Alcoa Corporation (NYSE: AA) today reported second quarter 2020
results consistent with the Company’s previously announced
preliminary results and reflect improved productivity and continued
operational stability during the COVID-19 pandemic.
Second Quarter Highlights
- Managing health risks posed by the COVID-19 pandemic across
global operations; all production sites remain fully
operational
- Executed previously announced cost-saving actions with
continued progress on working capital and productivity; cash
balance grew to $965 million, a sequential increase of $136
million
- Generated $288 million in cash from operations; $211 million
free cash flow, the highest since the fourth quarter of 2018
- Set first-half and quarterly production records for Bauxite
segment; record quarterly shipments from Juruti (Brazil)
- Achieved a record quarterly production rate (metric
tons-per-day) for the Alumina segment
- Continuing to progress on strategic actions, including ongoing
review of production portfolio and non-core assets; 2020 programs
to improve working capital and productivity; and cash-preservation
actions related to COVID-19
- Increased liquidity by completing a $750 million debt issuance
on July 13, 2020 at 5.5%, a coupon rate lower than any of the
Company’s prior debt issuances
Financial Results
M, except per share amounts
2Q20
1Q20
2Q19
Revenue
$
2,148
$
2,381
$
2,711
Net (loss) income attributable to Alcoa
Corporation
$
(197
)
$
80
$
(402
)
(Loss) earnings per share attributable to
Alcoa Corporation
$
(1.06
)
$
0.43
$
(2.17
)
Adjusted net loss
$
(4
)
$
(42
)
$
(2
)
Adjusted loss per share
$
(0.02
)
$
(0.23
)
$
(0.01
)
Adjusted EBITDA excluding special
items
$
185
$
321
$
455
“I am proud of our global team’s resolve in facing challenges
created by the pandemic, focusing first on protecting people,” said
President and Chief Executive Officer Roy Harvey. “We acted early
to implement comprehensive measures to mitigate health risks, and
we continue to exercise all precautionary measures to keep people
safe and our locations fully operational.
“Despite challenging market conditions, our team has lowered
production costs, increased output, maintained stable shipments,
and improved our balance sheet. We continued to make progress in
executing our strategic actions and 2020 programs, and we finished
the quarter with a cash balance of nearly one billion dollars,”
Harvey continued.
“Earlier this month, we issued corporate bonds at a favorable
rate which provides us with improved flexibility as we continue to
navigate through the current economic uncertainties,” Harvey said.
“As we move forward and the economy recovers, we will also be well
positioned to complete objectives within our capital allocation
framework.”
- Shipments: Sequentially, the Company’s overall
third-party aluminum shipment volume increased approximately 9
percent, primarily due to the continued progress of the Aluminerie
de Bécancour Inc. (ABI) smelter in Quebec, Canada restart.
Third-party alumina shipments in the second quarter 2020 increased
approximately 2 percent, compared with first quarter 2020 shipment
volume.
- Revenue: Alcoa reported second quarter 2020 revenue of
$2.1 billion, down 10 percent sequentially, primarily due to lower
aluminum and alumina prices.
- Net (loss) income attributable to Alcoa Corporation: In
the second quarter of 2020, Alcoa reported net loss of $197
million, or $1.06 per share, compared with net income of $80
million, or $0.43 per share, in the first quarter of 2020. The 2020
second quarter results include the net impact of $193 million of
special items, including interim tax impacts, costs associated with
the curtailment of the Intalco smelter in the state of Washington
and the ongoing restart of the ABI smelter. The ABI restart process
is expected to be complete during the third quarter 2020.
- Adjusted net loss: Excluding the impact of special
items, the second quarter 2020 adjusted net loss was $4 million, or
$0.02 per share, improved from the first quarter 2020 adjusted net
loss of $42 million, or $0.23 per share.
- Adjusted EBITDA excluding special items: In the second
quarter of 2020, Adjusted EBITDA excluding special items was $185
million, a 42 percent sequential decrease primarily attributed to
lower aluminum and alumina prices.
- Cash: Alcoa ended the quarter with cash on hand of $965
million and debt of $1.8 billion, for net debt of $836 million.
