Solid Revenue of $5.8 Billion
Positive Free Cash Flow
Productivity Gains Help Offset Lower Aluminum Prices
Record Profitability in Engineered Products and Solutions
Special Items of $195 Million
2013 Forecast of 7 Percent Global Aluminum Demand Growth Reaffirmed
2Q 2013 Highlights
- Net loss of $119 million, or $0.11 per share; excluding special items, net income of $76 million, or $0.07 per share
- Solid revenue of $5.8 billion
- Cash from operations of $514 million; positive free cash flow of $228 million
- Cash on hand of $1.2 billion
- Sequential $566 million debt reduction
- Debt-to-capital ratio 34.5 percent; net debt-to-capital ratio 31.1 percent
- New second quarter low days working capital, 6 day improvement over prior year, equal to approximately $400 million in cash
- $539 million in productivity gains across all business segments year-to-date
- Record after-tax operating income of $193 million in Engineered Products and Solutions, up 23 percent year-over-year
- Global end-market growth remains robust
Alcoa (NYSE:AA) today reported strong operational performance in second
quarter 2013 offset by special items primarily for restructuring and a
legacy legal matter. As a result, Alcoa reported a net loss of $119
million, or $0.11 per share, in second quarter 2013, which includes $195
million of special items.
Excluding the impact of special items, net income was $76 million, or
$0.07 per share, driven by productivity gains across all business
segments and record performance in Engineered Products and Solutions. In
the first half of 2013, Alcoa’s value-add businesses accounted for 57
percent of total revenues and 80 percent of segment after-tax operating
income.
The Company reported solid second quarter 2013 revenue of $5.8 billion,
positive free cash flow, and lower debt as strong end-market demand
mitigated an 8 percent sequential decline in London Metal Exchange (LME)
cash price.
“Our businesses showed remarkable operating performance in the quarter
with solid free cash flow,” said Klaus Kleinfeld, Alcoa Chairman and
CEO. “In our value-add businesses we reached another milestone with
record profitability in our downstream business while acting decisively
to defy the headwinds of falling metal prices in our upstream
businesses. We improved our competitive position by actively
restructuring, curtailing, and closing facilities and made progress
addressing legacy legal issues.”
Second quarter 2013 net loss of $119 million, or $0.11 per share,
compares to net income of $149 million, or $0.13 per share, in first
quarter 2013, and a net loss of $2 million, or $0.00 per share, in
second quarter 2012.
Excluding special items, second quarter 2013 net income of $76 million,
or $0.07 per share, compares to $121 million, or $0.11 per share, in
first quarter 2013 and $61 million, or $0.06 per share, in second
quarter 2012. The $45 million sequential decline was largely due to
lower LME prices. Lower prices were partially offset by higher volumes,
particularly in the midstream business, productivity savings, and the
favorable impact of foreign exchange rates.
In second quarter 2013, Alcoa’s net loss included $42 million in charges
for the closing of the two Soderberg potlines at its Baie-Comeau smelter
in Québec, which is part of the 460,000 metric tons of smelting capacity
Alcoa has said is under review. The remaining previously announced
charges associated with the closure will be recognized in future
periods. In addition to the smelting capacity review, Alcoa also
announced its intention to permanently close its Fusina smelter in Italy
and recorded a $34 million charge. A $37 million charge was taken for
restructuring across all business segments, including asset retirements
of previously idled structures. Alcoa also recorded a charge of $62
million in connection with settlement negotiations related to the
government investigation of the Alba matter (see “Alba Update” below).
Continued Growth Across End Markets
Alcoa continues to project 7 percent global aluminum demand growth in
2013 and essentially balanced alumina and aluminum markets.
Alcoa projects global growth this year across the aerospace (9-10
percent), automotive (1-4 percent), commercial transportation (3-8
percent), packaging (1-2 percent), building and construction (4-5
percent), and industrial gas turbine (3-5 percent) end markets.
Strong Execution Against Strategic Goals
Alcoa made investments to capitalize on value-added growth opportunities
and took definitive actions in second quarter 2013 to improve its
position on the aluminum cost curve.
As previously announced, to serve growing demand for the Company’s third
generation aluminum-lithium alloys, Alcoa completed the expansion of
aluminum-lithium capacity at its Kitts Green facility in the United
Kingdom and also expanded capacity by 30 percent at the Alcoa Technical
Center outside Pittsburgh. Construction is progressing on the $90
million greenfield state-of-the-art aluminum-lithium alloy casting
facility in Lafayette, Indiana. It is scheduled to be completed and
online by the end of 2014. Alcoa projects its aluminum-lithium revenues
will quadruple over the next six years to nearly $200 million.
Alcoa announced a $275 million North American investment over the next
three years to expand and convert capacity at its Alcoa, TN rolling mill
to support the growing demand for aluminum sheet for automotive
production. Alcoa previously announced a $300 million expansion of its
Davenport, Iowa plant which is set to be completed by the end of this
year.
