Solid Revenue Despite Lower Aluminum Prices;
Continued Record Results in Mid and Downstream
Alcoa, Alba Settle Civil Litigation
3Q 2012 Highlights
- Loss from continuing operations of $143 million, or $0.13 per share; excluding special items, income from continuing operations of $32 million, or $0.03 per share
- Solid revenue of $5.8 billion, despite 17 percent decline in realized metal price year-on-year
- Record third quarter results in Global Rolled Products and Engineered Products and Solutions; significant sequential performance improvement in Alumina and Primary Metals
- Days working capital a record low for third quarter
- Cash on hand of $1.4 billion
- Company sees global aluminum demand of 6 percent in 2012; reaffirms long-term outlook that aluminum demand will double 2010 to 2020
Alcoa (NYSE:AA) today reported a loss from continuing operations of $143
million, or $0.13 per share, which includes special items of $175
million, primarily related to environmental remediation of the Grasse
River in New York State, and the settlement of a civil lawsuit brought
by Aluminium Bahrain (Alba) that had been pending in the U.S. District
Court in Pittsburgh. Excluding the negative impact of special items,
income from continuing operations was $32 million, or $0.03 per share.
The Company reported performance improvements across all segments and
solid revenue of $5.8 billion despite a 5 percent decline in realized
aluminum prices sequentially and 17 percent year-on-year.
“Markets seem to be driven more by headlines than fundamentals right
now, but Alcoa remains focused on the things within our control”, said
Klaus Kleinfeld, Chairman and CEO.
“We’re capitalizing on pockets of strong growth and achieving record
profitability in our mid and downstream businesses. We’re improving
performance in the upstream while optimizing our assets, and across the
board we’re driving productivity gains.”
Third quarter 2012 net loss of $143 million, or $0.13 per share,
compared to a net loss of $2 million, or $0.00 per share, in second
quarter 2012, and net income of $172 million, or $0.15 per share, in
third quarter 2011. Adjusted EBITDA for the third quarter was $282
million, down 45 percent from second quarter 2012 mainly due to lower
realized prices and special items.
Special items in third quarter 2012 included reserves for environmental
remediation, a net discrete tax charge, uninsured losses related to a
fire at the Massena, New York site, the negative impact of
mark-to-market changes on certain energy contracts, and restructuring
and other charges.
Additionally, Alcoa confirmed it has entered into a settlement agreement
with Aluminium Bahrain B.S.C. (“Alba”) resolving a civil lawsuit that
had been pending in the U.S. District Court for the Western District of
Pennsylvania since 2008. Without admitting any liability, Alcoa agreed
to make a cash payment to Alba of $85 million payable in two
installments. One half was made at settlement and the other half will be
made one year later. The settlement amount is within the range Alcoa
previously estimated as its reasonably possible losses, which it
disclosed in its second quarter 2012 earnings announcement. Alcoa said
the settlement with Alba represents the best possible outcome and avoids
the time and expense of complex litigation.
Based on the settlement agreement with Alba, Alcoa recorded a $40
million charge ($15 million after-tax and non-controlling interest) in
the third quarter in addition to the $45 million charge ($18 million
after-tax and non-controlling interest) it recorded in the second
quarter. Alcoa estimates an additional possible after-tax charge of
approximately $25 to 30 million to reflect an agreement between the
shareholders of Alcoa World Alumina LLC regarding the cash costs of the
settlement of the Alba civil lawsuit; such charge would be recognized in
the event that a settlement is reached with the Department of Justice
and the Securities and Exchange Commission regarding their
investigations.
Alcoa and Alba have also resumed a commercial relationship and have
entered into an Alumina Price Index-based, long-term alumina supply
agreement, demonstrating a mutual desire to work together going forward
and the significant value that Alcoa brings to customers in the region
through superior quality and optimal logistics of its alumina.
Third quarter 2012 revenue was $5.8 billion, down 9 percent compared
with third quarter 2011, primarily due to a 17 and 20 percent
year-on-year respective decline in the realized metal price and realized
alumina price.
Alcoa continued to turn in strong performance in the third quarter,
despite market turbulence.
Amidst challenging market conditions, Alcoa’s upstream businesses
achieved significant performance improvement in the third quarter,
delivering $98 million of combined sequential operational improvements
across the Alumina and Primary Metals segments as higher volume,
improved price and mix, and productivity gains more than offset cost
headwinds.
In what is traditionally a weaker quarter, Alcoa’s midstream and
downstream businesses continued to turn in record performance. Global
Rolled Products continued to deliver strong profitability despite
European weakness, achieving record third quarter ATOI of $98 million,
up 3 percent sequentially, and 63 percent year-on-year. Adjusted EBITDA
per metric ton for Global Rolled Products was a third quarter record at
$395, and year-to-date record at $405, 72 percent higher than the
10-year average. Engineered Products and Solutions achieved a record
adjusted EBITDA margin of 20 percent, a third consecutive quarterly
record.
Alcoa is on track to deliver against its financial and operational
targets in 2012. The Company continued strong productivity growth across
the upstream and downstream segments this quarter, driven by higher
utilization rates, process innovations, lower scrap rates, and usage
reductions.
