Actions in Aluminum segment further strengthen
Company
- Net loss of $402 million, or $2.17 per share
- Excluding special items, adjusted net loss of $2 million, or
$0.01 per share
- $455 million of adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) excluding special items
- Revenue of $2.7 billion
- $82 million cash from operations; negative free cash flow of $7
million
- $834 million cash balance and $1.8 billion of debt, for net
debt of $1.0 billion, as of June 30, 2019
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina, and aluminum products, today reported second quarter 2019
results that include several actions to improve the Aluminum
segment’s portfolio and further strengthen the Company.
M, except per share amounts
2Q181
1Q19
2Q19
Revenue
$3,579
$2,719
$2,711
Net income (loss) attributable to Alcoa
Corporation
$10
$(199)
$(402)
Earnings (loss) per share attributable to
Alcoa Corporation
$0.05
$(1.07)
$(2.17)
Adjusted net income (loss)
$221
$(43)
$(2)
Adjusted earnings (loss) per share
$1.17
$(0.23)
$(0.01)
Adjusted EBITDA excluding special
items
$783
$467
$455
1
As of January 1, 2019, the Company changed
its accounting method for valuing certain inventories from last-in,
first-out (LIFO) to average cost. The effects of the change in
accounting principle have been retrospectively applied to all prior
periods presented. See Exhibit 99.2 to the Company’s Form 8-K filed
with the Securities and Exchange Commission (SEC) on April 17,
2019, which illustrates the effects of the change in accounting
principle to 2018 interim and full year financial information.
“In the second quarter, our Aluminum segment rebounded despite
weaker metal prices, and we reported a solid cash balance, even
after sizeable cash outlays,” said President and Chief Executive
Officer Roy Harvey. “We also maintained strong operational
performance across all of our businesses.”
Harvey continued: “In addition, we successfully divested our
minority interest in the Saudi joint venture rolling mill, and we
made significant progress on other initiatives to reduce losses and
increase Company profits. As we enter the second half of the year,
we’ll continue to navigate through this market cycle with a
sustained focus on safety and operational excellence, finding new
ways to further improve the business.”
Alcoa reported a net loss of $402 million, or $2.17 per share
for the second quarter 2019, compared to a net loss of $199
million, or $1.07 per share, in the first quarter of 2019.
The second quarter results include the impact of $400 million of
special items, including $319 million from the divestiture of
Alcoa’s interest in the Ma’aden Rolling Company (MRC) in Saudi
Arabia and $81 million in other special items.
Excluding the impact of special items, second quarter 2019
adjusted net loss improved sequentially $41 million to an adjusted
net loss of $2 million, or $0.01 per share.
In the second quarter, Alcoa reported adjusted EBITDA excluding
special items of $455 million, down slightly from the prior
quarter, primarily due to lower pricing for both alumina and
aluminum that was partially offset by higher energy sales and lower
costs for raw materials.
Alcoa reported second quarter revenue of $2.7 billion, which is
flat sequentially.
Alcoa ended the quarter with cash on hand of $834 million and
debt of $1.8 billion, for net debt of $1.0 billion.
In the second quarter, cash from operations was $82 million,
which reflects payments of $306 million for prior year income
taxes. Cash used for financing activities was $71 million and cash
used for investing activities was $199 million, which included
contributions totaling $100 million made as part of the MRC
divestiture. Free cash flow was negative $7 million.
The Company reported 31 days working capital, a four-day
increase year-over-year, primarily due to lower revenues, but
improved four days sequentially.
To strengthen the Company, Alcoa:
- Divested its 25.1 percent minority interest in MRC,
releasing the Company from all future MRC obligations, including
Alcoa’s sponsor support of MRC debt, and its share of any future
MRC cash contributions. Alcoa continues to hold its interests in
the Ma’aden joint venture’s bauxite mining, alumina refining and
aluminum smelting businesses.
- Reached two new competitive labor agreements at smelters in
Québec, Canada—the first at Baie Comeau; the second at
Aluminerie de Bécancour (ABI), ending an 18-month labor dispute.
