Alumina and aluminum pricing drive revenue
growth, cash climbs to $1.36 billion
Fourth Quarter 2017
- Net loss of $196 million, or $1.06 per
share, includes the financial impacts of previously announced
actions taken in line with the Company’s strategic priorities
- Excluding special items, adjusted net
income of $195 million, or $1.04 per share, up 44 percent
sequentially
- $775 million of adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)
excluding special items, up 38 percent sequentially, on higher
alumina pricing
- $3.2 billion revenue, up 7 percent
sequentially, driven mostly by improved alumina pricing
- $1.36 billion cash balance and $1.41
billion of debt, for net debt of $0.05 billion, as of December 31,
2017
Full Year 2017
- Full-year 2017 net income of $217
million, or $1.16 per share and adjusted net income of $563
million, or $3.01 per share
- Adjusted EBITDA excluding special items
of $2.35 billion, more than double full-year 2016
- $11.7 billion revenue, up 25 percent
from 2016, on higher alumina and aluminum pricing
- $1.2 billion cash from operations; $0.8
billion free cash flow
- Company announces freeze of U.S. and
Canada salaried defined benefit pension plans, effective January 1,
2021
- Continuing progress on strategic
priorities to reduce complexity, drive returns and strengthen the
balance sheet
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina and aluminum products, today reported fourth quarter and
full-year 2017 results.
M, except per share amounts
4Q161
3Q17 4Q17
FY161
FY17 Revenue $2,537 $2,964
$3,174 $9,318 $11,652 Net (loss) income attributable
to Alcoa Corporation $(125 ) $113 $(196 ) $(400 ) $217 Earnings per
share attributable to Alcoa Corporation $(0.68 )
$0.60 $(1.06 ) $(2.19 ) $1.16 Adjusted net
income (loss) $26 $135 $195 $(227 ) $563 Adjusted earnings per
share $0.14 $0.72 $1.04
$(1.24 ) $3.01 Adjusted EBITDA excluding special items
$335 $561 $775 $1,108
$2,352
The quarter and the full-year reflect ongoing strength in
alumina and aluminum pricing as management continued to execute on
its strategic priorities to reduce complexity, drive returns and
strengthen the balance sheet.
The Company closed the year with $1.36 billion cash, up $239
million sequentially and $505 million year-over-year.
Based on January 2018 market assumptions2, Alcoa is projecting
full-year 2018 adjusted EBITDA, excluding special items, to range
between $2.6 billion and $2.8 billion.
“Solid market fundamentals allowed us to deliver our strongest
adjusted EBITDA quarter since our launch as an independent,
publicly-traded company,” said Roy Harvey, President and Chief
Executive Officer. “With a series of operating and asset decisions,
we also purposefully delivered against our strategic priorities.
Our first full year has been truly remarkable. By continuously
focusing on our strategic priorities, and supported by favorable
markets, we’ve been able to accelerate our plan to strengthen
Alcoa’s foundation for an even brighter tomorrow. As we enter 2018,
we will continue to execute on our objectives and look forward to
delivering more in the new year.”
Harvey also announced new actions: “In our continuous drive to
strengthen the balance sheet, today we informed salaried employees
in the United States and Canada of upcoming changes to their
retirement benefits. The decisions were difficult and affect
current employees who have been part of our Alcoa family the
longest. But to reduce our liabilities, change is necessary; it
will enable us to better prepare for an uncertain and cyclical
environment as we position our Company for the future.”
Fourth Quarter 2017 Results
In fourth quarter 2017, Alcoa reported a net loss of $196
million, or $1.06 per share, compared to net income of $113
million, or $0.60 per share, in third quarter 2017. The 2017 fourth
quarter results include $391 million of special items primarily due
to previously announced actions relating to the Rockdale Operations
and the Portovesme smelter that are aligned with the Company’s
strategic priorities to streamline and strengthen Alcoa.
1
Alcoa Corporation became an independent,
publicly-traded company on November 1, 2016. Prior to November 1,
2016, Alcoa Corporation’s financial statements were prepared on a
carve-out basis, as the underlying operations of the Company were
previously consolidated as part of Alcoa Corporation’s former
parent company’s financial statements. Accordingly, the financial
results of Alcoa Corporation for the first ten months of 2016
(including the first month of fourth quarter 2016) were prepared on
such basis. The carve-out financial statements of Alcoa Corporation
are not necessarily indicative of Alcoa Corporation’s consolidated
results of operations, financial position, and cash flows had it
been a standalone company during the referenced period. See the
Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2016 filed with
the United States Securities and Exchange Commission on March 15,
2017 for additional information.
