Company Announces $200 million Stock Repurchase Program
PITTSBURGH--(BUSINESS WIRE)--
Alcoa Corporation (NYSE: AA):
-
Net loss of $41 million, or $0.22 per share, includes previously
announced actions on pension and other postemployment benefits (OPEB)
-
Excluding special items, adjusted net income of $119 million, or $0.63
per share
- $795 million of adjusted earnings before interest, tax, depreciation,
and amortization (EBITDA) excluding special items
-
Revenue of $3.4 billion
- $1.0 billion cash balance and $1.8 billion of debt, for net debt of
$0.8 billion, as of September 30, 2018
-
Continuing to reduce complexity, drive returns, and strengthen the
balance sheet; used $194 million in available cash in third-quarter to
reduce net pension liability and debt; pension and OPEB obligations
now at $2.2 billion, down from $3.5 billion at year-end 2017
-
Tightened the range for full-year 2018 projection of adjusted EBITDA
excluding special items to between $3.1 billion and $3.2 billion, from
the prior quarter’s estimate of $3.0 billion to $3.2 billion
-
Projecting full-year global deficits for both alumina and aluminum in
2018; surplus for bauxite
-
Launched formal consultation process for collective dismissals of
employees at two Spanish smelters
-
Strengthening organization to support operator-centric approach
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|
|
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|
|
|
|
|
|
|
M, except per share amounts |
|
|
| 3Q17 |
|
|
| 2Q18 |
|
|
| 3Q18 |
|
Revenue
|
|
|
|
$
|
2,964
|
|
|
|
$
|
3,579
|
|
|
| $ | 3,390 | |
|
Net income (loss) attributable to Alcoa Corporation
| | | |
$
|
113
| | | |
$
|
75
| | | | $ | (41 | ) |
|
Earnings per share attributable to Alcoa Corporation
|
|
|
|
$
|
0.60
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|
|
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$
|
0.39
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| $ | (0.22 | ) |
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Adjusted net income
| | | |
$
|
135
| | | |
$
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286
| | | | $ | 119 | |
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Adjusted earnings per share
|
|
|
|
$
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0.72
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|
|
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$
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1.52
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|
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| $ | 0.63 |
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Adjusted EBITDA excluding special items2 |
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$
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582
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$
|
904
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| $ | 795 |
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1 | | Based on actual YTD 2018 results; outlook for unpriced sales at
$2,000 LME, $500 API, $0.20 Midwest premium and updated regional
premiums, and currencies. |
| |
|
2 | | On January 1, 2018, Alcoa Corporation adopted guidance issued
by the Financial Accounting Standards Board to the presentation of
net periodic benefit cost related to pension and other
postretirement benefit plans. This guidance requires the
non-service cost components of net periodic benefit cost to be
reported separately from the service cost component in an entity’s
income statement. Additionally, this guidance is required to be
applied retrospectively. Accordingly, previously reported amounts
for Cost of goods sold, Selling, general administrative, and other
expenses, and Other expenses (income), net on Alcoa Corporation’s
consolidated income statement have been recast to reflect these
changes. As a result, previously reported amounts for Adjusted
EBITDA on both a consolidated basis and for each of the Company’s
three segments have been updated to reflect these changes. See the
financial schedules to this release for additional information. |
| |
|
Alcoa Corporation (NYSE: AA), a global leader in bauxite, alumina, and
aluminum products, today reported third quarter 2018 results and
announced a $200 million common stock repurchase program as part of the
Company’s 2018 capital allocation framework.
In the third quarter of 2018, Alcoa also used $194 million in available
cash to further reduce its net pension liability and debt and finished
the quarter with a cash balance of $1.0 billion on September 30, 2018.
This year, the Company has reduced its net pension and OPEB liability to
$2.2 billion as of September 30, down from $3.5 billion at year-end 2017.
“Today’s stock buyback announcement, our smaller net pension and OPEB
liability, and our results since launching Alcoa Corporation nearly two
years ago all point to the success of our strategic priorities,” said
President and Chief Executive Officer Roy Harvey.
“By reducing complexity, driving returns, and strengthening the balance
sheet, we’ve made Alcoa a much stronger company even as commodity
markets remain volatile,” Harvey said. “We’re pleased to announce a
program to return cash to stockholders, and we look forward to improving
our Company further as 2018 comes to an end.”
Alcoa tightened the Company’s projection for full-year adjusted EBITDA
excluding special items to range between $3.1 billion and $3.2 billion.1
The low end of the forecast is $100 million higher than the prior
quarter’s estimate. The updated outlook reflects recent market prices,
including regional premiums, costs of raw materials, energy, and
expected operational performance.
In third quarter 2018, Alcoa reported a net loss of $41 million, or
$0.22 per share, compared to net income of $75 million, or $0.39 per
share, in second quarter 2018. The third quarter results include a
negative impact of $160 million for special items, due primarily to a
$174 million net settlement charge (non-cash) from additional
actions on U.S. pension and OPEB obligations.
Excluding the impact of special items, third quarter 2018 adjusted net
income was $119 million, or $0.63 per share, down 58 percent
sequentially from $286 million, or $1.52 per share.
In third quarter 2018, Alcoa reported $795 million of adjusted EBITDA
excluding special items, down 12 percent from $904 million in second
quarter 2018, primarily due to lower aluminum prices.
Alcoa reported third quarter 2018 revenue of $3.4 billion, down 5
percent sequentially, primarily due to lower realized aluminum prices
and decreased aluminum product shipments, somewhat offset by higher
realized alumina prices and favorable pricing for energy sales.
Cash from operations was $288 million and free cash flow was $206
million; both reflect $100 million in additional contributions made to
certain U.S. defined benefit pension plans in the quarter. Also in the
third quarter of 2018, cash used for financing activities was $280
million, which includes $94 million for the early repayment of the
majority of the remaining outstanding loans from Brazil’s National Bank
for Economic and Social Development, and cash used for investing
activities was $83 million.
Alcoa ended the quarter on September 30 with cash on hand of $1.0
billion and debt of $1.8 billion, for net debt of $0.8 billion. The
Company reported 26 days working capital, a 9-day increase from third
quarter 2017, reflecting higher raw material costs in inventory and
lower days payable outstanding.
Common Stock Repurchase Program
The Company today announced that its Board of Directors authorized a
common stock repurchase program under which Alcoa may purchase up to
$200 million of its outstanding common stock, depending on cash flow
availability, market conditions, and other factors. This program does
not have a predetermined expiration date.
The Company intends to retire the repurchased shares of common stock. As
of September 30, 2018, the Company had 186,490,966 issued and
outstanding shares of common stock.
Market Update
The Company continues to project a full-year 2018 global deficit for
both aluminum and alumina and a surplus for bauxite.
In aluminum, the Company expects a global deficit ranging between 1.0
million and 1.4 million metric tons, down from last quarter’s estimate
of between 1.1 million and 1.5 million metric tons. Global aluminum
demand growth is projected to be between 3.75 and 4.75 percent in 2018,
down from the second quarter estimate of between 4.25 and 5.25 percent,
driven by China.
In alumina, Alcoa is projecting a higher global deficit of between 400
thousand and 1.2 million metric tons, compared to last quarter’s deficit
expectation of between 200 thousand and 1.0 million metric tons.
The global market for bauxite is expected to be in a surplus for full
year 2018 with increased stockpile growth despite higher demand from
China.
