ALCOA INC
10-Q, 2000-07-28
PRIMARY PRODUCTION OF ALUMINUM
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                                    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 June 30, 2000     Commission File Number 1-3610

                               ALCOA INC.

         (Exact name of registrant as specified in its charter)


                             PENNSYLVANIA 25-0317820

     (State of incorporation) (I.R.S. Employer Identification No.)

        201 Isabella Street, Pittsburgh, Pennsylvania 15212-5858

          (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 July 26, 2000,  866,001,474  shares of common stock,  par value $1.00
per share, of the Registrant were outstanding.

A07-20002


<PAGE>


PART I - FINANCIAL  INFORMATION
Alcoa and subsidiaries
Condensed  Consolidated Balance Sheet
(in millions)

<TABLE>
<CAPTION>
                                                           (unaudited)
                                                       June 30    December 31
ASSETS                                                   2000        1999
                                                       --------    --------
<S>                                                    <C>         <C>
Current assets:

   Cash and cash equivalents                           $    320    $    237
   Short-term investments                                    76          77
   Receivables from customers, less allowances of
    $74 in 2000 and $58 in 1999                           3,231       2,199
   Other receivables                                        328         165
   Inventories (B)                                        2,842       1,618
   Deferred income taxes                                    284         233
   Prepaid expenses and other current assets                341         271
                                                       --------    --------
    Total current assets                                  7,422       4,800
                                                       --------    --------

Properties, plants and equipment, at cost                22,562      18,436
Less, accumulated depreciation, depletion and
 Amortization                                             9,500       9,303
                                                       --------    --------
    Net properties, plants and equipment                 13,062       9,133
                                                       --------    --------
Goodwill, net of accumulated amortization of $257 in
 2000 and $221 in 1999                                    5,005       1,328
Other assets, including assets held for sale (G)          5,343       1,805
                                                       --------    --------
    Total assets                                       $ 30,832    $ 17,066
                                                       ========    ========

LIABILITIES
Current liabilities:
   Short-term borrowings                               $  1,908    $    343
   Accounts payable, trade                                1,819       1,219
   Accrued compensation and retirement costs                860         582
   Taxes, including taxes on income                         512         368
   Other current liabilities                                904         424
   Long-term debt due within one year                       315          67
                                                       --------    --------
     Total current liabilities                            6,318       3,003
                                                       --------    --------
Long-term debt, less amount due within one year           6,095       2,657
Accrued postretirement benefits                           2,536       1,720
Other noncurrent liabilities and deferred credits         2,029       1,473
Deferred income taxes                                     1,369         437
                                                       --------    --------
     Total liabilities                                   18,347       9,290
                                                       --------    --------

MINORITY INTERESTS                                        1,445       1,458
                                                       --------    --------

CONTINGENT LIABILITIES (C)                                 --          --

SHAREHOLDERS' EQUITY
Preferred stock                                              56          56
Common stock                                                925         395
Additional capital                                        5,921       1,704
Retained earnings                                         6,592       6,061
Treasury stock, at cost                                  (1,696)     (1,260)
Accumulated other comprehensive income (D)                 (758)       (638)
                                                       --------    --------
     Total shareholders' equity                          11,040       6,318
                                                       --------    --------
      Total liabilities and shareholders' equity       $ 30,832    $ 17,066
</TABLE>
                                                       ========    ========

The accompanying notes are an integral part of the financial statements.


<PAGE>




Alcoa and subsidiaries

Condensed Statement of Consolidated Income (unaudited)
(in millions, except per share amounts)

<TABLE>
<CAPTION>
                                    Second quarter ended     Six months ended
                                           June 30               June 30
                                           -------               -------
                                       2000       1999       2000       1999

                                    --------    --------    --------    --------
<S>                                 <C>         <C>         <C>         <C>
REVENUES

Sales                               $  5,569    $  4,033    $ 10,100    $  8,017
Other income (expense)                    52          43          93          40
                                    --------    --------    --------    --------
                                       5,621       4,076      10,193       8,057
                                    --------    --------    --------    --------
COSTS AND EXPENSES
Cost of goods sold                     4,216       3,140       7,548       6,268
Selling, general administrative

 and other expenses                      272         203         499         395
Research and development expenses         48          30          87          58
Provision for depreciation,
 depletion and amortization              290         221         515         439
Interest expense                          95          50         146         102
                                    --------    --------    --------    --------
                                       4,921       3,644       8,795       7,262
                                    --------    --------    --------    --------

EARNINGS

   Income before taxes on income         700         432       1,398         795
Provision for taxes on income (E)        238         138         475         254
                                    --------    --------    --------    --------
   Income from operations                462         294         923         541
Less: Minority interests' share          (85)        (54)       (191)        (80)
                                    --------    --------    --------    --------
NET INCOME                          $    377    $    240    $    732    $    461
                                    ========    ========    ========    ========

EARNINGS PER SHARE (F)
    Basic                           $    .47    $    .33    $    .95    $    .63
                                    ========    ========    ========    ========

    Diluted                         $    .47    $    .32    $    .94    $    .62
                                    ========    ========    ========    ========

Dividends paid per common share     $   .125    $ .10063    $    .25    $ .20125
                                    ========    ========    ========    ========

</TABLE>


The accompanying notes are an integral part of the financial statements.


<PAGE>


27

Alcoa and subsidiaries

Condensed Statement of Consolidated Cash Flows (unaudited)
(in millions)
<TABLE>
<CAPTION>
                                                                Six months ended
                                                                     June 30
                                                                2000        1999
                                                               -------    -------
<S>                                                            <C>        <C>
CASH FROM OPERATIONS
Net income                                                     $   732    $   461
Adjustments to reconcile net income to cash from operations:
   Depreciation, depletion and amortization                        520        431
   Change in deferred income taxes                                  47        (10)
   Equity income before additional taxes, net of dividends         (17)        (7)
   Loss on sale or disposal of assets                                3         10
   Minority interests                                              190         79
   Other                                                            14         (1)
Changes in assets and liabilities, excluding the effects of
  acquisitions  and divestitures:

   (Increase) reduction in receivables                            (256)        43
   (Increase) reduction in inventories                             (41)       234
   (Increase) reduction in prepaid expenses and other               (3)        12
    current assets
   Reduction in accounts payable and accrued expenses             (153)      (142)
   Increase (reduction) in taxes, including taxes on income        161        (65)
   Reduction in deferred hedging gains                            --          (45)
   Net change in noncurrent assets and liabilities                 (91)       (88)
                                                               -------    -------
      CASH FROM OPERATIONS                                       1,106        912
                                                               -------    -------

FINANCING ACTIVITIES
Net changes in short-term borrowings                             1,311         (7)
Common stock issued and treasury stock so sold, excluding
 stock issued in acquisitions                                      152        427
Repurchase of common stock                                        (670)      (603)
Dividends paid to shareholders                                    (201)      (149)
Dividends paid to minority interests                              (164)       (62)
Net change in commercial paper                                  (1,453)       (70)
Additions to long-term debt                                      1,607        216
Payments on long-term debt                                       1,358       (283)
                                                               -------    -------
      CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES         1,940       (531)
                                                               -------    -------

INVESTING ACTIVITIES
Capital expenditures                                              (408)      (388)
Acquisitions, net of cash acquired (H)                          (2,534)       (16)
Proceeds from the sale of assets                                     4         31
Net change in short-term investments                                 1        (24)
Additions to investments                                           (19)       (68)
Changes in minority interests                                        4         (4)
Other                                                               (9)        (7)
                                                               -------    -------
      CASH USED FOR INVESTING ACTIVITIES                        (2,961)      (476)
                                                               -------    -------

      EFFECT OF EXCHANGE RATE CHANGES ON CASH                       (2)        (4)
                                                               -------    -------
Net change in cash and cash equivalents                             83        (99)
Cash and cash equivalents at beginning of year                     237        342
                                                               -------    -------
      CASH AND CASH EQUIVALENTS AT END OF PERIOD               $   320    $   243
                                                               =======    =======
</TABLE>

The accompanying notes are an integral part of the financial statements.


<PAGE>


Notes to Condensed Consolidated Financial Statements
(in millions)

A. Common Stock Split - On January 10, 2000,  the board of directors  declared a
two-for-one  common stock  split.  Alcoa  shareholders  approved an amendment to
Alcoa's  Articles of  Incorporation  to increase the authorized  shares of Alcoa
common stock from 600 million to 1.8 billion at the company's  annual meeting on
May 12, 2000. As a result of the stock split,  shareholders of record on May 26,
2000 received an  additional  common share for each share held.  The  additional
shares were distributed on June 9, 2000. In this report,  all per-share  amounts
and number of shares have been restated to reflect the stock split.

