Alcoa exceeds full-year targets on cash
actions, demonstrates strong operational performance and focused
execution on strategic priorities
Alcoa Corporation (NYSE: AA) today reported fourth quarter and
full-year 2020 results that reflect strong operational performance,
the successful execution of multiple cash actions throughout the
year, and significant progress on the Company’s strategy to
strengthen Alcoa for the long term.
Fourth Quarter Highlights
- Continued to safely maintain operations during the ongoing
COVID-19 pandemic; all production sites remain fully
operational
- Realized a 15 percent sequential increase in sales revenue of
value-add products due to improving demand in the Aluminum
segment
- Set quarterly production records in the Bauxite segment and the
Western Australian alumina refining portfolio
- Generated $38 million in cash from operations after making a
$250 million contribution to U.S. pension plans
- Cash balance $1.6 billion as of December 31, 2020
Full-Year Highlights
- Exceeded the 2020 target for cash actions, delivering in excess
of $900 million through strategic actions, improvements in working
capital and productivity, and savings and deferrals instituted in
response to the COVID-19 pandemic
- Executed on non-core asset sales; announced transactions
expected to generate approximately $840 million in cash, meeting
the Company’s target range of between $500 million and $1
billion
- Set annual production records for both the Bauxite and Alumina
segments
- Completed the restart of the Aluminerie de Bécancour Inc. (ABI)
smelter in Québec and curtailment of the Intalco smelter in
Washington State
- Expanded SustanaTM family of products to include the world’s
first low-carbon alumina brand, and earned additional
certifications from the Aluminium Stewardship Initiative
- Generated $394 million in cash from operations; free cash flow
of $41 million
Financial Results
M, except per share amounts
4Q20
3Q20
4Q19
FY20
FY19
Revenue
$2,392
$2,365
$2,436
$9,286
$10,433
Net loss attributable to Alcoa
Corporation
$(4)
$(49)
$(303)
$(170)
$(1,125)
Loss per share attributable to Alcoa
Corporation
$(0.02)
$(0.26)
$(1.63)
$(0.91)
$(6.07)
Adjusted net income (loss)
$49
$(218)
$(57)
$(215)
$(184)
Adjusted earnings (loss) per share
$0.26
$(1.17)
$(0.31)
$(1.16)
$(0.99)
Adjusted EBITDA excluding special
items
$361
$284
$346
$1,151
$1,656
“In a very challenging year, we set multiple production records,
exceeded our goals for cash management, and made significant
progress on our multi-year strategy,” said Alcoa President and CEO
Roy Harvey. “We had a very solid fourth quarter, and the work we
accomplished in 2020 positions us well to capture the benefits of
an improved market.
“The performance of employees across Alcoa, even throughout
these unprecedented times, shows that our strategies are bringing
positive results across the business,” Harvey said. “As we progress
into this new year, we will focus first on keeping our employees
safe as we continue to execute on our strategy, including
leveraging our industry-leading practices for a world that is
demanding sustainable solutions that we are uniquely qualified to
provide.”
Fourth Quarter 2020 Results
- Shipments: In Alumina, third-party shipments decreased
approximately 9 percent sequentially, primarily due to timing of
shipments. In Aluminum, third-party shipment volume declined
approximately 4 percent, primarily related to the workers’ strike
at San Ciprián, which has blocked over 50,000 metric tons of metal
shipments, partially offset by increases in shipments across the
remainder of the smelting portfolio.
- Revenue: Higher aluminum prices were partially offset by
lower alumina and aluminum shipments in the fourth quarter, driving
a 1 percent sequential increase in revenue. In value-add products,
the Company realized a 15 percent sequential increase in sales
revenue, including a 13 percent increase in volume, primarily due
to improved demand from the automotive sector.
- Net loss attributable to Alcoa Corporation: Alcoa
reported net loss of $4 million, or $0.02 per share, in the fourth
quarter 2020, an improvement from the net loss of $49 million, or
$0.26 per share, in the third quarter 2020. The improved sequential
results are primarily due to higher aluminum prices and a lower
provision for income taxes, partially offset by lower alumina and
aluminum shipments and higher restructuring-related charges in the
quarter.
- Adjusted net loss: Excluding the impact of special items
of $53 million, adjusted net income was $49 million, or $0.26 per
share, an improvement from the third quarter 2020 adjusted net loss
of $218 million, or $1.17 per share. Notable special items include
$44 million in non-cash settlement charges related to lump sum
buyouts offered to specific participants in U.S. defined benefit
pension plans. As a result, the Company paid approximately $32
million from plan assets on December 31, 2020 to about 430
participants and was relieved of the corresponding pension
liability.
- Adjusted EBITDA excluding special items: Adjusted EBITDA
excluding special items was $361 million, a 27 percent sequential
increase primarily attributed to higher aluminum and alumina prices
and the impact of portfolio changes.
