- Net loss of $199 million, or $1.07 per
share
- Excluding special items, adjusted net
loss of $43 million, or $0.23 per share
- $467 million of adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)
excluding special items
- Revenue of $2.7 billion
- $168 million cash from operations; $99
million free cash flow
- $1.0 billion cash balance and $1.8
billion of debt, for net debt of $0.8 billion, as of March 31,
2019
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina, and aluminum products, today reported first quarter 2019
results.
M, except per share amounts
1Q181
4Q181
1Q19 Revenue $ 3,090 $ 3,344
$ 2,719 Net income (loss) attributable to Alcoa
Corporation $ 195 $ 51
$ (199 ) Earnings
(loss) per share attributable to Alcoa Corporation $ 1.04
$ 0.27
$ (1.07 ) Adjusted net
income (loss) $ 190 $ 133
$ (43 ) Adjusted
earnings (loss) per share $ 1.01 $ 0.70
$ (0.23 ) Adjusted EBITDA excluding special
items $ 732 $ 770
$ 467
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.
“We improved our operations in the first quarter, even as
alumina and aluminum prices weakened,” said President and Chief
Executive Officer Roy Harvey. “Our Bauxite and Alumina segments
increased their production rates, and we took steps last quarter to
restructure our Aluminum portfolio.”
Harvey added: “We will work to realize the benefits of the
strategic actions we’ve already taken as we remain focused on
safety and operational excellence. We will also continue to review
our assets for their ability to compete across all market cycles,
all to strengthen the long-term position of the Company.”
In first quarter 2019, Alcoa reported net loss of $199 million,
or $1.07 per share, compared to net income of $51 million, or $0.27
per share, in fourth quarter 2018. The 2019 first quarter results
include the impact of $156 million for special items, stemming
primarily from a collective dismissal process at two smelters in
Spain.
Excluding the impact of special items, first quarter 2019
adjusted net loss was $43 million, or $0.23 per share, down from
fourth quarter 2018 net income of $133 million, or $0.70 per
share.
Alcoa reports adjusted EBITDA excluding special items for the
first quarter of 2019 of $467 million, a 39 percent sequential
decrease primarily due to lower alumina and aluminum prices.
Alcoa reported first quarter 2019 revenue of $2.7 billion, down
19 percent sequentially, also primarily due to lower alumina and
aluminum prices.
Cash from operations in first quarter 2019 was $168 million and
free cash flow was $99 million. Cash used for financing activities
was $199 million and cash used for investing activities was $59
million.
Alcoa ended first quarter 2019 with cash on hand of $1.0 billion
and debt of $1.8 billion, for net debt of $0.8 billion. The Company
reported 35 days working capital, a 10-day increase year-over-year,
primarily due to lower revenues, timing of trading activities and
higher inventory days on hand.
Update on Spain Collective Dismissal Process
In January 2019, Alcoa reached agreement with the workers’
representatives at the Avilés and La Coruña aluminum plants in
Spain as part of the collective dismissal process announced in
October 2018. As part of the agreement, the two smelters, with
combined operating capacity of 124,000 metric tons per year, were
curtailed in February and are being maintained in restart condition
through June 30, 2019, in the event that third parties have
interest in acquiring the facilities. The casthouses at both plants
and the paste plant at La Coruña remain in operation.
As part of the process, the Company recorded
restructuring-related and other charges of $120 million (pre- and
after-tax), or $0.65 per share in the first quarter of 2019. Of
that total, approximately 80 percent is non-cash, primarily related
to fixed asset and inventory write-downs.
Alcoa expects additional charges in the second quarter of 2019,
estimated to range from $70 million to $125 million (pre- and
after-tax), or $0.38 to $0.67 per share, depending on the outcome
of the collective dismissal process. Approximately 75 percent would
be cash outlays 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 be between 47.0 and
48.0 million dry metric tons. Total alumina shipments are projected
to be 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 second quarter of 2019, Alcoa expects favorable
improvements from third-party energy sales in Brazil and lower
alumina costs to the Aluminum segment. In addition, the Company
also expects moderate benefits from declines in raw material
prices, primarily in the Alumina segment.