The Company announced the review of 460,000 metric tons of smelting
capacity for possible curtailment due to low metal prices and to
maintain cost competitiveness. The review equates to 11 percent of
Alcoa’s global smelting capacity. As part of that review, Alcoa
announced it would permanently close the two Soderberg potlines at its
Baie-Comeau smelter in Québec by the end of third quarter 2013. The two
lines are among Alcoa’s highest-cost smelting capacity and represent
105,000 metric tons of capacity per year. In addition to the review,
Alcoa announced its intent to permanently close its Fusina smelter in
Italy, representing 44,000 metric tons of smelting capacity. These two
closures will reduce the Company’s global smelting capacity to
approximately 4.1 million metric tons with 13 percent, or 523,000 metric
tons, of smelting capacity idled.
Strong Execution Against 2013 Financial Targets
Alcoa remains committed to being free cash flow positive in 2013. In
second quarter 2013, the Company generated $228 million in free cash
flow by successfully executing against its annual financial and
operational targets to maximize profitability and generate cash. Days
working capital, which ultimately equates to cash, was a second quarter
record low of 27 days, 6 days lower than second quarter 2012. This
milestone was the 15th successive year-over-year improvement
and equates to approximately $400 million in cash.
In the first half of 2013, Alcoa achieved $539 million in productivity
savings across all business segments against a $750 million annual
target; managed growth capital expenditures of $203 million against a
$550 million annual plan and controlled sustaining capital expenditures
of $318 million against a $1.0 billion annual plan. Progress and
expenditures on the Saudi Arabia joint venture project were on track
with $75 million year-to-date invested against a $350 million annual
plan; and Alcoa’s debt-to-capital ratio stood at 34.5 percent, 20 basis
points lower than first quarter 2013 and 160 basis points lower than
second quarter 2012. Net debt-to-capital stood at 31.1 percent.
Alcoa ended the quarter with cash on hand of $1.2 billion and reduced
debt by $566 million from first quarter 2013.
Segment Performance
Engineered Products and Solutions
After-tax operating income (ATOI) in the second quarter was $193
million, up from $173 million in first quarter 2013, a 12 percent
improvement, and up 23 percent from $157 million in the second quarter
of 2012. Sequentially, favorable productivity and higher volumes across
all market segments drove the improvement. Innovation continues to drive
share gains across all markets. This segment reported a record quarterly
adjusted EBITDA margin of 22.2 percent, compared to 20.9 percent and
19.2 percent, respectively, for first quarter 2013 and the same quarter
last year.
Global Rolled Products
ATOI in the second quarter was $79 million compared to $81 million in
first quarter 2013 and $78 million in second quarter 2012. Sequentially,
lower metal prices were largely offset by strong demand from the
aerospace, automotive, and packaging businesses. Adjusted EBITDA per
metric ton decreased to $322 from $385 in first quarter 2013. This
segment reported its best second quarter ever in days working capital,
which improved by 7 days compared with second quarter 2012.
Alumina
ATOI in the second quarter was $64 million up from $58 million in first
quarter 2013, and up from $23 million in second quarter 2012.
Sequentially, the increase was driven by relatively higher Alumina Price
Index-based pricing, a favorable impact from foreign exchange rates, and
strong productivity savings, partially offset by lower LME prices.
Strong performance across the business also offset increased costs in
mining due to the Myara crusher move in Australia and an increase in
bauxite costs in Suriname. Adjusted EBITDA per metric ton was $47 up
from $44 in first quarter 2013 and up from $31 in second quarter 2012.
This segment reported its best ever days working capital in second
quarter 2013. It improved by 12 days compared with second quarter 2012.
Primary Metals
ATOI in the second quarter was a negative $32 million compared to
positive ATOI of $39 million in first quarter 2013 and negative ATOI of
$3 million in second quarter 2012. The sequential decline was driven by
lower LME prices and higher costs, including the previously announced
maintenance costs tied to power plant outages in Australia and the U.S.,
partially offset by favorable mix, productivity gains, and a favorable
impact from foreign exchange rates. Third-party realized price in the
second quarter was $2,237 per metric ton, down 7 percent sequentially
and 4 percent lower than second quarter 2012. Adjusted EBITDA per metric
ton decreased to $88 from $205 in first quarter 2013.
Alba Update
As previously disclosed, over five years ago, the Department of Justice
(“DOJ”) and the Securities and Exchange Commission (“SEC”) commenced
investigations of alleged corrupt payments in connection with contracts
for the sale of alumina to Alba. In the past year Alcoa has been seeking
settlements of both investigations. During the second quarter of 2013,
Alcoa proposed to settle the DOJ matter by offering a cash payment of
$103 million and has recorded a charge of $103 million ($62 million
after non-controlling interest). There is currently the potential of an
additional possible charge of up to approximately $200 million to settle
the DOJ matter. Settlement negotiations are continuing. Based on
negotiations to date, Alcoa expects any such settlement will be paid
over several years. Alcoa has also exchanged settlement offers with the
SEC. However, the SEC staff has rejected Alcoa’s most recent offer of
$60 million and no charge has been recorded. Alcoa expects that any
resolution through settlement with the SEC would be material to results
of operations for the relevant fiscal period.
