Cash balance over $950 million, up $150 million
sequentially
Alcoa Corporation (NYSE: AA):
2Q 2017 Results1
- Net income of $75 million, or $0.40 per
share
- Excluding special items, adjusted net
income of $116 million, or $0.62 per share
- Adjusted earnings before interest, tax,
depreciation, and amortization (EBITDA), excluding special items,
of $483 million, down 9 percent sequentially on lower alumina
prices
- Revenue of $2.9 billion, up 8 percent
sequentially, on higher shipments
- $954 million cash balance and $1.4
billion of debt for net debt of $0.5 billion as of June 30,
2017
- Company tightened its 2017 outlook for
adjusted EBITDA, excluding special items, to $2.1 billion to $2.2
billion2
M, except per share amounts
2Q16 1Q17 2Q17 Revenue
$ 2,323 $ 2,655 $ 2,859 Net (loss) income
attributable to Alcoa Corporation $ (55 ) $ 225 $ 75 Earnings per
share attributable to Alcoa Corporation $ (0.29 ) $
1.21 $ 0.40 Adjusted net (loss) income $ (44 ) $ 117 $ 116
Adjusted earnings per share $ (0.23 ) $ 0.63 $
0.62 Adjusted EBITDA excluding special items $ 310
$ 533 $ 483
______________________________________________________________________
1 Alcoa Corporation became an independent, publicly traded
company on November 1, 2016. Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the financial results of Alcoa
Corporation for the first ten months of 2016 (including the first
month of fourth quarter 2016) were prepared on such basis. The
carve-out financial statements of Alcoa Corporation are not
necessarily indicative of Alcoa Corporation’s consolidated results
of operations, financial position, and cash flows had it been a
standalone company during the referenced period. See the
Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the period ended December 31, 2016 filed
with the United States Securities and Exchange Commission on March
15, 2017 for additional information.
2 Based on actual results for 1H17, outlook for 2H17 at $1,900
LME, $305 API, and updated regional premiums and foreign
currencies.
______________________________________________________________________
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina, and aluminum products, today reported second quarter 2017
results. On a sequential basis, the Company increased revenue on
higher shipments and grew its cash balance. Alcoa additionally
maintained solid profitability despite lower alumina pricing.
The Company tightened its outlook for full-year adjusted 2017
EBITDA, excluding special items, to $2.1 to $2.2 billion, from $2.1
to $2.3 billion, based on current market assumptions. In addition,
Alcoa now expects negative $50 million in net performance for full
year 2017, as strength in the global aluminum market drives up
input costs.
“Alcoa generated solid profitability in the second quarter with
strong cash flow that grew our cash balance to more than $950
million,” said Roy Harvey, President and Chief Executive Officer.
“Through the first half of the year, our adjusted EBITDA topped $1
billion, and we expect improvements in the second half of 2017,
despite higher input costs.”
Harvey continued: “We are pursuing a simple set of strategic
priorities to reduce complexity, drive returns and strengthen the
balance sheet, and we will continue to base each of our decisions
on these three key levers for the benefit of our stockholders.”
In second quarter 2017, Alcoa reported net income of $75
million, or $0.40 per share. Results include the negative impact of
$41 million in special items, primarily for certain tax items and
additional restructuring charges related to previous actions.
Second quarter 2017 results compare to first quarter 2017 net
income of $225 million, or $1.21 per share, which included a $120
million gain from the sale of the Yadkin Hydroelectric Project.
Excluding the impact of special items, second quarter 2017
adjusted net income was $116 million, or $0.62 per share. In first
quarter 2017, Alcoa’s adjusted net income was $117 million, or
$0.63 per share, excluding special items.
Alcoa reported second quarter 2017 adjusted EBITDA excluding
special items of $483 million, down 9 percent from $533 million in
first quarter 2017. The decline was mainly due to lower alumina
prices, which rebounded late in the quarter, partially offset by
higher aluminum prices and other factors.
In second quarter 2017, Alcoa reported revenue of $2.9 billion,
up 8 percent sequentially, reflecting higher shipments across its
product portfolio.
