Total Segment Profit and Cash Grew Sequentially
on Higher Alumina and Aluminum Pricing
Alcoa Corporation (NYSE:AA):
4Q 2016 Results1
- Net loss of $125 million, or $(0.68)
per share, as a result of costs to streamline portfolio
- Excluding special items, adjusted net
income of $26 million, or $0.14 per share
- Adjusted earnings before interest, tax,
depreciation, and amortization (EBITDA), excluding special items of
$335 million, up 18 percent sequentially on rising alumina
pricing
- Revenue of $2.5 billion, up 9 percent
sequentially, reflecting higher volume in the Company’s rolled
products business, and higher alumina pricing
- $853 million cash balance and $1.4
billion of debt for net debt of $0.6 billion as of December 31,
2016
$M, except per share
amounts
3Q16 4Q16
FY15 FY16 Revenue
$ 2,329 $ 2,537 $ 11,199
$ 9,318 Net loss attributable to Alcoa Corporation $ (10 ) $ (125 )
$ (863 ) $ (400 ) Earnings per share attributable to Alcoa
Corporation $ (0.06 ) $ (0.68 )
$ (4.73 ) $ (2.19 ) Adjusted (loss) income $ (95 ) $ 26 $
103 $ (227 ) Adjusted earnings per share $ (0.52 )
$ 0.14 $ 0.57 $ (1.24 )
Adjusted EBITDA excluding special items $ 284
$ 335 $ 1,840 $ 1,108
______________________________________________________________________________
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 full
year 2015 and the first ten months of 2016 (including the third
quarter 2016 and the first month of the 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 combined 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 Company’s Quarterly Report on Form
10-Q for the period ended September 30, 2016 filed with the United
States Securities and Exchange Commission on October 11, 2016 and
December 1, 2016, respectively, for additional information.
______________________________________________________________________________
Alcoa Corporation (NYSE:AA), a global leader in bauxite,
alumina, and aluminum products, today reported fourth quarter 2016
results that reflect profit growth at the combined segment level
and an improved cash position, driven by higher alumina and
aluminum pricing.
Since launching as an independent company on November 1, 2016,
Alcoa has increased its cash position by $198 million and closed
the fourth quarter 2016 with a cash balance of $853 million.
“Alcoa’s first reporting period as a new, standalone,
publicly-traded company points to our ability to deliver
shareholder value,” said Roy Harvey, Chief Executive Officer of
Alcoa. “Rising alumina and aluminum prices improved the bottom
line, our alumina segment had exceptional profit growth in a
stronger market environment and doubled margins, while our bauxite
business also increased profits and reported robust margins. In
addition, we continued to streamline our portfolio and generated
cash to strengthen the balance sheet.”
Mr. Harvey added: “We’ve entered 2017 focused on our strategic
priorities. We will reduce complexity and costs across Alcoa,
remain disciplined with cash, and focus on smart investments with
strong returns.”
In fourth quarter 2016, Alcoa reported a net loss of $125
million, or $(0.68) per share. Results include $151 million of
special items primarily related to the permanent closure of
Suralco’s refinery and mines in Suriname and the impairment of
Alcoa of Australia Limited’s (AofA) interests in a Western
Australia (WA) gas field. Fourth quarter 2016 results compare to a
net loss of $10 million, or $(0.06) per share, in third quarter
2016.
Excluding the impact of special items, fourth quarter 2016
adjusted net income was $26 million, or $0.14 per share. In third
quarter 2016, Alcoa reported an adjusted net loss of $95 million,
or $(0.52) per share, excluding special items.
Alcoa reported fourth quarter 2016 adjusted EBITDA excluding
special items of $335 million, up 18 percent from third quarter
2016. Higher alumina and metal prices drove the sequential change
in adjusted EBITDA, more than offsetting increased costs primarily
tied to energy.
In fourth quarter 2016, Alcoa reported revenue of $2.5 billion,
up 9 percent sequentially, reflecting higher volumes in the
Company’s rolled products business, as well as rising alumina and
aluminum pricing.
In the fourth quarter, the Company achieved a seasonal low of 13
days working capital.
2016 Full-Year Results
In 2016, Alcoa reported a net loss of $400 million, or $(2.19)
per share. Excluding special items, the Company reported an
adjusted net loss of $227 million, or $(1.24) per share. The full
year net loss was driven largely by costs associated with portfolio
restructuring decisions, including the closure of the Warrick
smelter and the Suralco refinery and mines, and the impairment of
the WA gas field.