2
Based on unpriced sales at $2,200 LME and
$390 API, and updated regional premiums and foreign currencies.
Other special items included charges for income tax valuation
allowance and tax rate change adjustments, as well as certain
impacts from new U.S. income tax legislation (see U.S. Tax Cuts and
Jobs Act of 2017 below), and costs for the partial restart of the
Warrick smelter in Indiana. These items were slightly offset by the
reduction in a previously established reserve due to the settlement
of an Italian energy tariff dispute.
Excluding the impact of special items, fourth quarter 2017
adjusted net income was $195 million, or $1.04 per share, up 44
percent sequentially from $135 million, or $0.72 per share.
Adjusted EBITDA excluding special items rose 38 percent to $775
million in fourth quarter 2017 from $561 million in third quarter
2017. The improvement was primarily driven by increased pricing for
both alumina and aluminum, somewhat offset by higher energy
costs.
Alcoa reported fourth quarter 2017 revenue of $3.2 billion, up 7
percent sequentially, largely due to improved alumina and aluminum
prices and increased alumina shipments.
Cash from operations in fourth quarter 2017 was $455 million and
free cash flow was $305 million. Cash used for financing activities
and investing activities was $53 million and $170 million,
respectively, in the fourth quarter of 2017.
Alcoa ended fourth quarter 2017 with cash on hand of $1.36
billion with $1.41 billion of debt, for net debt of $0.05 billion.
The Company reported 11 days working capital, a 3-day improvement
year-over-year.
2017 Full-Year Results
For full year 2017, Alcoa reported net income of $217 million,
or $1.16 per share, compared to a $400 million net loss, or $2.19
per share, for full-year 2016. Excluding special items, the Company
reported adjusted net income of $563 million, or $3.01 per share,
compared to a $227 million adjusted net loss, or $1.24 per share,
in 2016.
Adjusted EBITDA excluding special items was $2.35 billion
(Company’s projection was approximately $2.4 billion3), more than
double the $1.11 billion earned in 2016. Strong alumina and
aluminum pricing drove the increase, which was slightly offset by
higher costs for energy and raw materials and unfavorable movements
in foreign currency exchange rates.
Revenue in 2017 was $11.7 billion, up 25 percent from 2016,
reflecting higher alumina and aluminum pricing.
Cash from operations in 2017 was $1.2 billion and free cash flow
was $0.8 billion. In 2017, cash used for financing activities and
investing activities was $506 million and $226 million,
respectively. Alcoa invested $118 million in return-seeking capital
projects and controlled sustaining capital expenditures to $287
million in 2017.
Market Update
For 2018, the Company projects balanced global bauxite and
alumina markets and a global aluminum deficit of 300 thousand to
700 thousand metric tons. Alcoa is projecting 2018 global aluminum
demand growth of 4.25 to 5.25 percent, following the Company’s
final 2017 global demand growth rate of 5.25 percent.
Pension and OPEB
Alcoa today announces changes to its U.S. and Canada defined
benefit pension plans, and to certain U.S. other post-employment
benefits (OPEB), to support the Company’s strategic priority to
strengthen the balance sheet by reducing its liabilities.
3
Projection as of October 18, 2017 based
on: actual results for September 2017 YTD, outlook for unpriced
sales for 4Q17 at $2,100 LME, $470 API, and updated regional
premiums and foreign currencies.
Effective January 1, 2021:
- Salaried employees in the United States
and Canada, where the Company’s largest portion of liabilities for
pension plans and OPEB reside, will cease accruing retirement
benefits for future service under defined benefit pension
plans.
- In connection with this change,
approximately 800 affected employees will be transitioned to
country-specific defined contribution plans.
- The Company will contribute 3 percent
of affected participants’ eligible earnings to defined contribution
plans in addition to its existing employer savings match.
Benefits earned from these defined benefit pension plans through
Dec. 31, 2020 will be protected and included in benefits provided
to the employees at the end of their employment with Alcoa or when
becoming eligible for retirement, as defined by the plans.
Participants already collecting benefits under the pension plans
and those currently covered by collective bargaining agreements are
not impacted by these changes.
Alcoa also expects to make discretionary contributions, beyond
required contributions, to the U.S. and Canada defined benefit
pension plans in 2018 approximating a combined total of $300
million. In connection with the discretionary contributions, the
Company intends to make annuity purchases to lower risk and cost
while maintaining minimum required contribution levels.
