Statement of Consolidated Cash Flows Alcoa and subsidiaries (in millions) For the year ended December 31 2004 2003 2002 Cash from Operations Net income $ 1,310 $ 938 $ 420 Adjustments to reconcile net income to cash from operations: Depreciation, depletion, and amortization 1,212 1,184 1,104 Change in deferred income taxes (95) 128 (167 ) Equity income, net of dividends (54) (94) (40) Noncash restructuring and other charges (D) (21) (27) 414 Net gain on early retirement of debt and interest rate swap settl e m ents (K) (58) — — Gains from investing activities—sale of assets (O) (44) (37) (52) Provision for doubtful accounts 24 11 16 Loss from discontinued operations (B) 92 70 132 Accounting changes (C and E) — 47 (34) Minority interests 245 238 172 Other 80 116 8 Changes in assets and liabilities, excluding effects of acquisition s and divestitures: (Increase) reduction in receivables (95) (144) 380 (Increase) reduction in inventories (395) 94 148 (Increase) reduction in prepaid expenses and other current a ss e ts (94) 58 38 Increase (reduction) in accounts payable and accrued expens es 122 (164) (256 ) Increase (reduction) in taxes, including taxes on income 113 (247) (199 ) Cash paid on early retirement of debt and interest rate swap se ttlements (K) (52) — — Cash received on long-term aluminum supply contract — 440 — Net change in noncurrent assets and liabilities (240) (256) (182 ) Reduction in net assets held for sale 148 81 33 Cash provided from continuing operations 2,198 2,436 1,935 Cash provided from (used for) discontinued operat ions 1 (2) (91) Cash from operations 2,199 2,434 1,844 Financing Activities Net changes to short-term borrowings 213 12 (384 ) Common stock issued for stock compensation plans 83 98 55 Repurchase of common stock (67) — (224 ) Dividends paid to shareholders (524) (516) (509 ) Dividends paid to minority interests (119) (207) (197 ) Net change in commercial paper 630 (665) 445 Additions to long-term debt 180 387 1,636 Payments on long-term debt (1,921) (823) (231 ) Cash (used for) provided from financing activities (1,525) (1,714) 591 Investing Activities Capital expenditures (1,142) (863) (1,264 ) Capital expenditures of discontinued operations (1) (7) ( 9) Acquisitions, net of cash acquired (F and P) (2) (9) (1,253 ) Proceeds from the sale of assets 392 164 127 Additions to investments (69) (11) (112 ) Sale of investments (F) — 129 — Changes in short-term investments 30 19 (54) Changes in minority interests (5) — 26 Other (5) 52 (8) Cash used for investing activities (802) (526) (2,547 ) Effect of exchange rate changes on cash 9 38 (56) Net change in cash and cash equivalents (119) 232 (168 ) Cash and cash equivalents at beginning of year 576 344 512 Cash and cash equivalents at end of year $ 457 $ 576 $ 344 The accompanying notes are an integral part of the consolidated financial statements. 43