Alumina and aluminum pricing drive growth in
annual results
Fourth Quarter 2018
- Net income of $43 million, or $0.23 per
share
- Excluding special items, adjusted net
income of $125 million, or $0.66 per share
- $749 million of adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)
excluding special items
- Revenue of $3.3 billion
- $535 million cash from operations; $387
million free cash flow
- $1.1 billion cash balance and $1.8
billion of debt, for net debt of $0.7 billion, as of December 31,
2018
- Company repurchased 1.7 million shares
of its common stock for $50 million
Full-Year 2018
- Net income of $227 million, or $1.20
per share and adjusted net income of $675 million, or $3.58 per
share
- Adjusted EBITDA excluding special items
of $3.1 billion
- Revenue of $13.4 billion
- $448 million cash from operations; $49
million free cash flow
- Net pension and other postretirement
employee benefits liability of $2.3 billion at December 31, 2018,
down from $3.5 billion at year-end 2017
- Final 2018 global market balances:
deficit for both alumina and aluminum, surplus for bauxite
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina, and aluminum products, today reported fourth quarter and
full-year 2018 results.
M, except per share amounts
4Q17
3Q18 4Q18 FY17
FY18 Revenue $ 3,174 $ 3,390
$
3,344 $ 11,652
$ 13,403 Net
(loss) income attributable to Alcoa Corporation $ (196 ) $ (41 )
$ 43 $ 217
$ 227 Earnings per share
attributable to Alcoa Corporation $ (1.06 ) $ (0.22 )
$ 0.23 $ 1.16
$
1.20 Adjusted net income $ 195 $ 119
$ 125 $
563
$ 675 Adjusted earnings per share $ 1.04
$ 0.63
$ 0.66 $
3.01
$ 3.58
Adjusted EBITDA excluding special
items1
$ 796 $ 795
$ 749
$ 2,437
$ 3,101
1
On January 1, 2018, Alcoa Corporation
adopted guidance issued by the Financial Accounting Standards Board
to the presentation of net periodic benefit cost related to pension
and other postretirement benefit plans. This guidance requires the
non-service cost components of net periodic benefit cost to be
reported separately from the service cost component in an entity’s
income statement. Additionally, this guidance is required to be
applied retrospectively. Accordingly, previously reported amounts
for Cost of goods sold, Selling, general administrative, and other
expenses, and Other expenses (income), net on Alcoa Corporation’s
consolidated income statement have been recast to reflect these
changes. As a result, previously reported amounts for Adjusted
EBITDA on both a consolidated basis and for each of the Company’s
three segments have been updated to reflect these changes. See the
financial schedules to this release for additional information.
“Our 2018 results reflect how we’ve made Alcoa stronger,” said
President and Chief Executive Officer Roy Harvey. “We’ve built upon
the progress we made since our launch, and by executing our
strategic priorities to reduce complexity, drive returns, and
strengthen the balance sheet, we’re now better positioned to thrive
through market cycles.”
Harvey added: “Despite sequentially weaker commodity prices, we
had a strong fourth quarter with higher profits in our Bauxite and
Alumina segments. With the help of higher market prices earlier in
the year, we increased annual profits, addressed liabilities,
significantly strengthened our balance sheet, and began returning
cash to stockholders. With markets likely to remain dynamic in
2019, we will focus on what we can control to continue improving
our operations, addressing challenges with agility, and making the
most of opportunities in the year ahead.”
Fourth Quarter 2018 Results
In fourth quarter 2018, Alcoa reported net income of $43
million, or $0.23 per share, compared to a net loss of $41 million,
or $0.22 per share, in third quarter 2018. The 2018 fourth quarter
results include a negative impact of $82 million for special items,
primarily due to a $50 million non-cash charge to establish an
allowance on state value-added tax credits in Brazil.
Excluding the impact of special items, fourth quarter 2018
adjusted net income was $125 million, or $0.66 per share, up 5
percent sequentially from $119 million, or $0.63 per share.
Adjusted EBITDA excluding special items fell 6 percent to $749
million in fourth quarter 2018 from $795 million in third quarter
2018. The sequential decline was primarily due to lower aluminum
prices and a decrease in the price of energy sales in Brazil,
partially offset by increased shipments across all three
segments.
Alcoa reported fourth quarter 2018 revenue of $3.3 billion, down
1 percent sequentially, mainly attributable to lower realized
prices for primary aluminum, alumina, and Brazil energy sales.
These negative impacts were partially offset by increased shipments
across all three segments.
Cash from operations in fourth quarter 2018 was $535 million and
free cash flow was $387 million. Cash used for financing activities
and investing activities was $294 million (includes $50 million for
stock repurchases) and $148 million, respectively, in the fourth
quarter of 2018.
Alcoa ended fourth quarter 2018 with cash on hand of $1.1
billion and debt of $1.8 billion, for net debt of $0.7 billion. The
Company reported 22 days working capital, an 11-day increase
year-over-year, reflecting higher raw material prices, lower
buy/resell activities, and timing of vendor payments.
Full-Year 2018 Results
For full-year 2018, Alcoa reported net income of $227 million,
or $1.20 per share, compared to net income of $217 million, or
$1.16 per share, for full-year 2017. Excluding special items, the
Company reported adjusted net income of $675 million, or $3.58 per
share, compared to $563 million, or $3.01 per share, in 2017.
Adjusted EBITDA excluding special items was $3.1 billion, up 27
percent from the $2.4 billion earned in 2017. The year-over-year
improvement was largely due to higher alumina and aluminum prices,
partially offset by higher costs for raw materials and energy and
increased maintenance expense.
Revenue in 2018 was $13.4 billion, up 15 percent from 2017,
mainly attributable to higher realized prices for alumina and
aluminum products.
Cash from operations in 2018 was $448 million and free cash flow
was $49 million, both of which reflect $725 million in additional
contributions made to certain U.S. and Canadian defined benefit
pension plans. In 2018, cash used for financing activities was $288
million and cash used for investing activities was $405 million.
Alcoa invested $92 million in return-seeking capital projects and
controlled sustaining capital expenditures to $307 million in
2018.
