Alcoa Announces Annual Income from Continuing Operations of $1.23 Billion, or $1.40 per share; Highest Annual Revenues in Company History

Highlights:

-- Income from continuing operations of $1.23 billion, or $1.40 per share, for 2005;

-- Annual revenues increased 13 percent to an all-time record of $26.2 billion;

-- Progress executing upstream and downstream growth projects to build share in attractive growth markets;

-- Fourth quarter 2005 income from continuing operations of $210 million, or $0.24, including a net negative impact of $93 million, or $0.11;

-- Strong quarterly performance in alumina and primary metals with segment ATOI improving 17 and 44 percent respectively over third quarter;

-- Debt-to-capital ratio of 30.8 percent at year-end, within target range despite investments in aggressive growth strategy.

Alcoa (NYSE: AA) announced today that its 2005 income fromcontinuing operations was $1.23 billion, or $1.40 per diluted share,as the company took action to partially mitigate $878 million inimpacts from raw materials, energy, and other cost inflation.

For the fourth quarter, income from continuing operations was $210 million, or $0.24. Profitability was eroded by negative impactstotaling $93 million, or $0.11, including: lowered production atrefineries in Jamaica and Texas due to the Gulf Coast hurricanes; anunplanned outage at the Portland, Australia smelter; the impact ofstrikes on operations at Spanish plants; restructuring costs for plantclosings and layoffs; mark-to-market losses on metal and metal-relatedactivities; and integration costs for the newly acquired facilities inRussia; partially offset by a favorable legal settlement for powercosts. Income from continuing operations was $0.33 in the thirdquarter of 2005, and $0.39 in the fourth quarter of 2004.

"Entering 2005, we anticipated significant pressures from risinginput, energy costs and other cost inflation, but actual increaseswere even higher, nearly $900 million for the year," said Alain Belda,Alcoa Chairman and CEO.

"To meet that challenge, we took aggressive action, passingthrough significant price increases to downstream customers, improvingour mix of value-added products, continuing productivity gains, andlowering taxes. That management action helped offset cost pressuresand drove the top-line to the highest level in Alcoa's 117-yearhistory," said Belda. "In the year ahead, we don't foresee the samesharp spikes on input prices, and our initiatives will gain furthermomentum to offset inflation and improve the bottom line.

"As we enter 2006, the vast majority of our primary metalproduction will benefit from the highest metal prices in more than 15 years," Belda added. "And we are working to secure future growth inattractive markets with customers around the world."

Net income in the quarter was $224 million, or $0.26, compared to$289 million, or $0.33, in the previous quarter, and $268 million, or$0.30, in the fourth quarter of 2004.

Annual revenues climbed 13 percent to $26.2 billion, the highestin the company's history. Revenues for the fourth quarter roseapproximately 12 percent compared to the fourth quarter of 2004,driven by higher metal prices and strength in the aerospace market.

Balance Sheet Overview

Cash from operations in the quarter was $1 billion, helping lowerthe company's debt to capital ratio to 30.8 percent at year's end,down from 31.5 percent in the third quarter. In addition to that, thecompany completed the sale of Southern Graphic Systems for $408 million in cash in the quarter.

For the year, cash from operations was $1.7 billion, including theimpact of a discretionary $300 million contribution to the company'spension plans. Annual capital expenditures were $2.1 billion,primarily used to fund growth projects.

After excluding spending on growth projects, the company's returnon capital for the year was 9.5 percent. Including those investments,the company's return on capital stood at 8.3 percent.

Update on Growth Projects

"We have the most aggressive growth strategy in the industry andthe best growth projects around the world. We continue to achieve thehighest returns in the industry, generating the cash we need to fundour growth and maintain a strong balance sheet," said Belda.

In addition to negotiations and feasibility studies underway inTrinidad, Ghana and Guinea, the company has a comprehensive array ofgrowth projects that are moving ahead in refining, smelting anddownstream, including:

Refining

Refining growth is focused on capturing Alcoa's unique advantageof multiple options to build low-capital cost brownfield expansions ofexisting low operating cost facilities:

-- Alumar refinery expansion - The expansion will add 2.1 million metric tons per year ("mtpy") in capacity, bringing the low-cost refinery's total capacity to 3.5 million metric tons. Work began this quarter and the expansion is expected to be completed by the first half of 2008. This project includes creation of a bauxite mine near Juruti in Para state, which will initially produce 2.6 million mtpy of bauxite to supply the expansion.