Adjusted EBITDA excluding special items for 2016 was $1.1
billion, compared to $1.8 billion in 2015, due to lower alumina and
aluminum pricing during the first three quarters and incremental
costs to operate the Warrick, IN rolling mill as a cold metal
plant, partially offset by net productivity improvements. Revenue
in 2016 was $9.3 billion, down 17 percent from 2015, reflecting
lower pricing and volumes in alumina and aluminum, slightly offset
by higher third-party bauxite shipments.
In 2016, Alcoa invested in return-seeking capital projects of
$82 million, and controlled sustaining capital expenditures to $322
million. Return on capital in 2016 was 5.3 percent.
4Q 2016 Business Update
In the fourth quarter, Alcoa continued to successfully build its
third-party bauxite business and to further streamline its
portfolio.
- AofA secured its first major bauxite
export contract out of Western Australia (WA), and was granted
approval to export up to 2.5 million metric tons per annum of
bauxite for five years to third-party customers.
- Alcoa announced the permanent closure
of the Suralco alumina refinery and bauxite mines in Suriname,
which have been fully curtailed since November 2015. Alcoa also
impaired AofA’s interests in a WA gas field. Alcoa determined that
the completed exploration activities do not support the current
carrying value. AofA and Suralco are part of the Alcoa World
Alumina and Chemicals group of companies owned 60 percent by Alcoa
and 40 percent by Alumina Limited.
Early this month, Alcoa announced that it will restart capacity
at the Portland Aluminium smelter in Australia that had been lost
due to a December power outage. Portland Aluminium is an
unincorporated joint venture between AofA (55 percent), CITIC
Nominees Pty Ltd (22.5 percent), and Marubeni Aluminium Australia
Pty Ltd (22.5 percent).
Market Update
For 2017, the Company projects relatively balanced global
bauxite and alumina markets and a modest global aluminum surplus of
400 thousand to 800 thousand metric tons. Alcoa is projecting 2017
global aluminum demand growth of 4 percent over 2016.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 PM
Eastern Time (ET) on Tuesday, January 24, 2017 to present fourth
quarter 2016 results and discuss the business and market
outlook for 2017.
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 ET on January 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 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 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, 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
Alcoa Corporation’s registration statement on Form 10 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 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 December 31, September 30,
December 31,
2015(2)
2016(2),(3)
2016(2)
Sales $ 2,451 $ 2,329 $ 2,537 Cost of goods sold (exclusive
of expenses below) 2,157 1,968 2,123 Selling, general
administrative, and other expenses 92 92 92 Research and
development expenses 15 8 7 Provision for depreciation, depletion,
and amortization 186 181 182 Restructuring and other charges 686 17
209 Interest expense 62 67 46 Other expenses (income), net
51 (106 )
1 Total costs and expenses 3,249 2,227 2,660
(Loss) income before income taxes (798 ) 102 (123 )
Provision for income taxes
92
92 6 Net
(loss) income (890 ) 10 (129 ) Less: Net (loss) income
attributable to noncontrolling interest
(64 )
20 (4 ) NET
LOSS ATTRIBUTABLE TO ALCOA CORPORATION
$
(826 )
$ (10 )
$ (125 )
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS(1):
Basic: Net loss $ (4.52 ) $ (0.06 ) $ (0.68 ) Average number of
shares 182,471,195 182,471,195 182,688,806 Diluted: Net loss
$ (4.52 ) $ (0.06 ) $ (0.68 ) Average number of shares 182,471,195
182,471,195 182,688,806 Shipments of aluminum
products (metric tons) 819,000 761,000 852,000 (1)
The respective basic and diluted earnings per share for the
quarters ended December 31, 2015 and September 30, 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. 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 quarters ended December 31,
2015 and September 30, 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 Combined Financial Statements included
in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Company’s Quarterly Report on Form 10-Q for the
period ended September 30, 2016 filed with the United States
Securities and Exchange Commission on October 11, 2016 and December
1, 2016, respectively, 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
September 30, 2016 included an immaterial error due to an
under-allocation of LIFO expense of $4. As a result, management has
revised Cost of goods sold from the $1,964 previously reported to
$1,968 and Net loss attributable to Alcoa Corporation from the $(6)
previously reported to $(10).