Also, effective January 1, 2021, Alcoa will no longer contribute
to pre-Medicare retiree medical coverage for U.S. salaried
employees and retirees.
As a result of the above actions, Alcoa expects to both reduce
its net pension and OPEB liability by $35 million and record
non-cash nonoperating income of approximately $20 million in the
first quarter of 2018.
U.S. Tax Cuts and Jobs Act of 2017
In fourth quarter 2017, the Company recorded a charge of $22
million in its income tax provision due to the remeasurement of its
deferred income tax positions at the new corporate income tax rate
of 21 percent (from 35 percent). Furthermore, Alcoa has completed
an analysis determining its best estimate of the impact of the
remaining tax reform provisions, which did not result in any
additional impact to the Company's 2017 financial results. The
Company continues to finalize its analyses of the tax reform
provisions in 2018, but it is not expected to have a material
impact on the financial results.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Standard Time (EST) on Wednesday, January 17, 2018 to
present fourth quarter and full year 2017 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 at approximately 4:15 p.m. EST on January 17,
2018 on the same website. 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 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 inventing 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, 2016 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
December 31, September 30, December
31,
2016(1)
2017 2017 Sales $ 2,537 $
2,964 $ 3,174 Cost of goods sold (exclusive of expenses
below) 2,123 2,361 2,359 Selling, general administrative, and other
expenses 92 70 70 Research and development expenses 7 8 9 Provision
for depreciation, depletion, and amortization 182 194 187
Restructuring and other charges 209 (10 ) 297 Interest expense 46
26 27 Other expenses, net
1
27 9 Total costs and
expenses 2,660 2,676 2,958 (Loss) income before income taxes
(123 ) 288 216 Provision for income taxes
6
119 272
Net (loss) income (129 ) 169 (56 ) Less: Net
(loss) income attributable to noncontrolling interest
(4 )
56
140
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$ (125 )
$ 113
$ (196 )
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic: Net (loss) income $ (0.68 ) $ 0.61 $ (1.06 ) Average number
of shares 182,688,806 184,594,233 185,078,245 Diluted: Net
(loss) income $ (0.68 ) $ 0.60 $ (1.06 ) Average number of shares
182,688,806 187,155,231 185,078,245 (1) Prior to November 1,
2016, Alcoa Corporation’s financial statements were prepared on a
carve-out basis, as the underlying operations of the Company were
previously consolidated as part of Alcoa Corporation’s former
parent company’s financial statements. Accordingly, the results of
operations of Alcoa Corporation for the month of October 2016
included in the quarter ended December 31, 2016 were prepared on
such basis. The carve-out financial statements of Alcoa Corporation
are not necessarily indicative of Alcoa Corporation’s consolidated
results of operations had it been a standalone company during the
referenced period. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information.
Alcoa
Corporation and subsidiaries Statement of Consolidated
Operations (unaudited), continued (dollars in millions,
except per-share amounts) Year ended
December 31,
2016(1)
2017 Sales $ 9,318 $ 11,652
Cost of goods sold (exclusive of expenses below) 7,898 9,072
Selling, general administrative, and other expenses 359 284
Research and development expenses 33 32 Provision for depreciation,
depletion, and amortization 718 750 Restructuring and other charges
318 309 Interest expense 243 104 Other income, net
(89 )
(58 ) Total costs and
expenses 9,480 10,493 (Loss) income before income taxes (162
) 1,159 Provision for income taxes
184
600 Net (loss) income (346 ) 559
Less: Net income attributable to noncontrolling interest
54 342
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION
$
(400 )
$ 217
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic: Net (loss) income $ (2.19 ) $ 1.18 Average number of shares
182,538,152 184,420,404 Diluted: Net (loss) income $ (2.19 )
$ 1.16 Average number of shares 182,538,152 186,981,665
Common stock outstanding at the end of the period 182,930,995
185,200,713 (1) Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the results of operations of
Alcoa Corporation for the first ten months included in the year
ended December 31, 2016 were prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s consolidated results of