-- Pinjarra efficiency upgrade - The project will expand the low-cost Pinjarra refinery by 657,000 mtpy to more than 4.2 million mtpy. It is scheduled to be completed in the first quarter of 2006.

-- Jamalco expansion - The Company's Alcoa World Alumina and Chemicals (AWAC) affiliate plans to expand the refinery in Clarendon, Jamaica by 1.5 million mtpy, more than doubling the refinery's capacity to approximately 2.8 million mtpy.

Smelting

Growth development work includes greenfield and brownfieldsmelting projects utilizing globally competitive energy sources.

-- Alumar smelter expansion - The expansion will add 63,000 mtpy to 433,000 mtpy in total. Approximately 50 percent was completed in November 2005, and the remainder is scheduled to be finished by the end of the first quarter of 2006.

-- Alcoa Fjardaal in Iceland - The company continued progress building its first greenfield smelter in 20 years, which is now approximately 40 percent complete. The 346,000 mtpy smelter is on-schedule to produce its first metal in April 2007.

-- Mosjoen, Norway anode plant - Work to build a carbon plant together with Elkem, our partners in Norway, began in the third quarter 2004 and is expected to be completed in time to ramp-up to full production in parallel with Fjardaal in late 2007.

-- Warrick, Indiana power self-generation - The company began construction work to continue its ability to self-generate power to fuel its Warrick, IN smelter and rolling mill while lowering costs through an environmental upgrade. As part of this project the company purchased the rights to mine coal in nearby Friendsville, IL.

-- Modernization of Pocos de Caldas smelter - Initial work began to upgrade this Brazilian smelter with world-class environmental controls to lower emissions and costs, and improve operational efficiency.

-- Aviles, and La Coruna, Spain Soderberg modernizations - The Aviles modernization project is approximately 40 percent complete and is scheduled to be fully operational in the second quarter of 2007. La Coruna is scheduled to be completed in the second quarter of 2008.

Fabricating and Downstream Growth

Growth work is underway to expand the company's position and lowerits costs in fabricating and downstream businesses:

-- Final approval from the Ministry of Commerce in China was received and the new joint venture was formed with China International Trust & Investment (CITIC), Alcoa's equity partner in Bohai Aluminum, to produce aluminum rolled products at the Bohai plant in Qinghuangdao, China. Alcoa anticipates having the expansion commissioned by 2008.

-- To serve customers in the aerospace market, the company is expanding its heat-treated sheet and plate capacity by 50 percent. The expansion is expected to be completed by the end of next year at plants in Davenport, Iowa USA; Kitts Green, UK; Fusina, Italy; and Belaya Kalitva, Russia.

-- Alcoa Fastening Systems business is creating two new 50,000 square-foot manufacturing sites in the Suzhou Industrial Park in China, 100 km from Shanghai, to support rapidly growing commercial aviation and railway/rail car production and sub-assembly in that market.

-- Continued integration of the recently acquired Belaya Kalitva and Samara plants in the Russian Federation. The plants have already begun the process of servicing North American automotive customers and have made additional progress to qualify products for key customers in the aerospace and commercial transportation markets.

Segment and Other Results

(all comparisons on a sequential quarter basis, unless noted)

Alumina - After-tax operating income ("ATOI") was $183 million, up17 percent from the third quarter. Stronger overall shipments andhigher pricing drove the result. Higher maintenance, energy andcaustic soda costs negatively affected the segment by $18 million.Alumina production for the quarter was 3,706 thousand metric tons("kmt"), compared to 3,688 kmt in the third quarter of 2005, withincreases coming from the Western Australian operations.

Primary Metals - Segment ATOI increased by $74 million, or 44 percent, to $242 million largely due to higher metal prices and afavorable legal settlement related to power costs. Total shipmentsdeclined as the company purchased less primary metal for internal use.Purchases for the quarter were 164 kmt, down from 189 kmt in the thirdquarter. Primary metal production for the quarter was 900 kmt, downslightly from third quarter production of 904 kmt. Increasedproduction from the Alumar expansion was offset by the outage at thePortland smelter. Third party realized metal prices increased $214 to$2,177 per ton. The mark-to-market impact on metal and metal-relatedactivity is not recognized in the segment results.

Flat Rolled Products - ATOI for the segment decreased $19 millionto $62 million. Strong productivity improvements and favorableaerospace mix were offset by raw material and energy cost increases,seasonally lower can sheet volumes, along with higher Russian losses.Aerospace demand remained strong.

