Profit in Future Combined Arconic Segments Grew Year-Over-Year
Profit in Future Combined Alcoa Corporation Segments Rose Sequentially
Company on Track to Separate in the Second Half of 2016
2Q 2016 Consolidated Highlights
- Net income of $135 million, or $0.09 per share;
excluding special items, adjusted net income of $213 million, or $0.15 per share - Revenue of $5.3 billion, down 10 percent year-over-year, reflects:
- 4 percent revenue increase from recent acquisitions and organic growth, more than offset by a 14 percent revenue decline due primarily to lower aluminum and alumina pricing and the impact of curtailed, divested and closed operations
- Announced sales of non-essential assets expected to generate total cash proceeds of $1.2 billion during 2016; $815 million received year-to-date, strengthening the balance sheet
- $1.9 billion cash on hand
- Strong productivity gains of $375 million, year-over-year, across all segments
Overview of Arconic and Alcoa Corporation Segments 1 :
2Q 2016 Arconic Segments (Value-Add)
- Revenue of $3.5 billion, up 1 percent year-over-year, reflects:
- 5 percent revenue increase related to acquisitions, mostly offset by a 4 percent revenue decline predominately from metal price impacts
- Record Engineered Products and Solutions revenue of $1.5 billion, up 15 percent year-over-year
- After-tax operating income of $294 million, up 3 percent year-over-year
- Global Rolled Products: $68 million after-tax operating income;
record quarter for automotive sheet shipments, up 17 percent year-over-year - Engineered Products and Solutions: Record after-tax operating income of $180 million, up 9 percent year-over-year
- Transportation and Construction Solutions: $46 million after-tax operating income, up 5 percent year-over-year
- Global Rolled Products: $68 million after-tax operating income;
- Signed a multi-year contract with Embraer valued at approximately $470 million
- Opened state-of-the-art, 3D printing metal powder production facility to develop and produce proprietary titanium, nickel and aluminum powders
- Achieved $176 million in productivity savings ($360 million year-to-date), on target to deliver $650 million in 2016
2Q 2016 Alcoa Corporation Segments (Upstream)
- Total revenue of $2.3 billion, up 7 percent sequentially
- Predominately due to 22 percent higher alumina prices, 2 percent higher aluminum pricing and organic growth, slightly offset by the impact of curtailed, divested and closed operations
- Third-party revenue of $1.8 billion, up 9 percent sequentially
- After-tax operating income of $150 million, up sequentially, as improved pricing, productivity savings and the realized benefit of a more competitive portfolio lifted Alumina and Primary Metals segments profits
- Alcoa World Alumina and Chemicals secured $60 million of new third-party bauxite sales over the next two years
- Reached power agreement to improve competitiveness of Intalco smelter in Washington State and curtailed Pt. Comfort, Texas refinery
- Achieved $199 million in productivity savings ($379 million year-to-date), on target to deliver $550 million in 2016
________________________________________________________________________________
1 The Arconic segments described in this release consist of Alcoa’s existing Value-Add segments: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. The Alcoa Corporation segments described herein consist of the existing Upstream segments: Alumina and Primary Metals. Until the separation is effected, financial information about the future Arconic and Alcoa Corporation companies herein relates solely to the Value-Add and Upstream segments, respectively, and does not include any of the corporate-related items that are currently presented in Alcoa’s Reconciliation of Total Segment ATOI to Consolidated Net Income. Following the separation, the rolling mill operations in Warrick, IN and Saudi Arabia (which are currently in the Global Rolled Products segment) will belong to Alcoa Corporation.
________________________________________________________________________________
Lightweight metals leader Alcoa (NYSE:AA) today reported second quarter
2016 results. Profit in the future combined Arconic (Value-Add) segments
grew year-over-year and the future combined Alcoa Corporation (Upstream)
segments strengthened sequentially. The Company is on track to complete
its separation in the second half of 2016.
“As markets ever more rapidly evolve, we have made Alcoa increasingly
agile; results continue to improve,” said Klaus Kleinfeld, Alcoa
Chairman and Chief Executive Officer. “In the face of a transforming
aerospace market, we moved quickly to bring our costs down while
capturing new opportunities. Contract wins continued as did our
innovation leadership with the opening of a state-of-the-art metals
powder plant geared toward rising demand for 3D-printed parts. Our
automotive sheet revenue hit an all-time high. After substantially
reshaping our Upstream segments they are now performing well even in a
low pricing environment; we are building out our bauxite business and
continue to win new supply contracts. Exceptional productivity and
monetization of non-essential assets has put us in an excellent cash
position. Our separation is on track for later this year.”
Alcoa reported second quarter 2016 net income of $135 million, or $0.09
per share, including $78 million in special items primarily related to
separation costs, restructuring-related charges and associated tax
impacts, discussed below. Year-over-year, second quarter 2016 results
compare to net income of $140 million, or $0.10 per share.
Excluding the impact of special items, second quarter 2016 adjusted net
income was $213 million, or $0.15 per share. All segments contributed to
$375 million in productivity gains, partially offsetting the negative
effects of lower year-over-year alumina and aluminum pricing and cost
increases. In second quarter 2015, Alcoa reported adjusted net income,
excluding special items, of $250 million, or $0.19 per share.
The second quarter effective tax rate of 46 percent was affected by
special items during the quarter, including certain non-deductible
expenses related to the separation and tax costs associated with the
sale of company-owned life insurance policies. Excluding the impact of
all special items, the quarterly tax rate on operating results was 31
percent.
Year-over-year, a 4 percent revenue increase from recent acquisitions
and organic growth was more than offset by a 14 percent revenue decline
due primarily to lower aluminum and alumina pricing and the impact of
curtailed, divested and closed operations. As a result of these combined
factors, Alcoa reported second quarter 2016 revenue of $5.3 billion,
down 10 percent from $5.9 billion in the second quarter of 2015.
Asset Sales
Alcoa continues to strengthen its balance sheet and maximize cash flow
through sales of non-essential assets. Announced sales are expected to
generate total cash proceeds of $1.2 billion during 2016, of which $815
million has been received year-to-date. In the second quarter of 2016,
Alcoa:
-
Liquidated additional company-owned life insurance policies for gross
proceeds of $223 million; -
Sold its Remmele Medical business, which was part of the RTI
International Metals acquisition, to LISI MEDICAL, for $102 million;
and -
Sold for $111 million equity and fixed income securities held by its
captive insurance company.
