Earnings Rise on Growing Revenue, Record Cash Performance
4Q 2010 Highlights
-
Income from continuing operations of $258 million, or $0.24 per share,
highest since 3Q08; includes a net benefit from special items of $35
million, or $0.03 per share - Net income of $258 million, or $0.24 per share
- All-time record cash from operations of $1.4 billion
- Record fourth-quarter free cash flow of $1.0 billion
- Adjusted EBITDA improves to $782 million, 13.8 percent margin
-
Revenue of $5.7 billion, up 7 percent from third quarter and 4 percent
from year-ago quarter - Projecting global aluminum growth rate of 12 percent for 2011
2010 Full-Year Highlights
- Exceeded all Cash Sustainability Program targets
-
Revenue of $21.0 billion compared to $18.4 billion in 2009, up 14
percent -
Income from continuing operations of $262 million, or $0.25 per share,
includes a negative impact from special items of $297 million, or
$0.29 per share - Cash from operations of $2.3 billion, compared to $1.4 billion in 2009
- Free cash flow of $1.2 billion, a $1.5 billion improvement over 2009
- Debt reduced, cash on hand of $1.5 billion
-
Debt-to-capital ratio reduced to 34.8 percent, 390 basis point
improvement over 2009
NEW YORK–Alcoa (NYSE: AA) today announced fourth quarter 2010 income from
continuing operations of $258 million, or $0.24 per share, the company’s
highest quarterly income since the economic downturn and $197 million
higher than the third quarter of 2010. Fourth quarter income from
continuing operations includes a $35 million, or $0.03 per share,
positive impact from special items, compared to a negative impact of $35
million, or $0.03 per share, in the third quarter of 2010 and a negative
impact of $275 million, or $0.28 per share, in the fourth quarter of
2009. The company also set an all-time record for cash from operations
and a fourth-quarter record for free cash flow.
Improved earnings were driven by higher pricing, continued strengthening
in most end markets and improved productivity as a result of the
company’s Cash Sustainability Program. Results were offset somewhat by a
weaker U.S. dollar and higher energy and raw material costs.
Results for the fourth quarter of 2010 include a favorable impact of $35
million, or $0.03 per share, for special items. Special items included a
net benefit for restructuring-related actions, discrete income tax
benefits and non-cash, mark-to-market impacts of derivatives in several
power contracts.
“We exceeded all of our targets and continued to build momentum,” said
Klaus Kleinfeld, Alcoa Chairman and CEO. “We delivered all-time record
cash from operations, record fourth-quarter free cash flow, improved
earnings, grew revenue and paid down debt.
“In 2011, we see aluminum growing another 12 percent on top of last
year’s 13-percent improvement. We are well positioned to outpace the
recovery in the markets we serve and grow shareholder value.”
Alcoa projects global demand for aluminum to double by 2020. For 2011,
the company projects growth in all end markets on a global basis.
4Q 2010
Revenue for the fourth quarter was $5.7 billion, up 7 percent compared
to the third quarter. The increase was driven by an improvement in
realized pricing for both alumina (9 percent) and aluminum (11 percent)
as well as continued strengthening in most end markets.
Income from continuing operations in the quarter was $258 million, or
$0.24 per share, compared to $61 million, or $0.06 per share, in the
previous quarter and a loss of $266 million, or $0.27 per share, in the
fourth quarter of 2009. Fourth-quarter income from continuing operations
includes a $35 million, or $0.03 per share, positive impact from special
items, compared to a negative impact of $35 million, or $0.03 per share,
in the third quarter of 2010 and a negative impact of $275 million, or
$0.28 per share, in the fourth quarter of 2009.
Net income was $258 million in the fourth quarter, an increase of $197
million from sequential quarter income of $61 million, and an increase
of $535 million from the prior year quarter loss of $277 million.
Adjusted EBITDA margin in the fourth quarter of 2010 improved to 13.8
percent, up from 11.4 percent in the third quarter of 2010 and 3.4
percent in the fourth quarter of 2009.
Cash from operations was an all-time record $1.4 billion, an increase of
$978 million from the previous quarter and a $246 million improvement
from the fourth quarter of 2009. The sequential increase in cash from
operations was driven by higher earnings, favorable changes in working
capital and lower interest and tax payments. Alcoa generated $1 billion
in free cash flow in the quarter, an increase of $829 million over the
third quarter. Free cash flow was $244 million higher than the fourth
quarter of 2009.
