Company grew profits sequentially on stronger
alumina and aluminum pricing
Alcoa Corporation (NYSE: AA):
1Q 2017 Results1
- Net income of $225 million, or $1.21
per share
- Excluding special items, adjusted net
income of $117 million, or $0.63 per share
- Adjusted earnings before interest, tax,
depreciation, and amortization (EBITDA), excluding special items of
$533 million, up 59 percent sequentially driven by higher alumina
and aluminum pricing
- Revenue of $2.7 billion, up 5 percent
sequentially, reflecting increased alumina and aluminum
pricing
- $804 million cash balance and $1.45
billion of debt, for net debt of $0.65 billion, as of March 31,
2017
- Company continues to expect full-year
2017 adjusted EBITDA, excluding special items, between $2.1 billion
and $2.3 billion2
$M, except per
share amounts
1Q16 4Q16
1Q17 Revenue $ 2,129 $ 2,537 $ 2,655
Net (loss) income attributable to Alcoa Corporation $ (210 ) $ (125
) $ 225 Earnings per share attributable to Alcoa Corporation
$ (1.15 ) $ (0.68 ) $ 1.21 Adjusted (loss) income $
(114 ) $ 26 $ 117 Adjusted earnings per share $ (0.62 )
$ 0.14 $ 0.63 Adjusted EBITDA excluding
special items $ 179 $ 335 $ 533
______________________________________________________________________
1 Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the financial results of Alcoa Corporation for the
quarter ended March 31, 2016 and for the month of October 2016
included in the quarter ended December 31, 2016 were also prepared
on a carve-out basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
combined results of operations, financial position, and cash flows
had it been a standalone company during the referenced periods. See
the Consolidated Financial Statements included in the Company’s
Form 10-K for the period ended December 31, 2016 filed with the
United States Securities and Exchange Commission on March 15, 2017
for additional information.
2 Based on actual results for 1Q17, outlook for 2Q17 – 4Q17 at
$1,900 LME, $305 API, and updated regional premiums and foreign
currencies.
______________________________________________________________________
Alcoa Corporation (NYSE: AA), a global leader in bauxite,
alumina, and aluminum products, today reported that first quarter
2017 profits grew sequentially on stronger alumina and aluminum
pricing and that it maintained a solid cash position.
In addition, the Company reiterated its expectations of
full-year 2017 adjusted EBITDA, excluding special items, between
$2.1 billion and $2.3 billion, based on April 2017 market
assumptions, and net performance of $50 million for the year.
“Alcoa is off to a strong start with our first full quarter as
an independent company,” said Roy Harvey, Chief Executive Officer
of Alcoa. “In our Bauxite segment, our third-party business
remained strong and we continued to grow profits, while our Alumina
and Aluminum segments captured the benefits of improved market
pricing to increase earnings substantially.”
Harvey continued: “Over the last few months, we also remained
focused on our strategic priorities. To reduce complexity, we
consolidated our business units and administrative locations; we
began to put our return seeking capital to work across our
businesses to drive returns, and we continued to strengthen the
balance sheet by maintaining a healthy level of cash on hand. As we
look forward to the rest of 2017, we are well positioned to deliver
value to our stockholders.”
In first quarter 2017, Alcoa reported net income of $225
million, or $1.21 per share. Results include $108 million of
special items largely due to gains from the sale of the Yadkin
Hydroelectric Project. First quarter 2017 results compare to a net
loss of $125 million, or $(0.68) per share, in fourth quarter 2016,
which included costs to streamline the portfolio.
Excluding the impact of special items, first quarter 2017
adjusted net income was $117 million, or $0.63 per share. In fourth
quarter 2016, Alcoa’s adjusted net income was $26 million, or $0.14
per share, excluding special items.
Alcoa reported first quarter 2017 adjusted EBITDA excluding
special items of $533 million, up 59 percent from $335 million in
fourth quarter 2016. In first quarter 2017, Alcoa reported revenue
of $2.7 billion, up 5 percent sequentially. Both revenue and
adjusted EBITDA excluding special items increased on higher alumina
and aluminum pricing.
