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Derivatives And Other Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2011
Derivatives And Other Financial Instruments |
Fair Value Of Outstanding Derivative Contracts Recorded As Assets |
Asset Derivatives |  | September 30, 2011 |  |  | December 31, 2010 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Prepaid expenses and other current assets: |  |  |  |  |  |  |  |
Aluminum contracts |  | $ | 9 |  |  | $ | 48 |
Foreign exchange contracts |  |  | 1 |  |  |  | 2 |
Interest rate contracts |  |  | 8 |  |  |  | 19 |
Other noncurrent assets: |  |  |  |  |  |  |  |
Aluminum contracts |  |  | 9 |  |  |  | 22 |
Energy contracts |  |  | 40 |  |  |  | 9 |
Interest rate contracts |  |  | 41 |  |  |  | 62 |
Total derivatives designated as hedging instruments |  | $ | 108 |  |  | $ | 162 |
Derivatives not designated as hedging instruments*: |  |  |  |  |  |  |  |
Prepaid expenses and other current assets: |  |  |  |  |  |  |  |
Aluminum contracts |  | $ | 1 |  |  | $ | 3 |
Other noncurrent assets: |  |  |  |  |  |  |  |
Aluminum contracts |  |  | 5 |  |  |  | — |
Foreign exchange contracts |  |  | — |  |  |  | 1 |
Total derivatives not designated as hedging instruments |  | $ | 6 |  |  | $ | 4 |
Less margin held: |  |  |  |  |  |  |  |
Prepaid expenses and other current assets: |  |  |  |  |  |  |  |
Aluminum contracts |  | $ | — |  |  | $ | 4 |
Interest rate contracts |  |  | 5 |  |  |  | 13 |
Other noncurrent assets: |  |  |  |  |  |  |  |
Interest rate contracts |  |  | 15 |  |  |  | 2 |
Sub-total |  | $ | 20 |  |  | $ | 19 |
Total Asset Derivatives |  | $ | 94 |  |  | $ | 147 |
* | See the "Other" section within Note P for additional information on Alcoa's purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.
Fair Value Of Outstanding Derivative Contracts Recorded As Liabilities |
Liability Derivatives |  | September 30, 2011 |  |  | December 31, 2010 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Other current liabilities: |  |  |  |  |  |  |  |
Aluminum contracts |  | $ | 90 |  |  | $ | 89 |
Other noncurrent liabilities and deferred credits: |  |  |  |  |  |  |  |
Aluminum contracts |  |  | 554 |  |  |  | 647 |
Total derivatives designated as hedging instruments |  | $ | 644 |  |  | $ | 736 |
Derivatives not designated as hedging instruments*: |  |  |  |  |  |  |  |
Other current liabilities: |  |  |  |  |  |  |  |
Aluminum contracts |  | $ | 43 |  |  | $ | 52 |
Energy contracts |  |  | — |  |  |  | 62 |
Other noncurrent liabilities and deferred credits: |  |  |  |  |  |  |  |
Aluminum contracts |  |  | 24 |  |  |  | 33 |
Embedded credit derivative |  |  | 33 |  |  |  | 23 |
Foreign currency contracts |  |  | 1 |  |  |  | — |
Total derivatives not designated as hedging instruments |  | $ | 101 |  |  | $ | 170 |
Less margin posted: |  |  |  |  |  |  |  |
Other current liabilities: |  |  |  |  |  |  |  |
Aluminum contracts |  | $ | 8 |  |  | $ | 4 |
Energy contracts |  |  | — |  |  |  | 37 |
Sub-total |  | $ | 8 |  |  | $ | 41 |
Total Liability Derivatives |  | $ | 737 |  |  | $ | 865 |
* | See the "Other" section within Note P for additional information on Alcoa's purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.
Derivative Contract Assets And Liabilities That Are Measured And Recognized At Fair Value On A Recurring Basis |
|  | September 30, 2011 |  |  | December 31, 2010 |
Assets: |  |  |  |  |  |  |  |
Level 1 |  | $ | 18 |  |  | $ | 76 |
Level 2 |  |  | 50 |  |  |  | 81 |
Level 3 |  |  | 46 |  |  |  | 9 |
Margin held* |  |  | (20 | ) |  |  | (19 | )
Total |  | $ | 94 |  |  | $ | 147 |
Liabilities: |  |  |  |  |  |  |  |
Level 1 |  | $ | 68 |  |  | $ | 35 |
Level 2 |  |  | 57 |  |  |  | 83 |
Level 3 |  |  | 620 |  |  |  | 788 |
Margin posted* |  |  | (8 | ) |  |  | (41 | )
Total |  | $ | 737 |  |  | $ | 865 |
* | Margin held represents cash collateral received related to interest rate contracts included in Level 2 and margin posted represents cash collateral paid related to aluminum contracts included in Level 1. At December 31, 2010, margin held also represents cash collateral received related to aluminum contracts included in Level 1 and margin posted also represents cash collateral paid related to energy contracts included in Level 3. Alcoa elected to net the margin held and posted against the fair value amounts recognized for derivative instruments executed with the same counterparties under master netting arrangements.