Alcoa Corporation
and subsidiaries Statement of Consolidated Operations
(unaudited), continued (dollars in millions, except
per-share amounts) Year ended December
31,
2015(2)
2016(2),(3)
Sales $ 11,199 $ 9,318 Cost of goods sold (exclusive of
expenses below) 9,039 7,898 Selling, general administrative, and
other expenses 353 359 Research and development expenses 69 33
Provision for depreciation, depletion, and amortization 780 718
Restructuring and other charges 983 318 Interest expense 270 243
Other expenses (income), net
42
(89 ) Total costs and expenses 11,536 9,480
Loss before income taxes (337 ) (162 ) Provision for income taxes
402 184
Net loss (739 ) (346 ) Less: Net income attributable
to noncontrolling interest
124
54 NET LOSS ATTRIBUTABLE TO ALCOA
CORPORATION
$ (863 )
$
(400 )
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS(1):
Basic: Net loss $ (4.73 ) $ (2.19 ) Average number of shares
182,471,195 182,538,152 Diluted: Net loss $ (4.73 ) $ (2.19
) Average number of shares 182,471,195 182,538,152 Common
stock outstanding at the end of the period – 182,930,995
Shipments of aluminum products (metric tons) 3,227,000
3,147,000 (1) The basic and diluted earnings per
share for the year ended December 31, 2015 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. 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 year ended December 31, 2015 and for the first
ten months included in the year 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 Combined Financial
Statements included in Exhibit 99.1 to Alcoa Corporation’s Form 10
Registration Statement and the Company’s Quarterly Report on Form
10-Q for the period ended September 30, 2016 filed with the United
States Securities and Exchange Commission on October 11, 2016 and
December 1, 2016, respectively, 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 nine months ended
September 30, 2016 included an immaterial error due to an
under-allocation of LIFO expense of $14. As a result, management
has revised Cost of goods sold from the $5,761 previously reported
to $5,775 and Net loss attributable to Alcoa Corporation from the
$(261) previously reported to $(275) for the nine months ended
September 30, 2016, the effects of which are included in the
Statement of Consolidated Operations for the year ended December
31, 2016.
Alcoa Corporation and
subsidiaries Consolidated Balance Sheet (unaudited)
(in millions)
December 31,2015(1)
December 31,2016
ASSETS Current assets: Cash and cash equivalents $ 557 $ 853
Receivables from customers 380 668 Other receivables 124 166
Inventories 1,172 1,160 Prepaid expenses and other current assets
333 334 Total
current assets
2,566
3,181 Properties, plants, and equipment
22,118 22,550 Less: accumulated depreciation, depletion, and
amortization
12,728
13,225 Properties, plants, and equipment, net
9,390 9,325
Investments 1,472 1,358 Deferred income taxes 589 741 Fair value of
derivative contracts 997 468 Other noncurrent assets
1,399 1,661 Total
assets
$ 16,413 $
16,734 LIABILITIES Current liabilities:
Accounts payable, trade $ 1,379 $ 1,472 Accrued compensation and
retirement costs 313 456 Taxes, including income taxes 136 147
Other current liabilities 558 746 Long-term debt due within one
year
18 21
Total current liabilities
2,404
2,842 Long-term debt, less amount due within
one year 207 1,424 Accrued pension benefits 359 1,834 Accrued other
postretirement benefits 78 1,166 Asset retirement obligations 539
604 Environmental remediation 207 264 Noncurrent income taxes 508
307 Other noncurrent liabilities and deferred credits
598 603 Total
liabilities
4,900
9,044 EQUITY Alcoa Corporation
shareholders’ equity: Parent Company net investment 11,042 – Common
stock – 2 Additional capital – 9,511 Retained deficit – (104 )
Accumulated other comprehensive loss
(1,600 )
(3,761 ) Total Alcoa Corporation shareholders'
equity
9,442 5,648
Noncontrolling interest
2,071
2,042 Total equity
11,513 7,690 Total
liabilities and equity
$ 16,413
$ 16,734 (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 position of Alcoa Corporation as of December 31, 2015 was
prepared on such basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
financial position 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 Company’s Quarterly Report on Form 10-Q for the
period ended September 30, 2016 filed with the United States
Securities and Exchange Commission on October 11, 2016 and December
1, 2016, respectively, for additional information.