In the first quarter, the Company’s cash from operations was $74
million and free cash flow was $3 million. Alcoa ended the first
quarter of 2017 with cash on hand of $804 million after
transferring the net proceeds received from the Yadkin sale to
former parent Arconic Inc. according to terms of the separation
agreement. The Company reported 19 days working capital.
In an ongoing effort to reduce complexity, in the first quarter
Alcoa streamlined its business segments into three, focused on
bauxite, alumina and aluminum. Earlier this month, the Company also
announced a consolidation of its administrative locations.
Market Update
For 2017, Alcoa is projecting 2017 global aluminum demand growth
of 4.5 to 5 percent over 2016. The Company continues to project
relatively balanced global bauxite and alumina markets and a modest
global aluminum surplus of 300 thousand to 700 thousand metric
tons.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 PM
Eastern Daylight Time (EDT) on Monday, April 24, 2017 to present
first quarter 2017 results and discuss its business and
markets.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will
be available for viewing at approximately 4:15 PM EDT on April 24,
2017 on the same website. Call information and related details are
available under the “Investors” section at
www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding Company
developments and financial performance through its website at
www.alcoa.com.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, with a strong portfolio of
value-added cast and rolled products and substantial energy assets.
Alcoa is built on a foundation of strong values and operating
excellence dating back nearly 130 years to the world-changing
discovery that made aluminum an affordable and vital part of modern
life. Since inventing 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. Visit
us online on www.alcoa.com, follow @Alcoa on Twitter and on
Facebook at www.facebook.com/Alcoa.
We have included the above website addresses only as inactive
textual references and do not intend these to be active links to
such websites. Information contained on such websites or that can
be accessed through such websites does not constitute a part of
this press release.
Forward-Looking Statements
This press release contains statements that relate to future
events and expectations and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results or operating performance; and statements about
strategies, outlook, business and financial prospects. These
statements reflect beliefs and assumptions that are based on Alcoa
Corporation’s perception of historical trends, current conditions
and expected future developments, as well as other factors that
management believes are appropriate in the circumstances.
Forward-looking statements are not guarantees of future performance
and are subject to known and unknown risks, uncertainties, and
changes in circumstances that are difficult to predict. Although
Alcoa Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) material adverse changes in aluminum
industry conditions, including global supply and demand conditions
and fluctuations in London Metal Exchange-based prices and
premiums, as applicable, for primary aluminum, 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 Corporation; (d) the impact of changes in foreign currency
exchange rates on costs and results; (e) increases in energy costs;
(f) changes in discount rates or investment returns on pension
assets; (g) the inability to achieve the level of revenue growth,
cash generation, cost savings, improvement in profitability and
margins, fiscal discipline, or strengthening of competitiveness and
operations anticipated from restructuring programs and productivity
improvement, cash sustainability, technology advancements, and
other initiatives; (h) the inability to realize expected benefits,
in each case as planned and by targeted completion dates, from
acquisitions, divestitures, facility closures, curtailments,
restarts, expansions, or joint ventures; (i) political, economic,
and regulatory risks in the countries in which Alcoa Corporation
operates or sells products; (j) the outcome of contingencies,
including legal proceedings, government or regulatory
investigations, and environmental remediation; (k) the impact of
cyberattacks and potential information technology or data security
breaches; and (l) the other risk factors discussed in Item 1A of
Alcoa Corporation’s Form 10-K for the fiscal year ended December
31, 2016 and other reports filed by Alcoa Corporation with the U.S.