The full restart of ABI is expected to begin on July 26, 2019, and
be complete in the second quarter of 2020. The Company expects to
record special items associated with restart expenses to range
between $30 million and $35 million (after-tax), or $0.16 and $0.19
per share, each in the second half of 2019 and in the first half of
2020.
- Implemented plans to upgrade the Deschambault smelter in
Québec to increase production approximately 10 percent by the
end of 2021. Alcoa will receive a non-refundable contribution of up
to $10 million (CAD) from Canada’s Strategic Innovation Fund to
offset costs for the $85 million (CAD) project, expected to be
complete in 2021.
- Reached a conditional agreement on July 5 to divest the
Avilés and La Coruña aluminum plants in Spain. If the
acquisition by PARTER Capital Group AG cannot be completed by July
31, 2019, the collective dismissal and social plan are expected to
go into effect on August 1, 2019. Alcoa expects to record
restructuring-related charges in the third quarter of 2019,
estimated to range from $100 million to $140 million (pre- and
after-tax), or $0.54 to $0.75 per share, depending on whether an
acquisition or collective dismissal occurs. Related cash outlays
are expected to be approximately $100 million to $130 million, with
approximately half to be paid in 2019.
2019 Outlook
The Company’s 2019 shipment outlook for Bauxite, Alumina and
Aluminum remains unchanged from the prior full-year estimates.
Total annual bauxite shipments are expected to range between 47.0
and 48.0 million dry metric tons. Total alumina shipments are
projected between 13.6 and 13.7 million metric tons with
anticipated operational improvements and higher year-on-year
production. Aluminum shipments are expected to be between 2.8 and
2.9 million metric tons.
In the third quarter of 2019, Alcoa expects benefits from higher
volumes and lower costs for raw materials and maintenance in the
Alumina and Bauxite segments. In the Aluminum segment, the Company
expects improvements primarily from lower alumina costs.
Market Update
For full-year 2019, Alcoa continues to project a global aluminum
deficit, ranging between 1.0 million and 1.4 million metric tons,
down from last quarter’s estimate of a deficit between 1.5 million
and 1.9 million metric tons.
Global aluminum demand growth for 2019 is estimated to range
between 1.25 percent and 2.25 percent, down from 2 percent to 3
percent in the previous quarter, driven by lower demand in both
China and the world ex-China due to trade tensions and
macroeconomic headwinds. Even so, aluminum inventories, measured in
days of consumption, continue to decline and are expected by year’s
end to reach levels not seen in more than a decade, since before
the Global Financial Crisis in 2008.
In the alumina market, Alcoa projects a global surplus for 2019,
ranging between 500 thousand metric tons and 1.3 million metric
tons, up from last quarter’s estimate of 200 thousand metric tons
to 1 million metric tons. Environmentally-driven Chinese alumina
curtailments were outweighed by the combination of a refinery
restart in the Atlantic region and lower alumina demand from
worldwide smelting production.
The third-party, seaborne bauxite market is expected to have a
larger surplus in 2019 ranging between 13 million and 17 million
metric tons, an increase from the previous quarter’s full-year
estimate of 8 million to 12 million metric tons. The increase is
due to higher production in Guinea and Southeast Asia, which is
only partially offset by higher demand in China.