Throughout 2018, management initiated several actions related to
Alcoa’s employee defined benefit plans to strengthen the Company’s
balance sheet, which included voluntary contributions and
annuitizations. As a result of these actions, along with favorable
discount rates used to remeasure the plans as of December 31, 2018,
the Company’s net pension and other postretirement employee
benefits liability at the end of the year was $2.3 billion, down
from $3.5 billion at year-end 2017.
Market Update
For 2019, Alcoa projects a global aluminum deficit ranging
between 1.7 million and 2.1 million metric tons with global demand
growth in a range of 3 to 4 percent. The Company’s final global
aluminum demand growth rate estimate for 2018 was 4 percent with a
deficit of 1.7 million metric tons.
The global alumina market closed 2018 with a deficit of 0.6
million metric tons, which fell within Alcoa’s last estimate of a
0.4 million to 1.2 million metric ton deficit. In 2019, the Company
expects the alumina market to move to a surplus that is projected
to range between 0.2 million and 1 million metric tons, which
assumes ongoing, third-party supply disruptions in the Atlantic
region. The projected alumina surplus is driven by China, where
refining expansions are expected to outpace demand growth from
smelting.
The bauxite market is expected to remain in surplus with global
stockpile growth projected to continue in 2019, ranging between 7
million and 11 million metric tons. The stockpile is driven by
China, which strategically holds bauxite due to uncertain sourcing
within and outside of the country.
2019 Outlook
In 2019, the Company projects total bauxite shipments to range
between 47.0 and 48.0 million dry metric tons. Total alumina
shipments are expected to be between 13.6 and 13.7 million metric
tons with anticipated operational improvements and higher
year-on-year production. Aluminum is expected to ship between 2.8
and 2.9 million metric tons, which reflects the expiration of a can
sheet tolling agreement in the flat-rolled business. The tolling
agreement’s expiration should have a negligible impact on Adjusted
EBITDA for the year.
Alcoa anticipates favorable impacts from spot prices for raw
materials to be fully offset by higher energy costs in the first
quarter, and to be partially offset for the remainder of the
year.
Based on current alumina and aluminum market conditions, the
Company expects an annual operational tax rate ranging from 45 to
55 percent.
For the first quarter of 2019, Alcoa expects moderate benefits
from both improvements in customer-specific alumina pricing and
lower alumina costs to the Aluminum segment. These are partially
offset by increased maintenance activities.
Update on Spain Collective Dismissal Process
On January 16, 2019, Alcoa reached a tentative agreement with
workers’ representatives at the Company’s Avilés and La Coruña
aluminum plants in Spain as part of the collective dismissal
process announced in October.
The plan, subject to ratification of the workforce by the end of
the month, calls for the curtailment of the two smelters’
remaining, combined operating capacity of 124,000 annual metric
tons. The casthouses at both plants and the paste plant at La
Coruña would remain in operation.
A social plan included in the tentative agreement preserves a
portion of the jobs at the two facilities and includes retirement
packages and potential relocation to the Company’s San Ciprián
facility.
Upon ratification, Alcoa expects to record restructuring-related
charges estimated to be between $90 million and $115 million (pre-
and after-tax), or $0.48 to $0.62 per share, all of which would be
paid in 2019. Depending on the ultimate outcome of this process,
the Company may incur additional charges for the closure of the two
smelters later in 2019 estimated to range between $125 million and
$135 million (pre- and after-tax), or $0.66 to $0.73 per share, of
which approximately 75 percent would be non-cash. The
remaining 25 percent would result in cash outlays subsequent to
2019.
As a result of the described potential curtailment, Alcoa would
expect an annual improvement to net income of $70 million to $80
million, based on 2018 market prices, beginning in the third
quarter of 2019.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Standard Time (EST) on Wednesday, January 16, 2019, to
present fourth quarter and full-year 2018 financial results and
discuss the business and market conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EST on January 16, 2019. Call information and related details
are available under the “Investors” section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website,
www.alcoa.com.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, and is built on a foundation of
strong values and operating excellence dating back 130 years to the
world-changing discovery that made aluminum an affordable and vital
part of modern life. Since developing the aluminum industry, and
throughout our history, our talented Alcoans have followed on with
breakthrough innovations and best practices that have led to
efficiency, safety, sustainability, and stronger communities
wherever we operate.
Forward-Looking Statements
This press release contains statements that relate to future
events and expectations and, as such, constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results or operating performance; statements about
strategies, outlook, and business and financial prospects; and
statements about return of capital. These statements reflect
beliefs and assumptions that are based on Alcoa Corporation’s
perception of historical trends, current conditions, and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa
Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) material adverse changes in aluminum
industry conditions, including global supply and demand conditions
and fluctuations in London Metal Exchange-based prices and
premiums, as applicable, for primary aluminum and other products,
and fluctuations in indexed-based and spot prices for alumina; (b)
deterioration in global economic and financial market conditions
generally; (c) unfavorable changes in the markets served by Alcoa
Corporation; (d) the impact of changes in foreign currency exchange
rates on costs and results; (e) increases in energy costs; (f)
declines in the discount rates used to measure pension liabilities
or lower-than-expected investment returns on pension assets, or
unfavorable changes in laws or regulations that govern pension plan
funding; (g) the inability to achieve improvement in profitability
and margins, cost savings, cash generation, revenue growth, fiscal
discipline, or strengthening of competitiveness and operations
anticipated from operational and productivity improvements, cash
sustainability, technology advancements, and other initiatives; (h)
the inability to realize expected benefits, in each case as planned
and by targeted completion dates, from acquisitions, divestitures,
facility closures, curtailments, restarts, expansions, or joint
ventures; (i) political, economic, trade, and regulatory risks in
the countries in which Alcoa Corporation operates or sells
products; (j) labor disputes and work stoppages; (k) the outcome of
contingencies, including legal proceedings, government or
regulatory investigations, and environmental remediation; (l) the
impact of cyberattacks and potential information technology or data
security breaches; and (m) the other risk factors described in Item
1A of Alcoa Corporation’s Form 10-K for the fiscal year ended
December 31, 2017 and other reports filed by Alcoa Corporation with
the U.S. Securities and Exchange Commission (SEC). Alcoa
Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law.