Spain Collective Dismissal Process
Alcoa today announced its intention to begin a formal consultation
process for collective dismissals that would affect all employees at its
Avilés and La Coruña aluminum plants in Spain, which are the least
productive within the Alcoa system due to their inherent structural
issues. Avilés employs 317 employees and La Coruña 369. Per Spanish law,
Alcoa will initiate a mandatory 30-day consultation period with the
workers’ representatives to achieve the best possible outcome for the
Company and its workforce.
An analysis of Alcoa’s operations in Spain found that organizational
improvements could be achieved if the Company ceased production at its
Avilés and La Coruña facilities and reorganized production at a single
plant in San Ciprián, which produces both alumina and aluminum.
Organizational Changes
To further support Alcoa’s operations and the Company’s operator-centric
approach, Alcoa announces that, effective November 1, 2018, the
presidents of its Bauxite, Alumina, and Aluminum segments will report to
Harvey.
As of the same date, Tómas Sigurðsson will assume the role of Senior
Vice President, Strategic Alliances. Sigurðsson, who will continue to
report to Harvey, will have primary responsibility for managing and
developing the Company’s key strategic relationships. Sigurðsson will no
longer serve as the Company’s Chief Operating Officer, and the role will
be eliminated.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m. Eastern
Daylight Time (EDT) on Wednesday, October 17, to present third quarter
2018 financial results and discuss the business, the capital allocation
program and market conditions.
The call will be webcast via the Company’s homepage on www.alcoa.com.
Presentation materials for the call will be available for viewing on the
same website at approximately 4:15 p.m. EDT on October 17. Call
information and related details are available under the “Investors”
section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website, www.alcoa.com.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite, alumina, and
aluminum products, and is built on a foundation of strong values and
operating excellence dating back nearly 130 years to the world-changing
discovery that made aluminum an affordable and vital part of modern
life. Since developing the aluminum industry, and throughout our
history, our talented Alcoans have followed on with breakthrough
innovations and best practices that have led to efficiency, safety,
sustainability, and stronger communities wherever we operate.
Forward-Looking Statements
This press release contains statements that relate to future events and
expectations and, as such, constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
“anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,”
“goal,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,”
“sees,” “should,” “targets,” “will,” “would,” or other words of similar
meaning. All statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements of
historical fact, are forward-looking statements, including, without
limitation, forecasts concerning global demand growth for bauxite,
alumina, and aluminum, and supply/demand balances; statements,
projections or forecasts of future or targeted financial results or
operating performance; statements about strategies, outlook, and
business and financial prospects; and statements about return of
capital. These statements reflect beliefs and assumptions that are based
on Alcoa Corporation’s perception of historical trends, current
conditions, and expected future developments, as well as other factors
that management believes are appropriate in the circumstances.
Forward-looking statements are not guarantees of future performance and
are subject to known and unknown risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa Corporation
believes that the expectations reflected in any forward-looking
statements are based on reasonable assumptions, it can give no assurance
that these expectations will be attained and it is possible that actual
results may differ materially from those indicated by these
forward-looking statements due to a variety of risks and uncertainties.
Such risks and uncertainties include, but are not limited to: (a)
material adverse changes in aluminum industry conditions, including
global supply and demand conditions and fluctuations in London Metal
Exchange-based prices and premiums, as applicable, for primary aluminum
and other products, and fluctuations in indexed-based and spot prices
for alumina; (b) deterioration in global economic and financial market
conditions generally; (c) unfavorable changes in the markets served by
Alcoa Corporation; (d) the impact of changes in foreign currency
exchange rates on costs and results; (e) increases in energy costs; (f)
declines in the discount rates used to measure pension liabilities or
lower-than-expected investment returns on pension assets, or unfavorable
changes in laws or regulations that govern pension plan funding; (g) the
inability to achieve improvement in profitability and margins, cost
savings, cash generation, revenue growth, fiscal discipline, or
strengthening of competitiveness and operations anticipated from
operational and productivity improvements, cash sustainability,
technology advancements, and other initiatives; (h) the inability to
realize expected benefits, in each case as planned and by targeted
completion dates, from acquisitions, divestitures, facility closures,
curtailments, restarts, expansions, or joint ventures; (i) political,
economic, trade, and regulatory risks in the countries in which Alcoa
Corporation operates or sells products; (j) labor disputes and work
stoppages; (k) the outcome of contingencies, including legal
proceedings, government or regulatory investigations, and environmental
remediation; (l) the impact of cyberattacks and potential information
technology or data security breaches; and (m) the other risk factors
described in Item 1A of Alcoa Corporation’s Form 10-K for the fiscal
year ended December 31, 2017 and other reports filed by Alcoa
Corporation with the U.S. Securities and Exchange Commission (SEC).
Alcoa Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law. Market
projections are subject to the risks described above and other risks in
the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from Alcoa
Corporation’s consolidated financial information but is not presented in
Alcoa Corporation’s financial statements prepared in accordance with
accounting principles generally accepted in the United States of America
(GAAP). Certain of these data are considered “non-GAAP financial
measures” under SEC regulations. Alcoa Corporation believes that the
presentation of non-GAAP financial measures is useful to investors
because such measures provide both additional information about the
operating performance of Alcoa Corporation and insight on the ability of
Alcoa Corporation to meet its financial obligations by adjusting the
most directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items in
nature, and/or nonoperating expense or income items. The presentation of
non-GAAP financial measures is not intended to be a substitute for, and
should not be considered in isolation from, the financial measures
reported in accordance with GAAP. Reconciliations to the most directly
comparable GAAP financial measures and management’s rationale for the
use of the non-GAAP financial measures can be found in the schedules to
this release.
This release includes a range of forecasted 2018 Adjusted EBITDA for the
Company. Alcoa Corporation has not provided a reconciliation of this
forward-looking non-GAAP financial measure to the most directly
comparable GAAP financial measure for the following reasons. The
Company’s financial results are heavily dependent on market-driven
factors, such as LME-based prices for aluminum, index- and spot-based
prices for alumina, and foreign currency exchange rates. As such, the
Company may experience significant volatility on a daily basis related
to its forecasted Adjusted EBITDA. Management applies estimated
sensitivities, such as those relating to aluminum and alumina prices and
foreign currency exchange rates, to the components that comprise
Adjusted EBITDA. However, a similar analysis cannot be performed
relating to the components necessary to reconcile Adjusted EBITDA to the
most directly comparable GAAP financial measure without unreasonable
effort due to the additional variability and complexity associated with
forecasting such items. Consequently, management believes such
reconciliation would imply a degree of precision that would be confusing
and/or potentially misleading to investors.