- Cash: Cash from operations was $38 million. Cash used
for financing activities was $63 million, and cash used for
investing activities was $117 million. Free cash flow was negative
$73 million. Cash from operations includes a $250 million pension
contribution made to the Company’s U.S. pension plans;
approximately $200 million of which had been deferred as permitted
under the Coronavirus Aid, Relief, and Economic Security (CARES)
Act.
- Working capital: The Company reported 23 days working
capital, a one day increase sequentially.
Full-Year 2020 Results
- Production records: Alcoa set annual production records
for both the Bauxite and Alumina segments.
- Shipments: In Alumina, third-party shipments increased
approximately 2 percent annually, primarily due to the timing of
those shipments and higher overall production. In Aluminum,
third-party shipment volume increased approximately 5 percent,
primarily related to the restart of the Aluminerie de Bécancour
Inc. (ABI) smelter in Québec.
- Revenue: Despite improved shipment volume, total revenue
declined 11 percent in 2020 to $9.3 billion, primarily due to lower
aluminum and alumina prices and the elimination of energy revenue
from the divestiture of the Afobaka hydroelectric dam on December
31, 2019.
- Net loss attributable to Alcoa Corporation: For
full-year 2020, Alcoa reported a net loss of $170 million, or $0.91
per share, compared with a net loss of $1,125 million, or $6.07 per
share, for full-year 2019. The $955 million year-over-year
improvement was primarily driven by lower restructuring-related
charges and a gain from the sale of the Gum Springs waste treatment
business, partially offset by lower alumina and aluminum
prices.
- Adjusted net loss: Excluding the impact of special items
of $45 million, adjusted net loss was $215 million, or $1.16 per
share, a decline from the 2019 adjusted net loss of $184 million,
or $0.99 per share.
- Adjusted EBITDA excluding special items: Adjusted EBITDA
excluding special items was $1,151 million compared with $1,656
million for full-year 2019, a 30 percent decrease primarily
attributed to lower alumina and aluminum prices in 2020.
- Cash, debt, and pension: Alcoa ended 2020 with cash on
hand of $1.6 billion. Debt as of December 31, 2020 was $2.5 billion
and net debt was $935 million. For the full year 2020, cash
provided from operations was $394 million. Cash provided from
financing activities was $514 million, primarily due to the debt
issuance proceeds partially offset by dividends to noncontrolling
interest. Cash used for investing activities was $167 million with
proceeds from asset sales, primarily Gum Springs, of $198 million
more than offset by capital expenditures of $353 million. Alcoa
invested $35 million in return-seeking capital projects and
controlled sustaining capital expenditures to $318 million in 2020.
Free cash flow was $41 million. The Company’s net pension and other
postretirement employee benefit (OPEB) liability at the end of the
year increased $96 million from year-end 2019, to $2.4 billion, and
includes approximately $83 million related to the Warrick rolling
mill sale (see below) recorded in Liabilities held for sale on the
Company’s balance sheet.
- Working capital: The Company reported 23 days working
capital, a year-over-year improvement of four days, primarily due
to decreases in days of inventory on hand and higher payables
related to favorable terms on trading activities.
Strategic Actions and Initiatives
In 2020, Alcoa exceeded its target to achieve $900 million in
cash actions through strategic actions, improvements in working
capital and productivity, and cash management in response to the
economic uncertainty from the COVID-19 pandemic.
Non-core asset sales
- Warrick Rolling Mill: On November 30, 2020, Alcoa announced an
agreement to sell its rolling mill business, held by Alcoa Warrick
LLC, to Kaiser Aluminum Corporation for total consideration of
approximately $670 million, which includes $587 million in cash and
the assumption of $83 million in OPEB liabilities. The sale is
expected to close by the end of the first quarter of 2021, pending
regulatory approval and customary closing conditions. The assets
and liabilities of the Warrick rolling mill were classified as held
for sale in the Company’s balance sheet as of December 31, 2020.
Alcoa will retain ownership of the site’s 269,000 metric ton per
year aluminum smelter and its electricity generating units at
Warrick Operations with a market-based metal supply agreement with
Kaiser. After closing, Alcoa expects annual approximate decreases
in sales of $800 million, net income (pre- and after-tax) of $45
million to $55 million, and Adjusted EBITDA of $90 million to $100
million, based on last 12-month pricing through December 2020.
Alcoa expects to spend approximately $100 million for site
separation and transaction costs, with approximately half being
spent in 2021 and the remainder in 2022 and 2023.
- Gum Springs: On February 3, 2020, Alcoa announced that it had
completed the sale of its wholly-owned subsidiary Elemental
Environmental Solutions LLC (EES), which operates a 1,300-acre
hazardous waste treatment business in Gum Springs, Arkansas, to
Veolia ES Technical Solutions, LLC (VTS). Alcoa received $200
million in cash upon closing of the sale on January 31, 2020. An
additional escrowed $50 million is pending based on certain
post-closing conditions.