Securities and Exchange Commission. 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 discussed above and other risks in the
market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa’s consolidated financial information but is not presented in
Alcoa’s financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
(GAAP). Certain of these data are considered “non-GAAP financial
measures” under SEC rules. These non-GAAP financial measures
supplement our GAAP disclosures and should not be considered in
isolation from, or as an alternative to, the GAAP measure.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Alcoa Corporation and subsidiaries Statement of
Consolidated Operations (unaudited) (dollars in millions,
except per-share amounts) Quarter ended March
31,
December 31,
March 31,
2016(2)(3)
2016(2)
2017 Sales $ 2,129 $ 2,537 $ 2,655 Cost
of goods sold (exclusive of expenses below) 1,866 2,123 2,043
Selling, general administrative, and other expenses 85 92 72
Research and development expenses 11 7 7 Provision for
depreciation, depletion, and amortization 177 182 179 Restructuring
and other charges 84 209 10 Interest expense 64 46 26 Other
expenses (income), net
39
1 (100 ) Total
costs and expenses 2,326 2,660 2,237 (Loss) income before
income taxes (197 ) (123 ) 418 Provision for income taxes
18 6
110 Net (loss) income (215 ) (129 ) 308
Less: Net (loss) income attributable to noncontrolling
interest
(5 )
(4 )
83
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$ (210 )
$ (125
)
$ 225
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS(1):
Basic: Net (loss) income $ (1.15 ) $ (0.68 ) $ 1.23 Average number
of shares 182,471,195 182,688,806 183,816,083 Diluted: Net
(loss) income $ (1.15 ) $ (0.68 ) $ 1.21 Average number of shares
182,471,195 182,688,806 186,303,547 Shipments of
aluminum products (metric tons) 764,000 852,000
801,000
(1) The respective basic and diluted earnings per share for
the quarter ended March 31, 2016 was calculated based on the
182,471,195 shares of Alcoa Corporation common stock distributed on
November 1, 2016 in conjunction with the completion of Alcoa
Corporation’s separation from its former parent company and are
considered pro forma in nature. Prior to November 1, 2016, Alcoa
Corporation did not have any issued and outstanding common stock.
(2)
Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the results of operations of
Alcoa Corporation for the quarter ended March 31, 2016 and for the
month of October 2016 included in the quarter ended December 31,
2016 were prepared on such basis. The carve-out financial
statements of Alcoa Corporation are not necessarily indicative of
Alcoa Corporation’s combined results of operations had it been a
standalone company during the referenced periods. See the
Consolidated Financial Statements included in Alcoa Corporation’s
Annual Report on Form 10-K for the period ended December 31, 2016
filed with the United States Securities and Exchange Commission on
March 15, 2017 for additional information.
(3) In preparing the Statement of Consolidated Operations
for the year ended December 31, 2016, management discovered that
the amount of Cost of goods sold previously reported for the
quarter ended March 31, 2016 included an immaterial error due to an
under-allocation of LIFO expense of $7. As a result, management has
revised Cost of goods sold from the $1,859 previously reported to
$1,866 and Net loss attributable to Alcoa Corporation from the
$(203) previously reported to $(210).
Alcoa Corporation and subsidiaries Consolidated Balance
Sheet (unaudited) (in millions) December
31, March 31, 2016 2017 ASSETS Current
assets: Cash and cash equivalents $ 853 $ 804 Receivables from
customers 668 708 Other receivables 166 174 Inventories 1,160 1,294
Prepaid expenses and other current assets
334
424 Total current assets
3,181 3,404
Properties, plants, and equipment 22,550 23,070 Less: accumulated
depreciation, depletion, and amortization
13,225 13,642
Properties, plants, and equipment, net
9,325
9,428 Investments 1,358 1,393
Deferred income taxes 741 814 Fair value of derivative contracts
468 357 Other noncurrent assets
1,668
1,680 Total assets
$
16,741 $ 17,076
LIABILITIES Current liabilities: Accounts payable,
trade $ 1,455 $ 1,434 Accrued compensation and retirement costs 456