The Company’s second quarter cash from operations was $311
million and free cash flow was $223 million. Alcoa ended second
quarter 2017 with cash on hand of $954 million with $1.4 billion of
debt for net debt of $0.5 billion. The Company reported 18 days
working capital.
On July 11, 2017, Alcoa announced plans to restart three of five
potlines at its Warrick Operations smelter to supply the co-located
rolling mill. The Company based its decision on its ability to
increase the integrated asset’s capacity utilization, the smelter’s
ability to directly supply molten metal to the mill, and the mill’s
anticipated production increase of flat-rolled aluminum for the
food and beverage can packaging industry.
Market Update
For 2017, Alcoa continues to project relatively balanced global
markets for bauxite and alumina with a modest surplus for
aluminum.
In global alumina, Alcoa now projects the market to range from
being in balance to a slight deficit of 800 thousand metric tons in
2017, an improvement from the range of balanced to slight surplus
expected in the first quarter of 2017.
In global aluminum, the Company maintains its expectation for a
modest global surplus between 300 thousand to 700 thousand metric
tons. Alcoa has increased its 2017 forecast for global aluminum
demand growth to a range of 4.75 to 5.25 percent, up from 4.5 to 5
percent in the first quarter of 2017.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Daylight Time (EDT) on Wednesday, July 19, 2017 to present
second quarter 2017 financial results, discuss the business and
review market fundamentals.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing at approximately 4:15 p.m. EDT on July 19th
on the same website. Call information and related details are
available under the “Investors” section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding Company
developments and financial performance through its website,
www.alcoa.com.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite, alumina
and aluminum products built on a foundation of strong values and
operating excellence dating back nearly 130 years to the
world-changing discovery that made aluminum an affordable and vital
part of modern life. Since inventing the aluminum industry, and
throughout our history, our talented Alcoans have followed on with
breakthrough innovations and best practices that have led to
efficiency, safety, sustainability and stronger communities
wherever we operate.
Forward-Looking Statements
This press release contains statements that relate to future
events and expectations and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results or operating performance; and statements about
strategies, outlook, business and financial prospects. These
statements reflect beliefs and assumptions that are based on Alcoa
Corporation’s perception of historical trends, current conditions
and expected future developments, as well as other factors that
management believes are appropriate in the circumstances.
Forward-looking statements are not guarantees of future performance
and are subject to known and unknown risks, uncertainties, and
changes in circumstances that are difficult to predict. Although
Alcoa Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) material adverse changes in aluminum
industry conditions, including global supply and demand conditions
and fluctuations in London Metal Exchange-based prices and
premiums, as applicable, for primary aluminum, alumina, and other
products, and fluctuations in indexed-based and spot prices for
alumina; (b) deterioration in global economic and financial market
conditions generally; (c) unfavorable changes in the markets served
by Alcoa Corporation; (d) the impact of changes in foreign currency
exchange rates on costs and results; (e) increases in energy costs;
(f) changes in discount rates or investment returns on pension
assets; (g) the inability to achieve the level of revenue growth,
cash generation, cost savings, improvement in profitability and
margins, fiscal discipline, or strengthening of competitiveness and
operations anticipated from restructuring programs and productivity
improvement, cash sustainability, technology advancements, and
other initiatives; (h) the inability to realize expected benefits,
in each case as planned and by targeted completion dates, from
acquisitions, divestitures, facility closures, curtailments,
restarts, expansions, or joint ventures; (i) political, economic,
and regulatory risks in the countries in which Alcoa Corporation
operates or sells products; (j) the outcome of contingencies,
including legal proceedings, government or regulatory
investigations, and environmental remediation; (k) the impact of
cyberattacks and potential information technology or data security
breaches; and (l) the other risk factors discussed in Item 1A of
Alcoa Corporation’s Form 10-K for the fiscal year ended December
31, 2016 and other reports filed by Alcoa Corporation with the U.S.
