Strong productivity, solid value-add profitability, and Alumina strength
3Q 2015 Highlights
- Net income of $44 million, or $0.02 per share;
excluding special items, net income of $109 million, or $0.07 per share - $5.6 billion revenue down approximately 11 percent year-over-year, reflecting a 21 percent decline from divestitures, closures and market headwinds, partially offset by a 10 percent revenue increase from aerospace and automotive organic growth, acquisitions and Alumina sales
- $3.4 billion revenue, after-tax operating income of $257 million, and adjusted EBITDA of $508 million for combined Value-Add businesses
- Engineered Products and Solutions record revenue of $1.4 billion;
aerospace revenue up 39 percent year-over-year - Global Rolled Products automotive revenue up 133 percent year-over-year
- Engineered Products and Solutions record revenue of $1.4 billion;
- $2.2 billion revenue, after-tax operating income of $153 million, and adjusted EBITDA of $379 million for combined Upstream businesses
- Best Alumina profitability year-to-date since 2007, offset by Primary Metals as Midwest transaction price declined $641 per metric ton, or 27.2 percent, year-to-date
- $287 million year-over-year productivity gains; year-to-date productivity gains of $849 million, as compared to annual 2015 target of $900 million
- $420 million cash from operations and free cash flow of $152 million; $1.7 billion cash on hand
3Q 2015 Portfolio Transformation Highlights
- Announced that Alcoa’s Board of Directors unanimously approved plan to create two independent, public companies—a Value-Add Company and an Upstream Company— resulting from successful multi-year transformation
- Completed RTI International Metals acquisition growing titanium offerings and advanced manufacturing technologies; signed approximately $1.1 billion Lockheed Martin contract that draws on new titanium capabilities gained through RTI
- Signed an approximately $1 billion contract with Airbus for high-tech, multi-material fastening systems
- Announced $60 million Alcoa Technical Center investment to deepen additive manufacturing capabilities for aerospace and other high growth markets
- Reached joint development agreement with Ford Motor Company to collaborate on next-generation aluminum alloys using Alcoa MicromillTM technology; Alcoa Micromill® material to debut on 2016 Ford F-150; signed letter of intent with Danieli Group to commercialize Micromill technology in worldwide licensing deal
- Began shipments from newly expanded Alcoa, Tennessee automotive facility and announced plan to restart Texarkana, Texas casthouse to meet higher aluminum demand from automotive industry
- Received approval from Government of Western Australia to export trial bauxite shipments from Willowdale and Huntly mines, targeting early 2016
- Saudi Arabia Ma’aden-Alcoa joint venture mine completed; smelter on track to produce nameplate capacity of 740,000 metric tons of aluminum, and refinery projected to produce 1 million metric tons of alumina, both in 2015
- Announced curtailment of remaining capacity at Suralco refinery in Suriname; permanently closed Anglesea coal mine and power station in Australia
Lightweight metals leader Alcoa (NYSE:AA) today reported a third quarter
profit as its value-add and upstream portfolios delivered solid results
in the face of strong market and currency headwinds. Alcoa has been
transforming by building its value-add portfolio for profitable growth
and creating a globally competitive upstream business. The Company’s
successful multi-year transformation will culminate with the launch of
two Fortune 500 companies, one value-add focused and the other upstream
focused, expected in the second half of 2016.
Alcoa reported third quarter 2015 net income of $44 million, or $0.02
per share, including $65 million in net unfavorable special items.
Special items included restructuring-related costs to optimize the
upstream portfolio and transaction costs, partially offset by gains on
asset sales. Third quarter 2015 results compare to net income of $149
million, or $0.12 per share, in third quarter 2014.
Excluding special items, third quarter 2015 net income was $109 million,
or $0.07 per share, led by strong productivity gains and solid midstream
and downstream profitability, offset by lower metal prices. The Midwest
transaction price was down $641 per metric ton, or 27.2 percent,
year-to-date through September 30, 2015. Third quarter 2015 results,
excluding special items, compare to net income of $370 million, or $0.31
per share, in third quarter 2014.
Third quarter 2015 revenue totaled $5.6 billion, down approximately 11
percent year-over-year. Divesting and closing lower-margin businesses
and market headwinds caused third quarter revenue to fall 21 percent.
This decrease was partially offset by a 10 percent third quarter revenue
increase from organic growth in aerospace, automotive and alumina,
combined with acquisitions.
“The third quarter brought economic headwinds and significant volatility
in some of our markets,” said Klaus Kleinfeld, Chairman and Chief
Executive Officer. “We continue to be laser focused on the things we can
control. We have successfully made our Upstream businesses less
vulnerable to commodity downswings. We have intensified innovation and
growth in the Value-Add businesses, and it shows through the solid
underlying performance despite currency movements and market
fluctuations. Our productivity performance was strong combined with good
cash generation. While we cannot control external factors, we do remain
focused on what we can control—making our businesses more resilient.”
2015 End Market Forecasts
In its global end markets, Alcoa maintained 2015 estimates for global
aerospace sales growth of 8 to 9 percent. In industrial gas turbines,
Alcoa increased its 2015 forecast for global airfoil market growth of 3
to 4 percent, up from 1 to 3 percent.
In North America, Alcoa tightened 2015 estimates for automotive
production to up 2 to 4 percent, from up 1 to 4 percent; maintained its
2015 estimate for heavy duty truck and trailer production growth of 9 to
11 percent; held steady its 2015 projection for commercial building and
construction sales growth at 4 to 5 percent; and kept its 2015 packaging
estimate unchanged at down 1 to 2 percent.
