Alcoa Announces Highest Quarterly Income and Revenue in Company History

Highlights:

-- Second quarter 2006 income from continuing operations of $752 million, or $0.86 per share.

-- Results include negative impact of previously announced charges of $0.04 per share for labor contract and strike preparation.

-- Quarterly revenues of nearly $8 billion.

-- First-half 2006 net income of $1.35 billion was higher than full-year results for every year in Company's history except fiscal 2000.

-- Record ATOI in Alumina and Primary Metals, up 15 and 10 percent, sequentially.

-- Engineered Solutions ATOI a record $100 million, up 64 percent from year ago quarter, and Flat Rolled Products ATOI up 20% sequentially.

-- Annualized ROC year-to-date stood at 15.4 percent.

-- Debt-to-capital ratio down slightly to 32.0 percent, within target range while making strategic investments in growth.

Alcoa (NYSE:AA) today announced second quarter 2006 income fromcontinuing operations of $752 million, or $0.86 per diluted share, thehighest quarterly profit in the company's more than 115-year history.

Income from continuing operations of $752 million, or $0.86, was52 percent better than the $496 million, or $0.56, in the secondquarter of 2005, and 22 percent higher than the $615 million, or$0.70, in the previous quarter.

Net income for the quarter was a record $744 million, or $0.85, 62percent higher than the $460 million, or $0.52, in the second quarterof 2005, and 22 percent higher than the $608 million, or $0.69, in theprevious quarter.

Included in the second quarter results are previously announcedafter-tax charges of $35 million, or $0.04 per share, associated withratification of a U.S. labor contract and costs to prepare for apotential work stoppage.

For the first half of 2006, income from continuing operations was$1.37 billion, up 79 percent from last year's $764 million first-halfresults. First half 2006 net income of $1.35 billion was higher thanthe full-year results of all but one year in the company's history.

Revenues for the quarter increased 10 percent sequentially to$7.96 billion, the highest quarterly sales in the company's history,as each of the company's six global business segments achieved highervolumes. Results were driven by higher LME prices and strong marketdemand in the aerospace, building and construction, commercial vehicleand can sheet markets. Compared to the year-ago quarter, sales havegrown 19 percent.

"Alcoans have generated another record quarter - delivering todaywhile we continue building for the future," said Alain Belda, AlcoaChairman and CEO. "By creating solutions for our customers andcontinuously improving productivity, we have driven record top andbottom line performances.

"We are consistently delivering returns well in excess of the costof capital, generating cash to fund strategic growth projects, andkeeping our balance sheet strong," added Belda.

Balance Sheet and Growth Projects

In the quarter, capital expenditures were $729 million, 64 percentof which was devoted to growth projects designed to captureopportunities in global aluminum consumption, which is expected todouble by 2020. Year to date, the company's capital expenditures standat $1.32 billion, primarily dedicated to growth projects such as the341,000 mtpy Alcoa Fjardaal smelter in Iceland, the Mosjoen anodeplant in Norway, and the Pinjarra alumina refinery upgrade inAustralia.

Cash from operations for the quarter was $699 million, a $912million improvement from the previous quarter, and $315 million betterthan the second quarter of 2005.

Days of working capital improved three days in the quartercompared to the second quarter of last year. Working capital dollarsincreased from the previous quarter due to the building of strategicinventories in the event of a work stoppage, higher prices, andcontinued strong markets. The debt-to-capital ratio declined slightlyto 32.0 percent at the end of the quarter, within the Company's targetrange and while continuing capital investments in strategic growthprojects around the world.

During the quarter, Alcoa took several additional strides in itsstrategic growth program, including: the acquisition of a 70% stake ina brazing sheet facility in Kunshan, China to serve the automotivemarket; the signing of an MOU with Vinacomin for a possible bauxiteand alumina refinery joint venture in the Dak Nong Province ofVietnam; the opening of the Company's first plant in Bulgaria toproduce consumer packaging products; and a sales operation in SouthAfrica to serve the aluminum wheels market. During the quarter, theCompany also announced its plan to divest its Home Exteriors businessto free up resources to invest in strategic growth opportunities.