Following the record low in days working capital achieved for both the
first quarter and second quarter of 2012, Alcoa also achieved a record
low in days working capital for the third quarter at 33 days, five days
lower than the previous third quarter record set in 2011. This is the
12th successive quarter the Company has demonstrated year-over-year
improvement.
In third quarter 2012, the debt-to-capital ratio stood at 36.1 percent,
with net debt-to-capital at 32.4 percent, and liquidity remained strong
with $1.4 billion cash on hand. Following on the improved working
capital performance, the Company generated cash from operations of $263
million in the quarter. Capital spending was $302 million in the
quarter, compared to $291 million in second quarter 2012. Free cash flow
in the third quarter was a negative $39 million. Expenditures on the
Saudi Arabia joint venture project were also on track at $16 million.
Alcoa continues to execute on previously announced curtailments in the
upstream business, improving competitiveness and driving toward the
Company’s stated goal of moving down the cost curve 10 percentage points
in smelting and 7 percentage points in refining by 2015. In line with
plans announced in January 2012, Alcoa has completed partial
curtailments at La Coruña and Avilés, Spain, and the Portovesme, Italy
curtailment is underway and will be complete by November 30, 2012.
Additionally, Alcoa permanently closed its smelter at Alcoa, Tennessee,
and two lines at Rockdale, Texas. When the Portovesme smelter is fully
curtailed, Alcoa will have 14 percent of its highest-cost system
smelting capacity offline.
Alcoa has moderated its 2012 global aluminum demand forecast to 6
percent, down from 7 percent, as a slowdown in China slightly impacts
the second half outlook. The aluminum market grew 13 percent in 2010,
and 10 percent in 2011, and is well ahead of the 6.5 percent compound
annual growth rate needed to meet Alcoa’s projection of a doubling of
aluminum demand 2010 to 2020.
In Alcoa’s global end markets, positive growth continues, particularly
in the aerospace market where we see 13 to 14 percent year-on-year
growth, and in the automotive market, where we have raised our 2012
North American forecast by 1 percent. Alcoa’s 2012 global growth outlook
for packaging (2 to 3 percent), commercial building and construction
(2.5 to 3.5 percent), and industrial gas turbine (3 to 5 percent)
markets remains positive and unchanged. In the heavy truck and trailer
market, Alcoa is lowering 2012 growth expectations (7 to 9 percent
decline) in anticipation of a slowdown across all major regions.
Segment Information
Alumina
After-tax operating income (ATOI) in the third quarter was negative $9
million, down $32 million compared with second quarter 2012 and down
$163 million compared with third quarter 2011. The sequential quarter
decrease was driven by lower London Metal Exchange (LME)-based pricing
and unfavorable currency impact, partially offset by stable Alumina
Price Index-pricing, productivity gains, and higher volumes.
Primary Metals
ATOI in the third quarter was negative $14 million, down $11 million
sequentially, and down $124 million year-on-year. LME-based pricing
negatively impacted results by $36 million sequentially, in addition to
higher alumina costs. Productivity gains, cost decreases, and improved
regional premiums partially offset these negative impacts. Third-party
realized price in the third quarter was $2,222 per metric ton, down 5
percent sequentially and down 17 percent year-on-year.
Global Rolled Products
ATOI for the third quarter was $98 million, up $3 million, or 3 percent,
sequentially and up $38 million, or 63 percent, year-on-year. The
sequential increase was mainly driven by improved price and mix, mostly
offset by lower volume and increased costs. The year-on-year improvement
was driven by better price and mix, higher volume, and strong
productivity gains.
Engineered Products and Solutions
ATOI in the third quarter was $160 million, flat sequentially and up $22
million, or 16 percent, year-on-year. Sequentially, continued
productivity improvements and favorable Massena impacts were offset by
cost increases and unfavorable volume. The year-on-year improvement was
driven primarily by productivity gains, partially offset by cost
increases.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on October 9, 2012 to present quarterly results. The meeting will be
webcast via alcoa.com. Call information and related details are
available at www.alcoa.com
under “Invest.”