Third-party shipments of aluminum were essentially flat compared to the
third quarter of 2010. End-market revenue performance improved over the
third quarter in Aerospace (+4 percent), Building and Construction (+2
percent), Distribution (+13 percent) and Industrial Gas Turbines (+16
percent).
Alcoa’s debt-to-capital ratio stands at 34.8 percent at the end of the
fourth quarter, 90 basis points better than the third quarter of 2010,
and 390 basis points lower than the fourth quarter of 2009. Liquidity
improved, with $1.5 billion in cash on hand at the end of the fourth
quarter compared to $843 million at the end of the third quarter of 2010.
2010 Full Year
Alcoa exceeded all targets in its Cash Sustainability Program in 2010.
Results for the year include procurement savings of $2.64 billion,
overhead savings of $509 million, capital spending reduced to $1.21
billion and working capital at 34 days.
For the year 2010, revenue was $21.0 billion, compared to $18.4 billion
in 2009. Income from continuing operations was $262 million, or $0.25
per share, compared with a loss of $985 million, or $1.06 per share, in
2009. In both periods, income from continuing operations includes
special items resulting in a negative impact of $297 million, or $0.29
per share, in 2010 and $300 million, or $0.32 per share, in 2009.
Full-year 2010 net income was $254 million, or $0.24 per share, compared
to a net loss of $1.15 billion, or $1.23 per share, in 2009. Cash from
operations in 2010 was $2.3 billion, compared to $1.4 billion in 2009.
Alcoa generated $1.2 billion in free cash flow in 2010, up $1.5 billion
over 2009.
The company’s debt to capital ratio was reduced 390 basis points in 2010
compared to year-end 2009, driven by a $654 million net reduction in
debt and a $1.6 billion increase in equity.
Segment Information
Alumina
After-tax operating income (ATOI) in the fourth quarter was $65 million,
a decrease of $5 million compared with third-quarter ATOI of $70
million. A discrete tax item in the third quarter of $42 million
obscured the improving performance of this business, with adjusted
EBITDA rising to $180 million compared with third-quarter adjusted
EBITDA of $146 million. A 9 percent improvement in realized alumina
price was partially offset by negative currency impacts, higher raw
material costs and continuing São Luis production recovery efforts.
Alumina production in the fourth quarter increased to 4.12 million
metric tons, record quarterly production.
Primary Metals
ATOI in the fourth quarter was $178 million, an increase of $100 million
compared with third-quarter ATOI of $78 million. Improved LME prices,
volume and productivity were partially offset by unfavorable currency
and cost increases in energy and carbon product prices. Primary
production for the quarter increased to 913,000 metric tons, with
buy/resell activity totaling 70,000 metric tons. The Avilés smelter
returned to full production this quarter. Adjusted EBITDA per ton
improved to $436 in the quarter, better than the ten-year historical
average.
Flat-Rolled Products
ATOI in the fourth quarter was $53 million, a decrease of $13 million
compared with third-quarter ATOI of $66 million. Seasonal volume
declines in North America and Europe as well as scrap and alloying cost
pressures accounted for the decline, although improving prices helped to
offset these effects. Russia remained profitable for the third
consecutive quarter, with $130 million of improved ATOI over 2009.
Engineered Products and Solutions
ATOI in the fourth quarter was $113 million, essentially flat with
third-quarter ATOI of $114 million. Adjusted EBITDA margin remained at
17 percent, 6 percent better than the fourth quarter of 2009. Seasonal
shutdowns and weather delays impacted this quarter’s results, although
the segment achieved improved sequential revenues due to volume
improvements in aerospace and commercial transportation.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on January 10, 2011 to present the quarter’s results. The meeting
will be webcast via alcoa.com. Call information and related
details are available at www.alcoa.com
under “Invest.”
About Alcoa
Alcoa is the world’s leading producer of primary and fabricated
aluminum, as well as the world’s largest miner of bauxite and refiner of
alumina. In addition to inventing the modern-day aluminum industry,
Alcoa innovation has been behind major milestones in the aerospace,
automotive, packaging, building and construction, commercial
transportation, consumer electronics and industrial markets over the
past 120 years. Among the solutions Alcoa markets are flat-rolled
products, hard alloy extrusions, and forgings, as well as Alcoa® wheels,
fastening systems, precision and investment castings, and building
systems in addition to its expertise in other light metals such as
titanium and nickel-based super alloys. Sustainability is an integral
part of Alcoa’s operating practices and the product design and
engineering it provides to customers. Alcoa has been a member of the Dow
Jones Sustainability Index for nine consecutive years and approximately
75 percent of all of the aluminum ever produced since 1888 is still in
active use today. Alcoa employs approximately 59,000 people in 31
countries across the world. More information can be found at www.alcoa.com.