Conference Call
Alcoa will hold its quarterly conference call at 5 p.m. Eastern
Daylight Time (EDT) on Wednesday, July 17, 2019, to present
second-quarter 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. EDT on July 17, 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 more than 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 and which may also affect Alcoa Corporation’s ability to
obtain credit or financing upon acceptable terms; (c) unfavorable
changes in the markets served by Alcoa Corporation; (d) the impact
of changes in foreign currency exchange and tax rates on costs and
results; (e) increases in energy costs or uncertainty of energy
supply; (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, legal, and regulatory risks in the countries in which Alcoa
Corporation operates or sells products; (j) labor disputes and/or
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 discussed in Item 1A of Alcoa Corporation’s
Form 10-K for the fiscal year ended December 31, 2018 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
June 30,
2018
March 31,
2019
June 30,
2019
Sales
$
3,579
$
2,719
$
2,711
Cost of goods sold (exclusive of expenses
below)(1)
2,753
2,180
2,189
Selling, general administrative, and other
expenses
64
84
68
Research and development expenses
9
7
7
Provision for depreciation, depletion, and
amortization
192
172
174
Restructuring and other charges, net
231
113
370
Interest expense
32
30
30
Other expenses, net
9
41
50
Total costs and expenses
3,290
2,627
2,888
Income (loss) before income taxes
289
92
(177
)
Provision for income taxes(1)
158
150
116
Net income (loss)(1)
131
(58
)
(293
)
Less: Net income attributable to
noncontrolling interest(1)
121
141
109
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA
CORPORATION(1)
$
10
$
(199
)
$
(402
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income (loss)
$
0.05
$
(1.07
)
$
(2.17
)
Average number of shares
186,398,784
185,325,040
185,533,936
Diluted:
Net income (loss)
$
0.05
$
(1.07
)
$
(2.17
)
Average number of shares
188,708,013
185,325,040
185,533,936
(1)
As of January 1, 2019, the
Company changed its accounting method for valuing certain
inventories from LIFO to average cost. The effects of the change in
accounting principle have been retrospectively applied to all prior
periods presented. See Exhibit 99.2 to the Company’s Form 8-K filed
with the SEC on April 17, 2019, which illustrates the effects of
the change in accounting principle to 2018 interim and full year
financial information.
Alcoa Corporation and
subsidiaries
Statement of Consolidated Operations
(unaudited), continued
(dollars in millions, except per-share
amounts)
Six months ended
June 30, 2018
June 30, 2019
Sales
$
6,669
$
5,430
Cost of goods sold (exclusive of expenses
below)(1)
5,055
4,369
Selling, general administrative, and other
expenses
131
152
Research and development expenses
17
14
Provision for depreciation, depletion, and
amortization
386
346
Restructuring and other charges, net
212
483
Interest expense
58
60
Other expenses, net
30
91
Total costs and expenses
5,889
5,515
Income (loss) before income taxes
780
(85
)
Provision for income taxes(1)
309
266
Net income (loss)(1)
471
(351
)
Less: Net income attributable to
noncontrolling interest(1)
266
250
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA
CORPORATION(1)
$
205
$
(601
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income (loss)
$
1.10
$
(3.24
)
Average number of shares
186,163,441
185,416,620
Diluted:
Net income (loss)
$
1.09
$
(3.24
)
Average number of shares
188,626,057
185,416,620
Common stock outstanding at the end of the
period
186,468,950
185,546,772
(1)
As of January 1, 2019, the
Company changed its accounting method for valuing certain
inventories from LIFO to average cost. The effects of the change in
accounting principle have been retrospectively applied to all prior
periods presented. See Exhibit 99.2 to the Company’s Form 8-K filed
with the SEC on April 17, 2019, which illustrates the effects of
the change in accounting principle to 2018 interim and full year
financial information.
Alcoa Corporation and
subsidiaries
Consolidated Balance Sheet
(unaudited)
(in millions)
December 31,
2018
June 30,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,113
$
834
Receivables from customers
830
684
Other receivables
173
203
Inventories(1)
1,819
1,767
Fair value of derivative instruments
73
80
Prepaid expenses and other current
assets(1),(2)
320
250
Total current assets
4,328
3,818
Properties, plants, and equipment
21,807
22,126
Less: accumulated depreciation, depletion,
and amortization
13,480
13,853
Properties, plants, and equipment, net
8,327
8,273
Investments
1,360
1,141
Deferred income taxes
560
599
Fair value of derivative instruments
82
55
Other noncurrent assets
1,475
1,463
Total assets
$
16,132
$
15,349
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,663
$
1,523
Accrued compensation and retirement
costs
400
409
Taxes, including income taxes
426
100
Fair value of derivative instruments
82
71
Other current liabilities
347
427
Long-term debt due within one year
1
1
Total current liabilities
2,919
2,531
Long-term debt, less amount due within one
year
1,801
1,804
Accrued pension benefits
1,407
1,388
Accrued other postretirement benefits
868
835
Asset retirement obligations
529
529
Environmental remediation
236
237
Fair value of derivative instruments
261
506
Noncurrent income taxes
301
320
Other noncurrent liabilities and deferred
credits
222
340
Total liabilities
8,544
8,490
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,611
9,629
Retained earnings (deficit)(1)
570
(31
)
Accumulated other comprehensive loss
(4,565
)
(4,705
)
Total Alcoa Corporation shareholders’
equity
5,618
4,895
Noncontrolling interest(1)
1,970
1,964
Total equity
7,588
6,859
Total liabilities and equity
$
16,132
$
15,349
(1)
As of January 1, 2019, the Company changed
its accounting method for valuing certain inventories from LIFO to
average cost. The effects of the change in accounting principle
have been retrospectively applied to the prior period presented.
