Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 40± 164K
2: EX-2 Plan of Acquisition, Reorganization, Arrangement, 75 279K
Liquidation or Succession
3: EX-10 Material Contract 8± 35K
4: EX-12 Statement re: Computation of Ratios 2± 8K
5: EX-13 Annual or Quarterly Report to Security Holders 56± 230K
6: EX-21 Subsidiaries of the Registrant 2± 11K
7: EX-23 Consent of Experts or Counsel 1 7K
8: EX-24 Power of Attorney 2± 11K
9: EX-27 Financial Data Schedule (Pre-XBRL) 1 6K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3610
ALUMINUM COMPANY OF AMERICA
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0317820
(State of incorporation) (I.R.S. Employer Identification No.)
425 Sixth Avenue, Alcoa Building, Pittsburgh, Pennsylvania
15219-1850
(Address of principal executive offices)
(Zip code)
Registrant's telephone number--area code 412
Investor Relations------------553-3042
Office of the Secretary------553-4707
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock, par value $1.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the
past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 6, 1998 there were 168,134,011 shares of common
stock, par value $1.00, of the registrant outstanding. The
aggregate market value of such shares, other than shares held by
persons who may be deemed affiliates of the registrant, was
approximately $12,001 million.
Documents incorporated by reference.
Parts I and II of this Form 10-K incorporate by reference
certain information from the registrant's 1997 Annual Report to
Shareholders. Part III of this Form 10-K incorporates by
reference the registrant's Proxy Statement dated March 11, 1998,
except for the performance graph and Compensation Committee
Report.
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ALUMINUM COMPANY OF AMERICA
Aluminum Company of America, with headquarters in Pittsburgh,
Pennsylvania, was formed in 1888 under the laws of the
Commonwealth of Pennsylvania. In this report, unless the context
otherwise requires, Alcoa or the Company means Aluminum Company
of America and all subsidiaries consolidated for the purposes of
its financial statements.
PART I
Item 1. Business.
Overview
Alcoa is the world's largest aluminum company. It is also
the world's largest alumina producer, with close proximity of
bauxite mines to its refineries in Australia, Jamaica and
Suriname, and high quality bauxite in Brazil. Alumina, a white
powdery material, is an intermediate product in the production of
aluminum from bauxite and is also a valuable chemical. As a
growing, worldwide company, Alcoa now has over 180 operating
locations in 28 countries, serving a broad range of markets in
developing and industrialized economies.
Alcoa's products are used in and on beverage containers,
airplanes and automobiles, commercial and residential buildings,
chemicals and a wide array of consumer and industrial
applications. These products are sold directly to industrial
customers and other end-users or through independent distributors
in the U.S., Brazil, Europe and Asia.
The Company is organized into 21 independently-managed
business units. Business unit leaders are assigned clear
performance responsibilities that concentrate authority closer to
customers-where most of Alcoa's value creation takes place.
The U.S. remains the largest market for aluminum. However,
the Pacific region, Latin America, Asia and Europe all present
opportunities for substantial growth in aluminum use. To take
advantage of these growth opportunities, Alcoa has made
acquisitions or formed joint ventures and strategic alliances in
key regional markets.
Recent Announcement
On March 9, 1998, Alcoa and Alumax Inc. announced that they
have entered into a definitive agreement under which Alcoa will
acquire all outstanding shares of Alumax for a combination of
cash and stock. Alcoa will commence the transaction with a cash
tender offer for one-half the outstanding Alumax shares at $50.00
per share. The second step will be a merger in which each
remaining outstanding Alumax share will be converted into 0.6975
of a share of Alcoa common stock.
The transaction is valued at approximately $3.8 billion,
including the assumption of debt. It is conditioned upon
approval by Alumax's shareholders of the merger as well as
expiration of antitrust waiting periods and other customary
conditions, and is expected to be completed in the second quarter
of 1998.
Market and Geographic Area Information
Alcoa serves a variety of customers in a number of markets.
Consolidated revenues from these markets during the past three
years were:
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[Download Table]
(dollars in millions)
1997 1996 1995
---- ---- ----
Packaging $3,201 $3,326 $3,797
Transportation 3,119 2,655 2,232
Distributor and Other 2,151 2,154 1,988
Alumina and Chemicals 1,961 1,940 1,705
Aluminum Ingot 1,521 1,449 1,247
Building and Construction 1,366 1,537 1,531
------ ----- ------
Total $13,319 $13,061 $12,500
====== ====== ======
Close to one-half of Alcoa's consolidated sales now is
derived from geographic regions other than the U.S., reflecting
the Company's growing global presence.
[Download Table]
(dollars in millions)
1997 1996 1995
---- ---- ----
U.S. $7,189 $7,246 $7,043
Pacific 2,222 2,248 1,986
Europe 2,090 1,841 1,691
Other Americas 1,818 1,726 1,780
------ ------ ------
Total $13,319 $13,061 $12,500
====== ====== ======
Major Operations
U.S. - The Company has six aluminum smelters with a combined
annual rated capacity of 1.285 million metric tons (mt) that
mostly support its internal primary aluminum requirements. It
has three large rolling plants, including two facilities for can
sheet, and a number of aluminum fabricating facilities that serve
the aerospace, automobile, truck, building and construction,
packaging and other markets. A substantial majority of 1997
consolidated revenues generated in the U.S. was derived from
these major operations.
Alcoa Fujikura Ltd. (AFL), a 51%-owned subsidiary, designs,
produces and markets automotive electrical distribution systems.
AFL also produces fiber optic products and systems for electric
utilities, telecommunications, cable television and datacom
markets. AFL's 1997 revenues were 13% of Alcoa's consolidated
revenues. AFL also has operations in Europe, Mexico and South
America.
Australia - Alcoa of Australia Limited (AofA) is 60%-owned
by Alcoa and is the Company's largest subsidiary. AofA's
aluminum operations include bauxite mining facilities, three
alumina refineries, two aluminum smelters and two alumina-based
chemicals plants. AofA is the world's largest, and one of the
lowest-cost, producers of alumina. An AofA subsidiary also mines
gold in Western Australia. AofA's 1997 revenues were 14% of
Alcoa's consolidated revenues. Kaal Australia Pty. Ltd., 50%-
owned by Alcoa, produces can sheet at its two rolling mills.
Brazil - Alcoa Aluminio S.A. (Aluminio) is owned 59% by
Alcoa. Aluminio operates bauxite mining facilities and two
alumina refineries that principally serve its two aluminum
smelters. It has several alumina-based chemicals, aluminum
fabricating and extrusion plants, plastic closures and container
operations, packaging equipment and building and automotive
product facilities. Aluminio's revenues in 1997 were 9% of
Alcoa's consolidated revenues.
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Alcoa's Financial Reporting Segments
Alcoa's operations consist of three segments: Alumina and
Chemicals, Aluminum Processing and Nonaluminum Products. See
Notes A and P to the Financial Statements for segment and
related geographic area financial information.
Alumina and Chemicals Segment
The Alumina and Chemicals segment includes the production
and sale of bauxite, alumina and alumina-based chemicals used
principally in industrial applications, and transportation
services for bauxite and alumina. The segment consists of a
group of companies and assets referred to as Alcoa World Alumina
and Chemicals (AWAC). Alcoa provides operating management for
AWAC, which is owned 60% by Alcoa and 40% by WMC Limited (WMC).
Bauxite
Bauxite, aluminum's principal raw material, is refined into
alumina through a chemical process. Most of the bauxite mined
and alumina produced by the Company, except by AofA, is further
processed by Alcoa into aluminum. All of the Company's active
bauxite interests are part of AWAC, except for Aluminio's mines
in Pocos de Caldas, Brazil and its 8.6% interest in Mineracao Rio
do Norte S.A. (MRN), a joint venture described under "Alumina"
below.
AofA's bauxite mineral leases expire in 2003. Renewal
options allow AofA to extend the leases until 2045.
Suriname Aluminum Company, L.L.C. (Suralco) mines bauxite in
Suriname under rights that expire in 2032. Suralco also holds a
24% minority interest in a bauxite mining joint venture managed
by the majority owner, an affiliate of Gencor Limited of South
Africa. Bauxite from both mining operations serves Suralco's
share of a refinery in Suriname. Current mine reserves at both
operations are expected to be depleted in the period 2005-2010.
Alcoa has long-term contracts to purchase bauxite mined by a
partially-owned entity in the Republic of Guinea in Western
Africa. The bauxite services most of the requirements of the
Point Comfort, Texas and San Ciprian, Spain alumina refineries.
The contracts expire after 2011.
Bauxite mining rights in Jamaica expire after the year 2020.
These rights are owned by a joint venture with the Government of
Jamaica.
Alumina
Alcoa is the world's leading supplier of alumina. Alumina
is sold principally from operations in Australia, Jamaica and
Suriname. About 65% of the Company's alumina production in 1997
was sold under supply contracts to third parties worldwide. Most
alumina supply contracts are negotiated on the basis of agreed
volumes over multi-year periods to assure a continuous supply to
the smelters. Prices are negotiated periodically or are based on
formulas related to aluminum ingot market prices or to alumina
production costs.
Australia. AofA's three alumina refineries, located in
Kwinana, Pinjarra and Wagerup, in Western Australia, have an
aggregate annual rated capacity of 6.7 million metric tons (mt).
AofA has begun a 440,000 mt per year expansion of the Wagerup
refinery with construction expected to be completed by mid-1999.
This US$193 million expansion will increase Wagerup's operating
capacity from 1.75 million mt per year to 2.19 million mt per
year. This is the first stage of a planned expansion to 3.30
million mt per year at Wagerup, for which AofA has obtained
environmental approval.