B. Inventories
<TABLE>
<CAPTION>

                                                June 30        December 31
                                                 2000              1999
                                              ----------         -------
<S>                                           <C>               <C>
Finished goods                                $   870           $   363
Work in process                                   874               550
Bauxite and alumina                               319               286
Purchased raw materials                           556               267
Operating supplies                                223               152
                                              -------           -------
                                              $ 2,842           $ 1,618
                                              =======           =======
</TABLE>

     Approximately  69% of total  inventories  at June 30, 2000 were valued on a
LIFO basis.  If valued on an average cost basis,  total  inventories  would have
been $675 and $645 higher at June 30, 2000 and December 31, 1999, respectively.

C. Contingent  Liabilities - Various lawsuits,  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  might 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.  However,  based  on facts
currently  available,  management  believes that the disposition of matters that
are  pending  or  asserted  will not have a  materially  adverse  impact  on the
financial position of the company.

     Alcoa  Aluminio,  S.A.  (Aluminio)  is currently  party to a  hydroelectric
construction project in Brazil. Total estimated  construction costs are $500, of
which the company's  share is 24%. In the event that other  participants in this
project fail to fulfill their financial responsibilities, Aluminio may be liable
for its pro rata share of the deficiency.

     Alcoa of  Australia,  Ltd.  (AofA) is party to a number of natural  gas and
electricity contracts that expire between 2001 and 2022. Under these take-or-pay
contracts,  AofA is  obligated  to pay for a minimum  amount of  natural  gas or
electricity  even  if  these   commodities  are  not  required  for  operations.
Commitments related to these contracts total $190 in 2000, $182 in 2001, $179 in
2002, $176 in 2003, $176 in 2004 and $2,222 thereafter. Expenditures under these
contracts totaled $179 in 1999.

D. Comprehensive Income
<TABLE>
<CAPTION>

                                   Second quarter ended Six Months ended
                                          June 30               June 30
                                          -------               -------
                                       2000     1999     2000     1999
                                      -----    -----    -----    -----
<S>                                   <C>      <C>      <C>      <C>
Net income                            $ 377    $ 240    $ 732    $ 461
Other comprehensive loss, primarily
 translation                            (41)     (11)    (120)     (99)
                                      -----    -----    -----    -----
Comprehensive income                  $ 336    $ 229    $ 612    $ 362
                                      =====    =====    =====    =====
</TABLE>

E.  Income  Taxes - The  income  tax  provision  for the  period is based on the
expected effective tax rate adjusted for the impact of the acquisitions from the
acquisition  dates through June 30. The 2000 second  quarter rate of 34% differs
from the statutory rate primarily  because of taxes on foreign income.  The 2000
second quarter rate differs from the 1999 second quarter rate primarily  because
of higher  income  before tax in 2000.  The  effective  tax rate for the year is
currently estimated at 35%.

F.  Earnings Per Share - Basic  earnings per share (EPS) amounts are computed by
dividing  earnings  applicable to common  stockholders  by the average number of
common  shares  outstanding.  Diluted EPS amounts  assume the issuance of common
stock  for  all  potentially  dilutive  equivalents  outstanding.  Anti-dilutive
outstanding  stock options have been excluded from the diluted EPS  calculation.
The detail of basic and diluted EPS follow:
<TABLE>
<CAPTION>

                                           Second quarter ended     Six months ended
                                                  June 30               June 30
                                                  -------               -------
                                               2000       1999       2000       1999
                                              -----      -----      -----      -----
<S>                                          <C>        <C>        <C>        <C>
Net income                                   $  377     $  240     $  732     $  461
Less: Preferred stock dividends                   -          -          1          1
                                              -----      -----      -----      -----
Income available to common
 stockholders                                $  377     $  240     $  731     $  460

Average shares outstanding-basic              797.0      734.2      770.1      734.1
Effect of dilutive securities:
  Shares issuable upon exercise of
   dilutive outstanding stock options           8.0        8.4       10.1       13.9
                                              -----      -----      -----      -----
  Average diluted shares outstanding          805.0      742.6      780.2      748.0
Basic EPS                                    $  .47     $  .33     $  .95     $  .63
                                             ======     ======     ======     ======
Diluted EPS                                  $  .47     $  .32     $  .94     $  .62
                                             ======     ======     ======     ======
</TABLE>

     In April 2000, Alcoa entered into a forward share  repurchase  agreement to
partially  hedge the equity exposure  related to its stock option  program.  The
contract,  which  matures in 2002,  allows the  company to  repurchase  up to 10
million shares from financial institutions.  The company may elect to settle the
contract  on a net share  basis in lieu of  physical  settlement.  The  contract
permits  early  settlement.  As of June  30,  2000,  9,900,000  shares  had been
committed to the contract at an average price of $31.90 per share. The effect of
this repurchase agreement has been included in determining diluted EPS.

G.  Acquisitions - In August 1999, Alcoa and Reynolds Metals Company  (Reynolds)
announced  they had reached a  definitive  agreement  to merge.  On May 3, 2000,
after  approval by the U.S.  Department  of Justice  (DOJ) and other  regulatory
agencies, Alcoa and Reynolds completed their merger. Under the agreement,  Alcoa
issued 2.12 shares  post-split of Alcoa common stock for each share of Reynolds.
The exchange  resulted in Alcoa issuing  approximately  135 million  shares at a
value of $33.30  (post-split)  to Reynolds  stockholders.  The  transaction  was
valued at approximately  $5,700,  including debt assumed, and has been accounted
for using the purchase method.  The total purchase costs of the acquisition will
be  allocated to the tangible and  intangible  assets and  liabilities  acquired
based on their fair  values.  The purchase  price  includes  the  conversion  of
outstanding  Reynolds  options to Alcoa options as well as other direct costs of
the  acquisition.  The  purchase  price  allocation  is  preliminary;  the final
allocation of the purchase  price will be based upon valuation and other studies
that  have  not  been  completed.   The  preliminary   allocation   resulted  in
total goodwill of approximately  $1,300,  which will be  amortized  over a
forty-year period.

     As part of the  merger  agreement,  Alcoa  agreed to divest  the  following
Reynolds  operations:
     - Reynolds' 56% stake in its alumina refinery at Worsley, Australia,
     - Reynolds' 50% stake in its alumina refinery at Stade,  Germany,
     - 100% of  Reynolds'  alumina  refinery at Sherwin,  Texas and
     - 25% of  Reynolds' interest in its aluminum smelter at Longview,
       Washington.

     Under the agreement, these divestitures must be completed within six months
of the merger  date of May 3, 2000  (nine  months for  Worsley).  The  Unaudited
Condensed  Consolidated  Financial  Statements  have been prepared in accordance
with EITF 87-11  "Allocation of Purchase Price to Assets to be Sold." Under EITF
87-11,  the net assets to be divested have been reported as assets held for sale
in the Condensed  Consolidated Balance Sheet, and the results of operations from
these assets have not been included in the Condensed  Statement of  Consolidated
Income.

     On March 14, 2000, Alcoa and Cordant  Technologies Inc. (Cordant) announced
a definitive agreement under which Alcoa would acquire all outstanding shares of
Cordant,  a  technology-based  company  serving global  aerospace and industrial
markets.  In addition,  on April 13, 2000,  Alcoa  announced plans to commence a
cash  tender  offer for all  outstanding  shares of  Howmet  International  Inc.
(Howmet).  The  offer for  Howmet  shares  was part of  Alcoa's  acquisition  of
Cordant,  which owned  approximately 85% of Howmet. On May 25, 2000 and June 20,
2000, after approval by the DOJ and other regulatory  agencies,  Alcoa completed
the  acquisition  of Cordant and Howmet,  respectively.  Under the agreement and
tender offer,  Alcoa paid $57 for each outstanding share of Cordant common stock
and $21 for each  outstanding  share of Howmet common stock.  The total value of
the transaction was approximately $3,300, including the assumption of debt. This
transaction will be accounted for using the purchase method.  The purchase price
includes  the  conversion  of  outstanding  Cordant and Howmet  options to Alcoa
options as well as other direct  costs of the  acquisition.  The purchase  price
allocation  is  preliminary;  the final  allocation  is subject to valuation and
other studies that have not been completed.  The preliminary allocation resulted
in total goodwill of approximately $2,400, which will be amortized over periods
not to exceed forty years.

     The following presents pro forma information  assuming that the acquisition
of 100% of Reynolds and Cordant had occurred at the beginning of each respective
year.  Adjustments  that have been  included  to arrive at the pro forma  totals
primarily  include those related to acquisition  financing,  the amortization of
goodwill,  the elimination of transactions between Alcoa, Reynolds, and Cordant,
and additional  depreciation related to the increase in basis that resulted from
the  transaction.  Tax effects from the pro forma  adjustments  noted above also
have been included at the 35% statutory rate.

<TABLE>
<CAPTION>

                                                   Six months ended
                                                        June 30
                                                        -------
                                                 2000              1999
                                               -------           -------
<S>                                            <C>               <C>
Sales                                          $12,882           $11,327
Net Income                                         777               438
Basic EPS                                      $  0.90           $  0.50
                                               =======           =======
Diluted EPS                                    $  0.89           $  0.49
                                               =======           =======
</TABLE>

     The pro forma results are not necessarily indicative of what actually would
have  occurred  if the  transaction  had been in effect for the  entire  periods
presented,  are not intended to be a projection  of future  results,  and do not
reflect any cost savings that might be achieved from the combined operations.