Although Alcoa seeks to resolve the Alba matter with the DOJ and the SEC
through settlements, there can be no assurance that settlements will be
reached. If settlements cannot be reached, Alcoa will proceed to trial.
Under those circumstances, the final outcome cannot be predicted and
there can be no assurance that it would not have a material adverse
effect on Alcoa. If settlements with both the DOJ and the SEC are
reached, based on an agreement between Alcoa and Alumina Limited,
Alcoa’s $62 million after non-controlling interest share of the second
quarter $103 million charge recorded with respect to the DOJ matter
would be approximately $25 million higher.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on July 8, 2013 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.”
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 125 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 11 consecutive years and approximately 75
percent of all of the aluminum ever produced since 1888 is still in
active use today. Alcoa employs approximately 61,000 people in 30
countries across the world. For more information, visit www.alcoa.com,
follow @Alcoa on Twitter at www.twitter.com/Alcoa
and follow Alcoa on Facebook at www.facebook.com/Alcoa.
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 growth for
aluminum, end market conditions, supply/demand balances, and growth
opportunities for aluminum in automotive, aerospace, and other
applications, trend projections, targeted financial results or operating
performance, and statements about Alcoa’s strategies, 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. Important factors that
could cause actual results to differ materially from those expressed or
implied 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, and fluctuations in
indexed-based and spot prices for alumina; (b) deterioration in global
economic and financial market conditions generally; (c) unfavorable
changes in the markets served by Alcoa, including aerospace, automotive,
commercial transportation, building and construction, distribution,
packaging, defense, and industrial gas turbine; (d) the impact of
changes in foreign currency exchange rates on costs and results,
particularly the Australian dollar, Brazilian real, Canadian dollar,
euro, and Norwegian kroner; (e) increases in energy costs, including
electricity, natural gas, and fuel oil, or the unavailability or
interruption of energy supplies; (f) increases in the costs of other raw
materials, including calcined petroleum coke, caustic soda, and liquid
pitch; (g) Alcoa’s 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
(including moving its alumina refining and aluminum smelting businesses
down on the industry cost curves and increasing revenues in its Global
Rolled Products and Engineered Products and Solutions segments)
anticipated from its restructuring programs, productivity improvement,
cash sustainability, and other initiatives; (h) Alcoa’s inability to
realize expected benefits, in each case as planned and by targeted
completion dates, from sales of non-core assets, or from newly
constructed, expanded, or acquired facilities, including facilities
supplying aluminum-lithium capacity, or from international joint
ventures, including the joint venture in Saudi Arabia; (i) political,
economic, and regulatory risks in the countries in which Alcoa operates
or sells products, including unfavorable changes in laws and
governmental policies, civil unrest, or other events beyond Alcoa’s
control; (j) the outcome of contingencies, including legal proceedings,
government investigations, and environmental remediation; (k) the
business or financial condition of key customers, suppliers, and
business partners; (l) adverse changes in tax rates or benefits; (m)
adverse changes in discount rates or investment returns on pension
assets; (n) the impact of cyber attacks and potential information
technology or data security breaches; and (o) the other risk factors
summarized in Alcoa’s Form 10-K for the year ended December 31, 2012,
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.
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 U.S. generally accepted
accounting principles (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 and on our website at www.alcoa.com