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The natural gas requirements of the refineries are supplied
primarily under a contract with parties comprising the North West
Shelf Gas Joint Venture. The prior contract expired in 2005 and
imposed minimum purchase requirements. In December 1997, these
arrangements were extended through a renegotiation of the prior
contract and the signing of a new contract running from 2005
through 2020. These new arrangements now are under review by the
Australian competition authorities.
AWAC entities and Sino Mining Alumina Limited (SMAL), a
subsidiary of China National Nonferrous Metals Industry
Corporation (CNNC), have a long-term agreement for the purchase
of alumina for the CNNC smelter system. The arrangements entitle
a subsidiary of SMAL to purchase a minimum of 400,000 mt of
alumina per year for 30 years. It also has the option to
increase its alumina purchases as CNNC's needs grow. CNNC is a
Chinese state-owned enterprise, which operates and controls the
state-owned nonferrous industry in China.
Suriname. Suralco owns 55% of a 1.7 million mt per year
alumina refinery in Paranam, Suriname and operates the plant. An
affiliate of Gencor holds the remaining 45% interest.
Jamaica. An Alcoa subsidiary and a corporation owned by the
Government of Jamaica are equal participants in an alumina
refinery in Clarendon Parish, Jamaica. The Alcoa subsidiary
manages the joint venture. The refinery's annual capacity is
expected to increase from 800,000 to about 1 million mt by 1999.
Brazil. Aluminio manages the operation of the Alumar
Consortium (Alumar), a cost-sharing and production-sharing
venture that owns a large refining and smelting project near Sao
Luis, in the northeastern state of Maranhao. In late 1996, the
Alumar refinery was expanded by 260,000 mt per year, bringing
total annual capacity to 1.3 million mt. It is owned 35.1% by
Aluminio, 36% by an affiliate of Gencor, 18.9% by Abalco S.A.
(owned 60% by Alcoa and 40% by WMC) and 10% by an affiliate of
Alcan Aluminium Limited (Alcan). Most of this alumina production
is consumed at the smelter.
Aluminio holds an 8.6% interest and Abalco S.A. holds a 4.6%
interest in MRN, a mining company that is jointly owned by
affiliates of Alcan, Companhia Brasileira de Aluminio, Companhia
Vale do Rio Doce, Gencor, Norsk Hydro and Reynolds Metals
Company. Aluminio and Abalco S.A. purchase bauxite from MRN
under long-term supply contracts.
At Pocos de Caldas, Aluminio mines bauxite and operates a
refinery. The refinery has an annual capacity of 270,000 mt and
primarily supplies Aluminio's nearby smelter.
Spain. In February 1998, Alcoa acquired from the Spanish
State Entity for Industrial Participations the stock of the main
sectors of the aluminum business of Industria Espanola del
Aluminio, S.A. (Inespal), Spain's state-owned aluminum producer
headquartered in Madrid. Inespal had 1997 revenues of $1.1
billion. The acquisition includes a 1.1 million mt per year
alumina refinery at San Ciprian, as well as three aluminum
smelters, three aluminum rolling facilities, two extrusion plants
and an administrative center. Alcoa and a WMC affiliate will
hold a 60% and 40% interest, respectively, in the refinery.
U.S. Alcoa Alumina & Chemicals, L.L.C., through a majority-
owned entity, St. Croix Alumina, L.L.C., owns a 600,000 mt per
year alumina refinery located on St. Croix, U.S. Virgin Islands.
In February 1998, AWAC restarted the refinery to fill customer
orders because AWAC's worldwide demand for alumina, including the
material it will produce at St. Croix, is sold out for 1998. The
refinery had been inactive due to world alumina market
conditions.
Alcoa Alumina & Chemicals, L.L.C. owns an alumina refinery
at Point Comfort, Texas. A 365,000 mt per year expansion was
completed during 1997 and brought annual capacity to 2.3 million
mt.
-5-
Industrial Chemicals
Alcoa sells industrial chemicals to customers in a broad
spectrum of markets for use in refractories, ceramics, abrasives,
chemicals processing and other specialty applications.
Industrial chemicals, principally alumina-based chemicals,
are produced or processed at the locations that follow. Except
for the plants located in Brazil, all of these facilities are
part of AWAC.
United States Outside the United States
Mobile, Alabama Kwinana and Rockingham, Australia
Bauxite, Arkansas Pocos de Caldas and Salto, Brazil
Ft. Meade, Florida Ludwigshafen, Germany
Dalton, Georgia Falta, India (joint venture)
Lake Charles, Port Allen
and Vidalia, Louisiana Iwakuni and Naoetsu, Japan
Leetsdale, Pennsylvania Moerdijk and Rotterdam, The
Netherlands
Nashville, Tennessee Singapore, Singapore
Point Comfort, Texas
Aluminum fluoride, used in aluminum smelting, is produced
from fluorspar at Point Comfort and from hydrofluosilicic acid at
Ft. Meade.
In late 1998, AWAC will begin construction of a facility in
China to process tabular alumina and other alumina-based
materials for sale to the Chinese refractory market.
Aluminum Processing Segment
The Aluminum Processing segment comprises the production and
sale of molten metal, ingot and aluminum products that are flat-
rolled, engineered or finished. Also included are power,
transportation and other services.
Revenues and shipments for the principal classes of products
in the Aluminum Processing segment follow.
[Download Table]
(dollars in millions)
1997 1996 1995
---- ---- ----
Revenues:
Flat-rolled products $3,956 $3,920 $4,177
Engineered products 2,476 2,269 2,303
Aluminum ingot 1,521 1,449 1,197
Other aluminum products 287 338 357
----- ----- -----
Total $8,240 $7,976 $8,034
===== ===== =====
(mt in thousands)
Shipments:
Flat-rolled products 1,392 1,357 1,380
Engineered products 562 495 454
Aluminum ingot 920 901 673
Other aluminum products 82 88 75
----- ----- -----
Total 2,956 2,841 2,582
===== ===== =====
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Aluminum Ingot
The Company smelts primary aluminum from alumina obtained
principally from its alumina refineries. Alcoa's consolidated
primary aluminum capacity is rated at approximately 2.1 million
mt per year. When operating at capacity, Alcoa's smelters more
than satisfy the primary aluminum requirements of its fabricating
operations. Most of the Company's primary aluminum production in
1997 was delivered to other Alcoa operations for alloying and/or
further fabricating. Purchases of aluminum scrap, principally
used beverage cans, supplemented by purchases of ingot when
necessary, satisfy additional aluminum requirements.
Since 1994, Alcoa has had 450,000 mt of its worldwide
smelting capacity idle because of an oversupply of ingot on world
markets.
Aluminum is produced from alumina by an electrolytic process
requiring large amounts of electric power. Electric power
accounts for about 25% of the Company's primary aluminum costs.
Alcoa generates approximately 40% of the power used at its
smelters worldwide. Most purchase contracts for firm power tie
prices to aluminum prices or to prices based on various indices.
Australia. AofA is a participant in a joint venture smelter
at Portland, State of Victoria, with an annual rated capacity of
320,000 mt. The venture is owned 45% by AofA, 25% by the State
of Victoria and 10% each by the First National Resources Trust,
the China International Trust and Investment Corporation and
Marubeni Aluminium Australia Pty., Ltd. A subsidiary of AofA
operates the smelter. Each participant in this smelter is
required to contribute to the cost of operations and construction
in proportion to its interest in the venture and is entitled to
its proportionate share of the output. Alumina is supplied by
AofA. The Portland site can accommodate additional smelting
capacity.
Currently, approximately 40% of the power for the 180,000 mt
Point Henry smelter is generated by AofA using its extensive
brown coal deposits. The balance of the power for this smelter
and power for the Portland smelter are provided under contracts
with the State Electricity Commission of Victoria (SECV). Power
prices are tied by formula to aluminum prices. During 1997, AofA
concluded contractual discussions with SECV, resulting in an
agreement on a supplemental power arrangement through 2002 that
meets the full supply requirements of the smelters. Discussions
continue with SECV to clarify various commercial aspects of power
supplies to the smelters, including the value of
"interruptibility" to the power supply at both plants.
Brazil. The Alumar smelter at Sao Luis, Brazil has an
annual rated capacity of 362,000 mt. Aluminio receives about 54%
of the production from this smelter. Electric power is purchased
from the government-controlled power grid in Brazil at a small
discount from the applicable industrial tariff price and is
protected by a cap based on the London Metal Exchange (LME) price
of aluminum.
Aluminio contracted with Central Eletricas de Minas Gerais
S.A. (CEMIG), the government-controlled electric utility, to
supply power to Aluminio's 90,000 mt Pocos de Caldas smelter for
a 30-month period that began in October 1996. Aluminio purchased
the plant's anticipated full power requirements for this 30-month
period through a single payment based on the price of energy on
the date of the agreement. At the end of this period, Aluminio
may be subject to increased power prices for the plant and may
decide to negotiate another purchase of power from CEMIG or from
another utility.
In 1996, Aluminio participated in a consortium that won a
bidding process to build the new Machadinho hydroelectric power
plant in Southern Brazil. If all environmental and other
approvals that are necessary for the construction of the dam and
related facilities are received, Aluminio would be entitled to a
share of the output beginning in 2002. Aluminio's share is
expected to be sufficient to supply approximately one-half of the
power requirements for the Pocos de Caldas smelter. In addition,
Aluminio intends to participate in an auction process that could
result in its purchase of the regional Rio Pardo hydroelectric
utility.