Securities and Exchange Commission. Alcoa Corporation disclaims any
obligation to update publicly any forward-looking statements,
whether in response to new information, future events or otherwise,
except as required by applicable law. Market projections are
subject to the risks discussed above and other risks in the
market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa’s consolidated financial information but is not presented in
Alcoa’s financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
(GAAP). Certain of these data are considered “non-GAAP financial
measures” under SEC rules. Alcoa Corporation believes that the
presentation of non-GAAP financial measures is useful to investors
because such measures provide both additional information about the
operating performance of Alcoa Corporation and insight on the
ability of Alcoa Corporation to meet its financial obligations by
adjusting the most directly comparable GAAP financial measure for
the impact of, among others, “special items” as defined by the
Company, non-cash items in nature, and/or nonoperating expense or
income items. The presentation of non-GAAP financial measures is
not intended to be a substitute for, and should not be considered
in isolation from, the financial measures reported in accordance
with GAAP. Reconciliations to the most directly comparable GAAP
financial measures and management’s rationale for the use of the
non-GAAP financial measures can be found in the schedules to this
release. Alcoa Corporation has not provided a reconciliation of any
forward-looking non-GAAP financial measures to the most directly
comparable GAAP financial measures due primarily to the variability
and complexity in making accurate forecasts and projections, as not
all of the information for a quantitative reconciliation is
available to the company without unreasonable effort.
Alcoa Corporation and
subsidiaries
Statement of Consolidated Operations (unaudited) (dollars
in millions, except per-share amounts) Quarter
ended June 30, March 31, June
30,
2016(2)
2017
2017
Sales $ 2,323 $ 2,655 $ 2,859 Cost of goods sold (exclusive
of expenses below) 1,941 2,043 2,309 Selling, general
administrative, and other expenses 90 72 72 Research and
development expenses 7 7 8 Provision for depreciation, depletion,
and amortization 178 179 190 Restructuring and other charges 8 10
12 Interest expense 66 26 25 Other (income) expenses, net
(23 )
(100 )
6 Total costs and expenses 2,267 2,237 2,622
Income before income taxes 56 418 237 Provision for income taxes
68 110
99 Net (loss) income (12 ) 308 138 Less:
Net income attributable to noncontrolling interest
43 83
63
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$ (55 )
$ 225
$ 75
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS(1):
Basic: Net (loss) income $ (0.29 ) $ 1.23 $ 0.41 Average number of
shares 182,471,195 183,816,083 184,240,686 Diluted: Net
(loss) income $ (0.29 ) $ 1.21 $ 0.40 Average number of shares
182,471,195 186,303,547 186,385,250 (1) The basic and
diluted earnings per share for the quarter ended June 30, 2016 were
calculated based on the 182,471,195 shares of Alcoa Corporation
common stock distributed on November 1, 2016 in conjunction with
the completion of Alcoa Corporation’s separation from its former
parent company and are considered pro forma in nature. Prior to
November 1, 2016, Alcoa Corporation did not have any issued and
outstanding publicly-traded common stock. (2) Prior to
November 1, 2016, Alcoa Corporation’s financial statements were
prepared on a carve-out basis, as the underlying operations of the
Company were previously consolidated as part of Alcoa Corporation’s
former parent company’s financial statements. Accordingly, the
results of operations of Alcoa Corporation for the quarter ended
June 30, 2016 were prepared on such basis. The carve-out financial
statements of Alcoa Corporation are not necessarily indicative of
Alcoa Corporation’s consolidated results of operations had it been
a standalone company during the referenced period. See the Combined
Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on
Form 10-K for the period ended December 31, 2016 filed with the
United States Securities and Exchange Commission on October 11,
2016 and March 15, 2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations (unaudited), continued
(dollars in millions, except per-share amounts)
Six months ended
June
30,
2016(2),(3)
2017
Sales $ 4,452 $ 5,514 Cost of goods sold (exclusive of
expenses below) 3,807 4,352 Selling, general administrative, and
other expenses 175 144 Research and development expenses 18 15
Provision for depreciation, depletion, and amortization 355 369
Restructuring and other charges 92 22 Interest expense 130 51 Other
expenses (income), net
16
(94 ) Total costs and expenses 4,593 4,859
(Loss) income before income taxes (141 ) 655 Provision for income
taxes
86 209
Net (loss) income (227 ) 446 Less: Net income
attributable to noncontrolling interest
38
146 NET (LOSS) INCOME
ATTRIBUTABLE TO ALCOA CORPORATION
$ (265
)
$ 300
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS(1):
Basic: Net (loss) income $ (1.45 ) $ 1.63 Average number of shares
182,471,195 184,000,248 Diluted: Net (loss) income $ (1.45 )
$ 1.61 Average number of shares 182,471,195 186,333,415
Common stock outstanding at the end of the period – 184,257,057 (1)
The basic and diluted earnings per share for the six months
ended June 30, 2016 were calculated based on the 182,471,195 shares
of Alcoa Corporation common stock distributed on November 1, 2016
in conjunction with the completion of Alcoa Corporation’s
separation from its former parent company and are considered pro
forma in nature. Prior to November 1, 2016, Alcoa Corporation did
not have any issued and outstanding publicly-traded common stock.