|
| |
| Alcoa Corporation and subsidiaries |
| Statement of Consolidated Operations (unaudited) |
| (dollars in millions, except per-share amounts) |
| |
|
| | Quarter ended |
| | September 30, |
| June 30, |
| September 30, |
| | 2017 | | 2018 | | 2018 |
|
Sales
| |
$
|
2,964
| | |
$
|
3,579
| |
$
|
3,390
| |
| | | | | |
|
|
Cost of goods sold (exclusive of expenses below)(1) | | |
2,340
| | | |
2,632
| | |
2,534
| |
|
Selling, general administrative, and other expenses(1) | | |
70
| | | |
64
| | |
58
| |
|
Research and development expenses
| | |
8
| | | |
9
| | |
7
| |
|
Provision for depreciation, depletion, and amortization
| | |
194
| | | |
192
| | |
173
| |
|
Restructuring and other charges
| | |
(10
|
)
| | |
231
| | |
177
| |
|
Interest expense
| | |
26
| | | |
32
| | |
33
| |
|
Other expenses, net(1) | |
| 48 |
| |
| 9 | |
| 2 |
|
|
Total costs and expenses
| | |
2,676
| | | |
3,169
| | |
2,984
| |
| | | | | |
|
|
Income before income taxes
| | |
288
| | | |
410
| | |
406
| |
|
Provision for income taxes
| |
| 119 |
| |
| 180 | |
| 251 |
|
| | | | | |
|
|
Net income
| | |
169
| | | |
230
| | |
155
| |
| | | | | |
|
|
Less: Net income attributable to noncontrolling interest
| |
| 56 |
| |
| 155 | |
| 196 |
|
| | | | | |
|
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA CORPORATION
| | $ | 113 |
| | $ | 75 | | $ | (41 |
)
|
| | | | | |
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON
SHAREHOLDERS:
| | | | | | |
|
Basic:
| | | | | | |
|
Net income (loss)
| |
$
|
0.61
| | |
$
|
0.40
| |
$
|
(0.22
|
)
|
|
Average number of shares
| | |
184,594,233
| | | |
186,398,784
| | |
186,479,038
| |
| | | | | |
|
|
Diluted:
| | | | | | |
|
Net income (loss)
| |
$
|
0.60
| | |
$
|
0.39
| |
$
|
(0.22
|
)
|
|
Average number of shares
| | |
187,155,231
| | | |
188,708,013
| | |
186,479,038
| |
| | | | | | | | | | |
|
| (1) |
|
On January 1, 2018, Alcoa Corporation adopted guidance issued by the
Financial Accounting Standards Board to the presentation of net
periodic benefit cost related to pension and other postretirement
benefit plans. This guidance requires that an entity report the
service cost component of net periodic benefit cost in the same line
item(s) on its income statement as other compensation costs arising
from services rendered by the pertinent employees during a reporting
period. The other components of net periodic benefit cost (see Note
N to the Consolidated Financial Statements included in Part II Item
8 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017) are required to be reported separately from the
service cost component. In other words, these other components may
be aggregated and presented as a separate line item or they may be
reported in existing line items on the income statement other than
such line items that include the service cost component. Previously,
Alcoa Corporation reported all components of net periodic benefit
cost, except for certain settlements, curtailments, and special
termination benefits, in Cost of goods sold (business employees) and
Selling, general administrative, and other expenses (corporate
employees) consistent with the location of other compensation costs
related to the respective employees. The non-service cost components
noted as exceptions are reported in Restructuring and other charges,
as applicable. Upon adoption of this guidance, management began
reporting the non-service cost components of net periodic benefit
cost, except for certain settlements, curtailments, and special
termination benefits that will continue to be reported in
Restructuring and other charges, in Other expenses, net on the
Company’s Statement of Consolidated Operations. For the quarters
ended September 30, 2018 and June 30, 2018, the non-service cost
components reported in Other expenses, net was $32 and $39,
respectively. Additionally, the Statement of Consolidated Operations
for the quarter ended September 30, 2017 was recast to reflect the
reclassification of the non-service cost components of net periodic
benefit cost to Other expenses, net from both Cost of goods sold and
Selling, general administrative, and other expenses. As a result,
for the quarter ended September 30, 2017, Cost of goods sold
decreased by $21 and Other expenses, net changed by $21 from
previously reported amounts (the decrease to Selling, general
administrative, and other expenses was not material).
|
| |
|
|
| |
| Alcoa Corporation and subsidiaries |
| Statement of Consolidated Operations (unaudited), continued |
| (dollars in millions, except per-share amounts) |
| |
|
| | Nine months ended |
| | September 30, |
| | 2017 |
| 2018 |
|
Sales
| |
$
|
8,478
| | |
$
|
10,059
|
| | | |
|
|
Cost of goods sold (exclusive of expenses below)(1) | | |
6,652
| | | |
7,547
|
|
Selling, general administrative, and other expenses(1) | | |
211
| | | |
189
|
|
Research and development expenses
| | |
23
| | | |
24
|
|
Provision for depreciation, depletion, and amortization
| | |
563
| | | |
559
|
|
Restructuring and other charges
| | |
12
| | | |
389
|
|
Interest expense
| | |
77
| | | |
91
|
|
Other (income) expenses, net(1) | |
| (3 |
)
| |
| 32 |
|
Total costs and expenses
| | |
7,535
| | | |
8,831
|
| | | |
|
|
Income before income taxes
| | |
943
| | | |
1,228
|
|
Provision for income taxes
| |
| 328 |
| |
| 569 |
| | | |
|
|
Net income
| | |
615
| | | |
659
|
| | | |
|
|
Less: Net income attributable to noncontrolling interest
| |
| 202 |
| |
| 475 |
| | | |
|
|
NET INCOME ATTRIBUTABLE TO ALCOA CORPORATION
| | $ | 413 |
| | $ | 184 |
| | | |
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON
SHAREHOLDERS:
| | | | |
|
Basic:
| | | | |
|
Net income
| |
$
|
2.24
| | |
$
|
0.99
|
|
Average number of shares
| | |
184,212,161
| | | |
186,259,129
|
| | | |
|
|
Diluted:
| | | | |
|
Net income
| |
$
|
2.21
| | |
$
|
0.97
|
|
Average number of shares
| | |
186,656,542
| | | |
188,655,070
|
| | | |
|
| | | |
|
|
Common stock outstanding at the end of the period
| | |
184,969,328
| | | |
186,490,966
|
| | | | | | |
|
| (1) |
|
On January 1, 2018, Alcoa Corporation adopted guidance issued by the
Financial Accounting Standards Board to the presentation of net
periodic benefit cost related to pension and other postretirement
benefit plans. This guidance requires that an entity report the
service cost component of net periodic benefit cost in the same line
item(s) on its income statement as other compensation costs arising
from services rendered by the pertinent employees during a reporting
period. The other components of net periodic benefit cost (see Note
N to the Consolidated Financial Statements included in Part II Item
8 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017) are required to be reported separately from the
service cost component. In other words, these other components may
be aggregated and presented as a separate line item or they may be
reported in existing line items on the income statement other than
such line items that include the service cost component. Previously,
Alcoa Corporation reported all components of net periodic benefit
cost, except for certain settlements, curtailments, and special
termination benefits, in Cost of goods sold (business employees) and
Selling, general administrative, and other expenses (corporate
employees) consistent with the location of other compensation costs
related to the respective employees. The non-service cost components
noted as exceptions are reported in Restructuring and other charges,
as applicable. Upon adoption of this guidance, management began
reporting the non-service cost components of net periodic benefit
cost, except for certain settlements, curtailments, and special
termination benefits that will continue to be reported in
Restructuring and other charges, in Other (income) expenses, net on
the Company’s Statement of Consolidated Operations. For the nine
months ended September 30, 2018, the non-service cost components
reported in Other expenses, net was $109. Additionally, the
Statement of Consolidated Operations for the nine months ended
September 30, 2017 was recast to reflect the reclassification of the
non-service cost components of net periodic benefit cost to Other
(income), net from both Cost of goods sold and Selling, general
administrative, and other expenses. As a result, for the nine months
ended September 30, 2017, Cost of goods sold decreased by $61,
Selling, general administrative, and other expenses decreased by $3,
and Other (income), net changed by $64 from previously reported
amounts.