under the “Invest” section.
| 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, | ||||||||||
|
2012 |
2013 |
2013 |
||||||||||
| Sales | $ | 5,963 | $ | 5,833 | $ | 5,849 | ||||||
| Cost of goods sold (exclusive of expenses below) | 5,154 | 4,847 | 4,933 | |||||||||
| Selling, general administrative, and other expenses | 245 | 251 | 254 | |||||||||
| Research and development expenses | 47 | 45 | 46 | |||||||||
| Provision for depreciation, depletion, and amortization | 363 | 361 | 362 | |||||||||
| Restructuring and other charges | 15 | 7 | 244 | |||||||||
| Interest expense | 123 | 115 | 118 | |||||||||
| Other expenses (income), net | 22 | (27 | ) | 19 | ||||||||
| Total costs and expenses | 5,969 | 5,599 | 5,976 | |||||||||
| (Loss) income before income taxes | (6 | ) | 234 | (127 | ) | |||||||
| Provision for income taxes | 13 | 64 | 21 | |||||||||
| Net (loss) income | (19 | ) | 170 | (148 | ) | |||||||
| Less: Net (loss) income attributable to noncontrolling interests | (17 | ) | 21 | (29 | ) | |||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA | $ | (2 | ) | $ | 149 | $ | (119 | ) | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
||||||||||||
| Basic: | ||||||||||||
| Net (loss) income | $ | – | $ | 0.14 | $ | (0.11 | ) | |||||
| Average number of shares | 1,066,763,022 | 1,068,814,403 | 1,069,480,834 | |||||||||
| Diluted: | ||||||||||||
| Net (loss) income | $ | – | $ | 0.13 | $ | (0.11 | ) | |||||
| Average number of shares | 1,066,763,022 | 1,168,961,421 | 1,069,480,834 | |||||||||
| Shipments of aluminum products (metric tons) | 1,305,000 | 1,224,000 | 1,268,000 | |||||||||
| Alcoa and subsidiaries | ||||||||
| Statement of Consolidated Operations (unaudited), continued | ||||||||
| (in millions, except per-share, share, and metric ton amounts) | ||||||||
| Six months ended | ||||||||
|
June 30, |
||||||||
|
2012 |
2013 |
|||||||
| Sales | $ | 11,969 | $ | 11,682 | ||||
| Cost of goods sold (exclusive of expenses below) | 10,252 | 9,780 | ||||||
| Selling, general administrative, and other expenses | 486 | 505 | ||||||
| Research and development expenses | 90 | 91 | ||||||
| Provision for depreciation, depletion, and amortization | 732 | 723 | ||||||
| Restructuring and other charges | 25 | 251 | ||||||
| Interest expense | 246 | 233 | ||||||
| Other expenses (income), net | 6 | (8 | ) | |||||
| Total costs and expenses | 11,837 | 11,575 | ||||||
| Income before income taxes | 132 | 107 | ||||||
| Provision for income taxes | 52 | 85 | ||||||
| Net income | 80 | 22 | ||||||
| Less: Net loss attributable to noncontrolling interests | (12 | ) | (8 | ) | ||||
| NET INCOME ATTRIBUTABLE TO ALCOA | $ | 92 | $ | 30 | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
||||||||
| Basic: | ||||||||
| Net income | $ | 0.09 | $ | 0.03 | ||||
| Average number of shares | 1,066,242,896 | 1,069,114,769 | ||||||
| Diluted: | ||||||||
| Net income | $ | 0.08 | $ | 0.03 | ||||
| Average number of shares | 1,075,454,724 | 1,079,365,837 | ||||||
| Common stock outstanding at the end of the period | 1,066,881,927 | 1,069,530,324 | ||||||
| Shipments of aluminum products (metric tons) | 2,600,000 | 2,492,000 | ||||||
| Alcoa and subsidiaries | ||||||||
| Consolidated Balance Sheet (unaudited) | ||||||||
| (in millions) | ||||||||
| December 31, | June 30, | |||||||
|
2012 |
2013 |
|||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,861 | $ | 1,202 | ||||
|
Receivables from customers, less allowances of $39 in 2012 and $22 |
1,399 | 1,354 | ||||||
| Other receivables | 340 | 677 | ||||||
| Inventories | 2,825 | 2,905 | ||||||
| Prepaid expenses and other current assets | 1,275 | 1,099 | ||||||
| Total current assets | 7,700 | 7,237 | ||||||
| Properties, plants, and equipment | 38,137 | 37,261 | ||||||
| Less: accumulated depreciation, depletion, and amortization | 19,190 | 19,150 | ||||||
| Properties, plants, and equipment, net | 18,947 | 18,111 | ||||||
| Goodwill | 5,170 | 5,113 | ||||||
| Investments | 1,860 | 1,848 | ||||||
| Deferred income taxes | 3,790 | 3,689 | ||||||
| Other noncurrent assets | 2,712 | 2,553 | ||||||
| Total assets | $ | 40,179 | $ | 38,551 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 53 | $ | 55 | ||||
| Accounts payable, trade | 2,702 | 2,920 | ||||||
| Accrued compensation and retirement costs | 1,058 | 949 | ||||||