Market Update
For 2019, Alcoa projects a global aluminum deficit ranging
between 1.5 million and 1.9 million metric tons, down from last
quarter’s full-year estimate of between 1.7 million and 2.1 million
metric tons.
Global aluminum demand growth for 2019 is estimated to range
between 2 to 3 percent, down from 3 to 4 percent in the previous
quarter, predominantly due to lower demand growth in China,
especially in the transportation and electrical sectors.
Alcoa continues to project a balanced market in China and
maintains a deficit estimate for the rest of the world between 1.7
million to 1.9 million metric tons, as lower demand growth is
offset by lower production expectations in Europe and South
America.
In the alumina market, Alcoa maintains its projection for a 2019
surplus in the range of 200 thousand metric tons to 1 million
metric tons. The estimate assumes ongoing, third-party supply
disruptions in the Atlantic region and a Chinese alumina surplus
that the Company estimates to be around 1 million metric tons.
The bauxite market is expected to have a slightly larger surplus
in 2019 versus Alcoa’s prior estimate, with stockpile growth
ranging between 8 million and 12 million metric tons, as higher
production expectations in Australia, Guinea, and Southeast Asia
are 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, April 17, 2019, to present first
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 April 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 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’s 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 March
31, December 31, March 31,
2018
2018
2019
Sales $ 3,090 $ 3,344 $ 2,719
Cost of goods sold (exclusive of expenses
below)(1)
2,302 2,513 2,180 Selling, general administrative, and other
expenses 67 59 84 Research and development expenses 8 7 7 Provision
for depreciation, depletion, and amortization 194 174 172
Restructuring and other charges, net
(19 ) 138 113 Interest expense 26 31 30 Other expenses, net
21 32
41 Total costs and expenses 2,599 2,954 2,627
Income before income taxes 491 390 92 Provision for income
taxes(1)
151 163
150
Net income (loss)(1)
340 227 (58 ) Less: Net income attributable to
noncontrolling interest(1)
145
176 141
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA
CORPORATION(1)
$ 195 $
51 $ (199 )
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic: Net income (loss) $ 1.05 $ 0.27 $ (1.07 ) Average number of
shares(2) 185,939,770 186,166,234 185,325,040 Diluted: Net
income (loss) $ 1.04 $ 0.27 $ (1.07 ) Average number of shares(2)
188,494,931 188,219,224 185,325,040 Common stock
outstanding at the end of the period(2) 186,210,129 184,770,249
185,519,564
(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 Consolidated Balance
Sheet (unaudited) (in millions)
December 31, March 31,
2018
2019
ASSETS Current assets: Cash and cash equivalents $ 1,113 $ 1,017
Receivables from customers 830 758 Other receivables 173 184
Inventories(1) 1,819 1,799 Fair value of derivative instruments 73
71 Prepaid expenses and other current assets(1),(2)
320 285 Total
current assets
4,328
4,114 Properties, plants, and equipment
21,807 22,015 Less: accumulated depreciation, depletion, and
amortization
13,480
13,687 Properties, plants, and equipment, net
8,327 8,328
Investments 1,360 1,362 Deferred income taxes 560 604 Fair value of
derivative instruments 82 68 Other noncurrent assets
1,475 1,480 Total
assets
$ 16,132 $
15,956 LIABILITIES Current liabilities:
Accounts payable, trade $ 1,663 $ 1,503 Accrued compensation and
retirement costs 400 383 Taxes, including income taxes 426 395 Fair
value of derivative instruments 82 84 Other current liabilities 347
437 Long-term debt due within one year
1
1 Total current liabilities
2,919 2,803
Long-term debt, less amount due within one year 1,801 1,802 Accrued
pension benefits 1,407 1,387 Accrued other postretirement benefits
868 851 Asset retirement obligations 529 543 Environmental
remediation 236 243 Fair value of derivative instruments 261 580
Noncurrent income taxes 301 300 Other noncurrent liabilities and
deferred credits
222
364 Total liabilities
8,544
8,873 EQUITY Alcoa
Corporation shareholders’ equity: Common stock 2 2 Additional
capital 9,611 9,618 Retained earnings(1) 570 371 Accumulated other
comprehensive loss
(4,565 )
(4,834 ) Total Alcoa Corporation shareholders' equity
5,618 5,157
Noncontrolling interest(1)
1,970
1,926 Total equity
7,588
7,083 Total liabilities and
equity
$ 16,132 $
15,956 (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 March 31, 2019.