425 Taxes, including income taxes 147 176 Other current liabilities
742 568 Long-term debt due within one year
21
20 Total current liabilities
2,821 2,623
Long-term debt, less amount due within one year 1,424 1,431 Accrued
pension benefits 1,851 1,813 Accrued other postretirement benefits
1,166 1,154 Asset retirement obligations 604 635 Environmental
remediation 264 263 Noncurrent income taxes 310 352 Other
noncurrent liabilities and deferred credits
604
642 Total liabilities
9,044 8,913
EQUITY Alcoa Corporation shareholders’ equity: Common stock 2 2
Additional capital 9,531 9,553 Retained (deficit) earnings (104 )
121 Accumulated other comprehensive loss
(3,775
)
(3,800 ) Total Alcoa Corporation
shareholders' equity
5,654
5,876 Noncontrolling interest
2,043 2,287 Total
equity
7,697 8,163
Total liabilities and equity
$
16,741 $ 17,076
Alcoa Corporation and subsidiaries
Statement of Consolidated Cash Flows (unaudited) (in
millions) Three months ended March 31,
2016(3)
2017 CASH FROM OPERATIONS Net (loss)
income $ (215 ) $ 308
Adjustments to reconcile net (loss) income
to cash from operations:
Depreciation, depletion, and amortization 177 179 Deferred income
taxes - 23 Equity income, net of dividends 4 (1 ) Restructuring and
other charges 84 10 Net gain (loss) from investing activities –
asset sales 2 (120 ) Net periodic pension benefit cost 11 28
Stock-based compensation 8
7
Other 6
9
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments: (Increase) decrease in receivables (23 ) 7 Decrease
(increase) in inventories 8 (102 ) Decrease in prepaid expenses and
other current assets -
13
(Decrease) in accounts payable, trade (152 ) (45 ) (Decrease) in
accrued expenses (205 ) (181 ) (Decrease) in taxes, including
income taxes (60 ) (17 ) Pension contributions (14 ) (21 ) Decrease
(increase) in noncurrent assets 14 (3 ) (Decrease) in noncurrent
liabilities
(4 )
(20 ) CASH (USED FOR) PROVIDED FROM OPERATIONS
(359 ) 74
FINANCING ACTIVITIES Net transfers from Parent Company 302 -
Cash paid to Arconic related to separation(1) - (238 ) Net change
in short-term borrowings (original maturities of three months or
less) (1 ) 2
Additions to debt (original maturities
greater than three months)
-
2
Payments on debt (original maturities greater than three months) (4
) (5 )
Proceeds from the exercise of employee
stock options
-
18
Contributions from noncontrolling interest - 24 Distributions to
noncontrolling interest (50 ) (57 ) Other
-
(6
) CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES
247 (260 )
INVESTING ACTIVITIES Capital expenditures (86 ) (71 )
Proceeds from the sale of assets and
businesses(2)
(13 ) 238 Additions to investments (3 ) (25 ) Net change in
restricted cash
(1 )
(11 )
CASH (USED FOR) PROVIDED FROM INVESTING ACTIVITIES
(103 )
131
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
17
6
Net change in cash and cash equivalents (198 ) (49 ) Cash
and cash equivalents at beginning of year
557
853
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
$ 359 $
804
(1)
On November 1, 2016, Alcoa Corporation
separated from its former parent company (now named Arconic Inc.)
into a standalone, publicly-traded company. In
accordance with the terms of the related Separation and
Distribution Agreement, Alcoa Corporation paid to Arconic Inc. the
net after-tax proceeds of $238 from the sale of the Yadkin
Hydroelectric Project.
(2)
Proceeds from the sale of assets and
businesses for the three months ended March 31, 2016 includes a
cash outflow for cash paid as a result of a post-closing adjustment
associated with the December 2014 divestiture of an ownership stake
in a smelter in the United States.
(3)
Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent company’s
financial statements. Accordingly, the cash flows of
Alcoa Corporation for the three months ended March 31, 2016 were
prepared on such basis. The carve-out financial
statements of Alcoa Corporation are not necessarily indicative of
Alcoa Corporation’s consolidated cash flows had it been a
standalone company during the referenced periods. See
the Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on
Form 10-K for the period ended December 31, 2016 filed with the
United States Securities and Exchange Commission on October 11,
2016 and March 15, 2017, respectively, for additional
information.