See Exhibit 99.2 to the Company’s Form 8-K filed with the SEC on
April 17, 2019, which illustrates the effects of the change in
accounting principle to 2018 interim and full year financial
information.
(2)
This line item includes $3 of restricted
cash as of both December 31, 2018 and June 30, 2019.
Alcoa Corporation and
subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in millions)
Six Months Ended June
30,
2018
2019
CASH FROM OPERATIONS
Net income (loss)(1)
$
471
$
(351
)
Adjustments to reconcile net income (loss)
to cash from operations:
Depreciation, depletion, and
amortization
387
346
Deferred income taxes(1)
(40
)
64
Equity earnings, net of dividends
(11
)
14
Restructuring and other charges, net
212
483
Net gain from investing activities – asset
sales
(3
)
(1
)
Net periodic pension benefit cost
81
60
Stock-based compensation
20
21
Provision for bad debt expense
—
20
Other
(32
)
24
Changes in assets and liabilities,
excluding effects of foreign currency translation adjustments:
(Increase) Decrease in receivables
(209
)
94
(Increase) Decrease in inventories(1)
(225
)
53
(Increase) Decrease in prepaid expenses
and other current assets
(8
)
68
(Decrease) in accounts payable, trade
(105
)
(144
)
(Decrease) in accrued expenses
(243
)
(51
)
Increase (Decrease) in taxes, including
income taxes
101
(342
)
Pension contributions(2)
(692
)
(55
)
(Increase) in noncurrent assets
(49
)
(32
)
(Decrease) in noncurrent liabilities
(30
)
(21
)
CASH (USED FOR) PROVIDED FROM
OPERATIONS
(375
)
250
FINANCING ACTIVITIES
Additions to debt (original maturities
greater than three months)(2)
553
—
Payments on debt (original maturities
greater than three months)
(7
)
—
Proceeds from the exercise of employee
stock options
22
1
Contributions from noncontrolling
interest
109
21
Distributions to noncontrolling
interest
(385
)
(286
)
Other
(6
)
(6
)
CASH PROVIDED FROM (USED FOR) FINANCING
ACTIVITIES
286
(270
)
INVESTING ACTIVITIES
Capital expenditures
(169
)
(158
)
Proceeds from the sale of assets
—
11
Additions to investments
(5
)
(111
)
CASH USED FOR INVESTING ACTIVITIES
(174
)
(258
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(7
)
(1
)
Net change in cash and cash equivalents
and restricted cash
(270
)
(279
)
Cash and cash equivalents and restricted
cash at beginning of year
1,365
1,116
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD
$
1,095
$
837
(1)
As of January 1, 2019, the Company changed
its accounting method for valuing certain inventories from LIFO to
average cost. The effects of the change in accounting principle
have been retrospectively applied to the prior period presented.
See Exhibit 99.2 to the Company’s Form 8-K filed with the SEC on
April 17, 2019, which illustrates the effects of the change in
accounting principle to 2018 interim and full year financial
information.
(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 six months ended June 30, 2018, the Pension
contributions line item includes a cash outflow of $500 and the
Additions to debt line item includes a cash inflow of $492 (net of
an $8 initial purchasers discount).
