Launching Two Strong Standalone
Companies Providing Shareholders with Two Distinct, Value-Creating
Investment Opportunities
- Upstream Company to be a highly
competitive global leader in bauxite, alumina and aluminum, with a
unique portfolio of value-add casthouses, and substantial energy
assets
- Value-Add Company to be a premier
innovator of high performance multi-material products and solutions
in attractive growth markets
- Transaction expected to be completed in
second half of 2016
- Alcoa to host conference call today at
8:00 AM Eastern Daylight Time
Lightweight metals leader Alcoa (NYSE:AA) is today announcing
that its Board of Directors has unanimously approved a plan to
separate into two independent, publicly-traded companies,
culminating Alcoa’s successful multi-year transformation. The
separation will launch two industry-leading, Fortune 500 companies.
The globally competitive Upstream Company will comprise five strong
business units that today make up Global Primary Products -
Bauxite, Alumina, Aluminum, Casting and Energy. The innovation and
technology-driven Value-Add Company will include Global Rolled
Products, Engineered Products and Solutions, and Transportation and
Construction Solutions. The transaction is expected to be completed
in the second half of 2016. At that point Alcoa shareholders will
own all of the outstanding shares of both the Upstream and
Value-Add Companies. The separation is intended to qualify as a
tax-free transaction to Alcoa shareholders for U.S. federal income
tax purposes.
Both independent companies will attract an investor base best
suited to their unique value proposition and operational and
financial characteristics. Both entities will be capitalized
prudently, with the Value-Add Company targeting an investment grade
rating and the Upstream Company a strong non-investment grade
rating. After the separation, the Upstream Company, with its strong
history in the aluminum and alumina markets, will operate under the
Alcoa name. The Value-Add Company will be named prior to
closing.
“In the last few years, we have successfully transformed Alcoa
to create two strong value engines that are now ready to pursue
their own distinctive strategic directions,” said Klaus Kleinfeld,
Chairman and Chief Executive Officer. “After steering the Company
through the deep downturn of 2008, we immediately went to work
reshaping the portfolio. We have repositioned the upstream
business; we have an enviable bauxite position and are unrivalled
in Alumina, we have optimized Aluminum, flexed our energy assets,
and turned our casthouses into a commercial success story. The
upstream business is now built to win throughout the cycle. Our
multi-material value-add business is a leader in attractive growth
markets. We have intensified innovation, made successful
acquisitions, shed businesses without product differentiation,
invested in smart organic growth, expanded our multi-materials
profile and brought key technologies to market; all while
significantly increasing profitability.”
Mr. Kleinfeld concluded, “Inventing and reinventing has defined
our Company throughout its 126-year history. With the unanimous
support of Alcoa’s Board we now take the next step; launching two
leading-edge companies, each with distinct and compelling
opportunities, and each ready to seize the future.”
Management Structure and Governance
Upon completion of the transaction, Klaus Kleinfeld will lead
the Value-Add Company as Chairman and Chief Executive Officer. He
will also serve as Chairman of the Upstream Company for the
critical initial phase, ensuring a smooth and effective transition.
Each company will have its own independent board of directors that
will include members of the current Alcoa Board. Full management
teams and boards for both companies will be named in the months
leading up to the launch of the two companies in the second half of
2016.
The Upstream Company
After the separation, the Upstream Company will be a
cost-competitive industry leader in bauxite mining, alumina
refining and aluminum production, positioned for success throughout
the market cycle. The company’s footprint will include 64
facilities worldwide, and approximately 17,000 employees. Revenues
for the 12 months through June 30, 2015 totaled $13.2 billion, with
$2.8 billion in EBITDA. It will be committed to disciplined capital
allocation and prudent return of capital to shareholders.
Global aluminum demand is expected to grow 6.5 percent in 2015
and double between 2010 and 2020; so far this decade, global demand
growth is tracking ahead of this projection. The Upstream Company
will be well-positioned to meet this robust demand.
The Upstream Company’s world-class asset base will include the
world’s largest bauxite mining portfolio, with 46 million bone dry
metric tons of production in 2014. It has a low 19th percentile
position on the global bauxite cost curve. With proximity to owned
refinery operations, its mining reserves will provide a consistent
supply of low-cost bauxite. Alcoa has been building its third-party
bauxite business and is well-positioned to meet growing global
demand.