In Europe, the Company updated its projection for 2015 automotive
production growth to up 1 to 3 percent, from down 1 to up 3 percent;
raised its 2015 heavy duty truck and trailer production forecast to up 1
to 3 percent, from down 2 percent to flat; maintained its 2015
commercial building and construction sales growth estimate at down 2 to
3 percent; and kept its 2015 packaging estimate unchanged at up 1 to 2
percent.
In China, Alcoa lowered its estimate for 2015 automotive production
growth to up 1 to 2 percent, from up 5 to 8 percent; reduced its
projection for 2015 heavy duty truck and trailer production growth to
down 22 to 24 percent, from down 14 to 16 percent; reduced its 2015
commercial building and construction sales growth to up 4 to 6 percent
from up 6 to 8 percent; and kept its 2015 packaging estimate unchanged
at up 8 to 12 percent.
In addition, Alcoa reaffirmed its projections that global aluminum
demand is expected to increase 6.5 percent in 2015 and double between
2010 and 2020; so far this decade, global demand growth is tracking
ahead of this projection. Alcoa is also projecting a global aluminum
deficit for 2016.
Value-Add Portfolio Transformation
After the separation, the innovation and technology-driven Value-Add
Company will include Global Rolled Products, Engineered Products and
Solutions, and Transportation and Construction Solutions. In the third
quarter, these combined business segments reported revenue of $3.4
billion, after-tax operating income (ATOI) of $257 million, and adjusted
EBITDA of $508 million.
In the third quarter, the Company acquired RTI International Metals.
Earlier this month, Alcoa announced an approximately $1.1 billion
contract with Lockheed Martin that draws on new titanium capabilities
gained through RTI. Under the contract, Alcoa becomes the titanium
supplier for airframe structures for all three variants of the F-35
Joint Strike Fighter over nine years, from 2016 to 2024. RTI is expected
to contribute $1.2 billion in revenue and its profitability is expected
to reach 25 percent EBITDA margin, both in 2019. Separately, Alcoa
announced an approximately $1 billion contract with Airbus for
high-tech, multi-material fastening systems, Alcoa’s largest-ever
fastener deal with the aircraft manufacturer. Under the contract, Alcoa
will supply primarily titanium, steel and nickel-based superalloy
fastening systems for every Airbus platform.
The Company announced a $60 million expansion at the Alcoa Technical
Center to accelerate advanced 3D-printing materials and processes. Alcoa
is building a multi-metals powder facility to make the critical input
material for metallic 3D-printed parts. In addition, Alcoa has developed
the patented Ampliforge™ process. With this process, the Company can
design and 3D-print a near complete part, and then treat it using a
traditional manufacturing process, such as forging, to enhance
metallurgical properties, including toughness and strength.
In automotive, Alcoa continued to make significant headway with both its
breakthrough Micromill technology and material, and rolling mill
investments to meet growing demand for aluminum intensive vehicles.
Alcoa’s automotive revenues are expected to increase 2.4 times from 2014
to $1.8 billion in 2018.
In the third quarter:
-
Ford and Alcoa announced a joint development agreement to collaborate
on advanced automotive aluminum alloys using Micromill technology.
Ford also said it will debut Micromill material on its 2016 Ford F-150
truck, making it the first automaker to use the advanced automotive
aluminum commercially. To date, the Company has Micromill
qualification agreements in place with nine major automotive customers
on three continents, including Ford. -
Alcoa signed a letter of intent with the Danieli Group to work toward
an agreement to license the breakthrough Micromill technology to
customers around the world. -
A new midstream business unit, Micromill Products and Services, was
established to drive revenue from licensing Alcoa’s intellectual
property and technology associated with manufacturing advanced
Micromill products. The business unit will provide services like
training and technical support as well as generate product sales from
San Antonio Works starting with automotive sheet in North America and
expanding into other market sectors and regions. -
In Tennessee, a $300 million automotive plant expansion backed by
customer contracts opened and began shipments four months ahead of
schedule. Alcoa also announced plans to restart its Texarkana, Texas
casthouse. It is expected to ramp up production in the first half of
2016 and produce aluminum slab for the North American automotive
market.
The Company also realigned its value-add portfolio to drive further
profitable growth.
-
In the third quarter, Alcoa created a new downstream business segment,
Transportation and Construction Solutions (TCS), comprising Alcoa
Wheel and Transportation Products and Alcoa Building and Construction.
The segment will expand into emerging regional markets, in addition to
capturing continued growth in existing markets. -
Global Rolled Products is also strengthening its ability to capture
profitable growth opportunities in attractive market sectors and
regions. The segment will now consist of four business units
comprising Aerospace and Automotive Products; Brazing, Commercial
Transportation and Industrial; Global Packaging; and Micromill
Products and Services.
Upstream Portfolio Transformation
After the separation, the Upstream Company will comprise five strong
business units that today make up Global Primary Products – Bauxite,
Alumina, Aluminum, Casting and Energy. In the third quarter, the
combined upstream businesses reported revenue of $2.2 billion, ATOI of
$153 million, and adjusted EBITDA of $379 million.
Alcoa made progress in building its third-party bauxite business. In the
third quarter, the Company received approval from the Government of
Western Australia to export trial bauxite shipments from its Willowdale
and Huntly mines, targeted for early 2016. Alcoa has the world’s largest
bauxite mining portfolio with a low 19th percentile position
on the global bauxite cost curve.
