Alcoa Corporation (NYSE: AA) today reported third quarter 2020
results that reflect improved pricing for alumina and aluminum,
continued operational excellence during the pandemic, and a strong
cash position.
Third Quarter Highlights
- Generated $158 million in cash from operations; $84 million
free cash flow
- Set new production records for Alcoa operated mines and
refineries
- Grew cash balance to $1.74 billion, including the proceeds from
a $750 million debt issuance
- Realized an 11 percent sequential increase in sales volume of
value-add products due to improving customer demand in the aluminum
segment
- On pace to deliver approximately $900 million in combined cash
actions in 2020
- Completed restart of ABI smelter in Bécancour, Québec and
curtailment of Intalco smelter in Washington State
- Continued progress in improving safety; managing health risks
posed by COVID-19 pandemic; all production sites remain fully
operational
Financial Results
M, except per share amounts
3Q20
2Q20
3Q19
Revenue
$2,365
$2,148
$2,567
Net loss attributable to Alcoa
Corporation
$(49)
$(197)
$(221)
Loss per share attributable to Alcoa
Corporation
$(0.26)
$(1.06)
$(1.19)
Adjusted net loss
$(218)
$(4)
$(82)
Adjusted loss per share
$(1.17)
$(0.02)
$(0.44)
Adjusted EBITDA excluding special
items
$284
$185
$388
“Across all of our segments,
we are delivering solid results and continuing to improve overall
performance,” said Alcoa President and CEO Roy Harvey. “In the
third quarter, we captured the gains from better pricing in alumina
and aluminum, increased sales of value-add aluminum products, and
realized a 54 percent sequential improvement in adjusted EBITDA,”
he continued. “We also boosted our Company’s liquidity, so we have
even greater flexibility to execute on our strategy.”
“We are doing far more than
simply maintaining stability – we are setting production records,
driving productivity, reducing costs, and improving our balance
sheet. All of this is aligned with our strategic priorities and is
only possible because of the dedication of our people and the work
to protect safety and health during these unprecedented times,”
Harvey said.
- Production records: In the third quarter of 2020, Alcoa
set a year-to-date production record for Alcoa-operated bauxite
mines and the Alumina segment surpassed its record rate (metric
tons per day) for quarterly production, last set in the second
quarter of 2020.
- Shipments: In Alumina, third-party shipments increased
approximately 6 percent sequentially, primarily due to the timing
of shipments and higher overall production. In Aluminum,
third-party shipment volume declined approximately 3 percent,
primarily related to the curtailment of the Intalco smelter in the
third quarter of 2020.
- Revenue: Higher aluminum and alumina prices coupled with
higher alumina shipments in the third quarter helped drive a 10
percent sequential increase in revenue to $2.4 billion. The Company
realized an 11 percent sequential increase in sales volume of
value-add products, primarily due to improved demand from the
automotive sector.
- Net loss attributable to Alcoa Corporation: Alcoa
reported net loss of $49 million, or $0.26 per share, compared with
net loss of $197 million, or $1.06 per share, in the second quarter
of 2020. The sequential improvement is primarily attributed to
higher aluminum and alumina prices in addition to lower
restructuring-related charges in the quarter.
- Adjusted net loss: Excluding the impact of special items
of $169 million, adjusted net loss was $218 million, or $1.17 per
share, a decline from the second quarter 2020 adjusted net loss of
$4 million, or $0.02 per share.
- Adjusted EBITDA excluding special items: Adjusted EBITDA
excluding special items was $284 million, a 54 percent sequential
increase primarily attributed to higher aluminum prices.
- Cash: Alcoa ended the quarter with cash on hand of $1.74
billion, which included $736 million in net proceeds from a July
2020 debt issuance. Debt as of September 30, 2020 was $2.5 billion
and net debt was $804 million. Cash provided from operations was
$158 million. Cash provided from financing activities was $692
million, primarily related to the debt issuance, and cash used for
investing activities was $78 million. Free cash flow was $84
million.
- Working capital: The Company reported 22 days working
capital, a 2-day improvement sequentially, and an 8-day improvement
year over year, primarily due to decreases in days of inventory on
hand.
Strategic Actions and Initiatives
Alcoa continues to execute strategic actions to drive lower
costs and sustainable profitability, including the review of its
existing production capacities and non-core assets, and other cash
preservation programs.