Portfolio Review
- San Ciprián smelter curtailment: On October 9, 2020, Alcoa
announced its decision to fully curtail the 228,000 metric tons of
annual capacity at its San Ciprián aluminum smelter in Spain and
initiate a collective dismissal process of employees. On December
17, 2020, Alcoa announced it would halt those plans to review a
decision from the High Court of Justice of Galicia, which declared
a collective dismissal process for the San Ciprián smelter to be
“null and void.” As a result, in the fourth quarter 2020, the
Company did not incur the approximately $35 million to $40 million
it previously announced as an expected charge for employee-related
costs associated with the curtailment and collective dismissal
process. The Company continues to evaluate potential
solutions.
2020 Programs
Earlier this year, Alcoa announced 2020 programs to drive leaner
working capital and improved productivity. During 2020, the Company
met the combined $175 million - $200 million full-year working
capital reduction and productivity savings target with $111 million
in working capital and $73 million in productivity cost savings.
This achievement would have been $82 million higher without the
impact of the workers’ strike at San Ciprián which has increased
inventory balances at the facility.
COVID-19 response
As a result of the global economic uncertainty associated with
the pandemic, in the first quarter of 2020, Alcoa instituted
measures to manage cash during the global health crisis. The
Company exceeded its 2020 reduction targets for capital
expenditures and costs associated with Asset Retirement Obligations
(ARO) and environmental spend. During 2020, the Company initially
deferred $202 million in pension contributions under provisions in
the U.S. Government’s CARES Act. With ample cash on hand and having
achieved its objective to hold cash during uncertain times in 2020,
the Company made a $250 million pension contribution to its U.S.
pension plans in late December to cover both the $197 million
deferred contributions due on January 4, 2021 and a $53 million
prepayment.
The Company continues to have comprehensive measures to protect
from risks associated with the COVID-19 pandemic.
Advancing Sustainably
In 2020, the Company made progress in accordance with its
strategic priority to “advance sustainably,” which includes
maintaining the Company’s social license to operate, reducing risks
and improving profitability through product differentiation. In
September of 2020, Alcoa added to its SustanaTM line of low-carbon
products by launching the world’s first low-carbon alumina brand,
EcoSourceTM, which can help aluminum producers reduce their carbon
footprint.
In addition, Alcoa certified additional operating assets to the
standards of the Aluminium Stewardship Initiative (ASI), the
industry’s most comprehensive system for third-party validation of
sustainable manufacturing processes. Alcoa earned ASI’s Chain of
Custody (CoC) certification that enables the Company to market
products across its three segments with ASI certification. The CoC
scope currently includes all of Alcoa’s bauxite mines in Western
Australia and the Juruti mine in Brazil, all of the alumina
refineries in Western Australia and the Alumar refinery in Brazil,
and five global smelters and casthouses.
2021 Outlook
Primary aluminum consumption is expected to increase in both
China and ex-China in 2021 with the recovery from the pandemic and
the impact of additional stimulus measures. As supply growth is
projected to be lower than demand growth, the global primary
aluminum market is anticipated to be closer to balance in 2021.
In 2021, the Company projects total bauxite shipments to range
between 49.0 and 50.0 million dry metric tons, an improvement from
2020. Total alumina shipments are expected to be between 13.9 and
14.0 million metric tons and stable in comparison to 2020. The
Aluminum segment is expected to ship between 2.7 and 2.8 million
metric tons, a decrease from 2020 related to the changes in the
portfolio but well positioned to benefit from the recovery in
value-add products.
Outside of the market improvements expected, in the first
quarter of 2021, Alcoa anticipates lower quarterly performance
results in the Bauxite segment due primarily to lower internal
bauxite pricing and lower earnings from minority owned mines. In
the Alumina segment, the Company expects the offsetting benefit
from lower bauxite internal prices, partially offset by higher
energy costs and seasonal maintenance costs. In the Aluminum
segment, lower quarterly performance is expected due to higher
sequential alumina costs as well as other unfavorable items.
Based on current alumina and aluminum market conditions, the
Company expects first quarter tax expense to approximate $65
million, which may vary with market conditions and jurisdictional
profitability.
The COVID-19 pandemic is ongoing, and its magnitude and duration
continue to be unknown. The uncertainty around its future impact on
the Company’s business, financial condition, operating results, and
cash flows could cause actual results to differ from this
outlook.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Standard Time (EST) on Wednesday, January 20, 2021, to
present fourth quarter and full-year 2020 financial results and
discuss the business, developments, and market conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EST on January 20, 2021. Call information and related details
are available under the “Investors” section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website,
www.alcoa.com, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls and webcasts.
