On November 1, 2016, Alcoa Inc. successfully separated into two
standalone companies: Arconic Inc. (the new name for Alcoa Inc.) and
Alcoa Corporation. Arconic is a global leader in multi-materials
innovation, precision engineering and advanced manufacturing, mainly in
aerospace and transportation.
This is Arconic’s first quarter reporting earnings following the
separation. The numbers include one month of Alcoa Corporation for
fourth quarter 2016 and ten months of Alcoa Corporation for full-year
2016. The pre-separation historical results of the businesses that now
comprise Alcoa Corporation are presented as discontinued operations in
Arconic’s financial results for all periods.
4Q and Full Year 2016 Highlights
-
Revenue roughly flat year over year:
-
Fourth quarter – $3.0 billion (versus $3.0 billion in fourth
quarter 2015) -
Full year 2016 – $12.4 billion (versus $12.4 billion in full year
2015)
-
Fourth quarter – $3.0 billion (versus $3.0 billion in fourth
-
Net loss attributable to Arconic:
- Mainly due to special items related to the separation of Alcoa Inc.
-
Fourth quarter – $1.2 billion, or $2.88 per share (versus net loss
of $0.7 billion in fourth quarter 2015) -
Full year 2016 – $0.9 billion, or $2.28 per share (versus net loss
of $0.3 billion in full year 2015)
-
Excluding special items, adjusted income from continuing operations:
- Fourth quarter – $71 million, or $0.12 per share
- Full year 2016 – $505 million, or $0.98 per share
-
Combined segment1 adjusted EBITDA up (up seven percent in
the fourth quarter, up nine percent in full year 2016) - Margin expansion in every segment
-
Strong net savings of 2.5 percent of revenues (gross productivity
savings $710 million; net savings $310 million) -
Strengthened balance sheet:
- $750 million debt redemption in December
- Year-end cash balance of $1.9 billion
________________________________________
1 References in this release to “combined segment” reflect
the combined performance of Arconic’s three segments – Engineered
Products and Solutions, Global Rolled Products (GRP) (which does not
include the rolling mill operations in Warrick, IN and Saudi Arabia),
and Transportation and Construction Solutions. Historical results for
the former Alumina and Primary Metals segments, along with the rolling
mill operations in Warrick, IN and Saudi Arabia (previously part of GRP)
– all of which now compose Alcoa Corporation – are presented as
discontinued operations in Arconic’s financial results for all periods.
________________________________________
Arconic Inc. (NYSE: ARNC) today reported fourth quarter and full-year
2016 results, the Company’s first quarter reporting earnings following
the separation of Alcoa Inc.
In the fourth quarter of 2016, the Company reported a net loss
attributable to Arconic of $1.2 billion, or $2.88 per share. As
previously indicated – most recently at Arconic’s Investor Day in
December 2016 – these results include $1.4 billion in special items,
including tax valuation allowance charges related primarily to the
separation of Alcoa Inc. as well as restructuring and other separation
costs.
Excluding special items, fourth quarter 2016 adjusted income from
continuing operations was $71 million, or $0.12 per share, driven by
strong productivity gains of $186 million across all segments, which
were partially offset by cost increases and unfavorable price and mix,
predominantly in aerospace.
Arconic recorded fourth quarter 2016 revenue of $3.0 billion, versus
$3.0 billion in the fourth quarter of 2015, as strong volume growth
across segments was offset by the Company’s ramp down from the North
American packaging business at its Tennessee operations (the “Tennessee
packaging ramp down”).
Fourth quarter consolidated adjusted EBITDA, excluding separation costs,
was $360 million. Combined segment adjusted EBITDA was $456 million, up
seven percent.
To further its de-leveraging program and strengthen its balance sheet,
in December 2016 Arconic completed the early redemption of its 5.55
percent Notes due 2017, in the aggregate principal amount of $750
million.
Klaus Kleinfeld, Arconic Chairman and CEO said, “In the fourth quarter
we completed the successful separation of Alcoa Inc., which has unlocked
substantial value for all shareholders. In the face of significant
market challenges, we continued to improve the businesses – we increased
adjusted EBITDA margins 100 basis points or more in each of our three
business segments, delivered strong net savings and systematically cut
overhead cost. We also strengthened our balance sheet, paid down $750
million of debt and ended the year with a strong cash balance of $1.9
billion.”
Kleinfeld continued, “In 2017 we are squarely focused on operational
improvements, margin expansion, and capital efficiency to drive
shareholder returns. We will continue to cut cost through productivity
and corporate overhead reduction. Beyond our stated targets, our
retained interest in Alcoa Corporation provides an additional lever for
value creation.”
Arconic ended fourth quarter 2016 with cash on hand of $1.9 billion.
Including the results of Alcoa Corporation up to the separation on
November 1, 2016, cash from operations was $665 million; cash
used for financing activities totaled $407 million; and cash used for
investing activities was $244 million. Free cash flow for the quarter
was $354 million.
4Q Segment Performance (Excluding Impact of Discontinued Operations)
Engineered Products and Solutions (EPS)
EPS reported revenue of $1.4 billion, flat year over year, record fourth
quarter ATOI of $138 million, up $15 million, or 12 percent, year over
year, adjusted EBITDA of $265 million, up nine percent year over year,
and an adjusted EBITDA margin of 18.8 percent in the fourth quarter of
2016, up from 17.3 percent in the fourth quarter of 2015. Productivity
improvements and the positive contribution from the RTI acquisition were
somewhat offset by unfavorable price and product mix, cost headwinds and
investments in growth projects.
Global Rolled Products (GRP)
GRP reported revenue of $1.1 billion, a decrease of 9 percent year over
year, ATOI of $45 million, compared to $49 million in the fourth quarter
2015, adjusted EBITDA of $116 million, flat year over year, adjusted
EBITDA margin of 10.8 percent, up 100 basis points year over year, and
adjusted EBITDA per metric ton of $329, up 8 percent (from $306) year
over year due to the Tennessee packaging ramp down and other upgrades in
product mix. Both ATOI and adjusted EBITDA were driven by productivity
and growth in automotive volume and were offset by a combination of the
following: cost increases, lower volume in the North America heavy duty
truck market, aerospace destocking and the unfavorable impact of
currency exchange rates. ATOI also reflects the impact of higher U.S.
taxes due to increased income in the United States. The quarter also set
a record for automotive sheet shipments, which were up 56 percent year
over year.
Transportation and Construction Solutions (TCS)
TCS delivered revenue of $456 million, an increase of 3 percent year
over year, record fourth quarter ATOI of $44 million, up $4 million, or
10 percent, year over year, adjusted EBITDA of $75 million, up 15
percent year over year, and a fourth quarter record adjusted EBITDA
margin of 16.4 percent; the prior record of 14.6 percent was set in the
fourth quarter of 2015. Strong productivity gains and growth in the
building and construction business more than offset cost increases and
continued softness in the North American heavy duty truck market.