Additionally in the second quarter, Alcoa reached agreement to sell the
following assets for a total of approximately $400 million:
-
Real estate in Ferndale, Washington to Petrogas and property
associated with a former Alcoa smelter in Frederick, Maryland to a
regional commercial real estate company; and -
The Yadkin Hydroelectric Project in North Carolina to Cube Hydro
Carolinas LLC, an affiliate of Cube Hydro Partners LLC, which will
manage the assets.
The transactions above are expected to close in the second half of 2016.
Cash Flows
Alcoa ended second quarter 2016 with cash on hand of $1.9 billion. Cash
from operations was $332 million. Free cash flow for the quarter was $55
million, which reflected an additional planned prepayment of $200
million related to a natural gas supply agreement in Australia and
pension contributions of $77 million. Additionally, cash used for
financing activities and cash provided from investing activities were
$100 million and $311 million, respectively.
Market Update
In the global aerospace market, 2016 continues to be a transition year
for original equipment manufacturers. Within jet engines, new launches
are accelerating demand, outpacing near-term demand for structural
airframe components, which is being partially absorbed through
de-stocking.
The Company is forecasting improvement in the second half of 2016 as new
platforms ramp up, and a strong 2017. Large commercial aircraft
deliveries declined approximately 1 percent year-over-year in the first
half of 2016, but are expected to rise 6 percent in the second half of
2016 compared to the first. As a result, Alcoa forecasts full-year 2016
deliveries to be flat to up 3 percent, followed by strong double-digit
growth in 2017.
In automotive, Alcoa continues to forecast global automotive production
growth of 1 to 4 percent. This includes 1 to 4 percent growth in North
America, where the United States continues to record strong sales,
particularly in the light truck segment. The global outlook is driven by
a variety of factors, including low fuel prices, sustained demand,
stable consumer confidence and recovery of global economies.
Alcoa also projects solid growth in other end markets. Low natural gas
prices in North America and the adoption of new, high-efficiency
industrial gas turbine models continue to drive orders for both
heavy-duty gas turbines and spare parts. Alcoa projects global airfoil
market growth to be 2 to 4 percent for 2016. The 2016 packaging market
is projected to grow 1 to 3 percent and the global building and
construction market, 4 to 6 percent.
Growth in the heavy duty truck, trailer and bus market in Europe and
China is expected to be offset by continued production declines in North
America, setting the global production outlook for the commercial
transportation market at negative 4 to negative 1 percent for the year.
In 2016, Alcoa projects an approximately 775 thousand metric ton global
aluminum deficit as 5 percent global aluminum demand growth outweighs
2.5 percent global aluminum supply growth. In addition, the Company
projects a global alumina deficit of 1.5 million metric tons.
Arconic Overview
After the Company’s separation, the innovation and technology-driven
Arconic will include Global Rolled Products (other than the rolling mill
operations in Warrick, IN and Saudi Arabia, which will move to Alcoa
Corporation), Engineered Products and Solutions and Transportation and
Construction Solutions. In second quarter 2016, these Value-Add segments
reported combined revenue of $3.5 billion, after-tax operating income
(ATOI) of $294 million, and adjusted EBITDA of $567 million.
ATOI and adjusted EBITDA increased 3 and 6 percent, respectively,
year-over-year. The combined segments also generated $176 million in
productivity ($360 million year-to-date) as part of their business
improvement programs announced in the first quarter. All Arconic
segments are on track to deliver a combined $650 million in productivity
savings in 2016.
In addition, in the second quarter, the future Arconic:
-
Signed a long-term contract valued at approximately $470 million with
Embraer for aluminum sheet and plate for Embraer’s new E2 jet
airliners; and -
Opened a state-of-the-art, 3D printing metal powder production
facility located at the Alcoa Technology Center to develop and produce
proprietary titanium, nickel and aluminum powders optimized for 3D
printed aerospace parts.
Alcoa Corporation Overview
Following the Company’s separation, Alcoa Corporation will comprise
Bauxite, Alumina, Aluminum, Cast Products, and Energy – today’s Alumina
and Primary Metals segments – as well as the rolling mill operations in
Warrick, IN, and Saudi Arabia that are currently part of the Global
Rolled Products segment. In second quarter 2016, the Alumina and Primary
Metals segments reported revenue of $2.3 billion, ATOI of $150 million
and adjusted EBITDA of $358 million. These segments generated $199
million in productivity in the second quarter ($379 million
year-to-date) as part of its business improvement program, and are on
track to deliver a combined $550 million in productivity savings for
2016.
In the second quarter, Alcoa Corporation continued to successfully build
its third-party bauxite business. Alcoa World Alumina and Chemicals
(AWAC) signed new third-party bauxite contracts valued at $60 million
over the next two years for a total of $410 million in the first half of
2016. Under the contracts, AWAC will supply bauxite to external
customers from four of its global mines. The new contracts, which will
triple Alcoa Corporation’s third-party bauxite sales in 2016 from 2015,
serve customers in China, the United States, Europe and Brazil. AWAC is
an unincorporated joint venture that consists of a group of companies,
which are owned 60 percent by Alcoa and 40 percent by Alumina Limited of
Australia.
In addition, Alcoa Corporation continued to take aggressive action to
improve its competitiveness and reached a new power agreement for its
Intalco smelter in Washington State and completed the curtailment of the
Pt. Comfort, Texas refinery.
As a result of these activities, Alcoa Corporation remains on target to
meet or exceed its 2016 goals of moving to the 38th
percentile on the global aluminum cost curve and 21st
percentile on the global alumina cost curve.
Segment Information
Global Rolled Products
ATOI in the second quarter was $68 million, compared to $76 million in
the second quarter of 2015. Excluding the $17 million impact of
transforming the Warrick rolling mill into a cold metal plant, the
year-over-year change reflected a $9 million improvement, as strong
productivity more than offset cost increases, volume declines in
aerospace due to new model transition and in commercial transportation
due to slower North America build rates, and overall pricing pressure in
global can sheet packaging. This segment continues to grow its
automotive business and had a record quarter for automotive sheet
shipments, up 17 percent year-over-year.
Engineered Products and Solutions
In the second quarter, this segment reported record revenue of $1.5
billion and record ATOI of $180 million. Year-over-year, revenue was up
15 percent driven by the RTI acquisition. ATOI was up $15 million, or 9
percent, year-over-year as productivity improvements in all businesses
and the positive contribution from the RTI acquisition were mostly
offset by unfavorable price/mix, cost headwinds and investments in
growth projects.
Transportation and Construction Solutions
This segment delivered ATOI of $46 million in the second quarter, up $2
million, or 5 percent, compared to second quarter 2015. This increase
was primarily the result of strong productivity gains offset by cost
increases and continued weakness in the heavy-duty truck market in North
America.