Extruded and End Products - Seasonal declines in residential andcommercial building and construction coupled with overall weak marketconditions in soft alloy extrusions drove ATOI down by $26 million.

Engineered Solutions - ATOI for the segment increased to $45 million, up 41 percent, driven by continued strong performance from the Industrial Castings and Forged Products business, FasteningSystems and Wheel Products business. Product launch costs at AFLAutomotive began to abate in the quarter.

Packaging and Consumer - Segment ATOI declined $8 million to $20 million in the quarter. The usual seasonal strength in the consumer products business was offset by higher raw material costs, largely hurricane related.

ATOI to Net Income Reconciliation

The largest variance in reconciling items was in the "other" lineitem. The sequential change in the "other" line item is related tohigher LIFO cost, the gain on the sale of the railroad business in thethird quarter, and the mark-to-market losses on metal andmetal-related activity.

Alcoa will hold its quarterly conference call at 5:00 PM EasternTime on January 9th to present the quarter's results. The meeting willbe webcast via alcoa.com. Call information and related details areavailable at www.alcoa.com under "Invest."

About Alcoa

Alcoa is the world's leading producer and manager of primaryaluminum, fabricated aluminum and alumina facilities, and is active inall major aspects of the industry. Alcoa serves the aerospace,automotive, packaging, building and construction, commercialtransportation and industrial markets, bringing design, engineering,production and other capabilities of Alcoa's businesses to customers.In addition to aluminum products and components, Alcoa also marketsconsumer brands including Reynolds Wrap(R) foils and plastic wraps,Alcoa(R) wheels, and Baco(R) household wraps. Among its otherbusinesses are vinyl siding, closures, fastening systems, precisioncastings, and electrical distribution systems for cars and trucks. Thecompany has 129,000 employees in 42 countries and has been named oneof the top three most sustainable corporations in the world at theWorld Economic Forum in Davos, Switzerland. More information can befound at www.alcoa.com

Forward Looking Statement

Certain statements in this release relate to future events andexpectations and as such constitute forward-looking statementsinvolving known and unknown risks and uncertainties that may causeactual results, performance or achievements of Alcoa to be differentfrom those expressed or implied in the forward-looking statements.Important factors that could cause actual results to differ materiallyfrom those in the forward-looking statements include: (a) materialadverse changes in economic or aluminum industry conditions generally,including global supply and demand conditions and prices for primaryaluminum, alumina and other products; (b) material adverse changes inthe markets served by Alcoa, including the transportation, building,construction, distribution, packaging, industrial gas turbine andother markets; (c) Alcoa's inability to achieve the level of costsavings, productivity improvements or earnings growth anticipated bymanagement, whether due to significant increases in energy, rawmaterials or employee benefits costs, labor disputes or other factors;(d) Alcoa's inability to realize the full extent of the expectedsavings or benefits from its restructuring activities or to completesuch activities in accordance with its planned timetable; (e) Alcoa'sinability to complete its expansion projects and investment activitiesoutside the U.S. as planned and by targeted completion dates, or toassure that the anticipated integration costs at its recently acquiredRussian facilities will not exceed its estimates; (f) unfavorablechanges in laws, governmental regulations or policies, currencyexchange rates or competitive factors in the countries in which Alcoaoperates; (g) significant legal proceedings or investigations adverseto Alcoa, including environmental, product liability, safety andhealth and other claims; and (h) the other risk factors summarized inAlcoa's Form 10-K for the year ended December 31, 2004, Forms 10-Q forthe quarters ended March 31, 2005, June 30, 2005, and September 30,2005 and other reports filed with the Securities and ExchangeCommission.
Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share, and metric ton amounts)

Quarter ended
December 31 September 30 December 31
2004 (a) 2005 2005
------------- ------------- -------------
Sales $ 5,979 $ 6,566 $ 6,669

Cost of goods sold 4,839 5,405 5,459
Selling, general
administrative, and other
expenses 327 317 362
Research and development
expenses 53 51 50
Provision for depreciation,
depletion, and amortization 306 321 316
Restructuring and other
charges 1 7 27
Interest expense 72 96 78
Other income, net (69) (92) (5)
------------- ------------- -------------
Total costs and expenses 5,529 6,105 6,287

Income from continuing
operations before taxes on
income 450 461 382
Provision for taxes on income 62 112 92
------------- ------------- -------------
Income from continuing
operations before minority
interests' share 388 349 290
Less: Minority interests'
share 48 59 80
------------- ------------- -------------