     Debt increased $4,475 as a result of the Reynolds and Cordant acquisitions.
$1,220 of debt was assumed in the  acquisition  of Reynolds,  while $826 of debt
was assumed in the  acquisition  of Cordant.  The Cordant  acquisition  price of
$2,429,  including  the  acquisition  of the  remaining  shares of  Howmet,  was
financed with debt.

     Alcoa  completed a number of other  acquisitions  in 1999 and 2000. None of
these transactions had a material impact on Alcoa's financial statements.

H. Cash Flow Information - The details of cash payments related to
acquisitions follow.

<TABLE>
<CAPTION>

                                           Six months ended
                                             June 30, 2000

<S>                                           <C>
Fair value of assets                          $ 14,283
Liabilities                                     (7,002)
Stock issued                                    (4,649)
                                              --------
Cash paid                                        2,632
Less: cash acquired                                (98)
                                              --------
Net cash paid for acquisitions                $  2,534
                                              ========
</TABLE>

I. Recently Issued Accounting Standards - In June 1998, the Financial Accounting
Standards  Board issued SFAS 133,  "Accounting  for Derivative  Instruments  and
Hedging  Activities."  The standard  requires that entities value all derivative
instruments at fair value and record the  instruments on the balance sheet.  The
standard also  significantly  changes the requirements for hedge accounting.  In
June 1999,  the FASB  approved a delay in the  effective  date of this  standard
until January 2001,  and in June 2000,  the FASB amended the standard to provide
guidance on its  implementation.  The company  believes that the adoption of the
standard  as amended  will have a material  impact on its  balance  sheet.  Upon
adoption,  Alcoa's  commodity,  foreign  exchange and interest  rate  derivative
contracts  as well as  certain  underlying  exposures  will be  recorded  on the
balance sheet at fair value.  Management  is currently  assessing the details of
the standard and is preparing a plan of implementation.

     In December 1999, the staff of the Securities and Exchange Commission (SEC)
issued Staff Accounting  Bulletin (SAB) 101,  "Revenue  Recognition in Financial
Statements."  SAB 101 outlines the basic  criteria that must be met to recognize
revenue,  and provides  guidelines for disclosure related to revenue recognition
policies.  This guidance is required to be  implemented in the fourth quarter of
2000. The company is currently reviewing this guidance in order to determine the
impact of its provisions, if any, on the consolidated financial statements.

J. Reclassifications - Certain amounts have been reclassified to
conform to current year presentation.

K. Segment Information - Alcoa is primarily a producer of aluminum products. Its
segments  are  organized  by product on a worldwide  basis.  Alcoa's  management
reporting system evaluates  performance  based on a number of factors;  however,
the primary measure of performance is the after-tax  operating  profit (ATOI) of
each segment.  Non-operating  items such as interest income,  interest  expense,
foreign  exchange  gains/losses,  the effects of LIFO  accounting  and  minority
interest are excluded from segment profit. In addition, certain expenses such as
corporate  general  administrative  expenses,  depreciation  and amortization on
corporate assets, and certain special items are not included in segment results.

     Alcoa's products are used primarily by transportation (including aerospace,
automotive,  rail and  shipping),  packaging,  building  and  construction,  and
industrial customers  worldwide.  Alcoa's businesses that do not fall into these
categories are listed as Other. In the 2000 second quarter as a result of recent
acquisition activity,  Alcoa changed its internal management reporting structure
to add a Packaging and Consumer Products segment.  Alcoa's closures,  PET bottle
and  packaging  machinery  businesses  were moved  from the Other  group to this
segment.  Previously  reported  data from the 1999 second  quarter and six-month
periods  have been  restated  in the  schedules  below to reflect  this  change.
Reynolds' packaging and consumer businesses were also added to the new Packaging
and Consumer Products segment.  Other Reynolds and Cordant businesses were added
to the appropriate existing segments.  For more information on the segments, see
Management's Discussion and Analysis beginning on page 13.

     The following  details sales and ATOI for each  reportable  segment for the
three-month  and  six-month  periods  ended June 30,  2000 and 1999,  as well as
restated quarterly amounts for 1999 and 2000.

<TABLE>
<CAPTION>

Segment Information:   Alumina           Flat-    Engin-   Pack-
                       & Chem-  Primary  Rolled   eered    aging &
Second quarter ended   icals    Metals   Products Products Consumer Other    Total
June 30, 2000 Sales:

<S>                    <C>      <C>      <C>      <C>      <C>      <C>      <C>
  Third-party sales    $  515   $  852   $1,394   $1,296   $  524   $  988   $5,569
  Intersegment sales      832       29     --       --      1,150
                       ------   ------   ------   ------   ------   ------   ------
                                                                       274       15
                                                                    ------   ------
  Total sales          $  789   $1,684   $1,423   $1,311   $  524   $  988   $6,719
                       ======   ======   ======   ======   ======   ======   ======


After-tax operating
 income                $  140   $  225   $   74   $   62   $   35   $   46   $  582
                       ======   ======   ======   ======   ======   ======   ======

Second quarter ended
June 30, 1999 Sales:

  Third-party sales   $   456   $  519   $1,258   $  939   $  209   $  652   $4,033
  Intersegment sales      221      714       11        3     --       --        949
                      -------   ------   ------   ------   ------   ------   ------
  Total sales         $   677   $1,233   $1,269   $  942   $  209   $  652   $4,982
                      =======   ======   ======   ======   ======   ======   ======

After-tax operating
 income               $    62   $  106   $   72   $   61   $   25   $   45   $  371
                      =======   ======   ======   ======   ======   ======   ======


Segment Information:   Alumina              Flat- Engin-   Pack-
                       & Chem- Primary   Rolled   eered    aging &
Six months ended       icals    Metals   Products Products Consumer Other    Total
June 30, 2000
Sales:
  Third-party sales    $1,055   $1,463   $2,798   $2,349   $  727  $1,708   $10,100

  Intersegment sales      524    1,682       42       28       -        -     2,276
                      -------   ------   ------   ------   ------   ------   ------
  Total sales          $1,579   $3,145   $2,840   $2,377   $  727   $1,708  $12,376
                      =======   ======   ======   ======   ======   ======   ======

After-tax operating

 income                $  295   $  452   $  147   $  115   $   52   $   79  $ 1,140
                      =======   ======   ======   ======   ======   ======   ======

Six months ended June 30, 1999 Sales:

  Third-party sales    $  876   $1,053   $2,528   $1,881   $  405   $1,269   $8,012
  Intersegment sales      452    1,454       26        6     --       --      1,938
                       ------   ------   ------   ------   ------   ------   ------

  Total sales          $1,328   $2,507   $2,554   $1,887   $  405   $1,269   $9,950
                      =======   ======   ======   ======   ======   ======   ======

After-tax operating

 income                $  122   $  203   $  137   $  106   $   38   $   60   $  666
                       ======   ======   ======   ======   ======   ======   ======
</TABLE>

The following table reconciles segment information to consolidated totals.

<TABLE>
<CAPTION>

                                       Second quarter ended    Six months ended
                                              June 30                June 30
                                              -------                -------
                                          2000       1999        2000       1999
                                        -------    -------    -------    -------
<S>                                    <C>        <C>        <C>        <C>
Total after-tax operating income       $   582    $   371    $ 1,140    $   666
Elimination of intersegment (profit)
 loss                                       (5)       (10)       (25)       (19)

Unallocated amounts (net of tax):

  Interest income                           19          8         26         13
  Interest expense                         (69)       (32)      (102)       (66)
  Minority interest                        (85)       (54)      (191)       (80)
  Corporate expense                        (51)       (41)      (107)       (76)
  Other                                    (14)        (2)        (9)        23
                                       -------    -------    -------    -------
Consolidated net income                $   377    $   240    $   732    $   461
                                       =======    =======    =======    =======
</TABLE>

<TABLE>
<CAPTION>
Segment assets:                             June 30        December 31
                                             2000              1999
                                          ----------         -------
<S>                                       <C>               <C>
  Alumina and chemicals                   $ 2,922           $ 3,250
  Primary metals                            6,783             5,098
  Flat-rolled products                      3,611             3,395
  Engineered products                       6,488             2,387
  Packaging and consumer                    1,555               745
  Other                                     2,979             1,664
                                          -------           -------
Total Segment Assets                      $24,338           $16,539
                                          =======           =======
</TABLE>

The total segment assets above do not include  unallocated  purchase  accounting
adjustments or assets to be divested.

L. Subsequent  Event - On July 20, 2000,  Alcoa issued $1,500 of callable notes.
Of these notes, $1,000 mature in 10 years and carry a coupon rate of 7.375%, and
$500  mature in 5 years and carry a coupon  rate of 7.25%.  A total of $1,487 of
existing  short-term debt was reclassified in the balance sheet at June 30, 2000
as a result of this transaction.