- Restart complete at Aluminerie de Bécancour Inc. (ABI) smelter
In the third quarter of 2020, Alcoa completed the full restart of
the ABI smelter, owned by Alcoa (74.95%) and Rio Tinto Alcan Inc.
(25.05%), with a total annual capacity of 413,000 metric tons per
year. The restart began on July 26, 2019 after completing a new
labor agreement for the facility.
- Intalco Works curtailment In August of 2020, the Company
completed the full curtailment of its 279,000-metric-ton Intalco
smelter in Washington State. In 2020, the Company recorded
cash-based restructuring charges of approximately $23 million (pre-
and after-tax) associated with the curtailment, including employee
severance and costs associated with termination of contracts.
- San Ciprián curtailment On October 9, 2020, Alcoa announced
that it will fully curtail the 228,000 metric tons of annual
capacity at its San Ciprián aluminum smelter in Spain, with the
curtailment expected to be complete in the first quarter of 2021.
The action follows an extensive consultation period with the
workers representatives, which was completed in accordance with
Spanish regulations. Associated with the curtailment, Alcoa expects
restructuring charges of approximately $35 million to $40 million
(pre- and after-tax), or $0.19 to $0.22 per share, in the fourth
quarter of 2020 for employee-related costs, which are all
cash-based charges expected to be paid primarily in the first half
of 2021.
- 2020 Programs Earlier this year, Alcoa announced 2020 programs
to drive leaner working capital and improved productivity. Year to
date, the Company is on pace to meet its combined $175 million -
$200 million full-year working capital reduction and productivity
savings target.
- COVID-19 Update As a result of our comprehensive measures to
protect employees, contractors and communities from risks
associated with the COVID-19 pandemic, all of our global operations
have maintained production without interruption, and the Company’s
segments have not experienced any significant disruption in its
supply sources. All locations have maintained comprehensive plans
to mitigate the risks caused by the pandemic and continue to refine
and update those plans based on specific conditions. The Company
continues to manage cash during the economic downturn caused by the
pandemic and is continuing to execute on programs to save or defer
up to $380 million, including deferring to 2021 approximately $200
million of cash contributions to the Company’s U.S. pension plans
as permitted under the U.S. Coronavirus Aid, Relief and Economic
Security Act.
Through the combination of the strategic actions, 2020 programs
and COVID-19 response initiatives, Alcoa is on track to generate,
save and defer a total of approximately $900 million in cash
actions in 2020.
2020 Outlook
The Company’s 2020 shipment outlook for Bauxite and Aluminum
remains unchanged from the prior full-year estimates. Total annual
bauxite shipments are expected to range between 48.0 and 49.0
million dry metric tons. Aluminum shipments are expected to be
between 2.9 and 3.0 million metric tons. The Company expects its
2020 shipment outlook for Alumina to improve by 0.2 million metric
tons to between 13.8 to 13.9 million metric tons due to improved
production levels.
In the fourth quarter of 2020, Alcoa expects flat sequential
quarterly results in the Bauxite segment. In the Alumina segment,
the Company expects lower sequential quarterly results primarily
from higher energy costs and a change in the mix of customer
shipments. In the Aluminum segment, the Company expects a
sequential decline with anticipated higher power costs in Europe, a
full quarter of Section 232 tariffs, and higher maintenance and
seasonal labor costs, partially offset by the positive impact of
the Intalco curtailment for a full quarter.
The fourth quarter 2020 operational tax expense is expected to
be significantly lower than 3Q and approximate $25 million based on
recent pricing.
The COVID-19 pandemic is ongoing, and its magnitude and duration
continue to be unknown. The uncertainty around its future impact on
the Company’s business, financial condition, operating results, and
cash flows could cause actual results to differ from this
outlook.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Daylight Time (EDT) on Wednesday, October 14, 2020, to
present third quarter financial results and discuss the business
and market conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EDT on October 14, 2020. Call information and related details
are available under the “Investors” section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website,
www.alcoa.com, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls and webcasts.
The Company does not incorporate the information contained on, or
accessible through, its corporate website into this press
release.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, and is built on a foundation of
strong values and operating excellence dating back more than 130
years to the world-changing discovery that made aluminum an
affordable and vital part of modern life. Since developing the
aluminum industry, and throughout our history, our talented Alcoans
have followed on with breakthrough innovations and best practices
that have led to efficiency, safety, sustainability, and stronger
communities wherever we operate.