Income from continuing
operations 340 290 210

(Loss) income from
discontinued operations (72) (1) 16

Cumulative effect of
accounting change - - (2)
------------- ------------- -------------

NET INCOME $ 268 $ 289 $ 224
============= ============= =============

Earnings (loss) per common
share:
Basic:
Income from continuing
operations $ .39 $ .33 $ .24
(Loss) income from
discontinued operations (.08) - .02
Cumulative effect of
accounting change - - -
------------- ------------- -------------
Net income $ .31 $ .33 $ .26
============= ============= =============

Diluted:
Income from continuing
operations $ .39 $ .33 $ .24
(Loss) income from
discontinued operations (.09) - .02
Cumulative effect of
accounting change - - -
------------- ------------- -------------
Net income $ .30 $ .33 $ .26
============= ============= =============

Average number of shares used
to compute:
Basic earnings per common
share 870,608,606 872,515,797 871,135,611
Diluted earnings per common
share 877,423,613 876,583,063 874,617,798

Shipments of aluminum
products (metric tons) 1,266,000 1,424,000 1,388,000



Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)


Twelve months ended
December 31 December 31
2004 (a) 2005
------------- -------------
Sales $ 23,236 $ 26,159

Cost of goods sold 18,469 21,217
Selling, general administrative, and other
expenses 1,252 1,352
Research and development expenses 182 194
Provision for depreciation, depletion, and
amortization 1,189 1,265
Restructuring and other charges (21) 339
Interest expense 271 339
Other income, net (271) (480)
------------- -------------
Total costs and expenses 21,071 24,226

Income from continuing operations before
taxes on income 2,165 1,933
Provision for taxes on income 543 441
------------- -------------
Income from continuing operations before
minority interests' share 1,622 1,492
Less: Minority interests' share 245 259
------------- -------------

Income from continuing operations 1,377 1,233

(Loss) income from discontinued operations (67) 2

Cumulative effect of accounting change - (2)
------------- -------------

NET INCOME $ 1,310 $ 1,233
============= =============

Earnings (loss) per common share:
Basic:
Income from continuing operations $ 1.58 $ 1.41
Loss from discontinued operations (.08) -
Cumulative effect of accounting change - -
------------- -------------
Net income $ 1.50 $ 1.41
============= =============

Diluted:
Income from continuing operations $ 1.57 $ 1.40
Loss from discontinued operations (.08) -
Cumulative effect of accounting change - -
------------- -------------
Net income $ 1.49 $ 1.40
============= =============

Average number of shares used to compute:
Basic earnings per common share 869,906,895 871,721,392
Diluted earnings per common share 877,449,161 876,897,531

Common stock outstanding at the end of the
period 870,980,083 870,268,513

Shipments of aluminum products (metric
tons) 5,120,000 5,503,000

(a) Prior periods financial statements have been reclassified to
reflect the imaging and graphic communications business in
discontinued operations in 2005.



Alcoa and subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(in millions)


December 31 December 31
2004 (b) 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 457 $ 762
Receivables from customers, less allowances:
$86 in 2004 and $80 in 2005 2,694 2,916
Other receivables 256 427
Inventories 2,968 3,452
Deferred income taxes 279 197
Prepaid expenses and other current assets 788 1,036
----------- -----------
Total current assets 7,442 8,790
----------- -----------

Properties, plants and equipment, at cost 25,569 27,017
Less: accumulated depreciation, depletion and
amortization 13,244 13,854
----------- -----------
Net properties, plants and equipment 12,325 13,163
----------- -----------
Goodwill 6,412 6,249
Investments 2,066 1,370
Other assets 3,822 4,090
Assets held for sale 542 34
----------- -----------
Total assets $32,609 $33,696
=========== ===========

LIABILITIES
Current liabilities:
Short-term borrowings $ 267 $ 300
Commercial paper 630 912
Accounts payable, trade 2,218 2,661
Accrued compensation and retirement costs 1,013 1,102
Taxes, including taxes on income 1,018 874
Other current liabilities 1,073 1,461
Long-term debt due within one year 57 58
----------- -----------
Total current liabilities 6,276 7,368
----------- -----------
Long-term debt, less amount due within one year 5,345 5,279
Accrued pension benefits 1,513 1,500
Accrued postretirement benefits 2,150 2,105
Other noncurrent liabilities and deferred
credits 1,727 1,823
Deferred income taxes 789 875
Liabilities of operations held for sale 93 8
----------- -----------
Total liabilities 17,893 18,958
----------- -----------