Alcoa Corporation and subsidiaries Statement of
Consolidated Cash Flows (unaudited) (in millions)
Three months ended
March
31,
2018
2019
CASH FROM OPERATIONS Net income (loss)(1) $ 340 $ (58 ) Adjustments
to reconcile net income (loss) to cash from operations:
Depreciation, depletion, and amortization 194 172 Deferred income
taxes(1) 2 33 Equity earnings, net of dividends (6 ) (3 )
Restructuring and other charges, net
(19 ) 113 Net gain from investing activities – asset sales (5 ) (8
) Net periodic pension benefit cost 40 30 Stock-based compensation
10 10 Provision for bad debt expense – 20 Other (14 ) 23 Changes in
assets and liabilities, excluding effects of acquisitions,
divestitures, and foreign currency translation adjustments:
Decrease in receivables 43 42 (Increase) Decrease in inventories(1)
(248 ) 17 Decrease in prepaid expenses and other current assets 2
13 (Decrease) in accounts payable, trade (106 ) (159 ) (Decrease)
in accrued expenses (186 ) (18 ) Increase (Decrease) in taxes,
including income taxes 84 (43 ) Pension contributions (40 ) (7 )
(Increase) in noncurrent assets (13 ) (10 ) (Decrease) Increase in
noncurrent liabilities
(23 )
1 CASH PROVIDED FROM OPERATIONS
55 168
FINANCING ACTIVITIES Additions to debt (original maturities greater
than three months) 61 – Payments on debt (original maturities
greater than three months) (4 ) – Proceeds from the exercise of
employee stock options 15 1 Contributions from noncontrolling
interest 53 20 Distributions to noncontrolling interest (267 ) (214
) Other
(5 )
(6 ) CASH USED
FOR FINANCING ACTIVITIES
(147 )
(199 ) INVESTING ACTIVITIES Capital
expenditures (74 ) (69 ) Proceeds from the sale of assets and
businesses – 11 Additions to investments
–
(1 ) CASH USED FOR
INVESTING ACTIVITIES
(74 )
(59 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
4
(6
)
Net change in cash and cash equivalents and restricted cash (162 )
(96 ) 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
$
1,203
$
1,020
(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.