Full Year 2016 Performance (Excluding Impact of Discontinued
Operations)
In 2016, Arconic reported a net loss attributable to Arconic of $0.9
billion, or $2.28 per share. Excluding the impact of special items –
primarily due to charges and costs associated with the separation of
Alcoa Inc. – the Company reported 2016 adjusted income from continuing
operations of $505 million, or $0.98 per share.
Revenue in 2016 was $12.4 billion, essentially flat year over year, as
the positive impact of acquisitions and higher volumes for aerospace and
automotive markets were offset by the Tennessee packaging ramp down and
the negative impact from metal pricing, foreign currency exchange rate
fluctuations, and price and product mix.
Full year 2016 combined segment adjusted EBITDA was $2.1 billion, up
nine percent year over year, with the Company recording a margin
expansion of 140 basis points across all business segments. Full year
2016 consolidated adjusted EBITDA, excluding separation costs, was $1.7
billion.
Arconic ended the year with debt of $8.1 billion and cash on hand of
$1.9 billion. Company employees achieved $710 million in gross
productivity savings, with net savings of $310 million.
Segment performance in 2016 included the following:
-
EPS revenue of $5.7 billion, up seven percent year over year, ATOI of
$642 million, up eight percent year over year, adjusted EBITDA of $1.2
billion, up eight percent year over year and an adjusted EBITDA margin
of 20.9 percent. -
GRP revenue of $4.9 billion, down seven percent year over year, ATOI
of $269 million, up 20 percent year over year, adjusted EBITDA of $577
million, up 13 percent year over year, and adjusted EBITDA of $364 per
metric ton. -
TCS revenue of $1.8 billion, down four percent year over year, ATOI of
$176 million, up six percent year over year, EBITDA of $291 million,
up seven percent year over year, and an adjusted EBITDA margin of 16.1
percent.
Looking Ahead: 2017
2
The focus on margin and return on net assets (RONA) improvement as well
as cost cutting will continue in 2017. The Company expects to cut $45
million in corporate overhead, decreasing such overhead as a percentage
of revenue from 1.5 percent as our run rate at the end of 2016 to 1.1
percent in 2017, reflecting the Company’s accelerated efforts to drive
out cost.
Beginning in the first quarter of 2017, Arconic’s segment reporting
metric will change from ATOI to adjusted EBITDA.
First Quarter 2017 Guidance
Arconic’s outlook for the first quarter of 2017 is as follows:
-
Revenue of $2.8 billion to $3.0 billion, including the impact of the
Tennessee packaging ramp down - Adjusted EBITDA of $420 million to $450 million
- Share count of 460 million
Full Year 2017 Guidance
Arconic affirmed its targets for full year 2017:
-
Revenue of $11.8 to $12.4 billion, including $400 million of negative
impact from the Tennessee packaging ramp down - Adjusted EBITDA margin of approximately 15 percent
- Free cash flow of $350 million or more
- $1 billion of debt reduction
- RONA of approximately 9 percent, with a target of 11-12 percent in 2019
-
Adjusted net income, excluding special items, of $1.10 to $1.20 per
share, based on share count of 470 million, due to mandatory
convertible preferred shares converting to common stock in October 2017
The Company is focused on margin expansion and RONA improvement across
all segments.
Both 2017 full year and first quarter guidance exclude any potential
future monetization of the Company’s 19.9 percent retained interest
(36,311,767 shares of common stock) in Alcoa Corporation. Based on the
closing price of Alcoa Corporation stock on January 26, 2017, the market
value of the retained shares was approximately $1.3 billion. On January
18, 2017, Alcoa Corporation filed a registration statement on Form S-1
to register Arconic’s retained interest. As communicated during
Arconic’s Investor Day in December 2016, Arconic plans to pursue a
responsible monetization of the retained shares with timing based on
market conditions, and expects to use the net proceeds for debt pay-down
and/or share repurchases.
________________________________________
2 Arconic has not provided a reconciliation of the
forward-looking financial measures of adjusted EBITDA, adjusted EBITDA
margin, Return on Net Assets, adjusted net income, and Free Cash Flow to
the most directly comparable financial measures prepared in accordance
with accounting principles generally accepted in the United States of
America (GAAP) because Arconic is unable to quantify certain amounts
that would be required to be included in the GAAP measure without
unreasonable efforts, and Arconic believes such reconciliations would
imply a degree of precision that would be confusing or misleading to
investors. In particular, reconciliations of these forward-looking
non-GAAP financial measures to the most directly comparable GAAP
measures are not available without unreasonable efforts due to the
variability and complexity with respect to the charges and other
components excluded from these non-GAAP measures, such as the effects of
foreign currency movements, equity income, gains or losses on sales of
assets, taxes and any future restructuring or impairment charges. These
reconciling items are in addition to the inherent variability already
included in the GAAP measures, which includes, but is not limited to,
price/mix and volume.
________________________________________
Arconic will hold its quarterly conference call at 5:00 PM Eastern
Standard Time on January 31, 2017 to present quarterly and full year
results. The meeting will be webcast via
www.arconic.com
.
Call information and related details are available at
www.arconic.com
under
“Investors;” presentation materials will be available at approximately
4:15 PM on January 31.
About Arconic
Arconic (NYSE: ARNC) creates breakthrough products that shape
industries. Working in close partnership with our customers, we solve
complex engineering challenges to transform the way we fly, drive, build
and power. Through the ingenuity of our people and cutting-edge advanced
manufacturing techniques, we deliver these products at a quality and
efficiency that ensure customer success and shareholder value. For more
information: www.arconic.com.
Follow @arconic: Twitter,
Instagram,
Facebook,
LinkedIn
and YouTube.
Dissemination of Company Information
Arconic intends to make future announcements regarding Company
developments and financial performance through its website on www.arconic.com
Forward-Looking Statements
This 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,”
“guidance,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,”
“seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of
similar meaning. All statements that reflect Arconic’s expectations,
assumptions or projections about the future, other than statements of
historical fact, are forward-looking statements, including, without
limitation, statements and guidance regarding future financial results
or operating performance; statements about Arconic’s strategies,
outlook, business and financial prospects; and forecasts and
expectations relating to end markets. 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 Arconic 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) deterioration in global economic and financial market conditions
generally; (b) unfavorable changes in the markets served by Arconic; (c)
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; (d)
changes in discount rates or investment returns on pension assets; (e)
Arconic’s 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; (f) the impact of cyber attacks and potential information
technology or data security breaches; (g) political, economic, and
regulatory risks in the countries in which Arconic operates or sells
products; (h) the impact of the separation on the businesses of Arconic;
(i) material adverse changes in aluminum industry conditions, including
fluctuations in London Metal Exchange-based aluminum prices; (j) the
impact of changes in foreign currency exchange rates on costs and
results; (k) the outcome of contingencies, including legal proceedings,
government or regulatory investigations, and environmental remediation;
and (l) the other risk factors discussed in Arconic’s Form 10-K for the
year ended December 31, 2015, and other reports filed with the U.S.
