Alumina and aluminum pricing drive growth in annual results
Fourth Quarter 2018
-
Net income of $43 million, or $0.23 per share
-
Excluding special items, adjusted net income of $125 million, or $0.66
per share
- $749 million of adjusted earnings before interest, taxes, depreciation
and amortization (EBITDA) excluding special items
-
Revenue of $3.3 billion
- $535 million cash from operations; $387 million free cash flow
- $1.1 billion cash balance and $1.8 billion of debt, for net debt of
$0.7 billion, as of December 31, 2018
-
Company repurchased 1.7 million shares of its common stock for $50
million
Full-Year 2018
-
Net income of $227 million, or $1.20 per share and adjusted net income
of $675 million, or $3.58 per share
-
Adjusted EBITDA excluding special items of $3.1 billion
-
Revenue of $13.4 billion
- $448 million cash from operations; $49 million free cash flow
-
Net pension and other postretirement employee benefits liability of
$2.3 billion at December 31, 2018, down from $3.5 billion at year-end
2017
-
Final 2018 global market balances: deficit for both alumina and
aluminum, surplus for bauxite
PITTSBURGH--(BUSINESS WIRE)--
Alcoa Corporation (NYSE: AA), a global leader in bauxite, alumina, and
aluminum products, today reported fourth quarter and full-year 2018
results.
|
|
|
|
|
|
|
|
|
|
|
|
M, except per share amounts |
| 4Q17 |
| 3Q18 |
| 4Q18 |
| FY17 |
| FY18 |
|
Revenue
|
|
$
|
3,174
| |
|
$
|
3,390
| |
| $ | 3,344 |
|
$
|
11,652
|
| $ | 13,403 |
|
Net (loss) income attributable to Alcoa Corporation
| |
$
|
(196
|
)
| |
$
|
(41
|
)
| | $ | 43 | |
$
|
217
| | $ | 227 |
|
Earnings per share attributable to Alcoa Corporation
|
|
$
|
(1.06
|
)
|
|
$
|
(0.22
|
)
|
| $ | 0.23 |
|
$
|
1.16
|
| $ | 1.20 |
|
Adjusted net income
| |
$
|
195
| | |
$
|
119
| | | $ | 125 | |
$
|
563
| | $ | 675 |
|
Adjusted earnings per share
|
|
$
|
1.04
|
|
|
$
|
0.63
|
|
| $ | 0.66 |
|
$
|
3.01
|
| $ | 3.58 |
Adjusted EBITDA excluding special items1 |
|
$
|
796
|
|
|
$
|
795
|
|
| $ | 749 |
|
$
|
2,437
|
| $ | 3,101 |
|
| |
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
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. |
| |
|
“Our 2018 results reflect how we’ve made Alcoa stronger,” said President
and Chief Executive Officer Roy Harvey. “We’ve built upon the progress
we made since our launch, and by executing our strategic priorities to
reduce complexity, drive returns, and strengthen the balance sheet,
we’re now better positioned to thrive through market cycles.”
Harvey added: “Despite sequentially weaker commodity prices, we had a
strong fourth quarter with higher profits in our Bauxite and Alumina
segments. With the help of higher market prices earlier in the year, we
increased annual profits, addressed liabilities, significantly
strengthened our balance sheet, and began returning cash to
stockholders. With markets likely to remain dynamic in 2019, we will
focus on what we can control to continue improving our operations,
addressing challenges with agility, and making the most of opportunities
in the year ahead.”
Fourth Quarter 2018 Results
In fourth quarter 2018, Alcoa reported net income of $43 million, or
$0.23 per share, compared to a net loss of $41 million, or $0.22 per
share, in third quarter 2018. The 2018 fourth quarter results include a
negative impact of $82 million for special items, primarily due to a $50
million non-cash charge to establish an allowance on state value-added
tax credits in Brazil.
Excluding the impact of special items, fourth quarter 2018 adjusted net
income was $125 million, or $0.66 per share, up 5 percent sequentially
from $119 million, or $0.63 per share.
Adjusted EBITDA excluding special items fell 6 percent to $749 million
in fourth quarter 2018 from $795 million in third quarter 2018. The
sequential decline was primarily due to lower aluminum prices and a
decrease in the price of energy sales in Brazil, partially offset by
increased shipments across all three segments.
Alcoa reported fourth quarter 2018 revenue of $3.3 billion, down 1
percent sequentially, mainly attributable to lower realized prices for
primary aluminum, alumina, and Brazil energy sales. These negative
impacts were partially offset by increased shipments across all three
segments.
Cash from operations in fourth quarter 2018 was $535 million and free
cash flow was $387 million. Cash used for financing activities and
investing activities was $294 million (includes $50 million for stock
repurchases) and $148 million, respectively, in the fourth quarter of
2018.
Alcoa ended fourth quarter 2018 with cash on hand of $1.1 billion and
debt of $1.8 billion, for net debt of $0.7 billion. The Company reported
22 days working capital, an 11-day increase year-over-year, reflecting
higher raw material prices, lower buy/resell activities, and timing of
vendor payments.
Full-Year 2018 Results
For full-year 2018, Alcoa reported net income of $227 million, or $1.20
per share, compared to net income of $217 million, or $1.16 per share,
for full-year 2017. Excluding special items, the Company reported
adjusted net income of $675 million, or $3.58 per share, compared to
$563 million, or $3.01 per share, in 2017.
Adjusted EBITDA excluding special items was $3.1 billion, up 27 percent
from the $2.4 billion earned in 2017. The year-over-year improvement was
largely due to higher alumina and aluminum prices, partially offset by
higher costs for raw materials and energy and increased maintenance
expense.
Revenue in 2018 was $13.4 billion, up 15 percent from 2017, mainly
attributable to higher realized prices for alumina and aluminum products.
