period were $394, down from $510.9 in
1993. Capital expenditures were mostly for sustaining operations
but included some capacity-enhancing expenditures. Alcoa
continues to focus on improving its manufacturing processes with
a minimum of capital spending. Short-term investments, excluding
cash equivalents, decreased by $237.6, primarily by AofA, which
used the proceeds to pay down its long-term debt.
Alcoa and subsidiaries
Summarized consolidated financial data for Alcoa Aluminio S.A., a
Brazilian subsidiary effectively owned 59% by Alcoa, follow.
<TABLE>
<CAPTION>
(unaudited)
September 30 December 31
------------ -----------
1994 1993
---- ----
<S> <C> <C>
Cash and short-term investments $ 77.9 $ 160.2
Other current assets 314.4 283.7
Properties, plants and equipment, net 918.7 870.8
Other assets 166.2 207.8
-------- --------
Total assets 1,477.2 1,522.5
-------- --------
Current liabilities 347.5 372.7
Long-term debt (1) 258.1 322.5
Other liabilities 33.0 35.9
-------- --------
Total liabilities 638.6 731.1
-------- --------
Net assets $ 838.6 $ 791.4
======== ========
<FN>
(1) Held by Alcoa Brazil Holdings Company - $22.5
</TABLE>
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 240.3 $ 177.6 $ 615.3 $ 498.7
Costs and expenses (205.8) (160.9) (538.1) (456.0)
Translation and exchange 12.3 (2.8) (3.0) (7.2)
adjustments
Income tax expense (10.1) (1.6) (12.6) (1.7)
------ ------ ------ ------
Net income $ 36.7 $ 12.3 $ 61.6 $ 33.8
====== ====== ====== ======
Alcoa's share of net income $ 21.7 $ 7.3 $ 36.3 $ 19.9
====== ====== ====== ======
</TABLE>
Alcoa and subsidiaries
Summarized consolidated financial data for AofA, a 51%-owned
subsidiary of Alcoa International Holdings Company, both of which
are included in Alcoa's consolidated financial statements,
follow.
<TABLE>
<CAPTION>
(unaudited)
September 30 December 31
------------ -----------
1994 1993
---- ----
<S> <C> <C>
Cash and short-term investments $ 86.6 $ 350.3
Other current assets 407.4 425.7
Properties, plants and equipment, net
1,532.3 1,430.1
Other assets 101.0 85.7
------- -------
Total assets 2,127.3 2,291.8
------- -------
Current liabilities 223.0 399.7
Long-term debt 149.9 302.0
Other liabilities 367.8 332.7
------- -------
Total liabilities 740.7 1,034.4
------- -------
Net assets $ 1,386.6 $ 1,257.4
======= =======
</TABLE>
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Third quarter ended Nine months ended
September 30 September 30
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues (1) $ 390.6 $ 408.8 $1,100.8 $1,245.9
Costs and expenses (321.2) (306.1) (896.1) (940.2)
Translation and exchange 0.2 2.6 2.2 6.1
adjustments
Income tax expense(2) (14.8) (34.7) (59.0) (60.0)
------- ------- ------- -------
Net income $ 54.8 $ 70.6 $ 147.9 $ 251.8
======= ======= ======= =======
Alcoa's share of net income $ 27.9 $ 36.0 $ 75.4 $ 128.4
======= ======= ======= =======
<FN>
(1) Revenues from Alcoa and its subsidiaries, the terms of which
were established by negotiations between the parties, follow.
Third quarter ended September 30: 1994 - $10.0, 1993 - $5.6
Nine months ended September 30: 1994 - $23.7, 1993 - $36.7
(2) The 1993 nine-month period includes a $51.5 tax benefit
associated with a change in the Australian corporate tax
rate.
</TABLE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Environmental Matters
As previously reported, on April 26, 1994, the Company received a
proposed consent order, No. R-6-1465-94-04, from the New York
State Department of Environmental Conservation related to alleged
violations of certain state water quality standards at Alcoa's
Massena, New York Operations. Pursuant to a consent order dated
September 20, 1994, Alcoa has agreed to pay a civil penalty in
the amount of $99,999, of which all but $60,000 is being held in
abeyance pending completion of certain remedial activities. The
Company paid the $60,000 in early October. This matter has been
terminated.
As previously reported, 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
matter was resolved by consent agreement and consent order dated
August 2, 1994. The Company was assessed a civil penalty in the
amount of $75,773 which was paid in August 1994.
Other Matters
On August 24, 1994 the United States Department of Justice (DOJ)
issued a Civil Investigative Demand (CID) requesting information
regarding the Company's primary aluminum production in 1993 and
1994 and decisions made by the Company to reduce production
levels in 1993. The Company is gathering documents and preparing
interrogatory answers in order to comply with the DOJ request.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11. Computation of Earnings per Common Share
12. Computation of Ratio of Earnings to Fixed Charges
15. Independent Accountants' letter regarding unaudited
financial information
27. Financial Data Schedule
(b) No reports on Form 8-K were filed by Alcoa during the
quarter covered by this report.