Alumina
This segment generated ATOI of $109 million in the second
quarter, an increase of $101 million from $8 million in the first
quarter of 2016. This improvement was primarily driven by a 22 percent
increase in the Alumina Price Index, the benefits of a more competitive
portfolio and productivity actions, slightly offset by net unfavorable
foreign currency movements due to a stronger Australian dollar and
Brazilian real.
Primary Metals
ATOI in the second quarter was $41 million, a $27 million sequential
improvement from $14 million in first quarter 2016. This improvement was
primarily due to higher metal prices, productivity improvements, a
favorable impact from the closure of the Warrick smelter and lower costs
for carbon and alumina, partially offset by lower energy sales.
Separation Update
On June 29, 2016, Alcoa Upstream Corporation (to be renamed Alcoa
Corporation prior to separation) filed an initial Registration Statement
on Form 10 with the U.S. Securities and Exchange Commission. The initial
Form 10 filing is a major milestone in Alcoa’s pending separation into
two strong standalone, publicly-traded companies. The Value-Add segments
(other than the rolling mill operations in Warrick, IN and Saudi Arabia)
will remain in the existing company, which will be named Arconic Inc.
The separation is on track to be completed in the second half of 2016.
The separation remains subject to the satisfaction of certain
conditions, including obtaining final approval from the Alcoa Board of
Directors; receipt of a favorable IRS ruling and an opinion from Alcoa’s
tax advisors regarding certain U.S. federal income tax matters; and the
effectiveness of the Form 10.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern
Daylight Time on July 11, 2016 to present quarterly results. The meeting
will be webcast via alcoa.com. Call information and related details are
available at
www.alcoa.com
under “Invest.” Presentation materials used during this meeting will be
available for viewing shortly after the market closes at 4:00 PM EDT on
July 11, 2016 at
www.alcoa.com
.
Dissemination of Company Information
Alcoa intends to make future announcements regarding Company
developments and financial performance through its website at www.alcoa.com.
About Alcoa
A global leader in lightweight metals technology, engineering and
manufacturing, Alcoa innovates multi-material solutions that advance our
world. Our technologies enhance transportation, from automotive and
commercial transport to air and space travel, and improve industrial and
consumer electronics products. We enable smart buildings, sustainable
food and beverage packaging, high-performance defense vehicles across
air, land and sea, deeper oil and gas drilling and more efficient power
generation. We pioneered the aluminum industry over 125 years ago, and
today, our approximately 57,000 people in 30 countries deliver value-add
products made of titanium, nickel and aluminum, and produce
best-in-class bauxite, alumina and primary aluminum products. For more
information, visit www.alcoa.com,
follow @Alcoa on Twitter at www.twitter.com/Alcoa
and follow us on Facebook at www.facebook.com/Alcoa.
We have included the above website addresses only as inactive textual
references and do not intend these to be active links to such websites.
Information contained on such websites or that can be accessed through
such websites does not constitute a part of this press release.
Forward-Looking Statements
This 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 that reflect Alcoa’s 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 aluminum, supply/demand
balances, and growth of the aerospace, automotive, and other end
markets; statements regarding targeted financial results or operating
performance; statements about Alcoa’s strategies, outlook, business and
financial prospects; and statements regarding the separation
transaction. Forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa 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) uncertainties as to
the timing of the separation and whether it will be completed; (b) the
possibility that various closing conditions for the separation may not
be satisfied; (c) the impact of the separation on the businesses of
Alcoa; (d) the risk that the businesses will not be separated
successfully or such separation may be more difficult, time-consuming or
costly than expected, which could result in additional demands on
Alcoa’s resources, systems, procedures and controls, disruption of its
ongoing business and diversion of management’s attention from other
business concerns; (e) 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; (f)
deterioration in global economic and financial market conditions
generally; (g) unfavorable changes in the markets served by Alcoa; (h)
the impact of changes in foreign currency exchange rates on costs and
results; (i) increases in energy costs; (j) 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 (including, without limitation, advanced aluminum alloys,
Alcoa Micromill, and other materials and processes), and other
initiatives; (k) Alcoa’s inability to realize expected benefits, in each
case as planned and by targeted completion dates, from acquisitions,
divestitures, facility closures, curtailments, or expansions, or joint
ventures; (l) political, economic, and regulatory risks in the countries
in which Alcoa operates or sells products; (m) the outcome of
contingencies, including legal proceedings, government or regulatory
investigations, and environmental remediation; (n) the impact of cyber
attacks and potential information technology or data security breaches;
and (o) the other risk factors discussed in Alcoa’s Form 10-K for the
year ended December 31, 2015, and other reports filed with the U.S.
Securities and Exchange Commission (SEC). Alcoa 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.
These non-GAAP financial measures supplement our GAAP disclosures and
should not be considered an alternative to the GAAP measure.