The Company's year-to-date annualized return on capital (ROC)stood at 15.4 percent.

Innovation/New Products and Sustainability

Alcoa continued its leadership position in applying technologiesto generate innovation on behalf of customers and the company.Examples this quarter included: an agreement with Nike to supplyaluminum for two new lines of baseball bats globally; the introductionof Reynobond with Kevlar, a new hurricane-resistant architecturalpanel system; and a new natural media filtration system as a low-costenvironmental control solution that saves the company millions.

During the quarter, Alcoa continued its leadership position insustainability. The company was recognized for its stewardship ofrivers by the U.S. Hydropower organization; and donated 20 Million ISK(US$280,000) to help create national parks in Iceland, includingEurope's largest conservation area. The Alcoa Foundation invested inan innovative land conservation program in the Palos Verdes peninsula.And the Company launched a new sustainability report and websitedetailing the company's commitment to sustainable development.

Segment and Other Results

Alumina -- After-tax operating income ("ATOI") was $278 million,up 15% over the previous quarter. Higher pricing was partially offsetby the effect of a weaker dollar. Additionally, alumina production forthe quarter was a record 3,746 thousand metric tons (kmt), up by 44kmtfrom the previous quarter.

Primary Metals - Segment ATOI was $489 million, up 10% over theprior quarter. The ATOI increase was driven by higher LME prices andpremiums, partially offset by higher energy, a weaker dollar, andstrike preparation costs. Third party realized metal prices increased$194 per ton, or 8%, to $2,728 per ton. Primary metal production forthe quarter increased 15 kmt to 882 kmt, due to the completion of theAlumar, Brazil expansion and partial return to service in Portland,Australia. The Company purchased roughly 145 kmt of primary metal forinternal use as part of its strategy to sell value-added products.

Flat Rolled Products - ATOI for the segment was $79 million, up20% over the prior quarter. Higher volumes in can sheet, aerospace,commercial transportation and common alloy distribution, coupled withlower natural gas prices, more than offset strike preparation andrelated costs.

Engineered Solutions -- Segment ATOI rose $17 million to anall-time high of $100 million, 64% above the prior year quarter and20% higher than the record performance delivered in the sequentialquarter. Strong demand in the aerospace, commercial vehicle, andindustrial markets, continued productivity gains and price increasesled to the improved results.

Packaging and Consumer -- Segment ATOI was $37 million, anincrease of $29 million over the previous quarter. Higher volume dueto seasonal strength, improved pricing, and productivity gains led tothe improved results.

Extruded and End Products -- ATOI improved $20 million from theprior quarter and all businesses achieved higher revenues includingthe soft alloy business which saw increased demand in Europe andproductivity advances. Global building and construction and hard alloyextrusion businesses continued their strong performance and alsoimproved profitability.

Alcoa will hold its quarterly conference call at 5:00 PM EasternTime on July 10th 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 closures, fastening systems, precision castings, andelectrical distribution systems for cars and trucks. The company has129,000 employees in 44 countries and has been named one of the topsustainable corporations in the world at the World Economic Forum inDavos, Switzerland. More information can be found 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 mitigate impacts from risingenergy and raw materials costs, or other cost inflation; (d) Alcoa'sinability to achieve the level of cost savings, productivityimprovements or earnings or revenue growth anticipated by management;(e) Alcoa's inability to complete its expansion projects andintegration of acquired facilities as planned and by targetedcompletion dates, including the integration of its recently acquiredRussian facilities; (f) unfavorable changes in laws, governmentalregulations or policies, currency exchange rates or competitivefactors in the countries in which Alcoa operates; (g) significantlegal proceedings or investigations adverse to Alcoa, includingenvironmental, product liability, safety and health and other claims;and (h) the other risk factors summarized in Alcoa's Form 10-K for theyear ended December 31, 2005, Form 10-Q for the quarter ended March31, 2006 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
June 30 March 31 June 30
2005(a) 2006 2006
---- ---- ----
Sales $6,693 $7,244 $7,959