About Alcoa
Alcoa is the world’s leading producer of primary aluminum and fabricated
aluminum, as well as the world’s largest miner of bauxite and refiner of
alumina. In addition to inventing the modern-day aluminum industry,
Alcoa innovation has been behind major milestones in the aerospace,
automotive, packaging, building and construction, commercial
transportation, consumer electronics, and industrial markets over the
past 120 years. Among the solutions Alcoa markets are flat-rolled
products, hard alloy extrusions, and forgings, as well as Alcoa® wheels,
fastening systems, precision and investment castings, and building
systems in addition to its expertise in other light metals such as
titanium and nickel-based superalloys. Sustainability is an integral
part of Alcoa’s operating practices and the product design and
engineering it provides to customers. Alcoa has been a member of the Dow
Jones Sustainability Index for 11 consecutive years and approximately 75
percent of all of the aluminum ever produced since 1888 is still in
active use today. Alcoa employs approximately 61,000 people in 31
countries across the world. More information can be found at www.alcoa.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,” “expects,” “forecasts,” “goal,” “outlook,” “plans,”
“projects,” “should,” “targets,” “will,” or other words of similar
meaning. All statements that reflect Alcoa’s expectations, assumptions
or projections about the future other than statements of historical fact
are forward-looking statements, including, without limitation, forecasts
concerning global demand for aluminum, end market conditions, growth
opportunities for aluminum in automotive, aerospace, and other
applications, or other trend projections, targeted financial results or
operating performance, and statements about Alcoa’s strategies, outlook,
and business and financial prospects. Forward-looking statements are
subject to a number of known and unknown risks, uncertainties, and other
factors and are not guarantees of future performance. Important factors
that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements include:
(a) material adverse changes in aluminum industry conditions, including
global supply and demand conditions and fluctuations in London Metal
Exchange-based prices for primary aluminum, alumina, and other products,
and fluctuations in indexed-based and spot prices for alumina;
(b) deterioration in global economic and financial market conditions
generally; (c) unfavorable changes in the markets served by Alcoa,
including aerospace, automotive, commercial transportation, building and
construction, packaging, and industrial gas turbine; (d) the impact of
changes in foreign currency exchange rates on costs and results,
particularly the Australian dollar, Brazilian real, Canadian dollar,
euro, and Norwegian kroner; (e) increases in energy costs, including
electricity, natural gas, and fuel oil, or the unavailability or
interruption of energy supplies; (f) increases in the costs of other raw
materials, including calcined petroleum coke, caustic soda, and liquid
pitch; (g) Alcoa’s inability to achieve the level of revenue growth,
cash generation, cost savings, improvement in profitability and margins,
fiscal discipline, or strengthening of competitiveness and operations
(including moving its refining and smelting businesses down on the
industry cost curves and increasing revenues in its Global Rolled
Products and Engineered Products and Solutions segments), anticipated
from its restructuring programs, productivity improvement, cash
sustainability, and other initiatives; (h) Alcoa’s inability to realize
expected benefits from newly constructed, expanded or acquired
facilities or from international joint ventures as planned and by
targeted completion dates, including the joint venture in Saudi Arabia
or the upstream operations and investments in hydropower projects in
Brazil; (i) political, economic, and regulatory risks in the countries
in which Alcoa operates or sells products, including unfavorable changes
in laws and governmental policies, civil unrest, and other events beyond
Alcoa’s control; (j) the outcome of contingencies, including legal
proceedings, government investigations, and environmental remediation;
(k) the business or financial condition of key customers, suppliers, and
business partners; (l) changes in tax rates or benefits; (m) adverse
changes in discount rates or investment returns on pension assets; (n)
the impact of cyber attacks and potential information technology or data
security breaches; and (o) the other risk factors summarized in Alcoa’s
Form 10-K for the year ended December 31, 2011 and other reports filed
with the Securities and Exchange Commission. Alcoa disclaims any
obligation to update publicly any forward-looking statements, whether in
response to new information, future events or otherwise, except as
required by applicable law.
|
Alcoa and subsidiaries Statement of Consolidated Operations (unaudited) (in millions, except per-share, share, and metric ton amounts) |
|||||||||||
| Quarter ended | |||||||||||
| September 30, | June 30, | September 30, | |||||||||
| 2011 | 2012 | 2012 | |||||||||
| Sales | $ | 6,419 | $ | 5,963 | $ | 5,833 | |||||
| Cost of goods sold (exclusive of expenses below) | 5,290 | 5,154 | 5,266 | ||||||||