Alcoa
Corporation and subsidiaries
Segment Information(1),(2)
(unaudited)
(dollars in millions; alumina and aluminum production and
shipments in thousands of metric tons [kmt])
1Q16 2Q16
3Q16 4Q16
2016 1Q17 Bauxite:
Production(3) (million dry metric
tons)
11.3 10.8 11.1 11.8 45.0 11.1
Total shipments (million dry metric
tons)
11.2 11.8 11.7 12.2 46.9 11.6 Third-party sales $ 44 $ 87 $ 93 $ 91
$ 315 $ 70 Intersegment sales $ 175 $ 182 $ 192 $ 202 $ 751 $ 219
Adjusted EBITDA $ 77 $ 99 $ 97 $ 102 $ 375 $ 110 Depreciation,
depletion, and amortization $ 17 $ 19
$ 21 $ 20 $ 77 $
18
Alumina: Production (kmt) 3,330 3,316 3,310
3,295 13,251 3,211 Third-party shipments (kmt) 2,168 2,266 2,361
2,276 9,071 2,255 Intersegment shipments (kmt) 1,257 1,137 1,140
1,169 4,703 947 Third-party sales $ 496 $ 601 $ 585 $ 618 $ 2,300 $
734 Intersegment sales $ 292 $ 321 $ 317 $ 377 $ 1,307 $ 361
Adjusted EBITDA $ 15 $ 114 $ 78 $ 171 $ 378 $ 297 Depreciation and
amortization $ 45 $ 47 $ 47 $ 47 $ 186 $ 49 Equity (loss) income
$ (14 ) $ (7 ) $ (9 ) $ (10 ) $
(40 ) $ 1
Aluminum: Primary aluminum
production (kmt) 600 595 586 587 2,368 559 Third-party aluminum
shipments (kmt) 764 770 761 852 3,147 801 Third-party sales $ 1,552
$ 1,597 $ 1,600 $ 1,782 $ 6,531 $ 1,806 Intersegment sales $ 34 $ 2
$ 2 $ 4 $ 42 $ 4 Adjusted EBITDA $ 165 $ 180 $ 183 $ 152 $ 680 $
206 Depreciation and amortization $ 103 $ 104 $ 103 $ 104 $ 414 $
101 Equity loss $ (7 ) $ (10 ) $ (7 ) $
– $ (24 ) $ (7 )
Reconciliation of
total segment Adjusted EBITDA to consolidated net (loss) income
attributable to Alcoa Corporation: Total segment Adjusted
EBITDA $ 257 $ 393 $ 358 $ 425 $ 1,433 $ 613 Unallocated amounts:
Impact of LIFO 18 (1 ) 1 (28 ) (10 ) (14 ) Metal price lag 2 2 1 4
9 6 Corporate expense (36 ) (50 ) (47 ) (44 ) (177 ) (33 )
Provision for depreciation, depletion, and amortization
(177
)
(178
)
(181
)
(182
)
(718
)
(179
)
Restructuring and other charges (84 ) (8 ) (17 ) (209 ) (318 ) (10
) Interest expense (64 ) (66 ) (67 ) (46 ) (243 ) (26 ) Other
(expenses) income, net (39 ) 23 106 (1 ) 89 100 Other
(74 ) (59 ) (52 ) (42 )
(227 ) (39 ) Consolidated (loss) income
before income taxes (197 ) 56 102 (123 ) (162 ) 418 Provision for
income taxes (18 ) (68 ) (92 ) (6 ) (184 ) (110 ) Net loss (income)
attributable to noncontrolling interest
5
(43
)
(20
)
4
(54
)
(83
)
Consolidated net (loss) income attributable to Alcoa Corporation
$
(210
)
$
(55
)
$
(10
)
$
(125
)
$
(400
)
$
225
The difference between certain segment totals and
consolidated amounts is in Corporate.
(1)
Effective in the first quarter of 2017, management elected to
change the profit and loss measure of Alcoa Corporation’s
reportable segments from After-tax operating income (ATOI) to
Adjusted EBITDA (Earnings before interest, taxes, depreciation, and
amortization) for internal reporting and performance measurement
purposes. This change was made to enhance the transparency and
visibility of the underlying operating performance of each segment.
Alcoa Corporation calculates Adjusted EBITDA as Total sales
(third-party and intersegment) minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
and Research and development expenses. Previously, Alcoa
Corporation calculated ATOI as Adjusted EBITDA minus (plus) the
following items: Provision for depreciation, depletion, and
amortization; Equity loss (income); Loss (gain) on certain asset
sales; and Income taxes. Alcoa Corporation’s Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.