Securities and Exchange Commission (SEC). Arconic 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
Arconic’s consolidated financial information but is not presented in
Arconic’s financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP).
Certain of these data are considered “non-GAAP financial measures” under
SEC rules. These non-GAAP financial measures supplement our GAAP
disclosures and should not be considered an alternative to the GAAP
measure. Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this release and on
our website at www.arconic.com
under the “Investors” section.
| Arconic and subsidiaries | ||||||||||||
| Statement of Consolidated Operations (unaudited) | ||||||||||||
| (in millions, except per-share and share amounts) | ||||||||||||
| Quarter ended | ||||||||||||
| December 31, | September 30, | December 31, | ||||||||||
|
2015 |
2016 |
2016 |
||||||||||
| Sales | $ | 2,991 | $ | 3,138 | $ | 2,967 | ||||||
| Cost of goods sold (exclusive of expenses below) | 2,437 | 2,502 | 2,375 | |||||||||
| Selling, general administrative, and other expenses | 210 | 230 | 269 | |||||||||
| Research and development expenses | 46 | 30 | 39 | |||||||||
| Provision for depreciation and amortization | 137 | 136 | 133 | |||||||||
| Impairment of goodwill | 25 | – | – | |||||||||
| Restructuring and other charges | 50 | 3 | 122 | |||||||||
| Interest expense | 122 | 126 | 128 | |||||||||
| Other income, net | (18 | ) | (11 | ) | (54 | ) | ||||||
| Total costs and expenses | 3,009 | 3,016 | 3,012 | |||||||||
| (Loss) income from continuing operations before income taxes | (18 | ) | 122 | (45 | ) | |||||||
| Provision for income taxes | 175 | 56 | 1,236 | |||||||||
| (Loss) income from continuing operations after income taxes | (193 | ) | 66 | (1,281 | ) | |||||||
|
(Loss) income from discontinued operations after income taxes |
(572 | ) | 120 | 38 | ||||||||
| Net (loss) income | (765 | ) | 186 | (1,243 | ) | |||||||
|
Less: Net (loss) income from discontinued operations attributable |
(64 | ) | 20 | 5 | ||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ARCONIC | $ | (701 | ) | $ | 166 | $ | (1,248 | ) | ||||
| EARNINGS PER SHARE ATTRIBUTABLE TO ARCONIC COMMON SHAREHOLDERS(2): | ||||||||||||
| Basic(3): | ||||||||||||
| Continuing operations | $ | (0.48 | ) | $ | 0.11 | $ | (2.95 | ) | ||||
| Discontinued operations | (1.16 | ) | 0.23 | 0.07 | ||||||||
| Net (loss) income | $ | (1.64 | ) | $ | 0.34 | $ | (2.88 | ) | ||||
| Average number of shares(2) | 436,703,833 | 438,445,001 | 438,486,935 | |||||||||
| Diluted(3)(4): | ||||||||||||
| Continuing operations | $ | (0.48 | ) | $ | 0.11 | $ | (2.95 | ) | ||||
| Discontinued operations | (1.16 | ) | 0.22 | 0.07 | ||||||||
| Net (loss) income | $ | (1.64 | ) | $ | 0.33 | $ | (2.88 | ) | ||||
| Average number of shares(2) | 436,703,833 | 443,678,007 | 438,486,935 | |||||||||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations of Alcoa Corporation have been reflected as discontinued operations for all periods presented. |
|
| (2) |
At a special meeting of Arconic common shareholders held on October 5, 2016, shareholders approved a 1-for-3 reverse stock split of Arconic’s outstanding and authorized shares of common stock which became effective on October 6, 2016. All share and per share data presented for all periods herein has been updated to reflect the reverse stock split. |
|
| (3) |
In order to calculate both basic and diluted earnings per share for the quarters ended December 31, 2015, September 30, 2016, and December 31, 2016, preferred stock dividends declared of $17, $18, and $17, respectively, need to be subtracted from Net income attributable to Arconic. |
|
| (4) |
In the quarter ended December 31, 2015, the diluted average number of shares for the quarter ended December 31, 2015 does not include any share equivalents related to outstanding employee stock options and awards, convertible debt (acquired through RTI International Metals) nor the mandatory convertible preferred stock as their effect was anti-dilutive. In the quarter ended September 30, 2016, the difference between the respective diluted average number of shares and the respective basic average number of shares relates to share equivalents associated with outstanding employee stock options and awards. The respective diluted average number of shares for the quarter ended September 30, 2016 does not include any share equivalents related to the convertible debt (acquired through RTI International Metals) and the mandatory convertible preferred stock as their effect was anti-dilutive. In the quarter ended December 31, 2016, the diluted average number of shares does not include any share equivalents related to outstanding employee stock options and awards, convertible debt (acquired through RTI International Metals) nor the mandatory convertible preferred stock as their effect was anti-dilutive. |
|
| Arconic and subsidiaries | ||||||||
| Statement of Consolidated Operations (unaudited), continued | ||||||||
| (in millions, except per-share and share amounts) | ||||||||
| Year ended | ||||||||
| December 31, | December 31, | |||||||
|
|
|
|||||||
| Sales | $ | 12,413 | $ | 12,394 | ||||
| Cost of goods sold (exclusive of expenses below) | 10,097 | 9,806 | ||||||
| Selling, general administrative, and other expenses | 772 | 947 | ||||||
| Research and development expenses | 169 | 132 | ||||||
| Provision for depreciation and amortization | 508 | 535 | ||||||
| Impairment of goodwill | 25 | – | ||||||
| Restructuring and other charges | 214 | 155 | ||||||
| Interest expense | 473 | 499 | ||||||
| Other income, net | (28 | ) | (93 | ) | ||||
| Total costs and expenses | 12,230 | 11,981 | ||||||
| Income from continuing operations before income taxes | 183 | 413 | ||||||
| Provision for income taxes | 339 | 1,465 | ||||||
| Loss from continuing operations after income taxes | (156 | ) | (1,052 | ) | ||||
| (Loss) income from discontinued operations after income taxes(1) | (41 | ) | 184 | |||||
| Net loss | (197 | ) | (868 | ) | ||||
|
Less: Net income from continuing operations attributable to noncontrolling interests |
1 | – | ||||||
|
Net income from discontinued operations attributable to noncontrolling interests(1) |
124 | 63 | ||||||
| NET LOSS ATTRIBUTABLE TO ARCONIC | $ | (322 | ) | $ | (931 | ) | ||
| EARNINGS PER SHARE ATTRIBUTABLE TO ARCONIC COMMON SHAREHOLDERS(2): | ||||||||
| Basic(3)(4): | ||||||||
| Continuing operations | $ | (0.54 | ) | $ | (2.56 | ) | ||
| Discontinued operations | (0.39 | ) | 0.28 | |||||
| Net loss | $ | (0.93 | ) | $ | (2.28 | ) | ||
| Average number of shares(2) | 419,563,185 | 438,275,079 | ||||||