The Company does not incorporate the information contained on, or
accessible through, its corporate website into this press
release.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, and is built on a foundation of
strong values and operating excellence dating back more than 130
years to the world-changing discovery that made aluminum an
affordable and vital part of modern life. Since developing the
aluminum industry, and throughout our history, our talented Alcoans
have followed on with breakthrough innovations and best practices
that have led to efficiency, safety, sustainability, and stronger
communities wherever we operate.
Forward-Looking Statements
This news release contains statements that relate to future
events and expectations and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results or operating performance; statements about
strategies, outlook, and business and financial prospects; and
statements about return of capital. These statements reflect
beliefs and assumptions that are based on Alcoa Corporation’s
perception of historical trends, current conditions, and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa
Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) current and potential future impacts of the
coronavirus (COVID-19) pandemic on the global economy and our
business, financial condition, results of operations, or cash
flows; (b) material adverse changes in aluminum industry
conditions, including global supply and demand conditions and
fluctuations in London Metal Exchange-based prices and premiums, as
applicable, for primary aluminum and other products, and
fluctuations in indexed-based and spot prices for alumina; (c)
deterioration in global economic and financial market conditions
generally and which may also affect Alcoa Corporation’s ability to
obtain credit or financing upon acceptable terms or at all; (d)
unfavorable changes in the markets served by Alcoa Corporation; (e)
the impact of changes in foreign currency exchange and tax rates on
costs and results; (f) increases in energy costs or uncertainty of
energy supply; (g) declines in the discount rates used to measure
pension liabilities or lower-than-expected investment returns on
pension assets, or unfavorable changes in laws or regulations that
govern pension plan funding; (h) the inability to achieve
improvement in profitability and margins, cost savings, cash
generation, revenue growth, fiscal discipline, or strengthening of
competitiveness and operations anticipated from portfolio actions,
operational and productivity improvements, cash sustainability,
technology advancements, and other initiatives; (i) the inability
to realize expected benefits, in each case as planned and by
targeted completion dates, from acquisitions, divestitures,
restructuring activities, facility closures, curtailments,
restarts, expansions, or joint ventures; (j) political, economic,
trade, legal, public health and safety, and regulatory risks in the
countries in which Alcoa Corporation operates or sells products;
(k) labor disputes and/or and work stoppages; (l) the outcome of
contingencies, including legal and tax proceedings , government or
regulatory investigations, and environmental remediation; (m) the
impact of cyberattacks and potential information technology or data
security breaches; and (n) the other risk factors discussed in Item
1A of Alcoa Corporation’s Form 10-K for the fiscal year ended
December 31, 2019, Form 10-Q for the quarters ended March 31, 2020,
June 30, 2020, and September 30, 2020, and other reports filed by
Alcoa Corporation with the U.S. Securities and Exchange Commission
(SEC). Alcoa Corporation disclaims any obligation to update
publicly any forward-looking statements, whether in response to new
information, future events or otherwise, except as required by
applicable law. Market projections are subject to the risks
described above and other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa Corporation’s consolidated financial information but is not
presented in Alcoa Corporation’s financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). Certain of these data are
considered “non-GAAP financial measures” under SEC regulations.
Alcoa Corporation believes that the presentation of non-GAAP
financial measures is useful to investors because such measures
provide both additional information about the operating performance
of Alcoa Corporation and insight on the ability of Alcoa
Corporation to meet its financial obligations by adjusting the most
directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items
in nature, and/or nonoperating expense or income items. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Reconciliation of Net Income to
Adjusted EBITDA for the Warrick rolling mill impact
(unaudited)
(dollars in millions)
Net income attributable to Alcoa
Corporation
$45 - $55
Provision for depreciation, depletion, and
amortization
25
Other expenses, net
20
Adjusted EBITDA
$90 - $100
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. The Adjusted EBITDA presented may not
be comparable to similarly titled measures of other companies.