Cash from operations in 2018 was $448 million and free cash flow was $49
million, both of which reflect $725 million in additional contributions
made to certain U.S. and Canadian defined benefit pension plans. In
2018, cash used for financing activities was $288 million and cash used
for investing activities was $405 million. Alcoa invested $92 million in
return-seeking capital projects and controlled sustaining capital
expenditures to $307 million in 2018.
Throughout 2018, management initiated several actions related to Alcoa’s
employee defined benefit plans to strengthen the Company’s balance
sheet, which included voluntary contributions and annuitizations. As a
result of these actions, along with favorable discount rates used to
remeasure the plans as of December 31, 2018, the Company’s net pension
and other postretirement employee benefits liability at the end of the
year was $2.3 billion, down from $3.5 billion at year-end 2017.
Market Update
For 2019, Alcoa projects a global aluminum deficit ranging between 1.7
million and 2.1 million metric tons with global demand growth in a range
of 3 to 4 percent. The Company’s final global aluminum demand growth
rate estimate for 2018 was 4 percent with a deficit of 1.7 million
metric tons.
The global alumina market closed 2018 with a deficit of 0.6 million
metric tons, which fell within Alcoa’s last estimate of a 0.4 million to
1.2 million metric ton deficit. In 2019, the Company expects the alumina
market to move to a surplus that is projected to range between 0.2
million and 1 million metric tons, which assumes ongoing, third-party
supply disruptions in the Atlantic region. The projected alumina surplus
is driven by China, where refining expansions are expected to outpace
demand growth from smelting.
The bauxite market is expected to remain in surplus with global
stockpile growth projected to continue in 2019, ranging between 7
million and 11 million metric tons. The stockpile is driven by China,
which strategically holds bauxite due to uncertain sourcing within and
outside of the country.
2019 Outlook
In 2019, the Company projects total bauxite shipments to range between
47.0 and 48.0 million dry metric tons. Total alumina shipments are
expected to be between 13.6 and 13.7 million metric tons with
anticipated operational improvements and higher year-on-year production.
Aluminum is expected to ship between 2.8 and 2.9 million metric tons,
which reflects the expiration of a can sheet tolling agreement in the
flat-rolled business. The tolling agreement’s expiration should have a
negligible impact on Adjusted EBITDA for the year.
Alcoa anticipates favorable impacts from spot prices for raw materials
to be fully offset by higher energy costs in the first quarter, and to
be partially offset for the remainder of the year.
Based on current alumina and aluminum market conditions, the Company
expects an annual operational tax rate ranging from 45 to 55 percent.
For the first quarter of 2019, Alcoa expects moderate benefits from both
improvements in customer-specific alumina pricing and lower alumina
costs to the Aluminum segment. These are partially offset by increased
maintenance activities.
Update on Spain Collective Dismissal Process
On January 16, 2019, Alcoa reached a tentative agreement with workers’
representatives at the Company’s Avilés and La Coruña aluminum plants in
Spain as part of the collective dismissal process announced in October.
The plan, subject to ratification of the workforce by the end of the
month, calls for the curtailment of the two smelters’ remaining,
combined operating capacity of 124,000 annual metric tons. The
casthouses at both plants and the paste plant at La Coruña would remain
in operation.
A social plan included in the tentative agreement preserves a portion of
the jobs at the two facilities and includes retirement packages and
potential relocation to the Company’s San Ciprián facility.
Upon ratification, Alcoa expects to record restructuring-related charges
estimated to be between $90 million and $115 million (pre- and
after-tax), or $0.48 to $0.62 per share, all of which would be paid in
2019. Depending on the ultimate outcome of this process, the Company may
incur additional charges for the closure of the two smelters later in
2019 estimated to range between $125 million and $135 million (pre- and
after-tax), or $0.66 to $0.73 per share, of which approximately 75
percent would be non-cash. The remaining 25 percent would result in cash
outlays subsequent to 2019.
As a result of the described potential curtailment, Alcoa would expect
an annual improvement to net income of $70 million to $80 million, based
on 2018 market prices, beginning in the third quarter of 2019.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m. Eastern
Standard Time (EST) on Wednesday, January 16, 2019, to present fourth
quarter and full-year 2018 financial results and discuss the business
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. EST on January 16, 2019. 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 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.
|
| |
| Alcoa Corporation and subsidiaries |
| Statement of Consolidated Operations (unaudited) |
| (dollars in millions, except per-share amounts) |
| |
|
| | Quarter ended |
| | December 31, |
| September 30, |
| December 31, |
| | 2017 | | 2018 | | 2018 |
|
Sales
| |
$
|
3,174
| | |
$
|
3,390
| | |
$
|
3,344
|
| | | | | |
|
|
Cost of goods sold (exclusive of expenses below)(1) | | |
2,339
| | | |
2,534
| | | |
2,534
|
|
Selling, general administrative, and other expenses(1) | | |
69
| | | |
58
| | | |
59
|
|
Research and development expenses
| | |
9
| | | |
7
| | | |
7
|
|
Provision for depreciation, depletion, and amortization
| | |
187
| | | |
173
| | | |
174
|
|
Restructuring and other charges
| | |
297
| | | |
177
| | | |
138
|
|
Interest expense
| | |
27
| | | |
33
| | | |
31
|
|
Other expenses, net(1) | |
| 30 |
| |
| 2 |
| |
| 32 |
|
Total costs and expenses
| | |
2,958
| | | |
2,984
| | | |
2,975
|
| | | | | |
|
|
Income before income taxes
| | |
216
| | | |
406
| | | |
369
|
|
Provision for income taxes
| |
| 272 |
| |
| 251 |
| |
| 157 |
| | | | | |
|
|
Net (loss) income
| | |
(56
|
)
| | |
155
| | | |
212
|
| | | | | |
|
|
Less: Net income attributable to noncontrolling interest
| |
| 140 |
| |
| 196 |
| |
| 169 |
| | | | | |
|
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION
| | $ | (196 |
)
| | $ | (41 |
)
| | $ | 43 |
| | | | | |
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON
SHAREHOLDERS:
| | | | | | |
|
Basic:
| | | | | | |
|
Net (loss) income
| |
$
|
(1.06
|
)
| |
$
|
(0.22
|
)
| |
$
|
0.23
|
|
Average number of shares(2) | | |
185,078,245
| | | |
186,479,038
| | | |
186,166,234
|
| | | | | |
|
|
Diluted:
| | | | | | |
|
Net (loss) income
| |
$
|
(1.06
|
)
| |
$
|
(0.22
|
)
| |
$
|
0.23
|
|
Average number of shares(2) | | |
185,078,245
| | | |
186,479,038
| | | |
188,219,224
|
| (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 December 31, 2018 and September 30, 2018, the non-service cost
components reported in Other expenses, net was $30 and $32,
respectively. Additionally, the Statement of Consolidated Operations
for the quarter ended December 31, 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 December 31, 2017, Cost of goods sold
decreased by $20, Selling, general administrative, and other
expenses decreased by $1, and Other expenses, net changed by $21
from previously reported amounts.