Since 2007, the Company has divested, closed or curtailed 1.4 million
metric tons, or 33 percent, of total smelting operating capacity. In
addition, Alcoa’s review of 500,000 metric tons of smelting capacity and
2.8 million metric tons of refining capacity for possible curtailment or
divestiture remains active.
In the third quarter, Alcoa:
-
Announced the curtailment of the remaining 887,000
metric-tons-per-year of Suralco’s alumina refining capacity in
Suriname. The refinery is scheduled to be idled by November 30, 2015. -
Permanently closed the Anglesea coal mine and power station in
Australia on August 31, 2015. -
Completed the mine at the Ma’aden-Alcoa joint venture in Saudi Arabia,
the lowest cost aluminum complex in the world. The joint venture’s
smelter is on track to produce nameplate capacity of 740,000 metric
tons of aluminum and the refinery is projected to produce 1 million
metric tons of alumina, both in 2015.
In addition, Alcoa has launched an improvement plan in its Primary
Metals segment to increase productivity between $110 million to $130
million in 2016.
As a result of strategic actions, Alcoa has dropped eight points on the
global aluminum cost curve since 2010 to the 43rd percentile
and is targeting the 38th percentile by 2016. On the global
alumina cost curve, Alcoa has dropped five points since 2010 to the 25th
percentile and is targeting the 21st percentile by 2016.
The Company also continued growing its value-add casthouse products,
which are projected to represent approximately 70 percent of 2015
smelter shipments. From 2010 to 2014, growth of total value-add product
shipments from its smelters delivered $1.3 billion in total incremental
margin. In Alumina, Alcoa estimates approximately 75 percent of its
total third-party smelter-grade alumina shipments will be based on
Alumina Price Index/spot market pricing this year.
Financial Performance
Alcoa continues to drive strong performance across all businesses,
delivering $287 million in third quarter year-over-year productivity
gains and $849 million year-to-date against a $900 million 2015 annual
target. Productivity gains have been driven by process improvements and
procurement savings across all segments. Alcoa invested return-seeking
capital of $389 million, compared to a $750 million 2015 annual target.
Approximately 80 percent of year-to-date return seeking capital was
invested in the value-add businesses. Alcoa controlled sustaining
capital expenditures of $408 million against a $725 million 2015 annual
plan.
Cash provided from operations was $420 million in the quarter and free
cash flow was $152 million. Alcoa ended the quarter with cash on hand of
$1.7 billion.
The Company achieved an average of 40 days working capital for the
quarter, 8 days higher than third quarter 2014 due to the impact of the
Firth Rixson, TITAL and RTI acquisitions. Excluding the impact of the
acquisitions, average days of working capital decreased 1 day from 32 to
31. Alcoa’s debt-to-adjusted EBITDA ratio on a trailing twelve months
basis was 2.44.
Segment Performance
Engineered Products and Solutions
This segment reported record revenue of $1.4 billion, up 35 percent
year-over-year, driven by acquisitions and share gains, somewhat offset
by unfavorable price/mix and currency. ATOI in the third quarter was
$151 million, down $4 million, year-over-year from $155 million,
including $16 million of after-tax expenses attributable to purchase
accounting adjustments and other costs in connection with the
acquisition of RTI. As a result, adjusted EBITDA margin was 20.3 percent
in third quarter 2015 compared to 25.7 percent in the year-ago quarter.
Year-over-year, productivity improvements and the positive contribution
from the Firth Rixson acquisition were offset by cost headwinds,
investments for ramping up growth projects and unfavorable price/mix.
Transportation and Construction Solutions
ATOI in the third quarter was $44 million, down $6 million
year-over-year. The decline was driven by cost headwinds and the
unfavorable impact from currency, which were offset by strong
productivity gains. This segment delivered an adjusted EBITDA margin of
15.2 percent, compared to 15.5 percent for the same quarter last year.
Global Rolled Products
ATOI in the third quarter was $62 million, down $7 million
year-over-year. Strong productivity and the benefit of automotive sales
growth of 133 percent, were more than offset by cost increases,
investments for ramping up growth projects (e.g. Tennessee automotive
expansion and Micromill), currency, portfolio actions and unfavorable
price/mix. As a result of this segment’s transformation initiatives,
including divestitures and upgrading the product mix, adjusted EBITDA
per metric ton was $330 in third quarter 2015, up 6 percent, or $18 per
metric ton, from $312 in the year-ago quarter.
Alumina
This segment reported ATOI of $212 million, its best year-to-date
profitability since 2007. Third quarter ATOI was down $3 million
sequentially from $215 million, and up $150 million year-over-year from
$62 million. Lower pricing drove the decline in sequential ATOI, but was
nearly offset by favorable foreign currency movements, cost control and
productivity improvements, higher shipments based on Alumina Price
Index/spot pricing, and higher volume. Adjusted EBITDA per metric ton
decreased $3 from second quarter 2015 to $95 per metric ton in third
quarter 2015 and increased $49 per metric ton year-over-year.
Primary Metals
ATOI in the third quarter was a negative $59 million, down $126 million
sequentially from $67 million, and down $304 million year-over-year from
$245 million. Sequential earnings declined due to lower London Metal
Exchange aluminum pricing, lower regional premiums and unfavorable
energy costs in Spain and the United States. These impacts were somewhat
offset by lower input costs, strong productivity and favorable currency.