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,” “estimates,” “expects,” “forecasts,” “intends,”
“outlook,” “plans,” “projects,” “should,” “targets,” “will,” 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 for aluminum,
aluminum end-market growth, aluminum consumption rates, or other trend
projections, targeted financial results or operating performance, and
statements about Alcoa’s strategies, objectives, goals, targets,
outlook, and business and financial prospects. Forward-looking
statements are subject to a number of known and unknown risks,
uncertainties, and other factors and are not guarantees of future
performance. Actual results, performance, or outcomes may differ
materially from those expressed in or implied by those forward-looking
statements. Important factors that could cause actual results to differ
materially from those in the forward-looking statements include: (a)
material adverse changes in aluminum industry conditions, including
global supply and demand conditions and fluctuations in London Metal
Exchange-based prices for primary aluminum, alumina, and other products;
(b) unfavorable changes in general business and economic conditions, in
the global financial markets, or in the markets served by Alcoa,
including automotive and commercial transportation, aerospace, building
and construction, distribution, packaging, oil and gas, defense, and
industrial gas turbines; (c) the impact of changes in foreign currency
exchange rates on costs and results, particularly the Australian dollar,
Brazilian real, Canadian dollar, and Euro; (d) increases in energy
costs, including electricity, natural gas, and fuel oil, or the
unavailability or interruption of energy supplies; (e) increases in the
costs of other raw materials, including caustic soda or carbon products;
(f) Alcoa’s inability to achieve the level of revenue growth, cash
generation, cost savings, improvement in profitability and margins,
fiscal discipline, or strengthening of operations (including lowering of
its refining and smelter system on the world cost curve), anticipated
from its productivity improvement, cash sustainability and other
initiatives; (g) Alcoa’s inability to realize expected benefits from
newly constructed, expanded or acquired facilities or from international
joint ventures as planned and by targeted completion dates, including
the joint venture in Saudi Arabia or the upstream operations in Brazil;
(h) political, economic, and regulatory risks in the countries in which
Alcoa operates or sells products, including unfavorable changes in laws
and governmental policies; (i) the outcome of contingencies, including
legal proceedings, government investigations, and environmental
remediation; (j) the outcome of negotiations with, and the business or
financial condition of, key customers, suppliers, and business partners;
(k) changes in tax rates or benefits; and (l) the other risk factors
summarized in Alcoa’s Form 10-K for the year ended December 31, 2009,
Forms 10-Q for the quarters ended March 31, 2010, June 30, 2010, and
September 30, 2010, and other reports filed with the Securities and
Exchange Commission. 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.
|
Alcoa and subsidiaries Statement of Consolidated Operations (unaudited) (in millions, except per-share, share, and metric ton amounts) |
||||||||||||
| Quarter ended | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
| 2009 | 2010 | 2010 | ||||||||||
| Sales | $ | 5,433 | $ | 5,287 | $ | 5,652 | ||||||
| Cost of goods sold (exclusive of expenses below) | 4,905 | 4,413 | 4,538 | |||||||||
| Selling, general administrative, and other expenses | 291 | 232 | 282 | |||||||||
| Research and development expenses | 51 | 40 | 50 | |||||||||
| Provision for depreciation, depletion, and amortization | 369 | 358 | 371 | |||||||||
| Restructuring and other charges | 69 | 2 | (12 | ) | ||||||||