|
| |
|
| (2) | |
In December 2018, Alcoa Corporation repurchased and retired
1,723,800 shares of outstanding common stock in accordance with its
previously announced common stock repurchase program. Both the basic
and diluted average number of shares for the quarter ended December
31, 2018 includes 1,396,755 representing the weighted average number
of shares for the length of time the 1,723,800 shares were
outstanding during the fourth quarter of 2018.
|
| |
|
|
| |
| Alcoa Corporation and subsidiaries |
| Statement of Consolidated Operations (unaudited), continued |
| (dollars in millions, except per-share amounts) |
| |
|
| | Year ended |
| | December 31, |
| | 2017 |
| 2018 |
|
Sales
| |
$
|
11,652
| |
$
|
13,403
|
| | | |
|
|
Cost of goods sold (exclusive of expenses below)(1) | | |
8,991
| | |
10,081
|
|
Selling, general administrative, and other expenses(1) | | |
280
| | |
248
|
|
Research and development expenses
| | |
32
| | |
31
|
|
Provision for depreciation, depletion, and amortization
| | |
750
| | |
733
|
|
Restructuring and other charges
| | |
309
| | |
527
|
|
Interest expense
| | |
104
| | |
122
|
|
Other expenses, net(1) | |
| 27 | |
| 64 |
|
Total costs and expenses
| | |
10,493
| | |
11,806
|
| | | |
|
|
Income before income taxes
| | |
1,159
| | |
1,597
|
|
Provision for income taxes
| |
| 600 | |
| 726 |
| | | |
|
|
Net income
| | |
559
| | |
871
|
| | | |
|
|
Less: Net income attributable to noncontrolling interest
| |
| 342 | |
| 644 |
| | | |
|
|
NET INCOME ATTRIBUTABLE TO ALCOA CORPORATION
| | $ | 217 | | $ | 227 |
| | | |
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON
SHAREHOLDERS:
| | | | |
|
Basic:
| | | | |
|
Net income
| |
$
|
1.18
| |
$
|
1.22
|
|
Average number of shares
| | |
184,420,404
| | |
186,230,908
|
| | | |
|
|
Diluted:
| | | | |
|
Net income
| |
$
|
1.16
| |
$
|
1.20
|
|
Average number of shares
| | |
186,981,665
| | |
188,534,139
|
| | | |
|
| | | |
|
|
Common stock outstanding at the end of the period(2) | | |
185,200,713
| | |
184,770,249
|
| (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 year ended
December 31, 2018, the non-service cost components reported in Other
expenses, net was $139. Additionally, the Statement of Consolidated
Operations for the year ended December 31, 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 year ended December 31, 2017, Cost of goods
sold decreased by $81, Selling, general administrative, and other
expenses decreased by $4, and Other expenses, net changed by $85
from previously reported amounts.
|
| |
|
| (2) | |
In December 2018, Alcoa Corporation repurchased and retired
1,723,800 shares of outstanding common stock in accordance with its
previously announced common stock repurchase program. Both the basic
and diluted average number of shares for the year ended December 31,
2018 includes 1,641,367 representing the weighted average number of
shares for the length of time the 1,723,800 shares were outstanding
during 2018.