Alcoa Corporation and
subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized
prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
1Q18
2Q18
3Q18
4Q18
2018
1Q19
2Q19
Bauxite:
Production(1) (mdmt)
11.2
11.3
11.5
11.8
45.8
11.9
11.3
Third-party shipments (mdmt)
1.1
1.6
1.4
1.6
5.7
1.2
1.5
Intersegment shipments (mdmt)
10.4
10.0
10.1
10.7
41.2
10.2
10.3
Third-party sales
$
47
$
77
$
67
$
80
$
271
$
65
$
67
Intersegment sales
$
249
$
226
$
224
$
245
$
944
$
236
$
246
Segment adjusted EBITDA(2)
$
110
$
100
$
106
$
110
$
426
$
126
$
112
Depreciation, depletion, and
amortization
$
29
$
27
$
27
$
28
$
111
$
28
$
27
Alumina:
Production (kmt)
3,173
3,227
3,160
3,297
12,857
3,240
3,309
Third-party shipments (kmt)
2,376
2,285
2,233
2,365
9,259
2,329
2,299
Intersegment shipments (kmt)
1,097
1,031
1,083
1,115
4,326
972
1,070
Average realized third-party price per
metric ton of alumina
$
385
$
467
$
493
$
479
$
455
$
385
$
376
Third-party sales
$
914
$
1,068
$
1,101
$
1,132
$
4,215
$
897
$
864
Intersegment sales
$
454
$
536
$
544
$
567
$
2,101
$
417
$
445
Segment adjusted EBITDA(2)
$
392
$
638
$
660
$
683
$
2,373
$
372
$
369
Depreciation and amortization
$
53
$
49
$
48
$
47
$
197
$
48
$
55
Equity (loss) income
$
(1
)
$
14
$
10
$
9
$
32
$
12
$
3
Aluminum:
Primary aluminum production (kmt)
554
565
567
573
2,259
537
533
Third-party aluminum shipments(3)
(kmt)
794
853
806
815
3,268
709
724
Average realized third-party price per
metric ton of primary aluminum
$
2,483
$
2,623
$
2,465
$
2,358
$
2,484
$
2,219
$
2,167
Third-party sales
$
2,111
$
2,413
$
2,198
$
2,107
$
8,829
$
1,735
$
1,757
Intersegment sales
$
4
$
4
$
6
$
4
$
18
$
3
$
4
Segment adjusted EBITDA(2),(4)
$
187
$
230
$
84
$
(50
)
$
451
$
(96
)
$
3
Depreciation and amortization
$
106
$
108
$
91
$
89
$
394
$
89
$
85
Equity loss
$
—
$
(8
)
$
(5
)
$
(25
)
$
(38
)
$
(22
)
$
(17
)
Reconciliation of total segment
Adjusted EBITDA to consolidated
net income (loss) attributable to Alcoa
Corporation:
Total segment Adjusted EBITDA(2),(4)
$
689
$
968
$
850
$
743
$
3,250
$
402
$
484
Unallocated amounts:
Transformation(5)
(2
)
(1
)
1
(1
)
(3
)
2
3
Intersegment eliminations(4),(6)
76
(152
)
21
47
(8
)
86
(1
)
Corporate expenses(7)
(27
)
(26
)
(22
)
(21
)
(96
)
(24
)
(28
)
Provision for depreciation, depletion, and
amortization
(194
)
(192
)
(173
)
(174
)
(733
)
(172
)
(174
)
Restructuring and other charges, net
19
(231
)
(177
)
(138
)
(527
)
(113
)
(370
)
Interest expense
(26
)
(32
)
(33
)
(31
)
(122
)
(30
)
(30
)
Other expenses, net
(21
)
(9
)
(2
)
(32
)
(64
)
(41
)
(50
)
Other(8)
(23
)
(36
)
(10
)
(3
)
(72
)
(18
)
(11
)
Consolidated income before income
taxes(4)
491
289
455
390
1,625
92
(177
)
Provision for income taxes(4)
(151
)
(158
)
(260
)
(163
)
(732
)
(150
)
(116
)
Net income attributable to noncontrolling
interest(4)
(145
)
(121
)
(201
)
(176
)
(643
)
(141
)
(109
)
Consolidated net income (loss)
attributable to Alcoa Corporation(4)
$
195
$
10
$
(6
)
$
51
$
250
$
(199
)
$
(402
)
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)
The Aluminum segment’s
third-party aluminum shipments are composed of both primary
aluminum and flat-rolled aluminum.