Forward-Looking Statements
This news release contains statements that relate to future
events and expectations and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results or operating performance; statements about
strategies, outlook, and business and financial prospects; and
statements about return of capital. These statements reflect
beliefs and assumptions that are based on Alcoa Corporation’s
perception of historical trends, current conditions, and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa
Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) current and potential future impacts of the
coronavirus (COVID-19) pandemic on the global economy and our
business, financial condition, results of operations, or cash
flows; (b) material adverse changes in aluminum industry
conditions, including global supply and demand conditions and
fluctuations in London Metal Exchange-based prices and premiums, as
applicable, for primary aluminum and other products, and
fluctuations in indexed-based and spot prices for alumina; (c)
deterioration in global economic and financial market conditions
generally and which may also affect Alcoa Corporation’s ability to
obtain credit or financing upon acceptable terms or at all; (d)
unfavorable changes in the markets served by Alcoa Corporation; (e)
the impact of changes in foreign currency exchange and tax rates on
costs and results; (f) increases in energy costs or uncertainty of
energy supply; (g) declines in the discount rates used to measure
pension liabilities or lower-than-expected investment returns on
pension assets, or unfavorable changes in laws or regulations that
govern pension plan funding; (h) the inability to achieve
improvement in profitability and margins, cost savings, cash
generation, revenue growth, fiscal discipline, or strengthening of
competitiveness and operations anticipated from portfolio actions,
operational and productivity improvements, cash sustainability,
technology advancements, and other initiatives; (i) the inability
to realize expected benefits, in each case as planned and by
targeted completion dates, from acquisitions, divestitures,
restructuring activities, facility closures, curtailments,
restarts, expansions, or joint ventures; (j) political, economic,
trade, legal, public health and safety, and regulatory risks in the
countries in which Alcoa Corporation operates or sells products;
(k) labor disputes and/or and work stoppages; (l) the outcome of
contingencies, including legal and tax proceedings , government or
regulatory investigations, and environmental remediation; (m) the
impact of cyberattacks and potential information technology or data
security breaches; and (n) the other risk factors discussed in Item
1A of Alcoa Corporation’s Form 10-K for the fiscal year ended
December 31, 2019, Form 10-Q for the quarters ended March 31, 2020
and June 30, 2020, and other reports filed by Alcoa Corporation
with the U.S. Securities and Exchange Commission (SEC). Alcoa
Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law.
Market projections are subject to the risks described above and
other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa Corporation’s consolidated financial information but is not
presented in Alcoa Corporation’s financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). Certain of these data are
considered “non-GAAP financial measures” under SEC regulations.
Alcoa Corporation believes that the presentation of non-GAAP
financial measures is useful to investors because such measures
provide both additional information about the operating performance
of Alcoa Corporation and insight on the ability of Alcoa
Corporation to meet its financial obligations by adjusting the most
directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items
in nature, and/or nonoperating expense or income items. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Alcoa Corporation and
Subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Quarter Ended
September 30,
2020
June 30,
2020
September 30,
2019
Sales
$
2,365
$
2,148
$
2,567
Cost of goods sold (exclusive of expenses
below)
2,038
1,932
2,120
Selling, general administrative, and other
expenses
47
44
66
Research and development expenses
6
5
7
Provision for depreciation, depletion, and
amortization
161
152
184
Restructuring and other charges, net
5
37
185
Interest expense
41
32
30