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 and subsidiaries | |||||||||||
| Statement of Consolidated Operations (unaudited) | |||||||||||
| (in millions, except per-share, share, and metric ton amounts) | |||||||||||
| Quarter ended | |||||||||||
| June 30, | March 31, | June 30, | |||||||||
|
2015 |
2016 |
2016 |
|||||||||
| Sales | $ | 5,897 | $ | 4,947 | $ | 5,295 | |||||
| Cost of goods sold (exclusive of expenses below) | 4,663 | 4,041 | 4,216 | ||||||||
| Selling, general administrative, and other expenses | 224 | 260 | 286 | ||||||||
| Research and development expenses | 68 | 42 | 39 | ||||||||
| Provision for depreciation, depletion, and amortization | 319 | 309 | 309 | ||||||||
| Restructuring and other charges | 217 | 93 | 23 | ||||||||
| Interest expense | 124 | 127 | 129 | ||||||||
| Other expenses (income), net | – | 34 | (37 | ) | |||||||
| Total costs and expenses | 5,615 | 4,906 | 4,965 | ||||||||
| Income before income taxes | 282 | 41 | 330 | ||||||||
| Provision for income taxes | 75 | 30 | 152 | ||||||||
| Net income | 207 | 11 | 178 | ||||||||
| Less: Net income (loss) attributable to noncontrolling interests | 67 | (5 | ) | 43 | |||||||
| NET INCOME ATTRIBUTABLE TO ALCOA | $ | 140 | $ | 16 | $ | 135 | |||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON
SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| Net income(1) | $ | 0.10 | $ | 0.00 | $ | 0.09 | |||||
|
Average number of shares(2) |
1,222,413,890 | 1,313,681,576 | 1,315,062,094 | ||||||||
| Diluted: | |||||||||||
| Net income(1) | $ | 0.10 | $ | 0.00 | $ | 0.09 | |||||
| Average number of shares(3) | 1,236,918,280 | 1,313,681,576 | 1,356,158,542 | ||||||||
| Shipments of aluminum products (metric tons) | 1,165,000 | 1,075,000 | 1,117,000 | ||||||||
|
(1) |
In order to calculate both basic and diluted earnings per share for the quarters ended June 30, 2015, March 31, 2016, and June 30, 2016, preferred stock dividends declared of $17, $18, and $17, respectively, need to be subtracted from Net income attributable to Alcoa. Additionally, in order to calculate diluted earnings per share for the quarter ended June 30, 2016, after-tax interest expense of $2 related to convertible debt (see footnote 3 below) needs to be added back to Net income attributable to Alcoa. |
|
| (2) |
In the third quarter of 2015, Alcoa issued 87 million shares of its common stock to acquire RTI International Metals. As a result, the basic average number of shares for the quarters ended March 31, 2016 and June 30, 2016 includes all 87 million shares. |
|
| (3) |
In the quarter ended June 30, 2015, the difference between the diluted average number of shares and the basic average number of shares relates to share equivalents associated with outstanding employee stock options and awards. The diluted average number of shares for the quarter ended June 30, 2015 does not include any share equivalents related to the mandatory convertible preferred stock as their effect was anti-dilutive. In the quarter ended March 31, 2016, the diluted average number of shares does not include any share equivalents as their effect was anti-dilutive. In the quarter ended June 30, 2016, the difference between the diluted average number of shares and the basic average number of shares relates to share equivalents associated with outstanding employee stock options and awards (13 million) and convertible debt (acquired through RTI International Metals) (28 million). The diluted average number of shares for the quarter ended June 30, 2016 does not include any share equivalents related to the mandatory convertible preferred stock as their effect was anti-dilutive. |
|
| Alcoa and subsidiaries | ||||||||
| Statement of Consolidated Operations (unaudited), continued | ||||||||
| (in millions, except per-share, share, and metric ton amounts) | ||||||||
| Six months ended | ||||||||
|
June 30, |
||||||||
|
2015 |
2016 |
|||||||
| Sales | $ | 11,716 | $ | 10,242 | ||||
| Cost of goods sold (exclusive of expenses below) | 9,106 | 8,257 | ||||||
| Selling, general administrative, and other expenses | 456 | 546 | ||||||
| Research and development expenses | 123 | 81 | ||||||
| Provision for depreciation, depletion, and amortization | 640 | 618 | ||||||
| Restructuring and other charges | 394 | 116 | ||||||
| Interest expense | 246 | 256 | ||||||
| Other income, net | (12 | ) | (3 | ) | ||||
| Total costs and expenses | 10,953 | 9,871 | ||||||
| Income before income taxes | 763 | 371 | ||||||
| Provision for income taxes | 301 | 182 | ||||||
| Net income | 462 | 189 | ||||||
| Less: Net income attributable to noncontrolling interests | 127 | 38 | ||||||
| NET INCOME ATTRIBUTABLE TO ALCOA | $ | 335 | $ | 151 | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON
SHAREHOLDERS: |
||||||||
| Basic: | ||||||||
| Net income(1) | $ | 0.25 | $ | 0.09 | ||||
| Average number of shares(2) | 1,221,518,961 | 1,314,300,042 | ||||||
| Diluted: | ||||||||
| Net income(1) | $ | 0.24 | $ | 0.09 | ||||
| Average number of shares(3) | 1,237,732,308 | 1,326,202,701 | ||||||
| Common stock outstanding at the end of the period | 1,222,507,649 | 1,315,141,710 | ||||||
| Shipments of aluminum products (metric tons) | 2,256,000 | 2,192,000 | ||||||
| (1) |
In order to calculate both basic and diluted earnings per share for the six months ended June 30, 2015 and 2016, preferred stock dividends declared of $35 need to be subtracted from Net income attributable to Alcoa. |
|
| (2) |
In the third quarter of 2015, Alcoa issued 87 million shares of its common stock to acquire RTI International Metals. As a result, the basic average number of shares for the six months ended June 30, 2016 includes all 87 million shares. |
|
| (3) |
In both the six months ended June 30, 2015 and 2016, the difference between the respective diluted average number of shares and the respective basic average number of shares relates to share equivalents associated with outstanding employee stock options and awards. The respective diluted average number of shares for both the six months ended June 30, 2015 and 2016 does not include any share equivalents related to the mandatory convertible preferred stock as their effect was anti-dilutive. Additionally, the diluted average number of shares for the six months ended June 30, 2016 does not include any share equivalents related to convertible debt (acquired through RTI International Metals) as their effect was anti-dilutive. |