Third-party realized price in third quarter 2015 was $1,901 per metric
ton, down 13 percent sequentially and down 25 percent year-over-year.
Adjusted EBITDA per metric ton in third quarter 2015 was $4, a
sequential decrease of $263 per metric ton.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern
Daylight Time on October 8, 2015 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.” Presentation materials will be available for viewing
at www.alcoa.com.
About Alcoa
A global leader in lightweight metals technology, engineering and
manufacturing, Alcoa innovates multi-material solutions that advance our
world. Our technologies enhance transportation, from automotive and
commercial transport to air and space travel, and improve industrial and
consumer electronics products. We enable smart buildings, sustainable
food and beverage packaging, high performance defense vehicles across
air, land and sea, deeper oil and gas drilling and more efficient power
generation. We pioneered the aluminum industry over 125 years ago, and
today, our more than 60,000 people in 30 countries deliver value-add
products made of titanium, nickel and aluminum, and produce
best-in-class bauxite, alumina and primary aluminum products. For more
information, visit www.alcoa.com,
follow @Alcoa on Twitter at www.twitter.com/Alcoa and
follow us on Facebook at www.facebook.com/Alcoa.
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,”
“intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,”
“should,” “targets,” “will,” “would,” 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 growth for aluminum, supply/demand balances,
and growth of the aerospace, automotive, and other end markets;
statements regarding targeted financial results or operating
performance; statements about Alcoa’s strategies, outlook, business and
financial prospects, and the acceleration of Alcoa’s portfolio
transformation; and statements regarding the separation transaction,
including the future performance of Value-Add Company and Upstream
Company if the separation is completed, the expected benefits of the
separation, the expected timing of completion of the separation, and the
expected qualification of the separation as a tax-free transaction.
Forward-looking statements are not guarantees of future performance and
are subject to risks, uncertainties, and changes in circumstances that
are difficult to predict. Although Alcoa 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) uncertainties as to the timing of
the separation and whether it will be completed; (b) the possibility
that various closing conditions for the separation may not be satisfied;
(c) failure of the separation to qualify for the expected tax treatment;
(d) the possibility that any third-party consents required in connection
with the separation will not be received; (e) the impact of the
separation on the businesses of Alcoa; (f) the risk that the businesses
will not be separated successfully or such separation may be more
difficult, time-consuming or costly than expected, which could result in
additional demands on Alcoa’s resources, systems, procedures and
controls, disruption of its ongoing business and diversion of
management’s attention from other business concerns; (g) material
adverse changes in aluminum industry conditions; (h) deterioration in
global economic and financial market conditions generally;
(i) unfavorable changes in the markets served by Alcoa; (j) the impact
of changes in foreign currency exchange rates on costs and results;
(k) increases in energy costs; (l) 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 (including moving the Upstream Company’s
alumina refining and aluminum smelting businesses down on the industry
cost curves and increasing revenues and improving margins in the
Value-Add Company’s businesses) anticipated from restructuring programs
and productivity improvement, cash sustainability, technology
advancements (including, without limitation, advanced aluminum alloys,
Alcoa Micromill, and other materials and processes), and other
initiatives; (m) Alcoa’s inability to realize expected benefits, in each
case as planned and by targeted completion dates, from acquisitions,
divestitures, facility closures, curtailments, or expansions, or
international joint ventures; (n) political, economic, and regulatory
risks in the countries in which Alcoa operates or sells products;
(o) the outcome of contingencies, including legal proceedings,
government or regulatory investigations, and environmental remediation;
(p) the impact of cyber attacks and potential information technology or
data security breaches; (q) the potential failure to retain key
employees while the separation transaction is pending or after it is
completed; (r) the risk that increased debt levels, deterioration in
debt protection metrics, contraction in liquidity, or other factors
could adversely affect the targeted credit ratings for Value-Add Company
or Upstream Company; and (s) the other risk factors discussed in Alcoa’s
Form 10-K for the year ended December 31, 2014, and other reports filed
with the U.S. Securities and Exchange Commission (SEC). 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. Market projections are subject to
the risks discussed above and other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from Alcoa’s
consolidated financial information but is not presented in Alcoa’s
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). Certain of
these data are considered “non-GAAP financial measures” under SEC rules.
These non-GAAP financial measures supplement our GAAP disclosures and
should not be considered an alternative to the GAAP measure.
Reconciliations to the most directly comparable GAAP financial measures
and management’s rationale for the use of the non-GAAP financial
measures can be found in the schedules to this release and on our
website at www.alcoa.com under
the “Invest” section. Alcoa has not provided a reconciliation of any
forward-looking non-GAAP financial measures to the most directly
comparable GAAP financial measures, due primarily to variability and
difficulty in making accurate forecasts and projections, as not all of
the information necessary for a quantitative reconciliation is available
to the Company without unreasonable effort.