The Upstream Company’s alumina refining system will be the
world’s largest, with operations well positioned to serve major
adjacent growth markets in Asia, the Middle East, and Latin
America. It has a 25th percentile, first quartile position on the
global alumina cost curve, with a target to reach the 21st
percentile by 2016.
The company will be the world’s fourth largest aluminum producer
with a highly competitive second quartile cost curve portfolio. It
will have an unrivalled value-add casthouse network in close
proximity to customers, and a substantial portfolio of energy
assets with power production capacity of approximately 1,550
megawatts with operational flexibility to profit from market
cyclicality.
Alcoa has aggressively reshaped its Alumina and Primary Metals
segments, closing, divesting or curtailing 1.4 million metric tons,
or 33 percent, of total smelting operating capacity since 2007. As
a result, Alcoa has dropped eight points on the global aluminum
cost curve since 2010 to the 43rd percentile, and is targeting the
38th percentile by 2016. Additionally, Alcoa has secured
approximately 75 percent of smelter power needs through 2022.
Alcoa has also steadily grown its offering of differentiated,
value-add aluminum products that are cast into specific shapes to
meet the needs of customers. The Company has grown total value-add
product shipments from its smelters from 57 percent in 2010 to 65
percent in 2014, delivering $1.3 billion in total incremental
margin. In 2015, value-add products are projected to represent
approximately 70 percent of smelter shipments. Alcoa has also
invested in the most advanced, low cost integrated aluminum complex
in the world in Saudi Arabia, with the refinery and smelter now
fully operational. Alcoa reformed pricing in the alumina market in
2010 by introducing the Alumina Price Index (API) to sell
smelter-grade alumina based on alumina market fundamentals rather
than London Metal Exchange pricing. In 2014, 68 percent of Alcoa’s
total third-party smelter-grade alumina shipments were based on
API/spot market pricing. That is projected to grow to approximately
75 percent in 2015. Additionally, the Upstream business has
achieved productivity gains of approximately $3.9 billion between
2009 and 2014.
The Value-Add Company
After the separation, the Value-Add Company will be a premier
provider of high-performance multi-material products and solutions
with 157 globally diverse operating locations and approximately
43,000 employees. Pro-forma revenues for the Value-Add Company for
the 12 months through June 30, 2015 totaled $14.5 billion, with
$2.2 billion in pro-forma EBITDA.
As Alcoa has transformed, EBITDA margins for the value-add
portfolio have increased from 8 percent in 2008 to 15 percent in
2015 on a pro-forma basis for the twelve months through June 30,
2015. The overall contribution of the value-add portfolio to
Alcoa’s after-tax operating income has more than doubled from 25
percent in 2008 to 51 percent in 2014. EBITDA margins in the
combined downstream segments (Engineered Products and Solutions and
Transportation and Construction Solutions) have increased from 14.6
percent in 2008 to 20.9 percent in 2014, and in the midstream
(Global Rolled Products) from $108 per metric ton in 2008 to $289
per metric ton in 2014.
The Value-Add Company will be positioned for profitable growth
by increasing share in fast growing end markets and leveraging
significant customer synergies across the midstream and downstream
portfolios. The company will be a differentiated supplier to the
high-growth aerospace industry with leading positions on every
major aircraft and jet engine platform, underpinned by market
leadership in jet engine and industrial gas turbine airfoils, and
aerospace fasteners. Approximately 40 percent of the company’s
pro-forma revenues for the 12 months through June 30, 2015 came
from the aerospace market. The company will also be at the
forefront of capturing demand for aluminum intensive vehicles
through Alcoa’s recent rolling mill capacity expansions and the
commercialization of breakthrough technologies such as the
Micromill. Automotive revenues are expected to increase 2.4 times
from 2014 to $1.8 billion in 2018. Additionally, the Value-Add
Company will be an unparalleled leader in aluminum commercial truck
wheels and will hold the number one market position in North
American architectural systems. Future profitable growth will be
supported by a full pipeline of innovative products and solutions,
and the pursuit of investment opportunities that provide a return
above the cost of capital.