| Interest expense | 121 | 139 | 118 | |||||||||
| Other expenses (income), net | 21 | 43 | (43 | ) | ||||||||
| Total costs and expenses | 5,827 | 5,227 | 5,304 | |||||||||
| (Loss) income from continuing operations before income taxes | (394 | ) | 60 | 348 | ||||||||
| (Benefit) provision for income taxes | (137 | ) | (49 | ) | 56 | |||||||
| (Loss) income from continuing operations | (257 | ) | 109 | 292 | ||||||||
| Loss from discontinued operations | (11 | ) | – | – | ||||||||
| Net (loss) income | (268 | ) | 109 | 292 | ||||||||
| Less: Net income attributable to noncontrolling interests | 9 | 48 | 34 | |||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA | $ | (277 | ) | $ | 61 | $ | 258 | |||||
|
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
||||||||||||
| (Loss) income from continuing operations | $ | (266 | ) | $ | 61 | $ | 258 | |||||
| Loss from discontinued operations | (11 | ) | – | – | ||||||||
| Net (loss) income | $ | (277 | ) | $ | 61 | $ | 258 | |||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
||||||||||||
| Basic: | ||||||||||||
| (Loss) income from continuing operations | $ | (0.27 | ) | $ | 0.06 | $ | 0.25 | |||||
| Loss from discontinued operations | (0.01 | ) | – | – | ||||||||
| Net (loss) income | $ | (0.28 | ) | $ | 0.06 | $ | 0.25 | |||||
| Diluted: | ||||||||||||
| (Loss) income from continuing operations | $ | (0.27 | ) | $ | 0.06 | $ | 0.24 | |||||
| Loss from discontinued operations | (0.01 | ) | – | – | ||||||||
| Net (loss) income | $ | (0.28 | ) | $ | 0.06 | $ | 0.24 | |||||
| Average number of shares used to compute: | ||||||||||||
| Basic earnings per common share | 974,377,851 | 1,021,260,553 | 1,021,697,163 | |||||||||
| Diluted earnings per common share | 974,377,851 | 1,026,774,598 | 1,119,285,945 | |||||||||
| Shipments of aluminum products (metric tons) | 1,404,000 | 1,223,000 | 1,218,000 | |||||||||
|
Alcoa and subsidiaries Statement of Consolidated Operations (unaudited), continued (in millions, except per-share, share, and metric ton amounts) |
|||||||||||
| Year ended | |||||||||||
| December 31, | |||||||||||
| 2009 | 2010 | ||||||||||
| Sales | $ | 18,439 | $ | 21,013 | |||||||
| Cost of goods sold (exclusive of expenses below) | 16,902 | 17,174 | |||||||||
| Selling, general administrative, and other expenses | 1,009 | 961 | |||||||||
| Research and development expenses | 169 | 174 | |||||||||
| Provision for depreciation, depletion, and amortization | 1,311 | 1,450 | |||||||||
| Restructuring and other charges | 237 | 207 | |||||||||
| Interest expense | 470 | 494 | |||||||||
| Other (income) expenses, net | (161 | ) | 5 | ||||||||
| Total costs and expenses | 19,937 | 20,465 | |||||||||
| (Loss) income from continuing operations before income taxes | (1,498 | ) | 548 | ||||||||
| (Benefit) provision for income taxes | (574 | ) | 148 | ||||||||
| (Loss) income from continuing operations | (924 | ) | 400 | ||||||||
| Loss from discontinued operations | (166 | ) | (8 | ) | |||||||
| Net (loss) income | (1,090 | ) | 392 | ||||||||
| Less: Net income attributable to noncontrolling interests | 61 | 138 | |||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA | $ | (1,151 | ) | $ | 254 | ||||||
| AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: | |||||||||||
| (Loss) income from continuing operations | $ | (985 | ) | $ | 262 | ||||||
| Loss from discontinued operations | (166 | ) | (8 | ) | |||||||
| Net (loss) income | $ | (1,151 | ) | $ | 254 | ||||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| (Loss) income from continuing operations | $ | (1.06 | ) | $ | 0.25 | ||||||
| Loss from discontinued operations | (0.17 | ) | – | ||||||||
| Net (loss) income | $ | (1.23 | ) | $ | 0.25 | ||||||
| Diluted: | |||||||||||
| (Loss) income from continuing operations | $ | (1.06 | ) | $ | 0.25 | ||||||
