Fourth Quarter 2019
- Net loss of $303 million, or $1.63 per share
- Excluding special items, adjusted net loss of $57 million, or
$0.31 per share
- $346 million of adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) excluding special items
- Revenue of $2.4 billion
- $262 million cash from operations; free cash flow of $128
million
- $879 million cash balance and $1.8 billion of debt, for net
debt of $921 million, as of December 31, 2019
- Company takes actions aligned with strategic priorities to
reduce complexity, drive returns and advance sustainably, including
closing one fully curtailed alumina refinery as part of multi-year
asset review process and announcing the first planned sale of
non-core assets
Full-Year 2019
- Net loss of $1,125 million, or $6.07 per share, and adjusted
net loss of $184 million, or $0.99 per share
- Adjusted EBITDA excluding special items of $1.66 billion
- Revenue of $10.4 billion
- $686 million cash from operations; free cash flow of $307
million
- Net pension and other postretirement employee benefits
liability of $2.4 billion at December 31, 2019, up $40 million from
year-end 2018
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina, and aluminum products, today reported fourth quarter and
full-year 2019 results.
M, except per share amounts
4Q181
3Q19
4Q19
FY181
FY19
Revenue
$3,344
$2,567
$2,436
$13,403
$10,433
Net income (loss) attributable to Alcoa
Corporation
$51
$(221)
$(303)
$250
$(1,125)
Earnings (loss) per share attributable to
Alcoa Corporation
$0.27
$(1.19)
$(1.63)
$1.33
$(6.07)
Adjusted net income (loss)
$133
$(82)
$(57)
$698
$(184)
Adjusted earnings (loss) per share
$0.70
$(0.44)
$(0.31)
$3.70
$(0.99)
Adjusted EBITDA excluding special
items
$770
$388
$346
$3,129
$1,656
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 2019, we acted to further strengthen Alcoa, completing the
divestiture of uncompetitive assets, modernizing labor agreements
in three countries, implementing a new operating model, and making
quick progress on the asset review process we announced last
quarter,” said Alcoa President and Chief Executive Officer Roy
Harvey.
“While the market in alumina and aluminum challenged us, we
maintained a strong cash balance of nearly $900 million and drove
operational stability,” Harvey said. “Also, our low-cost, top-tier
bauxite and alumina segments both set new annual production records
based on our current portfolio.”
Fourth Quarter 2019 Results
Alcoa reported a net loss of $303 million, or $1.63 per share,
in the fourth quarter of 2019 compared with a net loss of $221
million, or $1.19 per share, in the third quarter of 2019.
In the fourth quarter of 2019, the Company took several actions
in alignment with its strategic priorities, including taking the
first steps in a multi-year portfolio review and continuing work to
strengthen the balance sheet. The announced closure of the Point
Comfort alumina refinery in Texas and additional actions taken on
pension and other postemployment benefits were the primary drivers
of the $246 million in special items for the fourth quarter of
2019.
Excluding the impact of special items, adjusted net loss was $57
million, or $0.31 per share, a sequential improvement of 30 percent
from adjusted net loss of $82 million, or $0.44 per share in the
third quarter of 2019.
Adjusted EBITDA excluding special items fell 11 percent
sequentially to $346 million from $388 million in the third quarter
of 2019. The change was primarily due to lower alumina and aluminum
prices, partially offset by lower raw material prices.
Alcoa reported fourth quarter 2019 revenue of $2.4 billion, down
5 percent sequentially, due primarily to lower alumina and aluminum
prices.
Alcoa ended the quarter with cash on hand of $879 million and
debt of $1.8 billion, for net debt of $921 million.
In the fourth quarter of 2019, cash from operations was $262
million. Cash used for financing and investing activities were $93
million and $134 million, respectively. Free cash flow was $128
million.
The Company reported 27 days working capital, which is flat on a
year-over-year basis.
Full-Year 2019 Results
For full-year 2019, Alcoa reported a net loss of $1,125 million,
or $6.07 per share, compared with net income of $250 million, or
$1.33 per share, for full-year 2018.
Excluding special items, the Company reported adjusted net loss
of $184 million, or $0.99 per share, compared with adjusted net
income of $698 million, or $3.70 per share, in 2018.
Adjusted EBITDA excluding special items was $1.66 billion, down
47 percent from $3.1 billion in 2018. The year-over-year decrease
was largely due to lower alumina and aluminum prices, partially
offset by lower costs for raw materials.