Cost of goods sold 5,408 5,459 5,967
Selling, general administrative,
and other expenses 348 369 368
Research and development expenses 47 48 51
Provision for depreciation,
depletion, and amortization 314 308 326
Restructuring and other charges 216 1 (9)
Interest expense 87 92 98
Other income, net (347) (35) (61)
------ ------ ------
Total costs and expenses 6,073 6,242 6,740

Income from continuing operations
before taxes on income 620 1,002 1,219
Provision for taxes on income 64 282 343
------ ------ ------
Income from continuing operations
before minority interests' share 556 720 876
Less: Minority interests' share 60 105 124
------ ------ ------

Income from continuing operations 496 615 752

Loss from discontinued operations (36) (7) (8)
------ ------ ------

NET INCOME $ 460 $ 608 $ 744
====== ====== ======

Earnings (loss) per common share:
Basic:
Income from continuing
operations $ .57 $ .71 $ .86
Loss from discontinued
operations (.04) (.01) (.01)
------ ------ ------
Net income $ .53 $ .70 $ .85
====== ====== ======

Diluted:
Income from continuing
operations $ .56 $ .70 $ .86
Loss from discontinued
operations (.04) (.01) (.01)
------ ------ ------
Net income $ .52 $ .69 $ .85
====== ====== ======

Average number of shares used to
compute:
Basic earnings per common
share 872,149,447 870,560,769 869,811,164
Diluted earnings per common
share 877,950,254 875,971,920 877,005,617

Shipments of aluminum products
(metric tons) 1,400,000 1,359,000 1,410,000

(a) Prior periods financial statements have been reclassified to
reflect the Hawesville, KY automotive casting facility in
discontinued operations in 2006.



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

Six months ended
June 30 June 30
2005(a) 2006
------- ----
Sales $12,914 $15,203

Cost of goods sold 10,341 11,426
Selling, general administrative, and other
expenses 673 737
Research and development expenses 93 99
Provision for depreciation, depletion, and
amortization 626 634
Restructuring and other charges 261 (8)
Interest expense 165 190
Other income, net (383) (96)
------- -------
Total costs and expenses 11,776 12,982

Income from continuing operations before taxes
on income 1,138 2,221
Provision for taxes on income 254 625
------- -------
Income from continuing operations before
minority interests' share 884 1,596
Less: Minority interests' share 120 229
------- -------

Income from continuing operations 764 1,367

Loss from discontinued operations (44) (15)
------- -------

NET INCOME $ 720 $ 1,352
======= =======

Earnings (loss) per common share:
Basic:
Income from continuing operations $ .88 $ 1.57
Loss from discontinued operations (.05) (.02)
------- -------
Net income $ .83 $ 1.55
======= =======

Diluted:
Income from continuing operations $ .87 $ 1.56
Loss from discontinued operations (.05) (.02)
------- -------
Net income $ .82 $ 1.54
======= =======

Average number of shares used to compute:
Basic earnings per common share 871,817,999 870,195,464
Diluted earnings per common share 878,211,268 876,595,985

Common stock outstanding at the end of the
period 872,246,965 869,315,328

Shipments of aluminum products (metric tons) 2,689,000 2,769,000

(a) Prior periods financial statements have been reclassified to
reflect the Hawesville, KY automotive casting facility in
discontinued operations in 2006.



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

December 31 June 30
2005(b) 2006
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 762 $ 453
Receivables from customers, less allowances:
$80 in 2005 and $85 in 2006 2,914 3,625
Other receivables 427 370
Inventories 3,446 4,087
Fair value of derivative contracts 520 345
Prepaid expenses and other current assets 713 989
------- -------
Total current assets 8,782 9,869
------- -------

Properties, plants and equipment, at cost 26,944 28,387
Less: accumulated depreciation, depletion and
amortization 13,787 14,352
------- -------
Net properties, plants and equipment 13,157 14,035
------- -------
Goodwill 6,249 6,296
Investments 1,370 1,411
Other assets 4,090 4,132
Assets held for sale 48 28
------- -------
Total assets $33,696 $35,771
======= =======