operations had it been a standalone company during the referenced
period. See the Combined Financial Statements included in Exhibit
99.1 to Alcoa Corporation’s Form 10 Registration Statement and the
Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2016 filed with
the United States Securities and Exchange Commission on October 11,
2016 and March 15, 2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Consolidated Balance Sheet (unaudited) (in millions)
December 31, December 31, 2016
2017 ASSETS Current assets: Cash and cash equivalents $ 853
$ 1,358 Receivables from customers 668 811 Other receivables 166
232 Inventories 1,160 1,453 Fair value of derivative contracts 51
113 Prepaid expenses and other current assets
283 271 Total
current assets
3,181
4,238 Properties, plants, and equipment
22,550 23,046 Less: accumulated depreciation, depletion, and
amortization
13,225
13,908 Properties, plants, and equipment, net
9,325 9,138
Investments 1,358 1,410 Deferred income taxes 741 814 Fair value of
derivative contracts 468 128 Other noncurrent assets
1,668 1,719 Total
assets
$ 16,741 $
17,447 LIABILITIES Current liabilities:
Accounts payable, trade $ 1,455 $ 1,898 Accrued compensation and
retirement costs 456 459 Taxes, including income taxes 147 282 Fair
value of derivative contracts 35 185 Other current liabilities 707
412 Long-term debt due within one year
21
16 Total current liabilities
2,821 3,252
Long-term debt, less amount due within one year 1,424 1,388 Accrued
pension benefits 1,851 2,335 Accrued other postretirement benefits
1,166 1,100 Asset retirement obligations 604 617 Environmental
remediation 264 258 Fair value of derivative contracts 234 1,105
Noncurrent income taxes 310 318 Other noncurrent liabilities and
deferred credits
370
279 Total liabilities
9,044
10,652 EQUITY Alcoa
Corporation shareholders’ equity: Common stock 2 2 Additional
capital 9,531 9,590 Retained (deficit) earnings (104 ) 113
Accumulated other comprehensive loss
(3,775 )
(5,185 ) Total Alcoa Corporation shareholders'
equity
5,654 4,520
Noncontrolling interest
2,043
2,275 Total equity
7,697 6,795 Total
liabilities and equity
$ 16,741
$ 17,447 Alcoa
Corporation and subsidiaries Statement of Consolidated Cash
Flows (unaudited) (in millions) Year ended
December 31,
2016(6)
2017 CASH FROM OPERATIONS Net (loss)
income $ (346 ) $ 559 Adjustments to reconcile net (loss) income to
cash from operations: Depreciation, depletion, and amortization 718
752 Deferred income taxes (46 ) 176 Equity earnings, net of
dividends 48 9 Restructuring and other charges 318 309 Net gain
from investing activities – asset sales (164 ) (116 ) Net periodic
pension benefit cost 66 111 Stock-based compensation 28 24 Other
(16 ) 32 Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments: (Increase) in receivables (234 ) (118 ) Decrease
(Increase) in inventories 1 (238 ) (Increase) Decrease in prepaid
expenses and other current assets (52 ) 43 Increase in accounts
payable, trade 6 377 (Decrease) in accrued expenses(1) (320 ) (563
) (Decrease) Increase in taxes, including income taxes (148 ) 111
Pension contributions (66 ) (106 ) (Increase) in noncurrent
assets(2) (184 ) (99 ) Increase (Decrease) in noncurrent
liabilities
80 (39 )
CASH (USED FOR) PROVIDED FROM OPERATIONS
(311 )
1,224 FINANCING ACTIVITIES Net
transfers from former parent company 802 – Cash paid to former
parent company related to separation(3),(4) (1,072 ) (247 ) Net
change in short-term borrowings (original maturities of three
months or less) (4 ) 7 Additions to debt (original maturities
greater than three months)(3) – 21 Payments on debt (original
maturities greater than three months) (34 ) (60 ) Proceeds from the
exercise of employee stock options 10 43 Contributions from
noncontrolling interest 48 80 Distributions to noncontrolling
interest (233 ) (342 ) Other
–
(8 ) CASH USED FOR FINANCING ACTIVITIES
(483 )
(506 ) INVESTING
ACTIVITIES Capital expenditures (404 ) (405 ) Proceeds from the
sale of assets and businesses(5) 112 245 Additions to investments
(3 ) (66 ) Sales of investments 146 – Net change in restricted
cash(3)
1,226 –
CASH PROVIDED FROM (USED FOR) INVESTING ACTIVITIES
1,077 (226 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
13
13
Net change in cash and cash equivalents 296 505 Cash and
cash equivalents at beginning of year
557
853 CASH AND CASH EQUIVALENTS AT
END OF YEAR
$ 853 $
1,358
(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 has been curtailed since
the end of 2008.