The Value-Add Company and Upstream Company will have distinct
value profiles with the ability to effectively allocate resources
and deploy capital in-line with individual growth priorities and
cash-flow profiles. As independent entities, each company will be
positioned to capture opportunities in increasingly competitive and
rapidly evolving markets. The separation will enable both the
Value-Add Company and Upstream Company to pursue their own
independent strategies, pushing the performance envelope within
distinct operating environments.
Conditions and Timing to Close
Alcoa is currently targeting to complete the separation in the
second half of 2016. The transaction is subject to certain
conditions, including, among others, obtaining final approval by
Alcoa’s Board of Directors, receipt of a favorable opinion of legal
counsel with respect to the tax-free nature of the transaction for
U.S. federal income tax purposes, and effectiveness of a Form 10
registration statement to be filed with the U.S. Securities and
Exchange Commission. Alcoa may, at any time and for any reason
until the proposed transaction is complete, abandon the separation
or modify or change its terms.
Morgan Stanley and Greenhill & Co. are serving as financial
advisors to Alcoa, and Wachtell, Lipton, Rosen & Katz is
serving as legal counsel in connection with the separation.
Conference Call and Investor Presentation
Alcoa will host a conference call for investors today at 8:00 AM
Eastern Daylight Time to review the planned separation and answer
questions. Investors may access the call by dialing (855) 252-9433.
International callers may dial + 1 (484) 487-2715. Please provide
the operator with pass code 47322664. The meeting will be webcast
via www.alcoa.com. Presentation materials used during this meeting
will be available for viewing at www.alcoa.com under “Invest.”
Alcoa will hold its third quarter conference call as scheduled
on October 8, 2015 at 5:00 PM Eastern Daylight Time to present
quarterly results.
About AlcoaA global leader in lightweight metals
technology, engineering and manufacturing, Alcoa innovates
multi-material solutions that advance our world. Our technologies
enhance transportation, from automotive and commercial transport to
air and space travel, and improve industrial and consumer
electronics products. We enable smart buildings, sustainable food
and beverage packaging, high-performance defense vehicles across
air, land and sea, deeper oil and gas drilling and more efficient
power generation. We pioneered the aluminum industry over 125 years
ago, and today, our approximately 60,000 people in 30 countries
deliver value-add products made of titanium, nickel and aluminum,
and produce best-in-class bauxite, alumina and primary aluminum
products. For more information, visit www.alcoa.com, follow @Alcoa on Twitter at
www.twitter.com/Alcoa and follow us on Facebook at www.facebook.com/Alcoa.
Forward-Looking StatementsThis communication 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,” “intends,” “may,” “outlook,” “plans,” “projects,”
“seeks,” “sees,” “should,” “targets,” “will,” “would,” or
other words of similar meaning. All statements that reflect Alcoa’s
expectations, assumptions or projections about the future other
than statements of historical fact are forward-looking statements,
including, without limitation, statements regarding the separation
transaction; the future performance of Value-Add Company and
Upstream Company if the separation is completed; the expected
benefits of the separation; projections of improved profitability,
enhanced shareholder value, competitive position, market share,
growth opportunities, revenues, cash flow or other financial items
of the separated companies; the expected timing of completion of
the separation; the expected qualification of the separation as a
tax-free transaction; and projections regarding growth of the
aerospace, automotive, and other end markets. In making these
statements, Alcoa has made assumptions with respect to, among other
things: the ability of Value-Add Company and Upstream Company, as
applicable, to predict and adapt to changing customer requirements
and preferences; supply/demand fundamentals in the aluminum and
alumina markets; future capital expenditures, including the amount
and nature thereof; trends and developments in the aerospace,
automotive, metals engineering (including aluminum and titanium),
advanced manufacturing, building and construction, and other
sectors of the economy that are related to these sectors; business
strategy and outlook; expansion and growth of business and
operations; credit risks and potential credit ratings; the ability
to obtain financing on acceptable terms or at all; future results
being similar to historical results; expectations related to future
macroeconomic and market conditions; and other matters, many of
which are beyond Alcoa’s control. Forward-looking statements
are not guarantees of future performance and are subject to risks,
uncertainties, and changes in circumstances that are difficult to
predict. Although Alcoa believes that the expectations reflected in
any forward-looking statements are based on reasonable assumptions,
it can give no assurance that these expectations will be attained