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations (unaudited) (dollars in
millions, except per-share amounts)
Quarter Ended
December 31, 2020
September 30, 2020
December 31, 2019
Sales
$
2,392
$
2,365
$
2,436
Cost of goods sold (exclusive of expenses
below)
1,974
2,038
2,048
Selling, general administrative, and other
expenses
55
47
62
Research and development expenses
9
6
6
Provision for depreciation, depletion, and
amortization
170
161
183
Restructuring and other charges, net
60
5
363
Interest expense
43
41
31
Other expenses, net
44
45
44
Total costs and expenses
2,355
2,343
2,737
Income (loss) before income taxes
37
22
(301
)
Provision for income taxes
20
42
54
Net income (loss)
17
(20
)
(355
)
Less: Net income (loss) attributable to
noncontrolling interest
21
29
(52
)
NET LOSS ATTRIBUTABLE TO ALCOA
CORPORATION
$
(4
)
$
(49
)
$
(303
)
EARNINGS PER SHARE ATTRIBUTABLE TO
ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss
$
(0.02
)
$
(0.26
)
$
(1.63
)
Average number of shares
185,945,762
185,923,106
185,575,479
Diluted:
Net loss
$
(0.02
)
$
(0.26
)
$
(1.63
)
Average number of shares
185,945,762
185,923,106
185,575,479
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations (unaudited), continued
(dollars in millions, except per-share amounts)
Year ended
December 31, 2020
December 31, 2019
Sales
$
9,286
$
10,433
Cost of goods sold (exclusive of expenses
below)
7,969
8,537
Selling, general administrative, and other
expenses
206
280
Research and development expenses
27
27
Provision for depreciation, depletion, and
amortization
653
713
Restructuring and other charges, net
104
1,031
Interest expense
146
121
Other expenses, net
8
162
Total costs and expenses
9,113
10,871
Income (loss) before income taxes
173
(438
)
Provision for income taxes
187
415
Net loss
(14
)
(853
)
Less: Net income attributable to
noncontrolling interest
156
272
NET LOSS ATTRIBUTABLE TO ALCOA
CORPORATION
$
(170
)
$
(1,125
)
EARNINGS PER SHARE ATTRIBUTABLE TO
ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss
$
(0.91
)
$
(6.07
)
Average number of shares
185,875,964
185,489,491
Diluted:
Net loss
$
(0.91
)
$
(6.07
)
Average number of shares
185,875,964
185,489,491
Common stock outstanding at the end of the
period
185,978,069
185,580,166
Alcoa Corporation and subsidiaries
Consolidated Balance Sheet (unaudited) (in millions)
December 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,607
$
879
Receivables from customers
471
546
Other receivables
85
114
Inventories
1,398
1,644
Fair value of derivative instruments
21
59
Assets held for sale
648
—
Prepaid expenses and other current
assets(1)
290
288
Total current assets
4,520
3,530
Properties, plants, and equipment
20,522
21,715
Less: accumulated depreciation, depletion,
and amortization
13,332
13,799
Properties, plants, and equipment, net
7,190
7,916
Investments
1,051
1,113
Deferred income taxes
659
642
Fair value of derivative instruments
—
18
Other noncurrent assets
1,444
1,412
Total assets
$
14,864
$
14,631
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,403
$
1,484
Accrued compensation and retirement
costs
395
413
Taxes, including income taxes
91
104
Fair value of derivative instruments
103
67
Liabilities held for sale
242
—
Other current liabilities
525
494
Long-term debt due within one year
2
1
Total current liabilities
2,761
2,563
Long-term debt, less amount due within one
year
2,463
1,799
Accrued pension benefits
1,523
1,505
Accrued other postretirement benefits
744
749
Asset retirement obligations
625
606
Environmental remediation
293
296
Fair value of derivative instruments
742
581
Noncurrent income taxes
207
276
Other noncurrent liabilities and deferred
credits
515
370
Total liabilities
9,873
8,745
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,663
9,639
Retained deficit
(725
)
(555
)
Accumulated other comprehensive loss
(5,653
)
(4,974
)
Total Alcoa Corporation shareholders’
equity
3,287
4,112
Noncontrolling interest
1,704
1,774
Total equity
4,991
5,886
Total liabilities and equity
$
14,864
$
14,631
(1)
This line item includes $3 and $4 of
restricted cash as of December 31, 2020 and 2019, respectively.
Alcoa Corporation and subsidiaries
Statement of Consolidated Cash Flows (unaudited) (in
millions)
Year Ended December
31,
2020
2019
CASH FROM OPERATIONS
Net loss
$
(14
)
$
(853
)
Adjustments to reconcile net loss to cash
from operations:
Depreciation, depletion, and
amortization
653
713
Deferred income taxes
(26
)
15
Equity earnings, net of dividends
20
21
Restructuring and other charges, net
104
1,031
Net gain from investing activities – asset
sales
(173
)
(3
)
Net periodic pension benefit cost
138
119
Stock-based compensation
25
30