<PAGE>




    --------------------------------

     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,
     1999.

     The  financial  information  required  in this Form  10-Q by Rule  10-01 of
     Regulation S-X has been subject to a review by PricewaterhouseCoopers  LLP,
     the Company's  independent  certified public  accountants,  as described in
     their report on page 12.


<PAGE>



    Independent Accountant's Review Report

    To the Shareholders and Board of Directors
    Alcoa Inc. (Alcoa)


        We have reviewed the unaudited condensed  consolidated  balance sheet of
    Alcoa  and  subsidiaries  as of  June  30,  2000,  the  unaudited  condensed
    statements of consolidated  income for the three-month and six-month periods
    ended June 30,  2000 and 1999,  and the  unaudited  condensed  statement  of
    consolidated  cash flows for the  six-month  periods ended June 30, 2000 and
    1999,  which are included in Alcoa's Form 10-Q for the period ended June 30,
    2000.  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 auditing  standards  generally  accepted in the
    United  States,  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 condensed  consolidated  financial statements referred
    to above for them to be in conformity with accounting  principles  generally
    accepted in the United States.

        We have previously audited, in accordance with audit standards generally
    accepted in the United States,  the consolidated  balance sheet of Alcoa and
    subsidiaries  as of  December  31,  1999,  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 10, 2000, except
    for Note V, for  which  the date is  February  11,  2000,  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, 1999, is fairly stated, in all
    material respects,  in relation to the consolidated balance sheet from which
    it has been derived.

    /s/ PricewaterhouseCoopers LLP

    PricewaterhouseCoopers LLP

    Pittsburgh, Pennsylvania
    July 10, 2000

    Except for note L, for which the date is July 20, 2000.


<PAGE>


Management's Discussion and Analysis of the
Results of Operations and Financial Condition.

(dollars in millions, except share amounts and ingot prices; shipments
in thousands of metric tons (mt))

Certain  statements  in this report under this caption and  elsewhere  relate to
future  events  and   expectations   and  as  such  constitute   forward-looking
statements.  Such  forward-looking  statements  involve known and unknown risks,
uncertainties  and other factors that may cause actual  results,  performance or
achievements  of Alcoa to be  different  from those  expressed or implied in the
forward-looking statements.

Results of Operations

 Principal income and operating data follow.

<TABLE>
<CAPTION>

                                           Second quarter ended     Six months ended
                                                  June 30               June 30
                                                  -------               -------
                                               2000       1999       2000       1999
                                           --- ------ --- ------ --- ------ --- ----
<S>                                         <C>        <C>        <C>        <C>
 Sales                                      $ 5,569    $ 4,033    $10,100    $ 8,017
 Net income                                     377        240        732        461
 Basic earnings per common share            $   .47    $   .33    $   .95    $   .63
 Diluted earnings per common share          $   .47    $   .32    $   .94    $   .62
 Shipments of aluminum products (mt)          1,361      1,117      2,494      2,249
 Shipments of alumina (mt)                    1,801      1,836      3,634      3,500
 Alcoa'a average realized ingot price       $   .74    $   .64    $   .76    $   .63
 Average 3-month LME price                  $   .68    $   .60    $   .72    $   .58
 -------------------------
</TABLE>

Earnings Summary

Alcoa reported that 2000 second  quarter  revenues rose 38% from the 1999 second
quarter to $5,569,  and revenues for the first half of 2000  increased  26% from
the 1999 six-month period to $10,100.  The increase in revenues for both periods
was due to  higher  overall  aluminum  and  alumina  prices,  as well as  higher
shipment volumes due to acquisitions.  Cost reductions  positively  impacted the
2000 second quarter and  year-to-date  results,  as net income increased to $377
for the quarter and $732 year-to-date, 57% above the 1999 second quarter and 59%
over the 1999 first half.

     Annualized  return on  shareholders'  equity was 17.0% as of June 30, 2000,
compared with 14.8% for the 1999 period. The increase was due to rising earnings
in 2000, which outpaced the increase in shareholders'  equity balances resulting
primarily from the recent acquisitions.

Segment Information

I.   Alumina and Chemicals

<TABLE>
<CAPTION>

                            Second quarter ended   Six months ended
                                    June 30           June 30
                                    -------           -------
                                 2000     1999       2000     1999
                                ------   ------     ------   ------
<S>                             <C>      <C>        <C>      <C>
Alumina production               3,495    3,306      6,972    6,518
Third-party alumina shipments    1,801    1,836      3,634    3,500

Third-party sales               $  515   $  456     $1,055   $  876
Intersegment sales                 274      221        524      452
                                ------   ------     ------   ------
  Total sales                   $  789   $  677     $1,579   $1,328
                                ======   ======     ======   ======

After-tax operating income      $  140   $   62     $  295   $  122
                                ======   ======     ======   ======
</TABLE>

This segment's  activities include the mining of bauxite,  which is then refined
into  alumina.  The  alumina is then sold to  internal  and  external  customers
worldwide,  or processed into industrial  chemical products.  Alcoa's Australian
alumina  operations  are a significant  component of this segment.  This segment
does not include the Reynolds alumina assets to be divested. The majority of the
third-party sales from this segment are derived from alumina.

     Third-party  sales  for this  segment  increased  13% from the 1999  second
quarter,  though shipments decreased 2%. Higher realized prices for alumina, 18%
over the 1999 second quarter,  drove these  increases.  For the six-month period
ending June 30, third-party sales increased 20% over the same 1999 period.  This
was due to 4% higher shipments and higher prices.

     After-tax  operating income (ATOI) for this segment  increased 126% to $140
for the 2000  second  quarter  and 142% to $295 for the  six-month  period.  The
increases were  primarily due to higher prices as well as improved  overall cost
performance. Second quarter 2000 conversion costs decreased $29 after tax versus
the  1999  second  quarter.  These  savings  were  primarily  generated  through
productivity growth and purchasing efficiencies.

II. Primary Metals

<TABLE>
<CAPTION>

                             Second quarter ended    Six months ended
                                     June 30              June 30
                                     -------              -------
                                  2000     1999      2000     1999
                                 ------   ------    ------   ------
<S>                              <C>      <C>       <C>      <C>
Aluminum production                 881      708     1,591    1,411
Third-party aluminum shipments      493      354       832      724

Third-party sales                $  852   $  519    $1,463   $1,053
Intersegment sales                  832      714     1,682    1,454
                                 ------   ------    ------   ------
  Total sales                    $1,684   $1,233    $3,145   $2,507
                                 ======   ======    ======   ======

After-tax operating income       $  225   $  106    $  452   $  203
                                 ======   ======    ======   ======
</TABLE>

This group's primary focus is Alcoa's worldwide  smelter system.  Primary Metals
receives  alumina from the alumina and chemicals  segment and produces  aluminum
ingot to be used by other Alcoa segments,  as well as sold to outside customers.
Results from  internal  hedging  contracts  and from  marking to market  certain
aluminum  commodity  contracts are also  included in this segment.  The smelting
operations  of  Reynolds  have  been  added to this  segment.  The sale of ingot
represents over 90% of this segment's  third-party sales. Revenues from the sale
of powder and scrap are also included here.

     In the 1999 fourth quarter,  Alcoa changed its internal reporting system to
include  the  results  of  aluminum  hedging  in  the  Primary  Metals  segment.
Previously these results were reported as reconciling items between segment ATOI
and net income. Segment results for the 1999 second quarter and six-month period
have been restated to reflect this change.

     In January  2000,  Alcoa  announced  that it was  restarting  approximately
200,000 mt of primary  aluminum  capacity.  The  restarted  capacity  will be in
production  by the end of  2000.  In July  2000,  Alcoa  announced  that it will
temporarily  curtail all  production  at its 121,000  metric ton per year (mtpy)
primary aluminum smelter in Troutdale,  Oregon, a former Reynolds facility which
had been operating at an 80,000 mtpy level.  Curtailment will begin immediately.
After the  scheduled  curtailment  and  restart  of  capacity,  Alcoa  will have
approximately 370,000 mtpy of idle capacity.

     Third-party  ingot  sales  for the  second  quarter  rose 64% from the 1999
second quarter on a 39% increase in shipments,  due to the addition of Reynolds'
smelters. Excluding the locations recently acquired, third-party sales increased
12% quarter-to-quarter and 13% year-to-year, as higher prices more than offset a
decline in  shipments  of 2%  quarter-to-quarter  and 3%  year-to-year.  Alcoa's
average realized third-party price for ingot rose 16% to 74 cents per pound from
the 1999 to the 2000  second  quarter  and 20% to 76 cents  from the 1999 to the
2000 six-month period,  reflecting the increase in market prices over last year.
Intersegment  sales also rose 17% in the 2000 second quarter and 16% in the 1999
six-month period as a result of these higher prices.