| Diluted(3)(5): | ||||||||
| Continuing operations | $ | (0.54 | ) | $ | (2.56 | ) | ||
| Discontinued operations | (0.39 | ) | 0.28 | |||||
| Net loss | $ | (0.93 | ) | $ | (2.28 | ) | ||
| Average number of shares(2) | 419,563,185 | 438,275,079 | ||||||
| Common stock outstanding at the end of the period(2) | 436,720,047 | 438,519,780 | ||||||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations of Alcoa Corporation have been reflected as discontinued operations for all periods presented. |
|
| (2) |
At a special meeting of Arconic common shareholders held on October 5, 2016, shareholders approved a 1-for-3 reverse stock split of Arconic’s outstanding and authorized shares of common stock which became effective on October 6, 2016. All share and per share data presented for all periods herein has been updated to reflect the reverse stock split. |
|
| (3) |
In order to calculate both basic and diluted earnings per share for the years ended December 31, 2015 and 2016, preferred stock dividends declared of $69 need to be subtracted from Net income attributable to Arconic. |
|
| (4) |
In the third quarter of 2015, Arconic issued 29 million (87 million pre-reverse stock split – see footnote 2 above) shares of its common stock to acquire RTI International Metals. As a result, the basic average number of shares for the year ended December 31, 2015 includes 12 million (37 million pre-reverse stock split – see footnote 2 above) representing the weighted average number of shares for the length of time the 29 million shares were outstanding during 2015, and the basic average number of shares for the year ended December 31, 2016 includes all 29 million shares. |
|
| (5) |
In both the year ended December 31, 2015 and 2016, the respective diluted average number of shares for both the year ended December 31, 2015 and 2016 does not include any share equivalents related to outstanding employee stock options and awards, convertible debt (acquired through RTI International Metals) nor the mandatory convertible preferred stock as their effect was anti-dilutive. |
|
| Arconic and subsidiaries | ||||||||
| Consolidated Balance Sheet (unaudited) | ||||||||
| (in millions, except per-share amounts) | ||||||||
|
|
December 31, |
December 31, |
||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,362 | $ | 1,863 | ||||
|
Receivables from customers, less allowances of $13 in 2015 and 2016 |
960 | 974 | ||||||
| Other receivables | 394 | 471 | ||||||
| Inventories | 2,284 | 2,253 | ||||||
| Prepaid expenses and other current assets | 397 | 325 | ||||||
| Current assets of discontinued operations(1) | 2,556 | – | ||||||
| Total current assets | 7,953 | 5,886 | ||||||
| Properties, plants, and equipment | 11,568 | 11,567 | ||||||
| Less: accumulated depreciation and amortization | 6,143 | 6,073 | ||||||
| Properties, plants, and equipment, net | 5,425 | 5,494 | ||||||
| Goodwill | 5,249 | 5,148 | ||||||
| Deferred income taxes | 1,327 | 1,249 | ||||||
| Investment in Alcoa Corporation common stock(1) | – | 1,020 | ||||||
| Other noncurrent assets(2) | 1,944 | 1,244 | ||||||
| Noncurrent assets of discontinued operations(1) | 14,579 | – | ||||||
| Total assets | $ | 36,477 | $ | 20,041 | ||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 38 | $ | 36 | ||||
| Accounts payable, trade | 1,510 | 1,726 | ||||||
| Accrued compensation and retirement costs | 410 | 397 | ||||||
| Taxes, including income taxes | 103 | 85 | ||||||
| Accrued interest payable | 170 | 153 | ||||||
| Other current liabilities | 441 | 330 | ||||||
| Long-term debt due within one year | 3 | 4 | ||||||
| Current liabilities of discontinued operations(1) | 2,536 | – | ||||||
| Total current liabilities | 5,211 | 2,731 | ||||||
| Long-term debt, less amount due within one year(2) | 8,786 | 8,044 | ||||||
| Accrued pension benefits | 1,925 | 2,346 | ||||||
| Accrued other postretirement benefits | 917 | 889 | ||||||
| Other noncurrent liabilities and deferred credits | 828 | 869 | ||||||
| Noncurrent liabilities of discontinued operations(1) | 4,679 | – | ||||||
| Total liabilities | 22,346 | 14,879 | ||||||
| EQUITY | ||||||||
| Arconic shareholders’ equity: | ||||||||
| Preferred stock | 55 | 55 | ||||||
| Mandatory convertible preferred stock | 3 | 3 | ||||||
| Common stock(3),(4) | 1,391 | 438 | ||||||
| Additional capital(3),(4) | 10,019 | 8,434 | ||||||
| Retained earnings (deficit) | 8,834 | (1,226 | ) | |||||
| Treasury stock, at cost(3) | (2,825 | ) | – | |||||
| Accumulated other comprehensive loss | (5,431 | ) | (2,568 | ) | ||||
| Total Arconic shareholders’ equity | 12,046 | 5,136 | ||||||
| Noncontrolling interests | 2,085 | 26 | ||||||
| Total equity | 14,131 | 5,162 | ||||||
| Total liabilities and equity | $ | 36,477 | $ | 20,041 | ||||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Arconic retained 19.9% of the Alcoa Corporation common stock and has reflected its investment as a noncurrent asset, Investment in Alcoa Corporation common stock, on the December 31, 2016 Consolidated Balance Sheet. The assets and liabilities of Alcoa Corporation have been reflected as assets and liabilities of discontinued operations on the December 31, 2015 Consolidated Balance Sheet. |
|
| (2) |
In the first quarter of 2016, Arconic adopted changes issued by the Financial Accounting Standards Board to the presentation of debt issuance costs, which require such costs to be classified as a direct deduction from the carrying value of the related debt liability on an entity’s balance sheet. As such, all debt issuance costs were classified as a contra liability in the Long-term debt, less amount due within one year line item on the December 31, 2016 Consolidated Balance Sheet. These changes are required to be applied on a retrospective basis; therefore, the December 31, 2015 Consolidated Balance Sheet was updated to conform to the December 31, 2016 presentation. As a result, $51 of debt issuance costs (previously reported in Other noncurrent assets) were reclassified to the Long-term debt, less amount due within one year line item on the December 31, 2015 Consolidated Balance Sheet. |
|
| (3) |
In August 2016, Arconic’s Board of Directors approved the retirement of all common shares held in treasury (76 million). As a result, Common stock and Additional capital were decreased by $76 and $2,563 to reflect the retirement of the treasury shares. |
|
| (4) |
In October 2016, shareholders approved a 1-for-3 reverse stock split of Arconic’s outstanding and authorized shares of common stock. The par value of Arconic’s common stock remains unchanged at $1 per share. The Common stock and Additional capital balances in the December 2016 Consolidated Balance Sheet reflect a decrease and increase, respectively, of $877. |