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Europe. In 1996, Alcoa acquired the principal operating
assets of Alumix S.p.A. (Alumix), Italy's state-owned aluminum
producer. Aluminum smelters at Portovesme and Fusina, with
combined annual capacity of 187,000 mt, were among the assets
purchased. Alumina is supplied under an evergreen agreement with
the owners of the Eurallumina refinery, located on Sardinia
adjacent to the Portovesme smelter. Power for these smelters is
supplied by ENEL, Italy's state-owned utility.
The acquisition of Inespal mentioned earlier included the
purchase of aluminum smelters at San Ciprian, La Coruna and
Aviles, with a combined annual capacity of 365,000 mt. Alumina
is supplied from Inespal's San Ciprian refinery. Electric power
currently is purchased from the government-controlled power grid
at the lowest applicable industrial tariff rate.
U.S. Approximately 55% of the power requirements for
Alcoa's six U.S. smelters is generated by the Company; the
remainder is purchased under long-term contracts. Approximately
12% of the self-generated power is obtained from Alcoa's
entitlement to a fixed percentage of the output from Chelan
County Public Utility District's Rocky Reach hydroelectric power
facility located in the State of Washington.
The Company has generated substantially all of the power
used at its Warrick, Indiana smelter using nearby coal reserves.
A 1996 coal supply contract satisfies 50% of the smelter's fuel
requirement through 2006. Existing low-sulfur coal contracts
satisfy an additional 35% of the requirement through 1999.
Lignite is used to generate power for the Rockdale, Texas
smelter. Company-owned generating units supply about half of the
total requirements, and the balance is purchased through a long-
term power contract expiring in 2013 with Texas Utilities.
Two subsidiaries of the Company own and operate
hydroelectric facilities under Federal Energy Regulatory
Commission licenses. They provide electric power for the
aluminum smelters at Alcoa, Tennessee and Badin, North Carolina.
The Tennessee plant also purchases firm and interruptible power
from the Tennessee Valley Authority under a contract that
recently was extended to 2010. At the Badin plant, additional
power is purchased from Duke Power under an evergreen contract
providing for specified periods of notice before termination by
either party.
The purchased power (primarily hydroelectric) contract for
the Massena, New York smelter expires not earlier than 2003, but
may be terminated by Alcoa with one year's notice.
In addition to the power output entitlement contract for its
Wenatchee, Washington smelter referred to earlier, Alcoa has a
contract with the Bonneville Power Administration (BPA). Several
contractual provisions allow restrictions when power is in short
supply. Beginning in 1995, a portion of the power supplied under
the BPA contract was replaced by power purchased from a local
public utility district. Additional power subsequently has been
purchased from the district, and currently no BPA power is
utilized at Wenatchee Works.
Suriname. Suralco owns and operates a 30,000 mt per year
smelter in Paranam, Suriname. Suralco also operates the Afobaka
hydro project, which supplies power to the smelter.
Norway. Although not included in the revenues and shipment
tables above, the Company reports equity earnings from its
interest in two smelters in Norway. Elkem Aluminium ANS, 50%-
owned by an Alcoa subsidiary, Norsk Alcoa A/S, is a partnership
that owns and operates the smelters.
Canada. On February 25, 1998, Alcoa and the government of
British Columbia, Canada signed a memorandum of understanding to
proceed with a feasibility study for the construction of a
250,000 mt per year primary aluminum smelter. The study will be
completed no later than December 31, 1998. If
-8-
the study produces a favorable result, construction could start
in 1999 and would represent an investment of approximately
$850 million.
Flat-Rolled Products
Alcoa's flat-rolled products serve three principal markets:
light gauge sheet products mainly serve the packaging market, and
sheet and plate products serve the transportation and building
and construction markets. Alcoa employs its own sales force for
most products sold in the packaging market.
Rigid Container Sheet (RCS). Most of the 1997 revenues in
the packaging market were derived from RCS which is sold to can
companies for production of beverage and food cans and can ends.
The number of RCS customers in the U.S. is relatively small.
Use of aluminum beverage cans continues to increase 3% annually
worldwide-particularly in Asia, Europe and South America, where
per capita consumption remains relatively low.
Aluminum's diverse characteristics, particularly its light
weight, recyclability and flexiblity for package designs, are
significant factors in packaging markets where alternatives such
as steel, plastic and glass are competitive materials.
Leadership in the packaging markets is maintained by improving
processes and facilities, as well as by providing marketing,
research and technical support to customers. RCS is produced at
the following locations:
RCS Facilities
Warrick, Indiana Yennora, Australia*
Alcoa, Tennessee Moka, Japan*
Point Henry, Australia* Swansea, Wales
*Joint venture
Kaal Australia Pty. Ltd., 50%-owned by Alcoa, owns and
operates the former AofA rolling mill at Point Henry and the
former Comalco Limited rolling mill at Yennora. These mills
produce RCS for the Australian and Asian markets. AofA continues
to supply Kaal Australia with aluminum ingot.
A subsidiary of Alcoa participates in a 50/50 joint venture
with Kobe Steel, Ltd. to serve RCS markets in Japan and other
Asian countries. In connection with this venture, Alcoa has a
long-term contract to supply metal to Kobe Steel.
Used aluminum beverage cans are an important source of metal
for RCS. Recycling aluminum conserves raw materials, reduces
litter and saves energy -- about 95% of the energy needed to
produce aluminum from bauxite. In addition, recycling capacity
costs much less than new primary aluminum capacity. Can
recycling or remelt facilities are located at or near Alcoa's
Warrick, Indiana; Alcoa, Tennessee; and Yennora, Australia
plants.
In April 1997, Alcoa announced that it had signed a Letter
of Intent with Reynolds Metals Company to acquire Reynolds'
rolling mill in Muscle Shoals, Alabama, two nearby can
reclamation plants and a coil coating facility in Sheffield,
Alabama. In late December 1997, Alcoa announced that it was
ending its acquisition plans with respect to those operations in
light of U.S. Department of Justice opposition.
Foil. Industrial foil, laminated foil and brazing sheet for
the automotive, packaging and building and construction markets
are produced at Alcoa's Lebanon, Pennsylvania facility.
Continuous casting facilities in Hawesville, Kentucky and Badin,
North Carolina produce reroll stock in support of the Lebanon
facility. Light gauge sheet, foil products and laminated
evaporator panels are manufactured by
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Aluminio near Recife, Brazil. Light gauge sheet also is
produced at Yennora, Australia. Foil products are produced at
Inespal's facilities at Alicante and Sabinanigo, Spain.
Alcoa and Shanghai Aluminum Fabrication Plant (SAFP) have a
joint venture, owned 60% by Alcoa and 40% by SAFP, that operates
the former SAFP aluminum foil and foil laminate production
facility in Shanghai, China. The joint venture facility
currently produces approximately 13,000 mt of aluminum foil per
year. Through the use of technology and the addition of a second
caster, annual output is expected to increase to about 18,000 mt
within two years.
Sheet and Plate. Sheet and plate products serve the
aerospace, auto and truck, lithographic, railroad, ship-building,
building and construction, defense and other industrial and
consumer markets. The Company maintains its own sales forces for
most of these products.
Differentiation of material properties, price and service
are significant competitive factors. Aluminum's diverse
characteristics are important in these markets where competitive
materials include steel and plastics for automotive and building
applications; magnesium, titanium, composites and plastics for
aerospace and defense applications; and wood and vinyl in
building and construction applications. Alcoa continues to
develop alloys and products for aerospace and defense
applications, such as those developed for the Boeing 777,
Lockheed F-16, Canadair aircraft and the Advanced Amphibious
Assault Vehicle.
Alcoa's largest sheet and plate plant is located at
Davenport, Iowa. It produces products requiring special
alloying, heat-treating and other processing, some of which are
unique or proprietary. In 1996, Alcoa announced an increase in
the Davenport, Iowa plant's heat-treating capacity for sheet and
plate as part of a $75 million investment to meet aerospace and
automotive demand. Alcoa also commissioned the largest vertical
heat-treat furnace in North America, thus tripling the plant's
capacity for wide-width fuselage sheet. A horizontal plate heat-
treating furnace that will increase capacity by 30% began
production in the 1997 second quarter.
The Company continues to produce cast aluminum plate at its
Vernon, California plant after closing its hard alloy extrusion,
tube and forgings facilities there in 1994. Alcoa has invested
approximately $10 million in new machinery and equipment for the
plant's cast aluminum plate operation since the restructuring.
Alcoa and Kobe Steel have a joint venture in the U.S. and
one in Japan to serve the transportation industry. Initial
emphasis of these ventures is focused on expanding the use of
aluminum sheet products in passenger cars and light trucks.
The Company's Hungarian subsidiary, Alcoa-Kofem Kft,
produces common alloy flat and coiled sheet as well as soft alloy
extrusions and end products for the building, construction, food
and agricultural markets in central and western Europe. In 1996,
Alcoa acquired the remaining 49.9% interest in Kofem from the
Hungarian government.
Kofem began delivering aluminum truck bodies to major
beverage companies in Russia and Poland in 1996. Kofem delivered
additional truck bodies to customers in central and eastern
European countries in 1997.
The Company's Alcoa Italia S.p.A. subsidiary, part of the
1996 Alumix acquisition, produces industrial plate and common
alloy flat and coiled sheet for the building and construction,
transportation and other industrial markets in Europe at its
Fusina, Italy rolling mill.
Alcoa has a 165,000 square-feet plant in Hutchinson, Kansas
for further processing and just-in-time stocking of aluminum
sheet products for the U.S. aerospace market. Alcoa serves
European sheet and plate markets through a distribution center in
Paal, Belgium.