|
| |
|
|
|
| |
|
|
| |
| Alcoa Corporation and subsidiaries |
| Consolidated Balance Sheet (unaudited) |
| (in millions) |
| | | | | | |
|
| | | December 31, | | | | September 30, |
| | | 2017 | | | | 2018 |
|
ASSETS
| | | | | | | |
|
Current assets:
| | | | | | | |
|
Cash and cash equivalents
| | |
$
|
1,358
| | | | |
$
|
1,022
| |
|
Receivables from customers
| | | |
811
| | | | | |
1,017
| |
|
Other receivables
| | | |
232
| | | | | |
176
| |
|
Inventories
| | | |
1,453
| | | | | |
1,666
| |
|
Fair value of derivative instruments
| | | |
113
| | | | | |
57
| |
|
Prepaid expenses and other current assets(1) | | |
| 271 |
| | | |
| 255 |
|
|
Total current assets
| | |
| 4,238 |
| | | |
| 4,193 |
|
| | | | | | |
|
|
Properties, plants, and equipment
| | | |
23,046
| | | | | |
21,839
| |
|
Less: accumulated depreciation, depletion, and amortization
| | |
| 13,908 |
| | | |
| 13,484 |
|
|
Properties, plants, and equipment, net
| | |
| 9,138 |
| | | |
| 8,355 |
|
|
Investments
| | | |
1,410
| | | | | |
1,381
| |
|
Deferred income taxes
| | | |
814
| | | | | |
599
| |
|
Fair value of derivative instruments
| | | |
128
| | | | | |
42
| |
|
Other noncurrent assets
| | |
| 1,719 |
| | | |
| 1,615 |
|
|
Total assets
| | | $ | 17,447 |
| | | | $ | 16,185 |
|
| | | | | | |
|
|
LIABILITIES
| | | | | | | |
|
Current liabilities:
| | | | | | | |
|
Accounts payable, trade
| | |
$
|
1,898
| | | | |
$
|
1,711
| |
|
Accrued compensation and retirement costs
| | | |
459
| | | | | |
420
| |
|
Taxes, including income taxes
| | | |
282
| | | | | |
417
| |
|
Fair value of derivative instruments
| | | |
185
| | | | | |
133
| |
|
Other current liabilities
| | | |
412
| | | | | |
319
| |
|
Long-term debt due within one year
| | |
| 16 |
| | | |
| 4 |
|
|
Total current liabilities
| | |
| 3,252 |
| | | |
| 3,004 |
|
|
Long-term debt, less amount due within one year
| | | |
1,388
| | | | | |
1,820
| |
|
Accrued pension benefits
| | | |
2,341
| | | | | |
1,210
| |
|
Accrued other postretirement benefits
| | | |
1,100
| | | | | |
926
| |
|
Asset retirement obligations
| | | |
617
| | | | | |
528
| |
|
Environmental remediation
| | | |
258
| | | | | |
248
| |
|
Fair value of derivative instruments
| | | |
1,105
| | | | | |
630
| |
|
Noncurrent income taxes
| | | |
309
| | | | | |
297
| |
|
Other noncurrent liabilities and deferred credits
| | |
| 279 |
| | | |
| 237 |
|
|
Total liabilities
| | |
| 10,649 |
| | | |
| 8,900 |
|
| | | | | | |
|
|
EQUITY
| | | | | | | |
|
Alcoa Corporation shareholders’ equity:
| | | | | | | |
|
Common stock
| | | |
2
| | | | | |
2
| |
|
Additional capital
| | | |
9,590
| | | | | |
9,656
| |
|
Retained earnings
| | | |
113
| | | | | |
298
| |
|
Accumulated other comprehensive loss
| | |
| (5,182 |
)
| | | |
| (4,740 |
)
|
|
Total Alcoa Corporation shareholders' equity
| | |
| 4,523 |
| | | |
| 5,216 |
|
|
Noncontrolling interest
| | |
| 2,275 |
| | | |
| 2,069 |
|
|
Total equity
| | |
| 6,798 |
| | | |
| 7,285 |
|
|
Total liabilities and equity
| | | $ | 17,447 |
| | | | $ | 16,185 |
|
| | | | | | | | | | |
|
| (1) |
|
This line item includes $7 and $4 of restricted cash as of December
31, 2017 and September 30, 2018, respectively.
|
| |
|
|
| |
| Alcoa Corporation and subsidiaries |
| Statement of Consolidated Cash Flows (unaudited) |
| (in millions) |
| |
|
| | Nine months ended |
| | September 30, |
| | 2017 |
|
| 2018 |
|
CASH FROM OPERATIONS
| | | | | |
|
Net income
| |
$
|
615
| | | |
$
|
659
| |
|
Adjustments to reconcile net income to cash from operations:
| | | | | |
|
Depreciation, depletion, and amortization
| | |
564
| | | | |
559
| |
|
Deferred income taxes
| | |
64
| | | | |
(16
|
)
|
|
Equity earnings, net of dividends
| | |
1
| | | | |
(11
|
)
|
|
Restructuring and other charges
| | |
12
| | | | |
389
| |
|
Net gain from investing activities – asset sales
| | |
(115
|
)
| | | |
–
| |
|
Net periodic pension benefit cost
| | |
83
| | | | |
115
| |
|
Stock-based compensation
| | |
21
| | | | |
29
| |
|
Other
| | |
31
| | | | |
(64
|
)
|
|
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments:
| | | | | |
|
(Increase) in receivables
| | |
(112
|
)
| | | |
(209
|
)
|
|
(Increase) in inventories
| | |
(102
|
)
| | | |
(279
|
)
|
|
Decrease in prepaid expenses and other current assets
| | |
62
| | | | |
3
| |
|
Increase (Decrease) in accounts payable, trade
| | |
109
| | | | |
(135
|
)
|
|
(Decrease) in accrued expenses
| | |
(320
|
)
| | | |
(288
|
)
|
|
Increase in taxes, including income taxes
| | |
15
| | | | |
248
| |
|
Pension contributions(1) | | |
(82
|
)
| | | |
(940
|
)
|
|
(Increase) in noncurrent assets
| | |
(88
|
)
| | | |
(89
|
)
|
|
Increase (Decrease) in noncurrent liabilities
| |
| 11 |
| | |
| (58 |
)
|
|
CASH PROVIDED FROM (USED FOR) OPERATIONS
| |
| 769 |
| | |
| (87 |
)
|
| | | | |
|
|
FINANCING ACTIVITIES
| | | | | |
|
Cash paid to former parent company related to separation(2) | | |
(247
|
)
| | | |
–
| |
|
Net change in short-term borrowings (original maturities of three
months or less)
| | |
2
| | | | |
–
| |
|
Additions to debt (original maturities greater than three months)(1) | | |
3
| | | | |
553
| |
|
Payments on debt (original maturities greater than three months)
| | |
(55
|
)
| | | |
(105
|
)
|
|
Proceeds from the exercise of employee stock options
| | |
38
| | | | |
23
| |
|
Contributions from noncontrolling interest
| | |
56
| | | | |
109
| |
|
Distributions to noncontrolling interest
| | |
(244
|
)
| | | |
(566
|
)
|
|
Other
| |
| (6 |
)
| | |
| (8 |
)
|
|
CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES
| |
| (453 |
)
| | |
| 6 |
|
| | | | |
|
|
INVESTING ACTIVITIES
| | | | | |
|
Capital expenditures
| | |
(255
|
)
| | | |
(251
|
)
|
|
Proceeds from the sale of assets and businesses
| | |
243
| | | | |
–
| |
|
Additions to investments
| |
| (44 |
)
| | |
| (6 |
)
|
|
CASH USED FOR INVESTING ACTIVITIES(3) | |
| (56 |
)
| | |
| (257 |
)
|
| | | | |
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH(3) | |
| 8 |
| | |
| (1 |
)
|
|
Net change in cash and cash equivalents and restricted cash(3) | | |
268
| | | | |
(339
|
)
|
|
Cash and cash equivalents and restricted cash at beginning of year(3) | |
| 859 |
| | |
| 1,365 |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD(3) | | $ | 1,127 |
| | | $ | 1,026 |
|
| | | | | | | | |
|
|
(1)
|
|
On May 17, 2018, Alcoa Nederland Holding B.V., a wholly-owned
subsidiary of Alcoa Corporation, issued $500 in 6.125% senior notes
due 2028. The gross proceeds from the debt issuance were used to
make discretionary contributions to three of Alcoa Corporation’s
U.S. defined benefit pension plans. Accordingly, for the nine months
ended September 30, 2018, the Pension contributions line item
includes a cash outflow of $500 and the Additions to debt line item
includes a cash inflow of $492 (net of an $8 initial purchasers
discount).