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
Bauxite: Production(1) (mdmt) 11.2 11.3 11.5 11.8 45.8 11.9
Third-party shipments (mdmt) 1.1 1.6 1.4 1.6 5.7 1.2 Intersegment
shipments (mdmt) 10.4 10.0 10.1 10.7 41.2 10.2 Third-party sales $
47 $ 77 $ 67 $ 80 $ 271 $ 65 Intersegment sales $ 249 $ 226 $ 224 $
245 $ 944 $ 236
Segment adjusted EBITDA(2)
$ 110 $ 100 $ 106 $ 110 $ 426 $ 126 Depreciation, depletion, and
amortization $ 29 $ 27 $ 27
$ 28 $ 111 $ 28
Alumina: Production (kmt) 3,173 3,227 3,160 3,297
12,857 3,240 Third-party shipments (kmt) 2,376 2,285 2,233 2,365
9,259 2,329 Intersegment shipments (kmt) 1,097 1,031 1,083 1,115
4,326 972 Average realized third-party price per metric ton of
alumina
$
385
$
467
$
493
$
479
$
455
$
385
Third-party sales $ 914 $ 1,068 $ 1,101 $ 1,132 $ 4,215 $ 897
Intersegment sales $ 454 $ 536 $ 544 $ 567 $ 2,101 $ 417
Segment adjusted EBITDA(2)
$ 392 $ 638 $ 660 $ 683 $ 2,373 $ 372 Depreciation and amortization
$ 53 $ 49 $ 48 $ 47 $ 197 $ 48 Equity (loss) income $ (1 )
$ 14 $ 10 $ 9 $ 32
$ 12
Aluminum: Primary aluminum
production (kmt) 554 565 567 573 2,259 537 Third-party aluminum
shipments(3) (kmt) 794 853 806 815 3,268 709 Average realized
third-party price per metric ton of primary aluminum
$
2,483
$
2,623
$
2,465
$
2,358
$
2,484
$
2,219
Third-party sales $ 2,111 $ 2,413 $ 2,198 $ 2,107 $ 8,829 $ 1,735
Intersegment sales $ 4 $ 4 $ 6 $ 4 $ 18 $ 3
Segment adjusted EBITDA(2),(4)
$ 187 $ 230 $ 84 $ (50 ) $ 451 $ (96 ) Depreciation and
amortization $ 106 $ 108 $ 91 $ 89 $ 394 $ 89 Equity loss $
-– $ (8 ) $ (5 ) $ (25 ) $ (38 )
$ (22 )
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 Unallocated amounts: Transformation(5) (2 )
(1 ) 1 (1 ) (3 ) 2 Intersegment eliminations(4),(6) 76 (152 ) 21 47
(8 ) 86 Corporate expenses(7) (27 ) (26 ) (22 ) (21 ) (96 ) (24 )
Provision for depreciation, depletion, and amortization
(194
)
(192
)
(173
)
(174
)
(733
)
(172
)
Restructuring and other charges, net
19 (231 ) (177 ) (138 ) (527 ) (113 ) Interest expense (26 ) (32 )
(33 ) (31 ) (122 ) (30 ) Other expenses, net (21 ) (9 ) (2 ) (32 )
(64 ) (41 ) Other(8) (23 ) (36 )
(10 ) (3 ) (72 )
(18 ) Consolidated income before income taxes(4) 491 289 455 390
1,625 92 Provision for income taxes(4) (151 ) (158 ) (260 ) (163 )
(732 ) (150 ) Net income attributable to noncontrolling interest(4)
(145
)
(121
)
(201
)
(176
)
(643
)
(141
)
Consolidated net income (loss) attributable to Alcoa Corporation(4)
$
195
$
10
$
(6
)
$
51
$
250
$
(199
)
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(5) Quarter ended
Quarter ended March 31, December 31,
March 31, March 31, December 31,
March 31,
2018
2018
2019
2018
2018
2019
Net income (loss) attributable to Alcoa Corporation(1) $ 195
$ 51 $ (199 ) $
1.04
(1)
$
0.27
(1)
$ (1.07 ) Special items:
Restructuring and other charges, net
(19 )
138
113 Discrete tax items(2) (2 ) (24 ) - Other special items(3) 18 29
44 Tax impact(4) (2 ) (43 ) (1 ) Noncontrolling interest impact(4)
-
(18
)
-
Subtotal
(5 )
82
156 Net income (loss)
attributable to Alcoa Corporation – as adjusted
$
190 $ 133
$ (43 )
1.01
0.70 (0.23 )
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 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) Discrete tax items include a net benefit for several
items for the quarters ended March 31, 2018 and December 31, 2018.