|
| |
|
|
| |
| |
| Alcoa Corporation and subsidiaries |
| Consolidated Balance Sheet (unaudited) |
| (in millions) |
| | | |
|
| | December 31, | | December 31, |
| | 2017 | | 2018 |
|
ASSETS
| | | | |
|
Current assets:
| | | | |
|
Cash and cash equivalents
| |
$
|
1,358
| | |
$
|
1,113
| |
|
Receivables from customers
| | |
811
| | | |
830
| |
|
Other receivables
| | |
232
| | | |
173
| |
|
Inventories
| | |
1,453
| | | |
1,644
| |
|
Fair value of derivative instruments
| | |
113
| | | |
73
| |
|
Prepaid expenses and other current assets(1) | |
| 271 |
| |
| 301 |
|
|
Total current assets
| |
| 4,238 |
| |
| 4,134 |
|
| | | |
|
|
Properties, plants, and equipment
| | |
23,046
| | | |
21,807
| |
|
Less: accumulated depreciation, depletion, and amortization
| |
| 13,908 |
| |
| 13,480 |
|
|
Properties, plants, and equipment, net
| |
| 9,138 |
| |
| 8,327 |
|
|
Investments
| | |
1,410
| | | |
1,360
| |
|
Deferred income taxes
| | |
814
| | | |
563
| |
|
Fair value of derivative instruments
| | |
128
| | | |
82
| |
|
Other noncurrent assets
| |
| 1,719 |
| |
| 1,480 |
|
|
Total assets
| | $ | 17,447 |
| | $ | 15,946 |
|
| | | |
|
|
LIABILITIES
| | | | |
|
Current liabilities:
| | | | |
|
Accounts payable, trade
| |
$
|
1,898
| | |
$
|
1,663
| |
|
Accrued compensation and retirement costs
| | |
459
| | | |
400
| |
|
Taxes, including income taxes
| | |
282
| | | |
426
| |
|
Fair value of derivative instruments
| | |
185
| | | |
82
| |
|
Other current liabilities
| | |
412
| | | |
347
| |
|
Long-term debt due within one year
| |
| 16 |
| |
| 1 |
|
|
Total current liabilities
| |
| 3,252 |
| |
| 2,919 |
|
|
Long-term debt, less amount due within one year
| | |
1,388
| | | |
1,801
| |
|
Accrued pension benefits
| | |
2,341
| | | |
1,414
| |
|
Accrued other postretirement benefits
| | |
1,100
| | | |
868
| |
|
Asset retirement obligations
| | |
617
| | | |
529
| |
|
Environmental remediation
| | |
258
| | | |
236
| |
|
Fair value of derivative instruments
| | |
1,105
| | | |
261
| |
|
Noncurrent income taxes
| | |
309
| | | |
303
| |
|
Other noncurrent liabilities and deferred credits
| |
| 279 |
| |
| 222 |
|
|
Total liabilities
| |
| 10,649 |
| |
| 8,553 |
|
| | | |
|
|
EQUITY
| | | | |
|
Alcoa Corporation shareholders’ equity:
| | | | |
|
Common stock
| | |
2
| | | |
2
| |
|
Additional capital
| | |
9,590
| | | |
9,611
| |
|
Retained earnings
| | |
113
| | | |
341
| |
|
Accumulated other comprehensive loss
| |
| (5,182 |
)
| |
| (4,568 |
)
|
|
Total Alcoa Corporation shareholders' equity
| |
| 4,523 |
| |
| 5,386 |
|
|
Noncontrolling interest
| |
| 2,275 |
| |
| 2,007 |
|
|
Total equity
| |
| 6,798 |
| |
| 7,393 |
|
|
Total liabilities and equity
| | $ | 17,447 |
| | $ | 15,946 |
|
| (1) |
|
This line item includes $7 and $3 of restricted cash as of December
31, 2017 and 2018, respectively.
|
| |
|
|
| |
| Alcoa Corporation and subsidiaries |
| Statement of Consolidated Cash Flows (unaudited) |
| (in millions) |
| |
|
| | Year ended |
| | December 31, |
| | 2017 |
| 2018 |
|
CASH FROM OPERATIONS
| | | | |
|
Net income
| |
$
|
559
| | |
$
|
871
| |
|
Adjustments to reconcile net income to cash from operations:
| | | | |
|
Depreciation, depletion, and amortization
| | |
752
| | | |
733
| |
|
Deferred income taxes
| | |
176
| | | |
(36
|
)
|
|
Equity earnings, net of dividends
| | |
9
| | | |
17
| |
|
Restructuring and other charges
| | |
309
| | | |
527
| |
|
Net gain from investing activities – asset sales
| | |
(116
|
)
| | |
–
| |
|
Net periodic pension benefit cost
| | |
111
| | | |
146
| |
|
Stock-based compensation
| | |
24
| | | |
35
| |
|
Other
| | |
32
| | | |
(59
|
)
|
|
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments:
| | | | |
|
(Increase) in receivables
| | |
(118
|
)
| | |
(43
|
)
|
|
(Increase) in inventories
| | |
(238
|
)
| | |
(278
|
)
|
|
Decrease (Increase) in prepaid expenses and other current assets
| | |
43
| | | |
(32
|
)
|
|
Increase (Decrease) in accounts payable, trade
| | |
377
| | | |
(165
|
)
|
|
(Decrease) in accrued expenses(1) | | |
(563
|
)
| | |
(319
|
)
|
|
Increase in taxes, including income taxes
| | |
111
| | | |
241
| |
|
Pension contributions(2) | | |
(106
|
)
| | |
(992
|
)
|
|
(Increase) in noncurrent assets
| | |
(99
|
)
| | |
(101
|
)
|
|
(Decrease) in noncurrent liabilities
| |
| (39 |
)
| |
| (97 |
)
|
|
CASH PROVIDED FROM OPERATIONS
| |
| 1,224 |
| |
| 448 |
|
| | | |
|
|
FINANCING ACTIVITIES
| | | | |
|
Cash paid to former parent company related to separation(3) | | |
(247
|
)
| | |
–
| |
|
Net change in short-term borrowings (original maturities of three
months or less)
| | |
7
| | | |
–
| |
|
Additions to debt (original maturities greater than three months)(2) | | |
21
| | | |
560
| |
|
Payments on debt (original maturities greater than three months)
| | |
(60
|
)
| | |
(135
|
)
|
|
Proceeds from the exercise of employee stock options
| | |
43
| | | |
23
| |
|
Repurchase of common stock(4) | | |
–
| | | |
(50
|
)
|
|
Contributions from noncontrolling interest
| | |
80
| | | |
149
| |
|
Distributions to noncontrolling interest
| | |
(342
|
)
| | |
(827
|
)
|
|
Other
| |
| (8 |
)
| |
| (8 |
)
|
|
CASH USED FOR FINANCING ACTIVITIES
| |
| (506 |
)
| |
| (288 |
)
|
| | | |
|
|
INVESTING ACTIVITIES
| | | | |
|
Capital expenditures
| | |
(405
|
)
| | |
(399
|
)
|
|
Proceeds from the sale of assets and businesses
| | |
245
| | | |
1
| |
|
Additions to investments
| |
| (66 |
)
| |
| (7 |
)
|
|
CASH USED FOR INVESTING ACTIVITIES(5) | |
| (226 |
)
| |
| (405 |
)
|
| | | |
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH(5) | |
| 14 |
| |
| (4 |
)
|
|
Net change in cash and cash equivalents and restricted cash(5) | | |
506
| | | |
(249
|
)
|
Cash and cash equivalents and restricted cash at beginning of year(5) | |
| 859 |
| |
| 1,365 |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR(5) | | $ | 1,365 |
| | $ | 1,116 |
|
(1) |
|
The (Decrease) in accrued expenses line item for the year ended
December 31, 2017 includes a $238 payment for the early termination
of a power supply contract related to Alcoa’s Rockdale (Texas)
smelter, which had been curtailed since the end of 2008.