Revenue in 2019 was $10.4 billion, down 22 percent from 2018,
mainly attributable to lower realized prices for alumina and
aluminum products.
Cash from operations in 2019 was $686 million. Cash used for
financing activities was $444 million and cash used for investing
activities was $468 million. Free cash flow was $307 million. Alcoa
invested $89 million in return-seeking capital projects and
controlled sustaining capital expenditures to $290 million in
2019.
Over the course of 2019, the Company undertook actions to reduce
liabilities associated with Alcoa’s pension and other
postretirement employee benefit plans. As a result of these
actions, along with favorable asset returns, the Company was able
to mostly offset the negative impact of sharply lower discount
rates as part of the annual remeasurement on December 31, 2019.
The Company’s net pension and other postretirement employee
benefits liability at the end of the year was $2.4 billion, up $40
million from year-end 2018.
Strategic Actions Update
In October 2019, Alcoa announced a review of its assets to drive
lower costs and sustainable profitability. The review includes two
components: The potential sales of non-core assets over the next 12
to 18 months, generating between $500 million and $1 billion in
cash, and an analysis of existing production capacities, focusing
on 1.5 million metric tons of global smelting capacity and 4
million metric tons of global alumina refining capacity. Conducted
over the next five years, the analysis of production capacity will
consider opportunities for significant improvement, potential
curtailments, closures, or divestitures.
Non-Core Asset Sales
- On January 2, 2020, the Company announced the first non-core
assets sale after reaching agreement to sell its waste treatment
facility in Gum Springs, Arkansas, in a transaction valued at $250
million. The transaction, which is subject to regulatory approval
and customary closing conditions, is expected to close in the first
quarter of 2020. When the transaction closes, Alcoa will receive
$200 million in cash with the remaining $50 million paid upon
satisfaction of post-closing conditions.
Portfolio Actions
- In connection with the asset portfolio review, Alcoa announced
in December 2019 the permanent closure of the Point Comfort alumina
refinery in Texas, which has been fully curtailed since 2016. As
previously reported, the closure is expected to result in annual
net income improvement of approximately $15 million (after-tax and
noncontrolling interest) and cash savings of approximately $10
million (Alcoa’s share) when compared to the ongoing spend for
curtailment, exclusive of closure costs.
- On December 31, 2019, Alcoa completed the transfer of the
Afobaka hydroelectric dam to the Government of the Republic of
Suriname, according to definitive agreements approved by its
parliament. After curtailment of Alcoa’s operations in Suriname in
2015 and permanent closure in early 2017, Alcoa continued to
operate the dam, selling electricity to the government for its
subsequent sale to customers in Suriname. Alcoa expects an annual
net income reduction related to the loss of electricity sales of
approximately $20 million (after-tax and noncontrolling interest)
in 2020, based on 2019 results.
Market Update
For 2020, Alcoa projects a global aluminum surplus ranging
between 600 thousand to 1 million metric tons with global demand
growth in a range of 1.4 percent to 2.4 percent. The Company’s
final global aluminum demand growth rate estimate for 2019 was
between negative 0.4 percent to negative 0.2 percent with a deficit
between 1.1 million and 900 thousand metric tons.
The global alumina market closed 2019 with a surplus estimated
between 600 thousand metric tons and 1.0 million metric tons, a
smaller surplus than the Company’s previous estimate. In 2020,
Alcoa expects a balanced alumina market ranging between negative
100 thousand metric tons to positive 700 thousand metric tons.
Compared to 2019, the bauxite market is projected to be in a
smaller surplus in 2020, with Chinese stockpile projected to
continue, ranging between 8 million and 12 million metric tons. The
2019 surplus was lower than previously expected, estimated to be
between 10 million and 12 million metric tons.
2020 Outlook
In 2020, the Company projects total bauxite shipments to range
between 48.0 and 49.0 million dry metric tons. Total alumina
shipments are expected to be between 13.6 and 13.7 million metric
tons. The Aluminum segment is expected to ship between 3.0 and 3.1
million metric tons.
In the first quarter of 2020, Alcoa expects lower quarterly
results in the Bauxite segment primarily due to lower pricing and
seasonally lower volumes. In the Alumina segment, the Company
expects benefits from lower costs for raw materials and the
announced portfolio decision to be mostly offset by lower volumes
and higher operating costs due to seasonal maintenance. In the
Aluminum segment, the Company expects performance to be flat, as
improvements from lower alumina costs are expected to be offset by
higher energy costs, lower rolled products shipments, and
unfavorable price and mix.
