Alcoa Announces 2002 Second Quarter Sequential Increases in Shipments, Revenues and Profits; Net Income of $232 Million or $.27 EPS
PITTSBURGH--July 8, 2002--Alcoa Inc. today announced net income for the 2002 second quarter of $232 million, or 27 cents per diluted share. Revenues were up 5% over the previous quarter, the first sequential increase in six quarters."Despite essentially flat aluminum prices, we achieved higher profits driven by improving shipment levels, and on-going control of costs and operating expenses through continuing deployment of the Alcoa Business System," said Chairman and CEO Alain Belda. "If economic trends solidify, we should continue to see improving profitability over the second half of the year, even at current aluminum prices."
During the quarter, automotive, commercial transportation, and industrial products markets all showed strength, along with seasonal expansions in building and construction, and packaging and consumer markets. Those improvements more than offset continuing weakness in the aerospace and industrial gas turbine markets, where build rates have declined substantially since last year.
Alcoa earned $307 million, or 35 cents per diluted share, in the second quarter of 2001, and $218 million, or 26 cents per share, in the first quarter of 2002, according to Generally Accepted Accounting Principles ("GAAP".) In the previous quarter, a one-time gain for the change in accounting for goodwill boosted Alcoa's earnings by $34 million, or 4 cents per share, and a special charge for restructuring diluted GAAP earnings by $114 million or 13 cents per share in the second quarter of 2001.
Compared to the second quarter of 2001, price declines and the impact from idled capacity have dampened profitability, as the average three-month LME price for primary aluminum declined by 6 cents per pound, or 8.8%.
When the previously announced restart of the Intalco smelter is complete, Alcoa will have 540,000 metric tons (mt) of aluminum production idled on a base capacity of 4.1 million metric tons.
At the end of the 2002 second quarter, Alcoa had achieved $492 million in annualized cost savings and remains on target to achieve its $1.0 billion 2003 goal. The run rate at the end of the quarter was $123 million, compared with $109 million in the prior quarter.
Quarterly Analysts' Meeting
Alcoa's quarterly analysts' meeting and conference call will be at 4:00 p.m. EDT on Wednesday, July 17, 2002. The meeting will be webcast via alcoa.com.
Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses as a single solution to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) aluminum foil, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks. The company has 129,000 employees in 38 countries.
Alcoa Inc.
Editor's Note: The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.
Certain statements relate to future events and expectations and as such constitute forward-looking statements involving 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. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the risk that estimated cost savings from the Alcoa Business System will not be reflected in earnings and other risk factors summarized in Alcoa's 2001 10-K report and other SEC reports.
FINANCIAL REPORT
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)
Second quarter ended
June 30
-------
2002 2001
------- -------
Sales $ 5,245 $ 5,991
Cost of goods sold 4,196 4,607
Selling, general administrative
and other expenses 277 326
Research and development expenses 52 55
Provision for depreciation, depletion
and amortization 269 309
Special items - 212
Interest expense 83 93
Other income, net (34) (107)
------- -------
4,843 5,495
------- -------
Income before taxes on income 402 496
Provision for taxes on income 123 157
------- -------
Income from operations 279 339
Less: Minority interests' share 47 32
------- -------
Income before accounting change 232 307
Cumulative effect of accounting
change for goodwill - -
------- -------
NET INCOME $ 232 $ 307
======= =======
Earnings per common share:
Basic (before cumulative effect) $ 0.27 $ 0.36
Basic (after cumulative effect) $ 0.27 $ 0.36
Diluted (before cumulative effect) $ 0.27 $ 0.35
Diluted (after cumulative effect) $ 0.27 $ 0.35
Average number of shares used to compute:
Basic earnings per common share 845,712,405 861,633,715
Diluted earnings per common share 851,877,799 872,047,474
Currency translation adjustments
included in net income $ (3) $ 14
Shipments of aluminum products
(metric tons) 1,333,000 1,292,000
The effects of adopting SFAS No. 142 on net income and diluted
earnings per share for the three-month periods ended June 30, 2002 and
2001 follow.