Cash provided from operations in the second quarter of 2020 was
$288 million. Cash used for financing activities was $71 million
and cash used in investing activities was $79 million. Free cash
flow was $211 million.
- Working capital: The Company reported 24 days working
capital, a 7-day improvement both sequentially and year-over-year,
primarily due to fewer receivable days sales outstanding,
reflecting progress in the Company’s objective to drive
year-over-year improvement in working capital.
Strategic Actions and Initiatives
Alcoa is continuing its strategic actions to drive lower costs
and sustainable profitability, including the review of its existing
production capacities and non-core assets and other
cash-preservation programs.
Intalco Works curtailment
On April 22, 2020, Alcoa announced the full curtailment at its
Intalco Works smelter in Ferndale, Washington. The curtailment of
the site’s remaining 230,000 metric tons is included in the
Company’s previously announced review of 1.5 million metric tons of
global smelting capacity over a five-year period for potential
curtailment, closure, divestiture, or significant improvement. The
curtailment is expected to be complete in the third quarter of
2020.
In the second quarter of 2020, the Company recorded
restructuring charges of approximately $27 million (pre- and
after-tax) associated with the curtailment, including employee
severance and costs associated with termination of contracts. The
restructuring charges are all cash-based and are expected to be
paid primarily in the third quarter of 2020.
Spain Collective Dismissal Process
On June 25, 2020, Alcoa launched a 30-day formal consultation
process with the Spanish Works Council representing employees at
the San Ciprián aluminum facility in Spain, which has incurred
significant and recurring financial losses that are expected to
continue. The formal consultation began after the conclusion of an
informal process that started on May 28, 2020.
A collective dismissal could potentially affect up to 534
employees at the aluminum plant. The Company envisions a
restructuring that retains a portion of the casthouse in operation.
No final decisions will be made until the formal consultation
process is complete. The San Ciprián site has both an aluminum
plant and alumina refinery; the San Ciprián alumina refinery is not
affected by this formal consultation process.
2020 Programs
Earlier this year, Alcoa announced 2020 programs to drive leaner
working capital and improved productivity. Alcoa intends to improve
working capital by $75 to $100 million through reduced inventories
and optimized contract terms. Greater productivity and lower costs
are expected to result in approximately $100 million of
improvements.
COVID-19 Update
As a result of our comprehensive measures to protect employees,
contractors and communities from risks associated with the COVID-19
pandemic, all of our global operations have maintained production
without interruption. Globally, approximately 2 percent of the
Company’s global workforce, including employees and contractors,
has been affected by the virus, but most have recovered and have
returned to work. The Company’s segments have not experienced any
significant disruption in its supply sources.
In the second quarter, the Company experienced a sequential
decline in demand for aluminum value-added products, as customers
reduced production levels in response to the economic impacts from
the pandemic. As a result, Alcoa’s production volume was shifted to
lower-priced, commodity-grade ingot.
The Company continues to manage cash during the economic
downcycle caused by the pandemic. Those actions include:
- Utilizing provisions of the U.S. Coronavirus Aid, Relief, and
Economic Security (CARES) Act, which provides for both payment
deferrals and credits. With these programs, Alcoa expects to defer
cash payments for Company pension contributions (approximately $220
million) into 2021 and defer employer payroll taxes (approximately
$14 million) into 2021 and 2022.
- Reducing $100 million of non-critical capital
expenditures.
- Implementing hiring, travel and other spending restrictions
targeted to save or defer approximately $35 million.
- Delaying certain environmental and Asset Retirement Obligations
(ARO) spending of $25 million.
Alcoa and Alcoa Foundation continue to support the communities
near our operating locations, with special focus on Brazil
communities that have been more adversely affected by the pandemic.
Alcoa Foundation has pledged more than $1 million to support
coronavirus relief efforts in the communities where Alcoa operates
through its humanitarian aid program. This is in addition to the
almost $3 million the Foundation already committed to grantmaking
in communities where we operate, which is being used to provide
needed support such as medical supplies, equipment, and food.