Reconciliation Of Activity For Derivative Contracts On A Net Basis |
|  | Third quarter ended September 30, 2011 |  |  | Nine months ended September 30, 2011 |
Balance at beginning of period |  | $ | 796 |  |  | $ | 779 |
Total gains or losses (realized and unrealized) included in: |  |  |  |  |  |  |  |
Sales – (decrease) |  |  | (14 | ) |  |  | (51 | )
Cost of goods sold – (increase) |  |  | (4 | ) |  |  | (15 | )
Other expenses (income), net – (increase) |  |  | (3 | ) |  |  | (37 | )
Other comprehensive loss – (increase) |  |  | (196 | ) |  |  | (97 | )
Purchases, sales, issuances, and settlements* |  |  | (5 | ) |  |  | (5 | )
Transfers into and (or) out of Level 3* |  |  | — |  |  |  | — |
Balance at end of period |  | $ | 574 |  |  | $ | 574 |
Total gains or losses included in earnings attributable to the change in unrealized gains or losses relating to derivative contracts still held at September 30, 2011: |  |  |  |  |  |  |  |
Sales |  | $ | — |  |  | $ | — |
Cost of goods sold |  |  | — |  |  |  | — |
Other expenses (income), net – (increase) |  |  | (13 | ) |  |  | (10 | )
* | During the 2011 third quarter, there was an issuance of a Level 3 financial instrument related to a natural gas supply contract (see below). There were no purchases, sales, or settlements of Level 3 financial instruments. Additionally, there were no transfers of financial instruments into or out of Level 3.
Gain Or Loss On Hedged Items |
Derivatives in Fair Value Hedging Relationships |  | Location of Gain or (Loss) Recognized in Earnings on Derivatives |  | Amount of Gain or (Loss) Recognized in Earnings on Derivatives |
|  | Third quarter ended September 30, |  |  | Nine months ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
Aluminum contracts |  | Sales |  | $ | (100 | ) |  | $ | 101 |  |  | $ | (78 | ) |  | $ | 7 |
Interest rate contracts |  | Interest expense |  |  | 5 |  |  |  | 43 |  |  |  | 58 |  |  |  | 79 |
Total |  |  |  | $ | (95 | ) |  | $ | 144 |  |  | $ | (20 | ) |  | $ | 86 |
Hedged Items in Fair Value Hedging Relationships |  | Location of Gain or (Loss) Recognized in Earnings on Hedged Items |  | Amount of Gain or (Loss) Recognized in Earnings on Hedged Items |
|  | Third quarter ended September 30, |  |  | Nine months ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
Aluminum contracts |  | Sales |  | $ | 102 |  |  | $ | (94 | ) |  | $ | 76 |  |  | $ | (8 | )
Interest rate contracts |  | Interest expense |  |  | (5 | ) |  |  | (15 | ) |  |  | (25 | ) |  |  | (51 | )
Total |  |  |  | $ | 97 |  |  | $ | (109 | ) |  | $ | 51 |  |  | $ | (59 | )
Gains And Losses On Derivatives |
|  | Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) |  |  | Location of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion) |  | Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)* |  |  | Location of Gain or (Loss) Recognized in Earnings on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) |  | Amount of Gain or (Loss) Recognized in Earnings on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)** |
| Third quarter ended September 30, |  |  | Nine months ended September 30, |  |  |  | Third quarter ended September 30, |  |  | Nine months ended September 30, |  |  |  | Third quarter ended September 30, |  |  | Nine months ended September 30, |
| 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |  |  |  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |  |  |  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
Aluminum contracts |  | $ | 145 |  |  | $ | (247 | ) |  | $ | 53 |  |  | $ | (13 | ) |  | Sales |  | $ | (30 | ) |  | $ | (19 | ) |  | $ | (106 | ) |  | $ | (83 | ) |  | Other expenses (income), net |  | $ | 4 |  |  | $ | (2 | ) |  | $ | 4 |  |  | $ | 1 |
Energy contracts |  |  | 6 |  |  |  | 1 |  |  |  | 14 |  |  |  | (12 | ) |  | Cost of goods sold |  |  | (2 | ) |  |  | (7 | ) |  |  | (8 | ) |  |  | (18 | ) |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Energy contracts |  |  | — |  |  |  | (6 | ) |  |  | — |  |  |  | (7 | ) |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Foreign exchange contracts |  |  | 2 |  |  |  | 4 |  |  |  | 4 |  |  |  | (3 | ) |  | Sales |  |  | 2 |  |  |  | (2 | ) |  |  | 4 |  |  |  | (6 | ) |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Interest rate contracts |  |  | (2 | ) |  |  | — |  |  |  | (2 | ) |  |  | — |  |  | Interest expense |  |  | (2 | ) |  |  | — |  |  |  | (2 | ) |  |  | — |  |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Interest rate contracts |  |  | (2 | ) |  |  | — |  |  |  | (4 | ) |  |  | — |  |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | (2 | ) |  |  | — |  |  | Other expenses (income), net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 149 |  |  | $ | (248 | ) |  | $ | 65 |  |  | $ | (35 | ) |  |  |  | $ | (32 | ) |  | $ | (28 | ) |  | $ | (114 | ) |  | $ | (107 | ) |  |  |  | $ | 4 |  |  | $ | (2 | ) |  | $ | 4 |  |  | $ | 1 |
* | Assuming market rates remain constant with the rates at September 30, 2011, a loss of $22 is expected to be recognized in earnings over the next 12 months.