     Primary  metals second  quarter and six-month  ATOI rose 112% from the 1999
second quarter and 123% from the 1999 six-month period, respectively,  as higher
ingot  prices and the impact of acquired  Reynolds  facilities  beginning in May
lifted ATOI. Also  contributing  were mark to market gains of $7 for the quarter
and $6 year-to-date after tax. Partially  offsetting these positive factors were
lower  shipments  from the  locations  other than those  recently  acquired from
Reynolds,  both in the second quarter and in the six-month period. Higher energy
costs for these  locations  also  impacted  earnings,  reducing ATOI $12 for the
quarter and $17 for the six-month period.

III. Flat-Rolled Products

<TABLE>
<CAPTION>
                              Second quarter ended      Six months ended
                                      June 30              June 30
                                      -------              -------
                                   2000     1999        2000     1999
                                 ------   ------      ------   ------
<S>                              <C>      <C>         <C>      <C>
Third-party aluminum shipments      504      496       1,011      983

Third-party sales                $1,394   $1,258      $2,798   $2,528
Intersegment sales                   29       11          42       26
                                 ------   ------      ------   ------
  Total sales                    $1,423   $1,269      $2,840   $2,554
                                 ======   ======      ======   ======

After-tax operating income       $   74   $   72      $  147   $  137
                                 ======   ======      ======   ======
</TABLE>

This segment's  primary  business is the production and sale of aluminum  plate,
sheet,  and foil. This segment includes the aggregation of rigid container sheet
(RCS), which is used to produce aluminum beverage cans, and sheet and plate used
in  the  aerospace  and  distributor  markets.  Approximately  one-half  of  the
third-party  sales  from  this  segment  are  derived  from  sheet and plate and
one-third are from RCS.

     Third-party  flat-rolled product sales for the second quarter rose 11% over
the prior year  quarter,  driven by slightly  higher  overall  shipments  and 8%
higher prices.  Year-to-date  sales increased 10% over the prior year period due
to  increases  in  shipments  and  prices of 3% and 7%,  respectively.  For RCS,
third-party  sales were up 13% for the quarter and 10%  year-to-date  versus the
comparable 1999 periods due again to higher prices -- 10% for the quarter and 9%
year-to-date.  For the 2000 six-month period,  sheet and plate third-party sales
were up 12% over the 1999  period due  equally to rising  shipment  volumes  and
prices.

     Flat-rolled  products'  ATOI of $74 for the second  quarter  and $147 year-
to-date  were  3% and 7%  higher,  respectively,  than  the  corresponding  1999
periods.  RCS  ATOI  improved  20% for the  quarter  and 30% for the year due to
productivity  improvements.  Sheet and plate ATOI  decreased  4% for the quarter
while increasing 4% for the six-month  period.  After tax cost reductions of $12
for the quarter and $27  year-to-date  and  continued  improvement  in Brazilian
results were offset by lower  European ATOI from a less  profitable  product mix
and overall flat U.S. results.

IV. Engineered Products

<TABLE>
<CAPTION>

                             Second quarter ended   Six months ended
                                     June 30           June 30
                                     -------           -------
                                  2000     1999     2000     1999
                                 ------   ------   ------   ------
<S>                              <C>      <C>      <C>      <C>
Third-party aluminum shipments      282      249      548      507

Third-party sales                $1,296   $  939   $2,349   $1,881
Intersegment Sales                   15        3       28        6
                                 ------   ------   ------   ------
  Total sales                    $1,311   $  942   $2,377   $1,887
                                 ======   ======   ======   ======

After-tax operating income       $   62   $   61   $  115   $  106
                                 ======   ======   ======   ======
</TABLE>

Products  produced  by this  segment  include  hard and soft  alloy  extrusions,
including Alcoa's  architectural  extrusion  businesses,  super-alloy  castings,
steel and  aluminum  fasteners,  forgings  and wheels.  These  products are used
primarily by transportation and distribution  customers worldwide.  This segment
includes the Reynolds' wheels business acquired in May 2000, as well as the Huck
(fasteners) and Howmet (super-alloy  castings)  businesses added in June 2000 as
part of the Cordant  acquisition,  and Excel  Extrusions  acquired  from Noranda
Aluminum in January 2000.

     Including  acquisitions  engineered  products second quarter results showed
increases of 38% in  third-party  revenues and 13% in shipments  over the second
three months of 1999.  Year-to-date  third-party revenues and shipments improved
by 25% and 8%, respectively.  Excluding these recent  acquisitions,  third-party
sales  increased 7% in the second quarter and 9% in the six-month  period versus
the corresponding 1999 periods, though volumes remained stable.

     Approximately two-thirds of the revenues from this segment are derived from
the sale of extrusions.  Second quarter and  year-to-date  third-party  sales of
soft alloy extrusions were up 25% and 19%, respectively,  from the corresponding
1999 periods. Volume increases of 11% quarter-to-quarter and 7% year-to-year, as
well as higher  average prices drove this  improvement.  Hard alloy revenues for
the quarter were flat, as higher  prices  offset a 6% decline in shipments.  For
the six-month  period,  third-party sales were down 8% on 11% lower shipments as
compared with the 1999 period.

     In the 2000 second  quarter,  sales of wheels  increased  69% over the 1999
second quarter on 77% higher volumes. For the year-to-date period, revenues from
wheels increased 59% over the 2000 period on a 58% increase in shipment volumes.
Almost 26% of second quarter  revenues and 33% of shipments are  attributable to
the Reynolds' wheels business.  Excluding these, revenues increased 26% over the
1999 second  quarter and 36% over the 1999  six-month  period,  while  shipments
increased 19% quarter-over-quarter and 28% year-over-year.

     ATOI for the  segment  was $62 in the 2000  second  quarter and $115 in the
2000 six-month period, up 2% and 8%,  respectively,  over the corresponding 1999
periods.  Cost savings related to purchased  materials of $5 in the 2000 quarter
and $18 year-to-date contributed to these increases.

V. Packaging and Consumer

<TABLE>
<CAPTION>
                                         Second quarter ended  Six months ended
                                               June 30           June 30
                                               -------           -------
                                             2000   1999       2000   1999
                                             ----   ----       ----   ----
<S>                                          <C>    <C>        <C>    <C>
Third-party aluminum shipments                 32      3         34      5

Third-party sales                            $524   $209       $727   $405

After-tax operating income                   $ 35   $ 25       $ 52   $ 38
                                             ====   ====       ====   ====
</TABLE>

This segment includes closures, closure and packaging machinery,  Aluminio's PET
bottle  businesses  in Latin  America,  as well as the  packaging  and  consumer
businesses of Reynolds  acquired in the 2000 second quarter.  Alcoa's  closures,
packaging  and PET  bottle  businesses  were  previously  included  in the Other
category.

     Second quarter  third-party sales for this segment rose 151%, due primarily
to the  acquisition  of the Reynolds'  packaging and consumer  businesses in May
2000, as well as the  acquisition  of MCG Closures  Limited (MCG) in April 2000.
Excluding these recent  acquisitions,  third-party sales rose 9% versus the 1999
second  quarter and 6% versus the 1999  six-month  period.  Sales by  Aluminio's
packaging  operations  in Brazil,  which were  negatively  impacted  by the 1999
currency  devaluation  and  recession,  grew by 10% quarter over quarter and 16%
year over year.  Closures sales were up 3% and 2% for the second quarter and the
six-month period,  respectively,  versus 1999 periods,  due primarily to the MCG
acquisition.

     Segment  ATOI  was $35 in the  2000  second  quarter  and  $52 in the  2000
six-month period, up 40% and 37% over the respective 1999 periods. This increase
was  primarily  due to the  acquisitions  noted  earlier,  offset by higher  raw
materials costs for the closures and PET bottle businesses.

VI. Other
<TABLE>
<CAPTION>
                                           Second quarter ended     Six months ended
                                                  June 30               June 30
                                                  -------               -------
                                               2000       1999       2000       1999
                                           --- ------ --- ------ --- ------ --- ----
<S>                                         <C>         <C>        <C>       <C>
 Third-party aluminum shipments                    50         15         69       30

 Third-party sales                          $     988    $   652    $ 1,708  $ 1,269

 After-tax operating income                 $      46    $    45    $    79  $    60
                                            =========  =========  =========  =======
</TABLE>

This group includes Alcoa  businesses that do not fit into the categories  noted
above.  Among others,  this includes Alcoa Fujikura,  Ltd. (AFL), which produces
fiber  optic  cable  and  services  for  the  telecommunications   industry  and
electrical components for the automotive industry, Thiokol Propulsion (Thiokol),
a producer of solid rocket  propulsion  systems,  Reynolds'  metal  distribution
business (RASCO), and Alcoa's residential building products operations.  Thiokol
and RASCO were added in the 2000  second  quarter  as parts of the  Cordant  and
Reynolds acquisitions, respectively. Packaging, closures and packaging machinery
businesses which were previously  reported in this group are now included in the
Packaging and Consumer segment.