Provision for bad debt expense
2
21
Other
32
30
Changes in assets and liabilities,
excluding effects of divestitures and
foreign currency translation
adjustments:
Decrease in receivables
16
283
Decrease in inventories
122
137
Decrease in prepaid expenses and other
current assets
17
27
Increase (decrease) in accounts payable,
trade
25
(153
)
(Decrease) in accrued expenses
(153
)
(175
)
Increase (decrease) in taxes, including
income taxes
119
(330
)
Pension contributions
(343
)
(173
)
(Increase) in noncurrent assets
(82
)
(24
)
(Decrease) in noncurrent liabilities
(88
)
(30
)
CASH PROVIDED FROM OPERATIONS
394
686
FINANCING ACTIVITIES
Additions to debt (original maturities
greater than three months)
739
—
Payments on debt (original maturities
greater than three months)
(1
)
(7
)
Proceeds from the exercise of employee
stock options
1
2
Financial contributions for the
divestiture of businesses
(38
)
(12
)
Contributions from noncontrolling
interest
24
51
Distributions to noncontrolling
interest
(207
)
(472
)
Other
(4
)
(6
)
CASH PROVIDED FROM (USED FOR) FINANCING
ACTIVITIES
514
(444
)
INVESTING ACTIVITIES
Capital expenditures
(353
)
(379
)
Proceeds from the sale of assets
198
23
Additions to investments
(12
)
(112
)
CASH USED FOR INVESTING ACTIVITIES
(167
)
(468
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH
EQUIVALENTS AND RESTRICTED CASH
(14
)
(7
)
Net change in cash and cash equivalents
and restricted cash
727
(233
)
Cash and cash equivalents and restricted
cash at beginning of year
883
1,116
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT
END OF PERIOD
$
1,610
$
883
Alcoa Corporation and subsidiaries
Segment Information (unaudited) (dollars in millions, except
realized prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
4Q19
2019
1Q20
2Q20
3Q20
4Q20
2020
Bauxite:
Production(1) (mdmt)
12.1
47.4
11.6
12.2
12.0
12.2
48.0
Third-party shipments (mdmt)
1.5
6.2
1.4
1.6
1.6
1.9
6.5
Intersegment shipments (mdmt)
10.3
41.4
10.5
10.8
10.5
10.4
42.2
Third-party sales
$
65
$
297
$
71
$
66
$
56
$
79
$
272
Intersegment sales
$
246
$
979
$
235
$
245
$
236
$
225
$
941
Segment Adjusted EBITDA(2)
$
132
$
504
$
120
$
131
$
124
$
120
$
495
Depreciation, depletion, and
amortization
$
30
$
120
$
34
$
30
$
33
$
38
$
135
Alumina:
Production (kmt)
3,373
13,302
3,298
3,371
3,435
3,371
13,475
Third-party shipments (kmt)
2,464
9,473
2,365
2,415
2,549
2,312
9,641
Intersegment shipments (kmt)
981
4,072
1,075
987
1,135
1,046
4,243
Average realized third-party price per
metric ton of
alumina
$
291
$
343
$
299
$
250
$
274
$
268
$
273
Third-party sales
$
718
$
3,250
$
707
$
603
$
697
$
620
$
2,627
Intersegment sales
$
330
$
1,561
$
336
$
289
$
329
$
314
$
1,268
Segment Adjusted EBITDA(2)
$
133
$
1,097
$
193
$
88
$
119
$
97
$
497
Depreciation and amortization
$
57
$
214
$
49
$
37
$
41
$
45
$
172
Equity (loss) income
$
(9
)
$
6
$
(9
)
$
(8
)
$
(4
)
$
(2
)
$
(23
)
Aluminum:
Primary aluminum production (kmt)
535
2,135
564
581
559
559
2,263
Third-party aluminum shipments(3)
(kmt)
718
2,859
725
789
767
735
3,016
Average realized third-party price per
metric ton of
primary aluminum
$
2,042
$
2,141
$
1,988
$
1,694
$
1,904
$
2,094
$
1,915
Third-party sales
$
1,634
$
6,803
$
1,598
$
1,475
$
1,607
$
1,685
$
6,365
Intersegment sales
$
6
$
17
$
3
$
2
$
2
$
5
$
12
Segment Adjusted EBITDA(2)
$
75
$
25
$
62
$
(34
)
$
116
$
181
$
325
Depreciation and amortization
$
84
$
346
$
81
$
79
$
80
$
82
$
322
Equity (loss) income
$
(5
)
$
(49
)
$
5
$
(12
)
$
(6
)
$
6
$
(7
)
Reconciliation of total segment
Adjusted EBITDA to consolidated net (loss) income attributable to
Alcoa Corporation
Total segment Adjusted EBITDA(2)
$
340
$
1,626
$
375
$
185
$
359
$
398
$
1,317
Unallocated amounts:
Transformation(4)
(6
)
(7
)
(16
)
(10
)
(11
)
(8
)
(45
)
Intersegment eliminations
40
150
(8
)
30
(35
)
5
(8
)
Corporate expenses(5)
(22
)
(101
)
(27
)
(21
)
(24
)
(30
)
(102
)
Provision for depreciation, depletion,
and amortization
(183
)
(713
)
(170
)
(152
)
(161
)
(170
)
(653
)
Restructuring and other charges, net
(363
)
(1,031
)
(2
)
(37
)
(5
)
(60
)
(104
)
Interest expense
(31
)
(121
)
(30
)
(32
)
(41
)
(43
)
(146
)
Other (expenses) income, net
(44
)
(162
)
132
(51
)
(45
)
(44
)
(8
)
Other(6)
(32
)
(79
)
(35
)
(17
)
(15
)
(11
)
(78
)
Consolidated (loss) income before income
taxes
(301
)
(438
)
219
(105
)
22
37
173
Provision for income taxes
(54
)
(415
)
(80
)
(45
)
(42
)
(20
)
(187
)
Net loss (income) attributable to
noncontrolling interest
52
(272
)
(59
)
(47
)
(29
)
(21
)
(156
)
Consolidated net (loss) income
attributable to
Alcoa Corporation
$
(303
)
$
(1,125
)
$
80
$
(197
)
$
(49
)
$
(4
)
$
(170
)
The difference between segment totals and
consolidated amounts is in Corporate.