MINORITY INTERESTS 1,416 1,365
----------- -----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock 55 55
Common stock 925 925
Additional capital 5,775 5,721
Retained earnings 8,636 9,344
Treasury stock, at cost (1,926) (1,899)
Accumulated other comprehensive loss (165) (773)
----------- -----------
Total shareholders' equity 13,300 13,373
----------- -----------
Total liabilities and equity $32,609 $33,696
=========== ===========

(b) Prior periods financial statements have been reclassified to
reflect the imaging and graphic communications business in
discontinued operations in 2005.



Alcoa and subsidiaries
Condensed Statement of Consolidated Cash Flows (unaudited)
(in millions)


Year ended
December 31
2004 (c) 2005
--------- ---------
CASH FROM OPERATIONS
Net income $ 1,310 $ 1,233
Adjustments to reconcile net income to cash from
operations:
Depreciation, depletion, and amortization 1,197 1,267
Change in deferred income taxes (95) (16)
Equity (income) loss, net of dividends (54) 35
Noncash restructuring and other charges (21) 339
Net gain on early retirement of debt and
interest rate swaps (58) -
Gains from investing activities - sale of assets (44) (406)
Provision for doubtful accounts 24 20
Loss (income) from discontinued operations 67 (2)
Minority interests 245 259
Accounting changes - 2
Other 80 5
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
Increase in receivables (94) (483)
Increase in inventories (397) (526)
Increase in prepaid expenses and other current
assets (93) (3)
Increase in accounts payable and accrued
expenses 118 691
Increase (decrease) in taxes, including taxes on
income 113 (93)
Cash paid on early retirement of debt and
interest rate swaps (52) -
Cash paid on long-term aluminum supply contract - (93)
Pension contributions (101) (383)
Net change in noncurrent assets and liabilities (137) (169)
Net change in net assets held for sale 145 -
--------- ---------
CASH PROVIDED FROM CONTINUING OPERATIONS 2,153 1,677
CASH PROVIDED FROM (USED FOR) DISCONTINUED
OPERATIONS 46 (1)
--------- ---------
CASH FROM OPERATIONS 2,199 1,676
--------- ---------

FINANCING ACTIVITIES
Net changes to short-term borrowings 213 5
Common stock issued for stock compensation plans 83 72
Repurchase of common stock (67) (108)
Dividends paid to shareholders (524) (524)
Dividends paid to minority interests (119) (75)
Net change in commercial paper 630 282
Additions to long-term debt 180 278
Payments on long-term debt (1,921) (254)
--------- ---------
CASH USED FOR FINANCING ACTIVITIES (1,525) (324)
--------- ---------

INVESTING ACTIVITIES
Capital expenditures (1,143) (2,138)
Acquisition of AFL minority interest - (176)
Acquisitions, net of cash acquired (2) (262)
Proceeds from the sale of assets 392 505
Sale of investments - 1,081
Change in short-term investments and restricted
cash 30 (8)
Other (79) (37)
--------- ---------
CASH USED FOR INVESTING ACTIVITIES (802) (1,035)
--------- ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH 9 (12)
--------- ---------
Net change in cash and cash equivalents (119) 305
Cash and cash equivalents at beginning of year 576 457
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 457 $ 762
========= =========

(c) Prior periods financial statements have been reclassified to
reflect the imaging and graphic communications business in
discontinued operations in 2005.



Alcoa and subsidiaries
Segment Information (unaudited) (a)
(in millions, except metric ton amounts and realized prices)


Consolidated Third-
Party Revenues: 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
------ ------- ------ ------ ------ ------ --------
Alumina $ 536 $ 1,975 $ 505 $ 533 $ 531 $ 561 $ 2,130
Primary Metals 1,039 3,806 1,089 1,124 1,204 1,281 4,698
Flat-Rolled
Products 1,502 5,962 1,655 1,763 1,679 1,739 6,836
Extruded and End
Products 976 3,974 1,037 1,153 1,092 1,022 4,304
Engineered
Solutions 1,159 4,603 1,241 1,286 1,246 1,275 5,048
Packaging and
Consumer (3) 764 2,923 708 827 806 798 3,139
----------------------------------------------------------------------
Total (1) $5,976 $23,243 $6,235 $6,686 $6,558 $6,676 $26,155
======================================================================