     Third-party  revenues  for this group were $988 in the 2000 second  quarter
and $1,708 in the 2000 six-month period, up 52% and 35% from the respective 1999
periods. After excluding Thiokol and RASCO, these growth rates adjust to 17% for
both quarter over quarter and year over year.

     AFL revenues  increased 19% in the 2000 second quarter and 16% in the first
six months of 2000 over the corresponding 1999 periods. These increases were due
in large part to growth in  telecommunications  sales of 95%  quarter-to-quarter
and 77% year-to-year, a significant portion of which were from acquisitions made
since  second  quarter  1999.  Revenues  from the sale of  residential  building
products  decreased 5% from the 1999 second quarter on 6% lower shipment volume,
leaving  revenue  growth for the  six-month  period flat on 4% lower  shipments.
Sales by Alcoa's automotive  operations  benefited from the acquisition,  in the
1999 third  quarter,  of the remaining 50% of the A-CMI joint venture with Hayes
Lemmerz  International.  After  excluding the second quarter 2000  acquisitions,
A-CMI, which was accounted for as an equity holding in 1999,  contributed 29% of
the overall  revenue  growth in this category  quarter over quarter and 32% year
over year.

     ATOI for this  category in the 2000 second  quarter was $46, up 2% from the
1999 second quarter,  and was $79 for the 2000 six-month period, up 32% from the
1999  six-month  period.  Increases in ATOI for the 2000 quarter versus the 1999
second  quarter  were due to the  addition  of  Thiokol  and  RASCO,  offset  by
increases in feedstock costs for the building products business of $7 after tax.
For the 2000  year-to-date  period,  productivity  improvements of $16 after tax
along with strong growth at AFL, drove ATOI results higher.

Reconciliation of ATOI to Consolidated Net Income

Items required to reconcile ATOI to consolidated  net income include:  corporate
adjustments  to eliminate any  remaining  profit or loss between  segments;  the
after-tax impact of interest income and expense at the statutory rate;  minority
interest; corporate expense, comprised of the general administrative and selling
expenses of operating the corporate headquarters and other global administrative
facilities along with depreciation on  corporate-owned  assets; and other, which
includes the impact of LIFO,  differences  between  estimated  tax rates used in
each segment and the corporate effective tax rate, and other non-operating items
such as foreign exchange.

     Intersegment profit eliminations for the 2000 six-month period exceeded the
1999 period due to overall  higher  prices for alumina  and  aluminum.  Interest
expense  increased  because  of higher  debt  related  to  recent  acquisitions.
Minority  interest  increased  quarter  over  quarter  and year over year due to
higher income at AofA, AFL, and Aluminio.  Corporate  expense increased from the
1999 second quarter and six-month period due to acquisitions. Other decreased in
the 2000 second quarter as compared to the 1999 second quarter due to a negative
swing in  foreign  exchange  losses,  offset  by  higher  equity  income.  Other
decreased in the 2000 six-month period versus the corresponding  1999 period due
to the above  mentioned  items and because the  estimated  tax rates used in the
segments in the 2000 first quarter were closer to the actual  effective rate for
the corporation as a whole than in the 1999 first quarter.

Costs and Other

Cost of Goods Sold - Cost of goods  sold  increased  $1,076 and $1,280  from the
prior year second  quarter and  six-month  period,  respectively.  The  increase
reflects  higher  volumes  including  those related to  acquisitions,  partially
offset by improved cost performance. Cost of goods sold as a percentage of sales
in the 2000 second  quarter was 76.0% versus  77.9% in the 1999 second  quarter,
and in the 2000 six-month period was 74.7% versus 78.2% in the 1999 period.  The
lower ratios in 2000 are due to higher revenues resulting from higher prices for
alumina and aluminum, higher aluminum volumes and improved cost performance.

Selling,   General  Administrative,   and  Other  Expenses  -  Selling,  general
administrative,  and  other  (SG&A)  expenses  were up $69 from the 1999  second
quarter  and  $104  from  the  1999  six-month  period,   predominantly  due  to
acquisitions.  SG&A as a  percentage  of revenue was 4.9% in 2000  year-to-date,
unchanged from the 1999 period.

Interest  Expense - Interest  expense was up $45,  or 90%,  from the 1999 second
quarter,  and $44, or 43%, for the 1999 six-month period, due to higher interest
rates and higher debt levels as a consequence of the recent acquisitions.

     On July 20, 2000,  Alcoa issued $1,500 of callable  notes.  Of these notes,
$1,000 mature in 10 years and carry a coupon rate of 7.375%,  and $500 mature in
5 years and carry a coupon rate of 7.25%.

Income Taxes - The income tax  provision for the period is based on the expected
effective tax rate adjusted for the impact of acquisitions  from the acquisition
dates  through  June 30. The 2000 second  quarter  rate of 34% differs  from the
statutory  rate  primarily  because  of taxes on foreign  income.  The 2000 rate
differs from the 1999 second  quarter rate  primarily  because of higher  income
before tax in 2000.  The effective tax rate for the year is currently  estimated
at 35%.

Other  Income/Foreign  Currency - Other income (expense) increased to $52 in the
2000 second quarter and $93 in the 2000 six-month period from $43 and $40 in the
comparable  1999 periods.  Quarterly and  year-to-date  results  benefited  from
higher equity and interest income,  gains on sales of assets,  proceeds from the
demutualization  of Met Life,  and from  acquisitions.  The positive  items were
partially  offset by higher exchange losses.  Mark-to-market  gains for the 2000
six-month period were $7 versus $6 in the prior year period.

Minority  Interests  -  Minority  interests'  share of  income  from  operations
increased 57% from the 1999 second  quarter and 139% from the 1999 first half to
$85 and $191, respectively. The increase was due primarily to earnings growth at
AofA and AFL, and a turnaround at Aluminio,  which  reported  income in the 2000
first half versus a net loss in the 1999 period.

Risk Factors

In  addition  to the risks  inherent  in its  operations,  Alcoa is  exposed  to
financial, market, political and economic risks. The following discussion, which
provides  additional  detail regarding Alcoa's exposure to the risks of changing
commodity   prices,   foreign  exchange  rates  and  interest  rates,   includes
forward-looking  statements that involve risk and uncertainties.  Actual results
could  differ   materially  from  those   projected  in  these   forward-looking
statements.

Commodity Price Risks - Alcoa is a leading global producer of aluminum ingot and
aluminum fabricated  products.  As a condition of sale,  customers often require
Alcoa to commit to fixed-price contracts that sometimes extend a number of years
into the future.  Customers  will  likely  require  Alcoa to enter into  similar
arrangements  in the  future.  These  contracts  expose  Alcoa  to the  risk  of
fluctuating  aluminum prices between the time the order is accepted and the time
that the order ships.

     In order to fulfill some of the orders noted above, Alcoa might be required
to purchase  aluminum to supplement  its internal  production.  These  purchases
expose the company to the risk of higher  aluminum  prices.  To hedge this risk,
Alcoa enters into long positions,  principally using futures and options.  Alcoa
follows a stable  pattern of purchasing  metal;  therefore,  it is highly likely
that  anticipated  metal  requirements  will be met.  At June 30, 2000 and 1999,
these  contracts  totaled  approximately  454,000 and 548,000 mt,  respectively.
These  contracts  act to  fix  the  purchase  price  for  these  metal  purchase
requirements, thereby reducing Alcoa's risk to rising metal prices.

     The  futures  and  options  contracts  noted  above  are with  creditworthy
counterparties and are further supported by cash,  treasury bills or irrevocable
letters of credit issued by carefully chosen banks.

     The  expiration  dates of the options and the delivery dates of the futures
contracts  noted above do not always  coincide  exactly  with the dates on which
Alcoa is required to purchase  metal to meet its  contractual  commitments  with
customers. Accordingly, some of the futures and options positions will be rolled
forward.  This may result in significant  cash inflows if the hedging  contracts
are "in-the-money" at the time they are rolled forward.  Conversely, there could
be  significant  cash outflows if metal prices fall below the price of contracts
being rolled forward.

     In addition to the above-noted aluminum positions, Alcoa had 157,000 mt and
75,000 mt of futures  and  options  contracts  outstanding  at June 30, 2000 and
1999,  respectively,  that cover  long-term,  fixed-price  commitments to supply
customers with metal from internal sources.  Accounting convention requires that
these contracts be marked to market,  which resulted in  year-to-date  after-tax
additions to earnings of $7 at June 30, 2000 and $6 at June 30, 1999.

     Alcoa  also sells  products  to various  third  parties at prices  that are
influenced by changes in London Metal Exchange (LME) aluminum prices.  From time
to time,  the company may elect to hedge a portion of these  exposures to reduce
the risk of  fluctuating  market prices on these sales.  Towards this end, Alcoa
may enter into short positions using futures and options contracts.  At June 30,
2000, these contracts totaled 94,000 mt. These contracts act to fix a portion of
the sales price related to these sales contracts.