(1)
The production amounts can vary from total
shipments due primarily to differences between the equity
allocation of production and off-take agreements with the
respective equity investment.
(2)
Alcoa Corporation’s definition of Adjusted
EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation,
depletion, and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. The Adjusted EBITDA presented may not be comparable
to similarly titled measures of other companies.
(3)
The Aluminum segment’s third-party
aluminum shipments are composed of both primary aluminum and
flat-rolled aluminum.
(4)
Transformation includes, among other
items, the Adjusted EBITDA of previously closed operations.
(5)
Corporate expenses are composed of general
administrative and other expenses of operating the corporate
headquarters and other global administrative facilities, as well as
research and development expenses of the corporate technical
center.
(6)
Other includes certain items that impact
Cost of goods sold and other expenses on Alcoa Corporation’s
Statement of Consolidated Operations that are not included in the
Adjusted EBITDA of the reportable segments.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited) (in millions, except
per-share amounts)
Adjusted Income
Income (Loss)
Income (Loss)
Quarter ended
Year ended
December 31, 2020
September 30, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Net loss attributable to Alcoa
Corporation
$
(4
)
$
(49
)
$
(303
)
$
(170
)
$
(1,125
)
Special items:
Restructuring and other charges, net
60
5
363
104
1,031
Other special items(1)
5
14
25
(103
)
50
Discrete tax items and interim tax
impacts(2)
(6
)
(184
)
(23
)
(26
)
11
Tax impact on special items(3)
(1
)
(3
)
(9
)
(13
)
(32
)
Noncontrolling interest impact(3)
(5
)
(1
)
(110
)
(7
)
(119
)
Subtotal
53
(169
)
246
(45
)
941
Net income (loss) attributable to
Alcoa
Corporation – as adjusted
$
49
$
(218
)
$
(57
)
$
(215
)
$
(184
)
Diluted EPS(4):
Net loss attributable to Alcoa
Corporation
common shareholders
$
(0.02
)
$
(0.26
)
$
(1.63
)
$
(0.91
)
$
(6.07
)
Net income (loss) attributable to Alcoa
Corporation
common shareholders - as adjusted
$
0.26
$
(1.17
)
$
(0.31
)
$
(1.16
)
$
(0.99
)
Net income (loss) attributable to Alcoa Corporation – as
adjusted is a non-GAAP financial measure. Management believes this
measure is meaningful to investors because management reviews the
operating results of Alcoa Corporation excluding the impacts of
restructuring and other charges, various tax items, and other
special items (collectively, “special items”). There can be no
assurances that additional special items will not occur in future
periods. To compensate for this limitation, management believes it
is appropriate to consider both Net income (loss) attributable to
Alcoa Corporation determined under GAAP as well as Net income
(loss) attributable to Alcoa Corporation – as adjusted.
(1)
Other special items include the
following:
- for the quarter ended December 31, 2020, external costs related
to portfolio actions ($4), a net favorable change in certain
mark-to-market energy derivative instruments ($2), and charges for
other special items ($3);
- for the quarter ended September 30, 2020, costs related to the
restart process at the Bécancour, Canada smelter ($7), a net
unfavorable change in certain mark-to-market energy derivative
instruments ($4), and external costs related to portfolio actions
($3);
- for the quarter ended December 31, 2019, costs related to the
restart process at the Bécancour, Canada smelter ($23) and a net
charge for other special items ($2);
- for the year ended December 31, 2020, costs related to the
restart process at the Bécancour, Canada smelter ($56), external
costs related to portfolio actions ($8), a net unfavorable change
in certain mark-to-market energy derivative instruments ($10), a
gain on the sale of a waste treatment facility in Gum Springs,
Arkansas ($180),and costs related to hurricane damages at Lake
Charles ($3); and,
- for the year ended December 31, 2019, costs related to the
restart process at the Bécancour, Canada smelter ($39), costs
related to a collective employee dismissal process in Spain at the
Avilés and La Coruña facilities ($16), gains on the sale of excess
land ($16), costs related to union negotiations in the U.S. ($7),
and a net charge for several other special items ($4).