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Alcoa has completed construction of a 165,000 square-feet
plant in Danville, Illinois for further processing and just-in-
time stocking of aluminum sheet products for the North American
automotive market. The Company expects this facility to begin
production in the 1998 first quarter.
The Inespal acquisition mentioned earlier also included the
purchase of rolling mills at Amorebieta, Alicante and Sabinanigo,
Spain which produce industrial plate and common alloy flat and
coiled sheet for the building and construction, transportation
and other industrial markets in Europe.
Engineered Products
Engineered products include extrusions used in the
transportation and construction markets; aluminum forgings and
castings; aluminum wheels; wire, rod and bar; and automotive
components.
Extrusions. Aluminum extrusions and tube are produced
principally at five U.S. locations:
- the Chandler, Arizona plant produces hard alloy
extrusions, tube and forge stock;
- the Lafayette, Indiana plant produces a broad range of
hard alloy extrusions and tube;
- the Baltimore, Maryland plant produces large press
extrusions; and
- the Tifton, Georgia and Delhi, Louisiana plants produce
common alloy extrusions.
Aluminum extruded products are manufactured by a subsidiary
in Argentina and by Aluminio at several locations in Brazil. In
1996, Aluminio acquired the extrusion assets of an Alcan
affiliate in Brazil. The assets included four plants and eight
extrusion presses. The transaction has been submitted to
Brazilian antitrust authorities for review and approval, and that
approval is pending.
Alcoa Extrusions Hannover GmbH & Co. KG produces and markets
high-strength aluminum extrusions and rod and bar to serve
European transportation and defense markets. In January 1997,
Alcoa acquired the remaining 40% interest and now owns 100% of
this company.
The subsidiaries of Alcoa Nederland Holding B.V. produce
extrusions, common alloy sheet products and a variety of finished
products for the building industry, such as aluminum windows,
doors and aluminum ceiling systems. These companies also
manufacture products for the agricultural industry such as
automated greenhouse systems.
Aluminum East ZAO, through its Building Systems
International branch, assembled and sold aluminum windows and
doors in Russia. This business is being discontinued.
The Alumix acquisition mentioned earlier also included the
purchase of extrusion plants in Bolzano, Fossanova, Feltre and
Iglesias, Italy and an extrusion die shop in Mori, Italy.
The Inespal acquisition also included the purchase of
extrusion plants at Noblejas and La Coruna, Spain.
Alcoa also has extrusion plants in Valls, Spain, Hungary and
the United Kingdom.
Mechanical-grade redraw rod, wire and cold-finished rod and
bar are produced at Massena, New York and are sold to
distributors and customers for applications in the building and
transportation markets.
Forgings/Castings. Aluminum forgings, sold principally in
the aerospace, automotive, commercial transportation and defense
markets, are produced at Cleveland, Ohio and Szekesfehervar,
Hungary.
-11-
In 1997 Alcoa completed construction of a multi-phase
facility to increase wheel production at its Cleveland
operations. This represented a $42 million investment to
increase production of forged aluminum wheels to meet market
demand for U.S. light trucks.
Alcoa and Superior Industries International Inc. have formed
a company to produce cast aluminum wheels for commercial trucks
and buses. The wheels will be marketed through Alcoa's existing
wheel sales organization. The initial manufacturing operations
are located at Superior's Van Nuys, California facility. The
parties expect to reach commercial production levels by mid-1999.
Alcoa's plant in Szekesfehervar, Hungary manufactures forged
aluminum truck wheels for the European market. The plant also
manufactures wheels for export to Asian, South American and other
geographic markets where European-style wheels are used. The
plant began production in mid-1997.
Alcoa has a 50% interest in a partnership, A-CMI, with a
subsidiary of CMI International, Inc. to produce cast and forged
aluminum automotive parts. A-CMI's first European manufacturing
plant in Lista, Norway develops and produces cast aluminum
chassis, suspension, brake and powertrain components and systems.
The plant represents a total investment of approximately $40
million. It is located near the 50%-owned Elkem Aluminium ANS
smelter, which delivers molten aluminum to the plant. Production
began in late 1997.
A-CMI's Kentucky Casting Center in Hawesville, Kentucky, its
second North American facility, produces aluminum chassis and
suspension structural components for the automotive market.
Alcoa also designs and builds specialized die-casting
machines through a subsidiary in Montreal, Canada.
Automotive Body Structures. Alcoa Automotive Structures
GmbH produces aluminum components and sub-assemblies for aluminum
automotive spaceframes. Aluminum spaceframes represent a
significant departure from the traditional method and material
used to manufacture primary auto body structures.
In 1993, Alcoa began operating a unique multi-million dollar
plant in Soest, Germany to supply aluminum components and
subassemblies to its first customer, Audi AG. In 1994, Audi
began marketing its A8 luxury sedan in Europe-the first
production automobile to utilize a complete aluminum spaceframe
body structure. The aluminum spaceframe of the A8 is a result of
a cooperative effort between Alcoa and Audi that began in 1981
and is constructed from these components and sub-assemblies
produced by Alcoa. The 1997 A8 debuted in U.S. showrooms in the
fall of 1996. The Soest plant also produces the front end module
for the new Mercedes-Benz A Class car.
Alcoa also operates design and engineering offices in
Esslingen (Stuttgart), Germany; Detroit, Michigan and at Alcoa
Technical Center, near Pittsburgh, Pennsylvania, where it designs
aluminum auto body structures for a variety of European car
manufacturers.
Alcoa is working with several other automobile manufacturers
in North America and Japan to develop new automotive applications
for aluminum products. For example, Chrysler Corporation's
Plymouth Prowler, a new roadster, entered initial, low-volume
production in 1997. Carrying 900 pounds of aluminum (or
approximately one-third of its weight), the Prowler is
constructed of an all-aluminum frame and body as well as aluminum
for brake rotors and suspension components. Alcoa and Chrysler
designed the car's spaceframe and Alcoa provides aluminum sheet
stock to be stamped into body panels and bumper assemblies.
Alcoa's plant in Northwood, Ohio manufactures the Prowler frame
and a variety of aluminum structural assemblies for the U.S.
automotive industry including the Corvette windshield surround.
-12-
Other Aluminum Products. Aluminio produces aluminum truck
and van bodies and aluminum casting products in Sao Paulo, Brazil
and aluminum electrical cable at its Pocos de Caldas plant.
Aluminio is negotiating for the sale of the assets of its
aluminum truck body division.
In December 1997, Aluminio and Phelps Dodge Corporation
signed a joint venture agreement to produce aluminum electric
cable and copper wiring and cables in Brazil. The venture,
Phelps Dodge & Alcoa Fios e Cabos Eletricos S.A., is owned 60% by
Phelps Dodge and 40% by Aluminio. Production takes place at the
venture's plant in Pocos de Caldas. The transaction has been
submitted to Brazilian antitrust authorities for review and
approval.
Alcoa Building Products, Inc. manufactures and markets
residential aluminum siding and other aluminum building products.
These products are sold principally to wholesale distributors.
Alcoa Closure Systems International, Inc. produces aluminum
closures for bottles at Worms, Germany; Nogi and Ichikawa, Japan;
and Barcelona, Spain. In April 1997, Alcoa sold the assets of
its Richmond, Indiana works to Silgan Holdings Inc.
Alcoa and Sinter Metals, Inc. of Cleveland, Ohio, have
formed a strategic alliance to develop and expand the market for
aluminum parts produced by powder metallurgy techniques,
especially for the automotive, business machine, appliance, lawn
care and leisure equipment markets.
Alcoa produces and markets aluminum paste, particles, flakes
and atomized powder. It also produces high-purity aluminum.
Nonaluminum Products Segment
The Nonaluminum Products segment includes the production and
sale of electrical, plastic and composite materials products,
manufacturing and packaging equipment, gold, magnesium products
and steel and titanium forgings.
Alcoa Fujikura Ltd. (AFL)
AFL produces and markets electronic and electrical
distribution systems (EDS) for the automotive industry, as well
as fiber optic products and systems for selected electric
utilities, telecommunications, cable television and datacom
markets. AFL supplies EDS to Ford, Subaru, Kenworth, Peterbilt,
Mack and Navistar.
In 1995, AFL acquired the operations of Electro-Wire
Products, Inc. Electro-Wire manufactured EDS for autos, trucks
and farm equipment. Combining these two businesses created a
worldwide enterprise that is the largest supplier of EDS to Ford
Motor Company's worldwide operations. The combined enterprise
also is the largest supplier of EDS to the heavy truck industry.
AFL owns Michels GmbH & Co. K.G. (Michels), a manufacturer
of EDS for automobiles, appliances and farm equipment, with two
plants in Germany and five plants in Hungary. In mid-1997, AFL
acquired the remaining 10% interest in Michels from its founder.
The Stribel group of companies, European manufacturers of
electromechanical and electronic components for the European
automotive market, also are owned by AFL.
AFL and Aluminio have a joint venture, AFL do Brasil Ltda.,
that manufactures and sells EDS in Brazil. During 1997, AFL
established an EDS manufacturing facility in Venezuela.
Significant competitive factors in the EDS markets include
price, quality and full service supplier capability. Automakers
increasingly require support from their selected suppliers on a
global basis.
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In mid-1997, AFL's telecommunications division acquired the
assets of Six "R" Communications Inc., a Monroe, North Carolina-
based provider of EF&I services (engineer, furnish and install)
to the telecom, CATV and electric utility industries. Six "R"
Communications, L.L.C., a majority-owned entity, now operates
this business.