(2)
The (Increase) in noncurrent assets line
item for the year ended December 31, 2016 includes a $200
prepayment related to a natural gas supply agreement for three
alumina refineries in Western Australia, which are owned by Alcoa
Corporation’s majority-owned subsidiary, Alcoa of Australia
Limited.
(3)
In September 2016, Alcoa Nederland Holding
B.V., a wholly-owned subsidiary of Alcoa Corporation, issued $1,250
in new senior notes in preparation for the separation of the
Company from its former parent company (completed on November 1,
2016). The net proceeds of $1,228 from the debt issuance, along
with $81 of cash on hand (see below) from the former parent
company, were required to be placed in escrow contingent on
completion of the separation transaction. As a result, the $1,228
of escrowed cash was recorded as restricted cash on Alcoa
Corporation’s Combined Balance Sheet as of September 30, 2016. The
issuance of the debt and the increase in restricted cash both in
the amount of $1,228 were not reflected in the Statement of
Consolidated Cash Flows for the year ended December 31, 2016 as
these represent noncash financing and investing activities,
respectively. The $81 represented the necessary cash to fund the
redemption of the notes, pay all regularly scheduled interest on
the notes through a specified date defined in the notes, and a
premium on the principal of the notes if the separation had not
been completed by a certain time as defined in the notes. The
subsequent release of the $1,228 from escrow was reflected in the
Statement of Consolidated Cash Flows for the year ended December
31, 2016 as a cash inflow in the Net change in restricted cash line
item. Of this amount, $1,072 was paid to Alcoa Corporation’s former
parent company in conjunction with the completion of the separation
transaction.
(4)
In accordance with the terms of the
Separation and Distribution Agreement related to Alcoa
Corporation’s separation from its former parent company into a
standalone, publicly-traded company, the Company paid $243 of the
net after-tax proceeds from the sale of the Yadkin Hydroelectric
Project to the former parent company.
(5)
Proceeds from the sale of assets and
businesses for the year ended December 31, 2016 includes a cash
outflow for cash paid as a result of a post-closing adjustment
associated with the December 2014 divestiture of an ownership stake
in a smelter in the United States.
(6)
Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the cash flows of Alcoa
Corporation for the first ten months included in the year ended
December 31, 2016 were prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s consolidated cash flows had it
been a standalone company during the referenced period. See the
Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2016 filed with the
United States Securities and Exchange Commission on October 11,
2016 and March 15, 2017, respectively, for additional
information.
Alcoa
Corporation and subsidiaries
Segment Information(1)
(unaudited)
(dollars in millions; bauxite production and shipments in
millions of dry metric tons (mdmt); alumina and aluminum
production and shipments in thousands of metric tons (kmt))
4Q16(8)
2016(8)
1Q17 2Q17
3Q17 4Q17
2017
Bauxite: Production(2),(3) (mdmt) 11.8 45.0 11.1 11.0 11.6
12.1 45.8 Total shipments (mdmt) 12.2 46.9 11.6 11.5 12.3 12.3 47.7
Third-party sales $ 91 $ 315 $ 70 $ 80 $ 104 $ 79 $ 333
Intersegment sales $ 202 $ 751 $ 219 $ 208 $ 221 $ 227 $ 875
Adjusted EBITDA $ 102 $ 375 $ 110 $ 98 $ 113 $ 106 $ 427
Depreciation, depletion, and amortization $ 20
$ 77 $ 18 $ 19 $ 24
$ 21 $ 82
Alumina:
Production (kmt) 3,295 13,251 3,211 3,249 3,305 3,331 13,096
Third-party shipments (kmt) 2,276 9,071 2,255 2,388 2,271 2,306
9,220 Intersegment shipments (kmt) 1,169 4,703 947 1,152 1,153
1,223 4,475 Third-party sales $ 618 $ 2,300 $ 734 $ 749 $ 713 $ 937
$ 3,133 Intersegment sales $ 377 $ 1,307 $ 361 $ 384 $ 398 $ 580 $
1,723 Adjusted EBITDA $ 171 $ 378 $ 297 $ 227 $ 203 $ 562 $ 1,289
Depreciation and amortization $ 47 $ 186 $ 49 $ 53 $ 53 $ 52 $ 207
Equity (loss) income $ (10 ) $ (40 ) $ 1