| Selling, general administrative, and other expenses | 261 | 245 | 234 | ||||||||
| Research and development expenses | 47 | 47 | 51 | ||||||||
| Provision for depreciation, depletion, and amortization | 376 | 363 | 366 | ||||||||
| Restructuring and other charges | 9 | 15 | 2 | ||||||||
| Interest expense | 125 | 123 | 124 | ||||||||
| Other expenses (income), net | 31 | 22 | (2 | ) | |||||||
| Total costs and expenses | 6,139 | 5,969 | 6,041 | ||||||||
| Income (loss) from continuing operations before income taxes | 280 | (6 | ) | (208 | ) | ||||||
| Provision (benefit) for income taxes | 55 | 13 | (33 | ) | |||||||
| Income (loss) from continuing operations | 225 | (19 | ) | (175 | ) | ||||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | 225 | (19 | ) | (175 | ) | ||||||
| Less: Net income (loss) attributable to noncontrolling interests | 53 | (17 | ) | (32 | ) | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA | $ | 172 | $ | (2 | ) | $ | (143 | ) | |||
|
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Income (loss) from continuing operations | $ | 172 | $ | (2 | ) | $ | (143 | ) | |||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | $ | 172 | $ | (2 | ) | $ | (143 | ) | |||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| Income (loss) from continuing operations | $ | 0.16 | $ | – | $ | (0.13 | ) | ||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | $ | 0.16 | $ | – | $ | (0.13 | ) | ||||
| Diluted: | |||||||||||
| Income (loss) from continuing operations | $ | 0.15 | $ | – | $ | (0.13 | ) | ||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | $ | 0.15 | $ | – | $ | (0.13 | ) | ||||
| Average number of shares used to compute: | |||||||||||
| Basic earnings per common share | 1,064,226,988 | 1,066,763,022 | 1,067,000,575 | ||||||||
| Diluted earnings per common share | 1,164,085,935 | 1,066,763,022 | 1,067,000,575 | ||||||||
| Shipments of aluminum products (metric tons) | 1,277,000 | 1,305,000 | 1,317,000 | ||||||||
|
Alcoa and subsidiaries Statement of Consolidated Operations (unaudited), continued (in millions, except per-share, share, and metric ton amounts) |
|||||||||
| Nine months ended | |||||||||
| September 30, | |||||||||
| 2011 | 2012 | ||||||||
| Sales | $ | 18,962 | $ | 17,802 | |||||
| Cost of goods sold (exclusive of expenses below) | 15,252 | 15,518 | |||||||
| Selling, general administrative, and other expenses | 759 | 720 | |||||||
| Research and development expenses | 136 | 141 | |||||||
| Provision for depreciation, depletion, and amortization | 1,112 | 1,098 | |||||||
| Restructuring and other charges | 49 | 27 | |||||||
| Interest expense | 399 | 370 | |||||||
| Other (income) expenses, net | (47 | ) | 4 | ||||||
| Total costs and expenses | 17,660 | 17,878 | |||||||
| Income (loss) from continuing operations before income taxes | 1,302 | (76 | ) | ||||||
| Provision for income taxes | 329 | 19 | |||||||
| Income (loss) from continuing operations | 973 | (95 | ) | ||||||
| Loss from discontinued operations | (5 | ) | – | ||||||
| Net income (loss) | 968 | (95 | ) | ||||||
| Less: Net income (loss) attributable to noncontrolling interests | 166 | (44 | ) | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA | $ | 802 | $ | (51 | ) | ||||
| AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: | |||||||||
| Income (loss) from continuing operations | $ | 807 | $ | (51 | ) | ||||
| Loss from discontinued operations | (5 | ) | – | ||||||
| Net income (loss) | $ | 802 | $ | (51 | ) | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||
| Basic: | |||||||||
| Income (loss) from continuing operations | $ | 0.76 | $ | (0.05 | ) | ||||
| Loss from discontinued operations | (0.01 | ) | – | ||||||
| Net income (loss) | $ | 0.75 | $ | (0.05 | ) | ||||
| Diluted: | |||||||||
| Income (loss) from continuing operations | $ | 0.71 | $ | (0.05 | ) | ||||
| Loss from discontinued operations | – | – | |||||||
| Net income (loss) | $ | 0.71 | $ | (0.05 | ) | ||||
| Average number of shares used to compute: | |||||||||
| Basic earnings per common share | 1,059,945,523 | 1,066,482,064 | |||||||
| Diluted earnings per common share | 1,160,380,773 | 1,066,482,064 | |||||||
| Common stock outstanding at the end of the period | 1,064,276,127 | 1,067,152,804 | |||||||
| Shipments of aluminum products (metric tons) | 3,757,000 | 3,917,000 | |||||||
|
Alcoa and subsidiaries Consolidated Balance Sheet (unaudited) (in millions) |
|||||||||
|
|
December 31, |
September 30, |
|||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,939 | $ | 1,432 | |||||
|
Receivables from customers, less allowances of $46 in 2011 and $44 |
1,571 | 1,619 | |||||||
| Other receivables | 371 | 448 | |||||||
| Inventories | 2,899 | 2,973 | |||||||
| Prepaid expenses and other current assets | 933 | 1,303 | |||||||
| Total current assets | 7,713 | 7,775 | |||||||
| Properties, plants, and equipment | 37,608 | 37,718 | |||||||
| Less: accumulated depreciation, depletion, and amortization | 18,326 | 18,860 | |||||||
| Properties, plants, and equipment, net | 19,282 | 18,858 | |||||||
| Goodwill | 5,157 | 5,175 | |||||||
| Investments | 1,626 | 1,831 | |||||||
| Deferred income taxes | 3,546 | 3,494 | |||||||
| Other noncurrent assets | 2,796 | 3,058 | |||||||