Packaging and Closures
Alcoa Closure Systems International, Inc. (ACSI) is the
world's largest producer of plastic closures for beverage
containers. Its business is coordinated from Indianapolis,
Indiana. The use of plastic closures has surpassed that of
aluminum closures for beverage containers in the U.S. and is
gaining momentum in other countries. Alcoa has plastic closure,
PET (polyethylene terephthalate) plastic bottles or packaging
equipment design and assembly facilities at the following
locations:
Packaging and Closures Facilities
Crawfordsville, Indiana
Santiago, Chile
Ichikawa and Nogi, Japan
Olive Branch, Mississippi
Tianjin, China
Saltillo, Mexico
Buenos Aires, Argentina
Bogota, Colombia
Lima, Peru
Manama, Bahrain
Szekesfehervar, Hungary
Lyubuchany, Russia
Barueri, Itapissuma, Lages and Queimados, Brazil
Barcelona, Spain
In September 1997, ACSI began production of plastic closures
at Lyubuchany, Russia, south of Moscow. The unit is known as
Alcoa CSI Vostok.
The Alcoa Packaging Equipment business unit (APE) designs,
manufactures and services bodymakers, decoration equipment,
registered embossers, end conversion presses and a variety of
testing equipment for the can making industry, along with plastic
and aluminum closure handling, orientation, inspection and
capping equipment for the food and beverage industry. Alcoa
Advanced Technologies, a division of APE, supplies advanced
material products to the semiconductor equipment industry.
Other Nonaluminum Products
The former Stolle Corporation was comprised of four
divisions -- Alcoa Building Products (whose principal products
for building and construction markets are vinyl siding and
accessories, plastic injected molded shutters and architectural
accessories and coated aluminum trim and rain carrying products);
Dayton Technologies (which produced extruded profiles for the
vinyl window and patio door markets); Norcold (which produced
refrigerator units) and Caradco (which manufactured vinyl and
wood windows and patio doors).
In February 1997, Alcoa sold the assets of Dayton
Technologies to Deceuninck Plastics Industries, N.V., a Belgian
building materials company, and the assets of Norcold and a
related Alcoa subsidiary, Arctek Corporation, to The Dyson-
Kissner-Moran Corporation. In April 1997, Alcoa sold the assets
of Caradco to JELD-WEN inc., a privately-held building products
and millwork manufacturer. The Stolle Corporation was renamed
Alcoa Building Products, Inc.
Northwest Alloys, Inc., in Addy, Washington, produces
magnesium from minerals in the area owned by the Company. The
magnesium is used by Alcoa for certain aluminum alloys and also
is sold to third parties.
Aluminio and Alcatel Cable Ameriques (ACA), a subsidiary of
Alcatel of France, have formed a joint venture to manufacture, in
Brazil, and sell telecommunication cables and related accessories
in South America. The venture, called Alcatel Cabos Brazil, is
owned 40% by Aluminio and 60% by ACA
-14-
and affiliates. The transaction has been submitted to the
Brazilian antitrust authorities for review and approval.
Aluminio formerly owned and operated a chain of retail
construction materials outlets in Brazil. Aluminio disposed of
its interest in these outlets in September 1997.
In January 1997, Alcoa sold the assets of Composite
Structures, in Monrovia, California (which was the last operating
division of Alcoa Composites, Inc.), to an investment group. ACI
has been conducting a transition and/or liquidation of its
remaining assets and liabilities. ACI principally designed and
manufactured composite parts and structures for aerospace and
transportation applications.
An AofA subsidiary, Hedges Gold Pty. Ltd., mines gold in
Western Australia under leases that expire in 2009 subject to
renewal options. Gold production has been declining since 1990.
Large press steel, titanium and special super-alloy forgings
are produced at Cleveland, Ohio. These products are sold
principally in aerospace and commercial markets.
Alcoa owns a 36% interest in American Trim, L.L.C., a joint
venture that manufactures primarily auto parts and appliance
control panels.
Competition
The markets for most aluminum products are highly
competitive. Price, quality and service are the principal
competitive factors in most of these markets. Where aluminum
products compete with other materials, the diverse
characteristics of aluminum are also a significant factor,
particularly its light weight and recyclability. The competitive
conditions are discussed earlier for each of the Company's major
product classes.
The Company continues to examine all aspects of its
operations and activities and redesign them where necessary to
enhance effectiveness and achieve cost reductions. Alcoa
believes that its competitive position is enhanced by its
improved processes, extensive facilities and willingness and
ability to commit capital where necessary to meet growth in
important markets, and by the capability of its employees. This
includes implementation of Alcoa Business System and the Alcoa
Production System. Research and development has led to improved
product quality and production techniques, new product
development and cost control.
Other Risk Factors
The following discussion about the Company's risk management
activities includes forward-looking statements that involve risk
and uncertainties. Actual results could differ materially from
those projected in the forward-looking statements.
In addition to inherent operating risks, Alcoa is exposed to
financial, market, political and economic risks.
Commodity Price Risks
Alcoa is a leading global producer of aluminum ingot and
aluminum fabricated products. Aluminum ingot is an
internationally-produced, priced and traded commodity. The
principal trading market for ingot is the LME. Alcoa
participates in this market by buying and selling future portions
of its aluminum requirements and output.
The aluminum industry is highly cyclical and the Company's
results of operations are influenced by LME-based prices of
primary aluminum. This price sensitivity impacts a portion of
the Company's
-15-
alumina sales and many of the Company's aluminum
products, with less impact on the more specialized and value-
added products.
For aluminum price risk management purposes, Alcoa divides
its operations into four regions: U.S., Pacific, Other Americas
and Europe. AofA in the Pacific region and Aluminio in the Other
Americas are generally in net long metal positions. From time to
time, they may sell production forward. Operations in the
European region are generally net metal short and may purchase
forward positions periodically. Historically, forward purchase
and sales activity within these three regions has not been
material.
In the normal course of business, Alcoa enters into long-
term contracts with a number of its fabricated products
customers. At December 31, 1997 and 1996, such contracts
approximated 2.093 million mt and 2.369 million mt, respectively.
Alcoa may enter into similar arrangements in the future.
In order to hedge the risk of higher prices for the
anticipated metal purchases required to fulfill these long-term
customer contracts, 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 December 31, 1997 and 1996,
these contracts totaled approximately 1,084,000 mt and 872,000
mt, respectively.
A hypothetical 10% change from the 1997 year-end, three-
month LME aluminum ingot price of $1,552 per mt would result in a
pre-tax gain or loss to future earnings of $170 million related
to these contracts. However, it should be noted that any change
in the value of these contracts, real or hypothetical, would be
significantly offset by an inverse change in the cost of
purchased metal. Earnings were selected as the measure of
sensitivity due to the historical relationship between aluminum
ingot prices and Alcoa's earnings. The hypothetical change of
10% was calculated using a parallel shift in the existing
December 31, 1997 forward price curve for aluminum ingot. The
price curve takes into account the time value of money, as well
as future expectations regarding the price of aluminum ingot.
The model also assumes there will be no aluminum smelter capacity
restarted by Alcoa.
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.
For financial accounting purposes, the gains and losses on
the hedging contracts are reflected in earnings concurrent with
the hedged costs. The cash flows from these contracts are
classified in a manner consistent with the underlying nature of
the transactions.
Alcoa intends to close out the hedging positions at the time
it purchases the metal from third parties, thus creating the
right economic match both in time and price. Deferred gains of
$113 million on the hedging contracts at December 31, 1997 are
expected to offset the increase in the price of the purchased
metal.
The expiration dates of the options and the delivery dates
of the futures contracts 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
also had 259,000 mt and 205,000 mt of futures and options
contracts outstanding at year-end 1997 and 1996, 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 after-
tax charges to earnings of $13 million in 1997 and $57 million in
1996.
-16-
A hypothetical 10% change in aluminum ingot prices from the
year-end 1997 level of $1,552 per mt would result in a pre-tax
gain or loss of $30 million related to these positions. The
hypothetical gain or loss was calculated using the same model and
assumptions noted earlier.
Alcoa also purchases certain other commodities, such as 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. For additional information on
financial instruments, see Notes A and Q to the Financial
Statements.
Foreign Exchange Risks
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
used to limit transactional exposure to changes in currency
exchange rates. The forward contracts principally cover existing
exposures and firm commitments, while options are generally used
to hedge anticipated transactions.
A hypothetical 10% change in applicable 1997 year-end
forward rates would result in a pre-tax gain or loss of
approximately $80 million related to these positions. However,
it should be noted that any change in value of these contracts,
real or hypothetical, would be significantly offset by an inverse
change in the value of the underlying hedged items. The model
assumes a parallel shift in the forward curve for the applicable
currencies. See Note Q to the Financial Statements for
information related to the notional and fair market values of
Alcoa's foreign exchange contracts at December 31, 1997 and 1996.
Interest Rate Risks
Alcoa 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.
At December 31, 1997 and 1996, Alcoa had $1,952 million and
$2,075 million of debt outstanding at effective interest rates of
7.00% and 6.71% after the impact of interest rate swaps and caps
is taken into account. A hypothetical change of 10% in Alcoa's
effective interest rate from year-end 1997 levels would increase
or decrease interest expense by $14 million. For more
information related to Alcoa's use of interest rate instruments,
see Notes A and Q to the Financial Statements.
Risk Management
All of the aluminum and other commodity contracts, as well
as the various types of financial instruments, are
straightforward and are 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). It is composed of the chief
executive officer, the president, the chief financial officer and
other officers and employees whom 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.