Through the combination of the strategic actions, 2020 programs
and COVID-19 response actions, Alcoa is on track to save or defer
approximately $900 million in cash spend in 2020.
Debt Issuance
On July 8, 2020, Alcoa announced an offering of $750 million
aggregate principal amount of 5.500% senior notes due in 2027 (the
“notes”) by Alcoa Nederland Holding B.V., a wholly-owned
subsidiary. The notes increase the Company’s overall liquidity and
provide for greater flexibility for the Company to execute on
strategic actions. The transaction closed on July 13, 2020.
2020 Outlook
The Company’s 2020 shipment outlook for Bauxite, Alumina and
Aluminum remains unchanged from the prior full-year estimates.
Total annual bauxite shipments are expected to range between 48.0
and 49.0 million dry metric tons. Total alumina shipments are
projected between 13.6 and 13.7 million metric tons. Aluminum
shipments are expected to be between 2.9 and 3.0 million metric
tons.
In the third quarter of 2020, Alcoa expects slightly lower
quarterly results in the Bauxite segment primarily due to lower
volume. In the Alumina segment, the Company expects lower quarterly
results from higher energy costs in Australia. In the Aluminum
segment, the Company expects improved results with lower raw
material costs including energy.
Alcoa is lowering its annual outlook for depreciation, depletion
and amortization expense to $665 million from $685 million as
favorable currency rates resulted in lower expense in the first
half of 2020, as well as lower capital spending in the year. The
Company is increasing its expected interest expense for full year
2020 to approximately $150 million from a prior range of $125 to
$130 million due to the debt issuance.
As Alcoa’s profit before taxes is lower in the current economic
environment, the annual operational tax rate can fluctuate
significantly. Consequently, the Company is providing an
operational tax expense range rather than a rate; third quarter
2020 operational tax expense is expected to approximate $150
million, based on recent pricing.
The COVID-19 pandemic is ongoing, and its magnitude and duration
continue to be unknown. The uncertainty around its future impact on
the Company’s business, financial condition, operating results, and
cash flows could cause actual results to differ from this
outlook.
Conference Call
Alcoa will hold its quarterly conference call at 5 p.m. Eastern
Daylight Time (EDT) on Wednesday, July 15, 2020, to present second
quarter financial results and discuss the business and market
conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EDT on July 15, 2020. Call information and related details are
available under the “Investors” section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website,
www.alcoa.com, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls and webcasts.
The Company does not incorporate the information contained on, or
accessible through, its corporate website into this press
release.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, and is built on a foundation of
strong values and operating excellence dating back more than 130
years to the world-changing discovery that made aluminum an
affordable and vital part of modern life. Since developing the
aluminum industry, and throughout our history, our talented Alcoans
have followed on with breakthrough innovations and best practices
that have led to efficiency, safety, sustainability, and stronger
communities wherever we operate.
Forward-Looking Statements
This presentation 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,
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 proceedings (including the Australian Taxation Office
matter), 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
quarter ended March 31, 2020, and other reports filed by Alcoa
Corporation with the U.S. Securities and Exchange Commission (SEC).
Alcoa Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law.
Market projections are subject to the risks described above and
other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa Corporation’s consolidated financial information but is not
presented in Alcoa Corporation’s financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). Certain of these data are
considered “non-GAAP financial measures” under SEC regulations.