| 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, | |||||||||
| 2014 | 2015 | 2015 | |||||||||
| Sales | $ | 6,239 | $ | 5,897 | $ | 5,573 | |||||
| Cost of goods sold (exclusive of expenses below) | 4,904 | 4,663 | 4,559 | ||||||||
| Selling, general administrative, and other expenses | 243 | 224 | 261 | ||||||||
| Research and development expenses | 57 | 68 | 55 | ||||||||
| Provision for depreciation, depletion, and amortization | 347 | 319 | 318 | ||||||||
| Restructuring and other charges | 209 | 217 | 66 | ||||||||
| Interest expense | 126 | 124 | 123 | ||||||||
| Other expenses (income), net | 23 | – | (15 | ) | |||||||
| Total costs and expenses | 5,909 | 5,615 | 5,367 | ||||||||
| Income before income taxes | 330 | 282 | 206 | ||||||||
| Provision for income taxes | 199 | 75 | 100 | ||||||||
| Net income | 131 | 207 | 106 | ||||||||
| Less: Net (loss) income attributable to noncontrolling interests | (18 | ) | 67 | 62 | |||||||
| NET INCOME ATTRIBUTABLE TO ALCOA | $ | 149 | $ | 140 | $ | 44 | |||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| Net income(1) | $ | 0.13 | $ | 0.10 | $ | 0.02 | |||||
| Average number of shares(2) | 1,176,560,799 | 1,222,413,890 | 1,280,536,623 | ||||||||
| Diluted: | |||||||||||
| Net income(1) | $ | 0.12 | $ | 0.10 | $ | 0.02 | |||||
| Average number of shares(3) | 1,204,581,680 | 1,236,918,280 | 1,294,392,945 | ||||||||
| Shipments of aluminum products (metric tons) | 1,225,000 | 1,165,000 | 1,137,000 | ||||||||
| (1) |
In order to calculate both basic and diluted earnings per share for the quarters ended June 30, 2015 and September 30, 2015, preferred stock dividends declared of $17 and $18, respectively, need to be subtracted from Net income attributable to Alcoa. |
|
| (2) |
In the fourth quarter of 2014, Alcoa issued 37 million shares of its common stock as part of the consideration paid to acquire Firth Rixson. As a result, the respective basic average number of shares for the quarters ended June 30, 2015 and September 30, 2015 includes all 37 million shares. Additionally, in the third quarter of 2015, Alcoa issued 87 million shares of its common stock to acquire RTI International Metals. As a result, the basic average number of shares for the quarter ended September 30, 2015 includes 58 million representing the weighted average number of shares for the length of time the 87 million shares were outstanding during the third quarter of 2015. |
|
| (3) |
In the quarter ended September 30, 2014, the difference between the diluted average number of shares and the basic average number of shares relates to share equivalents associated with employee stock options and awards (20 million) and mandatory convertible preferred stock (8 million). In the quarters ended June 30, 2015 and September 30, 2015, 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 quarters ended June 30, 2015 and September 30, 2015 does not include any share equivalents related to the mandatory convertible preferred stock as their effect was anti-dilutive. Additionally, the diluted average number of shares for the quarter ended September 30, 2015 does not include any share equivalents related to convertible debt (acquired through RTI International Metals) as their effect was anti-dilutive. |
|
| Alcoa and subsidiaries | |||||||||
| Statement of Consolidated Operations (unaudited), continued | |||||||||
| (in millions, except per-share, share, and metric ton amounts) | |||||||||
| Nine months ended | |||||||||
| September 30, | |||||||||
| 2014 | 2015 | ||||||||
| Sales | $ | 17,529 | $ | 17,289 | |||||
| Cost of goods sold (exclusive of expenses below) | 14,164 | 13,665 | |||||||
| Selling, general administrative, and other expenses | 724 | 717 | |||||||
| Research and development expenses | 158 | 178 | |||||||
| Provision for depreciation, depletion, and amortization | 1,036 | 958 | |||||||
| Restructuring and other charges | 780 | 460 | |||||||
| Interest expense | 351 | 369 | |||||||
| Other expenses (income), net | 53 | (27 | ) | ||||||
| Total costs and expenses | 17,266 | 16,320 | |||||||
| Income before income taxes | 263 | 969 | |||||||
| Provision for income taxes | 200 | 401 | |||||||
| Net income | 63 | 568 | |||||||
| Less: Net (loss) income attributable to noncontrolling interests | (46 | ) | 189 | ||||||
| NET INCOME ATTRIBUTABLE TO ALCOA | $ | 109 | $ | 379 | |||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||
| Basic: | |||||||||
| Net income(1) | $ | 0.09 | $ | 0.26 | |||||
| Average number of shares(2) | 1,150,142,608 | 1,241,376,202 | |||||||
| Diluted: | |||||||||
| Net income(1) | $ | 0.09 | $ | 0.26 | |||||
| Average number of shares(3) | 1,170,219,426 | 1,256,809,085 | |||||||
| Common stock outstanding at the end of the period | 1,177,672,033 | 1,310,024,012 | |||||||
| Shipments of aluminum products (metric tons) | 3,598,000 | 3,393,000 | |||||||
| (1) |
In order to calculate both basic and diluted earnings per share for the nine months ended September 30, 2014 and 2015, preferred stock dividends declared of $2 and $52, respectively, need to be subtracted from Net income attributable to Alcoa. |