Material Limitations
The disclosures with respect to aluminum prices and foreign
exchange risk do not take into account the underlying anticipated
purchase obligations and the underlying transactional foreign
exchange exposures. If the underlying items were included in the
analysis, the gains or losses on the
-17-
futures and options contracts may be offset. Actual results
will be determined by a number of factors that are not under
Alcoa's control and could vary significantly from those
disclosed.
Year 2000 Issue
Alcoa, assisted by outside consultants, has conducted a
detailed review of its administrative and process control
computer systems to identify areas that are affected by the "Year
2000" issue. The Year 2000 issue is the result of computer
programs being written using two digits (rather than four) to
define the applicable year. This could result in computational
errors as dates are compared across the century boundary. The
vast majority of the Company's products do not contain
microprocessors or other electronic components and thus are not
susceptible to Year 2000 issues in their operation.
The Company's evaluation of the Year 2000 readiness of
process control systems includes monitoring and control devices
for plants and other operating locations. Plans detailing the
tasks and resources required to ensure Year 2000 readiness for
process control are expected to be in place by mid-year. The
total cost associated with any required modifications for the
Company's critical process control systems is not expected to be
material to the Company's financial position.
An unexpected failure to have corrected a Year 2000 problem
could result in an interruption in certain normal business
activities or operations. However, the Company believes that,
with the completion of its Year 2000 project, significant
interruptions will not be encountered. See also Year 2000 Issue
on page 35 in the Annual Report to Shareholders.
Employees
Alcoa had 81,600 employees worldwide at year-end 1997.
About one-third of the employees are located in the U.S.
New six-year labor agreements covering the majority of
Alcoa's U.S. production workers were ratified in mid-1996. As
part of the agreements, Alcoa and the unions agreed to an
unprecedented partnership mandating that they work cooperatively
on customer requirements, business objectives and shareholder and
union interests. The agreements set broad, new goals for
employee safety, job security, influence, control and
accountability for the work environment. Other major provisions
include: wage increases over the first five years; enhanced
pension benefits; increases in sickness and accident insurance,
life insurance and dental benefits and the amount of income a
spouse may earn before sharing medical benefit costs. The new
agreements have five years of defined provisions. At the end of
the fifth year, the entire contract will be reopened. If
agreement cannot be reached, the economic provisions will be
submitted to arbitration.
In 1996, a new five-year labor agreement covering about
1,100 employees at Alcoa's Forged Products business unit in
Cleveland, Ohio was ratified. A three-week strike followed the
expiration of the previous three-year pact.
Wages for AofA employees are covered by agreements that are
negotiated under guidelines established by a national industrial
relations authority.
Wages for both hourly and salaried employees of Aluminio are
negotiated annually in compliance with government guidelines.
Each Aluminio location, however, has a separate compensation
package for its employees.
Research and Development
Alcoa, a technology leader in the aluminum industry, engages
in research and development programs which include basic and
applied research, and process and product development. These
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activities are conducted principally at Alcoa Technical Center.
Several business units conduct their own R&D programs.
Expenditures for R&D activities were $143 million in 1997,
$166 million in 1996 and $141 million in 1995. Substantially all
R&D is funded by the Company.
Environmental
Alcoa's Environment, Health and Safety Policy confirms its
commitment to operate worldwide in a manner which protects the
environment and the health and safety of employees and of the
citizens of the communities where the Company operates.
Alcoa continues its efforts to develop and implement modern
technology, and standards and procedures, to meet its
Environment, Health and Safety Policy. Approximately $94 million
was spent during 1997 for new or expanded facilities for
environmental control. Capital expenditures for such facilities
will approximate $102 million in 1998. The costs of operating
these facilities are not included in these figures. Remediation
expenses are continuing at many of the Company's facilities. See
Environmental Matters on page 33 in the Annual Report to
Shareholders and "Item 3 - Legal Proceedings" below.
Alcoa's operations worldwide, like those of others in
manufacturing industries, have in recent years become subject to
increasingly stringent legislation and regulations intended to
protect human health and safety and the environment. This trend
is expected to continue. Compliance with new laws, regulations
or policies could require substantial expenditures by the Company
in addition to those referenced above.
Alcoa supports the use of sound scientific research and
realistic risk criteria to analyze environmental and human health
and safety effects and to develop effective laws and regulations
in all countries where it operates. The Company also relies on
internal standards that are applied worldwide to ensure that its
facilities operate with minimal adverse environmental, health and
safety impacts, even where no regulatory requirements exist.
Alcoa recognizes that recycling and pollution prevention offer
real solutions to many environmental problems, and it continues
vigorously to pursue efforts in these areas.
Item 2. Properties.
See "Item 1 - Business." Alcoa believes that its
facilities, substantially all of which are owned, are suitable
and adequate for its operations.
Item 3. Legal Proceedings.
In the ordinary course of its business, Alcoa is involved in
a number of lawsuits and claims, both actual and potential,
including some which it has asserted against others. While the
amounts claimed may be substantial, the ultimate liability cannot
now be determined because of the considerable uncertainties that
exist. It is possible that results of operations or liquidity in
a particular period could be materially affected by certain
contingencies. Management believes, however, that the
disposition of matters that are pending or asserted will not have
a material adverse effect on the financial position of the
Company.
Environmental Matters
Alcoa is involved in proceedings under the Superfund or
analogous state provisions regarding the usage, disposal, storage
or treatment of hazardous substances at a number of sites in the
U.S. The Company has committed to participate, or is engaged in
negotiations with Federal or state authorities relative to its
alleged liability for participation, in clean-up efforts at
several such sites.
-19-
In response to a unilateral order issued under Section 106
of the Comprehensive Environmental Compensation and Liability Act
of 1980 (CERCLA) by the U.S. Environmental Protection Agency
(EPA) Region II regarding releases of hazardous substances,
including polychlorinated biphenyls (PCBs), into the Grasse River
near its Massena, New York facility, Alcoa conducted during 1995
certain remedial activities in the Grasse River for the removal
and appropriate disposal of certain river sediments. During
1996, the Company submitted an Analysis of Alternatives Report,
which is being reviewed by the EPA.
Representatives of various Federal and state agencies and a
Native American tribe, acting in their capacities as trustees for
natural resources, have asserted that Alcoa may be liable for
loss or damage to such resources under Federal and state law
based on Alcoa's operations at its Massena, New York facility.
While formal proceedings have not been instituted, the Company is
actively investigating these claims.
The New York State Department of Environmental Conservation
(DEC), in a letter dated October 10, 1997, notified Alcoa that
its Massena, New York facility allegedly is in violation of
certain air pollution control requirements. The allegations
included operation of certain emission sources without permits,
non-compliance with permitting and control standards for sulfur
dioxide, carbon monoxide and carbonyl sulfide and violation of
requirements related to the deposition of fluoride on vegetation.
In early March 1998, the Company agreed to an Order on Consent
with the DEC. Resolution includes a civil penalty of $57,500.
The settlement is expected to be effective by the end of the
first quarter of 1998.
In March 1994, Alcoa and Region VI of the EPA entered into
an administrative order on consent, EPA Docket No. 6-11-94,
concerning the Alcoa (Point Comfort)/Lavaca Bay National
Priorities List site which includes portions of Alcoa's Point
Comfort, Texas bauxite refining operations and portions of Lavaca
Bay, Texas, adjacent to the Company's plant. The administrative
order requires the Company to conduct a remedial investigation
and feasibility study at the site overseen by the EPA. Work
under the administrative order is proceeding. The Company and
certain Federal and state natural resource trustees, who
previously served Alcoa with notice of their intent to file suit
to recover damages for alleged loss or injury of natural
resources in Lavaca Bay, entered into several agreements during
1996 to cooperatively identify restoration alternatives and
approaches for Lavaca Bay. Efforts under those agreements are
ongoing.
In March 1997, Alcoa Italia received an order from Italian
governmental authorities relating to several environmental
deficiencies at its Fusina Plant. Alcoa Italia and the
governmental authorities commenced discussions that resulted in a
plan for sampling certain emission points. The plan is expected
to be implemented in the near future and will confirm compliance
of these sources with legal requirements.
Other Matters
Alcoa was named as one of several defendants in a number of
lawsuits filed as a result of the Sioux City, Iowa DC-10 plane
crash in 1989. The plaintiffs claim that Alcoa fabricated the
titanium fan disk involved in the alleged engine failure of the
plane from a titanium forging supplied by a third party. All of
the 117 cases originally filed have been resolved.
In August 1994, the U.S. Department of Justice (DOJ) issued
a Civil Investigative Demand (CID) to Alcoa regarding activities
undertaken by Alcoa in response to a multinational Memorandum of
Understanding negotiated by the U.S. government and other
sovereign nations. In the second quarter of 1997, Alcoa received
a letter from the DOJ closing the investigation.
On June 13, 1995, the Company was served with a class action
complaint in the matter of John P. Cooper, et al. v. Aluminum
Company of America, Case Number 3-95-CV-10074, pending in the
United States District Court for the Southern District of Iowa.
The named plaintiffs alleged violation of Federal and state civil
rights laws prohibiting discrimination on the basis of race and
gender. In June
-20-
1997, the court approved a settlement agreement
which provides for complete settlement of all class-wide claims
for injunctive relief in consideration for $212,000 and
implementation of certain structural changes. The settlement
also provides for mediation of certain remaining individual
claims for damages due to a hostile work environment or wrongful
termination. All other claims were released under the terms of
the agreement. The mediation process is ongoing.