Alcoa Corporation believes that the presentation of non-GAAP
financial measures is useful to investors because such measures
provide both additional information about the operating performance
of Alcoa Corporation and insight on the ability of Alcoa
Corporation to meet its financial obligations by adjusting the most
directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items
in nature, and/or nonoperating expense or income items. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Alcoa Corporation and
Subsidiaries
Statement of Consolidated
Operations (unaudited)
(dollars in millions, except
per-share amounts)
Quarter Ended
June 30,
2020
March 31,
2020
June 30,
2019
Sales
$
2,148
$
2,381
$
2,711
Cost of goods sold (exclusive of expenses
below)
1,932
2,025
2,189
Selling, general administrative, and other
expenses
44
60
68
Research and development expenses
5
7
7
Provision for depreciation, depletion, and
amortization
152
170
174
Restructuring and other charges, net
37
2
370
Interest expense
32
30
30
Other expenses (income), net
51
(132
)
50
Total costs and expenses
2,253
2,162
2,888
(Loss) income before income taxes
(105
)
219
(177
)
Provision for income taxes
45
80
116
Net (loss) income
(150
)
139
(293
)
Less: Net income attributable to
noncontrolling interest
47
59
109
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$
(197
)
$
80
$
(402
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net (loss) income
$
(1.06
)
$
0.43
$
(2.17
)
Average number of shares
185,917,932
185,749,763
185,533,936
Diluted:
Net (loss) income
$
(1.06
)
$
0.43
$
(2.17
)
Average number of shares
185,917,932
186,609,231
185,533,936
Alcoa Corporation and
Subsidiaries
Statement of Consolidated
Operations (unaudited), continued
(dollars in millions, except
per-share amounts)
Six months ended
June 30,
2020
June 30,
2019
Sales
$
4,529
$
5,430
Cost of goods sold (exclusive of expenses
below)
3,957
4,369
Selling, general administrative, and other
expenses
104
152
Research and development expenses
12
14
Provision for depreciation, depletion, and
amortization
322
346
Restructuring and other charges, net
39
483
Interest expense
62
60
Other (income) expenses, net
(81
)
91
Total costs and expenses
4,415
5,515
Income (loss) before income taxes
114
(85
)
Provision for income taxes
125
266
Net loss
(11
)
(351
)
Less: Net income attributable to
noncontrolling interest
106
250
NET LOSS ATTRIBUTABLE TO ALCOA
CORPORATION
$
(117
)
$
(601
)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss
$
(0.63
)
$
(3.24
)
Average number of shares
185,822,220
185,416,620
Diluted:
Net loss
$
(0.63
)
$
(3.24
)
Average number of shares
185,822,220
185,416,620
Common stock outstanding at the end of the
period
185,918,829
185,546,772
Alcoa Corporation and
Subsidiaries
Consolidated Balance Sheet
(unaudited)
(in millions)
June 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
965
$
879
Receivables from customers
402
546
Other receivables
105
114
Inventories
1,419
1,644
Fair value of derivative instruments
24
59
Prepaid expenses and other current
assets(1)
264
288
Total current assets
3,179
3,530
Properties, plants, and equipment
20,877
21,715
Less: accumulated depreciation, depletion,
and amortization
13,588
13,799
Properties, plants, and equipment, net
7,289
7,916
Investments
1,037
1,113
Deferred income taxes
482
642
Fair value of derivative instruments
5
18
Other noncurrent assets
1,308
1,412
Total assets
$
13,300
$
14,631
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,253
$
1,484
Accrued compensation and retirement
costs
393
413
Taxes, including income taxes
96
104
Fair value of derivative instruments
47
67
Other current liabilities
451
494
Long-term debt due within one year
1
1
Total current liabilities
2,241
2,563
Long-term debt, less amount due within one
year
1,800
1,799
Accrued pension benefits
1,602
1,505
Accrued other postretirement benefits
711
749
Asset retirement obligations
565
606
Environmental remediation
277
296
Fair value of derivative instruments
203
581
Noncurrent income taxes
245
276
Other noncurrent liabilities and deferred
credits
332
370
Total liabilities
7,976
8,745
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,655
9,639
Accumulated deficit
(672
)
(555
)
Accumulated other comprehensive loss
(5,280
)
(4,974
)
Total Alcoa Corporation shareholders’
equity
3,705
4,112
Noncontrolling interest
1,619
1,774
Total equity
5,324
5,886
Total liabilities and equity
$
13,300
$
14,631
(1)
This line item includes $3 and $4 of
restricted cash as of June 30, 2020 and December 31, 2019,
respectively.