(2) Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
six months ended June 30, 2016 were prepared on such basis. The
carve-out financial statements of Alcoa Corporation are not
necessarily indicative of Alcoa Corporation’s consolidated results
of operations had it been a standalone company during the
referenced period. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the period ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information. (3) In preparing the Statement
of Combined Operations for the nine months ended September 30,
2016, management discovered that the amount of Research and
development expenses previously reported for the six months ended
June 30, 2016 included an immaterial error due to an
over-allocation of such expenses of $10. Additionally, in preparing
the Statement of Consolidated Operations for the year ended
December 31, 2016, management discovered that the amount of Cost of
goods sold previously reported for the six months ended June 30,
2016 included an immaterial error due to an under-allocation of
LIFO expense of $10. As a result, management has revised Research
and development expenses from the $28 previously reported to $18
and Cost of goods sold from the $3,797 previously reported to
$3,807 for the six months ended June 30, 2016.
Alcoa Corporation and subsidiaries Consolidated Balance
Sheet (unaudited) (in millions)
December 31,2016
June 30,2017
ASSETS Current assets: Cash and cash equivalents $ 853 $ 954
Receivables from customers 668 789 Other receivables 166 206
Inventories 1,160 1,287 Prepaid expenses and other current assets
334 347 Total
current assets
3,181
3,583 Properties, plants, and equipment
22,550 22,971 Less: accumulated depreciation, depletion, and
amortization
13,225
13,734 Properties, plants, and equipment, net
9,325 9,237
Investments 1,358 1,378 Deferred income taxes 741 784 Fair value of
derivative contracts 468 259 Other noncurrent assets
1,668 1,688 Total
assets
$ 16,741 $
16,929 LIABILITIES Current liabilities:
Accounts payable, trade $ 1,455 $ 1,508 Accrued compensation and
retirement costs 456 445 Taxes, including income taxes 147 144
Other current liabilities 742 492 Long-term debt due within one
year
21 19
Total current liabilities
2,821
2,608 Long-term debt, less amount due within
one year 1,424 1,418 Accrued pension benefits 1,851 1,748 Accrued
other postretirement benefits 1,166 1,094 Asset retirement
obligations 604 632 Environmental remediation 264 266 Noncurrent
income taxes 310 348 Other noncurrent liabilities and deferred
credits
604 616
Total liabilities
9,044
8,730 EQUITY Alcoa Corporation
shareholders’ equity: Common stock 2 2 Additional capital 9,531
9,559 Retained (deficit) earnings (104 ) 196 Accumulated other
comprehensive loss
(3,775 )
(3,803 ) Total Alcoa Corporation shareholders' equity
5,654 5,954
Noncontrolling interest
2,043
2,245 Total equity
7,697
8,199 Total liabilities and
equity