| Loss from discontinued operations | (0.17 | ) | (0.01 | ) | |||||||
| Net (loss) income | $ | (1.23 | ) | $ | 0.24 | ||||||
| Average number of shares used to compute: | |||||||||||
| Basic earnings per common share | 935,457,676 | 1,017,828,406 | |||||||||
| Diluted earnings per common share | 935,457,676 | 1,024,713,554 | |||||||||
| Common stock outstanding at the end of the period | 974,378,820 | 1,022,025,965 | |||||||||
| Shipments of aluminum products (metric tons) | 5,097,000 | 4,757,000 | |||||||||
|
Alcoa and subsidiaries Consolidated Balance Sheet (unaudited) (in millions) |
|||||||||||
|
December 31,
2009 |
December 31,
2010 |
||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,481 | $ | 1,543 | |||||||
|
Receivables from customers, less allowances of $70 in 2009 and $45 |
1,529 | 1,565 | |||||||||
| Other receivables | 653 | 326 | |||||||||
| Inventories | 2,328 | 2,562 | |||||||||
| Prepaid expenses and other current assets | 1,031 | 873 | |||||||||
| Total current assets | 7,022 | 6,869 | |||||||||
| Properties, plants, and equipment | 35,525 | 37,446 | |||||||||
| Less: accumulated depreciation, depletion, and amortization | 15,697 | 17,285 | |||||||||
| Properties, plants, and equipment, net | 19,828 | 20,161 | |||||||||
| Goodwill | 5,051 | 5,119 | |||||||||
| Investments | 1,061 | 1,340 | |||||||||
| Deferred income taxes | 2,958 | 3,143 | |||||||||
| Other noncurrent assets | 2,419 | 2,523 | |||||||||
| Assets held for sale | 133 | 99 | |||||||||
| Total assets | $ | 38,472 | $ | 39,254 | |||||||
| LIABILITIES | |||||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings | $ | 176 | $ | 92 | |||||||
| Accounts payable, trade | 1,954 | 2,322 | |||||||||
| Accrued compensation and retirement costs | 925 | 929 | |||||||||
| Taxes, including income taxes | 345 | 461 | |||||||||
| Other current liabilities | 1,345 | 1,201 | |||||||||
| Long-term debt due within one year | 669 | 231 | |||||||||
| Total current liabilities | 5,414 | 5,236 | |||||||||
| Long-term debt, less amount due within one year | 8,974 | 8,842 | |||||||||
| Accrued pension benefits | 3,163 | 2,832 | |||||||||
| Accrued postretirement benefits | 2,696 | 2,591 | |||||||||
| Other noncurrent liabilities and deferred credits | 2,605 | 2,560 | |||||||||
| Liabilities of operations held for sale | 60 | 31 | |||||||||
| Total liabilities | 22,912 | 22,092 | |||||||||
| CONVERTIBLE SECURITIES OF SUBSIDIARY | 40 | – | |||||||||
| EQUITY | |||||||||||
| Alcoa shareholders’ equity: | |||||||||||
| Preferred stock | 55 | 55 | |||||||||
| Common stock | 1,097 | 1,141 | |||||||||
| Additional capital | 6,608 | 7,087 | |||||||||
| Retained earnings | 11,020 | 11,149 | |||||||||
| Treasury stock, at cost | (4,268 | ) | (4,146 | ) | |||||||
| Accumulated other comprehensive loss | (2,092 | ) | (1,599 | ) | |||||||
| Total Alcoa shareholders’ equity | 12,420 | 13,687 | |||||||||
| Noncontrolling interests | 3,100 | 3,475 | |||||||||
| Total equity | 15,520 | 17,162 | |||||||||
| Total liabilities and equity | $ | 38,472 | $ | 39,254 | |||||||
|
Alcoa and subsidiaries Statement of Consolidated Cash Flows (unaudited) (in millions) |
|||||||||||
|
Year ended
December 31, |
|||||||||||
| 2009 | 2010 | ||||||||||
| CASH FROM OPERATIONS | |||||||||||
| Net (loss) income | $ | (1,090 | ) | $ | 392 | ||||||
| Adjustments to reconcile net (loss) income to cash from operations: | |||||||||||
| Depreciation, depletion, and amortization | 1,311 | 1,451 | |||||||||
| Deferred income taxes | (596 | ) | (287 | ) | |||||||
| Equity loss (income), net of dividends | 39 | (22 | ) | ||||||||
| Restructuring and other charges | 237 | 207 | |||||||||
| Net gain from investing activities – asset sales | (106 | ) | (9 | ) | |||||||
| Loss from discontinued operations | 166 | 8 | |||||||||
| Stock-based compensation | 87 | 84 | |||||||||
