Alcoa Corporation (NYSE: AA):
- Net income of $150 million, or $0.80
per share
- Excluding special items, adjusted net
income of $145 million, or $0.77 per share
- $653 million of adjusted earnings
before interest, tax, depreciation, and amortization (EBITDA)
excluding special items
- Revenue of $3.1 billion
- $1.2 billion cash balance and $1.5
billion of debt, for net debt of $0.3 billion, as of March 31,
2018
- Company increased its 2018 projection
for adjusted EBITDA excluding special items to $3.5 billion to $3.7
billion, up from $2.6 billion to $2.8 billion1
- Company projects full-year 2018 global
deficit for both alumina and aluminum
M, except per
share amounts
1Q17 4Q17
1Q18 Revenue $ 2,655 $ 3,174 $ 3,090
Net income (loss) attributable to Alcoa Corporation $ 225 $ (196 )
$ 150 Earnings per share attributable to Alcoa Corporation $
1.21 $ (1.06 ) $ 0.80 Adjusted net income $ 117 $ 195
$ 145 Adjusted earnings per share $ 0.63 $ 1.04
$ 0.77 Adjusted EBITDA excluding special items2
$ 554 $ 796 $ 653
1
Based on actual YTD 2018 results; outlook
for unpriced sales at $2,300 LME, $500 API, $0.21 Midwest premium
and updated regional premiums, and currencies.
2
On January 1, 2018, Alcoa Corporation
adopted changes issued by the Financial Accounting Standards Board
to the presentation of net periodic benefit cost related to pension
and other postretirement benefit plans. These changes require 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, these changes are 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 first quarter 2018
results that show resilient profitability amid lower alumina prices
earlier in the year.
In addition, Alcoa ended the quarter on March 31, 2018 with a
cash balance of $1.2 billion, down $162 million sequentially, but
up $392 million year-over-year.
“Our first quarter results point to a good start for the year,
enabling us to make further progress against our strategic
priorities to reduce complexity, drive returns, and strengthen the
balance sheet,” said Alcoa President and Chief Executive Officer
Roy Harvey.
Alcoa also updated its full-year outlook for adjusted EBITDA
excluding special items to range between $3.5 billion to $3.7
billion1, up from the prior quarter’s range of $2.6 billion to $2.8
billion, due to recent favorable market conditions.
“While the markets may continue to change, our portfolio of
assets across the aluminum value chain is steadfastly positioned to
perform through commodity cycles,” Harvey said. “Most importantly,
we are uniquely suited for today’s market environment, and we are
committed to driving improved pricing to the bottom line to
strengthen Alcoa at an even faster rate.”
In first quarter 2018, Alcoa reported net income of $150
million, or $0.80 per share. In fourth quarter 2017, Alcoa reported
a net loss of $196 million, or $1.06 per share, which included $391
million in special items tied primarily to previously announced
actions taken in line with the Company’s strategic priorities.
The Company reported a positive impact of $5 million from
special items in first quarter 2018. This impact was primarily due
to a net gain from changes to employee retirement benefits in the
United States and Canada, announced in January 2018, and a net
benefit related to certain mark-to-market energy derivatives. Those
gains were mostly offset by costs for the partial restart of the
smelter at Warrick Operations in Indiana and a net unfavorable
impact for several tax items.
Excluding the impact of special items, first quarter 2018
adjusted net income was $145 million, or $0.77 per share, down 26
percent sequentially from $195 million, or $1.04 per share.
In first quarter 2018, Alcoa reported $653 million of adjusted
EBITDA excluding special items, down 18 percent from $796 million2
in fourth quarter 2017. Lower alumina prices were the primary
factor driving the sequential change in adjusted EBITDA. Other
factors, including seasonal volume declines and higher raw material
costs, were offset by improved aluminum prices and lower energy
costs.
Alcoa reported first quarter 2018 revenue of $3.1 billion, down
3 percent sequentially, largely due to decreased aluminum shipments
and a decline in alumina prices, partially offset by both increased
shipments and favorable mix in alumina and higher aluminum
prices.
Cash from operations in first quarter 2018 was $55 million and
free cash flow was a negative $19 million primarily due to seasonal
increases in working capital. Cash used for financing activities
and investing activities was $147 million and $74 million,
respectively, in the first quarter of 2018.
Alcoa ended first quarter 2018 with cash on hand of $1.2 billion
and $1.5 billion of debt, for net debt of $0.3 billion. The Company
reported 18 days working capital, a 1-day improvement from first
quarter 2017.