Other expenses, net
45
51
27
Total costs and expenses
2,343
2,253
2,619
Income (loss) before income taxes
22
(105
)
(52
)
Provision for income taxes
42
45
95
Net loss
(20
)
(150
)
(147
)
Less: Net income attributable to
noncontrolling interest
29
47
74
NET LOSS ATTRIBUTABLE TO ALCOA
CORPORATION
$
(49
)
$
(197
)
$
(221
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss
$
(0.26
)
$
(1.06
)
$
(1.19
)
Average number of shares
185,923,106
185,917,932
185,566,202
Diluted:
Net loss
$
(0.26
)
$
(1.06
)
$
(1.19
)
Average number of shares
185,923,106
185,917,932
185,566,202
Alcoa Corporation and
Subsidiaries
Statement of Consolidated Operations
(unaudited), continued
(dollars in millions, except per-share
amounts)
Nine months ended
September 30,
2020
September 30,
2019
Sales
$
6,894
$
7,997
Cost of goods sold (exclusive of expenses
below)
5,995
6,489
Selling, general administrative, and other
expenses
151
218
Research and development expenses
18
21
Provision for depreciation, depletion, and
amortization
483
530
Restructuring and other charges, net
44
668
Interest expense
103
90
Other (income) expenses, net
(36
)
118
Total costs and expenses
6,758
8,134
Income (loss) before income taxes
136
(137
)
Provision for income taxes
167
361
Net loss
(31
)
(498
)
Less: Net income attributable to
noncontrolling interest
135
324
NET LOSS ATTRIBUTABLE TO ALCOA
CORPORATION
$
(166
)
$
(822
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss
$
(0.89
)
$
(4.43
)
Average number of shares
185,852,913
185,463,438
Diluted:
Net loss
$
(0.89
)
$
(4.43
)
Average number of shares
185,852,913
185,463,438
Common stock outstanding at the end of the
period
185,924,651
185,572,917
Alcoa Corporation and
Subsidiaries
Consolidated Balance Sheet
(unaudited)
(in millions)
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,736
$
879
Receivables from customers
516
546
Other receivables
95
114
Inventories
1,398
1,644
Fair value of derivative instruments
11
59
Prepaid expenses and other current
assets(1)
270
288
Total current assets
4,026
3,530
Properties, plants, and equipment
21,061
21,715
Less: accumulated depreciation, depletion,
and amortization
13,811
13,799
Properties, plants, and equipment, net
7,250
7,916
Investments
1,034
1,113
Deferred income taxes
540
642
Fair value of derivative instruments
1
18
Other noncurrent assets
1,372
1,412
Total assets
$
14,223
$
14,631
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,360
$
1,484
Accrued compensation and retirement
costs
408
413
Taxes, including income taxes
30
104
Fair value of derivative instruments
61
67
Other current liabilities
415
494
Long-term debt due within one year
2
1
Total current liabilities
2,276
2,563
Long-term debt, less amount due within one
year
2,538
1,799
Accrued pension benefits
1,566
1,505
Accrued other postretirement benefits
770
749
Asset retirement obligations
553
606
Environmental remediation
289
296
Fair value of derivative instruments
475
581
Noncurrent income taxes
244
276
Other noncurrent liabilities and deferred
credits
493
370
Total liabilities
9,204
8,745
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,661
9,639
Accumulated deficit
(721
)
(555
)
Accumulated other comprehensive loss
(5,547
)
(4,974
)
Total Alcoa Corporation shareholders’
equity
3,395
4,112
Noncontrolling interest
1,624
1,774
Total equity
5,019
5,886
Total liabilities and equity
$
14,223
$
14,631
(1)
This line item includes $3 and $4
of restricted cash as of September 30, 2020 and December 31, 2019,
respectively.
Alcoa Corporation and
Subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in millions)
Nine Months Ended September
30,
2020
2019
CASH FROM OPERATIONS
Net loss
$
(31
)
$
(498
)
Adjustments to reconcile net loss to cash
from operations:
Depreciation, depletion, and
amortization
483
530
Deferred income taxes
(12
)
59
Equity earnings, net of dividends
19
12
Restructuring and other charges, net
44
668
Net gain from investing activities – asset
sales
(174
)
(6
)
Net periodic pension benefit cost
103
90
Stock-based compensation
24
29
Provision for bad debt expense
2
21
Other
11
19
Changes in assets and liabilities,
excluding effects of divestitures and foreign currency translation
adjustments:
Decrease in receivables
26
127
Decrease in inventories
221
111
Decrease in prepaid expenses and other
current assets
21
70
(Decrease) in accounts payable, trade
(87
)
(199
)
(Decrease) in accrued expenses