LIABILITIES
Current liabilities:
Short-term borrowings $ 300 $ 361
Commercial paper 912 1,898
Accounts payable, trade 2,659 2,822
Accrued compensation and retirement costs 1,102 1,018
Taxes, including taxes on income 874 947
Other current liabilities 1,460 1,100
Long-term debt due within one year 58 62
------- -------
Total current liabilities 7,365 8,208
------- -------
Long-term debt, less amount due within one
year 5,279 5,158
Accrued pension benefits 1,500 1,464
Accrued postretirement benefits 2,105 2,111
Other noncurrent liabilities and deferred
credits 1,823 2,098
Deferred income taxes 875 833
Liabilities of operations held for sale 11 5
------- -------
Total liabilities 18,958 19,877
------- -------

MINORITY INTERESTS 1,365 1,474
------- -------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock 55 55
Common stock 925 925
Additional capital 5,720 5,807
Retained earnings 9,345 10,431
Treasury stock, at cost (1,899) (1,952)
Accumulated other comprehensive loss (773) (846)
------- -------
Total shareholders' equity 13,373 14,420
------- -------
Total liabilities and equity $33,696 $35,771
======= =======

(b) Prior periods financial statements have been reclassified to
reflect the Hawesville, KY automotive casting facility in
discontinued operations in 2006.



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

Six months ended
June 30
2005(c) 2006
------- ----
CASH FROM OPERATIONS
Net income $ 720 $1,352
Adjustments to reconcile net income to cash from
operations:
Depreciation, depletion, and amortization 627 634
Deferred income taxes (102) (3)
Equity loss (income), net of dividends 64 (42)
Restructuring and other charges 261 (8)
Gains from investing activities-sale of assets (342) (8)
Provision for doubtful accounts 10 11
Loss from discontinued operations 44 15
Minority interests 120 229
Stock-based compensation 12 50
Other (59) (66)
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
Increase in receivables (656) (525)
Increase in inventories (472) (559)
Increase in prepaid expenses and other current
assets (25) (130)
Increase (decrease) in accounts payable and
accrued expenses 89 (374)
Increase in taxes, including taxes on income 12 29
Cash paid on long-term aluminum supply contract (93) -
Pension contributions (46) (102)
Excess tax benefits from share-based payment
arrangements - (15)
Net change in noncurrent assets and liabilities (21) -
------ ------
CASH PROVIDED FROM CONTINUING OPERATIONS 143 488
CASH PROVIDED FROM (USED FOR) DISCONTINUED
OPERATIONS 2 (2)
------ ------
CASH FROM OPERATIONS 145 486
------ ------

FINANCING ACTIVITIES
Net changes to short-term borrowings (9) 54
Common stock issued for stock compensation plans 17 136
Repurchase of common stock - (210)
Dividends paid to shareholders (263) (262)
Dividends paid to minority interests (72) (200)
Net change in commercial paper 475 986
Additions to long-term debt 200 8
Payments on long-term debt (47) (27)
Excess tax benefits from share-based payment
arrangements - 15
Other - 40
------ ------
CASH PROVIDED FROM FINANCING ACTIVITIES 301 540
------ ------

INVESTING ACTIVITIES
Capital expenditures (829) (1,321)
Capital expenditures of discontinued operations (5) -
Acquisition of minority interests (176) (1)
Acquisitions, net of cash acquired (257) 8
Sale of investments 1,077 7
Change in short-term investments and restricted
cash (228) (21)
Additions to investments (10) (44)
Other (9) 20
------ ------
CASH USED FOR INVESTING ACTIVITIES (437) (1,352)
------ ------

EFFECT OF EXCHANGE RATE CHANGES ON CASH (9) 17
------ ------
Net change in cash and cash equivalents - (309)
Cash and cash equivalents at beginning of year 457 762
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 457 $ 453
====== ======

(c) Prior period financial statements have been reclassified to
reflect the Hawesville, KY automotive casting facility in
discontinued operations in 2006.