Net Income Diluted EPS
------------------ ------------------
2002 2001 2002 2001
------- ------- ------- -------
Net Income $ 232 $ 307 $ .27 $ .35
Less: cumulative effect
income from accounting
change for goodwill - - - -
------- ------- ------- -------
Income excluding cumulative
effect 232 307 .27 .35
Add: goodwill amortization - 43 - .05
------- ------- ------- -------
Income excluding cumulative
effect in 2002 and
goodwill amortization
in 2001 $ 232 $ 350 $ .27 $ .40
======= ======= ======= =======
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)
Six months ended
June 30
-------
2002 2001
-------- --------
Sales $ 10,228 $ 12,167
Cost of goods sold 8,240 9,320
Selling, general administrative
and other expenses 555 649
Research and development expenses 103 104
Provision for depreciation, depletion
and amortization 530 630
Special items - 212
Interest expense 158 208
Other income, net (89) (199)
-------- --------
9,497 10,924
-------- --------
Income before taxes on income 731 1,243
Provision for taxes on income 227 404
-------- --------
Income from operations 504 839
Less: Minority interests' share 88 128
-------- --------
Income before accounting change 416 711
Cumulative effect of accounting
change for goodwill 34 -
-------- --------
NET INCOME $ 450 $ 711
======== ========
Earnings per common share:
Basic (before cumulative effect) $ 0.49 $ 0.82
Basic (after cumulative effect) $ 0.53 $ 0.82
Diluted (before cumulative effect) $ 0.49 $ 0.81
Diluted (after cumulative effect) $ 0.53 $ 0.81
Average number of shares used to compute:
Basic earnings per common share 846,351,690 863,462,208
Diluted earnings per common share 852,870,259 873,156,282
Common stock outstanding at
the end of the period 844,427,046 858,352,398
Currency translation adjustments
included in net income $ (1) $ 24
Shipments of aluminum
products (metric tons) 2,592,000 2,612,000
Return on average shareholders' equity 8.0% 13.1%
The effects of adopting SFAS No. 142 on net income and diluted
earnings per share for the six-month periods ended June 30, 2002 and
2001 follow.
Net Income Diluted EPS
------------------- -----------------
2002 2001 2002 2001
------- ------- ------- -------
Net Income $ 450 $ 711 $ .53 $ .81
Less: cumulative effect
income from accounting
change for goodwill (34) - (.04) -
------- ------- ------- -------
Income excluding
cumulative effect 416 711 .49 .81
Add: goodwill amortization - 87 - .10
------- ------- ------- -------
Income excluding cumulative
effect in 2002 and
goodwill amortization
in 2001 $ 416 $ 798 $ .49 $ .91
======= ======= ======= =======
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
June 30 December 31
2002 2001
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 413 $ 512
Short-term investments 38 15
Receivables from customers,
less allowances:
$123 in 2002 and $129 in 2001 2,764 2,577
Other receivables 427 288
Inventories 2,423 2,531
Deferred income taxes 398 410
Prepaid expenses and
other current assets 517 459
------- -------
Total current assets 6,980 6,792
Properties, plants and
equipment, at cost 23,098 22,536
Less: accumulated depreciation,
depletion and amortization 10,900 10,554
------- -------
Net properties, plants and equipment 12,198 11,982
------- -------
Goodwill 5,927 5,733
Other assets 3,792 3,848
------- -------
Total assets $28,897 $28,355
======= =======
LIABILITIES
Current liabilities:
Short-term borrowings $ 54 $ 142
Accounts payable, trade 1,729 1,630
Accrued compensation and retirement costs 821 889
Taxes, including taxes on income 867 903
Other current liabilities 1,065 1,336
Long-term debt due within one year 133 103