(3) Other special items include the following:
•
for the quarter ended March 31, 2018, a net favorable change in
certain mark-to-market energy derivative instruments ($17), costs
related to the partial restart of the Warrick, Indiana smelter
($16), an unfavorable tax impact resulting from the difference
between Alcoa Corporation’s consolidated estimated annual effective
tax rate and the statutory rates applicable to special items ($15),
costs related to a work stoppage at the Bécancour, Canada smelter
($3, primarily contractor services), and an unfavorable tax impact
related to the interim period treatment of operational losses in
certain jurisdictions for which no tax benefit was recognized ($1);
•
for the quarter ended December 31, 2018, an unfavorable tax impact
resulting from the difference between Alcoa’s consolidated
estimated annual effective tax rate and the statutory rates
applicable to special items ($32), a favorable tax impact related
to the interim period treatment of operational losses in certain
jurisdictions for which no tax benefit was recognized ($5), a net
favorable change in certain mark-to-market energy derivative
instruments ($3), and costs related to each of the following: a
work stoppage at the Bécancour, Canada smelter ($3, primarily
contractor services), a collective employee dismissal process in
Spain at the Avilés and La Coruña smelters ($1, primarily
contractor services), and the partial restart of the Warrick,
Indiana smelter ($1); and
•
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, primarily contractor
services). (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 ended March 31, 2018, no
additional share equivalents were dilutive based on Net income
attributable to Alcoa Corporation common shareholders – as
adjusted, resulting in a diluted average number of shares of
188,494,931;
•
for the quarter ended December 31, 2018,
no additional share equivalents were dilutive based on Net income
attributable to Alcoa Corporation common shareholders – as
adjusted, resulting in a diluted average number of shares of
188,219,224; and
•
for the quarter ended March 31, 2019, no
additional share equivalents were dilutive based on Net loss
attributable to Alcoa Corporation common shareholders – as
adjusted, resulting in a diluted average number of shares of
185,325,040.
Alcoa Corporation and subsidiaries Calculation of
Financial Measures (unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
March 31, December 31, March 31,
2018
2018
2019
Net income (loss) attributable to Alcoa Corporation(1) $ 195
$ 51 $ (199 ) Add: Net income attributable to noncontrolling
interest(1)
145
176
141
Provision for income taxes(1) 151 163 150 Other expenses, net 21 32
41 Interest expense 26 31 30
Restructuring and other charges, net
(19 ) 138 113 Provision for depreciation, depletion, and
amortization
194
174
172
Adjusted EBITDA
713
765 448 Special
items(2)
19 5
19 Adjusted EBITDA, excluding special
items
$
732
$
770
$
467
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 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) Special items include the following (see reconciliation
of Adjusted Income above for additional information):
•
for the quarter ended March 31, 2018,
costs related to the partial restart of the Warrick, Indiana
smelter ($16) and costs related to a work stoppage at the
Bécancour, Canada smelter ($3, primarily contractor services).
•
for the quarter ended December 31, 2018,
costs related to each of the following: a work stoppage at the
Bécancour, Canada smelter ($3, primarily contractor services), a
collective employee dismissal process in Spain at the Avilés and La
Coruña smelters ($1, primarily contractor services), and the
partial restart of the Warrick, Indiana smelter ($1); and
•
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, primarily contractor services).
Alcoa Corporation and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow Quarter ended March 31,
December 31, March 31,
2018
2018
2019
Cash from operations $ 55 $ 535 $ 168 Capital
expenditures
(74
)
(148
)
(69
)
Free cash flow
$ (19 )
$ 387 $
99
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.
Net Debt December 31, March 31,
2018
2019
Short-term borrowings $ – $ – Long-term debt due within one
year 1 1 Long-term debt, less amount due within one year
1,801 1,802 Total debt $ 1,802 $
1,803 Less: Cash and cash equivalents
1,113 1,017 Net debt
$ 689 $ 786
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/20190417005855/en/
Investor Contact:James Dwyer+1 412 992
5450James.Dwyer@alcoa.com
Media Contact:Monica Orbe+1 412 315
2896Monica.Orbe@alcoa.com
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