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

1Q05 2Q05 3Q05 4Q05 2005 1Q06 2Q06
---- ---- ---- ---- ---- ---- ----
Alumina:
Third-party
shipments (Kmt) 1,923 1,951 2,017 1,966 7,857 2,023 2,108
Alumina production
(Kmt) 3,583 3,621 3,688 3,706 14,598 3,702 3,746
Third-party sales $505 $533 $531 $561 $2,130 $628 $713
Intersegment sales $393 $439 $424 $451 $1,707 $555 $515
ATOI $161 $182 $156 $183 $682 $242 $278
Depreciation,
depletion and
amortization $41 $43 $44 $44 $172 $43 $46
Income taxes $61 $66 $47 $72 $246 $93 $112
Equity (loss) income $(1) $- $- $1 $- $(1) $-
======================================================================

Primary Metals:
Third-party realized
price - aluminum $2,042 $1,977 $1,963 $2,177 $2,044 $2,534 $2,728
Third-party
shipments (Kmt) 487 520 590 557 2,154 488 508
Aluminum production
(Kmt) 851 899 904 900 3,554 867 882
Third-party sales $1,089 $1,124 $1,204 $1,281 $4,698 $1,408 $1,589
Intersegment sales $1,303 $1,215 $1,108 $1,182 $4,808 $1,521 $1,696
ATOI $225 $187 $168 $242 $822 $445 $489
Depreciation,
depletion and
amortization $90 $90 $93 $95 $368 $96 $102
Income taxes $92 $75 $50 $90 $307 $197 $209
Equity income (loss) $18 $(76) $20 $26 $(12) $20 $28
======================================================================

Flat-Rolled Products:
Third-party
shipments (Kmt) 509 560 543 544 2,156 562 579
Third-party sales $1,655 $1,763 $1,679 $1,739 $6,836 $1,940 $2,115
Intersegment sales $34 $36 $29 $29 $128 $49 $66
ATOI $75 $70 $81 $62 $288 $66 $79
Depreciation,
depletion and
amortization $52 $54 $57 $54 $217 $50 $57
Income taxes $24 $27 $30 $30 $111 $26 $25
Equity income (loss) $- $- $- $- $- $- $( 1)
======================================================================

Extruded and End
Products:
Third-party
shipments (Kmt) 221 237 224 212 894 232 241
Third-party sales $1,037 $1,153 $1,092 $1,022 $4,304 $1,170 $1,328
Intersegment sales $14 $19 $14 $17 $64 $23 $31
ATOI $10 $20 $23 $(3) $50 $- $20
Depreciation,
depletion and
amortization(1) $31 $32 $31 $32 $126 $30 $31
Income taxes $(2) $18 $10 $2 $28 $2 $9
======================================================================

Engineered Solutions:
Third-party
shipments (Kmt) 38 37 36 34 145 37 38
Third-party sales $1,237 $1,282 $1,242 $1,271 $5,032 $1,360 $1,405
ATOI $61 $61 $34 $47 $203 $83 $100
Depreciation,
depletion and
amortization $47 $45 $42 $42 $176 $40 $42
Income taxes $26 $30 $23 $10 $89 $37 $44
Equity income $1 $- $- $- $1 $- $-
======================================================================

Packaging and Consumer:
Third-party shipments
(Kmt) 34 46 31 40 151 40 44
Third-party sales $708 $827 $806 $798 $3,139 $749 $834
ATOI $16 $41 $28 $20 $105 $8 $37
Depreciation,
depletion and
amortization(1) $32 $31 $31 $32 $126 $31 $31
Income taxes $10 $18 $14 $8 $50 $5 $9
Equity income $1 $- $- $- $1 $- $-
======================================================================

(1) Segment depreciation, depletion and amortization has been adjusted
from the previously reported annual amounts to reflect the
movement of certain amounts to Corporate.



