BW20030406002001 20030407T060009Z UTC
( BW)(ALCOA-INC)(ALI) 1st Quarter Results
Business Editors
UK REGULATORY NEWS
LONDON--(BUSINESS WIRE)--April 7, 2003--
Strong Cost Savings Help Offset Higher Energy Prices, Driving Alcoa's
Income From Continuing Operations HigherSequentially and
Year-Over-Year
PITTSBURGH--(BUSINESS WIRE)--April 4, 2003--Alcoa (NYSE:AA)
Highlights of the quarter:
-- Income from continuing operations was $0.23 per diluted share
versus a loss of $0.15 in the previous quarter and income of
$0.22 in the year-ago quarter
-- Revenue was $5.11 billion, up from both the prior and year-ago
quarters
-- Gross margin expanded sequentially from 19.2 percent to
20.3 percent
-- Cost savings were $52 million in the quarter, bringing the
Company's annual run rate on savings to $808 million
-- Every segment of the business demonstrated improved sequential
profitability except Packaging and Consumer, which experienced
seasonal declines.
Alcoa today reported income from continuing operations in the first
quarter of $195 million or $0.23 per diluted share compared to a loss
from continuing operations of $125 million or $0.15 per diluted share
in the previous quarter. The loss in the fourth quarter of 2002
included restructuring charges, goodwill impairment and losses on
divestitures totaling $258 million. (See attached schedule.) Income
from continuing operations was $184 million or $0.22 per diluted share
in the first quarter of 2002.
"We are focused on managing what is under our control in a challenging
business environment," said Alain Belda, Chairman and CEO of Alcoa.
"Despite significantly higher energy prices which offset more
favorable metal prices, we achieved solid cost savings results from
the restructuring undertaken over the last two years as well as
synergies from acquired businesses. Every segment of the business
demonstrated improved profitability except for Packaging and Consumer,
which experienced typical seasonal declines. Given the uncertain
economic and geopolitical outlook today, we will keep our focus on
controlling costs, improving productivity, and building closer
connections to our customers."
Cost Savings
The company achieved $52 million in savings in the quarter. Consistent
with Alcoa's approach since its first cost challenge in 1998, the
savings number includes the effect of higher benefit costs, but
excludes changes in energy prices due to volatility. Energy costs in
the first quarter of 2003 were $75 million higher than the fourth
quarter 2002 and $110 million higher than first quarter 2002. Benefit
costs were $25 million higher than the previous quarter.
The cost savings were driven in large part by accelerating the
benefits of prior years' restructurings and the continued
implementation of the Alcoa Business System. Despite higher energy and
raw material costs, the company's margin improved 110 basis points to
20.3% of sales in the quarter. Alcoa has now achieved $808 million
toward its $1 billion cost savings goal by the end of 2003 and remains
solidly on track to meet that challenge.
Markets
Sales were $5.11 billion up from $5.06 billion in the fourth quarter
of last year - and up 4% from $4.9 billion in the first quarter of
2002. Sequentially, higher upstream pricing and the inclusion of
Fairchild Fasteners revenues offset seasonal declines in the packaging
and consumer markets. While the aerospace, industrial gas turbine and
commercial building markets remain soft, the company benefited from
aggressive cost cutting in businesses serving those markets.
Automotive markets remained strong in the quarter while residential
construction weakened due to severe winter weather in the U.S.
Acquisitions and Divestitures
Fairchild Fasteners, a part of Alcoa Fastening Systems since December
2002, has already achieved $19 million in annualized synergies. These
savings are excluded from the $1 billion cost challenge. Alcoa
continues to pursue the divestiture of non-core businesses announced
earlier this year, and expects to use proceeds from those sales to pay
down debt.
Customers
Alcoa continues to strengthen its performance by developing innovative
products that add value for its customers. Introduced last summer,
Reynolds Wrap(R) Release(R), an innovative new non-stick foil, has now
established a strong presence in the North American market. Almost
five million households throughout the United States have already
tried Reynolds Wrap(R) Release(R) and almost 50% of these consumers
have plans to come back for more -- twice the number of consumers who
typically make a repeat purchase of a new product in this market.
Alcoa Dura-Bright(R) wheels continue to gain acceptance in the market
and are on track to triple sales from the previous year.
Dura-Bright(R) wheels have been used primarily in transit bus and
motor home applications, and are now being rapidly adopted in trucks
and trailers. They were named as one of the top 50 new products for
2002 by Heavy Duty Trucking magazine.
Alcoa was also selected to supply metallic solutions for regional and
business jets to Bombardier.
Accounting Change and Other Items
In the first quarter of 2003, Alcoa adopted Financial Accounting
Standard No. 143, "Accounting for Asset Retirement Obligations." The
cumulative effect of adopting this standard was a one-time, non-cash
charge of $47 million. Including this charge, Alcoa's net income for
the quarter was $151 million. Net income in the first quarter of 2002
included a one time, non-cash gain of $34 million upon adoption of FAS
No. 142.
Sequentially, the negative impact of foreign currency translation and
lower non-operating income were partially offset by higher equity
earnings.