Alcoa Corporation and
Subsidiaries
Statement of Consolidated Cash
Flows (unaudited)
(in millions)
Six Months Ended June
30,
2020
2019
CASH FROM OPERATIONS
Net loss
$
(11
)
$
(351
)
Adjustments to reconcile net loss to cash
from operations:
Depreciation, depletion, and
amortization
322
346
Deferred income taxes
(6
)
64
Equity earnings, net of dividends
15
14
Restructuring and other charges, net
39
483
Net gain from investing activities – asset
sales
(176
)
(1
)
Net periodic pension benefit cost
67
60
Stock-based compensation
17
21
Provision for bad debt expense
2
20
Other
5
24
Changes in assets and liabilities,
excluding effects of divestitures and foreign currency translation
adjustments:
Decrease in receivables
124
94
Decrease in inventories
184
53
Decrease in prepaid expenses and other
current assets
13
68
(Decrease) in accounts payable, trade
(183
)
(144
)
(Decrease) in accrued expenses
(120
)
(51
)
Increase (Decrease) in taxes, including
income taxes
7
(342
)
Pension contributions
(59
)
(55
)
Decrease (Increase) in noncurrent
assets
19
(32
)
(Decrease) in noncurrent liabilities
(61
)
(21
)
CASH PROVIDED FROM OPERATIONS
198
250
FINANCING ACTIVITIES
Proceeds from the exercise of employee
stock options
—
1
Financial contributions for the
divestiture of businesses
(24
)
—
Contributions from noncontrolling
interest
16
21
Distributions to noncontrolling
interest
(106
)
(286
)
Other
(1
)
(6
)
CASH USED FOR FINANCING ACTIVITIES
(115
)
(270
)
INVESTING ACTIVITIES
Capital expenditures
(168
)
(158
)
Proceeds from the sale of assets
199
11
Additions to investments
(3
)
(111
)
CASH PROVIDED FROM (USED FOR) INVESTING
ACTIVITIES
28
(258
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(26
)
(1
)
Net change in cash and cash equivalents
and restricted cash
85
(279
)
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
$
968
$
837
Alcoa Corporation and
Subsidiaries
Segment Information
(unaudited)
(dollars in millions, except
realized prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
1Q19
2Q19
3Q19
4Q19
2019
1Q20
2Q20
Bauxite:
Production(1) (mdmt)
11.9
11.3
12.1
12.1
47.4
11.6
12.2
Third-party shipments (mdmt)
1.2
1.5
2.0
1.5
6.2
1.4
1.6
Intersegment shipments (mdmt)
10.2
10.3
10.6
10.3
41.4
10.5
10.8
Third-party sales
$
65
$
67
$
100
$
65
$
297
$
71
$
66
Intersegment sales
$
236
$
246
$
251
$
246
$
979
$
235
$
245
Segment Adjusted EBITDA(2)
$
126
$
112
$
134
$
132
$
504
$
120
$
131
Depreciation, depletion, and
amortization
$
28
$
27
$
35
$
30
$
120
$
34
$
30
Alumina:
Production (kmt)
3,240
3,309
3,380
3,373
13,302
3,298
3,371
Third-party shipments (kmt)
2,329
2,299
2,381
2,464
9,473
2,365
2,415
Intersegment shipments (kmt)
972
1,070
1,049
981
4,072
1,075
987
Average realized third-party price per
metric ton of alumina
$
385
$
376
$
324
$
291
$
343
$
299
$
250
Third-party sales
$
897
$
864
$
771
$
718
$
3,250
$
707
$
603
Intersegment sales
$
417
$
445
$
369
$
330
$
1,561
$
336
$
289
Segment Adjusted EBITDA(2)
$
372
$
369
$
223
$
133
$
1,097
$
193
$
88
Depreciation and amortization
$
48
$
55
$
54
$
57
$
214
$
49
$
37
Equity income (loss)
$
12
$
3
$
—
$
(9
)
$
6
$
(9
)
$
(8
)
Aluminum:
Primary aluminum production (kmt)
537
533
530
535
2,135
564
581
Third-party aluminum shipments(3)
(kmt)
709
724
708
718
2,859
725
789
Average realized third-party price per
metric ton of primary aluminum
$
2,219
$
2,167
$
2,138
$
2,042
$
2,141
$
1,988
$
1,694
Third-party sales
$
1,735
$
1,757
$
1,677
$
1,634
$
6,803
$
1,598
$
1,475
Intersegment sales
$
3
$
4
$
4
$
6
$
17
$
3
$
2
Segment Adjusted EBITDA(2)
$
(96
)
$
3
$
43
$
75
$
25
$
62
$
(34
)
Depreciation and amortization
$
89
$
85
$
88
$
84
$
346
$
81
$
79
Equity (loss) income
$
(22
)
$
(17
)
$
(5
)
$
(5
)
$
(49
)
$
5
$
(12
)
Reconciliation of total segment
Adjusted
EBITDA to consolidated net (loss)
income
attributable to Alcoa
Corporation:
Total Segment Adjusted EBITDA(2)