------- -------
Total current liabilities 4,669 5,003
Long-term debt, less amount
due within one year 7,120 6,388
Accrued postretirement benefits 2,443 2,513
Other noncurrent liabilities
and deferred credits 1,851 1,968
Deferred income taxes 600 556
------- -------
Total liabilities 16,683 16,428
------- -------
MINORITY INTERESTS 1,331 1,313
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock 55 56
Common stock 925 925
Additional capital 6,094 6,114
Retained earnings 7,712 7,517
Treasury stock, at cost (2,838) (2,706)
Accumulated other comprehensive loss (1,065) (1,292)
------- -------
Total shareholders' equity 10,883 10,614
------- -------
Total liabilities and equity $28,897 $28,355
======= =======
Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)
Consolidated
Third-Party Revenues 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 547 490 454 417 1,908 425 419
Primary Metals 967 972 808 685 3,432 764 788
Flat-Rolled Products 1,343 1,255 1,219 1,182 4,999 1,156 1,192
Engineered Products 1,593 1,582 1,514 1,409 6,098 1,396 1,411
Packaging and Consumer 646 701 671 702 2,720 624 678
Other 1,080 991 845 786 3,702 618 757
---- ---- ---- ---- ---- ---- ----
Total 6,176 5,991 5,511 5,181 22,859 4,983 5,245
Consolidated Intersegment
Revenues 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 283 275 246 217 1,021 229 233
Primary Metals 867 887 839 707 3,300 878 1,001
Flat-Rolled Products 16 15 20 13 64 15 18
Engineered Products 9 8 9 9 35 8 10
Packaging and Consumer 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 0
---- ---- ---- ---- ---- ---- ----
Total 1,175 1,185 1,114 946 4,420 1,130 1,262
Consolidated
Third-Party Shipments
(KMT's) 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 2,031 1,730 1,789 1,667 7,217 1,825 1,796
Primary Metals 476 494 448 455 1,873 503 507
Flat-Rolled Products 470 450 442 456 1,818 439 456
Engineered Products 254 242 232 204 932 228 252
Packaging and Consumer 42 41 33 27 143 31 31
Other 78 65 57 28 228 58 87
---- ---- ---- ---- ---- ---- ----
Total Aluminum 1,320 1,292 1,212 1,170 4,994 1,259 1,333
Average realized
price - Primary 0.77 0.73 0.71 0.65 0.72 0.66 0.67
After-Tax Operating
Income (1) 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02
---- ---- ---- ---- ---- ---- ----
Alumina and Chemicals 166 130 115 60 471 65 73
Primary Metals 294 264 216 131 905 143 175
Flat-Rolled Products 65 74 59 64 262 61 66
Engineered Products 40 60 62 11 173 51 45
Packaging and Consumer 43 47 47 48 185 28 55
Other 50 45 4 (52) 47 7 19
---- ---- ---- ---- ---- ---- ----
Total 658 620 503 262 2,043 355 433
Reconciliation of
after-tax operating
income (ATOI) to
consolidated net
income 1Q01 2Q01 3Q01 4Q01 2001 1Q02 2Q02
---- ---- ---- ---- ---- ---- ----
Total ATOI 658 620 503 262 2,043 355 433
Impact of intersegment
profit eliminations 4 (8) (14) (2) (20) (3) (1)
Unallocated amounts
(net of tax):
Interest income 8 12 10 10 40 10 9
Interest expense (75) (61) (55) (51) (242) (49) (54)
Minority interests (96) (32) (52) (28) (208) (41) (47)
Corporate expense (66) (66) (45) (84) (261) (58) (53)
Special items - (148) - (249) (397) - -
Accounting change - - - - - 34 -
Other (29) (10) (8) - (47) (30) (55)
---- ---- ---- ---- ---- ---- ----
Consolidated net
income 404 307 339 (142) 908 218 232
(1) Under the provisions of SFAS No. 142, effective January 1, 2002,
goodwill is no longer amortized. This resulted in a positive
impact to segment ATOI results in the 2002 second quarter as
follows: Primary $6, Flat-Rolled Products ($1), Engineered
Products $15, Packaging and Consumer $4, and Other $8. $11 was
recorded in Corporate.