| Total assets | $ | 40,120 | $ | 40,191 | |||||
| LIABILITIES | |||||||||
| Current liabilities: | |||||||||
| Short-term borrowings | $ | 62 | $ | 591 | |||||
| Commercial paper | 224 | 43 | |||||||
| Accounts payable, trade | 2,692 | 2,590 | |||||||
| Accrued compensation and retirement costs | 985 | 1,018 | |||||||
| Taxes, including income taxes | 438 | 405 | |||||||
| Other current liabilities | 1,167 | 1,344 | |||||||
| Long-term debt due within one year | 445 | 540 | |||||||
| Total current liabilities | 6,013 | 6,531 | |||||||
| Long-term debt, less amount due within one year | 8,640 | 8,350 | |||||||
| Accrued pension benefits | 3,261 | 2,754 | |||||||
| Accrued other postretirement benefits | 2,583 | 2,516 | |||||||
| Other noncurrent liabilities and deferred credits | 2,428 | 3,186 | |||||||
| Total liabilities | 22,925 | 23,337 | |||||||
| EQUITY | |||||||||
| Alcoa shareholders’ equity: | |||||||||
| Preferred stock | 55 | 55 | |||||||
| Common stock | 1,178 | 1,178 | |||||||
| Additional capital | 7,561 | 7,549 | |||||||
| Retained earnings | 11,629 | 11,447 | |||||||
| Treasury stock, at cost | (3,952 | ) | (3,882 | ) | |||||
| Accumulated other comprehensive loss | (2,627 | ) | (2,777 | ) | |||||
| Total Alcoa shareholders’ equity | 13,844 | 13,570 | |||||||
| Noncontrolling interests | 3,351 | 3,284 | |||||||
| Total equity | 17,195 | 16,854 | |||||||
| Total liabilities and equity | $ | 40,120 | $ | 40,191 | |||||
|
Alcoa and subsidiaries Statement of Consolidated Cash Flows (unaudited) (in millions) |
|||||||||
|
Nine months ended |
|||||||||
| 2011 (a) | 2012 | ||||||||
| CASH FROM OPERATIONS | |||||||||
| Net income (loss) | $ | 968 | $ | (95 | ) | ||||
| Adjustments to reconcile net income (loss) to cash from operations: | |||||||||
| Depreciation, depletion, and amortization | 1,113 | 1,099 | |||||||
| Deferred income taxes | (78 | ) | (195 | ) | |||||
| Equity income, net of dividends | (28 | ) | (3 | ) | |||||
| Restructuring and other charges | 49 | 27 | |||||||
| Net loss from investing activities – asset sales | 1 | – | |||||||
| Loss from discontinued operations | 5 | – | |||||||
| Stock-based compensation | 70 | 54 | |||||||
| Excess tax benefits from stock-based payment arrangements | (6 | ) | (1 | ) | |||||
| Other | 35 | 100 | |||||||
|
Changes in assets and liabilities, excluding effects of |
|||||||||
| (Increase) in receivables | (419 | ) | (174 | ) | |||||
| (Increase) in inventories | (608 | ) | (65 | ) | |||||
| Decrease (increase) in prepaid expenses and other current assets | 13 | (18 | ) | ||||||
| Increase (decrease) in accounts payable, trade | 170 | (109 | ) | ||||||
| (Decrease) in accrued expenses | (195 | ) | (82 | ) | |||||
| Increase in taxes, including income taxes | 116 | 13 | |||||||
| Pension contributions | (217 | ) | (515 | ) | |||||
| (Increase) decrease in noncurrent assets | (92 | ) | 34 | ||||||
| Increase in noncurrent liabilities | 160 | 499 | |||||||
| (Increase) in net assets held for sale | – | (3 | ) | ||||||
| CASH PROVIDED FROM CONTINUING OPERATIONS | 1,057 | 566 | |||||||
| CASH USED FOR DISCONTINUED OPERATIONS | (6 | ) | (2 | ) | |||||
| CASH PROVIDED FROM OPERATIONS | 1,051 | 564 | |||||||
| FINANCING ACTIVITIES | |||||||||
|
Net change in short-term borrowings (original maturities of three months or less) |
(36 | ) | 29 | ||||||
| Net change in commercial paper | 107 | (181 | ) | ||||||
| Additions to debt (original maturities greater than three months) | 1,254 | 886 | |||||||
| Debt issuance costs | (17 | ) | (3 | ) | |||||
| Payments on debt (original maturities greater than three months) | (1,122 | ) | (793 | ) | |||||
| Proceeds from exercise of employee stock options | 36 | 12 | |||||||
| Excess tax benefits from stock-based payment arrangements | 6 | 1 | |||||||
| Dividends paid to shareholders | (98 | ) | (98 | ) | |||||
| Distributions to noncontrolling interests | (253 | ) | (71 | ) | |||||
| Contributions from noncontrolling interests | 136 | 132 | |||||||
| CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES | 13 | (86 | ) | ||||||
| INVESTING ACTIVITIES | |||||||||
| Capital expenditures | (801 | ) | (863 | ) | |||||
| Acquisitions, net of cash acquired | (240 | ) | – | ||||||
| Proceeds from the sale of assets and businesses | (6 | ) | 13 | ||||||
| Additions to investments | (216 | ) | (241 | ) | |||||
| Sales of investments | 5 | 11 | |||||||
| Net change in short-term investments and restricted cash | – | 51 | |||||||
| Other | (11 | ) | 63 | ||||||
| CASH USED FOR INVESTING ACTIVITIES | (1,269 | ) | (966 | ) | |||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(6 |
) |
(19 |
) |
|||||
| Net change in cash and cash equivalents | (211 | ) | (507 | ) | |||||
| Cash and cash equivalents at beginning of year | 1,543 | 1,939 | |||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,332 | $ | 1,432 | |||||
| (a) |
The Statement of Consolidated Cash Flows for the nine months ended September 30, 2011 was revised to reflect the movement of the Global Foil business (one remaining plant located in Brazil) from held for sale classification in the fourth quarter of 2011. Management is no longer committed to a plan to sell the location and has refocused their efforts to drive higher profitability and is evaluating expanding the functionality of the plant so that it can manufacture certain products aimed at capturing new growth in Brazil. |