|
| Arconic and subsidiaries | ||||||||
| Condensed Statement of Consolidated Cash Flows (unaudited) | ||||||||
| (in millions) | ||||||||
|
Year Ended |
||||||||
|
|
|
|||||||
| Cash provided from operating activities | $ | 1,582 | $ | 873 | ||||
| Cash used for financing activities(2) | (441 | ) | (757 | ) | ||||
| Cash used for investing activities(3) | (1,060 | ) | (165 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (39 | ) | (7 | ) | ||||
| Net change in cash and cash equivalents | 42 | (56 | ) | |||||
| Cash and cash equivalents at beginning of year | 1,877 | 1,919 | ||||||
| Cash and cash equivalents at end of year | $ | 1,919 | $ | 1,863 | ||||
| (1) |
On November 1, 2016, the former Alcoa Inc. separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Cash flow information has not been restated for discontinued operations and therefore the year ended December 31, 2015 includes the results of operations for both Arconic and Alcoa Corporation. The cash flow information for the year ended December 31, 2016 includes the results of operations for Arconic and the results of operations for the first ten months of 2016 for Alcoa Corporation. |
|
| (2) |
Cash used for financing activities in 2016 includes net debt reduction of $772 and net cash transferred from Alcoa Corporation at separation of $417. |
|
| (3) |
Cash used for investing activities in 2016 includes capital expenditures of $1,125 as well as proceeds from asset and investment sales of $972. Cash used for investing activities in 2015 includes capital expenditures of $1,180. |
| Arconic and subsidiaries | ||||||||||||||||||||||||||||
| Segment Information (unaudited) | ||||||||||||||||||||||||||||
| (dollars in millions, shipments in thousands of metric tons [kmt]) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Global Rolled Products (1) : |
||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 365 | 1,512 | 369 | 411 | 405 | 284 | 1,469 | |||||||||||||||||||||
| Third-party sales | $ | 1,184 | $ | 5,253 | $ | 1,184 | $ | 1,316 | $ | 1,285 | $ | 1,079 | $ | 4,864 | ||||||||||||||
| Intersegment sales | $ | 26 | $ | 125 | $ | 29 | $ | 29 | $ | 30 | $ | 30 | $ | 118 | ||||||||||||||
| Depreciation and amortization | $ | 52 | $ | 203 | $ | 50 | $ | 50 | $ | 52 | $ | 49 | $ | 201 | ||||||||||||||
| Income taxes | $ | 15 | $ | 85 | $ | 31 | $ | 32 | $ | 22 | $ | 22 | $ | 107 | ||||||||||||||
| ATOI | $ | 49 | $ | 225 | $ | 74 | $ | 81 | $ | 69 | $ | 45 | $ | 269 | ||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||
| Third-party sales | $ | 1,409 | $ | 5,342 | $ | 1,449 | $ | 1,465 | $ | 1,406 | $ | 1,408 | $ | 5,728 | ||||||||||||||
| Depreciation and amortization | $ | 67 | $ | 233 | $ | 65 | $ | 62 | $ | 63 | $ | 65 | $ | 255 | ||||||||||||||
| Income taxes | $ | 54 | $ | 282 | $ | 78 | $ | 87 | $ | 71 | $ | 62 | $ | 298 | ||||||||||||||
| ATOI | $ | 123 | $ | 595 | $ | 162 | $ | 180 | $ | 162 | $ | 138 | $ | 642 | ||||||||||||||
| Transportation and Construction Solutions: | ||||||||||||||||||||||||||||
| Third-party sales | $ | 444 | $ | 1,882 | $ | 429 | $ | 467 | $ | 450 | $ | 456 | $ | 1,802 | ||||||||||||||
| Depreciation and amortization | $ | 11 | $ | 43 | $ | 11 | $ | 12 | $ | 12 | $ | 13 | $ | 48 | ||||||||||||||
| Income taxes | $ | 14 | $ | 63 | $ | 14 | $ | 18 | $ | 17 | $ | 18 | $ | 67 | ||||||||||||||
| ATOI | $ | 40 | $ | 166 | $ | 39 | $ | 46 | $ | 47 | $ | 44 | $ | 176 | ||||||||||||||
|
Reconciliation of total segment ATOI to consolidated net income (loss) attributable to Arconic: |
||||||||||||||||||||||||||||
| Total segment ATOI(2) | $ | 212 | $ | 986 | $ | 275 | $ | 307 | $ | 278 | $ | 227 | $ | 1,087 | ||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||
| Impact of LIFO | 18 | 66 | (8 | ) | (8 | ) | (1 | ) | 6 | (11 | ) | |||||||||||||||||
| Metal price lag | (21 | ) | (115 | ) | – | 5 | 4 | 12 | 21 | |||||||||||||||||||
| Interest expense | (79 | ) | (307 | ) | (79 | ) | (81 | ) | (82 | ) | (82 | ) | (324 | ) | ||||||||||||||
| Noncontrolling interests | – | (1 | ) | – | – | – | – | – | ||||||||||||||||||||
| Corporate expense | (64 | ) | (252 | ) | (52 | ) | (77 | ) | (76 | ) | (101 | ) | (306 | ) | ||||||||||||||
| Impairment of goodwill | (25 | ) | (25 | ) | – | – | – | – | – | |||||||||||||||||||
| Restructuring and other charges | (33 | ) | (192 | ) | (11 | ) | (9 | ) | (3 | ) | (91 | ) | (114 | ) | ||||||||||||||
| Discontinued operations(3) | (508 | ) | (165 | ) | (94 | ) | 82 | 100 | 33 | 121 | ||||||||||||||||||
| Other(4) | (201 | ) | (317 | ) | (15 | ) | (84 | ) | (54 | ) | (1,252 | ) | (1,405 | ) | ||||||||||||||
| Consolidated net income (loss) attributable to Arconic |
$ |
(701 |
) |
$ |
(322 |
) |
$ |
16 |
$ | 135 | $ | 166 |
$ |
(1,248 |
) |
$ |
(931 |
) |
||||||||||
|
The difference between certain segment totals and consolidated |
||
| (1) |
On November 1, 2016, Alcoa Inc. completed its separation into two standalone, publicly-traded companies. Arconic includes the former Alcoa Inc. segments: Engineered Products and Solutions, Transportation and Construction Solutions, and Global Rolled Products, except for the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia which both became part of Alcoa Corporation. The Global Rolled Products segment information has been updated to exclude the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia. |
|
| (2) |
Total segment ATOI is the summation of the respective ATOI of Arconic’s three reportable segments. |
|
| (3) |
The reconciliation of total segment ATOI to consolidated net income (loss) attributable to Arconic has been updated for all periods presented to exclude the results of operations for Alcoa Corporation which have been reflected as discontinued operations for all periods presented. |
|
| (4) |
Other, both for the quarter ended December 31, 2016 and for the year ended December 31, 2016, include a charge for valuation allowances related to the November 1, 2016 separation ($1,267) and a net charge for the remeasurement of certain deferred tax assets due to tax rate and tax law changes ($51). |
|
| Arconic and subsidiaries | ||||||||||||||||
| Calculation of Financial Measures (unaudited) | ||||||||||||||||
| (in millions, except per-share amounts) | ||||||||||||||||
| Adjusted Income | Quarter ended | Year ended | ||||||||||||||
|
December 31, |
December 31, |
December 31, |
December 31, |
|||||||||||||
| Net (loss) income attributable to Arconic | $ | (701 | ) | $ | (1,248 | ) | $ | (322 | ) | $ | (931 | ) | ||||