Also effective in the first quarter of 2017, management
combined Alcoa Corporation’s aluminum smelting, casting, and
rolling businesses, along with the majority of the energy business,
into a new Aluminum business unit. This new business unit is
managed as a single operating segment. Prior to this change, each
of these businesses were managed separately and comprised the
Aluminum, Cast Products, Energy, and Rolled Products segments. As a
result, Alcoa Corporation’s operating and reportable segments are
Bauxite, Alumina, and Aluminum. Segment information for all
prior periods presented was revised to reflect the new segment
structure, as well as the new measure of profit and loss.
(2) Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the financial results of Alcoa Corporation for all
periods prior to fourth quarter 2016 were prepared on such basis.
Additionally, the financial results of Alcoa Corporation for the
first month of fourth quarter 2016 were also prepared on a
carve-out basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
consolidated results of operations, financial position, and cash
flows had it been a standalone company during the referenced
periods. See the Combined Financial Statements included in Exhibit
99.1 to Alcoa Corporation’s Form 10 Registration Statement and the
Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the period ended December 31, 2016 filed
with the United States Securities and Exchange Commission on
October 11, 2016 and March 15, 2017, respectively, for additional
information.
(3)
The production amounts do not include
additional bauxite that Alcoa is entitled to receive (i.e. an
amount in excess of its equity ownership interest) from certain
other partners at the mine in Guinea.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited) (in
millions, except per-share amounts)
Adjusted (Loss) Income
(Loss) Income Diluted EPS(2) Quarter
ended Quarter ended
March
31,2016(1)
December
31,2016(1)
March
31,2017
March
31,2016(1)
December
31,2016(1)
March
31,2017
Net (loss) income attributable to Alcoa Corporation $
(210
) $ (125 ) $ 225 $ (1.15 ) $ (0.68 ) $ 1.21 Special items:
Restructuring and other charges
84
209
10
Discrete tax items(3)
5
(11
)
(2
)
Other special items(4)
12
30
(124
)
Tax impact(5)
(5
) (22 ) 5 Noncontrolling interest impact(5)
–
(55
)
3
Subtotal
96
151 (108 )
Net (loss) income attributable to Alcoa Corporation – as
adjusted
$
(114
)
$
26
$
117
(0.62
)
0.14
0.63
Net (loss) income attributable to Alcoa Corporation – 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 Corporation excluding the impacts of
restructuring and other charges, discrete tax items, and other
special items (collectively, “special items”). There can be no
assurances that additional special items will not occur in future
periods. To compensate for this limitation, management believes
that it is appropriate to consider both Net (loss) income
attributable to Alcoa Corporation determined under GAAP as well as
Net (loss) income attributable to Alcoa Corporation – as adjusted.
(1) Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
quarter ended March 31, 2016 and for the month of October 2016
included in the quarter ended December 31, 2016 were prepared on
such basis. The carve-out financial statements of Alcoa Corporation
are not necessarily indicative of Alcoa Corporation’s consolidated
results of operations had it been a standalone company during the
referenced periods. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the period ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information. (2) In any given period, the
average number of shares applicable to diluted EPS for Net (loss)
income 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) income attributable to
Alcoa Corporation common shareholders – as adjusted due to a larger
and/or positive numerator. Specifically, for the quarter
ended December 31, 2016, share equivalents associated with
outstanding employee stock options and awards were dilutive based
on Net income attributable to Alcoa Corporation common shareholders
– as adjusted, resulting in a diluted average number of shares of
184,448,353, and for the quarter ended March 31, 2017, no
additional share equivalents were dilutive based on Net income
attributable to Alcoa common shareholders – as adjusted, resulting
in a diluted average number of shares of 186,303,547. Prior
to November 1, 2016, Alcoa Corporation did not have any issued and
outstanding common stock. As such, the respective basic and diluted
EPS related to both Net loss attributable to Alcoa Corporation and
Net loss attributable to Alcoa Corporation – as adjusted for the
quarter ended March 31, 2016 were calculated based on the
182,471,195 shares of Alcoa Corporation common stock distributed on
November 1, 2016 in conjunction with the completion of Alcoa
Corporation’s separation from its former parent company and are
considered pro forma in nature. (3) Discrete tax items
include the following:
•
for the quarter ended March 31, 2016, a
net charge for a number of small items;
•
for the quarter ended December 31, 2016, a
benefit for the remeasurement of certain deferred tax assets of a
subsidiary in Brazil due to a tax rate change; and
•
for the quarter ended March 31, 2017, a
net benefit for a number of small items.