Earlier this month, Alcoa announced it had signed group annuity
contracts with three insurance companies to cover approximately
2,100 retirees or beneficiaries of Canadian defined benefit pension
plans. The transfer of approximately $555 million in obligations
and related assets lowers the Company’s risk to volatility from
pension plan obligations. In connection with the transaction, the
Company will record a non-cash charge of approximately $175 million
($128 million after-tax) in the second quarter of 2018. The Company
also contributed approximately $95 million in April 2018 to
facilitate the annuity transaction and maintain the funding level
of the remaining plan obligations.
Market Update
Alcoa is projecting a global deficit for both aluminum and
alumina in 2018.
Due to delays in projects to expand smelters in China, the
Company expects the global aluminum deficit to grow to between 600
thousand metric tons and 1 million metric tons, up from last
quarter’s deficit estimate of between 300 thousand metric tons and
700 thousand metric tons. Global aluminum demand growth is
projected between 4.25 to 5.25 percent.
In alumina, Alcoa projects a global deficit between 300 thousand
metric tons and 1.1 million metric tons for full year 2018,
primarily due to supply disruptions in the Atlantic region. This
projection compares to last quarter’s expectations of a balanced
market.
The global market for bauxite is expected to remain in
balance.
Considerable uncertainty remains in the global supply chain due
to multiple trade actions, sanctions, and supply disruptions.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Daylight Time (EDT) on Wednesday, April 18, to present
first quarter 2018 financial results, discuss the business, and
review market fundamentals.
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 April 18. 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; and statements about
strategies, outlook, and business and financial prospects. 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, alumina, 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 the level of
revenue growth, cash generation, cost savings, improvement in
profitability and margins, fiscal discipline, or strengthening of
competitiveness and operations anticipated from restructuring
programs and productivity improvement, 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, and regulatory risks in the
countries in which Alcoa Corporation operates or sells products;
(j) the outcome of contingencies, including legal proceedings,
government or regulatory investigations, and environmental
remediation; (k) the impact of cyberattacks and potential
information technology or data security breaches; and (l) the other
risk factors discussed 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
discussed above and other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa’s consolidated financial information but is not presented in
Alcoa’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 rules. 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 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 March
31, December 31, March 31,
2017 2017
2018 Sales $ 2,655 $ 3,174 $ 3,090 Cost
of goods sold (exclusive of expenses below)(1) 2,023 2,339 2,381
Selling, general administrative, and other expenses(1) 71 69 67
Research and development expenses 7 9 8 Provision for depreciation,
depletion, and amortization 179 187 194 Restructuring and other
charges 10 297 (19 ) Interest expense 26 27 26 Other (income)
expenses, net(1)
(79 )
30
21 Total costs and expenses 2,237
2,958 2,678 Income before income taxes 418 216 412 Provision
for income taxes
110
272 138 Net
income (loss) 308 (56 ) 274 Less: Net income attributable to
noncontrolling interest
83
140 124
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA
CORPORATION
$ 225 $
(196 )
$ 150
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic: Net income (loss) $ 1.23 $ (1.06 ) $ 0.81 Average number of
shares 183,816,083 185,078,245 185,939,770 Diluted: Net
income (loss) $ 1.21 $ (1.06 ) $ 0.80 Average number of shares
186,303,547 185,078,245 188,494,931 Common stock outstanding
at the end of the period 184,225,341 185,200,713 186,210,129 (1)
On January 1, 2018, Alcoa Corporation adopted changes issued
by the Financial Accounting Standards Board to the presentation of
net periodic benefit cost related to pension and other
postretirement benefit plans. These changes require 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
presented 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 included in existing line items
on the income statement other than such line items that include the
service cost component. Previously, Alcoa Corporation included all
components of net periodic benefit cost, except for certain
settlements, curtailments, and special termination benefits related
to severance programs, 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 included in Restructuring and
other charges, as applicable. Upon adoption of these changes,
management began classifying the non-service cost components of net
periodic benefit cost, except for certain settlements,
curtailments, and special termination benefits related to severance
programs 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 quarter ended March
31, 2018, the non-service cost components included in Other
expenses, net was $38. Additionally, the Statement of Consolidated
Operations for the quarters ended March 31, 2017 and December 31,
2017 were recast to reflect the reclassification of the non-service
cost components of net periodic benefit cost to Other (income)
expenses, net from both Cost of goods sold and Selling, general
administrative, and other expenses. As a result, for the quarters
ended March 31, 2017 and December 31, 2017, Cost of goods sold
decreased by $20, Selling, general administrative, and other
expenses decreased by $1, and Other (income) expenses, net changed
by $21.