Market projections are subject to the risks described above and
other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa Corporation’s consolidated financial information but is not
presented in Alcoa Corporation’s financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). Certain of these data are
considered “non-GAAP financial measures” under SEC regulations.
Alcoa Corporation believes that the presentation of non-GAAP
financial measures is useful to investors because such measures
provide both additional information about the operating performance
of Alcoa Corporation and insight on the ability of Alcoa
Corporation to meet its financial obligations by adjusting the most
directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items
in nature, and/or nonoperating expense or income items. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Alcoa Corporation and subsidiaries Statement of
Consolidated Operations (unaudited) (dollars in millions,
except per-share amounts) Quarter ended
December 31, September 30, December
31, 2017 2018
2018 Sales $ 3,174 $ 3,390 $ 3,344 Cost
of goods sold (exclusive of expenses below)(1) 2,339 2,534 2,534
Selling, general administrative, and other expenses(1) 69 58 59
Research and development expenses 9 7 7 Provision for depreciation,
depletion, and amortization 187 173 174 Restructuring and other
charges 297 177 138 Interest expense 27 33 31 Other expenses,
net(1)
30 2
32 Total costs and expenses 2,958 2,984 2,975
Income before income taxes 216 406 369 Provision for income
taxes
272 251
157 Net (loss) income (56 ) 155 212
Less: Net income attributable to noncontrolling interest
140 196
169
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$ (196 )
$ (41
)
$ 43
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic: Net (loss) income $ (1.06 ) $ (0.22 ) $ 0.23 Average number
of shares(2) 185,078,245 186,479,038 186,166,234 Diluted:
Net (loss) income $ (1.06 ) $ (0.22 ) $ 0.23 Average number of
shares(2) 185,078,245 186,479,038 188,219,224 (1) On January
1, 2018, Alcoa Corporation adopted guidance issued by the Financial
Accounting Standards Board to the presentation of net periodic
benefit cost related to pension and other postretirement benefit
plans. This guidance requires that an entity report the service
cost component of net periodic benefit cost in the same line
item(s) on its income statement as other compensation costs arising
from services rendered by the pertinent employees during a
reporting period. The other components of net periodic benefit cost
(see Note N to the Consolidated Financial Statements included in
Part II Item 8 of the Company’s Annual Report on Form 10-K for the
year ended December 31, 2017) are required to be reported
separately from the service cost component. In other words, these
other components may be aggregated and presented as a separate line
item or they may be reported in existing line items on the income
statement other than such line items that include the service cost
component. Previously, Alcoa Corporation reported all components of
net periodic benefit cost, except for certain settlements,
curtailments, and special termination benefits, in Cost of goods
sold (business employees) and Selling, general administrative, and
other expenses (corporate employees) consistent with the location
of other compensation costs related to the respective employees.
The non-service cost components noted as exceptions are reported in
Restructuring and other charges, as applicable. Upon adoption of
this guidance, management began reporting the non-service cost
components of net periodic benefit cost, except for certain
settlements, curtailments, and special termination benefits that
will continue to be reported in Restructuring and other charges, in
Other expenses, net on the Company’s Statement of Consolidated
Operations. For the quarters ended December 31, 2018 and September
30, 2018, the non-service cost components reported in Other
expenses, net was $30 and $32, respectively. Additionally, the
Statement of Consolidated Operations for the quarter ended December
31, 2017 was recast to reflect the reclassification of the
non-service cost components of net periodic benefit cost to Other
expenses, net from both Cost of goods sold and Selling, general
administrative, and other expenses. As a result, for the quarter
ended December 31, 2017, Cost of goods sold decreased by $20,
Selling, general administrative, and other expenses decreased by
$1, and Other expenses, net changed by $21 from previously reported
amounts. (2) In December 2018, Alcoa Corporation repurchased
and retired 1,723,800 shares of outstanding common stock in
accordance with its previously announced common stock repurchase
program. Both the basic and diluted average number of shares for
the quarter ended December 31, 2018 includes 1,396,755 representing
the weighted average number of shares for the length of time the
1,723,800 shares were outstanding during the fourth quarter of
2018.
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations (unaudited), continued
(dollars in millions, except per-share amounts)
Year ended December 31,
2017 2018 Sales $
11,652 $ 13,403 Cost of goods sold (exclusive of expenses
below)(1) 8,991 10,081 Selling, general administrative, and other
expenses(1) 280 248 Research and development expenses 32 31
Provision for depreciation, depletion, and amortization 750 733
Restructuring and other charges 309 527 Interest expense 104 122
Other expenses, net(1)
27
64 Total costs and expenses 10,493 11,806
Income before income taxes 1,159 1,597 Provision for income taxes
600 726 Net income
559 871 Less: Net income attributable to noncontrolling
interest
342 644 NET
INCOME ATTRIBUTABLE TO ALCOA CORPORATION
$
217 $ 227
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic: Net income $ 1.18 $ 1.22 Average number of shares
184,420,404 186,230,908 Diluted: Net income $ 1.16 $ 1.20
Average number of shares 186,981,665 188,534,139
Common stock outstanding at the end of the period(2) 185,200,713
184,770,249 (1) On January 1, 2018, Alcoa Corporation
adopted guidance issued by the Financial Accounting Standards Board
to the presentation of net periodic benefit cost related to pension
and other postretirement benefit plans. This guidance requires that
an entity report the service cost component of net periodic benefit
cost in the same line item(s) on its income statement as other
compensation costs arising from services rendered by the pertinent
employees during a reporting period. The other components of net
periodic benefit cost (see Note N to the Consolidated Financial
Statements included in Part II Item 8 of the Company’s Annual
Report on Form 10-K for the year ended December 31, 2017) are
required to be reported separately from the service cost component.