|
| |
|
|
(2)
| |
On November 1, 2016, Alcoa Corporation separated from its former
parent company (now named Arconic Inc.) into a standalone,
publicly-traded company. In accordance with the terms of the related
Separation and Distribution Agreement, Alcoa Corporation paid to
Arconic Inc. the net after-tax proceeds of $243 from the sale of the
Yadkin Hydroelectric Project.
|
| |
|
|
(3)
| |
On January 1, 2018, Alcoa Corporation adopted guidance issued by the
Financial Accounting Standards Board to the presentation of
restricted cash in the statement of cash flows. This guidance
requires that restricted cash be aggregated with cash and cash
equivalents in both the beginning-of-period and end-of-period line
items at the bottom of the statement of cash flows. Previously, the
change in restricted cash between the beginning-of-period and end-of
period was reflected as either an investing, financing, operating,
or non-cash activity based on the underlying nature of the
transaction. Accordingly, for the Company’s Statement of
Consolidated Cash Flows for the nine months ended September 30,
2018, the Cash and cash equivalents and restricted cash at beginning
of year and Cash and cash equivalents and restricted cash at end of
period line items include restricted cash of $7 and $4,
respectively. Additionally, the Company’s Statement of Consolidated
Cash Flows for the nine months ended September 30, 2017 was recast
to reflect this change in presentation. As a result, the Cash and
cash equivalents and restricted cash at beginning of year and Cash
and cash equivalents and restricted cash at end of period line items
include restricted cash of $6 and $8, respectively. The change of $2
is reflected in the Effect of exchange rate changes on cash and cash
equivalents and restricted cash line item.
|
| |
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| Alcoa Corporation and subsidiaries |
| Segment Information (unaudited) |
| (dollars in millions, except realized prices; dry metric tons in
millions (mdmt); metric tons in thousands (kmt)) |
| | | | | | | | | | | | | | | |
|
| | 1Q17 | | 2Q17 | | 3Q17 | | 4Q17 | | 2017 | | 1Q18 | | 2Q18 | | 3Q18 |
| Bauxite: | | | | | | | | | | | | | | | | |
|
Production(1) (mdmt)
| | |
11.1
| | | |
11.0
| | | |
11.6
| | | |
12.1
| | | |
45.8
| | | |
11.2
| | | |
11.3
| | | |
11.5
| |
|
Third-party shipments (mdmt)
| | |
1.4
| | | |
1.6
| | | |
2.1
| | | |
1.5
| | | |
6.6
| | | |
1.1
| | | |
1.6
| | | |
1.4
| |
|
Intersegment shipments (mdmt)
| | |
10.2
| | | |
9.9
| | | |
10.2
| | | |
10.8
| | | |
41.1
| | | |
10.4
| | | |
10.0
| | | |
10.1
| |
|
Third-party sales
| |
$
|
70
| | |
$
|
80
| | |
$
|
104
| | |
$
|
79
| | |
$
|
333
| | |
$
|
47
| | |
$
|
77
| | |
$
|
67
| |
|
Intersegment sales
| |
$
|
219
| | |
$
|
208
| | |
$
|
221
| | |
$
|
227
| | |
$
|
875
| | |
$
|
249
| | |
$
|
226
| | |
$
|
224
| |
|
Adjusted EBITDA(2),(3) | |
$
|
110
| | |
$
|
97
| | |
$
|
112
| | |
$
|
105
| | |
$
|
424
| | |
$
|
110
| | |
$
|
100
| | |
$
|
106
| |
|
Depreciation, depletion, and amortization
|
|
$
|
18
|
|
|
$
|
19
|
|
|
$
|
24
|
|
|
$
|
21
|
|
|
$
|
82
|
|
|
$
|
29
|
|
|
$
|
27
|
|
|
$
|
27
|
|
| | | | | | | | | | | | | | | |
|
| Alumina: | | | | | | | | | | | | | | | | |
|
Production (kmt)
| | |
3,211
| | | |
3,249
| | | |
3,305
| | | |
3,331
| | | |
13,096
| | | |
3,173
| | | |
3,227
| | | |
3,160
| |
|
Third-party shipments (kmt)
| | |
2,255
| | | |
2,388
| | | |
2,271
| | | |
2,306
| | | |
9,220
| | | |
2,376
| | | |
2,285
| | | |
2,233
| |
|
Intersegment shipments (kmt)
| | |
947
| | | |
1,152
| | | |
1,153
| | | |
1,223
| | | |
4,475
| | | |
1,097
| | | |
1,031
| | | |
1,083
| |
|
Average realized third-party price per metric ton of alumina
| |
$
|
325
| | |
$
|
314
| | |
$
|
314
| | |
$
|
406
| | |
$
|
340
| | |
$
|
385
| | |
$
|
467
| | |
$
|
493
| |
|
Third-party sales
| |
$
|
734
| | |
$
|
749
| | |
$
|
713
| | |
$
|
937
| | |
$
|
3,133
| | |
$
|
914
| | |
$
|
1,068
| | |
$
|
1,101
| |
|
Intersegment sales
| |
$
|
361
| | |
$
|
384
| | |
$
|
398
| | |
$
|
580
| | |
$
|
1,723
| | |
$
|
454
| | |
$
|
536
| | |
$
|
544
| |
|
Adjusted EBITDA(2),(3) | |
$
|
297
| | |
$
|
227
| | |
$
|
203
| | |
$
|
562
| | |
$
|
1,289
| | |
$
|
392
| | |
$
|
638
| | |
$
|
660
| |
|
Depreciation and amortization
| |
$
|
49
| | |
$
|
53
| | |
$
|
53
| | |
$
|
52
| | |
$
|
207
| | |
$
|
53
| | |
$
|
49
| | |
$
|
48
| |
|
Equity income (loss)
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
$
|
(5
|
)
|
|
$
|
5
|
|
|
$
|
(5
|
)
|
|
$
|
(1
|
)
|
|
$
|
14
|
|
|
$
|
10
|
|
| | | | | | | | | | | | | | | |
|
| Aluminum: | | | | | | | | | | | | | | | | |
|
Primary aluminum production (kmt)
| | |
559
| | | |
575
| | | |
596
| | | |
598
| | | |
2,328
| | | |
554
| | | |
565
| | | |
567
| |
|
Third-party aluminum shipments(4) (kmt)
| | |
801