| Discontinued operations(1) | 508 | (33 | ) | 165 | (121 | ) | ||||||||||
| Special items(2): | ||||||||||||||||
| Restructuring and other charges | 50 |
122 |
214 |
155 |
||||||||||||
| Discrete tax items(3) | 183 | 1,272 | 216 | 1,280 | ||||||||||||
| Other special items(4) | 5 | 2 | 39 | 196 | ||||||||||||
| Tax impact(5) | (17 | ) | (44 | ) | (14 | ) | (74 | ) | ||||||||
| Noncontrolling interests impact(5) | – | – | – | – | ||||||||||||
| Net income attributable to Arconic – as adjusted |
$ |
28 |
$ |
71 |
$ |
298 |
$ |
505 |
||||||||
| Diluted EPS(6): | ||||||||||||||||
| Net (loss) income attributable to Arconic common shareholders |
$ |
(1.64 |
) |
$ |
(2.88 |
) |
$ |
(0.93 |
) |
$ |
(2.28 |
) |
||||
|
Net (loss) income attributable to Arconic common shareholders – as adjusted |
$ |
0.03 |
|
$ |
0.12 |
$ |
0.54 |
$ |
0.98 |
|||||||
|
Net (loss) income attributable to Arconic – as adjusted is a |
||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations of Alcoa Corporation have been reflected as discontinued operations for all periods presented. |
|
| (2) |
In the second quarter of 2016, management changed the manner in which special items are presented in Arconic’s reconciliation of Adjusted Income. This change resulted in special items being presented on a pretax basis and the related tax and noncontrolling interest’s impacts on special items being aggregated into separate respective line items. The special items for the quarter and year ended December 31, 2015 were updated to conform to the current period presentation. |
|
| (3) | Discrete tax items include the following: | |
|
• |
for the quarter ended December 31, 2015, a charge for valuation allowances related to certain deferred tax assets in the U.S. and Iceland ($190) and a net benefit for a number of small items ($7); |
|
|
• |
for the quarter ended December 31, 2016, a charge for valuation allowances related to the November 1, 2016 separation (see Note 1 above) ($1,267), a net charge for the remeasurement of certain deferred tax assets due to tax rate and tax law changes ($51), a net benefit for valuation allowances not associated with the separation ($29), and a net benefit for a number of small items ($17); |
|
|
• |
for the year ended December 31, 2015, a charge for valuation allowances related to certain deferred tax assets in the U.S. and Iceland ($190), a net charge for other valuation allowances and for a number of small items ($26); and |
|
|
• |
for the year ended December 31, 2016, a charge for valuation allowances related to the November 1, 2016 separation (see Note 1 above) ($1,267), a net charge for the remeasurement of certain deferred tax assets due to tax rate and tax law changes ($51), a net benefit for valuation allowances not associated with the separation ($18), and a net benefit for a number of small items ($20). |
|
| (4) | Other special items include the following: | |
|
• |
for the quarter ended December 31, 2015, a favorable tax impact related to the interim period treatment of operational losses in certain foreign jurisdictions for which no tax benefit was recognized ($69), an unfavorable tax impact resulting from the difference between Arconic’s consolidated estimated annual effective tax rate and the statutory rates applicable to special items ($37), an impairment of goodwill related to the soft alloy extrusions business in Brazil ($25), and costs associated with the planned separation of Alcoa ($12); |
|
|
• |
for the quarter ended December 31, 2016, costs associated with the planned separation of Alcoa ($87), a favorable adjustment to the contingent earn-out liability related to the November 2014 acquisition of Firth Rixson ($56), a favorable tax benefit related to the currency impacts of a distribution of previously taxed income ($49), an unfavorable tax impact related to the interim period treatment of operational losses in certain foreign jurisdictions for which no tax benefit was recognized ($37), and a favorable tax impact resulting from the difference between Arconic’s consolidated estimated annual effective tax rate and the statutory rates applicable to special items ($17); |
|
|
• |
for the year ended December 31, 2015, costs associated with the acquisitions of RTI International Metals and TITAL ($28), an impairment of goodwill related to the soft alloy extrusions business in Brazil ($25), costs associated with the planned separation of Alcoa ($24), a gain on the sale of land ($19), and a gain on the sale of an equity investment in a China rolling mill ($19); and |
|
|
• |
for the year ended December 31, 2016, costs associated with the planned separation of Alcoa ($205), unfavorable tax costs associated with the redemption of company-owned life insurance policies ($100), a favorable adjustment to the contingent earn-out liability and a post-closing adjustment both of which related to the November 2014 acquisition of Firth Rixson ($76), a favorable tax benefit related to the currency impacts of a distribution of previously taxed income ($49), and unfavorable tax costs associated with the sale of a US subsidiary with book goodwill ($16). |
|
| (5) |
The tax impact on special items is based on the applicable statutory rates whereby the difference between such rates and Arconic’s consolidated estimated annual effective tax rate is itself a special item (see footnote 2 above). The noncontrolling interest’s impact on special items represents Arconic’s partners’ share of certain special items. |
|
| (6) |
At a special meeting of Arconic common shareholders held on October 5, 2016, shareholders approved a 1-for-3 reverse stock split of Arconic’s outstanding and authorized shares of common stock which became effective on October 6, 2016. All share and per share data for all periods presented have been updated to reflect the reverse stock split. |
|
|
The average number of shares applicable to diluted EPS for Net (loss) income attributable to Arconic common shareholders excludes certain share equivalents as their effect was anti-dilutive (see footnote 4 to the Statement of Consolidated Operations). However, certain of these share equivalents may become dilutive in the EPS calculation applicable to Net income attributable to Arconic common shareholders – as adjusted due to a larger and/or positive numerator. Specifically: |
||
|
• |
for the quarter ended December 31, 2015, share equivalents associated with outstanding employee stock options and awards were dilutive based on Net income attributable to Arconic common shareholders – as adjusted, resulting in a diluted average number of shares of 441,459,378; |