(166
)
(147
)
Increase (Decrease) in taxes, including
income taxes
95
(344
)
Pension contributions
(83
)
(67
)
(Increase) in noncurrent assets
(64
)
(24
)
(Decrease) in noncurrent liabilities
(76
)
(27
)
CASH PROVIDED FROM OPERATIONS
356
424
FINANCING ACTIVITIES
Additions to debt (original maturities
greater than three months)
739
—
Proceeds from the exercise of employee
stock options
—
2
Financial contributions for the
divestiture of businesses
(30
)
—
Contributions from noncontrolling
interest
24
41
Distributions to noncontrolling
interest
(152
)
(388
)
Other
(4
)
(6
)
CASH PROVIDED FROM (USED FOR) FINANCING
ACTIVITIES
577
(351
)
INVESTING ACTIVITIES
Capital expenditures
(242
)
(245
)
Proceeds from the sale of assets
198
23
Additions to investments
(6
)
(112
)
CASH USED FOR INVESTING ACTIVITIES
(50
)
(334
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(27
)
(11
)
Net change in cash and cash equivalents
and restricted cash
856
(272
)
Cash and cash equivalents and restricted
cash at beginning of year
883
1,116
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD
$
1,739
$
844
Alcoa Corporation and
Subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized
prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
1Q19
2Q19
3Q19
4Q19
2019
1Q20
2Q20
3Q20
Bauxite:
Production(1) (mdmt)
11.9
11.3
12.1
12.1
47.4
11.6
12.2
12.0
Third-party shipments (mdmt)
1.2
1.5
2.0
1.5
6.2
1.4
1.6
1.6
Intersegment shipments (mdmt)
10.2
10.3
10.6
10.3
41.4
10.5
10.8
10.5
Third-party sales
$
65
$
67
$
100
$
65
$
297
$
71
$
66
$
56
Intersegment sales
$
236
$
246
$
251
$
246
$
979
$
235
$
245
$
236
Segment Adjusted EBITDA(2)
$
126
$
112
$
134
$
132
$
504
$
120
$
131
$
124
Depreciation, depletion, and
amortization
$
28
$
27
$
35
$
30
$
120
$
34
$
30
$
33
Alumina:
Production (kmt)
3,240
3,309
3,380
3,373
13,302
3,298
3,371
3,435
Third-party shipments (kmt)
2,329
2,299
2,381
2,464
9,473
2,365
2,415
2,549
Intersegment shipments (kmt)
972
1,070
1,049
981
4,072
1,075
987
1,135
Average realized third-party price per
metric ton of alumina
$
385
$
376
$
324
$
291
$
343
$
299
$
250
$
274
Third-party sales
$
897
$
864
$
771
$
718
$
3,250
$
707
$
603
$
697
Intersegment sales
$
417
$
445
$
369
$
330
$
1,561
$
336
$
289
$
329
Segment Adjusted EBITDA(2)
$
372
$
369
$
223
$
133
$
1,097
$
193
$
88
$
119
Depreciation and amortization
$
48
$
55
$
54
$
57
$
214
$
49
$
37
$
41
Equity income (loss)
$
12
$
3
$
—
$
(9
)
$
6
$
(9
)
$
(8
)
$
(4
)
Aluminum:
Primary aluminum production (kmt)
537
533
530
535
2,135
564
581
559
Third-party aluminum shipments(3)
(kmt)
709
724
708
718
2,859
725
789
767
Average realized third-party price per
metric ton of primary aluminum
$
2,219
$
2,167
$
2,138
$
2,042
$
2,141
$
1,988
$
1,694
$
1,904
Third-party sales
$
1,735
$
1,757
$
1,677
$
1,634
$
6,803
$
1,598
$
1,475
$
1,607
Intersegment sales
$
3
$
4
$
4
$
6
$
17
$
3
$
2
$
2
Segment Adjusted EBITDA(2)
$
(96
)
$
3
$
43
$
75
$
25
$
62
$
(34
)
$
116
Depreciation and amortization
$
89
$
85
$
88
$
84
$
346
$
81
$
79
$
80
Equity (loss) income
$
(22
)
$
(17
)
$
(5
)
$
(5
)
$
(49
)
$
5
$
(12
)
$
(6
)
Reconciliation of total segment
Adjusted
EBITDA to consolidated net (loss)
income
attributable to Alcoa
Corporation:
Total Segment Adjusted EBITDA(2)
$
402
$
484
$
400
$
340
$
1,626
$
375
$
185
$
359
Unallocated amounts:
Transformation(4)
2
3
(6
)
(6
)
(7
)
(16
)
(10
)
(11
)
Intersegment eliminations
86
(1
)
25
40
150
(8
)
30
(35
)
Corporate expenses(5)
(24
)
(28
)
(27
)
(22
)
(101
)
(27
)
(21
)
(24
)
Provision for depreciation, depletion, and
amortization
(172
)
(174
)
(184
)
(183
)
(713
)
(170
)
(152
)
(161
)
Restructuring and other charges, net
(113
)
(370
)
(185
)
(363
)
(1,031
)
(2
)
(37
)
(5
)
Interest expense
(30
)
(30
)
(30
)
(31
)
(121
)
(30
)
(32
)
(41
)
Other (expenses) income, net
(41
)
(50
)
(27
)
(44
)
(162
)
132
(51
)
(45
)
Other(6)
(18
)
(11
)
(18
)
(32
)
(79
)
(35
)
(17
)
(15
)
Consolidated income (loss) before income
taxes
92
(177
)
(52
)
(301
)
(438
)
219
(105
)
22
Provision for income taxes
(150
)
(116
)
(95
)
(54
)
(415
)
(80
)
(45
)
(42
)
Net (income) loss attributable to
noncontrolling interest
(141
)
(109
)
(74
)
52
(272
)
(59
)
(47
)
(29
)
Consolidated net (loss) income
attributable to Alcoa Corporation
$
(199
)
$
(402
)
$
(221
)
$
(303
)
$
(1,125
)
$
80
$
(197
)
$
(49
)
The difference between segment
totals and consolidated amounts is in Corporate.