In other words, these other components may be aggregated and
presented as a separate line item or they may be reported in
existing line items on the income statement other than such line
items that include the service cost component. Previously, Alcoa
Corporation reported all components of net periodic benefit cost,
except for certain settlements, curtailments, and special
termination benefits, in Cost of goods sold (business employees)
and Selling, general administrative, and other expenses (corporate
employees) consistent with the location of other compensation costs
related to the respective employees. The non-service cost
components noted as exceptions are reported in Restructuring and
other charges, as applicable. Upon adoption of this guidance,
management began reporting the non-service cost components of net
periodic benefit cost, except for certain settlements,
curtailments, and special termination benefits that will continue
to be reported in Restructuring and other charges, in Other
expenses, net on the Company’s Statement of Consolidated
Operations. For the year ended December 31, 2018, the non-service
cost components reported in Other expenses, net was $139.
Additionally, the Statement of Consolidated Operations for the year
ended December 31, 2017 was recast to reflect the reclassification
of the non-service cost components of net periodic benefit cost to
Other expenses, net from both Cost of goods sold and Selling,
general administrative, and other expenses. As a result, for the
year ended December 31, 2017, Cost of goods sold decreased by $81,
Selling, general administrative, and other expenses decreased by
$4, and Other expenses, net changed by $85 from previously reported
amounts. (2) In December 2018, Alcoa Corporation repurchased
and retired 1,723,800 shares of outstanding common stock in
accordance with its previously announced common stock repurchase
program. Both the basic and diluted average number of shares for
the year ended December 31, 2018 includes 1,641,367 representing
the weighted average number of shares for the length of time the
1,723,800 shares were outstanding during 2018.
Alcoa Corporation and subsidiaries Consolidated Balance
Sheet (unaudited) (in millions) December
31, December 31, 2017 2018 ASSETS Current
assets: Cash and cash equivalents $ 1,358 $ 1,113 Receivables from
customers 811 830 Other receivables 232 173 Inventories 1,453 1,644
Fair value of derivative instruments 113 73 Prepaid expenses and
other current assets(1)
271
301 Total current assets
4,238 4,134
Properties, plants, and equipment 23,046 21,807 Less: accumulated
depreciation, depletion, and amortization
13,908 13,480
Properties, plants, and equipment, net
9,138
8,327 Investments 1,410 1,360
Deferred income taxes 814 563 Fair value of derivative instruments
128 82 Other noncurrent assets
1,719
1,480 Total assets
$
17,447 $ 15,946
LIABILITIES Current liabilities: Accounts payable,
trade $ 1,898 $ 1,663 Accrued compensation and retirement costs 459
400 Taxes, including income taxes 282 426 Fair value of derivative
instruments 185 82 Other current liabilities 412 347 Long-term debt
due within one year
16
1 Total current liabilities
3,252 2,919
Long-term debt, less amount due within one year 1,388 1,801 Accrued
pension benefits 2,341 1,414 Accrued other postretirement benefits
1,100 868 Asset retirement obligations 617 529 Environmental
remediation 258 236 Fair value of derivative instruments 1,105 261
Noncurrent income taxes 309 303 Other noncurrent liabilities and
deferred credits
279
222 Total liabilities
10,649 8,553
EQUITY Alcoa Corporation shareholders’ equity: Common stock 2 2
Additional capital 9,590 9,611 Retained earnings 113 341
Accumulated other comprehensive loss
(5,182 )
(4,568 ) Total Alcoa Corporation shareholders'
equity
4,523 5,386
Noncontrolling interest
2,275
2,007 Total equity
6,798 7,393 Total
liabilities and equity
$ 17,447
$ 15,946 (1) This line item
includes $7 and $3 of restricted cash as of December 31, 2017 and
2018, respectively.
Alcoa Corporation and
subsidiaries Statement of Consolidated Cash Flows
(unaudited) (in millions) Year ended
December 31, 2017
2018 CASH FROM OPERATIONS Net income $ 559 $
871 Adjustments to reconcile net income to cash from operations:
Depreciation, depletion, and amortization 752 733 Deferred income
taxes 176 (36 ) Equity earnings, net of dividends 9 17
Restructuring and other charges 309 527 Net gain from investing
activities – asset sales (116 ) – Net periodic pension benefit cost
111 146 Stock-based compensation 24 35 Other 32 (59 ) Changes in
assets and liabilities, excluding effects of acquisitions,
divestitures, and foreign currency translation adjustments:
(Increase) in receivables (118 ) (43 ) (Increase) in inventories
(238 ) (278 ) Decrease (Increase) in prepaid expenses and other
current assets 43 (32 ) Increase (Decrease) in accounts payable,
trade 377 (165 ) (Decrease) in accrued expenses(1) (563 ) (319 )
Increase in taxes, including income taxes 111 241 Pension
contributions(2) (106 ) (992 ) (Increase) in noncurrent assets (99
) (101 ) (Decrease) in noncurrent liabilities
(39 )
(97 ) CASH PROVIDED FROM
OPERATIONS
1,224 448
FINANCING ACTIVITIES Cash paid to former parent
company related to separation(3) (247 ) – Net change in short-term
borrowings (original maturities of three months or less) 7 –
Additions to debt (original maturities greater than three
months)(2) 21 560 Payments on debt (original maturities greater
than three months) (60 ) (135 ) Proceeds from the exercise of
employee stock options 43 23 Repurchase of common stock(4) – (50 )
Contributions from noncontrolling interest 80 149 Distributions to
noncontrolling interest (342 ) (827 ) Other
(8
)
(8 ) CASH USED FOR FINANCING ACTIVITIES
(506 )
(288 )
INVESTING ACTIVITIES Capital expenditures (405 ) (399 ) Proceeds
from the sale of assets and businesses 245 1 Additions to
investments
(66 )
(7 ) CASH
USED FOR INVESTING ACTIVITIES(5)
(226 )
(405 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH(5)
14
(4
)
Net change in cash and cash equivalents and restricted cash(5) 506
(249 )
Cash and cash equivalents and restricted
cash at beginning of year(5)
859 1,365
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF YEAR(5)
$
1,365
$
1,116
(1)
The (Decrease) in accrued expenses line item for the year
ended December 31, 2017 includes a $238 payment for the early
termination of a power supply contract related to Alcoa’s Rockdale
(Texas) smelter, which had been curtailed since the end of 2008.