Alcoa Corporation and
subsidiaries Consolidated Balance Sheet (unaudited)
(in millions) December 31, March 31,
2017 2018 ASSETS Current assets: Cash and cash
equivalents $ 1,358 $ 1,196 Receivables from customers 811 814
Other receivables 232 187 Inventories 1,453 1,630 Fair value of
derivative contracts 113 52 Prepaid expenses and other current
assets(1)
271 270
Total current assets
4,238
4,149 Properties, plants, and equipment
23,046 22,837 Less: accumulated depreciation, depletion, and
amortization
13,908
13,803 Properties, plants, and equipment, net
9,138 9,034
Investments 1,410 1,413 Deferred income taxes 814 700 Fair value of
derivative contracts 128 99 Other noncurrent assets
1,719 1,701 Total
assets
$ 17,447 $
17,096 LIABILITIES Current liabilities:
Accounts payable, trade $ 1,898 $ 1,813 Accrued compensation and
retirement costs 459 416 Taxes, including income taxes 282 325 Fair
value of derivative contracts 185 113 Other current liabilities 412
294 Long-term debt due within one year
16
15 Total current liabilities
3,252 2,976
Long-term debt, less amount due within one year 1,388 1,445 Accrued
pension benefits 2,341 2,218 Accrued other postretirement benefits
1,100 1,075 Asset retirement obligations 617 631 Environmental
remediation 258 234 Fair value of derivative contracts 1,105 466
Noncurrent income taxes 309 285 Other noncurrent liabilities and
deferred credits
279
249 Total liabilities
10,649 9,579
EQUITY Alcoa Corporation shareholders’ equity: Common stock 2 2
Additional capital 9,590 9,633 Retained earnings 113 263
Accumulated other comprehensive loss
(5,182 )
(4,530 ) Total Alcoa Corporation shareholders'
equity
4,523 5,368
Noncontrolling interest
2,275
2,149 Total equity
6,798 7,517 Total
liabilities and equity
$ 17,447
$ 17,096 (1) This line item
includes $7 of restricted cash as of both December 31, 2017 and
March 31, 2018.
Alcoa Corporation and
subsidiaries Statement of Consolidated Cash Flows
(unaudited) (in millions) Three months
ended March 31, 2017
2018 CASH FROM OPERATIONS Net income $ 308 $
274 Adjustments to reconcile net income to cash from operations:
Depreciation, depletion, and amortization 179 194 Deferred income
taxes 23 (11 ) Equity earnings, net of dividends (1 ) (6 )
Restructuring and other charges 10 (19 ) Net gain from investing
activities – asset sales (120 ) (5 ) Net periodic pension benefit
cost 28 40 Stock-based compensation 7 10 Other 9 (14 ) Changes in
assets and liabilities, excluding effects of acquisitions,
divestitures, and foreign currency translation adjustments:
Decrease in receivables 7 43 (Increase) in inventories (102 ) (169
) Decrease in prepaid expenses and other current assets 13 2
(Decrease) in accounts payable, trade (45 ) (106 ) (Decrease) in
accrued expenses (181 ) (186 ) (Decrease) Increase in taxes,
including income taxes (17 ) 84 Pension contributions (21 ) (40 )
(Increase) in noncurrent assets (3 ) (13 ) (Decrease) in noncurrent
liabilities
(20 )
(23 )
CASH PROVIDED FROM OPERATIONS
74
55 FINANCING ACTIVITIES Cash paid to
former parent company related to separation(1) (238 ) – Net change
in short-term borrowings (original maturities of three months or
less) 2 – Additions to debt (original maturities greater than three
months) 2 61 Payments on debt (original maturities greater than
three months) (5 ) (4 ) Proceeds from the exercise of employee
stock options 18 15 Contributions from noncontrolling interest 24
53 Distributions to noncontrolling interest (57 ) (267 ) Other
(6 )
(5 ) CASH USED FOR
FINANCING ACTIVITIES
(260 )
(147 ) INVESTING ACTIVITIES Capital
expenditures (71 ) (74 ) Proceeds from the sale of assets and
businesses 238 – Additions to investments
(25 )
– CASH PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES(2)
142
(74 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH(2)
7
4
Net change in cash and cash equivalents and restricted
cash(2) (37 ) (162 ) Cash and cash equivalents and restricted cash
at beginning of year(2)
859
1,365
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD(2)
$
822
$
1,203
(1)
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 $238 from the
sale of the Yadkin Hydroelectric Project.