Alcoa Corporation and subsidiaries Statement of
Consolidated Cash Flows (unaudited) (in millions)
Year ended December 31,
2015 2016 CASH FROM
OPERATIONS Net loss $ (739 ) $ (346 ) Adjustments to reconcile net
loss to cash from operations: Depreciation, depletion, and
amortization 780 718 Deferred income taxes 86 (45 ) Equity income,
net of dividends 158 41 Restructuring and other charges 983 318 Net
gain from investing activities – asset sales (32 ) (164 ) Net
periodic pension benefit cost 67 68 Stock-based compensation 35 28
Other 41 (22 )
Changes in assets and liabilities,
excluding effects of acquisitions, divestitures, and foreign
currency translation adjustments:
Decrease (increase) in receivables 130 (223 ) Decrease in
inventories 212 43 Decrease (increase) in prepaid expenses and
other current assets 58 (43 ) (Decrease) increase in accounts
payable, trade (156 ) 6 (Decrease) in accrued expenses (311 ) (329
) (Decrease) in taxes, including income taxes (32 ) (148 ) Pension
contributions (69 ) (66 ) (Increase) in noncurrent assets(1) (356 )
(208 ) Increase in noncurrent liabilities
20
61 CASH PROVIDED FROM (USED FOR)
OPERATIONS
875 (311
) FINANCING ACTIVITIES Net transfers from (to) Parent
Company (34 ) 802 Cash provided at separation to Parent Company(2)
– (1,072 ) Net change in short-term borrowings (original maturities
of three months or less) – (4 ) Payments on debt (original
maturities greater than three months) (24 ) (34 ) Proceeds from
exercise of employee stock options – 10 Contributions from
noncontrolling interest 2 48 Distributions to noncontrolling
interest
(106 )
(233 ) CASH
USED FOR FINANCING ACTIVITIES
(162 )
(483 ) INVESTING ACTIVITIES Capital
expenditures (391 ) (404 ) Proceeds from the sale of assets and
businesses(3) 70 112 Additions to investments (63 ) (3 ) Sales of
investments – 146 Net change in restricted cash(2)
– 1,226 CASH (USED
FOR) PROVIDED FROM INVESTING ACTIVITIES
(384 )
1,077
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
(38
)
13
Net change in cash and cash equivalents 291 296 Cash and
cash equivalents at beginning of year
266
557 CASH AND CASH EQUIVALENTS AT
END OF YEAR
$ 557 $
853 (1)
The (Increase) in noncurrent assets line
item for the year ended December 31, 2015 and 2016 includes a $300
and $200, respectively, prepayment related to a natural gas supply
agreement for three alumina refineries in Western Australia, which
are owned by Alcoa Corporation’s majority-owned subsidiary, Alcoa
of Australia Limited.
(2) In September 2016, Alcoa Nederland Holding B.V., a
wholly-owned subsidiary of Alcoa Corporation, issued $1,250 in new
senior notes in preparation for the separation of the Company from
its former parent company (completed on November 1, 2016). The net
proceeds of $1,228 from the debt issuance, along with $81 of cash
on hand from the former parent company (see below), were required
to be placed into escrow contingent on the completion of the
separation transaction. As a result, the issuance of the debt and
the increase in restricted cash both in the amount of $1,228 were
not reflected in the Statement of Consolidated Cash Flows for the
year ended December 31, 2016 as these represent noncash financing
and investing activities, respectively. The $81 represented the
necessary cash to fund the redemption of the notes, pay all
regularly scheduled interest on the notes through a specified date
defined in the notes, and a premium on the principal of the notes
if the separation had not been completed by a certain time as
defined in the notes. The subsequent release of the $1,228 from
escrow was reflected in the Statement of Consolidated Cash Flows
for the year ended December 31, 2016 as a cash inflow in the Net
change in restricted cash line item. The majority of this amount
was paid to Alcoa Corporation’s former parent company in
conjunction with the completion of the separation transaction.
(3) Proceeds from the sale of assets and businesses for the
year ended December 31, 2016 includes a cash outflow for cash paid
as a result of post-closing adjustments associated with the
December 2014 divestiture of an ownership stake in a smelter in the
United States.