(2)
On May 17, 2018, Alcoa Nederland Holding B.V., a wholly-owned
subsidiary of Alcoa Corporation, issued $500 in 6.125% senior notes
due 2028. The gross proceeds from the debt issuance were used to
make discretionary contributions to three of Alcoa Corporation’s
U.S. defined benefit pension plans. Accordingly, for the year ended
December 31, 2018, the Pension contributions line item includes a
cash outflow of $500 and the Additions to debt line item includes a
cash inflow of $492 (net of an $8 initial purchasers discount).
(3)
On November 1, 2016, Alcoa Corporation separated from its former
parent company (now named Arconic Inc.) into a standalone,
publicly-traded company. In accordance with the terms of the
related Separation and Distribution Agreement, Alcoa Corporation
paid to Arconic Inc. the net after-tax proceeds of $243 from the
sale of the Yadkin Hydroelectric Project.
(4)
In December 2018, Alcoa Corporation repurchased and retired
1,723,800 shares of outstanding common stock in accordance with its
previously announced common stock repurchase program.
(5)
On January 1, 2018, Alcoa Corporation adopted guidance issued by
the Financial Accounting Standards Board to the presentation of
restricted cash in the statement of cash flows. This guidance
requires that restricted cash be aggregated with cash and cash
equivalents in both the beginning-of-period and end-of-period line
items at the bottom of the statement of cash flows. Previously, the
change in restricted cash between the beginning-of-period and
end-of period was reflected as either an investing, financing,
operating, or non-cash activity based on the underlying nature of
the transaction. Accordingly, for the Company’s Statement of
Consolidated Cash Flows for the year ended December 31, 2018, the
Cash and cash equivalents and restricted cash at beginning of year
and Cash and cash equivalents and restricted cash at end of period
line items include restricted cash of $7 and $3, respectively.
Additionally, the Company’s Statement of Consolidated Cash Flows
for the year ended December 31, 2017 was recast to reflect this
change in presentation. As a result, the Cash and cash equivalents
and restricted cash at beginning of year and Cash and cash
equivalents and restricted cash at end of year line items include
restricted cash of $6 and $7, respectively. The change of $1 for
the year ended December 31, 2017 is reflected in the Effect of
exchange rate changes on cash and cash equivalents and restricted
cash line item.
Alcoa Corporation and subsidiaries Segment
Information (unaudited)
(dollars in millions, except realized
prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
4Q17 2017
1Q18 2Q18
3Q18 4Q18
2018 Bauxite: Production(1) (mdmt) 12.1
45.8 11.2 11.3 11.5 11.8 45.8 Third-party shipments (mdmt) 1.5 6.6
1.1 1.6 1.4 1.6 5.7 Intersegment shipments (mdmt) 10.8 41.1 10.4
10.0 10.1 10.7 41.2 Third-party sales $ 79 $ 333 $ 47 $ 77 $ 67 $
80 $ 271 Intersegment sales $ 227 $ 875 $ 249 $ 226 $ 224 $ 245 $
944 Adjusted EBITDA(2),(3) $ 105 $ 424 $ 110 $ 100 $ 106 $ 110 $
426 Depreciation, depletion, and amortization $ 21
$ 82 $ 29 $ 27 $
27 $ 28 $ 111
Alumina: Production (kmt) 3,331 13,096 3,173 3,227 3,160
3,297 12,857 Third-party shipments (kmt) 2,306 9,220 2,376 2,285
2,233 2,365 9,259 Intersegment shipments (kmt) 1,223 4,475 1,097
1,031 1,083 1,115 4,326 Average realized third-party price per
metric ton of alumina
$
406
$
340
$
385
$
467
$
493
$
479
$
455
Third-party sales $ 937 $ 3,133 $ 914 $ 1,068 $ 1,101 $ 1,132 $
4,215 Intersegment sales $ 580 $ 1,723 $ 454 $ 536 $ 544 $ 567 $
2,101 Adjusted EBITDA(2),(3) $ 562 $ 1,289 $ 392 $ 638 $ 660 $ 683
$ 2,373 Depreciation and amortization $ 52 $ 207 $ 53 $ 49 $ 48 $
47 $ 197 Equity income (loss) $ 5 $ (5 )
$ (1 ) $ 14 $ 10 $ 9
$ 32
Aluminum: Primary aluminum
production (kmt) 598 2,328 554 565 567 573 2,259 Third-party
aluminum shipments(4) (kmt) 854 3,356 794 853 806 815 3,268 Average
realized third-party price per metric ton of primary aluminum
$
2,365
$
2,224
$
2,483
$
2,623
$
2,465
$
2,358
$
2,484
Third-party sales $ 2,143 $ 8,027 $ 2,111 $ 2,413 $ 2,198 $ 2,107 $
8,829 Intersegment sales $ 5 $ 21 $ 4 $ 4 $ 6 $ 4 $ 18 Adjusted
EBITDA(2),(3) $ 246 $ 1,012 $ 153 $ 231 $ 73 $ (53 ) $ 404
Depreciation and amortization $ 104 $ 419 $ 106 $ 108 $ 91 $ 89 $
394 Equity loss $ (8 ) $ (19 ) $ –
$ (8 ) $ (5 ) $ (25 ) $ (38 )
Reconciliation of total segment Adjusted EBITDA to consolidated
net (loss) income attributable to Alcoa Corporation: Total
segment Adjusted EBITDA(2) $ 913 $ 2,725 $ 655 $ 969 $ 839 $ 740 $
3,203 Unallocated amounts: Transformation(5),(6) 10 (49 ) (2 ) (1 )
1 (1 ) (3 ) Corporate inventory accounting(5),(7) (95 ) (107 ) 31
(32 ) (17 ) 29 11 Corporate expenses(3),(8) (31 ) (131 ) (27 ) (26
) (22 ) (21 ) (96 ) Provision for depreciation, depletion, and
amortization
(187
)
(750
)
(194
)
(192
)
(173
)
(174
)
(733
)
Restructuring and other charges (297 ) (309 ) 19 (231 ) (177 ) (138
) (527 ) Interest expense (27 ) (104 ) (26 ) (32 ) (33 ) (31 ) (122
) Other expenses, net(3) (30 ) (27 ) (21 ) (9 ) (2 ) (32 ) (64 )
Other(3),(5),(9) (40 ) (89 )
(23 ) (36 ) (10 )
(3 ) (72 ) Consolidated income before income taxes
216 1,159 412 410 406 369 1,597 Provision for income taxes (272 )
(600 ) (138 ) (180 ) (251 ) (157 ) (726 ) Net income attributable
to noncontrolling interest (140 ) (342
) (124 ) (155 ) (196 )
(169 ) (644 ) Consolidated net (loss)
income attributable to Alcoa Corporation
$
(196
)
$
217
$
150
$
75
$
(41
)
$
43
$
227
The difference between segment totals and consolidated
amounts is in Corporate.