|
| Alcoa and subsidiaries | ||||||||
| Consolidated Balance Sheet (unaudited) | ||||||||
| (in millions) | ||||||||
| December 31, | June 30, | |||||||
| 2015 | 2016 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,919 | $ | 1,929 | ||||
|
Receivables from customers, less allowances of $13 in 2015 and $14 |
1,340 | 1,595 | ||||||
| Other receivables | 522 | 494 | ||||||
| Inventories | 3,442 | 3,438 | ||||||
| Prepaid expenses and other current assets | 730 | 637 | ||||||
| Total current assets | 7,953 | 8,093 | ||||||
| Properties, plants, and equipment | 33,687 | 34,441 | ||||||
| Less: accumulated depreciation, depletion, and amortization | 18,872 | 19,424 | ||||||
| Properties, plants, and equipment, net | 14,815 | 15,017 | ||||||
| Goodwill | 5,401 | 5,396 | ||||||
| Investments | 1,685 | 1,466 | ||||||
| Deferred income taxes | 2,668 | 2,752 | ||||||
| Other noncurrent assets(1) | 3,955 | 3,415 | ||||||
| Total assets | $ | 36,477 | $ | 36,139 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 38 | $ | 33 | ||||
| Accounts payable, trade | 2,889 | 2,665 | ||||||
| Accrued compensation and retirement costs | 850 | 810 | ||||||
| Taxes, including income taxes | 239 | 206 | ||||||
| Other current liabilities | 1,174 | 1,000 | ||||||
| Long-term debt due within one year | 21 | 774 | ||||||
| Total current liabilities | 5,211 | 5,488 | ||||||
| Long-term debt, less amount due within one year(1) | 8,993 | 8,278 | ||||||
| Accrued pension benefits | 3,298 | 3,122 | ||||||
| Accrued other postretirement benefits | 2,106 | 2,070 | ||||||
| Other noncurrent liabilities and deferred credits | 2,738 | 2,652 | ||||||
| Total liabilities | 22,346 | 21,610 | ||||||
| EQUITY | ||||||||
| Alcoa shareholders’ equity: | ||||||||
| Preferred stock | 55 | 55 | ||||||
| Mandatory convertible preferred stock | 3 | 3 | ||||||
| Common stock | 1,391 | 1,391 | ||||||
| Additional capital | 10,019 | 9,877 | ||||||
| Retained earnings | 8,834 | 8,871 | ||||||
| Treasury stock, at cost | (2,825 | ) | (2,647 | ) | ||||
| Accumulated other comprehensive loss | (5,431 | ) | (5,215 | ) | ||||
| Total Alcoa shareholders’ equity | 12,046 | 12,335 | ||||||
| Noncontrolling interests | 2,085 | 2,194 | ||||||
| Total equity | 14,131 | 14,529 | ||||||
| Total liabilities and equity | $ | 36,477 | $ | 36,139 | ||||
| (1) |
In the first quarter of 2016, Alcoa adopted changes issued by the Financial Accounting Standards Board to the presentation of debt issuance costs, which require such costs to be classified as a direct deduction from the carrying value of the related debt liability on an entity’s balance sheet. As such, all debt issuance costs were classified as a contra liability in the Long-term debt, less amount due within one year line item on the June 30, 2016 Consolidated Balance Sheet. These changes are required to be applied on a retrospective basis; therefore, the December 31, 2015 Consolidated Balance Sheet was updated to conform to the June 30, 2016 presentation. As a result, $51 of debt issuance costs (previously reported in Other noncurrent assets) were reclassified to the Long-term debt, less amount due within one year line item on the December 31, 2015 Consolidated Balance Sheet. |
|
| Alcoa and subsidiaries | ||||||||
| Statement of Consolidated Cash Flows (unaudited) | ||||||||
| (in millions) | ||||||||
| Six months ended | ||||||||
| June 30, | ||||||||
|
2015 |
2016 |
|||||||
| CASH FROM OPERATIONS | ||||||||
| Net income | $ | 462 | $ | 189 | ||||
| Adjustments to reconcile net income to cash from operations: | ||||||||
| Depreciation, depletion, and amortization | 641 | 622 | ||||||
| Deferred income taxes | (45 | ) | (78 | ) | ||||
| Equity income, net of dividends | 50 | 20 | ||||||
| Restructuring and other charges | 394 | 116 | ||||||
| Net gain from investing activities – asset sales | (28 | ) | (28 | ) | ||||
| Net periodic pension benefit cost | 243 | 168 | ||||||
| Stock-based compensation | 55 | 55 | ||||||
| Excess tax benefits from stock-based payment arrangements | (9 | ) | – | |||||
| Other | (64 | ) | 19 | |||||
|
Changes in assets and liabilities, excluding effects of |
||||||||
| (Increase) in receivables | (200 | ) | (218 | ) | ||||
| (Increase) in inventories | (221 | ) | (3 | ) | ||||
| Decrease in prepaid expenses and other current assets | 7 | 4 | ||||||
| (Decrease) in accounts payable, trade | (130 | ) | (243 | ) | ||||
| (Decrease) in accrued expenses | (374 | ) | (301 | ) | ||||
| Increase in taxes, including income taxes | 130 | 57 | ||||||
| Pension contributions | (169 | ) | (147 | ) | ||||
| (Increase) in noncurrent assets(1) | (352 | ) | (215 | ) | ||||
| (Decrease) in noncurrent liabilities | (93 | ) | (115 | ) | ||||
| CASH PROVIDED FROM (USED FOR) OPERATIONS | 297 | (98 | ) | |||||
| FINANCING ACTIVITIES | ||||||||
|
Net change in short-term borrowings (original maturities of three months or less) |
(4 | ) | (5 | ) | ||||
| Additions to debt (original maturities greater than three months) | 1,027 | 801 | ||||||
| Payments on debt (original maturities greater than three months) | (1,037 | ) | (807 | ) | ||||
| Proceeds from exercise of employee stock options | 26 | 2 | ||||||
| Excess tax benefits from stock-based payment arrangements | 9 | – | ||||||
| Dividends paid to shareholders | (109 | ) | (114 | ) | ||||
| Distributions to noncontrolling interests | (71 | ) | (84 | ) | ||||
| CASH USED FOR FINANCING ACTIVITIES | (159 | ) | (207 | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (514 | ) | (528 | ) | ||||
| Acquisitions, net of cash acquired | (204 | ) | – | |||||
| Proceeds from the sale of assets and businesses(2) | 59 | 549 | ||||||
| Additions to investments | (50 | ) | (8 | ) | ||||
| Sales of investments | 22 | 275 | ||||||
| Net change in restricted cash | (9 | ) | 7 | |||||
| Other | 11 | 15 | ||||||