Alcoa initiated a lawsuit in King County, Washington in
December 1992 against nearly one hundred insurance companies that
provided insurance coverage for environmental property damage at
Alcoa plant sites between the years 1956 and 1985. The trial for
the first three sites concluded in October 1996 with a jury
verdict partially in Alcoa's favor and an award of damages to
Alcoa. In its post-trial decisions, the trial court
substantially reduced the amount that Alcoa will be able to
recover from its insurers on the three test sites. Alcoa has
appealed these rulings to the Washington Court of Appeals and
expects briefing and argument on the appeal to be completed in
1998.
In March 1996, a class action complaint was filed in Los
Angeles County (California) Superior Court against U.S. producers
of primary aluminum, including Alcoa, claiming conspiracy and
collusive action in violation of state antitrust laws. The suit
alleged that the defendants colluded to raise prices of aluminum
products by cutting production. The defendants removed the case
to Federal court in April 1996. On July 1, 1996, the U.S.
District Court for the Central District of California granted the
defendants' motion for summary judgment and the complaint was
dismissed. Plaintiff filed a notice of appeal with the Ninth
Circuit Court of Appeals. In December 1997, plaintiff's appeal
of the dismissal of this action was denied.
In March 1996, Alcoa received a subpoena from the U.S.
Department of Commerce in connection with the export of potassium
fluoride by a subsidiary for use at its alumina refineries in
Jamaica and Suriname. Following a review of records provided by
the Company, the Department of Commerce has charged that the
Company made shipments without export licenses, which had been
required since 1991 as a result of a regulatory change.
In December 1996, JMB Realty Corporation (JMB) filed a
complaint for declaratory relief and damages against Alcoa and
two subsidiaries, Alcoa Properties, Inc. and Alcoa Securities
Corporation, in the Circuit Court of Cook County, Illinois. JMB
claims that it is entitled to a rebate of approximately $78
million (including interest through 1997) from Alcoa Properties,
Inc., arising from a stock transaction that occurred in 1986 in
which a subsidiary of JMB purchased the outstanding stock of
substantially all of Alcoa Properties, Inc.'s real estate holding
subsidiaries. JMB also is seeking an order canceling three
promissory notes that it made and delivered to Alcoa Securities
Corporation. JMB owes Alcoa Securities Corporation approximately
$58 million on the notes (including interest through 1997). In
response to JMB's suit, Alcoa and Alcoa Properties, Inc. have
denied that any rebate is owed to JMB, and Alcoa Securities
Corporation has counterclaimed for collection of the outstanding
balance due on the notes.
In April 1997, German customs authorities conducted a search
of the offices of Alcoa VAW Hannover Presswerk GmbH & Co. KG
(Alcoa VAW) in Hannover, Germany, seeking materials relating to
export transactions dating from 1992. In November 1997, German
customs authorities reported 53 documentary customs violations,
and in January 1998, the local district attorney opened legal
proceedings on the matter. Discussions between Alcoa VAW and
German customs authorities continue.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's
security holders during the fourth quarter of 1997.
-21-
Item 4A. Executive Officers of the Registrant.
The names, ages, positions and areas of responsibility of
the executive officers of the Registrant as of March 1, 1998 are
listed below.
Paul H. O'Neill, 62, Chairman of the Board and Chief
Executive Officer. Mr. O'Neill was elected a director of Alcoa
in 1986 and became Chairman of the Board and Chief Executive
Officer in June 1987. Before joining Alcoa, Mr. O'Neill had been
an officer since 1977 and President and a director since 1985 of
International Paper Company.
Alain J. P. Belda, 54, President and Chief Operating
Officer. Mr. Belda was elected President and Chief Operating
Officer in January 1997. He was President of Alcoa Aluminio S.A.
in Brazil from 1979 to March 1994. Mr. Belda was elected Vice
President of Alcoa in 1982 and, in 1989, was given responsibility
for all of Alcoa's interests in Latin America (other than
Suriname). In August 1991 he was named President - Latin America
for the Company. Mr. Belda was elected Executive Vice President
in 1994 and Vice Chairman in 1995.
George E. Bergeron, 56, Executive Vice President. Mr.
Bergeron was named President - Alcoa Closure Systems
International in 1982 and was elected Vice President and General
Manager - Rigid Packaging Division in July 1990. He was
appointed President - Rigid Packaging Division in 1991.
Mr. Bergeron was elected Executive Vice President of Alcoa in
January 1998 and is responsible for corporate growth initiatives.
Michael Coleman, 47, Vice President and President - Alcoa
Rigid Packaging Division. Mr. Coleman joined Alcoa in January
1998. He had been Vice President - Operations of North Star
Steel from 1993 to 1994, Executive Vice President - Operations
from 1994 to 1996 and President from 1996 through 1997. Mr.
Coleman joined North Star Steel in 1982.
Richard L. Fischer, 61, Executive Vice President -
Chairman's Counsel. Mr. Fischer was elected Vice President and
General Counsel in 1983 and became Senior Vice President in 1984.
He was given the additional responsibility for Corporate
Development in 1986 and in 1991 named to his present position.
In his current assignment, Mr. Fischer is responsible for
Corporate Development and the expansion and integration of
Alcoa's international business activities.
L. Patrick Hassey, 52, Vice President and President - Alcoa
Europe. Mr. Hassey joined Alcoa in 1967 and was named Davenport
Works Manager in 1985. In 1991, he was elected a Vice President
of Alcoa and appointed President - Aerospace/Commercial Rolled
Products Division. Mr. Hassey was appointed President - Alcoa
Europe in November 1997.
Patricia L. Higgins, 48, Vice President and Chief
Information Officer. Ms. Higgins joined Alcoa in January 1997
and is responsible for the integration and implementation of the
Company's computer initiatives. She began her career at American
Telephone & Telegraph Co. in 1977 and was Vice President of
International Sales Operations in Network Systems before joining
Nynex Corporation in 1991 as Group Vice President, Manhattan
Market Area. In 1995, Ms. Higgins moved to Unisys Corporation
where she was President, Communications Market Sector Group.
Richard B. Kelson, 51, Executive Vice President and Chief
Financial Officer. Mr. Kelson was appointed Assistant Secretary
and Managing General Attorney in 1984 and Assistant General
Counsel in 1989. He was elected Senior Vice President -
Environment, Health and Safety in 1991 and Executive Vice
President and General Counsel in May 1994. Mr. Kelson was named
to his current position in May 1997.
Frank L. Lederman, 48, Vice President and Chief Technical
Officer. Mr. Lederman was Senior Vice President and Chief
Technical Officer for Noranda, Inc., a company he joined in 1988.
-22-
Mr. Lederman joined Alcoa as a Vice President in May 1995 and
became Chief Technical Officer in December 1995. In his current
position Mr. Lederman directs operations of the Alcoa Technical
Center.
G. John Pizzey, 52, Vice President and President, Alcoa
World Alumina. Mr. Pizzey joined Alcoa of Australia Limited in
1970 and was appointed to the board of Alcoa of Australia as
Executive Director - Victoria Operations and Managing Director of
Portland Smelter Services in 1986. He was named President -
Bauxite and Alumina Division of Alcoa in 1994 and President -
Primary Metals Division of Alcoa in 1995. Mr. Pizzey was elected
a Vice President of Alcoa in 1996 and was appointed President -
Alcoa World Alumina in November 1997.
Lawrence R. Purtell, 50, Executive Vice President -
Environment, Health and Safety and General Counsel. Mr. Purtell
joined Alcoa in November 1997. He had been Corporate Secretary
and Associate General Counsel of United Technologies Corporation
from 1989 to 1992 and Vice President and General Counsel of
Carrier Corporation from 1992 to 1993. Mr. Purtell was Senior
Vice President and General Counsel and Corporate Secretary of
McDermott International, Inc. from 1993 to 1996. In 1996, he
joined Koch Industries, Inc. as Senior Vice President, General
Counsel and Corporate Secretary.
Robert F. Slagle, 57, Executive Vice President, Human
Resources and Communications. Mr. Slagle was elected Treasurer
in 1982 and Vice President in 1984. In 1986, he was named Vice
President - Industrial Chemicals and, in 1987, was named Vice
President - Industrial Chemicals and U.S. Alumina Operations.
Mr. Slagle was named Vice President - Raw Materials, Alumina and
Industrial Chemicals in 1989, and Vice President of Alcoa and
Managing Director - Alcoa of Australia Limited in 1991. He was
named President - Alcoa World Alumina in 1996 and was elected to
his current position in November 1997.
G. Keith Turnbull, 62, Executive Vice President - Alcoa
Business System. Dr. Turnbull was appointed Assistant Director
of Alcoa Laboratories in 1980. He was named Director -
Technology Planning in 1982, Vice President - Technology Planning
in 1986 and Executive Vice President - Strategic
Analysis/Planning and Information in 1991. In January 1997 he
was named to his current position, with responsibility for
company-wide implementation of Alcoa Business System.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
Dividend per share data, high and low prices per share and
the principal exchanges on which the Company's common stock is
traded are set forth on pages 60 through 61 of the 1997 Annual
Report to Shareholders (the Annual Report) and are incorporated
herein by reference.
At February 9, 1998 (the record date for the Company's 1998
annual shareholders meeting), there were approximately 95,800
Alcoa shareholders, including both record holders and an estimate
of the number of individual participants in security position
listings.
Item 6. Selected Financial Data.
The comparative columnar table showing selected financial
data for the Company is set forth on page 27 of the Annual Report
and is incorporated herein by reference.