|
Alcoa and subsidiaries |
||||||||||||||||||||||||||||||||
| 1Q11 | 2Q11 | 3Q11 | 4Q11 | 2011 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||||||
| Alumina production (kmt) | 4,024 | 4,144 | 4,140 | 4,178 | 16,486 | 4,153 | 4,033 | 4,077 | ||||||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,206 | 2,378 | 2,256 | 2,378 | 9,218 | 2,293 | 2,194 | 2,368 | ||||||||||||||||||||||||
| Third-party sales | $ | 810 | $ | 926 | $ | 879 | $ | 847 | $ | 3,462 | $ | 775 | $ | 750 | $ | 764 | ||||||||||||||||
| Intersegment sales | $ | 633 | $ | 723 | $ | 751 | $ | 620 | $ | 2,727 | $ | 617 | $ | 576 | $ | 575 | ||||||||||||||||
| Equity income (loss) | $ | 3 | $ | 22 | $ | 2 | $ | (2 | ) | $ | 25 | $ | 1 | $ | 1 | $ | 2 | |||||||||||||||
| Depreciation, depletion, and amortization | $ | 103 | $ | 112 | $ | 117 | $ | 112 | $ | 444 | $ | 114 | $ | 114 | $ | 120 | ||||||||||||||||
| Income taxes | $ | 44 | $ | 60 | $ | 42 | $ | 33 | $ | 179 | $ | (1 | ) | $ | (6 | ) | $ | (22 | ) | |||||||||||||
| After-tax operating income (ATOI) | $ | 142 | $ | 186 | $ | 154 | $ | 125 | $ | 607 | $ | 35 | $ | 23 | $ | (9 | ) | |||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||||||
| Aluminum production (kmt) | 904 | 945 | 964 | 962 | 3,775 | 951 | 941 | 938 | ||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 698 | 724 | 754 | 805 | 2,981 | 771 | 749 | 768 | ||||||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,682 |
$ |
2,830 |
$ |
2,689 |
$ |
2,374 |
$ |
2,636 |
$ |
2,433 |
$ |
2,329 |
$ |
2,222 |
||||||||||||||||
| Third-party sales | $ | 1,980 | $ | 2,145 | $ | 2,124 | $ | 1,991 | $ | 8,240 | $ | 1,944 | $ | 1,804 | $ | 1,794 | ||||||||||||||||
| Intersegment sales | $ | 839 | $ | 922 | $ | 798 | $ | 633 | $ | 3,192 | $ | 761 | $ | 782 | $ | 691 | ||||||||||||||||
| Equity income (loss) | $ | 1 | $ | (1 | ) | $ | (4 | ) | $ | (3 | ) | $ | (7 | ) | $ | (2 | ) | $ | (9 | ) | $ | (5 | ) | |||||||||
| Depreciation, depletion, and amortization | $ | 141 | $ | 142 | $ | 137 | $ | 136 | $ | 556 | $ | 135 | $ | 133 | $ | 130 | ||||||||||||||||
| Income taxes | $ | 53 | $ | 55 | $ | 21 | $ | (37 | ) | $ | 92 | $ | (13 | ) | $ | (19 | ) | $ | (19 | ) | ||||||||||||
| ATOI | $ | 202 | $ | 201 | $ | 110 | $ | (32 | ) | $ | 481 | $ | 10 | $ | (3 | ) | $ | (14 | ) | |||||||||||||
| Global Rolled Products: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 446 | 473 | 454 | 407 | 1,780 | 452 | 484 | 483 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,892 | $ | 2,085 | $ | 1,974 | $ | 1,691 | $ | 7,642 | $ | 1,845 | $ | 1,913 | $ | 1,849 | ||||||||||||||||
| Intersegment sales | $ | 69 | $ | 62 | $ | 48 | $ | 39 | $ | 218 | $ | 44 | $ | 44 | $ | 42 | ||||||||||||||||
| Equity loss | $ | – | $ | – | $ | – | $ | (3 | ) | $ | (3 | ) | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | |||||||||||
| Depreciation, depletion, and amortization | $ | 58 | $ | 60 | $ | 61 | $ | 58 | $ | 237 | $ | 57 | $ | 57 | $ | 57 | ||||||||||||||||
| Income taxes | $ | 33 | $ | 35 | $ | 26 | $ | 10 | $ | 104 | $ | 49 | $ | 43 | $ | 44 | ||||||||||||||||
| ATOI | $ | 81 | $ | 99 | $ | 60 | $ | 26 | $ | 266 | $ | 96 | $ | 95 | $ | 98 | ||||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 55 | 57 | 56 | 53 | 221 | 58 | 59 | 53 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,247 | $ | 1,370 | $ | 1,373 | $ | 1,355 | $ | 5,345 | $ | 1,390 | $ | 1,420 | $ | 1,367 | ||||||||||||||||
| Equity income | $ | 1 | $ | – | $ | – | $ | – | $ | 1 | $ | – | $ | – | $ | – | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 38 | $ | 41 | $ | 40 | $ | 39 | $ | 158 | $ | 40 | $ | 39 | $ | 39 | ||||||||||||||||
| Income taxes | $ | 62 | $ | 72 | $ | 67 | $ | 59 | $ | 260 | $ | 72 | $ | 77 | $ | 79 | ||||||||||||||||
| ATOI | $ | 130 | $ | 149 | $ | 138 | $ | 122 | $ | 539 | $ | 155 | $ | 160 | $ | 160 | ||||||||||||||||
|
Reconciliation of ATOI to consolidated net income (loss) attributable to Alcoa: |
||||||||||||||||||||||||||||||||
| Total segment ATOI | $ | 555 | $ | 635 | $ | 462 | $ | 241 | $ | 1,893 | $ | 296 | $ | 275 | $ | 235 | ||||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||||||
| Impact of LIFO | (24 | ) | (27 | ) | 2 | 11 | (38 | ) | – | 19 | (7 | ) | ||||||||||||||||||||
| Interest expense | (72 | ) | (106 | ) | (81 | ) | (81 | ) | (340 | ) | (80 | ) | (80 | ) | (81 | ) | ||||||||||||||||
| Noncontrolling interests | (58 | ) | (55 | ) | (53 | ) | (28 | ) | (194 | ) | (5 | ) | 17 | 32 | ||||||||||||||||||
| Corporate expense | (67 | ) | (76 | ) | (76 | ) | (71 | ) | (290 | ) | (64 | ) | (69 | ) | (62 | ) | ||||||||||||||||
| Restructuring and other charges | (6 | ) | (22 | ) | (7 | ) | (161 | ) | (196 | ) | (7 | ) | (10 | ) | (2 | ) | ||||||||||||||||
| Discontinued operations | (1 | ) | (4 | ) | – | 2 | (3 | ) | – | – | – | |||||||||||||||||||||
| Other | (19 | ) | (23 | ) | (75 | ) | (104 | ) | (221 | ) | (46 | ) | (154 | ) | (258 | ) | ||||||||||||||||
| Consolidated net income (loss) attributable to Alcoa |
$ |
308 |
$ |
322 |
$ |
172 |
$ |
(191 |
) |
$ |
611 |
$ |
94 |
$ |
(2 |
) |
$ |
(143 |
) |
|||||||||||||
The difference between certain segment totals and consolidated amounts
is in Corporate.