$ (6 ) $ (5 ) $ 5 $ (5 )
Aluminum: Primary aluminum production (kmt) 587 2,368
559 575 596 598 2,328 Third-party aluminum shipments(4) (kmt) 852
3,147 801 833 868 854 3,356 Third-party sales $ 1,782 $ 6,531 $
1,806 $ 1,988 $ 2,090 $ 2,143 $ 8,027 Intersegment sales $ 4 $ 42 $
4 $ 3 $ 9 $ 5 $ 21 Adjusted EBITDA $ 152 $ 680 $ 206 $ 221 $ 303 $
234 $ 964 Depreciation and amortization $ 104 $ 414 $ 101 $ 108 $
106 $ 104 $ 419 Equity (loss) income $ – $ (24
) $ (7 ) $ 3 $ (7 ) $ (8 )
$ (19 )
Reconciliation of total segment Adjusted
EBITDA to consolidated net (loss) income attributable to Alcoa
Corporation: Total segment Adjusted EBITDA $ 425 $ 1,433 $ 613
$ 546 $ 619 $ 902 $ 2,680 Unallocated amounts: Impact of LIFO (28 )
(10 ) (14 ) (8 ) (14 ) (55 ) (91 ) Metal price lag(5) 4 9 6 11 5 4
26 Corporate expense(6) (44 ) (177 ) (34 ) (36 ) (34 ) (32 ) (136 )
Provision for depreciation, depletion, and amortization
(182
)
(718
)
(179
)
(190
)
(194
)
(187
)
(750
)
Restructuring and other charges (209 ) (318 ) (10 ) (12 ) 10 (297 )
(309 ) Interest expense (46 ) (243 ) (26 ) (25 ) (26 ) (27 ) (104 )
Other (expenses) income, net (1 ) 89 100 (6 ) (27 ) (9 ) 58
Other(7) (42 ) (227 ) (38
) (43 ) (51 ) (83 )
(215 ) Consolidated (loss) income before income taxes
(123 ) (162 ) 418 237 288 216 1,159 Provision for income taxes (6 )
(184 ) (110 ) (99 ) (119 ) (272 ) (600 ) Net loss (income)
attributable to noncontrolling interest
4
(54
)
(83
)
(63
)
(56
)
(140
)
(342
)
Consolidated net (loss) income attributable to Alcoa Corporation
$
(125
)
$
(400
)
$
225
$
75
$
113
$
(196
)
$
217
The difference between certain segment totals and
consolidated amounts is in Corporate. (1) Effective in the
first quarter of 2017, management elected to change the profit and
loss measure of Alcoa Corporation’s reportable segments from
After-tax operating income (ATOI) to Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) for
internal reporting and performance measurement purposes. This
change was made to enhance the transparency and visibility of the
underlying operating performance of each segment. Alcoa Corporation
calculates Adjusted EBITDA for each of its segments as Total sales
(third-party and intersegment) minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
and Research and development expenses. Previously, Alcoa
Corporation calculated ATOI for each of its segments as Adjusted
EBITDA minus (plus) the following items: Provision for
depreciation, depletion, and amortization; Equity loss (income);
Loss (gain) on certain asset sales; and Income taxes. The Adjusted
EBITDA for each of Alcoa Corporation’s segments may not be
comparable to similarly titled measures of other companies’
reportable segments. Also effective in the first quarter of
2017, management combined Alcoa Corporation’s aluminum smelting,
casting, and rolling businesses, along with the majority of the
energy business, into a new Aluminum business unit. This new
business unit is managed as a single operating segment. Prior to
this change, each of these businesses were managed as individual
operating segments and comprised the Aluminum, Cast Products,
Energy, and Rolled Products segments. As a result, Alcoa
Corporation’s operating and reportable segments are Bauxite,
Alumina, and Aluminum. Segment information for all prior
periods presented was revised to reflect the new segment structure,
as well as the new measure of profit and loss. (2) The
production amounts do not include additional bauxite (approximately
3 million metric tons 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.
(3) In the second quarter of 2017, Alcoa Corporation revised the
respective production amount for the 2016 first, second, and third
quarters to reflect refinements to individual mine data. As a
result, the production reflected in this table for the referenced
quarters was revised from prior period reports. Total bauxite
production for annual 2016 remains unchanged at 45.0 mdmt.
(4) The Aluminum segment’s third-party aluminum shipments are
composed of both its primary aluminum and rolling operations.