| | | |
833
| | | |
868
| | | |
854
| | | |
3,356
| | | |
794
| | | |
853
| | | |
806
| |
|
Average realized third-party price per metric ton of primary aluminum
| |
$
|
2,080
| | |
$
|
2,199
| | |
$
|
2,237
| | |
$
|
2,365
| | |
$
|
2,224
| | |
$
|
2,483
| | |
$
|
2,623
| | |
$
|
2,465
| |
|
Third-party sales
| |
$
|
1,806
| | |
$
|
1,988
| | |
$
|
2,090
| | |
$
|
2,143
| | |
$
|
8,027
| | |
$
|
2,111
| | |
$
|
2,413
| | |
$
|
2,198
| |
|
Intersegment sales
| |
$
|
4
| | |
$
|
3
| | |
$
|
9
| | |
$
|
5
| | |
$
|
21
| | |
$
|
4
| | |
$
|
4
| | |
$
|
6
| |
|
Adjusted EBITDA(2),(3) | |
$
|
217
| | |
$
|
234
| | |
$
|
315
| | |
$
|
246
| | |
$
|
1,012
| | |
$
|
153
| | |
$
|
231
| | |
$
|
73
| |
|
Depreciation and amortization
| |
$
|
101
| | |
$
|
108
| | |
$
|
106
| | |
$
|
104
| | |
$
|
419
| | |
$
|
106
| | |
$
|
108
| | |
$
|
91
| |
|
Equity (loss) income
|
|
$
|
(7
|
)
|
|
$
|
3
|
|
|
$
|
(7
|
)
|
|
$
|
(8
|
)
|
|
$
|
(19
|
)
|
|
$
|
–
|
|
|
$
|
(8
|
)
|
|
$
|
(5
|
)
|
| | | | | | | | | | | | | | | |
|
| Reconciliation of total segment Adjusted EBITDA to consolidated
net income (loss) attributable to Alcoa Corporation: | | | | | | | | | | | | | | | | |
|
Total segment Adjusted EBITDA(2) | |
$
|
624
| | |
$
|
558
| | |
$
|
630
| | |
$
|
913
| | |
$
|
2,725
| | |
$
|
655
| | |
$
|
969
| | |
$
|
839
| |
|
Unallocated amounts:
| | | | | | | | | | | | | | | | |
|
Transformation(5),(6) | | |
(20
|
)
| | |
(28
|
)
| | |
(11
|
)
| | |
10
| | | |
(49
|
)
| | |
(2
|
)
| | |
(1
|
)
| | |
1
| |
|
Corporate inventory accounting(5),(7) | | |
(17
|
)
| | |
14
| | | |
(9
|
)
| | |
(95
|
)
| | |
(107
|
)
| | |
31
| | | |
(32
|
)
| | |
(17
|
)
|
|
Corporate expenses(3),(8) | | |
(33
|
)
| | |
(34
|
)
| | |
(33
|
)
| | |
(31
|
)
| | |
(131
|
)
| | |
(27
|
)
| | |
(26
|
)
| | |
(22
|
)
|
|
Provision for depreciation, depletion, and amortization
| | |
(179
|
)
| | |
(190
|
)
| | |
(194
|
)
| | |
(187
|
)
| | |
(750
|
)
| | |
(194
|
)
| | |
(192
|
)
| | |
(173
|
)
|
|
Restructuring and other charges
| | |
(10
|
)
| | |
(12
|
)
| | |
10
| | | |
(297
|
)
| | |
(309
|
)
| | |
19
| | | |
(231
|
)
| | |
(177
|
)
|
|
Interest expense
| | |
(26
|
)
| | |
(25
|
)
| | |
(26
|
)
| | |
(27
|
)
| | |
(104
|
)
| | |
(26
|
)
| | |
(32
|
)
| | |
(33
|
)
|
|
Other income (expenses), net(3) | | |
79
| | | |
(28
|
)
| | |
(48
|
)
| | |
(30
|
)
| | |
(27
|
)
| | |
(21
|
)
| | |
(9
|
)
| | |
(2
|
)
|
|
Other(3),(5),(9) |
|
|
–
|
|
|
|
(18
|
)
|
|
|
(31
|
)
|
|
|
(40
|
)
|
|
|
(89
|
)
|
|
|
(23
|
)
|
|
|
(36
|
)
|
|
|
(10
|
)
|
|
Consolidated income before income taxes
| | |
418
| | | |
237
| | | |
288
| | | |
216
| | | |
1,159
| | | |
412
| | | |
410
| | | |
406
| |
|
Provision for income taxes
| | |
(110
|
)
| | |
(99
|
)
| | |
(119
|
)
| | |
(272
|
)
| | |
(600
|
)
| | |
(138
|
)
| | |
(180
|
)
| | |
(251
|
)
|
|
Net income attributable to noncontrolling interest
|
|
|
(83
|
)
|
|
|
(63
|
)
|
|
|
(56
|
)
|
|
|
(140
|
)
|
|
|
(342
|
)
|
|
|
(124
|
)
|
|
|
(155
|
)
|
|
|
(196
|
)
|
|
Consolidated net income (loss) attributable to Alcoa Corporation
|
|
$
|
225
|
|
|
$
|
75
|
|
|
$
|
113
|
|
|
$
|
(196
|
)
|
|
$
|
217
|
|
|
$
|
150
|
|
|
$
|
75
|
|
|
$
|
(41
|
)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
The difference between segment totals and consolidated amounts is in
Corporate.
|
|
|
| (1) |
|
The production amounts do not include additional bauxite
(approximately 3 mdmt per annum) that Alcoa World Alumina and
Chemicals is entitled to receive (i.e. an amount in excess of its
equity ownership interest) from certain other partners at the mine
in Guinea.
|
| |
|
| (2) | |
Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before
interest, taxes, depreciation, and amortization) is net margin plus
an add-back for depreciation, depletion, and amortization. Net
margin is equivalent to Sales minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
Research and development expenses; and Provision for depreciation,
depletion, and amortization. The Adjusted EBITDA presented may not
be comparable to similarly titled measures of other companies.
|
| |
|
| (3) | |
On January 1, 2018, Alcoa Corporation adopted guidance issued by the
Financial Accounting Standards Board to the presentation of net
periodic benefit cost related to pension and other postretirement
benefit plans. This guidance requires the non-service cost
components of net periodic benefit cost to be reported separately
from the service cost component in an entity’s income statement.
Additionally, this guidance is required to be applied
retrospectively. Accordingly, previously reported amounts for Cost
of goods sold, Selling, general administrative, and other expenses,
and Other expenses (income), net on Alcoa Corporation’s Statement of
Consolidated Operations have been recast to reflect these changes.