** | For both the third quarter and nine months ended September 30, 2011, the amount of gain or (loss) recognized in earnings represents $(1) related to the ineffective portion of the hedging relationships. There was also $5 recognized in earnings related to the amount excluded from the assessment of hedge effectiveness for both the third quarter and nine months ended September 30, 2011. For the third quarter and nine months ended September 30, 2010, the amount of gain or (loss) recognized in earnings related to the ineffective portion of the hedging relationships.
Outstanding Forward Contracts That Were Entered Into Hedge Forcasted Transactions |
|  | September 30, 2011 |  |  | December 31, 2010 |
Aluminum contracts (kmt) |  |  | 1,237 |  |  |  | 1,285 |
Energy contracts (electricity - megawatt hours) |  |  | 100,578,295 |  |  |  | 100,578,295 |
Foreign exchange contracts |  | $ | 5 |  |  | $ | 20 |
Fair Value Gains And Losses On Derivatives Contracts |
Derivatives Not Designated as Hedging Instruments |  | Location of Gain or (Loss) Recognized in Earnings on Derivatives |  | Amount of Gain or (Loss) Recognized in Earnings on Derivatives |
|  | Third quarter ended September 30, |  |  | Nine months ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
Aluminum contracts |  | Sales |  | $ | (10 | ) |  | $ | 7 |  |  | $ | (9 | ) |  | $ | 3 |
Aluminum contracts |  | Other expenses (income), net |  |  | 18 |  |  |  | (33 | ) |  |  | 7 |  |  |  | (18 | )
Embedded credit derivative |  | Other expenses (income), net |  |  | (13 | ) |  |  | 1 |  |  |  | (10 | ) |  |  | (8 | )
Energy contract |  | Other expenses (income), net |  |  | 16 |  |  |  | (12 | ) |  |  | 47 |  |  |  | (31 | )
Foreign exchange contracts |  | Other expenses (income), net |  |  | (7 | ) |  |  | 2 |  |  |  | (3 | ) |  |  | 1 |
Total |  |  |  | $ | 4 |  |  | $ | (35 | ) |  | $ | 32 |  |  | $ | (53 | )
Carrying Value And Fair Values Of Other Financial Instruments |
|  | September 30, 2011 |  |  | December 31, 2010 |
|  | Carrying value |  |  | Fair value |  |  | Carrying value |  |  | Fair value |
Cash and cash equivalents |  | $ | 1,332 |  |  | $ | 1,332 |  |  | $ | 1,543 |  |  | $ | 1,543 |
Restricted cash |  |  | 1 |  |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Noncurrent receivables |  |  | 23 |  |  |  | 23 |  |  |  | 23 |  |  |  | 23 |
Available-for-sale securities |  |  | 93 |  |  |  | 93 |  |  |  | 93 |  |  |  | 93 |
Short-term borrowings |  |  | 57 |  |  |  | 57 |  |  |  | 92 |  |  |  | 92 |
Commercial paper |  |  | 107 |  |  |  | 107 |  |  |  | — |  |  |  | — |
Long-term debt due within one year |  |  | 489 |  |  |  | 489 |  |  |  | 231 |  |  |  | 231 |
Long-term debt, less amount due within one year |  |  | 8,658 |  |  |  | 9,138 |  |  |  | 8,842 |  |  |  | 9,882 |

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