Consolidated
Intersegment
Revenues: 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
------ ------- ------ ------ ------ ------ --------
Alumina $ 390 $ 1,418 $ 393 $ 439 $ 424 $ 451 $ 1,707
Primary Metals 1,129 4,335 1,303 1,215 1,108 1,182 4,808
Flat-Rolled
Products 18 89 34 36 29 29 128
Extruded and End
Products 13 54 14 19 14 17 64
Engineered
Solutions - - - - - - -
Packaging and
Consumer - - - - - - -
----------------------------------------------------------------------
Total $1,550 $ 5,896 $1,744 $1,709 $1,575 $1,679 $ 6,707
======================================================================

Consolidated Third-
Party Shipments
(Kmt): 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
------ ------- ------ ------ ------ ------ --------
Alumina 2,213 8,062 1,923 1,951 2,017 1,966 7,857
Primary Metals 482 1,882 487 520 590 557 2,154
Flat-Rolled
Products 493 2,046 509 560 543 544 2,156
Extruded and End
Products 210 895 221 237 224 212 894
Engineered
Solutions 35 133 39 38 36 35 148
Packaging and
Consumer 46 164 34 46 31 40 151
----------------------------------------------------------------------
Total Aluminum 1,266 5,120 1,290 1,401 1,424 1,388 5,503
======================================================================

Alcoa's average
realized price-
Primary (mt) $1,942 $ 1,867 $2,042 $1,977 $1,963 $2,177 $ 2,044
======================================================================

After-Tax Operating
Income (ATOI): 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
------ ------- ------ ------ ------ ------ --------
Alumina $ 177 $ 632 $ 161 $ 182 $ 156 $ 183 $ 682
Primary Metals 198 808 225 187 168 242 822
Flat-Rolled
Products 59 246 75 70 81 62 288
Extruded and End
Products (2) (2) 73 10 20 23 (3) 50
Engineered
Solutions 41 211 59 60 32 45 196
Packaging and
Consumer 30 141 16 41 28 20 105
----------------------------------------------------------------------
Total $ 503 $ 2,111 $ 546 $ 560 $ 488 $ 549 $ 2,143
======================================================================

Reconciliation of
ATOI to
consolidated net
income (3): 4Q04 2004 1Q05 2Q05 3Q05 4Q05 2005
------ ------- ------ ------ ------ ------ --------
Total ATOI $ 503 $ 2,111 $ 546 $ 560 $ 488 $ 549 $ 2,143
Impact of
intersegment
profit
adjustments 18 52 17 (16) (2) 38 37
Unallocated
amounts (net of
tax):
Interest income 6 26 7 9 12 14 42
Interest
expense (46) (176) (51) (56) (62) (51) (220)
Minority
interests (48) (245) (60) (60) (59) (80) (259)
Corporate
expense (78) (283) (69) (73) (82) (88) (312)
Restructuring
and other
charges (1) 23 (30) (172) (5) (19) (226)
Discontinued
operations (72) (67) (7) (6) (1) 16 2
Other (14) (131) (93) 274 - (155) 26
----------------------------------------------------------------------
Consolidated net
income $ 268 $ 1,310 $ 260 $ 460 $ 289 $ 224 $ 1,233
======================================================================

(a) Segment information for all prior periods has been reclassified to
reflect the change in segments due to a global realignment within
the company, effective January 2005.

(1) The difference between the segment total and consolidated
third-party revenues is in Corporate.

(2) The first quarter 2005 ATOI amount has been modified to correct a
tax adjustment that should have been reflected in Corporate.

(3) Prior periods segment information has been reclassified to reflect
the imaging and graphic communications business in discontinued
operations in 2005.



Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions)


Return on Capital
Trailing
Four Quarters
--------------------
Net Income $ 1,233

Minority Interest 259

Interest Expense 261
--------------------
(After taxes of 23%)

Numerator (Sum Total) $ 1,753

Russia Net Income Impact 69
--------------------

Adjusted Net Income $ 1,822

Average Balances (1)
Short Term Borrowings $ 1,112
Long Term Borrowings 5,312
Preferred Equity 55
Minority Interest 1,391
Common Equity 13,282
--------------------

Denominator (Sum Total) $21,152
--------------------

Capital projects in progress &
Russia Capital Base (1,913)
--------------------

Adjusted Capital Base $19,239

Return on Capital 9.5%

(1) Calculated as (December 2004 ending balance + December 2005 ending
balance) divided by 2.