Alcoa and subsidiaries
Segment Information (unaudited), continued


Reconciliation of ATOI to
consolidated net income: 1Q05 2Q05 3Q05 4Q05 2005 1Q06 2Q06
---- ---- ---- ---- ---- ---- ----
Total ATOI $548 $561 $490 $551 $2,150 $844 $1,003
Impact of LIFO and
intersegment profit
adjustments(2) (2) (18) (23) (19) (62) 24 13
Unallocated amounts
(net of tax):
Interest income 7 9 12 14 42 11 10
Interest expense (51) (56) (62) (51) (220) (60) (63)
Minority interests (60) (60) (59) (80) (259) (105) (124)
Corporate expense (69) (73) (82) (88) (312) (89) (82)
Restructuring and
other charges (30) (144) (5) (18) (197) (1) 6
Discontinued
operations (8) (36) (3) 14 (33) (7) (8)
Other(2) (75) 277 21 (99) 124 (9) (11)
----------------------------------------------------------------------
Consolidated net income $260 $460 $289 $224 $1,233 $608 $744
======================================================================

Prior periods segment information has been reclassified to reflect
the movement of the Hawesville, KY automotive casting facility to
discontinued operations in 2006.

The difference between total segment third-party sales and
consolidated third-party sales is in Corporate.

(2) Prior periods Corporate LIFO expense has been reclassified from
"Other" to combine the total impact of inventory related items.



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

Return on Capital,
Return on Capital Excluding Growth
Bloomberg(1) Annualized(2) Investments
------------ -------------
Net income $ 1,865 $ 2,704 Net income $ 1,865

Minority Minority
interests 368 458 interests 368

Interest expense 268 273 Interest expense 268
(after tax) ------- ------- (after tax) -------

Numerator (sum Numerator (sum
total) $ 2,501 $ 3,435 total) $ 2,501

Russia and Bohai
net loss 78

Adjusted net
income $ 2,579

Average Balances Average
Balances(1)
Short-term Short-term
borrowings $ 309 $ 331 borrowings $ 309
Short-term debt 55 60 Short-term debt 55
Commercial paper 1,501 1,405 Commercial paper 1,501
Long-term debt 5,335 5,219 Long-term debt 5,335
Preferred stock 55 55 Preferred stock 55
Minority Minority
interests 1,340 1,419 interests 1,340
Common equity(3) 13,834 13,842 Common equity(3) 13,834
------- ------- -------
Denominator (sum Denominator (sum
total) $22,429 $22,331 total) $22,429
------- ------- -------
Capital projects
in progress and
Russia and Bohai
capital base (2,330)
-------
Adjusted capital
base $20,099

Return on
capital,
excluding growth
Return on Capital 11.2% 15.4% investments 12.8%

Return on capital, excluding growth investments is a non-GAAP
financial measure. Management believes that this measure is meaningful
to investors because it provides greater insight with respect to the
underlying operating performance of the company's productive assets.
The company has significant growth investments underway in its
upstream and downstream businesses, as previously noted, with expected
completion dates over the next several years. As these investments
generally require a period of time before they are productive,
management believes that a return on capital measure excluding these
growth investments is more representative of current operating
performance.

(1) The Bloomberg Methodology calculates ROC based on trailing four
quarters. Average balances are calculated as (June 2005 ending
balance + June 2006 ending balance) divided by 2.
(2) The Annualized Methodology numerator amounts are calculated using
the first six months of 2006 balances and multiplying by 2.
Average balances are calculated as (June 2006 ending balance +
December 2005 ending balance) divided by 2.
(3) Calculated as total shareholders' equity, less preferred stock.



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


Days of Working Capital
June 30 December 31 June 30
2005 2005 2006

Receivables from customers, less
allowances $3,195 $2,914 $3,625
Add: Inventories 3,462 3,446 4,087
Less: Accounts payable, trade 2,339 2,659 2,822
------ ------ ------
Working Capital $4,318 $3,701 $4,890

Sales 6,693 6,666 7,959

Days of Working Capital 58.7 51.1 55.9

Days of Working Capital = Working Capital divided by (Sales/number of
days in the quarter)