$
402
$
484
$
400
$
340
$
1,626
$
375
$
185
Unallocated amounts:
Transformation(4)
2
3
(6
)
(6
)
(7
)
(16
)
(10
)
Intersegment eliminations
86
(1
)
25
40
150
(8
)
30
Corporate expenses(5)
(24
)
(28
)
(27
)
(22
)
(101
)
(27
)
(21
)
Provision for depreciation, depletion, and
amortization
(172
)
(174
)
(184
)
(183
)
(713
)
(170
)
(152
)
Restructuring and other charges, net
(113
)
(370
)
(185
)
(363
)
(1,031
)
(2
)
(37
)
Interest expense
(30
)
(30
)
(30
)
(31
)
(121
)
(30
)
(32
)
Other (expenses) income, net
(41
)
(50
)
(27
)
(44
)
(162
)
132
(51
)
Other(6)
(18
)
(11
)
(18
)
(32
)
(79
)
(35
)
(17
)
Consolidated income (loss) before income
taxes
92
(177
)
(52
)
(301
)
(438
)
219
(105
)
Provision for income taxes
(150
)
(116
)
(95
)
(54
)
(415
)
(80
)
(45
)
Net (income) loss attributable to
noncontrolling interest
(141
)
(109
)
(74
)
52
(272
)
(59
)
(47
)
Consolidated net (loss) income
attributable to Alcoa Corporation
$
(199
)
$
(402
)
$
(221
)
$
(303
)
$
(1,125
)
$
80
$
(197
)
The difference between segment totals and consolidated amounts is
in Corporate.
(1)
Production amounts can vary from
total shipments due primarily to differences between the equity
allocation of production and off-take agreements with the
respective equity investment.
(2)
Alcoa Corporation’s definition of
Adjusted EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation,
depletion, and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. The Adjusted EBITDA presented may not be comparable
to similarly titled measures of other companies.
(3)
The Aluminum segment’s
third-party aluminum shipments are composed of both primary
aluminum and flat-rolled aluminum.
(4)
Transformation includes, among
other items, the Adjusted EBITDA of previously closed
operations.
(5)
Corporate expenses are composed
of general administrative and other expenses of operating the
corporate headquarters and other global administrative facilities,
as well as research and development expenses of the corporate
technical center.
(6)
Other includes certain items that
impact Cost of goods sold and Selling, general administrative, and
other expenses on Alcoa Corporation’s Statement of Consolidated
Operations that are not included in the Adjusted EBITDA of the
reportable segments, including those described as “Other special
items” (see footnote 1 to the reconciliation of Adjusted Income
within Calculation of Financial Measures included in this
release).
Alcoa Corporation and
Subsidiaries
Calculation of Financial
Measures (unaudited)
(in millions, except per-share
amounts)
Adjusted Income
(Loss) Income
Diluted EPS(4)
Quarter ended
Quarter ended
June 30,
2020
March 31,
2020
June 30,
2019
June 30,
2020
March 31,
2020
June 30,
2019
Net (loss) income attributable to Alcoa
Corporation
$
(197
)
$
80
$
(402
)
$
(1.06
)
$
0.43
$
(2.17
)
Special items:
Restructuring and other charges, net
37
2
370
Other special items(1)
15
(137
)
8
Discrete tax items and interim tax
impacts(2)
142
22
32
Tax impact on special items(3)
(1
)
(8
)
(10
)
Noncontrolling interest impact(3)
—
(1
)
—
Subtotal
193
(122
)
400
Net loss attributable to Alcoa Corporation
– as adjusted
$
(4
)
$
(42
)
$
(2
)
$
(0.02
)
$
(0.23
)
$
(0.01
)
Net loss attributable to Alcoa Corporation – as adjusted is a
non-GAAP financial measure. Management believes this measure is
meaningful to investors because management reviews the operating
results of Alcoa Corporation excluding the impacts of restructuring
and other charges, various tax items, and other special items
(collectively, “special items”). There can be no assurances that
additional special items will not occur in future periods. To
compensate for this limitation, management believes it is
appropriate to consider both Net (loss) income attributable to
Alcoa Corporation determined under GAAP as well as Net loss
attributable to Alcoa Corporation – as adjusted.