| Excess tax benefits from stock-based payment arrangements | – | (1 | ) | ||||||||
| Other | 219 | 151 | |||||||||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|||||||||||
| Decrease (increase) in receivables | 676 | (94 | ) | ||||||||
| Decrease (increase) in inventories | 1,258 | (215 | ) | ||||||||
| Decrease in prepaid expenses and other current assets | 126 | 26 | |||||||||
| (Decrease) increase in accounts payable, trade | (632 | ) | 328 | ||||||||
| (Decrease) in accrued expenses | (101 | ) | (237 | ) | |||||||
| (Decrease) increase in taxes, including income taxes | (144 | ) | 505 | ||||||||
| Pension contributions | (128 | ) | (113 | ) | |||||||
| (Increase) in noncurrent assets | (203 | ) | (85 | ) | |||||||
| Increase in noncurrent liabilities | 233 | 183 | |||||||||
| Decrease (increase) in net assets held for sale | 27 | (18 | ) | ||||||||
| CASH PROVIDED FROM CONTINUING OPERATIONS | 1,379 | 2,254 | |||||||||
| CASH (USED FOR) PROVIDED FROM DISCONTINUED OPERATIONS | (14 | ) | 7 | ||||||||
| CASH PROVIDED FROM OPERATIONS | 1,365 | 2,261 | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Net change in short-term borrowings | (292 | ) | (44 | ) | |||||||
| Net change in commercial paper | (1,535 | ) | – | ||||||||
| Additions to long-term debt | 1,049 | 1,126 | |||||||||
| Debt issuance costs | (17 | ) | (6 | ) | |||||||
| Payments on long-term debt | (156 | ) | (1,757 | ) | |||||||
| Proceeds from exercise of employee stock options | – | 13 | |||||||||
| Excess tax benefits from stock-based payment arrangements | – | 1 | |||||||||
| Issuance of common stock | 876 | – | |||||||||
| Dividends paid to shareholders | (228 | ) | (125 | ) | |||||||
| Distributions to noncontrolling interests | (140 | ) | (256 | ) | |||||||
| Contributions from noncontrolling interests | 480 | 162 | |||||||||
| Acquisitions of noncontrolling interests | – | (66 | ) | ||||||||
| CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES | 37 | (952 | ) | ||||||||
| INVESTING ACTIVITIES | |||||||||||
| Capital expenditures | (1,617 | ) | (1,015 | ) | |||||||
| Capital expenditures of discontinued operations | (5 | ) | – | ||||||||
| Acquisitions, net of cash acquired (a) | 112 | (72 | ) | ||||||||
| Proceeds from the sale of assets and businesses (b) | (65 | ) | 4 | ||||||||
| Additions to investments (c) | (181 | ) | (352 | ) | |||||||
| Sales of investments | 1,031 | 141 | |||||||||
| Other | 4 | 22 | |||||||||
| CASH USED FOR INVESTING ACTIVITIES | (721 | ) | (1,272 | ) | |||||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
38 |
25 |
|||||||||
| Net change in cash and cash equivalents | 719 | 62 | |||||||||
| Cash and cash equivalents at beginning of year | 762 | 1,481 | |||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 1,481 | $ | 1,543 | |||||||
| (a) |
Acquisitions, net of cash acquired for the year ended December 31, |
|
| (b) |
Proceeds from the sale of assets and businesses for the year ended December 31, 2010 includes a cash outflow for cash paid to settle former customer contracts of the divested Electrical and Electronic Solutions and Automotive Castings businesses. Proceeds from the sale of assets and businesses for the year ended December 31, 2009 was a cash outflow as this line item includes cash paid to Platinum Equity related to the divestiture of the Electrical and Electronic Solutions’ wire harness and electrical distribution business, which was completed on June 15, 2009 with an effective date of June 1, 2009. |
|
| (c) |
Additions to investments for the year ended December 31, 2009 includes a cash inflow for the return of a portion of the contributions made in prior periods related to one of Alcoa Alumínio’s hydroelectric power projects. All contributions related to this project were originally presented as cash outflows in Additions to investments in the appropriate periods. |
|
Alcoa and subsidiaries Segment Information (unaudited)