(2)
On January 1, 2018, Alcoa Corporation adopted changes issued by the
Financial Accounting Standards Board to the presentation of
restricted cash in the statement of cash flows. These changes
require 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 three months ended March 31, 2018,
both 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 $7 of restricted cash. Additionally, the
Company’s Statement of Consolidated Cash Flows for the three months
ended March 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 period line items include $6 and $18,
respectively, of restricted cash. Of the $12 increase in restricted
cash for the three months ended March 31, 2017, $11 was previously
presented as a cash outflow in the investing activities section of
the Company’s Statement of Consolidated Cash Flows for the three
months ended March 31, 2017. The remaining change of $1 is now
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 Bauxite:
Production(1) (mdmt) 11.1 11.0 11.6 12.1 45.8 11.2 Third-party
shipments (mdmt) 1.4 1.6 2.1 1.5 6.6 1.1 Intersegment shipments
(mdmt) 10.2 9.9 10.2 10.8 41.1 10.4 Third-party sales $ 70 $ 80 $
104 $ 79 $ 333 $ 47 Intersegment sales $ 219 $ 208 $ 221 $ 227 $
875 $ 249 Adjusted EBITDA(2) $ 110 $ 97 $ 112 $ 105 $ 424 $ 110
Depreciation, depletion, and amortization $ 18
$ 19 $ 24 $ 21 $ 82
$ 29
Alumina: Production (kmt)
3,211 3,249 3,305 3,331 13,096 3,173 Third-party shipments (kmt)
2,255 2,388 2,271 2,306 9,220 2,376 Intersegment shipments (kmt)
947 1,152 1,153 1,223 4,475 1,097 Average realized third-party
price per metric ton of alumina
$
325
$
314
$
314
$
406
$
340
$
385
Third-party sales $ 734 $ 749 $ 713 $ 937 $ 3,133 $ 914
Intersegment sales $ 361 $ 384 $ 398 $ 580 $ 1,723 $ 454 Adjusted
EBITDA(2) $ 297 $ 227 $ 203 $ 562 $ 1,289 $ 392 Depreciation and
amortization $ 49 $ 53 $ 53 $ 52 $ 207 $ 53 Equity income (loss)
$ 1 $ (6 ) $ (5 ) $ 5
$ (5 ) $ (1 )
Aluminum: Primary
aluminum production (kmt) 559 575 596 598 2,328 554 Third-party
aluminum shipments(3) (kmt) 801 833 868 854 3,356 794 Average
realized third-party price per metric ton of primary aluminum
$
2,080
$
2,199
$
2,237
$
2,365
$
2,224
$
2,483
Third-party sales $ 1,806 $ 1,988 $ 2,090 $ 2,143 $ 8,027 $ 2,111
Intersegment sales $ 4 $ 3 $ 9 $ 5 $ 21 $ 4 Adjusted EBITDA(2) $
217 $ 234 $ 315 $ 246 $ 1,012 $ 153 Depreciation and amortization $
101 $ 108 $ 106 $ 104 $ 419 $ 106 Equity (loss) income $ (7
) $ 3 $ (7 ) $ (8 ) $ (19 )
$ –
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 Unallocated amounts:
Transformation(4),(5) (20 ) (28 ) (11 ) 10 (49 ) (2 ) Corporate
inventory accounting(4),(6) (17 ) 14 (9 ) (95 ) (107 ) 31 Corporate
expenses(2),(7) (33 ) (34 ) (33 ) (31 ) (131 ) (27 ) Provision for
depreciation, depletion, and amortization
(179
)
(190
)
(194
)
(187
)
(750
)
(194
)
Restructuring and other charges (10 ) (12 ) 10 (297 ) (309 ) 19
Interest expense (26 ) (25 ) (26 ) (27 ) (104 ) (26 ) Other income
(expenses), net(2) 79 (28 ) (48 ) (30 ) (27 ) (21 )
Other(2),(4),(8) – (18 )
(31 ) (40 ) (89 )
(23 ) Consolidated income before income taxes 418 237 288 216 1,159
412 Provision for income taxes (110 ) (99 ) (119 ) (272 ) (600 )
(138 ) Net income attributable to noncontrolling interest
(83 ) (63 ) (56 )
(140 ) (342 ) (124 ) Consolidated net
income (loss) attributable to Alcoa Corporation
$
225
$
75
$
113
$
(196
)
$
217
$
150
The difference between certain segment totals and
consolidated amounts is in Corporate. (1) The production
amounts do not include additional bauxite (approximately 3 mdmt per
annum) that Alcoa Corporation 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) On January 1,
2018, Alcoa Corporation adopted changes issued by the Financial
Accounting Standards Board to the presentation of net periodic
benefit cost related to pension and other postretirement benefit
plans. These changes require 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, these
changes are 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 for additional information.