(4) Other special items include the following:
•
for the quarter ended March 31, 2016,
costs associated with the then-planned separation of Alcoa
Corporation from its former parent company ($9) and a write-down of
inventory related to the permanent closure of a smelter in the
United States ($3);
•
for the quarter ended December 31, 2016,
costs associated with the separation of Alcoa Corporation from its
former parent company ($19), interest expense incurred in October
2016 related to debt that was issued in September 2016 in
preparation for the separation of Alcoa Corporation from its former
parent company (completed on November 1, 2016) ($8), a net
unfavorable change in certain mark-to-market energy derivative
contracts ($2), and an inventory adjustment at a curtailed refinery
in the United States ($1); and
•
for the quarter ended March 31, 2017, a
gain on the sale of the Yadkin Hydroelectric Project in the United
States ($120) and a net favorable change in certain mark-to-market
energy derivative contracts ($4).
(5) 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 partners’ share of certain special items.
Alcoa Corporation and subsidiaries Calculation of
Financial Measures (unaudited), continued (in millions)
Adjusted EBITDA
Quarter ended
March 31,
2016(1)
December 31,
2016(1)
March 31,
2017
Net (loss) income attributable to Alcoa
Corporation
$
(210
) $ (125 ) $ 225 Add: Net (loss) income attributable to
noncontrolling interest
(5
)
(4
)
83
Provision for income taxes
18
6 110 Other expenses (income), net
39
1 (100 ) Interest expense
64
46 26 Restructuring and other charges
84
209 10 Provision for depreciation, depletion, and amortization
177
182
179
Adjusted EBITDA
$
167
$ 315 $
533 Special items(2)
12
20 –
Adjusted EBITDA, excluding special items
$
179
$
335
$
533
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 that 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) Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
quarter ended March 31, 2016 and for the month of October 2016
included in the quarter ended December 31, 2016 were prepared on
such basis. The carve-out financial statements of Alcoa Corporation
are not necessarily indicative of Alcoa Corporation’s consolidated
results of operations had it been a standalone company during the
referenced periods. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the period ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information. (2) Special items include the
following (see reconciliation of Adjusted (Loss) Income above for
additional information):
•
for the quarter ended March 31, 2016, costs associated with the
then-planned separation of Alcoa Corporation from its former parent
company ($9) and a write-down of inventory related to the permanent
closure of a smelter in the United States ($3); and
•
for the quarter ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company
($19) and an inventory adjustment at a curtailed refinery in the
United States ($1).
Alcoa Corporation and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow Quarter ended
December 31,
2016(1)
March 31,
2017
Cash from operations
$
239
$ 74 Capital expenditures
(146
)
(71
)
Free cash flow
$
93
$ 3 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 Corporation’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. (1)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the cash flows of Alcoa Corporation for the month of
October 2016 included in the quarter ended December 31, 2016 were
prepared on such basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
consolidated cash flows had it been a standalone company during the
referenced periods. See the Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the period ended December
31, 2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and March 15, 2017, respectively,
for additional information.
Net Debt December 31, March 31, 2016
2017 Short-term borrowings $ 1 $ 3 Long-term debt due
within one year 21 20 Long-term debt, less amount due within one
year
1,424 1,431 Total debt
$ 1,446 $ 1,454 Less: Cash and cash equivalents
853 804 Net debt
$ 593 $ 650 Net
debt is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after factoring in available
cash that could be used to repay outstanding debt.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170424006400/en/
Alcoa CorporationInvestor Contact:James Dwyer, +1
212-518-5450James.Dwyer@alcoa.comorMedia Contact:Monica Orbe, +1
212-518-5455Monica.Orbe@alcoa.com
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