     Alcoa also purchases certain other  commodities,  such as fuel oil, natural
gas and  copper,  for its  operations  and  enters  into  futures  contracts  to
eliminate volatility in the prices of such products. None of these contracts are
material.

Financial Risk - Alcoa is subject to significant  exposure from  fluctuations in
foreign  currencies.  As a matter of company policy,  foreign currency  exchange
contracts,  including forwards and options, are sometimes used to limit the risk
of fluctuating  exchange rates.  In addition,  Alcoa also attempts to maintain a
reasonable  balance  between fixed and floating rate debt and uses interest rate
swaps and caps to keep financing costs as low as possible.

Risk Management - All of the aluminum and other commodity contracts,  as well as
the various types of financial  instruments,  are  straightforward  and held for
purposes other than trading. They are used primarily to mitigate uncertainty and
volatility, and principally cover underlying exposures.

     Alcoa's commodity and derivative  activities are subject to the management,
direction and control of the Strategic Risk Management Committee (SRMC). SRMC is
composed of the chief executive  officer,  the chief financial officer and other
officers and employees that the chief executive  officer may select from time to
time.  SRMC reports to the board of directors at each of its scheduled  meetings
on the scope of its derivative activities.

Environmental Matters

Alcoa  continues to participate in  environmental  assessments and cleanups at a
number  of  locations.   These  include  approximately  24  owned  or  operating
facilities  and  adjoining  properties,  approximately  29  previously  owned or
operated facilities and adjoining  properties and approximately 90 Superfund and
other waste sites. A liability is recorded for  environmental  remediation costs
or damages when a cleanup program becomes  probable and the costs or damages can
be reasonably estimated.

     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.  Therefore,  it is not possible to determine the outcomes
or to estimate  with any degree of accuracy the  potential  costs for certain of
these matters.  For example,  there are issues related to the Massena, New York,
Pt.  Comfort,  Texas and Troutdale,  Oregon sites that allege  natural  resource
damage or off-site contaminated sediments, where investigations are ongoing. The
following discussion provides additional details regarding the current status of
these three sites.

     MASSENA/GRASSE  RIVER.  Sediments and fish in the Grasse River  adjacent to
Alcoa's Massena,  New York plant site contain varying levels of  polychlorinated
biphenyl (PCB). Alcoa has been identified by the U.S.  Environmental  Protection
Agency (EPA) as potentially  responsible for this contamination and, since 1989,
has been conducting investigations and studies of the river under order from the
EPA issued under the  Comprehensive  Environmental  Response,  Compensation  and
Liability Act, also known as Superfund.  During 1999, Alcoa continued to perform
studies and  investigations on the Grasse River. A planned pilot test of certain
sediment capping techniques, intended for 1999, could not be completed because a
final  scope of work could not be  developed  with EPA in time to  complete  the
project  before the  construction  season  concluded.  In addition,  in the 1999
fourth quarter,  Alcoa submitted an Analysis of Alternatives to EPA. This report
identified potential courses of remedial action related to the PCB contamination
of the river.  Alcoa has  proposed to EPA that the planned  pilot scale tests be
conducted to assess the  feasibility  of  performing  certain  sediment-covering
techniques  before selection and approval of a remedial  alternative by EPA. The
costs of these pilot scale tests have been fully reserved.  The results of these
tests and  discussions  with EPA  regarding all of the  alternatives  identified
should  provide  additional  information  for the  selection and approval of the
appropriate remedial alternative.

     The Analysis of Alternatives report and the results of the pilot tests must
be reviewed and approved by EPA.  Currently,  no one of the alternatives is more
likely to be selected than any other.  The range of additional  costs associated
with the potential  courses of remedial  action is between zero and $53.  During
meetings  in March and April,  2000,  EPA  indicated  to Alcoa that it  believes
additional  remedial  alternatives  need  to be  included  in  the  Analysis  of
Alternatives. Such additional remedies involve removal of more sediment from the
river than was included in the  alternatives  provided in the recent Analysis of
Alternatives report. The cost of such potential additional remedial alternatives
can not be estimated at this time.

     In 1988,  Reynolds  discovered  that soils in the area of the heat transfer
medium system at Reynolds'  primary aluminum  production  plant in Massena,  New
York  were  contaminated  with  polychlorinated  biphenyls  ("PCBs")  and  other
contaminants. Remediation of the contaminated soils and other contaminated areas
of the plant was substantially  completed in 1998.  Portions of the St. Lawrence
River system adjacent to the plant are also  contaminated with PCBs. Since 1989,
Reynolds  has been  conducting  investigations  and studies of the river  system
under order from the EPA issued under  Superfund.  Reynolds is in the process of
working with the EPA to better define the scope of the dredging  program,  which
is planned for 2001.  Alcoa and  Reynolds  are also aware of a natural  resource
damage claim that may be asserted by certain  federal,  state and tribal natural
resource trustees at this location.

     PT. COMFORT/LAVACA BAY. In 1990, Alcoa began discussions with certain state
and federal natural  resource  trustees  concerning  alleged releases of mercury
from its Pt.  Comfort,  Texas  facility  into the adjacent  Lavaca Bay. In March
1994,  EPA listed the "Alcoa  (Point  Comfort)/Lavaca  Bay Site" on the National
Priorities  List  and,  shortly  thereafter,  Alcoa  and  EPA  entered  into  an
administrative  order on  consent  under  which  Alcoa is  obligated  to conduct
certain remedial investigations and feasibility studies. In accordance with this
order,  Alcoa  recently  submitted  a  draft  remedial  investigation,  a  draft
feasibility  study and a draft  baseline  risk  assessment  to EPA. In addition,
Alcoa recently commenced  construction of the EPA-approved project to fortify an
offshore  dredge  disposal  island.  The probable and  estimable  costs of these
actions are fully reserved.  In addition,  during March 2000,  Alcoa submitted a
Feasibility  Study to EPA providing  remedial  alternatives  for the site. Alcoa
believes it has now fully  reserved the  probable  cost of  remediation  for the
site.  Since the order with EPA,  Alcoa and the natural  resource  trustees have
continued   efforts  to  understand   natural   resource  injury  and  ascertain
appropriate restoration  alternatives.  That process is currently expected to be
completed by late 2000 or early 2001.

     TROUTDALE,  OREGON.  In 1994,  the EPA added  Reynolds'  Troutdale,  Oregon
primary aluminum  production plant to the National  Priorities List of Superfund
sites.  Reynolds is cooperating with the EPA and, under a September 1995 consent
order,  is  working  with  the  EPA  in  investigating  potential  environmental
contamination at the Troutdale site and promoting more efficient  cleanup at the
site.

     Based on the above, it is possible that Alcoa's results of operations, in a
particular period, could be materially affected by matters relating to these two
sites. However, based on facts currently available, management believes that the
disposition  of these matters will not have a materially  adverse  effect on the
financial position or liquidity of the company.

     Alcoa's remediation reserve balance at June 30, 2000 was $343 (of which $45
was  classified as a current  liability) and reflects the most probable costs to
remediate identified  environmental conditions for which costs can be reasonably
estimated. No single site represents more than 20% of the total reserve balance.
Remediation expenses charged to the reserve in the 2000 second quarter were $21.
They include expenditures  currently mandated,  as well as those not required by
any regulatory  authority or third-party.  Additions to the reserve of $189 were
made in the 2000 second quarter pertaining predominantly to Reynolds sites.

     Included in annual  operating  expenses are the recurring costs of managing
hazardous substances and environmental programs. These costs are estimated to be
about 2% of cost of goods sold.

Liquidity and Capital Resources

Cash from Operations

Cash  from  operations  during  the 2000  year-to-date  period  totaled  $1,106,
compared with $912 in the 1999 period.  The increase  reflects higher net income
and an increase in the minority interests' share of net income, partly offset by
higher working capital requirements.

Financing Activities

Financing  activities  provided $1,940 of cash in the 2000 first half,  compared
with $531 used in the 1999  period.  The increase was mainly due to the issuance
of debt to fund acquisitions. Short-term borrowings and commercial paper grew by
$1,311 and $1,453, respectively,  in the 2000 period, compared with decreases of
$7 and 70, respectively,  in the 1999 period. Long-term debt increased by $1,607
in the 2000  six-month  period,  versus an increase of $216 in the 1999  period.
Offsetting  this growth in debt was an increase in payments on  long-term  debt,
$1,358 in the 2000 period versus $283 in the 1999 period.

     Dividends paid to shareholders  were $201 in the 2000 six-month  period, an
increase  of $52 over the 1999  period.  The change was  primarily  due to a 24%
increase in Alcoa's total  dividend,  which paid out 25 cents in the 2000 period
versus 20.125 cents per share in the 1999 period.

Investing Activities

     Investing  activities used $2,961 during the 2000 first half, compared with
$476 in the 1999  period.  Acquisitions  accounted  for the bulk of the  change,
requiring  $2,534 above cash  acquired in the 2000 period versus $16 in the 1999
period.  In the 2000 first quarter Alcoa  acquired Excel  Extrusions,  Inc. from
Noranda Aluminum.  In the second quarter,  Alcoa acquired MCG from Wassall plc.,
as well as Cordant,  the portion of Howmet not owned by Cordant,  and  Reynolds.
Also in the second quarter, AofA acquired Eastern Aluminum Ltd.