About Alcoa
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 to customers. In addition to aluminum products and
components, Alcoa also markets consumer brands including Reynolds
Wrap(R) foils and plastic wraps, 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 127,000 employees in 40 countries.
More information can be found at www.alcoa.com
Alcoa Business System
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.
Forward Looking Statement
Certain statements in this release relate to future events and
expectations and as such constitute forward-looking statements
involving known and unknown risks and uncertainties 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 company's
inability to achieve the level of cost savings or productivity
improvements anticipated by management, including possible increases
in the cost of doing business resulting from war or terrorist
activities; and other risk factors summarized in Alcoa's SEC reports.
FINANCIAL REPORT
Alcoa and subsidiaries Supplemental
Net Income and EPS Information (unaudited)
(in millions, except per-share amounts)
Net Income Diluted EPS
--------------------- -----------------------
1Q03 4Q02 1Q02 1Q03 4Q02 1Q02
---------------------------------------------- -----------------------
GAAP Net income (loss) $151 $(223) $218 $0.17 $(.27) $.26
Cumulative effect of
accounting change 47 - (34) 0.06 - (.04)
Discontinued operations
- operating (income)
loss (3) 20 - - .03 -
Discontinued operations
- loss on Divestitures - 78 - - .09 -
----------------------------------------------------------------------
GAAP Income (loss) from
continuing operations $195 $(125) $184 $0.23 $(.15) $.22
----------------------------------------------------------------------
One-time charges:
Special items -
restructurings (3) 95 -
Special items - loss
on divestitures - 143 -
Goodwill impairment - 20 -
----------------------------------------------------------------------
Income from continuing
operations excluding
one-time charges (1) $ 192 $ 133 $ 184 $ 0.23 $ 0.16 $ 0.22
======================================================================
Average diluted shares
outstanding 846 844 854
(1) Alcoa believes that presenting income from continuing operations
excluding one-time charges is an additional measure of performance
that investors can use to compare operating results between reporting
periods. The schedule above allows for ease of analysis in reviewing
Alcoa's earnings performance using these measures. Income from
continuing operations excluding one-time charges can provide a more
relevant view of a company's performance.
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)
Quarter ended
March 31 March 31 December 31
2003 2002 2002
-------------- ------------- -------------
Sales $5,112 $4,900 $5,061
Cost of goods sold 4,073 3,968 4,088
Selling, general administrative
and other expenses 294 273 339
Research and development
expenses 50 51 58
Provision for depreciation,
depletion and amortization 285 259 297
Impairment of goodwill - - 44
Special items (4) - 368
Interest expense 88 75 97
Other income, net (37) (55) (67)
-------------- ------------- -------------
4,749 4,571 5,224
Income (loss) from
continuing operations
before taxes on income 363 329 (163)
(Provision) benefit for
taxes on income (109) (104) 36
-------------- ------------- -------------
Income (loss) from
continuing operations
before minority
interests' share 254 225 (127)
Less: Minority interests'
share 59 41 (2)
-------------- ------------- -------------
Income (loss) from
continuing operations 195 184 (125)
Income (loss) from
discontinued operations 3 - (98)
Cumulative effect of
accounting change (47) 34 -
-------------- ------------- -------------
NET INCOME (LOSS) $151 $218 $(223)
============== ============= =============
Earnings (loss) per common
share:
Basic:
Income (loss) from
continuing operations $.23 $.22 $(.15)
Loss from discontinued
operations - - (.12)
Cumulative effect of
accounting change (.06) .04 -
-------------- ------------- -------------
Net income (loss) $.17 $.26 $(.27)
============== ============= =============
Diluted:
Income (loss) from
continuing operations $.23 $.22 $(.15)
Loss from discontinued
operations - - (.12)
Cumulative effect of
accounting change (.06) .04 -
-------------- ------------- -------------
Net income (loss) $.17 $.26 $(.27)
============== ============= =============
Average number of shares
used to compute:
Basic earnings per
common share 845,065,093 847,105,553 844,456,673
Diluted earnings per
common share 846,328,622 854,151,135 844,456,673
Common stock outstanding
at the end of the period 845,157,381 846,809,997 844,819,462
Currency translation
adjustments included in
net income $ (13) $2 $ 2
Shipments of aluminum
products (metric tons) 1,192,000 1,251,000 1,320,000
Alcoa and subsidiaries
Condensed Consolidated Balance Sheet
(in millions)
(unaudited)
March 31 Dec. 31
2003 2002
-----------------------
ASSETS
Current assets:
Cash and cash equivalents $370 $344
Receivables from customers, less allowances:
$127 in 2003 and $120 in 2002 2,611 2,378
Other receivables 253 174
Inventories 2,557 2,441
Deferred income taxes 457 468
Prepaid expenses and other current assets 437 508