|
| (2) |
In the first quarter of 2014, holders of $575 principal amount of Alcoa’s 5.25% Convertible Notes due March 15, 2014 (the “Notes”) exercised their option to convert the Notes into 89 million shares of Alcoa common stock. As a result, the basic average number of shares for the nine months ended September 30, 2014 includes 67 million representing the weighted average number of shares for the length of time the 89 million shares were outstanding during the nine-month period of 2014, and the basic average number of shares for the nine months ended September 30, 2015 includes all 89 million shares. |
|
|
Additionally, in the fourth quarter of 2014, Alcoa issued 37 million shares of its common stock as part of the consideration paid to acquire Firth Rixson. As a result, the basic average number of shares for the nine months ended September 30, 2015 includes all 37 million shares. |
||
|
Furthermore, in the third quarter of 2015, Alcoa issued 87 million shares of its common stock to acquire RTI International Metals. As a result, the basic average number of shares for the nine months ended September 30, 2015 includes 20 million representing the weighted average number of shares for the length of time the 87 million shares were outstanding during the nine-month period of 2015. |
||
| (3) |
In the nine months ended September 30, 2014, the difference
|
|
| Alcoa and subsidiaries | |||||||||
| Consolidated Balance Sheet (unaudited) | |||||||||
| (in millions) | |||||||||
| December 31, | September 30, | ||||||||
|
2014(1) |
2015(1),(2) |
||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,877 | $ | 1,739 | |||||
|
Receivables from customers, less allowances of $14 and $12 in 2014 |
1,395 | 1,525 | |||||||
| Other receivables | 733 | 669 | |||||||
| Inventories | 3,082 | 3,559 | |||||||
| Prepaid expenses and other current assets | 1,182 | 1,100 | |||||||
| Total current assets | 8,269 | 8,592 | |||||||
| Properties, plants, and equipment | 35,517 | 33,237 | |||||||
| Less: accumulated depreciation, depletion, and amortization | 19,091 | 18,485 | |||||||
| Properties, plants, and equipment, net | 16,426 | 14,752 | |||||||
| Goodwill | 5,247 | 5,443 | |||||||
| Investments | 1,944 | 1,647 | |||||||
| Deferred income taxes | 2,754 | 2,265 | |||||||
| Other noncurrent assets | 2,759 | 3,888 | |||||||
| Total assets | $ | 37,399 | $ | 36,587 | |||||
| LIABILITIES | |||||||||
| Current liabilities: | |||||||||
| Short-term borrowings | $ | 54 | $ | 50 | |||||
| Accounts payable, trade | 3,152 | 2,734 | |||||||
| Accrued compensation and retirement costs | 937 | 825 | |||||||
| Taxes, including income taxes | 348 | 421 | |||||||
| Other current liabilities | 1,021 | 981 | |||||||
| Long-term debt due within one year | 29 | 136 | |||||||
| Total current liabilities | 5,541 | 5,147 | |||||||
| Long-term debt, less amount due within one year | 8,769 | 9,091 | |||||||
| Accrued pension benefits | 3,291 | 2,968 | |||||||
| Accrued other postretirement benefits | 2,155 | 2,110 | |||||||
| Other noncurrent liabilities and deferred credits | 2,849 | 2,580 | |||||||
| Total liabilities | 22,605 | 21,896 | |||||||
| EQUITY | |||||||||
| Alcoa shareholders’ equity: | |||||||||
| Preferred stock | 55 | 55 | |||||||
| Mandatory convertible preferred stock | 3 | 3 | |||||||
| Common stock | 1,304 | 1,391 | |||||||
| Additional capital | 9,284 | 9,954 | |||||||
| Retained earnings | 9,379 | 9,553 | |||||||
| Treasury stock, at cost | (3,042 | ) | (2,830 | ) | |||||
| Accumulated other comprehensive loss | (4,677 | ) | (5,532 | ) | |||||
| Total Alcoa shareholders’ equity | 12,306 | 12,594 | |||||||
| Noncontrolling interests | 2,488 | 2,097 | |||||||
| Total equity | 14,794 | 14,691 | |||||||
| Total liabilities and equity | $ | 37,399 | $ | 36,587 | |||||
| (1) |
On November 19, 2014, Alcoa completed the acquisition of Firth Rixson. As a result, Alcoa’s Consolidated Balance Sheet as of December 31, 2014 included an estimate of the beginning balance sheet of Firth Rixson. This estimate resulted in the allocation of $1,227 of the $3,125 purchase price (includes $130 of contingent consideration) to various assets, primarily Properties, plants, and equipment, and liabilities with the difference included in Goodwill. In the 2015 nine-month period, an adjustment of $94 was recorded to increase the estimated beginning balance of certain assets acquired and to decrease the initial amount recorded as Goodwill. This adjustment was based on currently available information from a third-party valuation of the acquired business, which was completed in the third quarter of 2015. |
|
| (2) |