| Taxes, including income taxes | 366 | 414 | ||||||
| Other current liabilities | 1,298 | 1,205 | ||||||
| Long-term debt due within one year | 465 | 604 | ||||||
| Total current liabilities | 5,942 | 6,147 | ||||||
| Long-term debt, less amount due within one year | 8,311 | 7,700 | ||||||
| Accrued pension benefits | 3,722 | 3,558 | ||||||
| Accrued other postretirement benefits | 2,603 | 2,541 | ||||||
| Other noncurrent liabilities and deferred credits | 3,078 | 2,747 | ||||||
| Total liabilities | 23,656 | 22,693 | ||||||
| EQUITY | ||||||||
| Alcoa shareholders’ equity: | ||||||||
| Preferred stock | 55 | 55 | ||||||
| Common stock | 1,178 | 1,178 | ||||||
| Additional capital | 7,560 | 7,524 | ||||||
| Retained earnings | 11,689 | 11,653 | ||||||
| Treasury stock, at cost | (3,881 | ) | (3,812 | ) | ||||
| Accumulated other comprehensive loss | (3,402 | ) | (3,783 | ) | ||||
| Total Alcoa shareholders’ equity | 13,199 | 12,815 | ||||||
| Noncontrolling interests | 3,324 | 3,043 | ||||||
| Total equity | 16,523 | 15,858 | ||||||
| Total liabilities and equity | $ | 40,179 | $ | 38,551 | ||||
| Alcoa and subsidiaries | ||||||||
| Statement of Consolidated Cash Flows (unaudited) | ||||||||
| (in millions) | ||||||||
| Six months ended | ||||||||
|
June 30, |
||||||||
|
2012 |
2013 |
|||||||
| CASH FROM OPERATIONS | ||||||||
| Net income | $ | 80 | $ | 22 | ||||
| Adjustments to reconcile net income to cash from operations: | ||||||||
| Depreciation, depletion, and amortization | 733 | 724 | ||||||
| Deferred income taxes | (103 | ) | (58 | ) | ||||
| Equity (income) loss, net of dividends | (9 | ) | 23 | |||||
| Restructuring and other charges | 25 | 251 | ||||||
| Net loss (gain) from investing activities – asset sales | 1 | (6 | ) | |||||
| Stock-based compensation | 39 | 46 | ||||||
| Excess tax benefits from stock-based payment arrangements | (1 | ) | – | |||||
| Other | 83 |
27 |
|
|||||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
||||||||
| (Increase) in receivables | (215 | ) | (375 | ) | ||||
| (Increase) in inventories | (188 | ) | (175 | ) | ||||
| (Increase) decrease in prepaid expenses and other current assets |
(16 |
) |
37 |
|||||
| (Decrease) increase in accounts payable, trade | (33 | ) | 299 | |||||
| (Decrease) in accrued expenses | (70 | ) |
(353 |
) | ||||
| Increase in taxes, including income taxes | 20 | 40 | ||||||
| Pension contributions | (352 | ) | (181 | ) | ||||
| Decrease (increase) in noncurrent assets | 74 |
(48 |
) | |||||
| Increase in noncurrent liabilities | 237 |
171 |
||||||
| (Increase) in net assets held for sale | (2 | ) | – | |||||
| CASH PROVIDED FROM CONTINUING OPERATIONS | 303 | 444 | ||||||
| CASH USED FOR DISCONTINUED OPERATIONS | (2 | ) | – | |||||
| CASH PROVIDED FROM OPERATIONS | 301 | 444 | ||||||
| FINANCING ACTIVITIES | ||||||||
|
Net change in short-term borrowings (original maturities of three months or less) |
44 | 4 | ||||||
| Net change in commercial paper | 94 | – | ||||||
| Additions to debt (original maturities greater than three months) | 735 | 1,202 | ||||||
| Debt issuance costs | (3 | ) | – | |||||
| Payments on debt (original maturities greater than three months) | (659 | ) | (1,647 | ) | ||||
| Proceeds from exercise of employee stock options | 10 | 1 | ||||||
| Excess tax benefits from stock-based payment arrangements | 1 | – | ||||||
| Dividends paid to shareholders | (66 | ) | (66 | ) | ||||
| Distributions to noncontrolling interests | (70 | ) | (27 | ) | ||||
| Contributions from noncontrolling interests | 110 | 12 | ||||||
| CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES | 196 | (521 | ) | |||||
| INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (561 | ) | (521 | ) | ||||
| Proceeds from the sale of assets and businesses | 13 | 5 | ||||||
| Additions to investments | (187 | ) | (159 | ) | ||||
| Sales of investments | 11 | – | ||||||
| Net change in restricted cash | 6 | 105 | ||||||
| Other | 14 | 9 | ||||||
| CASH USED FOR INVESTING ACTIVITIES | (704 | ) | (561 | ) | ||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(20 |
) |
(21 |
) |
||||
| Net change in cash and cash equivalents | (227 | ) | (659 | ) | ||||
| Cash and cash equivalents at beginning of year | 1,939 | 1,861 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,712 | $ | 1,202 | ||||