(4)
As of January 1, 2019, the
Company changed its accounting method for valuing certain
inventories from LIFO to average cost. The effects of the change in
accounting principle have been retrospectively applied to all prior
periods presented. See Exhibit 99.2 to the Company’s Form 8-K filed
with the SEC on April 17, 2019, which illustrates the effects of
the change in accounting principle to 2018 interim and full year
financial information.
(5)
Transformation includes, among
other items, the Adjusted EBITDA of previously closed
operations.
(6)
Concurrent with the change in
inventory accounting method as of January 1, 2019, management
elected to change the presentation of certain line items in the
reconciliation of total segment Adjusted EBITDA to Consolidated net
income (loss) attributable to Alcoa Corporation. Corporate
inventory accounting previously included the impact of LIFO, metal
price lag and intersegment eliminations. The impact of LIFO has
been eliminated with the change in inventory method. Metal price
lag attributable to the Company’s rolled operations business is now
netted within the Aluminum segment to simplify presentation of an
impact that nets to zero in consolidation. Only Intersegment
eliminations remain as a reconciling line item and are labeled as
such.
(7)
Corporate expenses are composed
of general administrative and other expenses of operating the
corporate headquarters and other global administrative facilities,
as well as research and development expenses of the corporate
technical center.
(8)
Other includes 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 3 to the reconciliation of Adjusted Income
within Calculation of Financial Measures included in this
release).
Alcoa Corporation and
subsidiaries
Calculation of Financial Measures
(unaudited)
(in millions, except per-share
amounts)
Adjusted Income
Income (Loss)
Diluted EPS
Quarter ended
Quarter ended
June 30,
2018
March 31,
2019
June 30,
2019
June 30,
2018
March 31,
2019
June 30,
2019
Net income (loss) attributable to Alcoa
Corporation(1)
$
10
$
(199
)
$
(402
)
$
0.05
$
(1.07
)
$
(2.17
)
Special items:
Restructuring and other charges, net
231
113
370
Discrete tax items(2)
2
—
1
Other special items(3)
34
44
39
Tax impact(4)
(43
)
(1
)
(10
)
Noncontrolling interest impact(4)
(13
)
—
—
Subtotal
211
156
400
Net income (loss) attributable to Alcoa
Corporation – as adjusted
$
221
$
(43
)
$
(2
)
$
1.17
$
(0.23
)
$
(0.01
)
Net income (loss) attributable to Alcoa Corporation – as adjusted
is a non-GAAP financial measure. Management believes 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 it is
appropriate to consider both Net income (loss) attributable to
Alcoa Corporation determined under GAAP as well as Net income
(loss) attributable to Alcoa Corporation – as adjusted.
(1)
As of January 1, 2019, the Company changed
its accounting method for valuing certain inventories from LIFO to
average cost. The effects of the change in accounting principle
have been retrospectively applied to the prior period presented.
See Exhibit 99.2 to the Company’s Form 8-K filed with the SEC on
April 17, 2019, which illustrates the effects of the change in
accounting principle to 2018 interim and full year financial
information.
(2)
Discrete tax items include a net charge
for several items for the quarters ended June 30, 2018 and June 30,
2019.
(3)
Other special items include the
following:
•for the quarter ended June 30, 2018, a
loss on a contractor arbitration matter ($29), a net unfavorable
change in certain mark-to-market energy derivative instruments
($6), a favorable tax impact related to the interim period
treatment of operational losses in certain jurisdictions for which
no tax benefit was recognized ($5), costs related to the partial
restart of the Warrick (Indiana) smelter ($2), and costs related to
a work stoppage at the Bécancour, Canada smelter ($2);
• for the quarter ended March 31, 2019, an
unfavorable tax impact related to the interim period treatment of
operational losses in certain jurisdictions for which no tax
benefit was recognized ($83), 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 ($49), costs related to a collective employee dismissal
process in Spain at the Avilés and La Coruña smelters ($17,
primarily inventory write downs), a gain on the sale of excess land
($9), and costs related to a work stoppage at the Bécancour, Canada
smelter ($2); and
• for the quarter ended June 30, 2019, an
unfavorable tax impact related to the interim period treatment of
operational losses in certain jurisdictions for which no tax
benefit was recognized ($298), 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 ($267), costs related to ongoing union negotiations in the
U.S. ($5), costs related to a work stoppage at the Bécancour,
Canada smelter ($2), and costs related to a collective employee
dismissal process in Spain at the Avilés and La Coruña smelters
($1).