|
Alcoa and subsidiaries |
||||||||||||
| Adjusted EBITDA Margin | Quarter ended | |||||||||||
|
September 30, |
June 30, |
September 30, |
||||||||||
| Net income (loss) attributable to Alcoa | $ | 172 | $ | (2 | ) | $ | (143 | ) | ||||
| Add: | ||||||||||||
| Net income (loss) attributable to noncontrolling interests |
53 |
(17 |
) |
(32 |
) |
|||||||
| Provision (benefit) for income taxes | 55 | 13 | (33 | ) | ||||||||
| Other expenses (income), net | 31 | 22 | (2 | ) | ||||||||
| Interest expense | 125 | 123 | 124 | |||||||||
| Restructuring and other charges | 9 | 15 | 2 | |||||||||
| Provision for depreciation, depletion, and amortization | 376 | 363 | 366 | |||||||||
| Adjusted EBITDA | $ | 821 | $ | 517 | $ | 282 | ||||||
| Sales | $ | 6,419 | $ | 5,963 | $ | 5,833 | ||||||
| Adjusted EBITDA Margin | 12.8 | % | 8.7 | % | 4.8 | % | ||||||
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for
depreciation, depletion, and amortization. Net margin is equivalent to
Sales minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development expenses;
and Provision for depreciation, depletion, and amortization. Adjusted
EBITDA is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because Adjusted EBITDA provides
additional information with respect to Alcoa’s operating performance and
the Company’s ability to meet its financial obligations. The Adjusted
EBITDA presented may not be comparable to similarly titled measures of
other companies.
| Free Cash Flow | Quarter ended | ||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
|||||||||||||||||
| Cash from operations | $ | 489 | $ | 537 | $ | 263 | |||||||||||||
| Capital expenditures |
(325 |
) |
(291 |
) |
(302 |
) |
|||||||||||||
| Free cash flow | $ | 164 | $ | 246 | $ | (39 | ) | ||||||||||||
Free Cash Flow is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management reviews cash
flows generated from operations after taking into consideration capital
expenditures due to the fact that these expenditures are considered
necessary to maintain and expand Alcoa’s asset base and are 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.