|
| |
|
(2) | |
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 year ended
December 31, 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).
|
| |
|
(3) | |
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.
|
| |
|
(4) | |
In December 2018, Alcoa Corporation repurchased and retired
1,723,800 shares of outstanding common stock in accordance with its
previously announced common stock repurchase program.
|
| |
|
(5) | |
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 year ended December 31, 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 $3, respectively.
Additionally, the Company’s Statement of Consolidated Cash Flows for
the year ended December 31, 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 year line items include restricted
cash of $6 and $7, respectively. The change of $1 for the year ended
December 31, 2017 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)) |
| | | | | | | | | | | | | |
|
| | 4Q17 | | 2017 | | 1Q18 | | 2Q18 | | 3Q18 | | 4Q18 | | 2018 |
| Bauxite: | | | | | | | | | | | | | | |
|
Production(1) (mdmt)
| | |
12.1
| | | |
45.8
| | | |
11.2
| | | |
11.3
| | | |
11.5
| | | |
11.8
| | | |
45.8
| |
|
Third-party shipments (mdmt)
| | |
1.5
| | | |
6.6
| | | |
1.1
| | | |
1.6
| | | |
1.4
| | | |
1.6
| | | |
5.7
| |
|
Intersegment shipments (mdmt)
| | |
10.8
| | | |
41.1
| | | |
10.4
| | | |
10.0
| | | |
10.1
| | | |
10.7
| | | |
41.2
| |
|
Third-party sales
| |
$
|
79
| | |
$
|
333
| | |
$
|
47
| | |
$
|
77
| | |
$
|
67
| | |
$
|
80
| | |
$
|
271
| |
|
Intersegment sales
| |
$
|
227
| | |
$
|
875
| | |
$
|
249
| | |
$
|
226
| | |
$
|
224
| | |
$
|
245
| | |
$
|
944
| |
|
Adjusted EBITDA(2),(3) | |
$
|
105
| | |
$
|
424
| | |
$
|
110
| | |
$
|
100
| | |
$
|
106
| | |
$
|
110
| | |
$
|
426
| |
|
Depreciation, depletion, and amortization
|
|
$
|
21
|
|
|
$
|
82
|
|
|
$
|
29
|
|
|
$
|
27
|
|
|
$
|
27
|
|
|
$
|
28
|
|
|
$
|
111
|
|
| | | | | | | | | | | | | |
|
| Alumina: | | | | | | | | | | | | | | |
|
Production (kmt)
| | |
3,331
| | | |
13,096
| | | |
3,173
| | | |
3,227
| | | |
3,160
| | | |
3,297
| | | |
12,857
| |
|
Third-party shipments (kmt)
| | |
2,306
| | | |
9,220
| | | |
2,376
| | | |
2,285
| | | |
2,233
| | | |
2,365
| | | |
9,259
| |
|
Intersegment shipments (kmt)
| | |
1,223
| | | |
4,475
| | | |
1,097
| | | |
1,031
| | | |
1,083
| | | |
1,115
| | | |
4,326
| |
|
Average realized third-party price per metric ton of alumina
| |
$
|
406
| | |
$
|
340
| | |
$
|
385
| | |
$
|
467
| | |
$
|
493
| | |
$
|
479
| | |
$
|
455
| |
|
Third-party sales
| |
$
|
937
| | |
$
|
3,133
| | |
$
|
914
| | |
$
|
1,068
| | |
$
|
1,101
| | |
$
|
1,132
| | |
$
|
4,215
| |
|
Intersegment sales
| |
$
|
580
| | |
$
|
1,723
| | |
$
|
454
| | |
$
|
536
| | |
$
|
544
| | |
$
|
567
| | |
$
|
2,101
| |
|
Adjusted EBITDA(2),(3) | |
$
|
562
| | |
$
|
1,289
| | |
$
|
392
| | |
$
|
638
| | |
$
|
660
| | |
$
|
683
| | |
$
|
2,373
| |
|
Depreciation and amortization
| |
$
|
52
| | |
$
|
207
| | |
$
|
53
| | |
$
|
49
| | |
$
|
48
| | |
$
|
47
| | |
$
|
197
| |
|
Equity income (loss)
|
|
$
|
5
|
|
|
$
|
(5
|
)
|
|
$
|
(1
|
)
|
|
$
|
14
|
|
|
$
|
10
|
|
|
$
|
9
|
|
|
$
|
32
|
|
| | | | | | | | | | | | | |
|
| Aluminum: | | | | | | | | | | | | | | |
|
Primary aluminum production (kmt)
| | |
598
| | | |
2,328
| | | |
554
| | | |
565
| | | |
567
| | | |
573
| | | |
2,259
| |
|
Third-party aluminum shipments(4) (kmt)
| | |
854
| | | |
3,356
| | | |
794
| | | |
853
| | | |
806
| | | |
815
| | | |
3,268
| |
|
Average realized third-party price per metric ton of primary aluminum
| |
$
|
2,365
| | |
$
|
2,224
| | |
$
|
2,483
| | |
$
|
2,623
| | |
$
|
2,465
| | |
$
|
2,358
| | |
$
|
2,484
| |
|
Third-party sales
| |
$
|
2,143
| | |
$
|
8,027
| | |
$
|
2,111
| | |
$
|
2,413
| | |
$
|
2,198
| | |
$
|
2,107
| | |
$
|
8,829
| |
|
Intersegment sales
| |
$
|
5
| | |
$
|
21
| | |
$
|
4
| | |
$
|
4
| | |
$
|
6
| | |
$
|
4
| | |
$
|
18
| |
|
Adjusted EBITDA(2),(3) | |
$
|
246
| | |
$
|
1,012
| | |
$
|
153
| | |
$
|
231
| | |
$
|
73
| | |
$
|
(53
|
)
| |
$
|
404
| |
|
Depreciation and amortization
| |
$
|
104
| | |
$
|
419
| | |
$
|
106
| | |
$
|
108
| | |
$
|
91
| | |
$
|
89
| | |
$
|
394
| |
|
Equity loss
|
|
$
|
(8
|
)
|
|
$
|
(19
|
)
|
|
$
|
–
|
|
|
$
|
(8
|
)
|
|
$
|
(5
|
)
|
|
$
|
(25
|
)
|
|
$
|
(38
|
)
|
| | | | | | | | | | | | | |
|
| Reconciliation of total segment Adjusted EBITDA to consolidated
net (loss) income attributable to Alcoa Corporation: | | | | | | | | | | | | | | |