(dollars in millions, except realized prices; production and |
||||||||||||||||||||||||||||
| 4Q09 | 2009 | 1Q10 | 2Q10 | 3Q10 | 4Q10 | 2010 | ||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||
| Alumina production (kmt) | 3,897 | 14,265 | 3,866 | 3,890 | 4,047 | 4,119 | 15,922 | |||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,716 | 8,655 | 2,126 | 2,264 | 2,423 | 2,433 | 9,246 | |||||||||||||||||||||
| Third-party sales | $ | 760 | $ | 2,161 | $ | 638 | $ | 701 | $ | 717 | $ | 759 | $ | 2,815 | ||||||||||||||
| Intersegment sales | $ | 412 | $ | 1,534 | $ | 591 | $ | 530 | $ | 506 | $ | 585 | $ | 2,212 | ||||||||||||||
| Equity income | $ | 3 | $ | 8 | $ | 2 | $ | 4 | $ | 1 | $ | 3 | $ | 10 | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 89 | $ | 292 | $ | 92 | $ | 107 | $ | 100 | $ | 107 | $ | 406 | ||||||||||||||
| Income taxes | $ | (13 | ) | $ | (22 | ) | $ | 27 | $ | 41 | $ | (22 | ) | $ | 14 | $ | 60 | |||||||||||
| After-tax operating income (ATOI) | $ | 19 | $ | 112 | $ | 72 | $ | 94 | $ | 70 | $ | 65 | $ | 301 | ||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||
| Aluminum production (kmt) | 897 | 3,564 | 889 | 893 | 891 | 913 | 3,586 | |||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 878 | 3,038 | 695 | 699 | 708 | 743 | 2,845 | |||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,155 |
$ |
1,856 |
$ |
2,331 |
$ |
2,309 |
$ |
2,261 |
$ |
2,512 |
$ |
2,356 |
||||||||||||||
| Third-party sales | $ | 1,900 | $ | 5,252 | $ | 1,702 | $ | 1,710 | $ | 1,688 | $ | 1,970 | $ | 7,070 | ||||||||||||||
| Intersegment sales | $ | 557 | $ | 1,836 | $ | 623 | $ | 693 | $ | 589 | $ | 692 | $ | 2,597 | ||||||||||||||
| Equity (loss) income | $ | – | $ | (26 | ) | $ | – | $ | 1 | $ | – | $ | – | $ | 1 | |||||||||||||
| Depreciation, depletion, and amortization | $ | 156 | $ | 560 | $ | 147 | $ | 142 | $ | 142 | $ | 140 | $ | 571 | ||||||||||||||
| Income taxes | $ | (47 | ) | $ | (365 | ) | $ | 18 | $ | – | $ | (3 | ) | $ | 81 | $ | 96 | |||||||||||
| ATOI | $ | (214 | ) | $ | (612 | ) | $ | 123 | $ | 109 | $ | 78 | $ | 178 | $ | 488 | ||||||||||||
| Flat-Rolled Products: | ||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 465 | 1,831 | 379 | 420 | 448 | 411 | 1,658 | |||||||||||||||||||||
| Third-party sales | $ | 1,603 | $ | 6,069 | $ | 1,435 | $ | 1,574 | $ | 1,645 | $ | 1,623 | $ | 6,277 | ||||||||||||||
| Intersegment sales | $ | 30 | $ | 113 | $ | 46 | $ | 40 | $ | 46 | $ | 48 | $ | 180 | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 60 | $ | 227 | $ | 59 | $ | 57 | $ | 57 | $ | 65 | $ | 238 | ||||||||||||||
| Income taxes | $ | 32 | $ | 48 | $ | 18 | $ | 28 | $ | 26 | $ | 20 | $ | 92 | ||||||||||||||
| ATOI | $ | 37 | $ | (49 | ) | $ | 30 | $ | 71 | $ | 66 | $ | 53 | $ | 220 | |||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 46 | 180 | 46 | 50 | 51 | 50 | 197 | |||||||||||||||||||||
| Third-party sales | $ | 1,097 | $ | 4,689 | $ | 1,074 | $ | 1,122 | $ | 1,173 | $ | 1,215 | $ | 4,584 | ||||||||||||||
| Equity income | $ | 1 | $ | 2 | $ | 1 | $ | – | $ | 1 | $ | – | $ | 2 | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 50 | $ | 177 | $ | 41 | $ | 38 | $ | 37 | $ | 38 | $ | 154 | ||||||||||||||
| Income taxes | $ | 20 | $ | 139 | $ | 31 | $ | 48 | $ | 63 | $ | 53 | $ | 195 | ||||||||||||||
| ATOI | $ | 57 | $ | 315 | $ | 81 | $ | 107 | $ | 114 | $ | 113 | $ | 415 | ||||||||||||||
|
Reconciliation of ATOI to consolidated net (loss) income attributable to Alcoa: |
||||||||||||||||||||||||||||
| Total segment ATOI | $ | (101 | ) | $ | (234 | ) | $ | 306 | $ | 381 | $ | 328 | $ | 409 | $ | 1,424 | ||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||
| Impact of LIFO | 87 | 235 | (14 | ) | (3 | ) | (2 | ) | 3 | (16 | ) | |||||||||||||||||
| Interest income | 4 | 12 | 3 | 3 | 3 | 3 | 12 | |||||||||||||||||||||