The Consolidated Balance Sheet as of September 30, 2015 includes amounts related to the acquisition of RTI International Metals. These amounts are composed of an estimate of the beginning balance sheet of RTI International Metals on the acquisition date, July 23, 2015, and the changes in these balances from July 23, 2015 through September 30, 2015. The estimate of the beginning balance sheet is the result of allocating $661 of the $870 purchase price to various assets, primarily Properties, plants, and equipment, and liabilities with the difference included in Goodwill. The final allocation of the purchase price will be based on a third-party valuation of the acquired business, which will be completed in 2016. |
|
| Alcoa and subsidiaries | |||||||||
| Statement of Consolidated Cash Flows (unaudited) | |||||||||
| (in millions) | |||||||||
| Nine months ended | |||||||||
| September 30, | |||||||||
| 2014 | 2015 | ||||||||
| CASH FROM OPERATIONS | |||||||||
| Net income | $ | 63 | $ | 568 | |||||
| Adjustments to reconcile net income to cash from operations: | |||||||||
| Depreciation, depletion, and amortization | 1,036 | 959 | |||||||
| Deferred income taxes | 2 | (18 | ) | ||||||
| Equity income, net of dividends | 88 | 137 | |||||||
| Restructuring and other charges | 780 | 460 | |||||||
| Net gain from investing activities – asset sales | (44 | ) | (69 | ) | |||||
| Net periodic pension benefit cost(1) | 321 | 365 | |||||||
| Stock-based compensation | 71 | 78 | |||||||
| Excess tax benefits from stock-based payment arrangements | (7 | ) | (9 | ) | |||||
| Other | 67 | (65 | ) | ||||||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|||||||||
| (Increase) in receivables | (665 | ) | (97 | ) | |||||
| (Increase) in inventories | (485 | ) | (176 | ) | |||||
| (Increase) decrease in prepaid expenses and other current assets | (28 | ) | 31 | ||||||
| Increase (decrease) in accounts payable, trade | 83 | (240 | ) | ||||||
| (Decrease) in accrued expenses | (456 | ) | (424 | ) | |||||
| (Decrease) increase in taxes, including income taxes | (51 | ) | 135 | ||||||
| Pension contributions | (446 | ) | (363 | ) | |||||
| Decrease (increase) in noncurrent assets(1),(2) | 5 | (348 | ) | ||||||
| (Decrease) in noncurrent liabilities(1) | (118 | ) | (207 | ) | |||||
| CASH PROVIDED FROM OPERATIONS | 216 | 717 | |||||||
| FINANCING ACTIVITIES | |||||||||
|
Net change in short-term borrowings (original maturities of three months or less) |
– | (6 | ) | ||||||
| Net change in commercial paper | 99 | – | |||||||
| Additions to debt (original maturities greater than three months) | 2,881 | 1,534 | |||||||
| Debt issuance costs | (16 | ) | (2 | ) | |||||
| Payments on debt (original maturities greater than three months)(3) | (1,717 | ) | (1,551 | ) | |||||
| Proceeds from exercise of employee stock options | 128 | 26 | |||||||
| Excess tax benefits from stock-based payment arrangements | 7 | 9 | |||||||
| Issuance of mandatory convertible preferred stock | 1,213 | – | |||||||
| Dividends paid to shareholders | (105 | ) | (149 | ) | |||||
| Distributions to noncontrolling interests | (75 | ) | (72 | ) | |||||
| Contributions from noncontrolling interests | 44 | – | |||||||
| Acquisitions of noncontrolling interests | (28 | ) | – | ||||||
| CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES | 2,431 | (211 | ) | ||||||
| INVESTING ACTIVITIES | |||||||||
| Capital expenditures | (750 | ) | (782 | ) | |||||
| Acquisitions, net of cash acquired(4) | – | 97 | |||||||
| Proceeds from the sale of assets and businesses(5) | 6 | 112 | |||||||
| Additions to investments | (137 | ) | (86 | ) | |||||
| Sales of investments | 49 | 40 | |||||||
| Net change in restricted cash | – | (7 | ) | ||||||
| Other | 25 | 23 | |||||||
| CASH USED FOR INVESTING ACTIVITIES | (807 | ) | (603 | ) | |||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(5 |
) |
(41 |
) |
|||||
| Net change in cash and cash equivalents | 1,835 | (138 | ) | ||||||
| Cash and cash equivalents at beginning of year | 1,437 | 1,877 | |||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 3,272 | $ | 1,739 | |||||
| (1) |
In the first quarter of 2015, management decided to reflect the net periodic benefit cost related to Alcoa-sponsored defined benefit pension plans as a separate line item in the Statement of Consolidated Cash Flows. In prior periods, a portion of this amount was reported in both the Decrease (increase) in noncurrent assets (overfunded plans) and the (Decrease) in noncurrent liabilities (underfunded plans) line items. As a result, the Statement of Consolidated Cash Flows for the nine months ended September 30, 2014 was revised to conform to the current period presentation. |
|
| (2) |
The Decrease (increase) in noncurrent assets line item for the nine months ended September 30, 2015 includes a $300 prepayment related to a natural gas supply agreement for three alumina refineries in Western Australia, which are owned by Alcoa’s majority-owned subsidiary, Alcoa of Australia Limited. |
|
| (3) |
In the first quarter of 2014, holders of $575 principal amount of Alcoa’s 5.25% Convertible Notes due March 15, 2014 (the “Notes”) exercised their option to convert the Notes into 89 million shares of Alcoa common stock. This transaction was not reflected in the Statement of Consolidated Cash Flows for the nine months ended September 30, 2014 as it represents a noncash financing activity. |