and it is possible that actual results may differ materially from
those indicated by these forward-looking statements due to a
variety of risks and uncertainties. Such risks and uncertainties
include, but are not limited to: (a) uncertainties as to the timing
of the separation and whether it will be completed; (b) the
possibility that various closing conditions for the separation may
not be satisfied; (c) failure of the separation to qualify for the
expected tax treatment; (d) the possibility that any third-party
consents required in connection with the separation will not be
received; (e) the impact of the separation on the businesses of
Alcoa; (f) the risk that the businesses will not be separated
successfully or such separation may be more difficult,
time-consuming or costly than expected, which could result in
additional demands on Alcoa’s resources, systems, procedures and
controls, disruption of its ongoing business and diversion of
management’s attention from other business concerns; (g)
material adverse changes in aluminum industry conditions; (h)
deterioration in global economic and financial market conditions
generally; (i) unfavorable changes in the markets served by Alcoa;
(j) the impact of changes in foreign currency exchange rates on
costs and results; (k) increases in energy costs; (l) 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
(including moving the Upstream Company’s alumina refining and
aluminum smelting businesses down on the industry cost curves and
increasing revenues and improving margins in the Value-Add
Company’s businesses) anticipated from restructuring programs and
productivity improvement, cash sustainability, technology
advancements (including, without limitation, advanced aluminum
alloys, Alcoa Micromill, and other materials and processes), and
other initiatives; (m) Alcoa’s inability to realize expected
benefits, in each case as planned and by targeted completion dates,
from acquisitions, divestitures, facility closures, curtailments,
or expansions, or international joint ventures; (n) political,
economic, and regulatory risks in the countries in which Alcoa
operates or sells products; (o) the outcome of contingencies,
including legal proceedings, government or regulatory
investigations, and environmental remediation; (p) the impact of
cyber attacks and potential information technology or data security
breaches; (q) the potential failure to retain key employees while
the separation transaction is pending or after it is completed; (r)
the risk that increased debt levels, deterioration in debt
protection metrics, contraction in liquidity, or other factors
could adversely affect the targeted credit ratings for Value-Add
Company or Upstream Company; and (s) the other risk factors
discussed in Alcoa’s Form 10-K for the year ended December 31,
2014, and other reports filed with the U.S. Securities and Exchange
Commission (SEC). Alcoa disclaims any obligation to update publicly
any forward-looking statements, whether in response to new
information, future events or otherwise, except as required by
applicable law. Market projections are subject to the risks
discussed above and other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa’s consolidated financial information but is not presented in
Alcoa’s financial statements prepared in accordance with accounting
principles generally accepted in the United States of America
(GAAP). Certain of these data are considered “non-GAAP financial
measures” under SEC rules. These non-GAAP financial measures
supplement our GAAP disclosures and should not be considered an
alternative to the GAAP measure. Reconciliations to the most
directly comparable GAAP financial measures and management’s
rationale for the use of the non-GAAP financial measures can be
found in the schedules to this release and on our website
at www.alcoa.com under the “Invest” section. Any
reference to historical EBITDA means adjusted EBITDA, for which we
have provided calculations and reconciliations in the schedules to
this release.
Alcoa and subsidiariesCalculation of Financial
Measures (unaudited)(dollars in millions)
Segment Alumina Primary Upstream
Global Rolled
Engineered
Transportation Pro-forma Value-Add
Measures Metals Company
Products(1)
Products and
and
Adjustments(3)
Company
Solutions(1),(2)
Construction
Solutions(1),(2)
Adjusted EBITDA
Last Twelve Months ended June 30,
2015
After-tax operating income (ATOI)
$ 676 $ 766 $ 1,442 $ 251 $ 600 $ 170 $ 121 $ 1,142 Add:
Depreciation, depletion, and
amortization
347
459
806
231
179
42
56
508
Equity loss (income)
35
(3
)
32
32
–
–
–
32
Income taxes 280 247 527 103 299 65 35 502 Other
–
(2 )
(2 )
(1 )
– – (2 )
(3 )
Adjusted EBITDA
$
1,338
$
1,467
$
2,805
$
616
$
1,078
$
277
$
210
$
2,181
Alcoa’s definition of Adjusted EBITDA (Earnings before interest,
taxes, depreciation, and amortization) is net margin plus an
add-back for depreciation, depletion, and amortization. Net margin
is equivalent to Sales minus the following items: Cost of goods
sold; Selling, general administrative, and other expenses; Research
and development expenses; and Provision for depreciation,
depletion, and amortization. The Other line in the table above
includes gains/losses on asset sales and other nonoperating items.