$ 16,741 $
16,929 Alcoa Corporation and
subsidiaries Statement of Consolidated Cash Flows
(unaudited) (in millions) Six months ended
June
30,
2016(4)
2017
CASH FROM OPERATIONS Net (loss) income $ (227 ) $ 446 Adjustments
to reconcile net (loss) income to cash from operations:
Depreciation, depletion, and amortization 355 369 Deferred income
taxes (28 ) 50 Equity income, net of dividends 20 14 Restructuring
and other charges 92 22 Net gain from investing activities – asset
sales (32 ) (116 ) Net periodic pension benefit cost 23 55
Stock-based compensation 18 14 Other 15 (3 ) Changes in assets and
liabilities, excluding effects of acquisitions, divestitures, and
foreign currency translation adjustments: (Increase) in receivables
(24 ) (75 ) Decrease (Increase) in inventories 42 (86 ) (Increase)
Decrease in prepaid expenses and other current assets (11 ) 52
(Decrease) Increase in accounts payable, trade (133 ) 19 (Decrease)
in accrued expenses (214 ) (190 ) (Decrease) in taxes, including
income taxes (125 ) (44 ) Pension contributions (33 ) (47 )
(Increase) in noncurrent assets(1) (179 ) (46 ) (Decrease) in
noncurrent liabilities
–
(49 ) CASH (USED FOR) PROVIDED FROM OPERATIONS
(441 )
385 FINANCING
ACTIVITIES Net transfers from Parent Company 335 – Cash paid to
Arconic related to separation(2) – (247 ) Net change in short-term
borrowings (original maturities of three months or less) (1 ) 3
Additions to debt (original maturities greater than three months) –
3 Payments on debt (original maturities greater than three months)
(10 ) (10 ) Proceeds from the exercise of employee stock options –
18 Contributions from noncontrolling interest – 56 Distributions to
noncontrolling interest (84 ) (155 ) Other
–
(6 ) CASH PROVIDED FROM (USED FOR)
FINANCING ACTIVITIES
240
(338 ) INVESTING ACTIVITIES Capital
expenditures (172 ) (159 ) Proceeds from the sale of assets and
businesses(3) (13 ) 243 Additions to investments (3 ) (36 ) Sales
of investments 146 – Net change in restricted cash
(1 )
(4 ) CASH (USED FOR) PROVIDED
FROM INVESTING ACTIVITIES
(43 )
44
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
19
10
Net change in cash and cash equivalents (225 ) 101 Cash and
cash equivalents at beginning of year
557
853 CASH AND CASH EQUIVALENTS AT
END OF PERIOD
$ 332 $
954
(1)
The (Increase) in noncurrent assets line item for the six
months ended June 30, 2016 includes a $200 prepayment related to a
natural gas supply agreement for three alumina refineries in
Western Australia, which are owned by Alcoa Corporation’s
majority-owned subsidiary, Alcoa of Australia Limited.
(2)
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.
(3)
Proceeds from the sale of assets and businesses for the six months
ended June 30, 2016 includes a cash outflow for cash paid as a
result of a post-closing adjustment associated with the December
2014 divestiture of an ownership stake in a smelter in the United
States.