Based on current alumina and aluminum market conditions, the
Company expects an annual operational tax rate ranging from 70 to
80 percent, which will vary with market conditions and
jurisdictional profitability.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Standard Time (EST) on Wednesday, January 15, 2020, to
present fourth quarter and full-year 2019 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 15, 2020. 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, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls and
webcasts.
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
December 31, 2018
September 30, 2019
December 31, 2019
Sales
$
3,344
$
2,567
$
2,436
Cost of goods sold (exclusive of expenses
below)(1)
2,513
2,120
2,048
Selling, general administrative, and other
expenses
59
66
62
Research and development expenses
7
7
6
Provision for depreciation, depletion, and
amortization
174
184
183
Restructuring and other charges, net
138
185
363
Interest expense
31
30
31
Other expenses, net
32
27
44
Total costs and expenses
2,954
2,619
2,737
Income (loss) before income taxes
390
(52
)
(301
)
Provision for income taxes(1)
163
95
54
Net income (loss)(1)
227
(147
)
(355
)
Less: Net income (loss) attributable to
noncontrolling interest(1)
176
74
(52
)
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA
CORPORATION(1)
$
51
$
(221
)
$
(303
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income (loss)
$
0.27
$
(1.19
)
$
(1.63
)
Average number of shares(2)
186,166,234
185,566,202
185,575,479
Diluted:
Net income (loss)
$
0.27
$
(1.19
)
$
(1.63
)
Average number of shares(2)
188,219,224
185,566,202
185,575,479
(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.
(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, 2018
December 31, 2019
Sales
$
13,403
$
10,433
Cost of goods sold (exclusive of expenses
below)(1)
10,053
8,537
Selling, general administrative, and other
expenses
248
280
Research and development expenses
31
27
Provision for depreciation, depletion, and
amortization
733
713
Restructuring and other charges, net
527
1,031
Interest expense
122
121
Other expenses, net
64
162
Total costs and expenses
11,778
10,871
Income (loss) before income taxes
1,625
(438
)
Provision for income taxes(1)
732
415
Net income (loss)(1)
893
(853
)
Less: Net income attributable to
noncontrolling interest(1)
643
272
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA
CORPORATION(1)
$
250
$
(1,125
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income (loss)
$
1.34
$
(6.07
)
Average number of shares(2)
186,230,908
185,489,491
Diluted:
Net income (loss)
$
1.33
$
(6.07
)
Average number of shares(2)
188,534,139
185,489,491
Common stock outstanding at the end of the
period
184,770,249
185,580,166
(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.
(2)
In December 2018, Alcoa
Corporation repurchased and retired 1,723,800 shares of outstanding
common stock in accordance with its 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, 2018
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,113
$
879
Receivables from customers
830
546
Other receivables
173
114
Inventories(1)
1,819
1,644
Fair value of derivative instruments
73
59
Prepaid expenses and other current
assets(1),(2)
320
288
Total current assets
4,328
3,530
Properties, plants, and equipment
21,807
21,706
Less: accumulated depreciation, depletion,
and amortization
13,480
13,790
Properties, plants, and equipment, net
8,327
7,916
Investments
1,360
1,113
Deferred income taxes
560
649
Fair value of derivative instruments
82
18
Other noncurrent assets
1,475
1,414
Total assets
$
16,132
$
14,640
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,663
$
1,484
Accrued compensation and retirement
costs
400
413
Taxes, including income taxes
426
104
Fair value of derivative instruments
82
67
Other current liabilities
347
494
Long-term debt due within one year
1
1
Total current liabilities
2,919
2,563
Long-term debt, less amount due within one
year
1,801
1,799
Accrued pension benefits
1,407
1,544
Accrued other postretirement benefits
868
748
Asset retirement obligations
529
606
Environmental remediation
236
296
Fair value of derivative instruments
261
581
Noncurrent income taxes
301
276
Other noncurrent liabilities and deferred
credits
222
371
Total liabilities
8,544
8,784
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,611
9,639
Retained earnings (deficit)(1)
570
(555
)
Accumulated other comprehensive loss
(4,565
)
(5,004
)
Total Alcoa Corporation shareholders’
equity
5,618
4,082
Noncontrolling interest(1)
1,970
1,774
Total equity
7,588
5,856
Total liabilities and equity
$
16,132
$
14,640
(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 and $4
of restricted cash as of December 31, 2018 and 2019,
respectively.