(2)
Discrete tax items and interim tax impacts
are the result of discrete transactions and interim period tax
impacts based on full-year assumptions and include the
following:
- for the quarter ended December 31, 2020, a net charge for
interim tax impacts ($19), a benefit related to the favorable
ruling of a Spanish tax matter ($32), and a net charge of several
other items ($7);
- for the quarter ended September 30, 2020, a net benefit of
interim tax impacts ($182) and a net benefit of several other items
($2);
- for the quarter ended December 31, 2019, a net benefit of
interim tax impacts ($25) and a net charge of several other items
($2);
- for the year ended December 31, 2020, a benefit related to the
favorable ruling of a Spanish tax matter ($32), and a net charge of
several other items ($6); and,
- for the year ended December 31, 2019, a net charge of several
items ($11).
(3)
The tax impact on special items is based
on the applicable statutory rates in the jurisdictions where the
special items occurred. The noncontrolling interest impact on
special items represents Alcoa’s partner’s share of certain special
items.
(4)
In any given period, the average number of
shares applicable to diluted EPS for Net (loss) 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 income (loss) attributable to Alcoa Corporation
common shareholders – as adjusted due to a larger and/or positive
numerator. Specifically, except for the quarter ended December 31,
2020, the average number of share equivalents applicable to diluted
EPS – as adjusted had an anti-dilutive effect, and therefore, are
excluded from the diluted EPS calculation. For the quarter ended
December 31, 2020, 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
187,677,215.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued (in
millions)
Adjusted EBITDA
Quarter ended
Year ended
December 31, 2020
September 30, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Net loss attributable to Alcoa
Corporation
$
(4
)
$
(49
)
$
(303
)
$
(170
)
$
(1,125
)
Add:
Net income (loss) attributable to
noncontrolling
interest
21
29
(52
)
156
272
Provision for income taxes
20
42
54
187
415
Other expenses, net
44
45
44
8
162
Interest expense
43
41
31
146
121
Restructuring and other charges, net
60
5
363
104
1,031
Provision for depreciation, depletion,
and amortization
170
161
183
653
713
Adjusted EBITDA
354
274
320
1,084
1,589
Special items(1)
7
10
26
67
67
Adjusted EBITDA, excluding special
items
$
361
$
284
$
346
$
1,151
$
1,656
Alcoa’s Corporation’s definition of Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. Adjusted EBITDA is a
non-GAAP financial measure. Management believes this measure is
meaningful to investors because Adjusted EBITDA provides additional
information with respect to Alcoa Corporation’s operating
performance and the Company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies.
(1)
Special items include the following (see
reconciliation of Adjusted Income above for additional
information):
- for the quarter ended December 31, 2020, external costs related
to portfolio actions ($4) and charges for other special items
($3);
- for the quarter ended September 30, 2020, costs related to the
restart process at the Bécancour, Canada smelter ($7) and external
costs related to portfolio actions ($3);
- for the quarter ended December 31, 2019, costs related to the
restart process at the Bécancour, Canada smelter ($23) and charges
for other special items ($3);
- for the year ended December 31, 2020, costs related to the
restart process at the Bécancour, Canada smelter ($56), external
costs related to portfolio actions ($8), and charges for other
special items ($3); and,
- for the year ended December 31, 2019, costs related to the
restart process at the Bécancour, Canada smelter ($39), costs
related to a collective employee dismissal process in Spain at the
Avilés and La Coruña facilities ($16), costs related to union
negotiations in the U.S. ($7), and charges for other special items
($5).
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued (in
millions)
Free Cash Flow
Quarter ended
Year ended
December 31, 2020
September 30, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Cash from operations
$
38
$
158
$
262
$
394
$
686
Capital expenditures
(111
)
(74
)
(134
)
(353
)
(379
)
Free cash flow
$
(73
)
$
84
$
128
$
41
$
307
Free Cash Flow is a non-GAAP financial measure. Management
believes this measure is meaningful to investors because management
reviews cash flows generated from operations after taking into
consideration capital expenditures, which are both necessary to
maintain and expand Alcoa Corporation’s asset base and expected to
generate future cash flows from operations. It is important to note
that Free Cash Flow does not represent the residual cash flow
available for discretionary expenditures since other
non-discretionary expenditures, such as mandatory debt service
requirements, are not deducted from the measure.
Net Debt
December 31, 2020
December 31, 2019
Short-term borrowings
$
77
$
—
Long-term debt due within one year
2
1
Long-term debt, less amount due within one
year
2,463
1,799
Total debt
2,542
1,800
Less: Cash and cash equivalents
1,607
879
Net debt
$
935
$
921
Net debt is a non-GAAP financial measure. Management believes
this measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after considering available
cash that could be used to repay outstanding debt.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210120005678/en/
Investor Contact: James Dwyer +1 412 992 5450
James.Dwyer@alcoa.com Media Contact: Jim Beck +1 412 315
2909 Jim.Beck@alcoa.com
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