(4)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the cash flows of Alcoa Corporation for the six months
ended June 30, 2016 were prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s consolidated cash flows had it
been a standalone company during the referenced period. See the
Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on
Form 10-K for the period ended December 31, 2016 filed with the
United States Securities and Exchange Commission on October 11,
2016 and March 15, 2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Segment Information(1),(2)
(unaudited)
(dollars in millions; bauxite
production and shipments in millions of dry metric tons (mdmt);
alumina and aluminum production and shipments in thousands of
metric tons (kmt))
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
Bauxite: Production(3) (mdmt) 11.3 10.8 11.1 11.8 45.0 11.1
11.0 Total shipments (mdmt) 11.2 11.8 11.7 12.2 46.9 11.6 11.5
Third-party sales $ 44 $ 87 $ 93 $ 91 $ 315 $ 70 $ 80 Intersegment
sales $ 175 $ 182 $ 192 $ 202 $ 751 $ 219 $ 208 Adjusted EBITDA $
77 $ 99 $ 97 $ 102 $ 375 $ 110 $ 98 Depreciation, depletion, and
amortization $ 17 $ 19 $ 21 $ 20 $ 77
$ 18 $ 19
Alumina: Production
(kmt) 3,330 3,316 3,310 3,295 13,251 3,211 3,249 Third-party
shipments (kmt) 2,168 2,266 2,361 2,276 9,071 2,255 2,388
Intersegment shipments (kmt) 1,257 1,137 1,140 1,169 4,703 947
1,152 Third-party sales $ 496 $ 601 $ 585 $ 618 $ 2,300 $ 734 $ 749
Intersegment sales $ 292 $ 321 $ 317 $ 377 $ 1,307 $ 361 $ 384
Adjusted EBITDA $ 15 $ 114 $ 78 $ 171 $ 378 $ 297 $ 227
Depreciation and amortization $ 45 $ 47 $ 47 $ 47 $ 186 $ 49 $ 53
Equity (loss) income $ (14 ) $ (7 ) $ (9 ) $ (10 ) $ (40 ) $ 1
$ (6 )
Aluminum: Primary aluminum production
(kmt) 600 595 586 587 2,368 559 575 Third-party aluminum shipments
(kmt) 764 770 761 852 3,147 801 833 Third-party sales $ 1,552 $
1,597 $ 1,600 $ 1,782 $ 6,531 $ 1,806 $ 1,988 Intersegment sales $
34 $ 2 $ 2 $ 4 $ 42 $ 4 $ 3 Adjusted EBITDA $ 165 $ 180 $ 183 $ 152
$ 680 $ 206 $ 221 Depreciation and amortization $ 103 $ 104 $ 103 $
104 $ 414 $ 101 $ 108 Equity (loss) income $ (7 ) $ (10 ) $ (7 ) $
– $ (24 ) $ (7 ) $ 3
Reconciliation of
total segment Adjusted EBITDA to consolidated net (loss) income
attributable to Alcoa Corporation: Total segment Adjusted
EBITDA $ 257 $ 393 $ 358 $ 425 $ 1,433 $ 613 $ 546 Unallocated
amounts: Impact of LIFO 18 (1 ) 1 (28 ) (10 ) (14 ) (8 ) Metal
price lag(4) 2 2 1 4 9 6 11 Corporate expense(5) (36 ) (50 ) (47 )
(44 ) (177 ) (34 ) (36 ) Provision for depreciation, depletion, and
amortization
(177
)
(178
)
(181
)
(182
)
(718
)
(179
)
(190
)
Restructuring and other charges (84 ) (8 ) (17 ) (209 ) (318 ) (10
) (12 ) Interest expense (64 ) (66 ) (67 ) (46 ) (243 ) (26 ) (25 )
Other (expenses) income, net (39 ) 23 106 (1 ) 89 100 (6 ) Other(6)
(74 ) (59 ) (52 ) (42 ) (227 )
(38 ) (43 ) Consolidated (loss) income before income
taxes (197 ) 56 102 (123 ) (162 ) 418 237 Provision for income
taxes (18 ) (68 ) (92 ) (6 ) (184 ) (110 ) (99 ) Net loss (income)
attributable to noncontrolling interest
5
(43
)
(20
)
4
(54
)
(83
)
(63
)
Consolidated net (loss) income attributable to Alcoa Corporation
$
(210
)
$
(55
)
$
(10
)
$
(125
)
$
(400
)
$
225
$
75
The difference between certain segment
totals and consolidated amounts is in Corporate.
(1) Effective in the first quarter of 2017, management
elected to change the profit and loss measure of Alcoa
Corporation’s reportable segments from After-tax operating income
(ATOI) to Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) for internal reporting and
performance measurement purposes. This change was made to enhance
the transparency and visibility of the underlying operating
performance of each segment. Alcoa Corporation calculates Adjusted
EBITDA as Total sales (third-party and intersegment) minus the
following items: Cost of goods sold; Selling, general
administrative, and other expenses; and Research and development
expenses. Previously, Alcoa Corporation calculated ATOI as Adjusted
EBITDA minus (plus) the following items: Provision for
depreciation, depletion, and amortization; Equity loss (income);
Loss (gain) on certain asset sales; and Income taxes. Alcoa
Corporation’s Adjusted EBITDA may not be comparable to similarly
titled measures of other companies. Also effective in the
first quarter of 2017, management combined Alcoa Corporation’s
aluminum smelting, casting, and rolling businesses, along with the
majority of the energy business, into a new Aluminum business unit.