SIGNATURES
Pursuant to the requirements 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
November 9, 1994 By /s/ JAN H. M. HOMMEN
Date Jan H. M. Hommen
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
November 9, 1994 By /s/ EARNEST J. EDWARDS
Date Earnest J. Edwards
Vice President and Controller
(Chief Accounting Officer)
EXHIBITS
Page
11. Computation of Earnings per Common Share 18
12. Computation of Ratio of Earnings to Fixed Charges 19
15. Independent Accountants' letter regarding unaudited 20
financial information
27. Financial Data Schedule
Alcoa and subsidiaries EXHIBIT 11
Computation of Earnings (Loss) per Common Share
For the nine months ended September 30
(in millions, except share amounts)
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
1. Income (loss) applicable to common stock
before extraordinary loss * $ 73.6 $ 90.1
2. Weighted average number of common shares
outstanding during the period 88,818,784 87,470,006
3. Primary earnings (loss) per common share
before extraordinary loss (1 divided by 2) $.83 $ 1.03
4. Fully diluted earnings (loss) before
extraordinary loss (1) $73.6 $ 90.1
5. Shares issuable under compensation plans 8,582 8,750
6. Shares issuable upon exercise of dilutive
outstanding stock options (treasury stock
method) 554,781 230,467
7. Fully diluted shares (2 + 5 + 6) 89,382,147 87,709,223
8. Fully diluted earnings (loss) per common
share before extraordinary loss (4
divided by 7) $.82 $ 1.03
<FN>
* After preferred dividend requirement
</TABLE>
Alcoa and subsidiaries EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges
For the nine months ended September 30, 1994
(in millions, except ratio)
<TABLE>
<CAPTION>
1994
----
<S> <C>
Earnings:
Income before taxes on income $ 289.9
Minority interests' share of earnings of majority-
owned subsidiaries without fixed charges -
Equity income (25.0)
Fixed charges 105.3
Proportionate share of income (loss) of 50%-owned
persons (5.9)
Distributed income of less than 50%-owned persons -
Amortization of capitalized interest 16.5
------
Total earnings $ 380.8
Fixed Charges:
Interest expense:
Consolidated $ 81.5
Proportionate share of 50%-owned persons 5.5
------
87.0
------
Amount representative of the interest factor in rents:
Consolidated 18.0
Proportionate share of 50%-owned persons .3
------
18.3
------
Fixed charges added to earnings 105.3
------
Interest capitalized:
Consolidated 1.1
Proportionate share of 50%-owned persons -
------
1.1
------
Preferred stock dividend requirements of
majority-owned subsidiaries 10.3
------
Total fixed charges $ 116.7
======
Ratio of earnings to fixed charges 3.26
======
</TABLE>
EXHIBIT 15
October 7, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Aluminum Company of America
1. Form S-8 (Registration No. 33-24846)
Alcoa Savings Plan for Salaried Employees
2. Form S-8 (Registration No. 33-22346)
Long Term Stock Incentive Plan
3. Form S-3 (Registration No. 33-877)
Aluminum Company of America
Debt Securities and Warrants to Purchase Debt
Securities
4. Form S-3 (Registration No. 33-49997)
Aluminum Company of America
Debt Securities and Warrants to Purchase Debt
Securities, Preferred Stock and Common Stock
Ladies and gentlemen:
We are aware that our report dated October 7, 1994,
accompanying interim financial information of Aluminum
Company of America (Alcoa) and subsidiaries for the three-
month period ended September 30, 1994, is incorporated by
reference in the registration statements referred to above.
Pursuant to Rule 436 (c) under the Securities Act of 1933,
this report should not be considered as part of a
registration statement prepared or certified by us within
the meaning of Sections 7 and 11 of that Act.
Very truly yours,
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
<CASH> 314,900
<SECURITIES> 8,300
<RECEIVABLES> 1,433,500
<ALLOWANCES> 41,900
<INVENTORY> 1,193,400
<CURRENT-ASSETS> 3,416,200
<PP&E> 14,175,600
<DEPRECIATION> 7,671,200
<TOTAL-ASSETS> 11,323,500
<CURRENT-LIABILITIES> 2,149,600
<BONDS> 1,240,800
<COMMON> 89,200
0
55,800
<OTHER-SE> 3,463,400
<TOTAL-LIABILITY-AND-EQUITY> 11,323,500
<SALES> 7,262,500
<TOTAL-REVENUES> 7,336,700
<CGS> 5,762,600
<TOTAL-COSTS> 5,762,600
<OTHER-EXPENSES> 499,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,500
<INCOME-PRETAX> 289,900
<INCOME-TAX> 88,400
<INCOME-CONTINUING> 75,100
<DISCONTINUED> 0
<EXTRAORDINARY> (67,900)
<CHANGES> 0
<NET-INCOME> 7,200
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