| Alcoa and subsidiaries | ||||||||||||||||||||||||||||
| Segment Information (unaudited) | ||||||||||||||||||||||||||||
|
(dollars in millions, except realized prices; production and shipments in thousands of metric tons [kmt]) |
||||||||||||||||||||||||||||
|
1Q12 |
2Q12 |
3Q12 |
4Q12 |
2012 |
1Q13 |
2Q13 |
||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||
| Alumina production (kmt) | 4,153 | 4,033 | 4,077 | 4,079 | 16,342 | 3,994 | 4,161 | |||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,293 | 2,194 | 2,368 | 2,440 | 9,295 | 2,457 | 2,328 | |||||||||||||||||||||
| Third-party sales | $ | 775 | $ | 750 | $ | 764 | $ | 803 | $ | 3,092 | $ | 826 | $ | 822 | ||||||||||||||
| Intersegment sales | $ | 617 | $ | 576 | $ | 575 | $ | 542 | $ | 2,310 | $ | 595 | $ | 581 | ||||||||||||||
| Equity income (loss) | $ | 1 | $ | 1 | $ | 2 | $ | 1 | $ | 5 | $ | 1 | $ | (1 | ) | |||||||||||||
| Depreciation, depletion, and amortization | $ | 114 | $ | 114 | $ | 120 | $ | 107 | $ | 455 | $ | 109 | $ | 115 | ||||||||||||||
| Income taxes | $ | (1 | ) | $ | (6 | ) | $ | (22 | ) | $ | 2 | $ | (27 | ) | $ | 14 | $ | 14 | ||||||||||
| After-tax operating income (ATOI) | $ | 35 | $ | 23 | $ | (9 | ) | $ | 41 | $ | 90 | $ | 58 | $ | 64 | |||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||
| Aluminum production (kmt) | 951 | 941 | 938 | 912 | 3,742 | 891 | 896 | |||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 771 | 749 | 768 | 768 | 3,056 | 705 | 693 | |||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,433 |
$ |
2,329 |
$ |
2,222 |
$ |
2,325 |
$ |
2,327 |
$ |
2,398 |
$ |
2,237 |
||||||||||||||
| Third-party sales | $ | 1,944 | $ | 1,804 | $ | 1,794 | $ | 1,890 | $ | 7,432 | $ | 1,758 | $ | 1,620 | ||||||||||||||
| Intersegment sales | $ | 761 | $ | 782 | $ | 691 | $ | 643 | $ | 2,877 | $ | 727 | $ | 677 | ||||||||||||||
| Equity loss | $ | (2 | ) | $ | (9 | ) | $ | (5 | ) | $ | (11 | ) | $ | (27 | ) | $ | (9 | ) | $ | (7 | ) | |||||||
| Depreciation, depletion, and amortization | $ | 135 | $ | 133 | $ | 130 | $ | 134 | $ | 532 | $ | 135 | $ | 132 | ||||||||||||||
| Income taxes | $ | (13 | ) | $ | (19 | ) | $ | (19 | ) | $ | 157 | $ | 106 | $ | 1 | $ | (25 | ) | ||||||||||
| ATOI | $ | 10 | $ | (3 | ) | $ | (14 | ) | $ | 316 | $ | 309 | $ | 39 | $ | (32 | ) | |||||||||||
| Global Rolled Products: | ||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 452 | 484 | 483 | 448 | 1,867 | 450 | 502 | |||||||||||||||||||||
| Third-party sales | $ | 1,845 | $ | 1,913 | $ | 1,849 | $ | 1,771 | $ | 7,378 | $ | 1,779 | $ | 1,877 | ||||||||||||||
| Intersegment sales | $ | 44 | $ | 44 | $ | 42 | $ | 33 | $ | 163 | $ | 51 | $ | 43 | ||||||||||||||
| Equity loss | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | $ | (2 | ) | $ | (6 | ) | $ | (4 | ) | $ | (2 | ) | |||||||
| Depreciation, depletion, and amortization | $ | 57 | $ | 57 | $ | 57 | $ | 58 | $ | 229 | $ | 57 | $ | 55 | ||||||||||||||
| Income taxes* | $ | 51 | $ | 34 | $ | 39 | $ | 35 | $ | 159 | $ | 39 | $ | 32 | ||||||||||||||
| ATOI* | $ | 102 | $ | 78 | $ | 89 | $ | 77 | $ | 346 | $ | 81 | $ | 79 | ||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 58 | 59 | 53 | 52 | 222 | 55 | 58 | |||||||||||||||||||||
| Third-party sales | $ | 1,390 | $ | 1,420 | $ | 1,367 | $ | 1,348 | $ | 5,525 | $ | 1,423 | $ | 1,468 | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 40 | $ | 39 | $ | 39 | $ | 40 | $ | 158 | $ | 40 | $ | 39 | ||||||||||||||
| Income taxes* | $ | 73 | $ | 76 | $ | 77 | $ | 71 | $ | 297 | $ | 84 | $ | 94 | ||||||||||||||
| ATOI* | $ | 157 | $ | 157 | $ | 158 | $ | 140 | $ | 612 | $ | 173 | $ | 193 | ||||||||||||||
|
Reconciliation of ATOI to consolidated net income (loss) attributable to Alcoa: |
||||||||||||||||||||||||||||
| Total segment ATOI* | $ | 304 | $ | 255 | $ | 224 | $ | 574 | $ | 1,357 | $ | 351 | $ | 304 | ||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||
| Impact of LIFO | – | 19 | (7 | ) | 8 | 20 | (2 | ) | 5 | |||||||||||||||||||
| Interest expense | (80 | ) | (80 | ) | (81 | ) | (78 | ) | (319 | ) | (75 | ) | (76 | ) | ||||||||||||||
| Noncontrolling interests | (5 | ) | 17 | 32 | (15 | ) | 29 | (21 | ) | 29 | ||||||||||||||||||
| Corporate expense | (64 | ) | (69 | ) | (62 | ) | (87 | ) | (282 | ) | (67 | ) | (71 | ) | ||||||||||||||