|
Total segment Adjusted EBITDA(2) | |
$
|
913
| | |
$
|
2,725
| | |
$
|
655
| | |
$
|
969
| | |
$
|
839
| | |
$
|
740
| | |
$
|
3,203
| |
|
Unallocated amounts:
| | | | | | | | | | | | | | |
|
Transformation(5),(6) | | |
10
| | | |
(49
|
)
| | |
(2
|
)
| | |
(1
|
)
| | |
1
| | | |
(1
|
)
| | |
(3
|
)
|
|
Corporate inventory accounting(5),(7) | | |
(95
|
)
| | |
(107
|
)
| | |
31
| | | |
(32
|
)
| | |
(17
|
)
| | |
29
| | | |
11
| |
|
Corporate expenses(3),(8) | | |
(31
|
)
| | |
(131
|
)
| | |
(27
|
)
| | |
(26
|
)
| | |
(22
|
)
| | |
(21
|
)
| | |
(96
|
)
|
|
Provision for depreciation, depletion, and amortization
| | |
(187
|
)
| | |
(750
|
)
| | |
(194
|
)
| | |
(192
|
)
| | |
(173
|
)
| | |
(174
|
)
| | |
(733
|
)
|
|
Restructuring and other charges
| | |
(297
|
)
| | |
(309
|
)
| | |
19
| | | |
(231
|
)
| | |
(177
|
)
| | |
(138
|
)
| | |
(527
|
)
|
|
Interest expense
| | |
(27
|
)
| | |
(104
|
)
| | |
(26
|
)
| | |
(32
|
)
| | |
(33
|
)
| | |
(31
|
)
| | |
(122
|
)
|
|
Other expenses, net(3) | | |
(30
|
)
| | |
(27
|
)
| | |
(21
|
)
| | |
(9
|
)
| | |
(2
|
)
| | |
(32
|
)
| | |
(64
|
)
|
|
Other(3),(5),(9) |
|
|
(40
|
)
|
|
|
(89
|
)
|
|
|
(23
|
)
|
|
|
(36
|
)
|
|
|
(10
|
)
|
|
|
(3
|
)
|
|
|
(72
|
)
|
|
Consolidated income before income taxes
| | |
216
| | | |
1,159
| | | |
412
| | | |
410
| | | |
406
| | | |
369
| | | |
1,597
| |
|
Provision for income taxes
| | |
(272
|
)
| | |
(600
|
)
| | |
(138
|
)
| | |
(180
|
)
| | |
(251
|
)
| | |
(157
|
)
| | |
(726
|
)
|
|
Net income attributable to noncontrolling interest
|
|
|
(140
|
)
|
|
|
(342
|
)
|
|
|
(124
|
)
|
|
|
(155
|
)
|
|
|
(196
|
)
|
|
|
(169
|
)
|
|
|
(644
|
)
|
|
Consolidated net (loss) income attributable to Alcoa Corporation
|
|
$
|
(196
|
)
|
|
$
|
217
|
|
|
$
|
150
|
|
|
$
|
75
|
|
|
$
|
(41
|
)
|
|
$
|
43
|
|
|
$
|
227
|
|
|
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 (loss) income
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 | | Quarter ended | | | Year ended |
| December 31,
2017 |
| September 30,
2018 |
| December 31,
2018 | | | December 31,
2017 |
| December 31,
2018 |
| | | | | | | | | | |
|
|
Net (loss) income attributable to Alcoa Corporation
| |
$
|
(196
|
)
| |
$
|
(41
|
)
| |
$
|
43
| | | |
$
|
217
| | |
$
|
227
| |
| | | | | | | | | | |
|
|
Special items:
| | | | | | | | | | | |
|
Restructuring and other charges
| | |
297
| | | |
177
| | | |
138
| | | | |
309
| | | |
527
| |
|
Discrete tax items(1) | | |
82
| | | |
26
| | | |
(24
|
)
| | | |
93
| | | |
2
| |
|
Other special items(2) | | |
31
| | | |
(42
|
)
| | |
29
| | | | |
(9
|
)
| | |
39
| |
|
Tax impact(3) | | |
(7
|
)
| | |
(1
|
)
| | |
(43
|
)
| | | |
(24
|
)
| | |
(89
|
)
|
|
Noncontrolling interest impact(3) | |
| (12 |
)
| |
| – |
| |
| (18 |
)
| | |
| (23 |
)
| |
| (31 |
)
|
|
Subtotal
| |
| 391 |
| |
| 160 |
| |
| 82 |
| | |
| 346 |
| |
| 448 |
|
| | | | | | | | | | |
|
|
Net income attributable to Alcoa Corporation – as adjusted
| | $ | 195 |
| | $ | 119 |
| | $ | 125 |
| | | $ | 563 |
| | $ | 675 |
|
| | | | | | | | | | |
|
| | | | | | | | | | |
|
|
Diluted EPS(4):
| | | | | | | | | | | |
|
Net (loss) income attributable to Alcoa Corporation common
shareholders
| |
$
|
(1.06
|
)
| |
$
|
(0.22
|
)
| |
$
|
0.23
| | | |
$
|
1.16
| | |
$
|
1.20
| |
| | | | | | | | | | |
|
|
Net income attributable to Alcoa Corporation common shareholders –
as adjusted
| | |
1.04
| | | |
0.63
| | | |
0.66
| | | | |
3.01
| | | |
3.58
| |
|
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 (loss) income 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 December 31, 2017, a charge for a valuation
allowance related to certain non-U.S. deferred income tax assets
($60), a charge for the remeasurement of certain non-U.S. deferred
income tax assets due to a tax rate change ($16), a charge for the
remeasurement of U.S. deferred income tax assets and liabilities at
the new corporate income tax rate of 21% (from 35%) under the 2017
Tax Cuts and Jobs Act signed into law on December 22, 2017 ($22),
and a net benefit for several other items ($16);
|
| |
•
| |
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);
|
| |
•
| |
for the quarter ended December 31, 2018, a net benefit for several
items;
|
| |
•
| |
for the year ended December 31, 2017, a charge for a valuation
allowance related to certain non-U.S. deferred income tax assets
($60), a charge for the remeasurement of certain non-U.S. deferred