| Interest expense | (79 | ) | (306 | ) | (77 | ) | (77 | ) | (91 | ) | (76 | ) | (321 | ) | ||||||||||||||
| Noncontrolling interests | (9 | ) | (61 | ) | (22 | ) | (34 | ) | (48 | ) | (34 | ) | (138 | ) | ||||||||||||||
| Corporate expense | (92 | ) | (304 | ) | (67 | ) | (59 | ) | (71 | ) | (94 | ) | (291 | ) | ||||||||||||||
| Restructuring and other charges | (50 | ) | (155 | ) | (122 | ) | (21 | ) | 1 | 8 | (134 | ) | ||||||||||||||||
| Discontinued operations | (11 | ) | (166 | ) | (7 | ) | (1 | ) | – | – | (8 | ) | ||||||||||||||||
| Other | (26 | ) | (172 | ) | (201 | ) | (53 | ) | (59 | ) | 39 | (274 | ) | |||||||||||||||
| Consolidated net (loss) income attributable to Alcoa |
$ |
(277 |
) |
$ |
(1,151 |
) |
$ |
(201 |
) |
$ |
136 |
$ |
61 |
$ |
258 |
$ |
254 |
|||||||||||
|
The difference between certain segment totals and consolidated |
||||||||||||||||||||||||||||
|
Alcoa and subsidiaries Calculation of Financial Measures (unaudited) (dollars in millions) |
||||||||||||
|
Adjusted Earnings before interest, taxes, |
Quarter ended | |||||||||||
|
December 31,
2009 |
September 30,
2010 |
December 31,
2010 |
||||||||||
| Net (loss) income attributable to Alcoa | $ | (277 | ) | $ | 61 | $ | 258 | |||||
| Add: | ||||||||||||
| Net income attributable to noncontrolling interests | 9 | 48 | 34 | |||||||||
| Loss from discontinued operations | 11 | – | – | |||||||||
| (Benefit) provision for income taxes | (137 | ) | (49 | ) | 56 | |||||||
| Other expenses (income), net | 21 | 43 | (43 | ) | ||||||||
| Interest expense | 121 | 139 | 118 | |||||||||
| Restructuring and other charges | 69 | 2 | (12 | ) | ||||||||
| Provision for depreciation, depletion, and amortization | 369 | 358 | 371 | |||||||||
| Adjusted EBITDA | $ | 186 | $ | 602 | $ | 782 | ||||||
| Sales | $ | 5,433 | $ | 5,287 | $ | 5,652 | ||||||
| Adjusted EBITDA Margin | 3.4 | % | 11.4 | % | 13.8 | % | ||||||
Alcoa’s definition of Adjusted EBITDA 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.
| Free Cash Flow | Quarter ended | Year ended | ||||||||||||||||||||||
|
December 31,
2009 |
September 30,
2010 |
December 31,
2010 |
December 31,
2009 |
December 31,
2010 |
||||||||||||||||||||
| Cash provided from operations | $ | 1,124 | $ | 392 | $ | 1,370 | $ | 1,365 | $ | 2,261 | ||||||||||||||
| Capital expenditures |
(363 |
) |
(216 |
) |
(365 |
) |
(1,622 |
) |
(1,015 |
) |
||||||||||||||
| Free cash flow | $ | 761 | $ | 176 | $ | 1,005 | $ | (257 | ) | $ | 1,246 | |||||||||||||
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 and subsidiaries Calculation of Financial Measures (unaudited), continued (dollars in millions) |
||||||||||||||||||||||||||||
| Segment Measures |
Alumina |
Primary |
Engineered Products and |
|||||||||||||||||||||||||
|
Adjusted Earnings before interest, taxes, depreciation, and amortization (EBITDA) |
Quarter ended | |||||||||||||||||||||||||||
|
September 30, |
December 31, |
December 31, |
December 31, |
December 31, |
||||||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 70 | $ | 65 | $ | 178 | $ | 57 | $ | 113 | ||||||||||||||||||
| Add: | ||||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
100 |
107 |
140 |
50 |
38 |
|||||||||||||||||||||||
| Equity income | (1 | ) | (3 | ) | – | (1 | ) | – | ||||||||||||||||||||
| Income taxes | (22 | ) | 14 | 81 | 20 | 53 | ||||||||||||||||||||||
| Other | (1 | ) | (3 | ) | (1 | ) | – | (1 | ) | |||||||||||||||||||
| Adjusted EBITDA | $ | 146 | $ | 180 | $ | 398 | $ | 126 | $ | 203 | ||||||||||||||||||
| Production (thousand metric tons) (kmt) |
913 |
|||||||||||||||||||||||||||
| Adjusted EBITDA/Production ($ per metric ton) |
$ |
436 |
||||||||||||||||||||||||||
| Total sales | $ | 1,097 | $ | 1,215 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin |
11 |
% |
17 |
% |
||||||||||||||||||||||||
Alcoa’s definition of Adjusted EBITDA 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.