(1)
Production amounts can vary from
total shipments due primarily to differences between the equity
allocation of production and off-take agreements with the
respective equity investment.
(2)
Alcoa Corporation’s definition of
Adjusted EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation,
depletion, and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. The Adjusted EBITDA presented may not be comparable
to similarly titled measures of other companies.
(3)
The Aluminum segment’s
third-party aluminum shipments are composed of both primary
aluminum and flat-rolled aluminum.
(4)
Transformation includes, among
other items, the Adjusted EBITDA of previously closed
operations.
(5)
Corporate expenses are composed
of general administrative and other expenses of operating the
corporate headquarters and other global administrative facilities,
as well as research and development expenses of the corporate
technical center.
(6)
Other includes certain items that
impact Cost of goods sold and Selling, general administrative, and
other expenses on Alcoa Corporation’s Statement of Consolidated
Operations that are not included in the Adjusted EBITDA of the
reportable segments, including those described as “Other special
items” (see footnote 1 to the reconciliation of Adjusted Income
within Calculation of Financial Measures included in this
release).
Alcoa Corporation and
Subsidiaries
Calculation of Financial Measures
(unaudited)
(in millions, except per-share
amounts)
Adjusted Income
(Loss) Income
Diluted EPS(4)
Quarter ended
Quarter ended
September 30,
2020
June 30,
2020
September 30,
2019
September 30,
2020
June 30,
2020
September 30,
2019
Net loss attributable to Alcoa
Corporation
$
(49
)
$
(197
)
$
(221
)
$
(0.26
)
$
(1.06
)
$
(1.19
)
Special items:
Restructuring and other charges, net
5
37
185
Other special items(1)
14
15
7
Discrete tax items and interim tax
impacts(2)
(184
)
142
(32
)
Tax impact on special items(3)
(3
)
(1
)
(12
)
Noncontrolling interest impact(3)
(1
)
—
(9
)
Subtotal
(169
)
193
139
Net loss attributable to Alcoa Corporation
– as adjusted
$
(218
)
$
(4
)
$
(82
)
$
(1.17
)
$
(0.02
)
$
(0.44
)
Net loss attributable to Alcoa
Corporation – as adjusted is a non-GAAP financial measure.
Management believes this measure is meaningful to investors because
management reviews the operating results of Alcoa Corporation
excluding the impacts of restructuring and other charges, various
tax items, and other special items (collectively, “special items”).
There can be no assurances that additional special items will not
occur in future periods. To compensate for this limitation,
management believes it is appropriate to consider both Net loss
attributable to Alcoa Corporation determined under GAAP as well as
Net loss attributable to Alcoa Corporation – as adjusted.
(1)
Other special items include the
following:
•
for the quarter ended September
30, 2020, costs related to the restart process at the Bécancour,
Canada smelter ($7), a net unfavorable change in certain
mark-to-market energy derivative instruments ($4), and external
costs related to portfolio actions ($3);
•
for the quarter ended June 30,
2020, costs related to the restart process at the Bécancour, Canada
smelter ($17), a net favorable change in certain mark-to-market
energy derivative instruments ($3), and external costs related to
portfolio actions ($1); and,
•
for the quarter ended September
30, 2019, costs related to the restart process at the Bécancour,
Canada smelter ($12), a gain on the sale of excess land ($7), and
charges for other special items ($2).