This new business unit is managed as a single operating segment.
Prior to this change, each of these businesses were managed as
individual operating segments and comprised the Aluminum, Cast
Products, Energy, and Rolled Products segments. As a result, Alcoa
Corporation’s operating and reportable segments are Bauxite,
Alumina, and Aluminum. Segment information for all prior
periods presented was revised to reflect the new segment structure,
as well as the new measure of profit and loss. (2) Prior to
November 1, 2016, Alcoa Corporation’s financial statements were
prepared on a carve-out basis, as the underlying operations of the
Company were previously consolidated as part of Alcoa Corporation’s
former parent company’s financial statements. Accordingly, the
financial results of Alcoa Corporation for all periods prior to
fourth quarter 2016 were prepared on such basis. Additionally, the
financial results of Alcoa Corporation for the first month of
fourth quarter 2016 were also prepared on a carve-out basis. The
carve-out financial statements of Alcoa Corporation are not
necessarily indicative of Alcoa Corporation’s consolidated results
of operations, financial position, and cash flows had it been a
standalone company during the referenced periods. See the Combined
Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on
Form 10-K for the period ended December 31, 2016 filed with the
United States Securities and Exchange Commission on October 11,
2016 and March 15, 2017, respectively, for additional information.
(3) The production amounts do not include additional bauxite
(approximately 3 million metric tons per annum) that Alcoa
Corporation is entitled to receive (i.e. an amount in excess of its
equity ownership interest) from certain other partners at the mine
in Guinea. (4) 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.
(5) Corporate expense is primarily composed of general
administrative and other expenses of operating the corporate
headquarters and other global administrative facilities. (6)
Other includes, among other items, the Adjusted EBITDA of
previously closed operations as applicable, pension and other
postretirement benefit expenses associated with closed and sold
operations, and intersegment profit elimination.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited) (in
millions, except per-share amounts) Adjusted (Loss)
Income (Loss) Income Diluted EPS Quarter
ended Quarter ended
June 30,2016(1)
March 31,2017
June 30,2017
June 30,2016(1),(2)
March 31,2017
June 30,2017
Net (loss) income attributable to Alcoa Corporation $ (55 )
$ 225 $ 75 $ (0.29 ) $ 1.21 $ 0.40 Special items:
Restructuring and other charges
8
10
12
Discrete tax items(3)
–
(2
)
–
Other special items(4)
(10
)
(124
)
48
Tax impact(5) 8 5 (11 )
Noncontrolling interest impact(5)
5
3
(8
)
Subtotal
11 (108 )
41
Net (loss) income attributable to Alcoa
Corporation – as adjusted
$
(44
)
$
117
$
116
(0.23
)
0.63
0.62
Net (loss) 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 (loss) income attributable to Alcoa Corporation – as adjusted.