Alcoa Corporation and subsidiaries Segment
Information (unaudited)
(dollars in millions, except realized
prices; alumina and aluminum production and shipments in thousands
of metric tons [kmt])
4Q15
2015
1Q16
2Q16
3Q16
4Q16
2016
Bauxite: Bauxite production (million bone dry metric tons)
11.7 45.3 11.3 10.8 11.1 11.8 45.0 Third-party sales $ 16 $ 71 $ 44
$ 87 $ 93 $ 91 $ 315 Intersegment sales $ 285 $ 1,160 $ 175 $ 182 $
192 $ 202 $ 751 Depreciation, depletion, and amortization $ 21 $ 94
$ 17 $ 19 $ 21 $ 20 $ 77 Income taxes $ 32 $ 103 $ 16 $ 23 $ 22 $
26 $ 87 After-tax operating income (ATOI) $ 77
$ 258 $ 44 $ 57 $ 55
$ 56 $ 212
Alumina: Alumina production (kmt) 3,856 15,720 3,330 3,316
3,310 3,295 13,251 Third-party alumina shipments (kmt) 2,713 10,755
2,168 2,266 2,361 2,276 9,071 Intersegment alumina shipments (kmt)
1,341 5,410 1,257 1,137 1,140 1,169 4,703 Third-party sales $ 707 $
3,343 $ 496 $ 601 $ 585 $ 618 $ 2,300 Intersegment sales $ 357 $
1,687 $ 292 $ 321 $ 317 $ 377 $ 1,307 Equity loss $ (14 ) $ (41 ) $
(14 ) $ (7 ) $ (9 ) $ (10 ) $ (40 ) Depreciation, depletion, and
amortization $ 47 $ 202 $ 45 $ 47 $ 47 $ 47 $ 186 Income taxes $ 4
$ 191 $ (15 ) $ 15 $ 7 $ 30 $ 37 ATOI $ 19 $
476 $ (42 ) $ 47 $ 16
$ 81 $ 102
Aluminum:
Aluminum production (kmt) 699 2,811 655 595 586 587 2,423
Third-party sales $ 10 $ 14 $ 9 $ 6 $ – $ (6 ) $ 9 Intersegment
sales $ 1,052 $ 5,092 $ 987 $ 902 $ 918 $ 947 $ 3,754 Equity income
$ 4 $ 25 $ 4 $ 3 $ 5 $ 11 $ 23 Depreciation, depletion, and
amortization $ 77 $ 311 $ 76 $ 74 $ 72 $ 73 $ 295 Income taxes $
(53 ) $ (77 ) $ (26 ) $ (8 ) $ (9 ) $ (17 ) $ (60 ) ATOI $
(88 ) $ 1 $ (31 ) $ 5 $
10 $ (3 ) $ (19 )
Cast Products:
Third-party aluminum shipments (kmt) 748 2,957 700 701 691 701
2,793 Intersegment aluminum shipments (kmt) 3 12 11 45 51 65 172
Alcoa Corporation’s average realized price per metric ton of
aluminum
$
1,802
$
2,092
$
1,815
$
1,854
$
1,873
$
1,906
$
1,862
Third-party sales $ 1,348 $ 6,186 $ 1,270 $ 1,300 $ 1,294 $ 1,337 $
5,201 Intersegment sales $ 8 $ 46 $ 25 $ 81 $ 91 $ 119 $ 316 Equity
loss $ (1 ) $ (37 ) $ – $ (3 ) $ (2 ) $ (2 ) $ (7 ) Depreciation,
depletion, and amortization $ 11 $ 42 $ 10 $ 11 $ 10 $ 11 $ 42
Income taxes $ 14 $ 49 $ 15 $ 16 $ 15 $ 14 $ 60 ATOI $ 39
$ 110 $ 45 $ 44
$ 44 $ 43 $ 176
Energy: Third-party sales (GWh) 1,723 6,604 1,902 1,648
1,886 1,665 7,101 Third-party sales $ 92 $ 426 $ 65 $ 67 $ 77 $ 71
$ 280 Intersegment sales $ 69 $ 297 $ 55 $ 31 $ 41 $ 41 $ 168
Depreciation, depletion, and amortization $ 15 $ 61 $ 14 $ 14 $ 15
$ 14 $ 57 Income taxes $ 14 $ 69 $ 9 $ 4 $ 7 $ 6 $ 26 ATOI $
34 $ 145 $ 24 $ 12
$ 23 $ 17 $ 76
Rolled Products: Third-party aluminum shipments (kmt) 67 266
64 69 70 151 354 Third-party sales $ 239 $ 993 $ 213 $ 233 $ 237 $
386 $ 1,069 Equity loss $ (8 ) $ (32 ) $ (11 ) $ (10 ) $ (10 ) $ (9
) $ (40 ) Depreciation, depletion, and amortization $ 5 $ 23 $ 6 $
6 $ 5 $ 6 $ 23 Income taxes $ 5 $ 26 $ 2 $ (4 ) $ (3 ) $ (12 ) $
(17 ) ATOI $ 2 $ 20 $ (4 )
$ (12 ) $ (9 ) $ (16 ) $ (41 )
Reconciliation of total segment ATOI to consolidated net loss
attributable to Alcoa Corporation:
4Q15
2015
1Q16
2Q16
3Q16
4Q16
2016
Total segment ATOI $ 83 $ 1,010 $ 36 $ 153 $ 139 $ 178 $ 506
Unallocated amounts: Impact of LIFO 39 107 18 (1 ) 1 (28 ) (10 )