| CASH (USED FOR) PROVIDED FROM INVESTING ACTIVITIES | (685 | ) | 310 | |||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(19 |
) |
5 |
|||||
| Net change in cash and cash equivalents | (566 | ) | 10 | |||||
| Cash and cash equivalents at beginning of year | 1,877 | 1,919 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,311 | $ | 1,929 | ||||
| (1) |
The (Increase) in noncurrent assets line item for the six months ended June 30, 2015 and 2016 includes a $300 and $200, respectively, prepayment related to a natural gas supply agreement for three alumina refineries in Western Australia, which are owned by Alcoa’s majority-owned subsidiary, Alcoa of Australia Limited. |
|
| (2) |
Proceeds from the sale of assets and businesses for the six months ended June 30, 2015 and 2016 includes a cash outflow for cash paid as a result of post-closing adjustments associated with the December 2014 divestiture of three rolling mills in Spain and France and the December 2014 divestiture of an ownership stake in a smelter in the United States, respectively. |
|
| Alcoa and subsidiaries | ||||||||||||||||||||||||||||
| Segment Information (unaudited) | ||||||||||||||||||||||||||||
|
(dollars in millions, except realized prices; production and shipments in thousands of metric tons [kmt]) |
||||||||||||||||||||||||||||
|
1Q15 |
2Q15 |
3Q15 |
4Q15 |
2015 |
1Q16 |
2Q16 |
||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||
| Alumina production (kmt) | 3,933 | 3,977 | 3,954 | 3,856 | 15,720 | 3,330 | 3,316 | |||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,538 | 2,706 | 2,798 | 2,713 | 10,755 | 2,168 | 2,266 | |||||||||||||||||||||
| Total alumina shipments (kmt) | 4,040 | 3,993 | 4,078 | 4,054 | 16,165 | 3,426 | 3,402 | |||||||||||||||||||||
| Third-party sales | $ | 887 | $ | 924 | $ | 912 | $ | 732 | $ | 3,455 | $ | 545 | $ | 694 | ||||||||||||||
| Intersegment sales | $ | 501 | $ | 431 | $ | 391 | $ | 364 | $ | 1,687 | $ | 292 | $ | 300 | ||||||||||||||
| Equity loss | $ | (7 | ) | $ | (11 | ) | $ | (9 | ) | $ | (14 | ) | $ | (41 | ) | $ | (14 | ) | $ | (7 | ) | |||||||
| Depreciation, depletion, and amortization | $ | 80 | $ | 77 | $ | 71 | $ | 68 | $ | 296 | $ | 63 | $ | 66 | ||||||||||||||
| Income taxes | $ | 92 | $ | 87 | $ | 85 | $ | 36 | $ | 300 | $ | 5 | $ | 40 | ||||||||||||||
| After-tax operating income (ATOI) | $ | 221 | $ | 215 | $ | 212 | $ | 98 | $ | 746 | $ | 8 | $ | 109 | ||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||
| Aluminum production (kmt) | 711 | 701 | 700 | 699 | 2,811 | 655 | 595 | |||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 589 | 630 | 615 | 644 | 2,478 | 575 | 565 | |||||||||||||||||||||
| Total aluminum shipments (kmt) | 864 | 877 | 860 | 879 | 3,480 | 832 | 807 | |||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,420 |
$ |
2,180 |
$ |
1,901 |
$ |
1,799 |
$ |
2,069 |
$ |
1,793 |
$ |
1,849 |
||||||||||||||
| Third-party sales | $ | 1,572 | $ | 1,534 | $ | 1,249 | $ | 1,236 | $ | 5,591 | $ | 1,123 | $ | 1,119 | ||||||||||||||
| Intersegment sales | $ | 692 | $ | 562 | $ | 479 | $ | 437 | $ | 2,170 | $ | 475 | $ | 473 | ||||||||||||||
| Equity (loss) income | $ | (3 | ) | $ | (5 | ) | $ | (7 | ) | $ | 3 | $ | (12 | ) | $ | 4 | $ | – | ||||||||||
| Depreciation, depletion, and amortization | $ | 109 | $ | 109 | $ | 106 | $ | 105 | $ | 429 | $ | 102 | $ | 101 | ||||||||||||||
| Income taxes | $ | 57 | $ | 6 | $ | (49 | ) | $ | (42 | ) | $ | (28 | ) | $ | (16 | ) | $ | – | ||||||||||
| ATOI | $ | 187 | $ | 67 | $ | (59 | ) | $ | (40 | ) | $ | 155 | $ | 14 | $ | 41 | ||||||||||||
| Global Rolled Products: | ||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 432 | 462 | 449 | 432 | 1,775 | 433 | 480 | |||||||||||||||||||||
| Third-party sales | $ | 1,621 | $ | 1,668 | $ | 1,527 | $ | 1,422 | $ | 6,238 | $ | 1,397 | $ | 1,550 | ||||||||||||||
| Intersegment sales | $ | 36 | $ | 34 | $ | 29 | $ | 26 | $ | 125 | $ | 29 | $ | 29 | ||||||||||||||
| Equity loss | $ | (9 | ) | $ | (7 | ) | $ | (8 | ) | $ | (8 | ) | $ | (32 | ) | $ | (11 | ) | $ | (10 | ) | |||||||
| Depreciation, depletion, and amortization | $ | 56 | $ | 56 | $ | 56 | $ | 59 | $ | 227 | $ | 56 | $ | 55 | ||||||||||||||
| Income taxes | $ | 36 | $ | 25 | $ | 28 | $ | 20 | $ | 109 | $ | 34 | $ | 28 | ||||||||||||||
| ATOI | $ | 54 | $ | 76 | $ | 62 | $ | 52 | $ | 244 | $ | 68 | $ | 68 | ||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||
| Third-party sales | $ | 1,257 | $ | 1,279 | $ | 1,397 | $ | 1,409 | $ | 5,342 | $ | 1,449 | $ | 1,465 | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 51 | $ | 54 | $ | 61 | $ | 67 | $ | 233 | $ | 65 | $ | 62 | ||||||||||||||
| Income taxes | $ | 76 | $ | 81 | $ | 71 | $ | 54 | $ | 282 | $ | 78 | $ | 87 | ||||||||||||||
| ATOI | $ | 156 | $ | 165 | $ | 151 | $ | 123 | $ | 595 | $ | 162 | $ | 180 | ||||||||||||||
| Transportation and Construction Solutions: | ||||||||||||||||||||||||||||
| Third-party sales | $ | 471 | $ | 492 | $ | 475 | $ | 444 | $ | 1,882 | $ | 429 | $ | 467 | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 10 | $ | 11 | $ | 11 | $ | 11 | $ | 43 | $ | 11 | $ | 12 | ||||||||||||||
| Income taxes | $ | 14 | $ | 17 | $ | 18 | $ | 14 | $ | 63 | $ | 14 | $ | 18 | ||||||||||||||
| ATOI | $ | 38 | $ | 44 | $ | 44 | $ | 40 | $ | 166 | $ | 39 | $ | 46 | ||||||||||||||
|
Reconciliation of total segment ATOI to consolidated net income (loss) attributable to Alcoa: |
||||||||||||||||||||||||||||
| Total segment ATOI(1) | $ | 656 | $ | 567 | $ | 410 | $ | 273 | $ | 1,906 | $ | 291 | $ | 444 | ||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||
| Impact of LIFO | 7 | 36 | 50 | 43 | 136 | 4 | (10 | ) | ||||||||||||||||||||
| Metal price lag | (23 | ) | (39 | ) | (48 | ) | (23 | ) | (133 | ) | 1 | 7 | ||||||||||||||||
| Interest expense | (80 | ) | (80 | ) | (80 | ) | (84 | ) | (324 | ) | (83 | ) | (84 | ) | ||||||||||||||
| Noncontrolling interests | (60 | ) | (67 | ) | (62 | ) | 64 | (125 | ) | 5 | (43 | ) | ||||||||||||||||
| Corporate expense | (62 | ) | (65 | ) | (72 | ) | (67 | ) | (266 | ) | (55 | ) | (77 | ) | ||||||||||||||
| Impairment of goodwill | – | – | – | (25 | ) | (25 | ) | – | – | |||||||||||||||||||