(2)
Discrete tax items and interim
tax impacts are the result of discrete transactions and interim
period tax impacts based on full-year assumptions and include the
following:
•
for the quarter ended September
30, 2020, a net benefit of interim tax impacts ($182) and a net
benefit of several other items ($2);
•
for the quarter ended June 30,
2020, a net charge of interim tax impacts ($142); and,
•
for the quarter ended September
30, 2019, a net benefit of interim tax impacts ($40) and a net
charge of several other items ($8).
(3)
The tax impact on special items
is based on the applicable statutory rates in the jurisdictions
where the special items occurred. The noncontrolling interest
impact on special items represents Alcoa’s partner’s share of
certain special items.
(4)
In any given period, the average
number of shares applicable to diluted EPS for Net loss
attributable to Alcoa Corporation common shareholders may exclude
certain share equivalents as their effect is anti-dilutive.
However, certain of these share equivalents may become dilutive in
the EPS calculation applicable to Net loss attributable to Alcoa
Corporation common shareholders – as adjusted due to a larger
and/or positive numerator. Specifically, for all periods presented,
the average number of share equivalents applicable to diluted EPS –
as adjusted had an anti-dilutive effect, and therefore, are
excluded from the diluted EPS calculation.
Alcoa Corporation and
Subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
September 30,
2020
June 30,
2020
September 30,
2019
Net loss attributable to Alcoa
Corporation
$
(49
)
$
(197
)
$
(221
)
Add:
Net income attributable to noncontrolling
interest
29
47
74
Provision for income taxes
42
45
95
Other expenses, net
45
51
27
Interest expense
41
32
30
Restructuring and other charges, net
5
37
185
Provision for depreciation, depletion, and
amortization
161
152
184
Adjusted EBITDA
274
167
374
Special items(1)
10
18
14
Adjusted EBITDA, excluding special
items
$
284
$
185
$
388
Alcoa’s Corporation’s definition of Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. Adjusted EBITDA is a
non-GAAP financial measure. Management believes this measure is
meaningful to investors because Adjusted EBITDA provides additional
information with respect to Alcoa Corporation’s operating
performance and the Company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies.
(1)
Special items include the
following (see reconciliation of Adjusted Income above for
additional information):
•
for the quarter ended September
30, 2020, costs related to the restart process at the Bécancour,
Canada smelter ($7) and external costs related to portfolio actions
($3);
•
for the quarter ended June 30,
2020, costs related to the restart process at the Bécancour, Canada
smelter ($17) and external costs related to portfolio actions ($1);
and,
•
for the quarter ended September
30, 2019, costs related to the restart process at the Bécancour,
Canada smelter ($12) and charges for other special items ($2).
Alcoa Corporation and
Subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
September 30,
2020
June 30,
2020
September 30,
2019
Cash provided from operations
$
158
$
288
$
174
Capital expenditures
(74
)
(77
)
(87
)
Free cash flow
$
84
$
211
$
87
Free Cash Flow is a non-GAAP financial
measure. Management believes this measure is meaningful to
investors because management reviews cash flows generated from
operations after taking into consideration capital expenditures,
which are both necessary to maintain and expand Alcoa Corporation’s
asset base and expected to generate future cash flows from
operations. It is important to note that Free Cash Flow does not
represent the residual cash flow available for discretionary
expenditures since other non-discretionary expenditures, such as
mandatory debt service requirements, are not deducted from the
measure.
Net Debt
September 30,
2020
December 31,
2019
Short-term borrowings
$
—
$
—
Long-term debt due within one year
2
1
Long-term debt, less amount due within one
year
2,538
1,799
Total debt
2,540
1,800
Less: Cash and cash equivalents
1,736
879
Net debt
$
804
$
921
Net debt is a non-GAAP financial measure.
Management believes this measure is meaningful to investors because
management assesses Alcoa Corporation’s leverage position after
considering available cash that could be used to repay outstanding
debt.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201014005881/en/
Investor Contact: James Dwyer +1 412 992 5450
James.Dwyer@alcoa.com
Media Contact: Jim Beck +1 412 315 2909
Jim.Beck@alcoa.com
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