Alcoa Corporation and subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in millions)
Year Ended December
31,
2018
2019
CASH FROM OPERATIONS
Net income (loss)(1)
$
893
$
(853
)
Adjustments to reconcile net income (loss)
to cash from operations:
Depreciation, depletion, and
amortization
733
713
Deferred income taxes(1)
(30
)
15
Equity earnings, net of dividends
17
21
Restructuring and other charges, net
527
1,031
Net gain from investing activities – asset
sales
—
(3
)
Net periodic pension benefit cost
146
119
Stock-based compensation
35
30
Provision for bad debt expense
—
21
Other
(59
)
30
Changes in assets and liabilities,
excluding effects of divestitures and foreign currency translation
adjustments:
(Increase) Decrease in receivables
(43
)
283
(Increase) Decrease in inventories(1)
(306
)
137
(Increase) Decrease in prepaid expenses
and other current assets
(32
)
27
(Decrease) in accounts payable, trade
(165
)
(153
)
(Decrease) in accrued expenses
(319
)
(175
)
Increase (Decrease) in taxes, including
income taxes
241
(330
)
Pension contributions(2)
(992
)
(173
)
(Increase) in noncurrent assets
(101
)
(24
)
(Decrease) in noncurrent liabilities
(97
)
(30
)
CASH PROVIDED FROM OPERATIONS
448
686
FINANCING ACTIVITIES
Additions to debt (original maturities
greater than three months)(2)
560
—
Payments on debt (original maturities
greater than three months)
(135
)
(7
)
Proceeds from the exercise of employee
stock options
23
2
Repurchase of common stock(3)
(50
)
—
Financial contributions for the
divestiture of businesses
—
(12
)
Contributions from noncontrolling
interest
149
51
Distributions to noncontrolling
interest
(827
)
(472
)
Other
(8
)
(6
)
CASH USED FOR FINANCING ACTIVITIES
(288
)
(444
)
INVESTING ACTIVITIES
Capital expenditures
(399
)
(379
)
Proceeds from the sale of assets
1
23
Additions to investments
(7
)
(112
)
CASH USED FOR INVESTING ACTIVITIES
(405
)
(468
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(4
)
(7
)
Net change in cash and cash equivalents
and restricted cash
(249
)
(233
)
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
$
1,116
$
883
(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 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)
In December 2018, Alcoa
Corporation repurchased and retired 1,723,800 shares of outstanding
common stock in accordance with its common stock repurchase
program.
Alcoa Corporation and subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized
prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
4Q18
2018
1Q19
2Q19
3Q19
4Q19
2019
Bauxite:
Production(1) (mdmt)
11.8
45.8
11.9
11.3
12.1
12.1
47.4
Third-party shipments (mdmt)
1.6
5.7
1.2
1.5
2.0
1.5
6.2
Intersegment shipments (mdmt)
10.7
41.2
10.2
10.3
10.6
10.3
41.4
Third-party sales
$
80
$
271
$
65
$
67
$
100
$
65
$
297
Intersegment sales
$
245
$
944
$
236
$
246
$
251
$
246
$
979
Segment Adjusted EBITDA(2)
$
110
$
426
$
126
$
112
$
134
$
132
$
504
Depreciation, depletion, and
amortization
$
28
$
111
$
28
$
27
$
35
$
30
$
120
Alumina:
Production (kmt)
3,297
12,857
3,240
3,309
3,380
3,373
13,302
Third-party shipments (kmt)
2,365
9,259
2,329
2,299
2,381
2,464
9,473
Intersegment shipments (kmt)
1,115
4,326
972
1,070
1,049
981
4,072
Average realized third-party price per
metric ton of alumina
$
479
$
455
$
385
$
376
$
324
$
291
$
343
Third-party sales
$
1,132
$
4,215
$
897
$
864
$
771
$
718
$
3,250
Intersegment sales
$
567
$
2,101
$
417
$
445
$
369
$
330
$
1,561
Segment Adjusted EBITDA(2)
$
683
$
2,373
$
372
$
369
$
223
$
133
$
1,097
Depreciation and amortization
$
47
$
197
$
48
$
55
$
54
$
57
$
214
Equity income (loss)
$
9
$
32
$
12
$
3
$
—
$
(9
)
$
6
Aluminum:
Primary aluminum production (kmt)
573
2,259
537
533
530
535
2,135
Third-party aluminum shipments(3)
(kmt)
815
3,268
709
724
708
718
2,859
Average realized third-party price per
metric ton of primary aluminum
$
2,358
$
2,484
$
2,219
$
2,167
$
2,138
$
2,042