|
|
• |
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 Arconic common shareholders – as adjusted, resulting in a diluted average number of shares of 443,779,820; |
|
|
• |
for the year ended December 31, 2015, share equivalents associated with employee stock options and awards were dilutive based on Net income attributable to Arconic common shareholders – as adjusted, resulting in a diluted average number of shares of 424,628,747; and |
|
|
• |
for the year ended December 31, 2016, share equivalents associated with both outstanding employee stock options and awards and convertible notes related to the acquisition of RTI International Metals were dilutive based on Net income attributable to Arconic common shareholders – as adjusted, resulting in a diluted average number of shares of 453,118,372 (after-tax interest expense of $9 needs to be added back to the numerator since the convertible notes were dilutive). |
|
| Operational Tax Rate | Quarter ended December 31, 2016 | |||||||||||
|
As |
Special |
As |
||||||||||
| (Loss) income from continuing operations before income taxes | $ | (45 | ) | $ | 153 | $ | 108 | |||||
| Provision for income taxes | $ | 1,236 | $ | (1,198 | ) | $ | 38 | |||||
| Tax rate | N/A | 35.2 | % | |||||||||
| Operational Tax Rate | Year ended December 31, 2016 | |||||||||||
|
As |
Special |
As |
||||||||||
| Income from continuing operations before income taxes | $ | 413 | $ | 284 | $ | 697 | ||||||
| Provision for income taxes | $ | 1,465 | $ | (1,272 | ) | $ | 193 | |||||
| Tax rate | N/A | 27.7 | % | |||||||||
|
Operational Tax Rate is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Arconic 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 the Effective Tax Rate determined under GAAP as well as the Operational Tax Rate. |
|
(1) See Adjusted Income reconciliation above for a description of |
| Arconic and subsidiaries | ||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||
| Adjusted EBITDA | Quarter ended | Year ended | ||||||||||||||
|
December 31, |
December 31, |
December 31, |
December 31, |
|||||||||||||
| Net (loss) income attributable to Arconic | $ | (701 | ) | $ | (1,248 | ) | $ | (322 | ) | $ | (931 | ) | ||||
| Discontinued operations(1) | 508 | (33 | ) | 165 | (121 | ) | ||||||||||
|
(Loss) income from continuing operations after income taxes and noncontrolling interest |
(193 | ) | (1,281 | ) | (157 | ) | (1,052 | ) | ||||||||
| Add: | ||||||||||||||||
| Net income attributable to noncontrolling interests |
– |
– |
1 |
– |
||||||||||||
| Provision for income taxes | 175 | 1,236 | 339 | 1,465 | ||||||||||||
| Other (income) expenses, net | (18 | ) | (54 | ) | (28 | ) | (93 | ) | ||||||||
| Interest expense | 122 | 128 | 473 | 499 | ||||||||||||
| Restructuring and other charges | 50 | 122 | 214 | 155 | ||||||||||||
| Impairment of goodwill | 25 | – | 25 | – | ||||||||||||
| Provision for depreciation and amortization |
137 |
133 |
508 |
535 |
||||||||||||
| Adjusted EBITDA | $ | 298 | $ | 284 | $ | 1,375 | $ | 1,509 | ||||||||
|
Separation costs |
76 |
193 |
||||||||||||||
|
Adjusted EBITDA excluding separation costs |
$ |
360 |
$ |
1,702 |
||||||||||||
| Adjusted EBITDA Measures: | ||||||||||||||||
| Sales | $ | 2,991 | $ | 2,967 | $ | 12,413 | $ | 12,394 | ||||||||
| Adjusted EBITDA Margin | 10.0 | % | 9.6 | % | 11.1 | % | 12.2 | % | ||||||||
| Total Debt | $ | 8,827 | $ | 8,084 | ||||||||||||
| Debt-to-Adjusted EBITDA Ratio | 6.42 | 5.36 | ||||||||||||||
|
Arconic’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation 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 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 Arconic’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) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations of Alcoa Corporation have been reflected as discontinued operations for all periods presented. |
|
| Arconic and subsidiaries | ||||||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||||||
| (dollars in millions, except per metric ton amounts) | ||||||||||||||||||||
| Segment Measures |
Global Rolled Products (1) |
|||||||||||||||||||
| Adjusted EBITDA | Quarter ended | Year ended | ||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
||||||||||||||||
| After-tax operating income (ATOI) | $ | 49 | $ | 69 | $ | 45 | $ | 225 | $ | 269 | ||||||||||
| Add: | ||||||||||||||||||||
| Depreciation and amortization | 52 | 52 | 49 | 203 | 201 | |||||||||||||||
| Income taxes | 15 | 22 | 22 | 85 | 107 | |||||||||||||||
| Other | – | – | – | (1 | ) | – | ||||||||||||||
| Adjusted EBITDA | $ | 116 | $ | 143 | $ | 116 | $ | 512 | $ | 577 | ||||||||||
| Total shipments (thousand metric tons) (kmt) | 379 | 422 | 353 | 1,570 | 1,587 | |||||||||||||||
| Adjusted EBITDA / Total shipments ($ per metric ton) |
$ |
306 |
$ |
339 |
$ |
329 |
$ |
326 |
$ |
364 |
||||||||||
| Third Party Sales | $ | 1,184 | $ | 1,285 | $ | 1,079 | $ | 5,253 | $ | 4,864 | ||||||||||
| Adjusted EBITDA Margin | 9.8 | % | 11.1 | % | 10.8 | % | 9.7 | % | 11.9 | % | ||||||||||
|
Arconic’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation 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 and amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Arconic’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) |
Excludes the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia, both of which were previously part of the Global Rolled Products segment but became part of Alcoa Corporation effective November 1, 2016 |
|
| Arconic and subsidiaries | ||||||||||||||||||||||||||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
| Segment Measures | Engineered Products and Solutions | Transportation and Construction Solutions | ||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | Year ended | Quarter ended | Year ended | ||||||||||||||||||||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
|||||||||||||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 123 | $ | 162 | $ | 138 | $ | 595 | $ | 642 | $ | 40 | $ | 47 | $ | 44 | $ | 166 | $ | 176 | ||||||||||||||||||||
| Add: | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
67 |
63 |
65 |
233 |
255 |
11 |
12 |
13 |
43 |
48 |
||||||||||||||||||||||||||||||
| Income taxes | 54 | 71 | 62 | 282 | 298 | 14 | 17 | 18 | 63 | 67 | ||||||||||||||||||||||||||||||
| Other | – | – | – | – | – | – | – | – | (1 | ) | – | |||||||||||||||||||||||||||||
| Adjusted EBITDA |
$ |
244 |
$ |
296 |
$ |
265 |
$ |
1,110 |
$ |
1,195 |
$ |
65 |
$ |
76 |
$ |
75 |
$ |
271 |
$ |
291 |
||||||||||||||||||||
| Third-party sales |
$ |
1,409 |
$ |
1,406 |
$ |
1,408 |
$ |
5,342 |
$ |
5,728 |
$ |
444 |
$ |
450 |
$ |
456 |
$ |
1,882 |
$ |