income tax assets due to a tax rate change ($26), a charge for the
remeasurement of U.S. deferred income tax assets and liabilities at
the new corporate income tax rate of 21% (from 35%) under the 2017
Tax Cuts and Jobs Act signed into law on December 22, 2017 ($22),
and a net benefit for several other items ($15); and
|
| |
•
| |
for the year ended December 31, 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 other items ($28).
|
| | | |
|
| (2) | |
Other special items include the following:
|
| |
•
| |
for the quarter ended December 31, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($29), a favorable
tax impact resulting from the difference between Alcoa Corporation’s
consolidated estimated annual effective tax rate and the statutory
rates applicable to special items ($13), a write-down of inventory
related to the permanent closure of the Rockdale (Texas) smelter
($6), an unfavorable tax impact related to the interim period
treatment of operational losses in certain jurisdictions for which
no tax benefit was recognized ($6), preparation and contingency
costs for a potential work stoppage (lockout commenced on January
11, 2018) at the Bécancour (Canada) smelter ($4), an additional gain
on the sale of the Yadkin Hydroelectric Project in the United States
($2), and a net unfavorable change in certain mark-to-market energy
derivative instruments ($1);
|
| |
•
| |
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), and costs related to both a work stoppage at the
Bécancour (Canada) smelter ($3 (primarily contractor services)) and
the partial restart of the Warrick (Indiana) smelter ($1);
|
| |
•
| |
for the quarter ended December 31, 2018, an unfavorable tax impact
resulting from the difference between Alcoa’s consolidated estimated
annual effective tax rate and the statutory rates applicable to
special items ($32), a favorable tax impact related to the interim
period treatment of operational losses in certain jurisdictions for
which no tax benefit was recognized ($5), a net favorable change in
certain mark-to-market energy derivative instruments ($3), and costs
related to each of the following: a work stoppage at the Bécancour
(Canada) smelter ($3 (primarily contractor services)), a collective
employee dismissal process at the Avilés and La Coruña (Spain)
smelters ($1 (primarily contractor services)), and the partial
restart of the Warrick (Indiana) smelter ($1);
|
| |
•
| |
for the year ended December 31, 2017, a gain on the sale of the
Yadkin Hydroelectric Project in the United States ($122), costs
related to the partial restart of the Warrick (Indiana) smelter
($46), a net unfavorable change in certain mark-to-market energy
derivative instruments ($25), 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 (Australia) smelter ($21), settlement of
legacy tax matters in Brazil ($11), a write-down of inventory
related to the permanent closure of the Rockdale (Texas) smelter
($6), and preparation and contingency costs for a potential work
stoppage (lockout commenced on January 11, 2018) at the Bécancour
(Canada) smelter ($4); and
|
| |
•
| |
for the year ended December 31, 2018, a loss on a contractor
arbitration matter, including interest, ($29), a net favorable
change in certain mark-to-market energy derivative instruments
($22), and costs related to each of the following: the partial
restart of the Warrick (Indiana) smelter ($20), a work stoppage at
the Bécancour (Canada) smelter ($11 (primarily contractor
services)), and a collective employee dismissal process at the
Avilés and La Coruña (Spain) smelters ($1 (primarily contractor
services)).
|
| | | |
|
| (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 Corporation’s partner’s share of certain special
items.
|
| |
|
| (4) | |
In any given period, the average number of shares applicable to
diluted EPS for Net (loss) income 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 December 31, 2017, 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 188,027,654;
|
| |
•
| |
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;
|
| |
•
| |
for the quarter ended December 31, 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 188,219,224;
|
| |
•
| |
for the year ended December 31, 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 186,981,665; and
|
| |
•
| |
for the year ended December 31, 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 188,534,139.