(1)
The production amounts do not include additional bauxite
(approximately 3 mdmt per annum) that Alcoa World Alumina and
Chemicals is entitled to receive (i.e. an amount in excess of its
equity ownership interest) from certain other partners at the mine
in Guinea.
(2)
Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before
interest, taxes, depreciation, and amortization) is net margin plus
an add-back for depreciation, depletion, and amortization. Net
margin is equivalent to Sales minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
Research and development expenses; and Provision for depreciation,
depletion, and amortization. The Adjusted EBITDA presented may not
be comparable to similarly titled measures of other companies.
(3) On January 1, 2018, Alcoa Corporation adopted guidance
issued by the Financial Accounting Standards Board to the
presentation of net periodic benefit cost related to pension and
other postretirement benefit plans. This guidance requires the
non-service cost components of net periodic benefit cost to be
reported separately from the service cost component in an entity’s
income statement. Additionally, this guidance is required to be
applied retrospectively. Accordingly, previously reported amounts
for Cost of goods sold, Selling, general administrative, and other
expenses, and Other expenses (income), net on Alcoa Corporation’s
Statement of Consolidated Operations have been recast to reflect
these changes. As a result, previously reported amounts for
Adjusted EBITDA on both a consolidated basis and for each of the
Company’s three segments have been updated to reflect these
changes. See footnote 1 to the Statement of Consolidated Operations
included in this release for additional information. (4) The
Aluminum segment’s third-party aluminum shipments are composed of
both primary aluminum and flat-rolled aluminum. (5)
Effective in the first quarter of 2018, management elected to
change the presentation of certain line items in the reconciliation
of total segment Adjusted EBITDA to consolidated net (loss) income
attributable to Alcoa Corporation to provide additional
transparency to the nature of these reconciling items. Accordingly,
Transformation (see footnote 6), which was previously reported
within Other, is presented as a separate line item. Additionally,
Impact of LIFO (last in, first out) and Metal price lag, which were
previously reported as separate line items, are now combined and
reported in a new line item labeled Corporate inventory accounting
(see footnote 7). Also, the impact of intersegment profit
eliminations, which was previously reported within Other, is
reported in the new Corporate inventory accounting line item. The
applicable information for all prior periods presented was recast
to reflect these changes. (6) Transformation includes, among
other items, the Adjusted EBITDA of previously closed operations.
(7) Corporate inventory accounting is composed of the
impacts of LIFO inventory accounting, metal price lag, and
intersegment profit eliminations. Metal price lag describes the
timing difference created when the average price of metal sold
differs from the average cost of the metal when purchased by Alcoa
Corporation’s rolled aluminum operations. In general, when the
price of metal increases, metal price lag is favorable, and when
the price of metal decreases, metal price lag is unfavorable.
(8) Corporate expenses are composed of general
administrative and other expenses of operating the corporate
headquarters and other global administrative facilities, as well as
research and development expenses of the corporate technical
center. (9) Other includes certain items that impact Cost of
goods sold and Selling, general administrative, and other expenses
on Alcoa Corporation’s Statement of Consolidated Operations that
are not included in the Adjusted EBITDA of the reportable segments,
including those described as “Other special items” (see footnote 2
to the reconciliation of Adjusted Income within Calculation of
Financial Measures included in this release).
Alcoa Corporation and subsidiaries Calculation of
Financial Measures (unaudited) (in millions, except
per-share amounts) Adjusted Income Quarter
ended Year ended
December
31,2017
September
30,2018
December
31,2018
December
31,2017
December
31,2018
Net (loss) income attributable to Alcoa Corporation $ (196 )
$ (41 ) $ 43 $ 217 $ 227 Special items: Restructuring and
other charges
297
177
138
309
527
Discrete tax items(1) 82 26 (24 ) 93 2 Other special items(2) 31
(42 ) 29 (9 ) 39 Tax impact(3) (7 ) (1 ) (43 ) (24 ) (89 )
Noncontrolling interest impact(3)
(12
)
–
(18
)
(23
)
(31
)
Subtotal
391 160
82 346
448 Net income attributable to
Alcoa Corporation – as adjusted
$
195
$
119
$
125
$
563
$
675
Diluted EPS(4): Net (loss) income attributable
to Alcoa Corporation common shareholders
$
(1.06
)
$
(0.22
)
$
0.23
$
1.16
$
1.20
Net income attributable to Alcoa Corporation common
shareholders – as adjusted
1.04
0.63
0.66
3.01
3.58
Net income attributable to Alcoa Corporation – as adjusted is a
non-GAAP financial measure. Management believes that this measure
is meaningful to investors because management reviews the operating
results of Alcoa Corporation excluding the impacts of restructuring
and other charges, discrete tax items, and other special items
(collectively, “special items”). There can be no assurances that
additional special items will not occur in future periods. To
compensate for this limitation, management believes that it is
appropriate to consider both Net (loss) income attributable to
Alcoa Corporation determined under GAAP as well as Net income
attributable to Alcoa Corporation – as adjusted. (1)
Discrete tax items include the following:
•
for the quarter ended December 31, 2017, a charge for a
valuation allowance related to certain non-U.S. deferred income tax
assets ($60), a charge for the remeasurement of certain non-U.S.