$
2,141
Third-party sales
$
2,107
$
8,829
$
1,735
$
1,757
$
1,677
$
1,634
$
6,803
Intersegment sales
$
4
$
18
$
3
$
4
$
4
$
6
$
17
Segment Adjusted EBITDA(2),(4)
$
(50
)
$
451
$
(96
)
$
3
$
43
$
75
$
25
Depreciation and amortization
$
89
$
394
$
89
$
85
$
88
$
84
$
346
Equity loss
$
(25
)
$
(38
)
$
(22
)
$
(17
)
$
(5
)
$
(5
)
$
(49
)
Reconciliation of total segment
Adjusted EBITDA to consolidated net income (loss) attributable to
Alcoa Corporation:
Total segment Adjusted EBITDA(2),(4)
$
743
$
3,250
$
402
$
484
$
400
$
340
$
1,626
Unallocated amounts:
Transformation(5)
(1
)
(3
)
2
3
(6
)
(6
)
(7
)
Intersegment eliminations(4),(6)
47
(8
)
86
(1
)
25
40
150
Corporate expenses(7)
(21
)
(96
)
(24
)
(28
)
(27
)
(22
)
(101
)
Provision for depreciation, depletion, and
amortization
(174
)
(733
)
(172
)
(174
)
(184
)
(183
)
(713
)
Restructuring and other charges, net
(138
)
(527
)
(113
)
(370
)
(185
)
(363
)
(1,031
)
Interest expense
(31
)
(122
)
(30
)
(30
)
(30
)
(31
)
(121
)
Other expenses, net
(32
)
(64
)
(41
)
(50
)
(27
)
(44
)
(162
)
Other(8)
(3
)
(72
)
(18
)
(11
)
(18
)
(32
)
(79
)
Consolidated income (loss) before income
taxes(4)
390
1,625
92
(177
)
(52
)
(301
)
(438
)
Provision for income taxes(4)
(163
)
(732
)
(150
)
(116
)
(95
)
(54
)
(415
)
Net (income) loss attributable to
noncontrolling interest(4)
(176
)
(643
)
(141
)
(109
)
(74
)
52
(272
)
Consolidated net income (loss)
attributable to Alcoa Corporation(4)
$
51
$
250
$
(199
)
$
(402
)
$
(221
)
$
(303
)
$
(1,125
)
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 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
Income (Loss)
Income (Loss)
Quarter ended
Year ended
December 31, 2018
September 30, 2019
December 31, 2019
December 31, 2018
December 31, 2019
Net income (loss) attributable to Alcoa
Corporation(1)
$
51
$
(221
)
$
(303
)
$
250
$
(1,125
)
Special items:
Restructuring and other charges, net
138
185
363
527
1,031
Other special items(2)
2
7
25
39
50
Discrete tax items and interim tax
impacts(3)
3
(32
)
(23
)
2
11
Tax impact on special items(4)
(43
)
(12
)
(9
)
(89
)
(32
)
Noncontrolling interest impact(4)
(18
)
(9
)
(110
)
(31
)
(119
)
Subtotal
82
139
246
448
941
Net income (loss) attributable to Alcoa
Corporation – as adjusted
$
133
$
(82
)
$
(57
)
$
698
$
(184
)
Diluted EPS(5):
Net income (loss) attributable to Alcoa
Corporation common shareholders
$
0.27
$
(1.19
)
$
(1.63
)
$
1.33
$
(6.07
)
Net income (loss) attributable to Alcoa
Corporation common shareholders - as adjusted
$
0.70
$
(0.44
)
$
(0.31
)
$
3.70
$
(0.99
)
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, various 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)
Other special items include the
following:
•
for the quarter ended December 31, 2018, a
net favorable change in certain mark-to-market energy derivative
instruments ($3) and charges for other special items ($5);
•
for the quarter ended September 30, 2019,
costs related to the restart process at the Bécancour, Canada
smelter ($12), a gain on the sale of excess land ($7), and charges
for other special items ($2);
•
for the quarter ended December 31, 2019,
costs related to the restart process at the Bécancour, Canada
smelter ($23) and a net charge for other special items ($2);
•
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), costs related to the partial restart of the
Warrick (Indiana) smelter ($20), costs related to a work stoppage
at the Bécancour (Canada) smelter ($11 (primarily contractor
services)), and other charges for special items ($1); and,
•
for the year ended December 31, 2019,
costs related to the restart process at the Bécancour, Canada
smelter ($39), costs related to a collective employee dismissal
process in Spain at the Avilés and La Coruña facilities ($16),
gains on the sale of excess land ($16), costs related to union
negotiations in the U.S. ($7), and a net charge for several other
special items ($4).