(5) 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. (6) Corporate expense is
primarily composed of general administrative and other expenses of
operating the corporate headquarters and other global
administrative facilities. (7) Other includes, among other
items, the Adjusted EBITDA of previously closed operations as
applicable, pension and other postretirement benefit expenses
associated with closed and sold operations, and intersegment profit
elimination. (8) Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the results of operations of
Alcoa Corporation for the month of October 2016 included in the
quarter ended December 31, 2016 and for the first ten months
included in the year ended December 31, 2016 were prepared on such
basis. The carve-out financial statements of Alcoa Corporation are
not necessarily indicative of Alcoa Corporation’s consolidated
results of operations had it been a standalone company during the
referenced periods. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information.
Alcoa Corporation and subsidiaries Calculation of
Financial Measures (unaudited) (in millions, except
per-share amounts)
Adjusted Income (Loss)
Quarter ended Year ended
December
31,2016(5)
September
30,2017
December
31,2017
December
31,2016(5)
December
31,2017
Net (loss) income attributable to Alcoa Corporation $ (125 )
$ 113 $ (196 ) $ (400 ) $ 217 Special items: Restructuring
and other charges
209
(10
)
297
318
309
Discrete tax items(1) (11 ) 13 82 – 93 Other special items(2) 30 36
31 (65 ) (9 ) Tax impact(3) (22 ) (11 ) (7 ) (25 ) (24 )
Noncontrolling interest impact(3)
(55
)
(6
)
(12
)
(55
)
(23
)
Subtotal
151 22
391 173
346
Net income (loss) attributable to Alcoa
Corporation – as adjusted
$
26
$
135
$
195
$
(227
)
$
563
Diluted EPS(4): Net (loss) income attributable
to Alcoa Corporation common shareholders
$
(0.68
)
$
0.60
$
(1.06
)
$
(2.19
)
$
1.16
Net income (loss) attributable to Alcoa Corporation common
shareholders – as adjusted
0.14
0.72
1.04
(1.24
)
3.01
Net income (loss) 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 (loss) attributable to Alcoa Corporation – as adjusted.
(1)
Discrete tax items include the following:
•
for the quarter ended December 31, 2016, a benefit for the
remeasurement of certain deferred income tax assets of a subsidiary
in Brazil due to a tax rate change;
•
for the quarter ended September 30, 2017, a net charge 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);
•
for the year ended December 31, 2016, a benefit for the
remeasurement of certain deferred income tax assets of a subsidiary
in Brazil due to a tax rate change ($11) and a net charge for
several other items ($11); and
•
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).
(2)
Other special items include the following:
•
for the quarter ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company
($19), interest expense incurred in October 2016 related to debt
that was issued in September 2016 in preparation for the separation
of Alcoa Corporation from its former parent company (completed on
November 1, 2016) ($8), a net unfavorable change in certain
mark-to-market energy derivative contracts ($2), and an inventory
adjustment at a curtailed refinery in the United States ($1);
•
for the quarter ended September 30, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($17), settlement
of legacy tax matters in Brazil ($11), a net unfavorable change in
certain mark-to-market energy derivative contracts ($11), a
favorable tax impact related to the interim period treatment of
operational losses in certain jurisdictions for which no tax
benefit was recognized ($8), an unfavorable impact due to the
near-term power market exposure as a result of renegotiating a
hedging contract related to forecasted future spot market power
purchases for the Portland (Australia) smelter ($8), and 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 ($3);
•
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 contracts ($1);
•
for the year ended December 31, 2016, a gain on the sale of wharf
property near the Intalco (Washington) smelter ($118), costs
associated with the separation of Alcoa Corporation from its former
parent company ($73), a gain on the sale of an equity investment in
a natural gas pipeline in Australia ($27), a benefit for an
arbitration recovery related to a 2010 fire at the Iceland smelter
($14), interest expense incurred in October 2016 related to debt
that was issued in September 2016 in preparation for the separation
of Alcoa Corporation from its former parent company (completed on
November 1, 2016) ($8), a write-down of inventory related to the
permanent closure of a smelter in the United States and adjustments
at two previously curtailed facilities ($7), and a net unfavorable
change in certain mark-to-market energy derivative contracts ($6);
and
•
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 contracts ($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 a non-U.S.