Adjusted EBITDA is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because
Adjusted EBITDA provides additional information with respect to
Alcoa’s operating performance and the Company’s ability to meet its
financial obligations. The Adjusted EBITDA presented may not be
comparable to similarly titled measures of other companies.
(1) Effective in the second quarter of 2015, management removed
the impact of metal price lag from the results of the Global Rolled
Products and Engineered Products and Solutions (now Engineered
Products and Solutions and Transportation and Construction
Solutions – see footnote 2 below) segments in order to enhance the
visibility of the underlying operating performance of these
businesses. Metal price lag describes the timing difference created
when the average price of metal sold differs from the average cost
of the metal when purchased by the respective segment. The impact
of metal price lag is now reported as a separate line item in
Alcoa’s reconciliation of total segment ATOI to consolidated net
income (loss) attributable to Alcoa. As a result, this change does
not impact the consolidated results of Alcoa. Segment information
for all prior periods presented was updated to reflect this
change.
(2) In the third quarter of 2015, management approved a
realignment of Alcoa’s Engineered Products and Solutions segment
due to the expansion of this part of Alcoa’s business portfolio
through both organic and inorganic growth. This realignment
consisted of moving both the Alcoa Wheels and Transportation
Products and Building and Constructions Systems business units to a
new reportable segment named Transportation and Construction
Solutions. Additionally, the Latin American extrusions business
previously included in Corporate was moved into the new
Transportation and Construction Solutions segment. The remaining
Engineered Products and Solutions segment consists of the Alcoa
Fastening Systems and Rings (renamed to include portions of the
Firth Rixson business acquired in November 2014), Alcoa Power and
Propulsion (includes the TITAL business acquired in March 2015),
Alcoa Forgings and Extrusions (includes the other portions of Firth
Rixson), and Alcoa Titanium and Engineered Products (a new business
unit that represents the RTI International Metals business acquired
in July 2015) business units. Segment information for all prior
periods presented was revised to reflect the new segment
structure.
(3) Pro-forma Adjustments represent amounts related to portfolio
actions completed in the Global Rolled Products and Engineered
Products and Solutions segments as follows. In the Global Rolled
Products segment, six rolling mills (Australia, Spain, France, and
Russia) were closed or divested between December 2014 and March
2015. As such, the Pro-forma Adjustments include the removal of
amounts related to each respective line item for these six rolling
mills for the timeframe that Alcoa operated these facilities during
the twelve-month period ended June 30, 2015. In the Engineered
Products and Solutions segment, three acquisitions were completed
(see footnote 2 above) between November 2014 and July 2015. As
such, the Pro-forma Adjustments include the addition of amounts
related to each respective line item for these three businesses as
if Alcoa had acquired all of them on July 1, 2014. For these
acquisitions, Alcoa estimated the ATOI, and therefore the Adjusted
EBITDA, using unaudited internal management financial statements.
The ATOI estimate and calculation of Adjusted EBITDA for these
acquisitions does not purport to be the manner in which the
respective prior management of the acquired companies would have
calculated the acquired companies’ respective ATOI and Adjusted
EBITDA. Additionally, the calculation of ATOI and Adjusted EBITDA
is not intended to suggest that the respective prior management of
the acquired companies used ATOI or Adjusted EBITDA as a measure of
the acquired companies’ respective profitability.