Metal price lag (4 ) (30 ) 2 2 1 4 9 Interest expense (62 ) (270 )
(64 ) (66 ) (67 ) (46 ) (243 ) Noncontrolling interest (net of tax)
64 (124 ) 5 (43 ) (20 ) 4 (54 ) Corporate expense (42 ) (180 ) (36
) (50 ) (50 ) (46 ) (182 ) Restructuring and other charges (686 )
(983 ) (84 ) (8 ) (17 ) (209 ) (318 ) Income taxes (76 ) (41 ) (17
) (22 ) (53 ) 41 (51 ) Other (142 )
(352 ) (70 ) (20 ) 56
(23
)
(57
) Consolidated net loss attributable to Alcoa Corporation
$
(826
)
$
(863
)
$
(210
)
$
(55
)
$
(10
)
$
(125
)
$
(400
)
The difference between certain segment
totals and consolidated amounts is in Corporate.
(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 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 and the first ten months of
full year 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 Combined
Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Company’s
Quarterly Report on Form 10-Q for the period ended September 30,
2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and December 1, 2016, respectively,
for additional information.
Alcoa
Corporation and subsidiaries Calculation of Financial
Measures (unaudited) (in millions, except per-share
amounts) Adjusted (Loss) Income(1)
Quarter ended Year ended
December 31,2015
September 30,2016
December 31,2016
December 31,2015
December 31,2016
Net loss attributable to Alcoa Corporation $ (826 ) $ (10 )
$ (125 ) $ (863 ) $ (400 ) Special items: Restructuring and
other charges
686
17
209
983
318
Discrete tax items(2) 62 6 (11 ) 149 – Other special items(3) 75
(97 ) 30 103 (65 ) Tax impact(4) (16 ) (6 ) (22 ) (96 ) (25 )
Noncontrolling interest impact(4)
(87
)
(5
)
(55
)
(173
)
(55
)
Subtotal 720 (85 ) 151 966 173
Net (loss) income attributable to Alcoa
Corporation – as adjusted
$
(106
)
$
(95
)
$
26
$
103
$
(227
)
Diluted EPS(5): Net loss attributable to Alcoa
Corporation common shareholders
$
(4.52
)
$
(0.06
)
$
(0.68
)
$
(4.73
)
$
(2.19
)
Net (loss) income attributable to Alcoa Corporation common
shareholders – as adjusted
(0.58
)
(0.52
)
0.14
0.57
(1.24
)
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 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 quarters ended December 31, 2015 and
September 30, 2016, for the month of October 2016 included in the
quarter ended December 31, 2016, for the year ended December 31,
2015, and for the first ten months included in the year 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 Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Company’s
Quarterly Report on Form 10-Q for the period ended September 30,
2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and December 1, 2016, respectively,
for additional information.
(2)
Discrete tax items include the
following:
•
for the quarter ended December 31, 2015, a
charge for a valuation allowance related to certain Iceland
deferred tax assets ($56) and a net charge for a number of small
items ($6);
•
for the quarter ended September 30, 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;
•
for the year ended December 31, 2015, a
charge for valuation allowances related to certain Suriname and
Iceland deferred tax assets ($141) and a net charge for a number of
small items ($8); and
•
for the year 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 ($11) and a net
charge for a number of other items ($11).