     During the 1999  period,  Alcoa  acquired the bright  products  business of
Pechiney's  Rhenalu  rolling plant located near  Toulouse,  France and Reynolds'
aluminum extrusion plant in Irurzun, Spain.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

     As  previously  reported,  in March  1998,  Region  V of the  Environmental
Protection  Agency (EPA) referred  various alleged  environmental  violations at
Alcoa's  Warrick  Operations  to the civil  division of the U.S.  Department  of
Justice  (DOJ).  The  alleged  violations  stem from an April  1997  multi-media
environmental  inspection  of Warrick  Operations  by the EPA  relating to water
permit  exceedances  as  reported  on  monthly  discharge   monitoring  reports,
wastewater toxicity issues and alleged opacity  violations.  After negotiations,
the parties  reached  final  agreement  on the  language of a consent  decree in
settlement  of this  matter.  Alcoa  agreed to pay a civil  penalty  of $2.4 and
agreed to  performance of a  supplemental  environmental  project and injunctive
relief. The consent decree was signed and lodged with the court on May 13, 2000.
The court entered the consent  decree as a final  judgment on June 14, 2000, and
Alcoa paid the civil penalty on June 21, 2000.

     As previously reported, in March 1999, two search warrants were executed by
various  federal and state  agencies on the Alcoa Port Allen Works of  Discovery
Aluminas, Inc., a subsidiary in Port Allen, Louisiana.  Also in March, Discovery
Aluminas,  Inc.  was  served  with a  grand  jury  subpoena  that  required  the
production  to a federal  grand  jury of certain  company  records  relating  to
alleged  environmental issues involving wastewater  discharges and management of
solid or  hazardous  wastes at the plant.  In April  1999,  the Port Allen plant
manager was indicted  for a single  count of violating  the Clean Water Act. The
case has not been set for trial.  In October  1999, a second grand jury subpoena
for documents was issued to Alcoa requesting  information  regarding  wastewater
discharges from the Port Allen plant. Alcoa responded to the subpoena, continues
to  cooperate  with the  government,  and is engaged in  discussions  seeking to
resolve the situation.

     In late 1998,  Howmet  International  Inc.  ("Howmet")  discovered  certain
product testing and specification  non-compliance issues at the Montreal, Quebec
and  Bethlehem,   Pennsylvania   operations  of  its  Howmet  Aluminum  Castings
subsidiaries  (formerly  called Cercast).  In 1999,  Howmet  discovered  several
additional  instances of other testing and  specification  non-compliance at its
Hillsboro,  Texas  aluminum  casting  facility,  at the Montreal  and  Bethlehem
operations and, in 2000, at its Dover, New Jersey super-alloy  casting facility.
Howmet has notified  customers and the appropriate  government  agencies and has
substantially   completed  correction  of  these  issues.  Howmet  knows  of  no
in-service  problems  associated with any of these issues.  In addition,  Howmet
Aluminum  Casting  has been,  and expects to continue to be, late in delivery of
products  to certain  customers.  The  Defense  Criminal  Investigative  Service
("DCIS"),  in  conjunction  with the other agents from the Department of Defense
and the  National  Aeronautics  and  Space  Administration,  has  undertaken  an
investigation  with respect to certain of the foregoing  matters at the Montreal
and Bethlehem  facilities.  The DCIS has informed Howmet that the  investigation
concerns  possible  violations of the False Claims Act and the False  Statements
Act,  as well as  possible  criminal  penalties.  Howmet is unable to  determine
definitively  what, if any,  civil or criminal  penalties  might be imposed as a
result of the  investigation.  All  customer  claims  relating to the  foregoing
matters  either  have been  resolved  or, in the  judgment  of  Howmet,  will be
resolved  within  existing  reserves.  On August 6, 1999 Howmet  entered into an
Administrative Agreement with the U.S. Air Force terminating Notices of Proposed
Debarment issued on March 1, 1999 relating to certain of the foregoing  matters.
The  Administrative  Agreement  permitted  the  affected  facilities  to  resume
accepting  new U.S.  government  contracts and  subcontracts.  On June 20, 2000,
Alcoa completed its acquisition of Howmet.

     Effective May 17, 2000,  Article FIFTH of Alcoa's Articles of Incorporation
was amended to increase the number of shares of common  stock,  $1.00 par value,
that  Alcoa  is  authorized  to issue  from  600  million  to 1.8  billion.  The
amendment,  which had been approved by Alcoa's Board of Directors on January 10,
2000,  was  submitted  to and  approved  by Alcoa's  shareholders  at the annual
meeting  held on May 12,  2000.  (See Part II,  Item 4 below.)  Approval  of the
amendment was required to permit the two-for-one  split of the common stock that
was  distributed  on June 9, 2000 to  holders  of record  on May 26,  2000.  The
amendment  permits the issuance of  additional  shares up to the new 1.8 billion
maximum  authorization  without further action or authorization by shareholders,
except as may be required in a specific case by applicable law or stock exchange
regulations.  Such additional  authorized shares, if and when issued, would have
the same rights and  privileges  as the shares of Alcoa  common stock issued and
outstanding before the amendment became effective.

Item 4.  Submission of Matters to a Vote of Security Holders.
         ---------------------------------------------------

     At the annual meeting of Alcoa  shareholders  held on May 12, 2000, Paul H.
O'Neill was reelected a director of Alcoa to serve for a term expiring  December
31,  2000,  and Kenneth W. Dam and Judith M. Gueron were  reelected to serve for
three-year terms. Votes cast for Mr. O'Neill were 306,435,745 and votes withheld
were 2,898,561;  votes cast for Mr. Dam were 306,548,699 and votes withheld were
2,785,607;  and votes cast for Dr. Gueron were  306,522,575  and votes  withheld
were 2,811,731.

     Also at that annual meeting,  a proposal to approve an amendment to Alcoa's
Articles of Incorporation to increase the number of authorized  shares of common
stock was  adopted.  Total  votes  cast for the  amendment  to the  Articles  of
Incorporation  were  301,441,334,  votes cast against were 6,005,350,  and there
were  1,889,596  abstentions.  Abstentions  are not counted for voting  purposes
under Pennsylvania law, the jurisdiction of Alcoa's incorporation.

Item 6.  Exhibits and Reports on Form 8-K.
         --------------------------------

(a) Exhibits

     3(a).   Articles of Incorporation of the Registrant as amended

     10(n).  Revolving Credit Agreement (364-Day), dated as of
             April 28, 2000

     10(t).  Revolving Credit Agreement (Five-Year), dated as of
             April 28, 2000

     12.     Computation of Ratio of Earnings to Fixed Charges

     15.     Independent Accountants' letter regarding unaudited
             financial information

     27.     Financial Data Schedule

(b)  During the second  quarter of 2000,  Alcoa  filed with the  Securities  and
     Exchange Commission:

(1)      a Form 8-K, dated May 8, 2000,  reporting  under Item 5 the approval by
         the  U.S.  Department  of  Justice  and  the  European  Union,  and the
         completion  of, the merger  between Alcoa and Reynolds  Metals  Company
         ("Reynolds").  In addition,  Alcoa filed a Form 8-K/A on July 10, 2000,
         including  under  Item 2 the  approval  and  completion  of the  merger
         between  Alcoa and  Reynolds  and  including  under  Item 7  historical
         financial  statements  of Reynolds and  unaudited  pro forma  condensed
         consolidated financial information of Alcoa and Reynolds.

(2)      a Form 8-K,  dated May 15, 2000,  reporting  under Item 5 a two-for-one
         common stock split and  including  restated  financial  information  to
         reflect the stock split; and

(3)      a Form 8-K,  dated June 22, 2000,  reporting  under Item 5  information
         concerning new technology in the aluminum smelting process.


<PAGE>


                                   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.

                                     Alcoa Inc.




    July 27, 2000                   By /s/ RICHARD B. KELSON
    ------------------------        ----------------------------
    Date                             Richard B. Kelson
                                     Executive Vice President and
                                     Chief Financial Officer
                                     (Principal Financial Officer)



    July 27, 2000                   By /s/ TIMOTHY S. MOCK
    ------------------------        ----------------------------
    Date                             Timothy S. Mock
                                     Vice President and Controller
                                     (Chief Accounting Officer)





<PAGE>


                                    EXHIBITS

                                                                    Page

     3(a). Articles of Incorporation of the Registrant as amended

     10(n). Revolving Credit Agreement (364-Day), dated as of
            April 28, 2000

     10(t). Revolving Credit Agreement (Five-Year), dated as of
            April 28, 2000

     12.    Computation of Ratio of Earnings to Fixed Charges         28

     15.    Independent Accountants' letter regarding unaudited       29
            financial information

     27.    Financial Data Schedule



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