deferred income tax assets due to a tax rate change ($16), a charge
for the remeasurement of U.S. deferred income tax assets and
liabilities at the new corporate income tax rate of 21% (from 35%)
under the 2017 Tax Cuts and Jobs Act signed into law on December
22, 2017 ($22), and a net benefit for several other items ($16);
•
for the quarter ended September 30, 2018, a charge to establish a
reserve related to an outstanding income tax dispute involving a
former Spanish consolidated tax group previously owned by Alcoa
Corporation’s former parent company ($30) and a net benefit for
several small items ($4);
•
for the quarter ended December 31, 2018, a net benefit for several
items;
•
for the year ended December 31, 2017, a charge for a valuation
allowance related to certain non-U.S. deferred income tax assets
($60), a charge for the remeasurement of certain non-U.S. deferred
income tax assets due to a tax rate change ($26), a charge for the
remeasurement of U.S. deferred income tax assets and liabilities at
the new corporate income tax rate of 21% (from 35%) under the 2017
Tax Cuts and Jobs Act signed into law on December 22, 2017 ($22),
and a net benefit for several other items ($15); and
•
for the year ended December 31, 2018, a charge to establish a
reserve related to an outstanding income tax dispute involving a
former Spanish consolidated tax group previously owned by Alcoa
Corporation’s former parent company ($30) and a net benefit for
several other items ($28). (2) Other special items include
the following:
•
for the quarter ended December 31, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($29), a favorable
tax impact resulting from the difference between Alcoa
Corporation’s consolidated estimated annual effective tax rate and
the statutory rates applicable to special items ($13), a write-down
of inventory related to the permanent closure of the Rockdale
(Texas) smelter ($6), an unfavorable tax impact related to the
interim period treatment of operational losses in certain
jurisdictions for which no tax benefit was recognized ($6),
preparation and contingency costs for a potential work stoppage
(lockout commenced on January 11, 2018) at the Bécancour (Canada)
smelter ($4), an additional gain on the sale of the Yadkin
Hydroelectric Project in the United States ($2), and a net
unfavorable change in certain mark-to-market energy derivative
instruments ($1);
•
for the quarter ended September 30, 2018, a favorable tax impact
resulting from the difference between Alcoa’s consolidated
estimated annual effective tax rate and the statutory rates
applicable to special items ($47), an unfavorable tax impact
related to the interim period treatment of operational losses in
certain jurisdictions for which no tax benefit was recognized ($9),
a net favorable change in certain mark-to-market energy derivative
instruments ($8), and costs related to both a work stoppage at the
Bécancour (Canada) smelter ($3 (primarily contractor services)) and
the partial restart of the Warrick (Indiana) smelter ($1);
•
for the quarter ended December 31, 2018, an unfavorable tax impact
resulting from the difference between Alcoa’s consolidated
estimated annual effective tax rate and the statutory rates
applicable to special items ($32), a favorable tax impact related
to the interim period treatment of operational losses in certain
jurisdictions for which no tax benefit was recognized ($5), a net
favorable change in certain mark-to-market energy derivative
instruments ($3), and costs related to each of the following: a
work stoppage at the Bécancour (Canada) smelter ($3 (primarily
contractor services)), a collective employee dismissal process at
the Avilés and La Coruña (Spain) smelters ($1 (primarily contractor
services)), and the partial restart of the Warrick (Indiana)
smelter ($1);
•
for the year ended December 31, 2017, a gain on the sale of the
Yadkin Hydroelectric Project in the United States ($122), costs
related to the partial restart of the Warrick (Indiana) smelter
($46), a net unfavorable change in certain mark-to-market energy
derivative instruments ($25), an unfavorable impact due to the
near-term power market exposure as a result of renegotiating a
hedging contract related to forecasted future spot market power
purchases for the Portland (Australia) smelter ($21), settlement of
legacy tax matters in Brazil ($11), a write-down of inventory
related to the permanent closure of the Rockdale (Texas) smelter
($6), and preparation and contingency costs for a potential work
stoppage (lockout commenced on January 11, 2018) at the Bécancour
(Canada) smelter ($4); and
•
for the year ended December 31, 2018, a loss on a contractor
arbitration matter, including interest, ($29), a net favorable
change in certain mark-to-market energy derivative instruments
($22), and costs related to each of the following: the partial
restart of the Warrick (Indiana) smelter ($20), a work stoppage at
the Bécancour (Canada) smelter ($11 (primarily contractor
services)), and a collective employee dismissal process at the
Avilés and La Coruña (Spain) smelters ($1 (primarily contractor
services)). (3)
The tax impact on special items is based
on the applicable statutory rates in the jurisdictions where the
special items occurred. The noncontrolling interest impact on
special items represents Alcoa Corporation’s partner’s share of
certain special items.
(4) In any given period, the average number of shares
applicable to diluted EPS for Net (loss) income attributable to
Alcoa Corporation common shareholders may exclude certain share
equivalents as their effect is anti-dilutive. However, certain of
these share equivalents may become dilutive in the EPS calculation
applicable to Net income attributable to Alcoa Corporation common
shareholders – as adjusted due to a larger and/or positive
numerator. Specifically:
•
for the quarter ended December 31, 2017, share equivalents
associated with outstanding employee stock options and awards were
dilutive based on Net income attributable to Alcoa Corporation
common shareholders – as adjusted, resulting in a diluted average
number of shares of 188,027,654;
•
for the quarter ended September 30, 2018, share equivalents
associated with outstanding employee stock options and awards were
dilutive based on Net income attributable to Alcoa Corporation
common shareholders – as adjusted, resulting in a diluted average
number of shares of 188,726,446;
•
for the quarter ended December 31, 2018, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 188,219,224;
•
for the year ended December 31, 2017, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 186,981,665; and
•
for the year ended December 31, 2018, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 188,534,139.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions) Adjusted EBITDA Quarter
ended Year ended
December 31,
2017
September 30,
2018
December
31,2018
December
31,2017
December 31,
2018
Net (loss) income attributable to Alcoa Corporation
$
(196
)
$ (41 ) $ 43 $ 217
$
227
Add: Net income attributable to noncontrolling interest
140
196
169
342
644
Provision for income taxes
272
251
157
600
726
Other expenses, net(1)
30
2
32
27
64
Interest expense 27 33 31 104 122 Restructuring and other charges
297
177
138
309
527
Provision for depreciation, depletion, and amortization
187
173
174
750
733
Adjusted EBITDA(1)
$
757
$
791
$ 744 $
2,349 $ 3,043
Special items(2)
39
4 5 88
58 Adjusted EBITDA, excluding special
items(1)
$
796
$
795
$
749
$
2,437
$
3,101
Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before
interest, taxes, depreciation, and amortization) is net margin plus
an add-back for depreciation, depletion, and amortization. Net
margin is equivalent to Sales minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
Research and development expenses; and Provision for depreciation,
depletion, and amortization. Adjusted EBITDA is a non-GAAP
financial measure. Management believes that this measure is
meaningful to investors because Adjusted EBITDA provides additional
information with respect to Alcoa Corporation’s operating
performance and the Company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies. (1) On
January 1, 2018, Alcoa Corporation adopted guidance issued by the
Financial Accounting Standards Board to the presentation of net
periodic benefit cost related to pension and other postretirement
benefit plans. This guidance requires the non-service cost
components of net periodic benefit cost to be reported separately
from the service cost component in an entity’s income statement.