-----------------------
Total current assets 6,685 6,313
-----------------------
Properties, plants and equipment, at cost 23,606 23,120
Less: accumulated depreciation, depletion and
amortization 11,420 11,009
-----------------------
Net properties, plants and equipment 12,186 12,111
-----------------------
Goodwill 6,365 6,365
Other assets 4,511 4,446
Assets held for sale 609 575
-----------------------
Total assets $30,356 $29,810
=======================
LIABILITIES
Current liabilities:
Short-term borrowings $32 $37
Accounts payable, trade 1,762 1,618
Accrued compensation and retirement costs 846 933
Taxes, including taxes on income 817 818
Other current liabilities 865 970
Long-term debt due within one year 75 85
-----------------------
Total current liabilities 4,397 4,461
-----------------------
Long-term debt, less amount due within one year 8,672 8,365
Accrued postretirement benefits 2,304 2,320
Other noncurrent liabilities and deferred
credits 2,931 2,878
Deferred income taxes 509 502
Liabilities of operations held for sale 90 64
-----------------------
Total liabilities 18,903 18,590
-----------------------
MINORITY INTERESTS 1,370 1,293
-----------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock 55 55
Common stock 925 925
Additional capital 6,098 6,101
Retained earnings 7,451 7,428
Treasury stock, at cost (2,819) (2,828)
Accumulated other comprehensive loss (1,627) (1,754)
-----------------------
Total shareholders' equity 10,083 9,927
-----------------------
Total liabilities and equity $30,356 $29,810
=======================
Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)
Consolidated Third-Party 1Q02 2Q02 3Q02 4Q02 2002 1Q03
Revenues:
------------------------------------------
Alumina and Chemicals 425 419 469 430 1,743 449
Primary Metals 764 788 792 830 3,174 732
Flat-Rolled Products 1,156 1,192 1,162 1,130 4,640 1,152
Engineered Products 1,319 1,330 1,238 1,131 5,018 1,361
Packaging and Consumer 618 672 752 840 2,882 750
Other 618 757 731 700 2,806 668
----------------------------------------------------------------------
Total 4,900 5,158 5,144 5,061 20,263 5,112
======================================================================
Consolidated Intersegment
Revenues: 1Q02 2Q02 3Q02 4Q02 2002 1Q03
------------------------------------------
Alumina and Chemicals 229 233 235 258 955 240
Primary Metals 629 770 637 619 2,655 840
Flat-Rolled Products 15 18 21 14 68 20
Engineered Products 8 10 8 8 34 9
Packaging and Consumer - - - - - -
Other - - - - - -
----------------------------------------------------------------------
Total 881 1,031 901 899 3,712 1,109
======================================================================
Consolidated Third-Party
Shipments (KMT's): 1Q02 2Q02 3Q02 4Q02 2002 1Q03
------------------------------------------
Alumina and Chemicals 1,825 1,796 1,939 1,926 7,486 1,794
Primary Metals 503 507 517 546 2,073 453
Flat-Rolled Products 439 456 446 433 1,774 434
Engineered Products 221 244 223 203 891 217
Packaging and Consumer 30 31 46 55 162 36
Other 58 87 80 83 308 52
----------------------------------------------------------------------
Total Aluminum 1,251 1,325 1,312 1,320 5,208 1,192
======================================================================
Average realized price
-Primary 0.66 0.67 0.66 0.66 0.66 0.69
======================================================================
After-Tax Operating Income 1Q02 2Q02 3Q02 4Q02 2002 1Q03
(ATOI):
------------------------------------------
Alumina and Chemicals 65 73 93 84 315 91
Primary Metals 143 175 175 157 650 166
Flat-Rolled Products 61 66 46 47 220 53
Engineered Products 58 44 33 (28) 107 29
Packaging and Consumer 28 55 51 64 198 53
Other 7 19 8 (43) (9) 9
----------------------------------------------------------------------
Total 362 432 406 281 1,481 401
======================================================================
Reconciliation of ATOI to
Consolidated Net Income: 1Q02 2Q02 3Q02 4Q02 2002 1Q03
------------------------------------------
Total ATOI 362 432 406 281 1,481 401
Impact of intersegment
profit eliminations (3) (1) (5) 3 (6) 7
Unallocated amounts (net
of tax):
Interest income 10 9 7 5 31 5
Interest expense (49) (54) (62) (62) (227) (57)
Minority interests (41) (47) (49) 2 (135) (59)
Corporate expense (58) (53) (40) (83) (234) (57)
Special items - - (25) (261) (286) 4
Discontinued operations - (5) (9) (98) (112) 3
Accounting change 34 - - - 34 (47)
Other (37) (49) (30) (10) (126) (49)
----------------------------------------------------------------------
Consolidated net income 218 232 193 (223) 420 151
======================================================================
Short Name: Alcoa Inc
Category Code: QRF
Sequence Number: 00003677
Time of Receipt (offset from UTC): 20030404T033117+0100
--30--KK/ny*
CONTACT: Alcoa
Investor Contact -
William F. Oplinger, 212/836-2674
Media Contact -
Kevin Lowery, 412/553-1424
KEYWORD: UNITED KINGDOM INTERNATIONAL EUROPE PENNSYLVANIA
INDUSTRY KEYWORD: MINING/METALS MANUFACTURING AEROSPACE/DEFENSE
REAL ESTATE AUTOMOTIVE EARNINGS GOVERNMENT AEROSPACE/DEFENSE
SOURCE: Alcoa Inc
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