smelter ($4). (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 (loss) attributable to
Alcoa Corporation common shareholders – as adjusted due to a larger
and/or positive numerator. Specifically:
•
for the quarter ended December 31, 2016, 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 184,448,353;
•
for the quarter ended September 30, 2017, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 187,155,231;
•
for the quarter ended 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 year ended December 31, 2016, no additional share
equivalents were dilutive based on Net loss attributable to Alcoa
Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 182,538,152; and
•
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. (5) Prior
to November 1, 2016, Alcoa Corporation’s financial statements were
prepared on a carve-out basis, as the underlying operations of the
Company were previously consolidated as part of Alcoa Corporation’s
former parent company’s financial statements. Accordingly, the
results of operations of Alcoa Corporation for the month of October
2016 included in the quarter ended December 31, 2016 and for the
first ten months included in the year ended December 31, 2016 were
prepared on such basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
consolidated results of operations had it been a standalone company
during the referenced periods. See the Combined Financial
Statements included in Exhibit 99.1 to Alcoa Corporation’s Form 10
Registration Statement and the Consolidated Financial Statements
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2016 filed with the United States Securities and
Exchange Commission on October 11, 2016 and March 15, 2017,
respectively, for additional information.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended Year ended
December
31,2016(2)
September
30,2017
December 31,
2017
December 31,
2016(2)
December 31,
2017
Net (loss) income attributable to Alcoa Corporation $ (125 )
$ 113 $ (196 ) $ (400 ) $ 217 Add: Net (loss) income
attributable to noncontrolling interest
(4
)
56
140
54
342
Provision for income taxes
6
119
272
184
600
Other expenses (income), net
1
27
9
(89
)
(58
)
Interest expense 46 26 27 243 104 Restructuring and other charges
209
(10
)
297
318
309
Provision for depreciation, depletion, and amortization
182
194
187
718
750
Adjusted EBITDA
$ 315
$ 525 $
736 $ 1,028
$ 2,264 Special
items(1)
20 36
39 80
88 Adjusted EBITDA, excluding
special items
$
335
$
561
$
775
$
1,108
$
2,352
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) Special items include the following (see reconciliation
of Adjusted Income (Loss) above for additional information):
•
for the quarter ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company
($19) and an inventory adjustment at a curtailed refinery in the
United States ($1);
•
for the quarter ended September 30, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($17), settlement
of legacy tax matters in Brazil ($11), and an unfavorable impact
due to the near-term power market exposure as a result of
renegotiating a hedging contract related to forecasted future spot
market power purchases for the Portland (Australia) smelter ($8);
•
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);
•
for the year ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company
($73) and a write-down of inventory related to the permanent
closure of a smelter in the United States and adjustments at two
previously curtailed facilities ($7); and
•
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 a non-U.S.
smelter ($4). (2) Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the results of operations of
Alcoa Corporation for the month of October 2016 included in the
quarter ended December 31, 2016 and for the first ten months
included in the year ended December 31, 2016 were prepared on such
basis. The carve-out financial statements of Alcoa Corporation are
not necessarily indicative of Alcoa Corporation’s consolidated
results of operations had it been a standalone company during the
referenced periods. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information.
Alcoa
Corporation and subsidiaries Calculation of Financial
Measures (unaudited), continued (in millions)
Free Cash Flow Quarter ended Year ended
December 31,
2016(1)
September 30,
2017
December 31,
2017
December 31,
2016(1)
December 31,
2017
Cash from operations $ 239 $ 384 $ 455 $ (311 ) $ 1,224
Capital expenditures
(146
)
(96
)
(150
)
(404
)
(405
)
Free cash flow
$ 93
$ 288 $
305 $ (715 )
$ 819 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. (1) Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the cash flows of Alcoa
Corporation for the month of October 2016 included in the quarter
ended December 31, 2016 and for the first ten months included in
the year ended December 31, 2016 were prepared on such basis. The
carve-out financial statements of Alcoa Corporation are not
necessarily indicative of Alcoa Corporation’s consolidated cash
flows had it been a standalone company during the referenced
periods. See the Combined Financial Statements included in Exhibit
99.1 to Alcoa Corporation’s Form 10 Registration Statement and the
Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the period ended December 31, 2016 filed
with the United States Securities and Exchange Commission on
October 11, 2016 and March 15, 2017, respectively, for additional
information.
Net Debt
December 31, September 30, December 31,
2016 2017 2017 Short-term borrowings $
1 $ 3 $ 8 Long-term debt due within one year 21 17 16 Long-term
debt, less amount due within one year
1,424
1,384 1,388 Total debt $
1,446 $ 1,404 $ 1,412 Less: Cash and cash equivalents
853 1,119
1,358 Net debt
$ 593
$ 285 $ 54
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: http://www.businesswire.com/news/home/20180117006355/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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