Alcoa and subsidiariesCalculation of Financial
Measures (unaudited), continued(dollars in millions, except
per metric ton amounts)
Segment
Global Rolled
Products(1)
Engineered Products and Transportation and EPS and
TCS Measures
Solutions (EPS)(1),(2)
Construction Solutions Combined
(TCS)(1),(2)
Adjusted EBITDA
Year ended December 31,
2008
2014
2008
2014
2008
2014
2008
2014
After-tax operating income (ATOI) $ (3 ) $ 245 $ 465 $ 579 $
82 $ 180 $ 547 $ 759 Add: Depreciation, depletion, and
amortization
216
235
118
137
53
42
171
179
Equity loss – 27 – – – – – – Income taxes 35 89 225 298 – 69 225
367 Other
6 (1 )
2 –
– – 2 –
Adjusted EBITDA
$
254
$
595
$
810
$
1,014
$
135
$
291
$
945
$
1,305
Total shipments (thousand metric tons) (kmt)
2,361
2,056
Adjusted EBITDA / Total shipments ($ per metric ton)
$
108
$
289
Third-party sales
$
4,215
$
4,217
$
2,270
$
2,021
$
6,485
$
6,238
Adjusted EBITDA Margin
19.2
%
24.0
%
5.9
%
14.4
%
14.6
%
20.9
%
Alcoa’s definition of Adjusted EBITDA (Earnings before interest,
taxes, depreciation, and amortization) is net margin plus an
add-back for depreciation, depletion, and amortization. Net margin
is equivalent to Sales minus the following items: Cost of goods
sold; Selling, general administrative, and other expenses; Research
and development expenses; and Provision for depreciation,
depletion, and amortization. The Other line in the table above
includes gains/losses on asset sales and other nonoperating items.
Adjusted EBITDA is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because
Adjusted EBITDA provides additional information with respect to
Alcoa’s operating performance and the Company’s ability to meet its
financial obligations. The Adjusted EBITDA presented may not be
comparable to similarly titled measures of other companies.
(1) Effective in the second quarter of 2015, management removed
the impact of metal price lag from the results of the Global Rolled
Products and Engineered Products and Solutions (now Engineered
Products and Solutions and Transportation and Construction
Solutions – see footnote 2 below) segments in order to enhance the
visibility of the underlying operating performance of these
businesses. Metal price lag describes the timing difference created
when the average price of metal sold differs from the average cost
of the metal when purchased by the respective segment. The impact
of metal price lag is now reported as a separate line item in
Alcoa’s reconciliation of total segment ATOI to consolidated net
income (loss) attributable to Alcoa. As a result, this change does
not impact the consolidated results of Alcoa. Segment information
for all prior periods presented was updated to reflect this
change.
(2) In the third quarter of 2015, management approved a
realignment of Alcoa’s Engineered Products and Solutions segment
due to the expansion of this part of Alcoa’s business portfolio
through both organic and inorganic growth. This realignment
consisted of moving both the Alcoa Wheels and Transportation
Products and Building and Constructions Systems business units to a
new reportable segment named Transportation and Construction
Solutions. Additionally, the Latin American extrusions business
previously included in Corporate was moved into the new
Transportation and Construction Solutions segment. The remaining
Engineered Products and Solutions segment consists of the Alcoa
Fastening Systems and Rings (renamed to include portions of the
Firth Rixson business acquired in November 2014), Alcoa Power and
Propulsion (includes the TITAL business acquired in March 2015),
Alcoa Forgings and Extrusions (includes the other portions of Firth
Rixson), and Alcoa Titanium and Engineered Products (a new business
unit that represents the RTI International Metals business acquired
in July 2015) business units. Segment information for all prior
periods presented was revised to reflect the new segment
structure.
Alcoa and subsidiariesCalculation of Financial
Measures (unaudited), continued(dollars in millions)
Segment
Global Rolled
Products(1),(3)
Engineered Products and
Transportation and Value-Add Company Measures
Solutions
(EPS)(1),(2),(3)
Construction Solutions
(TCS)(1),(2)
Adjusted EBITDA Twelve months ended
December 31,
2008
June 30,
2015
December 31,
2008
June 30,
2015
December 31,
2008
June 30,
2015
December 31,
2008
June 30,
2015
After-tax operating income (ATOI) $ (3 ) $ 247 $ 465 $ 725 $
82 $ 170 $ 544 $ 1,142 Add: Depreciation, depletion, and
amortization
216
220
118
246
53
42
387
508
Equity loss – 32 – – – – – 32 Income taxes 35 104 225 333 – 65 260
502 Other
6 (1 )
2
(2 )
– – 8
(3 ) Adjusted EBITDA
$
254
$
602
$
810
$
1,302
$
135
$
277
$
1,199
$
2,181
Third-party sales
$
8,966
$
6,535
$
4,215
$
5,959
$
2,270
$
1,986
$
15,451
$
14,480
Adjusted EBITDA Margin
7.8
%
15.1
%
Alcoa’s definition of Adjusted EBITDA (Earnings before interest,
taxes, depreciation, and amortization) is net margin plus an
add-back for depreciation, depletion, and amortization. Net margin
is equivalent to Sales minus the following items: Cost of goods
sold; Selling, general administrative, and other expenses; Research
and development expenses; and Provision for depreciation,
depletion, and amortization. The Other line in the table above
includes gains/losses on asset sales and other nonoperating items.