1,802 |
||||||||||||||||||||
| Adjusted EBITDA Margin |
17.3 |
% |
21.1 |
% |
18.8 |
% |
20.8 |
% |
20.9 |
% |
14.6 |
% |
16.9 |
% |
16.4 |
% |
14.4 |
% |
16.1 |
% |
||||||||||||||||||||
|
Arconic’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation 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 and amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Arconic’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. |
| Arconic and subsidiaries | ||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||
| (dollars in millions, except per metric ton amounts) | ||||||||||||||||
| Segment Measures |
Arconic combined segments (1) |
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| Adjusted EBITDA | Quarter ended | Year ended | ||||||||||||||
|
December 31, |
December 31, |
December 31, |
December 31, |
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| Net (loss) income attributable to Arconic | $ | (701 | ) | $ | (1,248 | ) | $ | (322 | ) | $ | (931 | ) | ||||
| Discontinued operations(2) | 508 | (33 | ) | 165 | (121 | ) | ||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||
| Impact of LIFO | (18 | ) | (6 | ) | (66 | ) | 11 | |||||||||
| Metal price lag | 21 | (12 | ) | 115 | (21 | ) | ||||||||||
| Interest expense | 79 | 82 | 307 | 324 | ||||||||||||
| Noncontrolling interests | – | – | 1 | – | ||||||||||||
| Corporate expense | 64 | 101 | 252 | 306 | ||||||||||||
| Impairment of goodwill | 25 | – | 25 | – | ||||||||||||
| Restructuring and other charges | 33 | 91 | 192 | 114 | ||||||||||||
| Other(3) | 201 | 1,252 | 317 | 1,405 | ||||||||||||
| Combined segment After-tax operating income (ATOI) | $ | 212 | $ | 227 | $ | 986 | $ | 1,087 | ||||||||
| Add combined segment: | ||||||||||||||||
| Depreciation and amortization | 130 | 127 | 479 | 504 | ||||||||||||
| Income taxes | 83 | 102 | 430 | 472 | ||||||||||||
| Other(2) | – | – | (2 | ) | – | |||||||||||
| Combined segment Adjusted EBITDA | $ | 425 | $ | 456 | $ | 1,893 | $ | 2,063 | ||||||||
| Third party sales | $ | 3,037 | $ | 2,943 | $ | 12,477 | $ | 12,394 | ||||||||
| Adjusted EBITDA Margin | 14.0 | % | 15.5 | % | 15.2 | % | 16.6 | % | ||||||||
|
Arconic’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation 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 and amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Arconic’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. |
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| (1) |
Excludes the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia, both of which were previously part of the Global Rolled Products segment but became part of Alcoa Corporation effective November 1, 2016. |
|
| (2) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations of Alcoa Corporation have been reflected as discontinued operations for all periods presented. |
|
| (3) |
Other, both for the quarter ended December 31, 2016 and for the year ended December 31, 2016, include a charge for valuation allowances related to the November 1, 2016 separation ($1,267) and a net charge for the remeasurement of certain deferred tax assets due to tax rate and tax law changes ($51). |
|
| Arconic and subsidiaries | ||||||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
|
Free Cash Flow (1) |
Quarter ended | Year ended | ||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
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| Cash from operations | $ | 865 | $ | 306 | $ | 665 | $ | 1,582 | $ | 873 | ||||||||||
| Capital expenditures |
(398 |
) |
(286 |
) |
(311 |
) |
(1,180 |
) |
(1,125 |
) |
||||||||||
| Free cash flow | $ | 467 | $ | 20 | $ | 354 | $ | 402 | $ | (252 | ) | |||||||||
|
Free Cash Flow is a non-GAAP financial measure. Management |
||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Cash from operations and capital expenditures for Alcoa Corporation have not been segregated and are included in this table for all periods prior to November 1, 2016. |
|
| Net Debt |
December 31,
|
September 30,
|
December 31,
|
||||||
| Short-term borrowings | $ | 38 | $ | 32 | $ | 36 | |||
| Long-term debt due within one year | 3 | 752 | 4 | ||||||
| Long-term debt, less amount due within one year | 8,786 | 8,044 | 8,044 | ||||||
| Total debt | $ | 8,827 | $ | 8,828 | $ | 8,084 | |||
| Less: Cash and cash equivalents | 1,362 | 1,622 | 1,863 | ||||||
| Net debt | $ | 7,465 | $ | 7,206 | $ | 6,221 | |||
|
Net debt is a non-GAAP financial measure. Management believes that |
||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the assets and liabilities of Alcoa Corporation have been reflected as assets and liabilities of discontinued operations at December 31, 2015 and September 30, 2016 and therefore are not included in this table. |
|
| Arconic and subsidiaries | ||||
| Calculation of Financial Measures (unaudited), continued | ||||
| (dollars in millions) | ||||
| Return on Net Assets |
|
|||
| Net loss attributable to Arconic | $ | (931 | ) | |
| Discontinued operations(1) | (121 | ) | ||
| Special items(2) | 1,557 | |||
| Net income attributable to Arconic – as adjusted | $ | 505 | ||
| Net Assets: | ||||
| Add: Receivable from customers, less allowances | $ | 974 | ||
| Add: Deferred purchase price receivable(3) | 83 | |||
| Add: Inventories | 2,253 | |||
| Less: Accounts payable, trade | 1,726 | |||
| Working Capital | 1,584 | |||
| Properties, plants and equipment, net | 5,494 | |||
| Net Assets – total | $ | 7,078 | ||
| RONA | 7.1 | % | ||
|
Return on Net Assets (RONA) is a non-GAAP financial measure. RONA is calculated as adjusted net income divided by working capital and net PP&E. Management believes that this measure is meaningful to investors as RONA helps management and investors determine the percentage net income the company is generating from its assets. This ratio tells how effectively and efficiently the company is using its assets to generate earnings. |
||
| (1) |
On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations and assets and liabilities of Alcoa Corporation have been reflected as discontinued operations for all periods presented. |
|
| (2) |
See Reconciliation of Adjusted Income for the year ended December 31, 2016 for a description of special items. |
|
| (3) |
The Deferred purchase price receivable relates to an arrangement to sell certain customer receivables to several financial institutions on a recurring basis. Arconic is adding back the receivable for the purposes of the Working Capital calculation. |
|
Arconic Inc.
Investor Contact:
Patricia Figueroa, 212-836-2758
Patricia.Figueroa@arconic.com
or
Media Contact:
Shona Sabnis, 212-836-2626
Shona.Sabnis@arconic.com