(3) The Aluminum segment’s third-party aluminum shipments
are composed of both primary aluminum and flat-rolled aluminum.
(4) Effective in the first quarter of 2017, 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 5), 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 6). 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. (5)
Transformation includes, among other items, the Adjusted EBITDA of
previously closed operations. (6) 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. (7) 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. (8) Other includes items described as
“Other special items” (see footnote 2 to the reconciliation of
Adjusted Income on the Calculation of Financial Measures) that
impact Cost of goods sold and Selling, general administrative, and
other expenses on Alcoa Corporation’s Statement of Consolidated
Operations.
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
March
31,2017
December
31,2017
March
31,2018
March
31,2017
December
31,2017
March
31,2018
Net income (loss) attributable to Alcoa Corporation $
225
$ (196 ) $ 150 $ 1.21 $ (1.06 ) $ 0.80 Special items:
Restructuring and other charges
10
297
(19
)
Discrete tax items(1)
(2
)
82
(2
)
Other special items(2)
(124
)
31
18
Tax impact(3)
5
(7 ) (2 ) Noncontrolling interest impact(3)
3
(12
)
–
Subtotal
(108
)
391 (5 )
Net income attributable to Alcoa Corporation – as adjusted
$
117
$
195
$
145
0.63
1.04
0.77
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 March 31, 2017, a net benefit for several
small items;
•
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); and
•
for the quarter ended March 31, 2018, a net benefit for several
small items. (2) Other special items include the following:
•
for the quarter ended March 31, 2017, a gain on the sale of the
Yadkin Hydroelectric Project in the United States ($120) and a net
favorable change in certain mark-to-market energy derivative
instruments ($4);
•
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 a non-U.S. 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); and
•
for the quarter ended March 31, 2018, a net favorable change in
certain mark-to-market energy derivative instruments ($17), costs
related to the partial restart of the Warrick (Indiana) smelter
($16), an unfavorable tax impact resulting from the difference
between Alcoa Corporation’s consolidated estimated annual effective
tax rate and the statutory rates applicable to special items ($15),
costs, primarily contractor services, related to a work stoppage at
a non-U.S. smelter ($3), and an unfavorable tax impact related to
the interim period treatment of operational losses in certain
jurisdictions for which no tax benefit was recognized ($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 March 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 186,303,547;
•
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; and
•
for the quarter ended March 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 188,494,931.
Alcoa Corporation and subsidiaries Calculation of
Financial Measures (unaudited), continued (in millions)
Adjusted EBITDA
Quarter ended
March 31,
2017
December 31,
2017
March 31,
2018
Net income (loss) attributable to Alcoa Corporation $
225
$ (196 ) $ 150 Add: Net income attributable to
noncontrolling interest
83
140
124
Provision for income taxes
110
272 138 Other (income) expenses, net(1)
(79
) 30 21 Interest expense
26
27 26 Restructuring and other charges
10
297 (19 ) Provision for depreciation, depletion, and amortization
179
187
194
Adjusted EBITDA(1)
$
554
$ 757 $
634 Special items(2)
–
39 19
Adjusted EBITDA, excluding special items(1)
$
554
$
796
$
653
Alcoa’s 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 changes
issued by the Financial Accounting Standards Board to the
presentation of net periodic benefit cost related to pension and
other postretirement benefit plans. These changes require 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, these changes are 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 quarters ended March 31, 2017
and December 31, 2017, Other (income) 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 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 a non-U.S. smelter ($4); and
•
for the quarter ended March 31, 2018, costs related to the partial
restart of the Warrick (Indiana) smelter ($16) and costs, primarily
contractor services, related to a work stoppage at a non-U.S.
smelter ($3).
Alcoa Corporation and
subsidiaries Calculation of Financial Measures (unaudited),
continued (in millions) Free Cash Flow
Quarter ended
March 31,
2017
December 31,
2017
March 31,
2018
Cash from operations $
74
$ 455 $ 55 Capital expenditures
(71
)
(150
)
(74
)
Free cash flow
$
3
$ 305 $
(19 ) 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.
Net Debt
December 31,
2017
March 31,
2018
Short-term borrowings $ 8 $ – Long-term debt due within one
year 16 15 Long-term debt, less amount due within one year
1,388 1,445 Total debt $ 1,412 $
1,460 Less: Cash and cash equivalents
1,358 1,196 Net debt
$ 54 $ 264 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/20180418006272/en/
Alcoa CorporationInvestor Contact:James Dwyer, +1
412-992-5450James.Dwyer@alcoa.comorMedia Contact:Monica Orbe, +1
412-315-2896Monica.Orbe@alcoa.com
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