| Restructuring and other charges | (7 | ) | (10 | ) | (2 | ) | (56 | ) | (75 | ) | (5 | ) | (211 | ) | ||||||||||||||
| Other* | (54 | ) | (134 | ) | (247 | ) | (104 | ) | (539 | ) | (32 | ) | (99 | ) | ||||||||||||||
| Consolidated net income (loss) attributable to Alcoa |
$ |
94 |
$ |
(2 |
) |
$ |
(143 |
) |
$ |
242 |
$ |
191 |
$ |
149 |
$ |
(119 |
) |
|||||||||||
|
The difference between certain segment totals and consolidated amounts is in Corporate. |
||
|
* |
On January 1, 2013, management revised the inventory-costing |
|
| Alcoa and subsidiaries | ||||||||||||
| Calculation of Financial Measures (unaudited) | ||||||||||||
| (dollars in millions) | ||||||||||||
| Adjusted EBITDA Margin | Quarter ended | |||||||||||
|
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
||||||||||
| Net (loss) income attributable to Alcoa | $ | (2 | ) | $ | 149 | $ | (119 | ) | ||||
| Add: | ||||||||||||
| Net (loss) income attributable to noncontrolling interests |
(17 |
) |
21 |
(29 |
) |
|||||||
| Provision for income taxes | 13 | 64 | 21 | |||||||||
| Other expenses (income), net | 22 | (27 | ) | 19 | ||||||||
| Interest expense | 123 | 115 | 118 | |||||||||
| Restructuring and other charges | 15 | 7 | 244 | |||||||||
| Provision for depreciation, depletion, and amortization | 363 | 361 | 362 | |||||||||
| Adjusted EBITDA | $ | 517 | $ | 690 | $ | 616 | ||||||
| Sales | $ | 5,963 | $ | 5,833 | $ | 5,849 | ||||||
| Adjusted EBITDA Margin | 8.7 | % | 11.8 | % | 10.5 | % | ||||||
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.
| Free Cash Flow | Quarter ended | |||||||||||
|
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
||||||||||
| Cash from operations | $ | 537 | $ | (70 | ) | $ | 514 | |||||
| Capital expenditures |
(291 |
) |
(235 |
) |
(286 |
) |
||||||
| Free cash flow | $ | 246 | $ | (305 | ) | $ | 228 | |||||
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, except per-share amounts) | ||||||||||||||||||||||
| Adjusted Income | (Loss) Income | Diluted EPS | ||||||||||||||||||||
| Quarter ended | Quarter ended | |||||||||||||||||||||
|
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
|||||||||||||||||
| Net (loss) income attributable to Alcoa | $ | (2 | ) | $ | 149 | $ | (119 | ) | $ | – | $ | 0.13 | $ | (0.11 | ) | |||||||
| Restructuring and other charges |
|
10 |
5 |
170 |
||||||||||||||||||
| Discrete tax items* |
10 |
(19 |
) |
11 |
||||||||||||||||||
| Other special items** |
43 |
(14 |
) |
14 |
||||||||||||||||||
| Net income attributable to Alcoa – as adjusted |
$ |
61 |
$ |
121 |
$ |
76 |
0.06 |
0.11 |
0.07 |
|||||||||||||
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 (loss) income attributable
to Alcoa determined under GAAP as well as Net income attributable to
Alcoa – as adjusted.
* Discrete tax items include the following:
-
for the quarter ended June 30, 2013, a charge related to prior year
taxes in Spain and Australia ($10), a benefit for a tax rate change in
Jamaica ($2), and a net charge for other miscellaneous items ($3); -
for the quarter ended March 31, 2013, a benefit related to the
reinstatement under the American Taxpayer Relief Act of 2012 of two
tax provisions that will be applied in 2013 to Alcoa’s U.S. income tax
return for calendar year 2012 ($19); and -
for the quarter ended June 30, 2012, a charge related to prior year
U.S. taxes on certain depletable assets ($8) and a net charge for
other miscellaneous items ($2).
** Other special items include the following:
-
for the quarter ended June 30, 2013, a net unfavorable change in
certain mark-to-market energy derivative contracts ($9) and the write
off of inventory related to the permanent closure of two potlines at a
smelter in Canada and a smelter in Italy; -
for the quarter ended March 31, 2013, a net favorable change in
certain mark-to-market energy derivative contracts ($9) and a net
insurance recovery related to the March 2012 cast house fire at the
Massena, NY location ($5); and -
for the quarter ended June 30, 2012, a litigation reserve ($18),
uninsured losses related to fire damage to the cast house at the
Massena, NY location ($12), and a net increase in the environmental
reserve related to the Grasse River remediation in Massena, NY and
remediation at two former locations, East St. Louis, IL and Sherwin,
TX ($13).