(3)
Other special items include the
following:
•
for the quarter ended December 31, 2015, a
write-down of inventory related to the curtailment or permanent
closure of various facilities in Suriname and the United States
($59), a net unfavorable change in certain mark-to-market energy
derivative contracts ($10), and costs associated with the
then-planned separation of Alcoa Corporation from its former parent
company ($6);
•
for the quarter ended September 30, 2016,
a gain on the sale of wharf property near the Intalco, Washington
smelter ($118), costs associated with the then-planned separation
of Alcoa Corporation from its former parent company ($23), and a
net favorable change in certain mark-to-market energy derivative
contracts ($2);
•
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);
•
for the year ended December 31, 2015, a
write-down of inventory related to the curtailment or permanent
closure of various facilities in Suriname, the United States,
Brazil, and Australia ($90), a net unfavorable change in certain
mark-to-market energy derivative contracts ($30), a gain on the
sale of land in the United States ($29), and costs associated with
the then-planned separation of Alcoa Corporation from its former
parent company ($12); and
•
for the year ended December 31, 2016, a
gain on the sale of wharf property near the Intalco, Washington
smelter ($118), costs associated with the separation of Alcoa
Corporation from its former parent company ($73), a gain on the
sale of an equity investment in a natural gas pipeline in Australia
($27), a benefit for an arbitration recovery related to a 2010 fire
at the Iceland smelter ($14), 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 write-down
of inventory related to the permanent closure of a smelter in the
United States and adjustments two previously curtailed facilities
($7), and a net unfavorable change in certain mark-to-market energy
derivative contracts ($6).
(4)
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.
(5)
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) 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 year ended December 31, 2016, no additional
share equivalents were dilutive based on Net loss attributable to
Alcoa Corporation common shareholders – as adjusted, resulting in a
diluted average number of shares of 182,538,152.
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) income
attributable to Alcoa Corporation – as adjusted for the quarters
ended December 31, 2015 and September 30, 2016 and for the year
ended December 31, 2015 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.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions) Adjusted EBITDA(1)
Quarter ended Year ended
December 31,2015
September 30, 2016
December 31, 2016
December 31,2015
December 31,2016
Net loss attributable to Alcoa Corporation $ (826 ) $ (10 )
$ (125 ) $ (863 ) $ (400 ) Add: Net (loss) income
attributable to noncontrolling interests
(64
)
20
(4
)
124
54
Provision for income taxes
92
92
6
402
184
Other expenses (income), net
51
(106
)
1
42
(89
)
Interest expense 62 67 46 270 243 Restructuring and other charges
686
17
209
983
318
Provision for depreciation, depletion, and amortization
186
181
182
780
718
Adjusted EBITDA
$
187
$ 261 $
315 $ 1,738
$ 1,028 Special
items(2)
65
23 20
102 80
Adjusted EBITDA, excluding special items
$
252
$
284
$
335
$
1,840
$
1,108
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. 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 quarters ended December 31, 2015 and
September 30, 2016, for the month of October 2016 included in the
quarter ended December 31, 2016, for the year ended December 31,
2015, and for the first ten months included in the year 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 Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Company’s
Quarterly Report on Form 10-Q for the period ended September 30,
2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and December 1, 2016, respectively,
for additional information.
(2)
Special items include the following (see
reconciliation of Adjusted (Loss) Income above for additional
information):
•
for the quarter ended December 31, 2015, a
write-down of inventory related to the curtailment or permanent
closure of various facilities in Suriname and the United States
($59) and costs associated with the then-planned separation of
Alcoa Corporation from its former parent company ($6);
•
for the quarter ended September 30, 2016,
costs associated with the then-planned separation of Alcoa
Corporation from its former parent company;
•
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);
•
for the year ended December 31, 2015, a
write-down of inventory related to the curtailment or permanent
closure of various facilities in Suriname, the United States,
Brazil, and Australia ($90) and costs associated with the
then-planned separation of Alcoa Corporation from its former parent
company ($12); and
•
for the year ended December 31, 2016,
costs associated with the separation of Alcoa Corporation from its
former parent company ($73) and a write-down of inventory related
to the permanent closure of a smelter in the United States and
adjustments at two previously curtailed facilities ($7).
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions) Net Debt
September 30, 2016(1)
December 31, 2016
Short-term borrowings $ – $ 1 Long-term debt due within one
year 21 21 Long-term debt, less amount due within one year
1,457 1,424 Total debt $ 1,478 $
1,446 Less: Cash and cash equivalents
241 853 Net debt
$ 1,237 $ 593
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.
(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 position of Alcoa Corporation as of
September 30, 2016 was prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s financial position 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 Company’s
Quarterly Report on Form 10-Q for the period ended September 30,
2016 filed with the United States Securities and Exchange
Commission on October 11, 2016 and December 1, 2016, respectively,
for additional information.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170124006343/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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