As a result, previously reported amounts for Adjusted EBITDA on both
a consolidated basis and for each of the Company’s three segments
have been updated to reflect these changes. See footnote 1 to the
Statement of Consolidated Operations included in this release for
additional information.
|
| |
|
| (4) | |
The Aluminum segment’s third-party aluminum shipments are composed
of both primary aluminum and flat-rolled aluminum.
|
| |
|
| (5) | |
Effective in the first quarter of 2018, management elected to change
the presentation of certain line items in the reconciliation of
total segment Adjusted EBITDA to consolidated net income (loss)
attributable to Alcoa Corporation to provide additional transparency
to the nature of these reconciling items. Accordingly,
Transformation (see footnote 6), which was previously reported
within Other, is presented as a separate line item. Additionally,
Impact of LIFO (last in, first out) and Metal price lag, which were
previously reported as separate line items, are now combined and
reported in a new line item labeled Corporate inventory accounting
(see footnote 7). Also, the impact of intersegment profit
eliminations, which was previously reported within Other, is
reported in the new Corporate inventory accounting line item. The
applicable information for all prior periods presented was recast to
reflect these changes.
|
| |
|
| (6) | |
Transformation includes, among other items, the Adjusted EBITDA of
previously closed operations.
|
| |
|
| (7) | |
Corporate inventory accounting is composed of the impacts of LIFO
inventory accounting, metal price lag, and intersegment profit
eliminations. Metal price lag describes the timing difference
created when the average price of metal sold differs from the
average cost of the metal when purchased by Alcoa Corporation’s
rolled aluminum operations. In general, when the price of metal
increases, metal price lag is favorable, and when the price of metal
decreases, metal price lag is unfavorable.
|
| |
|
| (8) | |
Corporate expenses are composed of general administrative and other
expenses of operating the corporate headquarters and other global
administrative facilities, as well as research and development
expenses of the corporate technical center.
|
| |
|
| (9) | |
Other includes certain items that impact Cost of goods sold and
Selling, general administrative, and other expenses on Alcoa
Corporation’s Statement of Consolidated Operations that are not
included in the Adjusted EBITDA of the reportable segments,
including those described as “Other special items” (see footnote 2
to the reconciliation of Adjusted Income within Calculation of
Financial Measures included in this release).
|
| |
|
|
| |
|
| |
| Alcoa Corporation and subsidiaries |
| Calculation of Financial Measures (unaudited) |
| (in millions, except per-share amounts) |
| | | | |
|
| Adjusted Income | | Income (Loss) | | | Diluted EPS(4) |
| Quarter ended | | | Quarter ended |
| September 30,
2017 |
| June 30,
2018 |
| September 30,
2018 | | | September 30,
2017 |
| June 30,
2018 |
| September 30,
2018 |
| | | | | | | | | | | | |
|
|
Net income (loss) attributable to Alcoa Corporation
| |
$
|
113
| | |
$
|
75
| | |
$
|
(41
|
)
| | |
$
|
0.60
| |
$
|
0.39
| |
$
|
(0.22
|
)
|
| | | | | | | | | | | | |
|
|
Special items:
| | | | | | | | | | | | | |
|
Restructuring and other charges
| | |
(10
|
)
| | |
231
| | | |
177
| | | | | | | | |
|
Discrete tax items(1) | | |
13
| | | |
2
| | | |
26
| | | | | | | | |
|
Other special items(2) | | |
36
| | | |
34
| | | |
(42
|
)
| | | | | | | |
|
Tax impact(3) | | |
(11
|
)
| | |
(43
|
)
| | |
(1
|
)
| | | | | | | |
|
Noncontrolling interest impact(3) | |
| (6 |
)
| |
| (13 |
)
| |
| – |
| | | | | | | |
|
Subtotal
| |
| 22 |
| |
| 211 |
| |
| 160 |
| | | | | | | |
| | | | | | | | | | | | |
|
|
Net income attributable to Alcoa Corporation – as adjusted
| | $ | 135 |
| | $ | 286 |
| | $ | 119 |
| | | |
0.72
| | |
1.52
| | |
0.63
| |
| | | | | | | | | | | | | | | | | | | | | | |
|
|
Net income attributable to Alcoa Corporation – as adjusted is a
non-GAAP financial measure. Management believes that this measure is
meaningful to investors because management reviews the operating
results of Alcoa Corporation excluding the impacts of restructuring
and other charges, discrete tax items, and other special items
(collectively, “special items”). There can be no assurances that
additional special items will not occur in future periods. To
compensate for this limitation, management believes that it is
appropriate to consider both Net income (loss) attributable to Alcoa
Corporation determined under GAAP as well as Net income attributable
to Alcoa Corporation – as adjusted.
|
|
|
(1) |
|
Discrete tax items include the following:
|
•
| |
for the quarter ended September 30, 2017, a net charge for several
small items;
|
•
| |
for the quarter ended June 30, 2018, a net charge for several small
items; and
|
•
| |
for the quarter ended September 30, 2018, a charge to establish a
reserve related to an outstanding income tax dispute involving a
former Spanish consolidated tax group previously owned by Alcoa
Corporation’s former parent company ($30) and a net benefit for
several small items ($4).
|
| |
|
(2) | |
Other special items include the following:
|
•
| |
for the quarter ended September 30, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($17), settlement
of legacy tax matters in Brazil ($11), a net unfavorable change in
certain mark-to-market energy derivative instruments ($11), a
favorable tax impact related to the interim period treatment of
operational losses in certain jurisdictions for which no tax benefit
was recognized ($8), an unfavorable impact due to the near-term
power market exposure as a result of renegotiating a hedging
contract related to forecasted future spot market power purchases
for the Portland smelter ($8), and a favorable tax impact resulting
from the difference between Alcoa’s consolidated estimated annual
effective tax rate and the statutory rates applicable to special
items ($3);
|
•
| |
for the quarter ended June 30, 2018, a loss on a contractor
arbitration matter ($29), a net unfavorable change in certain
mark-to-market energy derivative instruments ($6), a favorable tax
impact related to the interim period treatment of operational losses
in certain jurisdictions for which no tax benefit was recognized
($5), costs related to the partial restart of the Warrick (Indiana)
smelter ($2), and costs, primarily contractor services, related to a
work stoppage at a non-U.S. smelter ($2); and
|
•
| |
for the quarter ended September 30, 2018, a favorable tax impact
resulting from the difference between Alcoa’s consolidated estimated
annual effective tax rate and the statutory rates applicable to
special items ($47), an unfavorable tax impact related to the
interim period treatment of operational losses in certain
jurisdictions for which no tax benefit was recognized ($9), a net
favorable change in certain mark-to-market energy derivative
instruments ($8), costs, primarily contractor services, related to a
work stoppage at a non-U.S. smelter ($3), and costs related to the
partial restart of the Warrick (Indiana) smelter ($1).
|
| |
|
(3) | |
The tax impact on special items is based on the applicable statutory
rates in the jurisdictions where the special items occurred. The
noncontrolling interest impact on special items represents Alcoa’s
partner’s share of certain special items.