-23-
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Management's review and comments on the consolidated
financial statements are set forth on pages 28 through 35 of the
Annual Report and are incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
The information regarding quantitative and qualitative
disclosures about market risk is set forth on pages 32 through 33
of the 1997 Annual Report to Shareholders and is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
The Company's consolidated financial statements, the notes
thereto and the report of the independent public accountants are
set forth on pages 37 through 49 of the Annual Report and are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding Directors is contained under the
caption "The Board of Directors" on pages 7 through 13 of the
Registrant's definitive Proxy Statement dated March 11, 1998 (the
Proxy Statement) and is incorporated herein by reference.
The information regarding executive officers is set forth in
Part I, Item 4A under "Executive Officers of the Registrant."
Item 11. Executive Compensation.
This information is contained under the caption
"Compensation of Executive Officers" on pages 13 through 20 of
the Proxy Statement and is incorporated herein by reference. The
performance graph and Report of the Compensation Committee shall
not be deemed to be "filed."
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
This information is contained under the caption "Alcoa
Common Stock Ownership" on page 6 of the Proxy Statement and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
This information is contained under the caption
"Transactions with Directors' Companies" on page 12 of the Proxy
Statement and is incorporated herein by reference.
-24-
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K.
(a) The consolidated financial statements, financial
statement schedule and exhibits listed below are filed as part of
this report.
(1) The Company's consolidated financial statements, the
notes thereto and the report of the independent public
accountants are set forth on pages 37 through 49 of the Annual
Report and are incorporated herein by reference.
(2) The following report and schedule should be read in
conjunction with the Company's consolidated financial statements
in the Annual Report:
Independent Accountant's Report of Coopers & Lybrand L.L.P.
dated January 8, 1998, except for Note V, for which the date
is February 6, 1998, on the Company's financial statement
schedule filed as a part hereof for the fiscal years ended
December 31, 1997, 1996 and 1995.
Schedule II - Valuation and Qualifying Accounts - for the
fiscal years ended December 31, 1997, 1996 and 1995.
(3) Exhibits
Exhibit
Number Description *
2. Agreement and Plan of Merger among the Company, AMX
Acquisition Corp. and Alumax Inc. dated as of March 8,
1998 (filed herewith). The Registrant will furnish
supplementally a copy of all omitted Schedules to
Exhibit 2 upon the request of the Securities and
Exchange Commission.
3(a).Articles of the Registrant as amended, incorporated by
reference to exhibit 3(a) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993.
3(b).By-Laws of the Registrant, incorporated by reference to
exhibit 3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1991.
10(a). Long Term Stock Incentive Plan (restated) effective
January 1, 1997, as amended January 1, 1998 (filed
herewith).
10(b). Employees' Excess Benefit Plan, Plan A, incorporated by
reference to exhibit 10(b) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1980.
10(c). Incentive Compensation Plan, as amended effective January
1, 1993, incorporated by reference to exhibit 10(c) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10(d). Employees' Excess Benefit Plan, Plan C, as amended and
restated in 1994, effective January 1, 1989, incorporated
by reference to exhibit 10(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10(e). Employees' Excess Benefit Plan, Plan D, as amended
effective October 30, 1992, incorporated by reference to
exhibit 10(e) to the Company's Annual Report on Form 10-K
-25-
for the year ended December 31, 1992 and exhibit 10(e)(1)
the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
10(f). Employment Agreement of Paul H. O'Neill, as amended
through February 25, 1993, incorporated by reference to
exhibit 10(h) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1987, exhibit 10(g) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1990 and exhibit 10(f)(2) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10(g). Deferred Fee Plan for Directors, as amended effective
November 10, 1995, incorporated by reference to exhibit
10(g) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
10(h). Restricted Stock Plan for Non-Employee Directors, as
amended effective March 10, 1995, incorporated by
reference to exhibit 10(h) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
10(h)(1). Amendment to Restricted Stock Plan for Non-Employee
Directors, effective November 10, 1995, incorporated by
reference to exhibit 10(h)(1) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10(i). Fee Continuation Plan for Non-Employee Directors,
incorporated by reference to exhibit 10(k) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989.
10(i)(1). Amendment to Fee Continuation Plan for Non-Employee
Directors, effective November 10, 1995, incorporated by
reference to exhibit 10(i)(1) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10(j). Deferred Compensation Plan, as amended effective October
30, 1992, incorporated by reference to exhibit 10(k) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.
10(j)(1). Amendments to Deferred Compensation Plan, effective
January 1, 1993, February 1, 1994 and January 1, 1995,
incorporated by reference to exhibit 10(j)(1) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
10(j)(2). Amendment to Deferred Compensation Plan, effective
June 1, 1995, incorporated by reference to exhibit
10(j)(2) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
10(k). Summary of the Executive Split Dollar Life Insurance
Plan, dated November 1990, incorporated by reference to
exhibit 10(m) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990.
10(l). Dividend Equivalent Compensation Plan, effective February
3, 1997, incorporated by reference to exhibit 10(l) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
10(m). Form of Indemnity Agreement between the Company and
individual directors or officers, incorporated by
reference to exhibit 10(j) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1987.
-26-
12. Computation of Ratio of Earnings to Fixed Charges.
13. Portions of Alcoa's 1997 Annual Report to Shareholders.
21. Subsidiaries and Equity Entities of the Registrant.
23. Consent of Independent Certified Public Accountants.
24. Power of Attorney for certain directors.
27. Financial data schedule.
*Exhibit Nos. 10(a) through 10(l) are management contracts
or compensatory plans required to be filed as Exhibits to this
Form 10-K.
Amendments and modifications to other Exhibits previously
filed have been omitted when in the opinion of the Registrant
such Exhibits as amended or modified are no longer material or,
in certain instances, are no longer required to be filed as
Exhibits.
No other instruments defining the rights of holders of long-
term debt of the Registrant or its subsidiaries have been filed
as Exhibits because no such instruments met the threshold
materiality requirements under Regulation S-K. The Registrant
agrees, however, to furnish a copy of any such instruments to the
Commission upon request.
(b) Reports on Form 8-K. None was filed in the fourth
quarter of 1997.
-27-
Independent Accountant's Report
To the Shareholders and Board of Directors
Aluminum Company of America
Our report on the consolidated financial statements of
Aluminum Company of America has been incorporated by reference in
this Form 10-K from page 36 of the 1997 Annual Report to
Shareholders of Aluminum Company of America. In connection with
our audits of such financial statements, we have also audited the
related financial statement schedule listed under Item 14 of this
Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
January 8, 1998, except
for Note V, for which the
date is February 6, 1998
-28-
[Enlarge/Download Table]
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31
(in millions)
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
Balance at Charged to Charged to
beginning costs and other Balance at
Description of period expenses (A) accounts (B) Deductions end of period
----------- --------- ------------ ------------ ---------- -------------
Allowance for doubtful accounts:
1997 $ 48.4 $ 5.8 $(4.0)(A) $13.6(B) $ 36.6
1996 $ 45.8 $24.0 $ 1.5(A) $22.9(B) $ 48.4
1995 $ 37.4 $17.4 $(1.8)(A) $ 7.2(B) $ 45.8
Income tax valuation allowance:
1997 $110.0 $11.9 $(13.2)(A) $5.2(C) $103.5
1996 $112.1 $23.9 - $26.0(C) $110.0
1995 $170.0 $16.2 - $74.1(C) $112.1
<FN>
Notes: (A) Collections on accounts previously written off,
acquisition/divestiture of subsidiaries and foreign
currency translation adjustments.
(B) Uncollectible accounts written off
(C) Related primarily to reductions in the valuation
reserve based on a change in circumstances.
-29-
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ALUMINUM COMPANY OF AMERICA
March 11, 1998 By /s/Earnest J. Edwards
Earnest J. Edwards
Senior Vice President and
Controller
(Also signing as Principal
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/Paul H. O'Neill Chairman of the Board March 11, 1998
Paul H. O'Neill and Chief Executive
Officer (Principal
Executive Officer
and Director)
/s/Richard B. Kelson Executive Vice President March 11, 1998
Richard B. Kelson and Chief Financial
Officer
(Principal Financial
Officer)
Kenneth W. Dam, Joseph T. Gorman, Judith M. Gueron, Sir Ronald
Hampel, John P. Mulroney, Sir Arvi Parbo, Henry B. Schacht,
Forrest N. Shumway, Franklin A. Thomas and Marina v.N. Whitman,
each as a Director, on March 11, 1998, by Denis A. Demblowski,
their Attorney-in-Fact.*
*By /s/Denis A. Demblowski
Denis A. Demblowski
Attorney-in-Fact
-30-
Dates Referenced Herein and Documents Incorporated by Reference
This ‘10-K405’ Filing | | Date | | Other Filings |
---|
| | |
| | 12/31/98 | | 10-K |
Filed on: | | 3/11/98 |
| | 3/9/98 |
| | 3/8/98 |
| | 3/6/98 |
| | 3/1/98 |
| | 2/25/98 |
| | 2/9/98 | | SC 13G/A |
| | 2/6/98 |
| | 1/8/98 |
| | 1/1/98 |
For Period End: | | 12/31/97 | | 10-K/A |
| | 10/10/97 |
| | 2/3/97 |
| | 1/1/97 |
| | 12/31/96 | | 10-K, 10-K/A |
| | 7/1/96 |
| | 12/31/95 | | 10-K405 |
| | 11/10/95 |
| | 6/13/95 |
| | 6/1/95 |
| | 3/10/95 |
| | 1/1/95 |
| | 12/31/94 | | 10-K, DEF 14A |
| | 2/1/94 |
| | 6/30/93 |
| | 2/25/93 |
| | 1/1/93 |
| | 12/31/92 |
| | 10/30/92 |
| List all Filings |
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