(1)
Other special items include the following:
●
for the quarter ended June 30, 2020, costs related to the restart
process at the Bécancour, Canada smelter ($17), external costs
related to portfolio actions ($1), and a net favorable change in
certain mark-to-market energy derivative instruments ($3);
●
for the quarter ended March 31, 2020, a gain on the sale of a waste
treatment facility in Gum Springs, Arkansas ($180), costs related
to the restart process at the Bécancour, Canada smelter ($32), and
a net unfavorable change in certain mark-to-market energy
derivative instruments ($11); and,
●
for the quarter ended June 30, 2019, costs related to union
negotiations in the U.S. ($5), costs related to a work stoppage at
the Bécancour, Canada smelter ($2), and costs related to a
collective employee dismissal process in Spain at the Avilés and La
Coruña smelters ($1).
(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 June 30, 2020, a net charge of interim tax
impacts ($142);
●
for the quarter ended March 31, 2020, a net charge of interim tax
impacts ($21) and a net charge of several other items ($1); and,
●
for the quarter ended June 30, 2019, a net charge of interim tax
impacts ($31) and a net charge of several other items ($1).
(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 loss attributable to Alcoa Corporation common shareholders –
as adjusted due to a larger and/or positive numerator.
Specifically, for all periods presented, the average number of
share equivalents applicable to diluted EPS – as adjusted had an
anti-dilutive effect, and therefore, are excluded from the diluted
EPS calculation.
Alcoa Corporation and
Subsidiaries
Calculation of Financial
Measures (unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
June 30,
2020
March 31,
2020
June 30,
2019
Net (loss) income attributable to Alcoa
Corporation
$
(197
)
$
80
$
(402
)
Add:
Net income attributable to noncontrolling
interest
47
59
109
Provision for income taxes
45
80
116
Other expenses (income), net
51
(132
)
50
Interest expense
32
30
30
Restructuring and other charges, net
37
2
370
Provision for depreciation, depletion, and
amortization
152
170
174
Adjusted EBITDA
167
289
447
Special items(1)
18
32
8
Adjusted EBITDA, excluding special
items
$
185
$
321
$
455
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 June 30,
2020, costs related to the restart process at the Bécancour, Canada
smelter ($17) and external costs related to portfolio actions
($1);
●
for the quarter ended March 31,
2020, costs related to the restart process at the Bécancour, Canada
smelter ($32); and,
●
for the quarter ended June 30,
2019, costs related to union negotiations in the U.S. ($5), costs
related to a work stoppage at the Bécancour, Canada smelter ($2),
and costs related to a collective employee dismissal process in
Spain at the Avilés and La Coruña smelters ($1).
Alcoa Corporation and
Subsidiaries
Calculation of Financial
Measures (unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
June 30,
2020
March 31,
2020
June 30,
2019
Cash provided from (used for)
operations
$
288
$
(90
)
$
82
Capital expenditures
(77
)
(91
)
(89
)
Free cash flow
$
211
$
(181
)
$
(7
)
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
June 30,
2020
December 31,
2019
Short-term borrowings
$
—
$
—
Long-term debt due within one year
1
1
Long-term debt, less amount due within one
year
1,800
1,799
Total debt
1,801
1,800
Less: Cash and cash equivalents
965
879
Net debt
$
836
$
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/20200715005852/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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