Adjusted EBITDA is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because
Adjusted EBITDA provides additional information with respect to
Alcoa’s operating performance and the Company’s ability to meet its
financial obligations. The Adjusted EBITDA presented may not be
comparable to similarly titled measures of other companies.
(1) Effective in the second quarter of 2015, management removed
the impact of metal price lag from the results of the Global Rolled
Products and Engineered Products and Solutions (now Engineered
Products and Solutions and Transportation and Construction
Solutions – see footnote 2 below) segments in order to enhance the
visibility of the underlying operating performance of these
businesses. Metal price lag describes the timing difference created
when the average price of metal sold differs from the average cost
of the metal when purchased by the respective segment. The impact
of metal price lag is now reported as a separate line item in
Alcoa’s reconciliation of total segment ATOI to consolidated net
income (loss) attributable to Alcoa. As a result, this change does
not impact the consolidated results of Alcoa. Segment information
for all prior periods presented was updated to reflect this
change.
(2) In the third quarter of 2015, management approved a
realignment of Alcoa’s Engineered Products and Solutions segment
due to the expansion of this part of Alcoa’s business portfolio
through both organic and inorganic growth. This realignment
consisted of moving both the Alcoa Wheels and Transportation
Products and Building and Constructions Systems business units to a
new reportable segment named Transportation and Construction
Solutions. Additionally, the Latin American extrusions business
previously included in Corporate was moved into the new
Transportation and Construction Solutions segment. The remaining
Engineered Products and Solutions segment consists of the Alcoa
Fastening Systems and Rings (renamed to include portions of the
Firth Rixson business acquired in November 2014), Alcoa Power and
Propulsion (includes the TITAL business acquired in March 2015),
Alcoa Forgings and Extrusions (includes the other portions of Firth
Rixson), and Alcoa Titanium and Engineered Products (a new business
unit that represents the RTI International Metals business acquired
in July 2015) business units. Segment information for all prior
periods presented was revised to reflect the new segment
structure.
(3) Amounts for the twelve months ended for the Global Rolled
Products and Engineered Products and Solutions segments have been
recast to reflect completed portfolio actions as follows. In the
Global Rolled Products segment, six rolling mills (Australia,
Spain, France, and Russia) were closed or divested between December
2014 and March 2015. As such, the recast amounts reflect the
removal of amounts related to each respective line item for these
six rolling mills for the timeframe that Alcoa operated these
facilities during the twelve-month period ended June 30, 2015. In
the Engineered Products and Solutions segment, three acquisitions
were completed (see footnote 2 above) between November 2014 and
July 2015. As such, the recast amounts include the addition of
amounts related to each respective line item for these three
businesses as if Alcoa had acquired all of them on July 1, 2014.
For these acquisitions, Alcoa estimated the ATOI, and therefore the
Adjusted EBITDA, using unaudited internal management financial
statements. The ATOI estimate and calculation of Adjusted EBITDA
for these acquisitions does not purport to be the manner in which
the respective prior management of the acquired companies would
have calculated the acquired companies’ respective ATOI and
Adjusted EBITDA. Additionally, the calculation of ATOI and Adjusted
EBITDA is not intended to suggest that the respective prior
management of the acquired companies used ATOI or Adjusted EBITDA
as a measure of the acquired companies’ respective
profitability.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150928005666/en/
Investor:Nahla Azmy,
212-836-2674Nahla.Azmy@alcoa.comorMedia:Monica Orbe,
212-836-2632Monica.Orbe@alcoa.com
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