| Restructuring and other charges | (161 | ) | (159 | ) | (48 | ) | (575 | ) | (943 | ) | (61 | ) | (15 | ) | ||||||||||||||
| Other | (82 | ) | (53 | ) | (106 | ) | (307 | ) | (548 | ) | (86 | ) | (87 | ) | ||||||||||||||
| Consolidated net income (loss) attributable to Alcoa |
$ |
195 |
$ |
140 |
$ |
44 |
$ |
(701 |
) |
$ |
(322 |
) |
$ |
16 |
$ |
135 |
||||||||||||
|
The difference between certain segment totals and consolidated amounts is in Corporate. |
||
| (1) |
Total segment ATOI is the summation of the respective ATOI of Alcoa’s five reportable segments, which represent the two components of the Company, an Upstream business and a Value-Add business. Upstream is composed of the Alumina and Primary Metals segments and Value-Add is composed of the Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions segments. As such, in all periods presented, ATOI of the Upstream business is equivalent to the summation of the respective ATOI of the Alumina and Primary Metals segments, and, likewise, ATOI of the Value-Add business is equivalent to the summation of the respective ATOI of the Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions segments. |
|
|
|
On September 28, 2015, Alcoa announced that its Board of Directors |
|
| Alcoa and subsidiaries | ||||||||||||||||||||||
| Calculation of Financial Measures (unaudited) | ||||||||||||||||||||||
| (dollars in millions, except per-share amounts) | ||||||||||||||||||||||
| Adjusted Income | Income |
Diluted EPS |
||||||||||||||||||||
| Quarter ended | Quarter ended | |||||||||||||||||||||
|
June 30, |
March 31, |
June 30, |
June 30, |
March 31, |
June 30, |
|||||||||||||||||
| Net income attributable to Alcoa | $ | 140 | $ | 16 | $ | 135 | $ | 0.10 | $ | 0.00 | $ | 0.09 | ||||||||||
| Special items(1): | ||||||||||||||||||||||
| Restructuring and other charges |
217 |
93 |
23 |
|||||||||||||||||||
| Discrete tax items(2) |
(4 |
) |
4 |
(5 |
) |
|||||||||||||||||
| Other special items(3) |
(31 |
) |
31 |
62 |
||||||||||||||||||
| Tax impact(4) | (52 | ) | (34 | ) | (7 | ) | ||||||||||||||||
| Noncontrolling interests impact(4) |
(20 |
) |
(2 |
) |
5 |
|||||||||||||||||
| Net income attributable to Alcoa – as adjusted |
$ |
250 |
$ |
108 |
$ |
213 |
0.19 |
0.07 |
0.15 |
|||||||||||||
|
Net income attributable to Alcoa – 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 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 income attributable to Alcoa determined under GAAP as well as Net income attributable to Alcoa – as adjusted. |
||||
|
(1) |
In the second quarter of 2016, management changed the manner in which special items are presented in Alcoa’s reconciliation of Adjusted Income. This change resulted in special items being presented on a pretax basis and the related tax and noncontrolling interests impacts on special items being aggregated into separate respective line items. The special items for all prior periods presented were updated to conform to the current period presentation. |
|||
| (2) | Discrete tax items include the following: | |||
|
• |
for the quarter ended June 30, 2015, a net benefit for a number of |
|||
|
• |
for the quarter ended March 31, 2016, a net charge for a number of |
|||
|
• |
for the quarter ended June 30, 2016, a benefit for one item. |
|||
| (3) | Other special items include the following: | |||
|
• |
for the quarter ended June 30, 2015, a gain on the sale of land in |
|||
|
• |
for the quarter ended March 31, 2016, costs associated with the |
|||
|
• |
for the quarter ended June 30, 2016, an unfavorable tax impact |
|||
| (4) |
The tax impact on special items is based on the applicable statutory rates whereby the difference between such rates and Alcoa’s consolidated estimated annual effective tax rate is itself a special item (see footnote 3 above). The noncontrolling interests impact on special items represents Alcoa’s partners’ share of certain special items. |
|||
| (5) |
The average number of shares applicable to diluted EPS for Net income attributable to Alcoa common shareholders excludes certain share equivalents as their effect was anti-dilutive (see footnote 3 to the Statement of Consolidated Operations). However, certain of these share equivalents may become dilutive in the EPS calculation applicable to Net income attributable to Alcoa common shareholders – as adjusted due to a larger and/or positive numerator. Specifically: |
|||
|
• |
for the quarter ended June 30, 2015, no additional share |
|||
|
• |
for the quarter ended March 31, 2016, share equivalents associated |
|||
|
• |
for the quarter ended June 30, 2016, no additional share |
|||
| Operational Tax Rate | Quarter ended June 30, 2016 | |||||||||||
|
As |
Special |
As |
||||||||||
| Income before income taxes | $ | 330 | $ | 36 | $ | 366 | ||||||
| Provision for income taxes |
$ |
152 |
$ |
(37 |
) |
$ |
115 |
|||||
| Tax rate | 46.1 | % | 31.4 | % | ||||||||
|
Operational Tax Rate is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa 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 the Effective Tax Rate determined under GAAP as well as the Operational Tax Rate. |
||
|
(1) See Adjusted Income reconciliation above for a |
||
| Alcoa and subsidiaries | ||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||
| (dollars in millions) | ||||||||||||
| Adjusted EBITDA |
Quarter ended |
|||||||||||
|
June 30, |
March 31, |
June 30, |
||||||||||
| Net income attributable to Alcoa | $ | 140 | $ | 16 | $ | 135 | ||||||
| Add: | ||||||||||||
| Net income (loss) attributable to noncontrolling interests |
67 |
(5 |
) |
43 |
||||||||
| Provision for income taxes | 75 | 30 | 152 | |||||||||
| Other expenses (income), net | – | 34 | (37 | ) | ||||||||
| Interest expense | 124 | 127 | 129 | |||||||||
| Restructuring and other charges | 217 | 93 | 23 | |||||||||
| Provision for depreciation, depletion, and amortization |
319 |
309 |
309 |
|||||||||
| Adjusted EBITDA | $ | 942 | $ | 604 | $ | 754 | ||||||
| Sales | $ | 5,897 | $ | 4,947 | $ | 5,295 | ||||||
| Adjusted EBITDA Margin | 16.0 | % | 12.2 | % | 14.2 | % | ||||||
Alcoa’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’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.
