This summary is based on the second quarter fiscal 2007 earnings call conducted by Alcoa Inc. (AA: chart) on July 9, 2007.

Chief Financial Officer: Chuck McLane

Chief Executive Officer: Alain Belda

Investor Relations: Tony Thene

Key Investors Issues

- Earnings per share were 81 cents compared to 85 cents in the prior year.
- Quarterly revenue grew 2% sequentially to $8.1 billion.
- For the first two quarters of fiscal 2007, Alcoa reported earnings of $1.38 billion, up 2.2% from prior year.

Second Quarter Fiscal 2007 Financial Highlights

In the second quarter, the firm continued to deliver outstanding results, achieving the second-highest earnings in the company’s history.

Income from continuing operations was $716 million, or 81 cents per share. Included in the results was a favorable after-tax restructuring adjustment of $21 million, or 2 cents per share. This adjustment was generated as a result of completing the soft alloy extrusion JV with Sapa. The quarterly results also included 2 cents per share in after-tax transaction costs stemming from the outstanding offer from Alcan. It is worth noting that the strong results were achieved despite the $36 million or 4 cents per share of curtailment costs at Tennessee and Rockdale.

Quarterly revenue of $8.1 billion, an all-time high, was up 2% sequentially and 3.5% higher than the year-ago quarter.

The company completed the JV for soft alloy extrusions on June 1st. Once the firm did that, those revenues ceased to be included in the consolidated results. If the company was to include those in its consolidated results, the revenues would have been $8.3 billion.

Cost of goods sold as a percent of sales increased slightly on a sequential basis.

Excluding the primary business curtailment and start-up costs, the underlying improvement was driven by productivity. SG&A costs as a percent of sales remained flat at 4.5%, though they included $26 million of transaction costs. Interest expense increased due to slightly higher debt levels.

Restructuring charges were a credit of $57 million.

The main driver was the completion of the Sapa joint venture as the asset valuations were higher than originally anticipated. The corresponding tax rate for the transaction was also higher than originally forecast. The original net impairment that the firm took last year was therefore reduced accordingly. The net impact to after-tax earnings from restructuring was $21 million, or 2 cents per share.

EBITDA margin for the quarter increased to 10% compared to 8.8% in the prior year quarter.

Full year 2006 EBITDA margin of 7.6% increased to 8.8% for the first half of 2007. Looking forward to the third quarter, the firm expects productivity improvements to offset any cost inflation and closures is expected to experience its normal seasonal decline.

Alcoa continued to build on a string of solid cash generation quarters with cash from operations of $1.35 billion, up $650 million year over year and $822 million sequentially.

Working capital decreased $474 million in the quarter, driven mainly by improvements in inventories and payables. In terms of days of working capital, the firm reduced 2.8 days year over year and 2.6 days sequentially.

Capital expenditures for the quarter were $891 million.