(3)
Discrete tax items and interim tax impacts
are the result of discrete transactions and interim period tax
impacts based on full-year assumptions and include the
following:
•
for the quarter ended December 31, 2018, a
net charge of interim tax impacts ($27) and a net benefit of
several other items ($24);
•
for the quarter ended September 30, 2019,
a net benefit of interim tax impacts ($40) and a net charge of
several other items ($8);
•
for the quarter ended December 31, 2019, a
net benefit of interim tax impacts ($25) and a net charge of
several other items ($2);
•
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); and,
•
for the year ended December 31, 2019, a
net charge of several items ($11).
(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.
(5)
In any given period, the average number of
shares applicable to diluted EPS for Net income (loss) attributable
to Alcoa Corporation common shareholders may exclude certain share
equivalents as their effect is anti-dilutive. However, certain of
these share equivalents may become dilutive in the EPS calculation
applicable to Net income (loss) attributable to Alcoa Corporation
common shareholders – as adjusted due to a larger and/or positive
numerator. Specifically:
•
for the quarter and year ended December
31, 2018, share equivalents associated with outstanding employee
stock options and awards were dilutive based on both Net income
attributable to Alcoa Corporation common shareholders and Net
income attributable to Alcoa Corporation common shareholders – as
adjusted, resulting in the same diluted average number of
shares;
•
and, for the quarters ended September 30,
2019 and December 31, 2019 and the year ended December 31, 2019,
the average number of share equivalents applicable to diluted EPS
had an anti-dilutive effect, and therefore, are excluded from the
diluted EPS calculation.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
Year ended
December 31, 2018
September 30, 2019
December 31, 2019
December 31, 2018
December 31, 2019
Net income (loss) attributable to Alcoa
Corporation(1)
$
51
$
(221
)
$
(303
)
$
250
$
(1,125
)
Add:
Net income (loss) attributable to
noncontrolling interest(1)
176
74
(52
)
643
272
Provision for income taxes(1)
163
95
54
732
415
Other expenses, net
32
27
44
64
162
Interest expense
31
30
31
122
121
Restructuring and other charges, net
138
185
363
527
1,031
Provision for depreciation, depletion, and
amortization
174
184
183
733
713
Adjusted EBITDA
765
374
320
3,071
1,589
Special items(2)
5
14
26
58
67
Adjusted EBITDA, excluding special
items
$
770
$
388
$
346
$
3,129
$
1,656
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 December
31, 2018, charges for several minor special items ($5);
•
for the quarter ended September
30, 2019, costs related to the restart process at the Bécancour,
Canada smelter ($12) and charges for other special items ($2);
•
for the quarter ended December
31, 2019, costs related to the restart process at the Bécancour,
Canada smelter ($23) and charges for other special items ($3);
•
for the year ended December 31,
2018, a loss on a contractor arbitration matter ($26), costs
related to the partial restart of the Warrick (Indiana) smelter
($20), costs related to a work stoppage at the Bécancour (Canada)
smelter ($11 (primarily contractor services)), and other charges
for special items ($1); and,
•
for the year ended December 31,
2019, costs related to the restart process at the Bécancour, Canada
smelter ($39), costs related to a collective employee dismissal
process in Spain at the Avilés and La Coruña facilities ($16),
costs related to union negotiations in the U.S. ($7), and charges
for other special items ($5).
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
Year ended
December 31, 2018
September 30, 2019
December 31, 2019
December 31, 2018
December 31, 2019
Cash from operations(1)
$
535
$
174
$
262
$
448
$
686
Capital expenditures
(148
)
(87
)
(134
)
(399
)
(379
)
Free cash flow
$
387
$
87
$
128
$
49
$
307
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 and
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, 2018
December 31, 2019
Short-term borrowings
$
—
$
—
Long-term debt due within one year
1
1
Long-term debt, less amount due within one
year
1,801
1,799
Total debt
1,802
1,800
Less: Cash and cash equivalents
1,113
879
Net debt
$
689
$
921
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/20200115005837/en/
Investor Contact: James Dwyer +1 412 992 5450
James.Dwyer@alcoa.com
Media Contact: Jim Beck +1 412 315 2909
Jim.Beck@alcoa.com
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