| Alcoa and subsidiaries | |||||||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | |||||||||||||||||||||
| (dollars in millions, except per metric ton amounts) | |||||||||||||||||||||
| Segment Measures | Alumina | Primary Metals | |||||||||||||||||||
| Adjusted EBITDA | Quarter ended | ||||||||||||||||||||
|
June 30, |
March 31, |
June 30, |
June 30, |
March 31, |
June 30, |
||||||||||||||||
| After-tax operating income (ATOI) | $ | 215 | $ | 8 | $ | 109 | $ | 67 | $ | 14 | $ | 41 | |||||||||
| Add: | |||||||||||||||||||||
| Depreciation, depletion, and amortization |
77 |
63 |
66 |
109 |
102 |
101 |
|||||||||||||||
| Equity loss (income) |
11 |
14 |
7 |
5 |
(4 |
) |
– |
||||||||||||||
| Income taxes | 87 | 5 | 40 | 6 | (16 | ) | – | ||||||||||||||
| Other | – | – | (7 | ) | – | (1 | ) | 1 | |||||||||||||
| Adjusted EBITDA |
$ |
390 |
$ |
90 |
$ |
215 |
$ |
187 |
$ |
95 |
$ |
143 |
|||||||||
| Production (thousand metric tons) (kmt) |
3,977 |
3,330 |
3,316 |
701 |
655 |
595 |
|||||||||||||||
| Adjusted EBITDA / Production ($ per metric ton) |
$ |
98 |
$ |
27 |
$ |
65 |
$ |
267 |
$ |
145 |
$ |
240 |
|||||||||
Alcoa’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 Other
line in the table above includes gains/losses on asset sales and other
nonoperating items. 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’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.
| Alcoa and subsidiaries | |||||||||||
| Calculation of Financial Measures (unaudited), continued | |||||||||||
| (in millions) | |||||||||||
| Segment Measures |
Upstream |
||||||||||
| Adjusted EBITDA | Quarter ended | ||||||||||
|
June 30, |
March 31, |
June 30, |
|||||||||
| After-tax operating income (ATOI) | $ | 282 | $ | 22 | $ | 150 | |||||
| Add: | |||||||||||
| Depreciation, depletion, and amortization |
186 |
165 |
167 |
||||||||
| Equity loss | 16 | 10 | 7 | ||||||||
| Income taxes | 93 | (11 | ) | 40 | |||||||
| Other | – | (1 | ) | (6 | ) | ||||||
| Adjusted EBITDA |
$ |
577 |
$ |
185 |
$ |
358 |
|||||
|
Alcoa’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 Other line in the table above includes gains/losses on asset sales and other nonoperating items. 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’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) |
Upstream is composed of the Alumina and Primary Metals segments. |
||
| Alcoa and subsidiaries | ||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||
| (dollars in millions, except per metric ton amounts) | ||||||||||
| Segment Measures | Global Rolled Products | |||||||||
| Adjusted EBITDA | Quarter ended | |||||||||
|
June 30, |
March 31, |
June 30, |
||||||||
| After-tax operating income (ATOI) | $ | 76 | $ | 68 | $ | 68 | ||||
| Add: | ||||||||||
| Depreciation, depletion, and amortization |
56 |
56 |
55 |
|||||||
| Equity loss | 7 | 11 | 10 | |||||||
| Income taxes | 25 | 34 | 28 | |||||||
| Other | – | (1 | ) | 1 | ||||||
| Adjusted EBITDA |
$ |
164 |
$ |
168 |
$ |
162 |
||||
| Total shipments (thousand metric tons) (kmt) |
479 |
449 |
497 |
|||||||
| Adjusted EBITDA / Total shipments ($ per metric ton) |
$ |
342 |
$ |
374 |
$ |
326 |
||||
Alcoa’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 Other
line in the table above includes gains/losses on asset sales and other
nonoperating items. 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’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.
| Alcoa and subsidiaries | |||||||||||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | |||||||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||||
| Segment Measures | Engineered Products and Solutions | Transportation and Construction Solutions | |||||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | ||||||||||||||||||||||||
|
June 30, |
March 31, |
June 30, |
June 30, |
March 31, |
June 30, |
||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 165 | $ | 162 | $ | 180 | $ | 44 | $ | 39 | $ | 46 | |||||||||||||
| Add: | |||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
54 |
65 |
62 |
11 |
11 |
12 |
|||||||||||||||||||
| Income taxes | 81 | 78 | 87 | 17 | 14 | 18 | |||||||||||||||||||
| Other | 1 | – | – | (1 | ) | – | – | ||||||||||||||||||
| Adjusted EBITDA |
$ |
301 |
$ |
305 |
$ |
329 |
$ |
71 |
$ |
64 |
$ |
76 |
|||||||||||||
| Third-party sales |
$ |
1,279 |
$ |
1,449 |
$ |
1,465 |
$ |
492 |
$ |
429 |
$ |
467 |
|||||||||||||
| Adjusted EBITDA Margin |
23.5 |
% |
21.0 |
% |
22.5 |
% |
14.4 |
% |
14.9 |
% |
16.3 |
% |
|||||||||||||
Alcoa’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 Other
line in the table above includes gains/losses on asset sales and other
nonoperating items. 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’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.
| Alcoa and subsidiaries | ||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||
| (dollars in millions) | ||||||||||||
| Segment Measures |
Value-Add (1) |
|||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||
|
June 30, |
March 31, |
June 30, |
||||||||||
| After-tax operating income (ATOI) | $ | 285 | $ | 269 | $ | 294 | ||||||
| Add: | ||||||||||||
| Depreciation, depletion, and amortization |
121 |
132 |
129 |
|||||||||
| Equity loss | 7 | 11 | 10 | |||||||||
| Income taxes | 123 | 126 | 133 | |||||||||
| Other | – | (1 | ) | 1 | ||||||||
| Adjusted EBITDA |
$ |
536 |
$ |
537 |
$ |
567 |
||||||
| Third-party sales |
$ |
3,439 |
$ |
3,275 |
$ |
3,482 |
||||||
| Adjusted EBITDA Margin |
15.6 |
% |
16.4 |
% |
16.3 |
% |
||||||
|
Alcoa’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 Other line in the table above includes gains/losses on asset sales and other nonoperating items. 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’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) |
Value-Add is composed of the Global Rolled Products, Engineered |
|
| Alcoa and subsidiaries | ||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||
| (in millions) | ||||||||||||
| Free Cash Flow | Quarter ended | |||||||||||
|
June 30, |
March 31, |
June 30, |
||||||||||
| Cash from operations | $ | 472 | $ | (430 | ) | $ | 332 | |||||
| Capital expenditures |
(267 |
) |
(251 |
) |
(277 |
) |
||||||
| Free cash flow | $ | 205 | $ | (681 | ) | $ | 55 | |||||
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 due to the fact that these expenditures are considered
necessary to maintain and expand Alcoa’s asset base and are 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.
Alcoa
Investor Contact:
Matt Garth, 212-836-2674
Matthew.Garth@alcoa.com
or
Media Contact:
Monica Orbe, 212-836-2632
Monica.Orbe@alcoa.com