|
Alcoa and subsidiaries |
|||||||||||||||
| Adjusted Income | Quarter ended | ||||||||||||||
|
September 30, |
|||||||||||||||
|
(Loss) |
Diluted |
||||||||||||||
| Net loss attributable to Alcoa | $ | (143 | ) | $ | (0.13 | ) | |||||||||
| Loss from discontinued operations | – | ||||||||||||||
| Loss from continuing operations attributable to Alcoa |
(143 |
) |
(0.13 |
) |
|||||||||||
| Restructuring and other charges | 2 | ||||||||||||||
| Discrete tax items* | 26 | ||||||||||||||
| Other special items** | 147 | ||||||||||||||
| Income from continuing operations attributable to Alcoa – as adjusted |
$ |
32 |
0.03 |
||||||||||||
|
Income from continuing operations attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa 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 Loss from continuing operations attributable to Alcoa determined under GAAP as well as Income from continuing operations attributable to Alcoa – as adjusted. |
|
| * |
Discrete tax items include unbenefitted losses in Italy, China, and Suriname ($35); a benefit as a result of including the anticipated gain from the sale of the Tapoco Hydroelectric Project in the calculation of the estimated annual effective tax rate ($12); and a net charge for other miscellaneous items ($3). |
| ** |
Other special items include an increase in the environmental reserve mostly related to the Grasse River remediation in Massena, NY and two new remediation projects at the smelter sites in Baie Comeau, Canada and Mosjøen, Norway ($120); a litigation reserve ($15); uninsured losses related to fire damage to the cast house at the Massena, NY location ($9); and a net unfavorable change in certain mark-to-market energy derivative contracts ($3). |
|
Alcoa and subsidiaries Calculation of Financial Measures (unaudited), continued (dollars in millions) |
||||||||||||
| Days Working Capital | Quarter ended | |||||||||||
|
September 30, |
June 30, |
September 30, |
||||||||||
| Receivables from customers, less allowances | $ | 1,943 | $ | 1,575 | $ | 1,619 | ||||||
| Add: Deferred purchase price receivable* | – | 141 | 81 | |||||||||
| Receivables from customers, less allowances, as adjusted |
1,943 |
1,716 |
1,700 |
|||||||||
| Add: Inventories | 3,194 | 3,051 | 2,973 | |||||||||
| Less: Accounts payable, trade | 2,488 | 2,633 | 2,590 | |||||||||
| Working Capital | $ | 2,649 | $ | 2,134 | $ | 2,083 | ||||||
| Sales | $ | 6,419 | $ | 5,963 | $ | 5,833 | ||||||
| Days Working Capital | 38 | 33 | 33 | |||||||||
|
Days Working Capital = Working Capital divided by (Sales/number of days in the quarter). |
|
| * |
The deferred purchase price receivable relates to an arrangement to sell certain customer receivables to a financial institution on a recurring basis. Alcoa is adding back this receivable for the purposes of the Days Working Capital calculation. |
| Net Debt-to-Capital | Quarter ended September 30, 2012 | |||||||||||||
|
Debt-to- |
Cash and |
Net Debt-to- |
||||||||||||
| Total Debt | ||||||||||||||
| Short-term borrowings | $ | 591 | ||||||||||||
| Commercial paper | 43 | |||||||||||||
| Long-term debt due within one year | 540 | |||||||||||||
| Long-term debt, less amount due within one year | 8,350 | |||||||||||||
| Numerator | $ | 9,524 | $ | 1,432 | $ | 8,092 | ||||||||
| Total Capital | ||||||||||||||
| Total debt | $ | 9,524 | ||||||||||||
| Total equity | 16,854 | |||||||||||||
| Denominator | $ | 26,378 | $ | 1,432 | $ | 24,946 | ||||||||
| Ratio | 36.1 | % | 32.4 | % | ||||||||||
Net debt-to-capital is a non-GAAP financial measure. Management believes
that this measure is meaningful to investors because management assesses
Alcoa’s leverage position after factoring in available cash that could
be used to repay outstanding debt.
|
Alcoa and subsidiaries Calculation of Financial Measures (unaudited), continued (dollars in millions, except per metric ton amounts) |
||||||||||||||||||||||||||||||
| Segment Measures | Alumina | Primary Metals | Global Rolled Products |
Engineered |
||||||||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||||||||||||||||||||
|
June 30, |
September 30, |
June 30, |
September 30, |
March 31, |
June 30, |
September 30, |
September 30, |
|||||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 23 | $ | (9 | ) | $ | (3 | ) | $ | (14 | ) | $ | 96 | $ | 95 | $ | 98 | $ | 160 | |||||||||||
| Add: | ||||||||||||||||||||||||||||||
|
Depreciation, depletion, and amortization |
114 |
120 |
133 |
130 |
57 |
57 |
57 |
39 |
||||||||||||||||||||||
| Equity (income) loss |
(1 |
) |
(2 |
) |
9 |
5 |
1 |
2 |
1 |
– |
||||||||||||||||||||
| Income taxes | (6 | ) | (22 | ) | (19 | ) | (19 | ) | 49 | 43 | 44 | 79 | ||||||||||||||||||
| Other | (3 | ) | (1 | ) | (1 | ) | 2 | – | – | (2 | ) | (1 | ) | |||||||||||||||||
| Adjusted EBITDA |
$ |
127 |
$ |
86 |
$ |
119 |
$ |
104 |
$ |
203 |
$ |
197 |
$ |
198 |
$ |
277 |
||||||||||||||
| Production (thousand metric tons) (kmt) |
4,033 |
4,077 |
941 |
938 |
||||||||||||||||||||||||||
| Adjusted EBITDA / Production ($ per metric ton) |
$ |
31 |
$ |
21 |
$ |
126 |
$ |
111 |
||||||||||||||||||||||
| Total shipments (thousand metric tons) (kmt) |
472 |
505 |
501 |
|||||||||||||||||||||||||||
| Adjusted EBITDA/Total shipments ($ per metric ton) |
$ |
430 |
$ |
390 |
$ |
395 |
||||||||||||||||||||||||
| Total sales | $ | 1,367 | ||||||||||||||||||||||||||||
| Adjusted EBITDA Margin |
20 |
% |
||||||||||||||||||||||||||||
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for
depreciation, depletion, and amortization. Net margin is equivalent to
Sales minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development expenses;
and Provision for depreciation, depletion, and amortization. The Other
line in the table above includes gains/losses on asset sales and other
nonoperating items. Adjusted EBITDA is a non-GAAP financial measure.
Management believes that this measure is meaningful to investors because
Adjusted EBITDA provides additional information with respect to Alcoa’s
operating performance and the Company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies.
Alcoa
Investor Contact: Kelly Pasterick, 212-836-2674
Media Contact: Libby Archell, 212-836-2719