(4)
The tax impact on special items is based
on the applicable statutory rates in the jurisdictions where the
special items occurred. The noncontrolling interest impact on
special items represents Alcoa’s partner’s share of certain special
items.
Alcoa Corporation and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
June 30,
2018
March 31,
2019
June 30,
2019
Net income (loss) attributable to Alcoa
Corporation(1)
$
10
$
(199
)
$
(402
)
Add:
Net income attributable to noncontrolling
interest(1)
121
141
109
Provision for income taxes(1)
158
150
116
Other expenses, net
9
41
50
Interest expense
32
30
30
Restructuring and other charges, net
231
113
370
Provision for depreciation, depletion, and
amortization
192
172
174
Adjusted EBITDA
753
448
447
Special items(2)
30
19
8
Adjusted EBITDA, excluding special
items
$
783
$
467
$
455
Alcoa’s Corporation’s definition
of Adjusted EBITDA (Earnings before interest, taxes, depreciation,
and amortization) is net margin plus an add-back for depreciation,
depletion, and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. Adjusted EBITDA is a non-GAAP financial measure.
Management believes 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)
As of January 1, 2019, the
Company changed its accounting method for valuing certain
inventories from LIFO to average cost. The effects of the change in
accounting principle have been retrospectively applied to the prior
period presented. See Exhibit 99.2 to the Company’s Form 8-K filed
with the SEC on April 17, 2019, which illustrates the effects of
the change in accounting principle to 2018 interim and full year
financial information.
(2)
Special items include the
following (see reconciliation of Adjusted Income above for
additional information):
• for the quarter ended June 30,
2018, a loss on a contractor arbitration matter ($26), costs
related to the partial restart of the Warrick (Indiana) smelter
($2), and costs related to a work stoppage at the Bécancour, Canada
smelter ($2).
• for the quarter ended March 31,
2019, costs related to a collective employee dismissal process in
Spain at the Avilés and La Coruña smelters ($17, primarily
inventory write downs), and costs related to a work stoppage at the
Bécancour, Canada smelter ($2).
• for the quarter ended June 30,
2019, costs related to ongoing union negotiations in the U.S. ($5),
costs related to a work stoppage at the Bécancour, Canada smelter
($2), and costs related to a collective employee dismissal process
in Spain at the Avilés and La Coruña smelters ($1).
Alcoa Corporation and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
June 30,
2018
March 31,
2019
June 30,
2019
Cash from operations(1)
$
(430
)
$
168
$
82
Capital expenditures
(95
)
(69
)
(89
)
Free cash flow
$
(525
)
$
99
$
(7
)
Free Cash Flow is a non-GAAP financial
measure. Management believes 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)
Cash from operations for the quarter ended
June 30, 2018 includes a $500 cash outflow for discretionary
contributions made to three of Alcoa Corporation’s U.S. defined
benefit pension plans. The $500 was funded with the gross proceeds
of 6.125% senior notes due 2028 issued in May 2018.
Net Debt
December 31,
2018
June 30,
2019
Short-term borrowings
$
—
$
—
Long-term debt due within one year
1
1
Long-term debt, less amount due within one
year
1,801
1,804
Total debt
1,802
1,805
Less: Cash and cash equivalents
1,113
834
Net debt
$
689
$
971
Net debt is a non GAAP financial measure.
Management believes this measure is meaningful to investors because
management assesses Alcoa Corporation’s leverage position after
considering available cash that could be used to repay outstanding
debt.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190717005698/en/
Investor Contact: James Dwyer +1 412 992 5450
James.Dwyer@alcoa.com
Media Contact: Monica Orbe +1 412 315 2896
Monica.Orbe@alcoa.com
Alcoa (NYSE:AA)
Historical Stock Chart
From Mar 2024 to Apr 2024
Alcoa (NYSE:AA)
Historical Stock Chart
From Apr 2023 to Apr 2024