Additionally, this guidance is required to be applied
retrospectively. Accordingly, previously reported amounts for Cost
of goods sold, Selling, general administrative, and other expenses,
and Other expenses (income), net on Alcoa Corporation’s Statement
of Consolidated Operations have been recast to reflect these
changes. As a result, for the quarter and year ended December 31,
2017, Other expenses (income), net changed by $21 and $85,
respectively. Moreover, previously reported amounts for Adjusted
EBITDA and Adjusted EBITDA, excluding special items have been
updated to reflect these changes. See footnote 1 to the Statement
of Consolidated Operations included in this release for additional
information. (2) Special items include the following (see
reconciliation of Adjusted Income above for additional
information):
•
for the quarter ended December 31, 2017, costs related to
the partial restart of the Warrick (Indiana) smelter ($29), a
write-down of inventory related to the permanent closure of the
Rockdale (Texas) smelter ($6), and preparation and contingency
costs for a potential work stoppage (lockout commenced on January
11, 2018) at the Bécancour (Canada) smelter ($4);
•
for the quarter ended September 30, 2018, costs related to both a
work stoppage at the Bécancour (Canada) smelter ($3 (primarily
contractor services)) and the partial restart of the Warrick
(Indiana) smelter ($1);
•
for the quarter ended December 31, 2018, costs related to each of
the following: a work stoppage at the Bécancour (Canada) smelter
($3 (primarily contractor services)), a collective employee
dismissal process at the Avilés and La Coruña (Spain) smelters ($1
(primarily contractor services)), and the partial restart of the
Warrick (Indiana) smelter ($1);
•
for the year ended December 31, 2017, costs related to the partial
restart of the Warrick (Indiana) smelter ($46), an unfavorable
impact due to the near-term power market exposure as a result of
renegotiating a hedging contract related to forecasted future spot
market power purchases for the Portland (Australia) smelter ($21),
settlement of legacy tax matters in Brazil ($11), a write-down of
inventory related to the permanent closure of the Rockdale (Texas)
smelter ($6), and preparation and contingency costs for a potential
work stoppage (lockout commenced on January 11, 2018) at the
Bécancour (Canada) smelter ($4); and
•
for the year ended December 31, 2018, a loss on a contractor
arbitration matter ($26) and costs related to each of the
following: the partial restart of the Warrick (Indiana) smelter
($20), a work stoppage at the Bécancour (Canada) smelter ($11
(primarily contractor services)), and a collective employee
dismissal process at the Avilés and La Coruña (Spain) smelters ($1
(primarily contractor services)).
Alcoa Corporation and subsidiaries Calculation of
Financial Measures (unaudited), continued (in millions)
Free Cash Flow Quarter ended Year ended
December 31,
2017
September 30,
2018
December 31,
2018
December 31,
2017
December 31,
2018*
Cash from operations
$
455
$ 288 $ 535 $ 1,224 $ 448 Capital expenditures
(150
)
(82
)
(148
)
(405
)
(399
)
Free cash flow
$
305
$ 206 $
387 $ 819
$ 49 Free Cash Flow is a non-GAAP
financial measure. Management believes that this measure is
meaningful to investors because management reviews cash flows
generated from operations after taking into consideration capital
expenditures, which are both necessary to maintain and expand Alcoa
Corporation’s asset base and expected to generate future cash flows
from operations. It is important to note that Free Cash Flow does
not represent the residual cash flow available for discretionary
expenditures since other non-discretionary expenditures, such as
mandatory debt service requirements, are not deducted from the
measure. * Cash from operations for the year ended December
31, 2018 includes a $500 cash outflow for discretionary
contributions made to three of Alcoa Corporation’s U.S. defined
benefit pension plans. The $500 was funded with the gross proceeds
of 6.125% senior notes due 2028 issued in May 2018.
Net Debt December 31, September
30, December 31, 2017 2018 2018
Short-term borrowings $ 8 $ – $ – Long-term debt due within
one year 16 4 1 Long-term debt, less amount due within one year
1,388 1,820
1,801 Total debt* $ 1,412 $ 1,824 $ 1,802 Less:
Cash and cash equivalents
1,358
1,022 1,113 Net debt
$ 54 $ 802
$ 689 Net debt is a non-GAAP financial
measure. Management believes that this measure is meaningful to
investors because management assesses Alcoa Corporation’s leverage
position after considering available cash that could be used to
repay outstanding debt. * Total debt as of both
September 30, 2018 and December 31, 2018 includes $500 aggregate
principal amount of 6.125% senior notes due 2028 issued in May
2018, the gross proceeds of which were used to make discretionary
contributions to three of Alcoa Corporation’s U.S. defined benefit
pension plans.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190116005785/en/
Investor Contact:James Dwyer+1 412 992
5450James.Dwyer@alcoa.comMedia Contact:Monica Orbe+1 412 315
2896Monica.Orbe@alcoa.com
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