|
| | | |
|
|
| |
|
| |
| Alcoa Corporation and subsidiaries |
| Calculation of Financial Measures (unaudited), continued |
| (in millions) |
| | | | |
|
| Adjusted EBITDA | | Quarter ended | | | Year ended |
| December 31,
2017 |
| September 30,
2018 |
| December 31,
2018 | | | December 31,
2017 |
| December 31,
2018 |
| | | | | | | | | | |
|
|
Net (loss) income attributable to Alcoa Corporation
| |
$
|
(196
|
)
| |
$
|
(41
|
)
| |
$
|
43
| | |
$
|
217
| |
$
|
227
|
| | | | | | | | | | |
|
|
Add:
| | | | | | | | | | | |
|
Net income attributable to noncontrolling interest
| | |
140
| | | |
196
| | | |
169
| | | |
342
| | |
644
|
|
Provision for income taxes
| | |
272
| | | |
251
| | | |
157
| | | |
600
| | |
726
|
|
Other expenses, net(1) | | |
30
| | | |
2
| | | |
32
| | | |
27
| | |
64
|
|
Interest expense
| | |
27
| | | |
33
| | | |
31
| | | |
104
| | |
122
|
|
Restructuring and other charges
| | |
297
| | | |
177
| | | |
138
| | | |
309
| | |
527
|
|
Provision for depreciation, depletion, and amortization
| |
| 187 |
| |
| 173 |
| |
| 174 | | |
| 750 | |
| 733 |
| | | | | | | | | | |
|
|
Adjusted EBITDA(1) | | $ | 757 |
| | $ | 791 |
| | $ | 744 | | | $ | 2,349 | | $ | 3,043 |
| | | | | | | | | | |
|
| | | | | | | | | | |
|
|
Special items(2) | |
| 39 |
| |
| 4 |
| |
| 5 | | |
| 88 | |
| 58 |
| | | | | | | | | | |
|
|
Adjusted EBITDA, excluding special items(1) | | $ | 796 |
| | $ | 795 |
| | $ | 749 | | | $ | 2,437 | | $ | 3,101 |
|
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 and year ended December 31, 2017, Other
expenses (income), net changed by $21 and $85, respectively.
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 December 31, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($29), a write-down
of inventory related to the permanent closure of the Rockdale
(Texas) smelter ($6), and preparation and contingency costs for a
potential work stoppage (lockout commenced on January 11, 2018) at
the Bécancour (Canada) smelter ($4);
|
| |
•
| |
for the quarter ended September 30, 2018, costs related to both a
work stoppage at the Bécancour (Canada) smelter ($3 (primarily
contractor services)) and the partial restart of the Warrick
(Indiana) smelter ($1);
|
| |
•
| |
for the quarter ended December 31, 2018, costs related to each of
the following: a work stoppage at the Bécancour (Canada) smelter ($3
(primarily contractor services)), a collective employee dismissal
process at the Avilés and La Coruña (Spain) smelters ($1 (primarily
contractor services)), and the partial restart of the Warrick
(Indiana) smelter ($1);
|
| |
•
| |
for the year ended December 31, 2017, costs related to the partial
restart of the Warrick (Indiana) smelter ($46), 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 (Australia) smelter ($21),
settlement of legacy tax matters in Brazil ($11), a write-down of
inventory related to the permanent closure of the Rockdale (Texas)
smelter ($6), and preparation and contingency costs for a potential
work stoppage (lockout commenced on January 11, 2018) at the
Bécancour (Canada) smelter ($4); and
|
| |
•
| |
for the year ended December 31, 2018, a loss on a contractor
arbitration matter ($26) and costs related to each of the following:
the partial restart of the Warrick (Indiana) smelter ($20), a work
stoppage at the Bécancour (Canada) smelter ($11 (primarily
contractor services)), and a collective employee dismissal process
at the Avilés and La Coruña (Spain) smelters ($1 (primarily
contractor services)).
|
| | | |
|
|
| |
|
| |
| Alcoa Corporation and subsidiaries |
| Calculation of Financial Measures (unaudited), continued |
| (in millions) |
| | | | |
|
| Free Cash Flow | | Quarter ended | | | Year ended |
| December 31,
2017 |
| September 30,
2018 |
| December 31,
2018 | | | December 31,
2017 |
| December 31,
2018* |
| | | | | | | | | | |
|
|
Cash from operations
| |
$
|
455
| | |
$
|
288
| | |
$
|
535
| | | |
$
|
1,224
| | |
$
|
448
| |
| | | | | | | | | | |
|
|
Capital expenditures
| |
| (150 |
)
| |
| (82 |
)
| |
| (148 |
)
| | |
| (405 |
)
| |
| (399 |
)
|
| | | | | | | | | | |
|
| | | | | | | | | | |
|
|
Free cash flow
| | $ | 305 |
| | $ | 206 |
| | $ | 387 |
| | | $ | 819 |
| | $ | 49 |
|
|
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 year ended December 31, 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 | | December 31, | | September 30, | | December 31, |
| | 2017 | | 2018 | | 2018 |
| | | | | |
|
|
Short-term borrowings
| |
$
|
8
| |
$
|
–
| |
$
|
–
|
|
Long-term debt due within one year
| | |
16
| | |
4
| | |
1
|
|
Long-term debt, less amount due within one year
| |
| 1,388 | |
| 1,820 | |
| 1,801 |
|
Total debt*
| |
$
|
1,412
| |
$
|
1,824
| |
$
|
1,802
|
| | | | | |
|
|
Less: Cash and cash equivalents
| |
| 1,358 | |
| 1,022 | |
| 1,113 |
| | | | | |
|
|
Net debt
| | $ | 54 | | $ | 802 | | $ | 689 |
|
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.
|
|
|
|
*
|
|
Total debt as of both September 30, 2018 and December 31, 2018
includes $500 aggregate principal amount of 6.125% senior notes due
2028 issued in May 2018, the gross proceeds of which were used to
make discretionary contributions to three of Alcoa Corporation’s
U.S. defined benefit pension plans.
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20190116005785/en/
Investor Contact:
James Dwyer
+1 412 992 5450
James.Dwyer@alcoa.com
Media
Contact:
Monica Orbe
+1 412 315 2896
Monica.Orbe@alcoa.com
Source: Alcoa Corporation