(1)
Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
quarter ended June 30, 2016 were prepared on such basis. The
carve-out financial statements of Alcoa Corporation are not
necessarily indicative of Alcoa Corporation’s consolidated results
of operations had it been a standalone company during the
referenced period. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the period ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information. (2) Prior to November 1, 2016,
Alcoa Corporation did not have any issued and outstanding
publicly-traded common stock. As such, the respective basic and
diluted EPS related to both Net loss attributable to Alcoa
Corporation and Net loss attributable to Alcoa Corporation – as
adjusted for the quarter ended June 30, 2016 were calculated based
on the 182,471,195 shares of Alcoa Corporation common stock
distributed on November 1, 2016 in conjunction with the completion
of Alcoa Corporation’s separation from its former parent company
and are considered pro forma in nature. (3) Discrete tax
items for the quarter ended March 31, 2017 represent a net benefit
for several small items. (4) Other special items include the
following:
•
for the quarter ended June 30, 2016, a
gain on the sale of an equity investment in a natural gas pipeline
in Australia ($27), costs associated with the then-planned
separation of Alcoa Corporation from its former parent company
($22), a benefit for an arbitration recovery related to a 2010 fire
at the Iceland smelter ($14), a net unfavorable change in certain
mark-to-market energy derivative contracts ($6), and a write-down
of inventory related to two previously curtailed facilities
($3);
•
for the quarter ended March 31, 2017, a gain on the sale of the
Yadkin Hydroelectric Project in the United States ($120) and a net
favorable change in certain mark-to-market energy derivative
contracts ($4); and
•
for the quarter ended June 30, 2017, an unfavorable tax impact
related to the interim period treatment of operational losses in
certain jurisdictions for which no tax benefit was recognized
($28), a net unfavorable change in certain mark-to-market energy
derivative contracts ($17), 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 smelter ($13), and 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 ($10). (5) 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, 2016(1)
March 31, 2017
June 30, 2017
Net (loss) income attributable to Alcoa Corporation $ (55 )
$ 225 $ 75 Add: Net income attributable to noncontrolling
interest
43
83
63
Provision for income taxes 68 110 99 Other (income) expenses, net
(23 ) (100 ) 6 Interest expense 66 26 25 Restructuring and other
charges 8 10 12 Provision for depreciation, depletion, and
amortization
178
179
190
Adjusted EBITDA
$ 285
$ 533 $
470 Special items(2)
25
– 13
Adjusted EBITDA, excluding special items
$
310
$
533
$
483
Alcoa’s Corporation’s definition of Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. Adjusted EBITDA is a
non-GAAP financial measure. Management believes that this measure
is meaningful to investors because Adjusted EBITDA provides
additional information with respect to Alcoa Corporation’s
operating performance and the Company’s ability to meet its
financial obligations. The Adjusted EBITDA presented may not be
comparable to similarly titled measures of other companies.
(1) Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
quarter ended June 30, 2016 were prepared on such basis. The
carve-out financial statements of Alcoa Corporation are not
necessarily indicative of Alcoa Corporation’s consolidated results
of operations had it been a standalone company during the
referenced period. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the period ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information. (2) Special items include the
following (see reconciliation of Adjusted (Loss) Income above for
additional information):
•
for the quarter ended June 30, 2016, costs associated with the
then-planned separation of Alcoa Corporation from its former parent
company ($22) and a write-down of inventory related to two
previously curtailed facilities ($3); and
•
for the quarter ended June 30, 2017, 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 smelter.
Alcoa
Corporation and subsidiaries Calculation of Financial
Measures (unaudited), continued (in millions)
Free Cash Flow Quarter ended
March 31, 2017
June 30, 2017
Cash from operations $ 74 $ 311 Capital expenditures
(71
)
(88
)
Free cash flow
$ 3
$ 223 Free Cash Flow is a non-GAAP
financial measure. Management believes that this measure is
meaningful to investors because management reviews cash flows
generated from operations after taking into consideration capital
expenditures, which are both necessary to maintain and expand Alcoa
Corporation’s asset base and expected to generate future cash flows
from operations. It is important to note that Free Cash Flow does
not represent the residual cash flow available for discretionary
expenditures since other non-discretionary expenditures, such as
mandatory debt service requirements, are not deducted from the
measure.
Net Debt
March 31, 2017
June 30, 2017
Short-term borrowings $ 3 $ 4 Long-term debt due within one
year 20 19 Long-term debt, less amount due within one year
1,431 1,418 Total debt $ 1,454 $
1,441 Less: Cash and cash equivalents
804 954 Net debt
$ 650 $ 487 Net
debt is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after considering available
cash that could be used to repay outstanding debt.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170719006295/en/
Alcoa CorporationInvestor Contact:James Dwyer, +1
212-518-5450James.Dwyer@alcoa.comorMedia Contact:Monica Orbe, +1
212-518-5455Monica.Orbe@alcoa.com
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