| Alcoa and subsidiaries | |||||||||
| Calculation of Financial Measures (unaudited), continued | |||||||||
| (dollars in millions) | |||||||||
| Days Working Capital | Quarter ended | ||||||||
|
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
|||||||
| Receivables from customers, less allowances | $ | 1,575 | $ | 1,680 | $ | 1,354 | |||
| Add: Deferred purchase price receivable* | 141 | 15 | 377 | ||||||
| Receivables from customers, less allowances, as adjusted |
1,716 |
1,695 |
1,731 |
||||||
| Add: Inventories | 3,051 | 2,982 | 2,905 | ||||||
| Less: Accounts payable, trade | 2,633 | 2,860 | 2,920 | ||||||
| Working Capital | $ | 2,134 | $ | 1,817 | $ | 1,716 | |||
| Sales | $ | 5,963 | $ | 5,833 | $ | 5,849 | |||
|
Days Working Capital |
33 | 28 | 27 | ||||||
|
Days Working Capital = Working Capital divided by (Sales/number of days in the quarter). |
||
|
* |
The deferred purchase price receivable relates to an arrangement |
|
| Net Debt-to-Capital | June 30, 2013 | ||||||||||
|
Debt-to- |
Cash and |
Net Debt-to- |
|||||||||
| Total Debt | |||||||||||
| Short-term borrowings | $ | 55 | |||||||||
| Commercial paper | – | ||||||||||
| Long-term debt due within one year | 604 | ||||||||||
| Long-term debt, less amount due within one year | 7,700 | ||||||||||
| Numerator | $ | 8,359 | $ | 1,202 | $ | 7,157 | |||||
| Total Capital | |||||||||||
| Total debt | $ | 8,359 | |||||||||
| Total equity | 15,858 | ||||||||||
| Denominator | $ | 24,217 | $ | 1,202 | $ | 23,015 | |||||
| Ratio | 34.5 | % | 31.1 | % | |||||||
Net debt-to-capital is a non-GAAP financial measure. Management believes
that this measure is meaningful to investors because management assesses
Alcoa’s leverage position after factoring in available cash that could
be used to repay outstanding debt.
| 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, 2012 |
March 31, 2013 |
June 30, 2013 |
June 30, 2012 |
September 30, 2012 |
December 31, 2012 |
March 31, 2013 |
June 30, 2013 |
||||||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 23 | $ | 58 | $ | 64 | $ | (3 | ) | $ | (14 | ) | $ | 316 | $ | 39 | $ | (32 | ) | ||||||||||||
| Add: | |||||||||||||||||||||||||||||||
|
Depreciation, depletion, and amortization |
114 |
109 |
115 |
133 |
130 |
134 |
135 |
132 |
|||||||||||||||||||||||
| Equity (income) loss |
(1 |
) |
(1 |
) |
1 |
9 |
5 |
11 |
9 |
7 |
|||||||||||||||||||||
| Income taxes | (6 | ) | 14 | 14 | (19 | ) | (19 | ) | 157 | 1 | (25 | ) | |||||||||||||||||||
| Other | (3 | ) | (3 | ) | – | (1 | ) | 2 | (423 | ) | (1 | ) | (3 | ) | |||||||||||||||||
| Adjusted EBITDA |
$ |
127 |
$ |
177 |
$ |
194 |
$ |
119 |
$ |
104 |
$ |
195 |
$ |
183 |
$ |
79 |
|||||||||||||||
| Production (thousand metric tons) (kmt) |
4,033 |
3,994 |
4,161 |
941 |
938 |
912 |
891 |
896 |
|||||||||||||||||||||||
| Adjusted EBITDA / Production ($ per metric ton) |
$ |
31 |
$ |
44 |
$ |
47 |
$ |
126 |
$ |
111 |
$ |
214 |
$ |
205 |
$ |
88 |
|||||||||||||||
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, except per metric ton amounts) | ||||||||||||||||||||||
| Segment Measures | Global Rolled Products* | Engineered Products and Solutions* | ||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||||||||||||
|
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
June 30, 2012 |
March 31, 2013 |
June 30, 2013 |
|||||||||||||||||
| After-tax operating income (ATOI) | $ | 78 | $ |
81 |
$ | 79 | $ | 157 | $ | 173 | $ | 193 | ||||||||||
| Add: | ||||||||||||||||||||||
|
Depreciation, depletion, and amortization |
|
57 |
|
57 |
|
55 |
|
39 |
|
40 |
|
39 |
||||||||||
| Equity loss | 2 | 4 | 2 | – | – | – | ||||||||||||||||
| Income taxes | 34 | 39 | 32 | 76 | 84 | 94 | ||||||||||||||||
| Other | 1 | (1 | ) | – | – | – | – | |||||||||||||||
| Adjusted EBITDA |
$ |
172 |
$ |
180 |
$ |
168 |
$ |
272 |
$ |
297 |
$ |
326 |
||||||||||
| Total shipments (thousand metric tons) (kmt) |
505 |
468 |
521 |
|||||||||||||||||||
|
Adjusted EBITDA/Total shipments ($ per metric ton) |
$ |
341 |
$ |
385 |
$ |
322 |
|
|
|
|
||||||||||||
| Third-party sales |
$ |
1,420 |
$ |
1,423 |
$ |
1,468 |
||||||||||||||||
|
Adjusted EBITDA Margin |
19 |
% |
21 |
% |
22 |
% |
||||||||||||||||
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.
|
* |
On January 1, 2013, management revised the inventory-costing |
Alcoa
Investor Contact:
Kelly Pasterick, 212-836-2674
Kelly.Pasterick@alcoa.com
or
Media Contact:
Monica Orbe, 212-836-2632
Monica.Orbe@alcoa.com