|
| |
|
(4) | |
In any given period, the average number of shares applicable to
diluted EPS for Net income (loss) attributable to Alcoa Corporation
common shareholders may exclude certain share equivalents as their
effect is anti-dilutive. However, certain of these share equivalents
may become dilutive in the EPS calculation applicable to Net income
attributable to Alcoa Corporation common shareholders – as adjusted
due to a larger and/or positive numerator. Specifically:
|
•
| |
for the quarter ended September 30, 2017, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 187,155,231;
|
•
| |
for the quarter ended June 30, 2018, no additional share equivalents
were dilutive based on Net income attributable to Alcoa Corporation
common shareholders – as adjusted, resulting in a diluted average
number of shares of 188,708,013; and
|
•
| |
for the quarter ended September 30, 2018, share equivalents
associated with outstanding employee stock options and awards were
dilutive based on Net income attributable to Alcoa Corporation
common shareholders – as adjusted, resulting in a diluted average
number of shares of 188,726,446.
|
| |
|
|
| |
| Alcoa Corporation and subsidiaries |
| Calculation of Financial Measures (unaudited), continued |
| (in millions) |
| |
|
| Adjusted EBITDA | | Quarter ended |
| September 30,
2017 |
| June 30,
2018 |
| September 30,
2018 |
| | | | | |
|
|
Net income (loss) attributable to Alcoa Corporation
| |
$
|
113
| | |
$
|
75
| |
$
|
(41
|
)
|
| | | | | |
|
|
Add:
| | | | | | |
|
Net income attributable to noncontrolling interest
| | |
56
| | | |
155
| | |
196
| |
|
Provision for income taxes
| | |
119
| | | |
180
| | |
251
| |
|
Other expenses, net(1) | | |
48
| | | |
9
| | |
2
| |
|
Interest expense
| | |
26
| | | |
32
| | |
33
| |
|
Restructuring and other charges
| | |
(10
|
)
| | |
231
| | |
177
| |
|
Provision for depreciation, depletion, and amortization
| |
| 194 |
| |
| 192 | |
| 173 |
|
| | | | | |
|
|
Adjusted EBITDA(1) | | $ | 546 |
| | $ | 874 | | $ | 791 |
|
| | | | | |
|
|
Special items(2) | |
| 36 |
| |
| 30 | |
| 4 |
|
| | | | | |
|
|
Adjusted EBITDA, excluding special items(1) | | $ | 582 |
| | $ | 904 | | $ | 795 |
|
| | | | | | | | | | |
|
|
Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before
interest, taxes, depreciation, and amortization) is net margin plus
an add-back for depreciation, depletion, and amortization. Net
margin is equivalent to Sales minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
Research and development expenses; and Provision for depreciation,
depletion, and amortization. Adjusted EBITDA is a non-GAAP financial
measure. Management believes that this measure is meaningful to
investors because Adjusted EBITDA provides additional information
with respect to Alcoa Corporation’s operating performance and the
Company’s ability to meet its financial obligations. The Adjusted
EBITDA presented may not be comparable to similarly titled measures
of other companies.
|
|
|
(1) |
|
On January 1, 2018, Alcoa Corporation adopted guidance issued by the
Financial Accounting Standards Board to the presentation of net
periodic benefit cost related to pension and other postretirement
benefit plans. This guidance requires the non-service cost
components of net periodic benefit cost to be reported separately
from the service cost component in an entity’s income statement.
Additionally, this guidance is required to be applied
retrospectively. Accordingly, previously reported amounts for Cost
of goods sold, Selling, general administrative, and other expenses,
and Other expenses (income), net on Alcoa Corporation’s Statement of
Consolidated Operations have been recast to reflect these changes.
As a result, for the quarter ended September 30, 2017, Other
expenses, net changed by $21. Moreover, previously reported amounts
for Adjusted EBITDA and Adjusted EBITDA, excluding special items
have been updated to reflect these changes. See footnote 1 to the
Statement of Consolidated Operations included in this release for
additional information.
|
| |
|
(2) | |
Special items include the following (see reconciliation of Adjusted
Income above for additional information):
|
•
| |
for the quarter ended September 30, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($17), settlement
of legacy tax matters in Brazil ($11), and an unfavorable impact due
to the near-term power market exposure as a result of renegotiating
a hedging contract related to forecasted future spot market power
purchases for the Portland smelter ($8);
|
•
| |
for the quarter ended June 30, 2018, a loss on a contractor
arbitration matter ($26), costs related to the partial restart of
the Warrick (Indiana) smelter ($2), and costs, primarily contractor
services, related to a work stoppage at a non-U.S. smelter ($2); and
|
•
| |
for the quarter ended September 30, 2018, costs, primarily
contractor services, related to a work stoppage at a non-U.S.
smelter ($3) and costs related to the partial restart of the Warrick
(Indiana) smelter ($1).
|
| |
|
|
|
|
|
|
| |
| Alcoa Corporation and subsidiaries |
| Calculation of Financial Measures (unaudited), continued |
| (in millions) |
| | | | | |
|
| Free Cash Flow | | | | | | Quarter ended |
| | | | | September 30,
2017 |
|
|
|
| June 30,
2018* |
|
|
|
| September 30,
2018 |
| | | | | | | | | | | | | | | |
|
|
Cash from operations
| | | | | | $ 384 | | | | | $ (430) | | | | | $ 288 |
| | | | | | | | | | | | | | | |
|
|
Capital expenditures
| | | | | | (96)
| | | | | (95)
| | | | | (82)
|
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
|
|
Free cash flow
| | | | | | $ 288 | | | | | $ (525)
| | | | | $ 206 |
| | | | | | | | | | | | | | | |
|
|
Free Cash Flow is a non-GAAP financial measure. Management believes
that this measure is meaningful to investors because management
reviews cash flows generated from operations after taking into
consideration capital expenditures, which are both necessary to
maintain and expand Alcoa Corporation’s asset base and expected to
generate future cash flows from operations. It is important to note
that Free Cash Flow does not represent the residual cash flow
available for discretionary expenditures since other
non-discretionary expenditures, such as mandatory debt service
requirements, are not deducted from the measure.
|
|
|
*
|
Cash from operations for the quarter ended June 30, 2018 includes
a $500 cash outflow for discretionary contributions made to three
of Alcoa Corporation’s U.S. defined benefit pension plans. The
$500 was funded with the gross proceeds of 6.125% senior notes due
2028 issued in May 2018.
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
| Net Debt | | | | | | June 30,
2018 | | | | | | September 30,
2018 |
| | | | | | | | | | | |
|
|
Long-term debt due within one year
| | | | | | $ 13 | | | | | | $ 4 |
|
Long-term debt, less amount due within one year
| | | | | | 1,916 | | | | | | 1,820 |
|
Total debt
| | | | | | $ 1,929 | | | | | | $ 1,824 |
| | | | | | | | | | | |
|
|
Less: Cash and cash equivalents
| | | | | | 1,089 | | | | | | 1,022 |
| | | | | | | | | | | |
|
|
Net debt
| | | | | | $ 840 | | | | | | $ 802 |
| | | | | | | | | | | |
|
|
Net debt is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after considering available
cash that could be used to repay outstanding debt.
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20181017005800/en/
Alcoa Corporation
Investor Contact:
James Dwyer,
+1-412-992-5450
James.Dwyer@alcoa.com
or
Media
Contact:
Monica Orbe, +1-412-315-2896
Monica.Orbe@alcoa.com
Source: Alcoa Corporation