|
| (4) |
In the third quarter of 2015, Alcoa issued 87 million shares of its common stock valued at $870 to acquire RTI International Metals. The issuance of common stock was not reflected in the Statement of Consolidated Cash Flows for the nine months ended September 30, 2015 as it represents a noncash investing activity. However, through this acquisition, Alcoa acquired $302 in cash, which was reflected as a cash inflow in the Acquisitions, net of cash acquired line item on the Statement of Consolidated Cash Flows for the nine months ended September 30, 2015. |
|
| (5) |
Proceeds from the sale of assets and businesses for the nine months ended September 30, 2015 includes a cash outflow for cash paid as a result of post-closing adjustments associated with the December 2014 divestiture of three rolling mills in Spain and France. |
|
| Alcoa and subsidiaries | ||||||||||||||||||||||||||||||||
| Segment Information (unaudited) | ||||||||||||||||||||||||||||||||
|
(dollars in millions, except realized prices; production and shipments in thousands of metric tons [kmt]) |
||||||||||||||||||||||||||||||||
| 1Q14 | 2Q14 | 3Q14 | 4Q14 | 2014 | 1Q15 | 2Q15 | 3Q15 | |||||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||||||
| Alumina production (kmt) | 4,172 | 4,077 | 4,196 | 4,161 | 16,606 | 3,933 | 3,977 | 3,954 | ||||||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,649 | 2,361 | 2,714 | 2,928 | 10,652 | 2,538 | 2,706 | 2,798 | ||||||||||||||||||||||||
| Third-party sales | $ | 845 | $ | 761 | $ | 886 | $ | 1,017 | $ | 3,509 | $ | 887 | $ | 924 | $ | 912 | ||||||||||||||||
| Intersegment sales | $ | 510 | $ | 480 | $ | 482 | $ | 469 | $ | 1,941 | $ | 501 | $ | 431 | $ | 391 | ||||||||||||||||
| Equity loss | $ | (5 | ) | $ | (7 | ) | $ | (7 | ) | $ | (10 | ) | $ | (29 | ) | $ | (7 | ) | $ | (11 | ) | $ | (9 | ) | ||||||||
| Depreciation, depletion, and amortization | $ | 97 | $ | 100 | $ | 100 | $ | 90 | $ | 387 | $ | 80 | $ | 77 | $ | 71 | ||||||||||||||||
| Income taxes | $ | 40 | $ | 12 | $ | 26 | $ | 75 | $ | 153 | $ | 92 | $ | 87 | $ | 85 | ||||||||||||||||
| After-tax operating income (ATOI) | $ | 92 | $ | 38 | $ | 62 | $ | 178 | $ | 370 | $ | 221 | $ | 215 | $ | 212 | ||||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||||||
| Aluminum production (kmt) | 839 | 795 | 760 | 731 | 3,125 | 711 | 701 | 700 | ||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 617 | 638 | 642 | 637 | 2,534 | 589 | 630 | 615 | ||||||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,205 |
$ |
2,291 |
$ |
2,538 |
$ |
2,578 |
$ |
2,405 |
$ |
2,420 |
$ |
2,180 |
$ |
1,901 |
||||||||||||||||
| Third-party sales | $ | 1,424 | $ | 1,659 | $ | 1,865 | $ | 1,852 | $ | 6,800 | $ | 1,572 | $ | 1,534 | $ | 1,249 | ||||||||||||||||
| Intersegment sales | $ | 734 | $ | 718 | $ | 730 | $ | 749 | $ | 2,931 | $ | 692 | $ | 562 | $ | 479 | ||||||||||||||||
| Equity (loss) income | $ | (28 | ) | $ | (17 | ) | $ | – | $ | 11 | $ | (34 | ) | $ | (3 | ) | $ | (5 | ) | $ | (7 | ) | ||||||||||
| Depreciation, depletion, and amortization | $ | 124 | $ | 129 | $ | 124 | $ | 117 | $ | 494 | $ | 109 | $ | 109 | $ | 106 | ||||||||||||||||
| Income taxes | $ | (11 | ) | $ | 30 | $ | 95 | $ | 89 | $ | 203 | $ | 57 | $ | 6 | $ | (49 | ) | ||||||||||||||
| ATOI | $ | (15 | ) | $ | 97 | $ | 245 | $ | 267 | $ | 594 | $ | 187 | $ | 67 | $ | (59 | ) | ||||||||||||||
| Global Rolled Products: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 467 | 504 | 506 | 487 | 1,964 | 432 | 462 | 449 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,677 | $ | 1,860 | $ | 1,926 | $ | 1,888 | $ | 7,351 | $ | 1,621 | $ | 1,668 | $ | 1,527 | ||||||||||||||||
| Intersegment sales | $ | 43 | $ | 44 | $ | 52 | $ | 46 | $ | 185 | $ | 36 | $ | 34 | $ | 29 | ||||||||||||||||
| Equity loss | $ | (5 | ) | $ | (6 | ) | $ | (8 | ) | $ | (8 | ) | $ | (27 | ) | $ | (9 | ) | $ | (7 | ) | $ | (8 | ) | ||||||||
| Depreciation, depletion, and amortization | $ | 58 | $ | 58 | $ | 62 | $ | 57 | $ | 235 | $ | 56 | $ | 56 | $ | 56 | ||||||||||||||||
| Income taxes(1) | $ | 29 | $ | 18 | $ | 26 | $ | 16 | $ | 89 | $ | 36 | $ | 25 | $ | 28 | ||||||||||||||||
| ATOI(1) | $ | 54 | $ | 70 | $ | 69 | $ | 52 | $ | 245 | $ | 54 | $ | 76 | $ | 62 | ||||||||||||||||
| Engineered Products and Solutions(2): | ||||||||||||||||||||||||||||||||
| Third-party sales | $ | 1,025 | $ | 1,044 | $ | 1,034 | $ | 1,114 | $ | 4,217 | $ | 1,257 | $ | 1,279 | $ | 1,397 | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 31 | $ | 32 | $ | 32 | $ | 42 | $ | 137 | $ | 51 | $ | 54 | $ | 61 | ||||||||||||||||
| Income taxes(1) | $ | 75 | $ | 81 | $ | 78 | $ | 64 | $ | 298 | $ | 76 | $ | 81 | $ | 71 | ||||||||||||||||
| ATOI(1) | $ | 147 | $ | 153 | $ | 155 | $ | 124 | $ | 579 | $ | 156 | $ | 165 | $ | 151 | ||||||||||||||||
| Transportation and Construction Solutions(2): | ||||||||||||||||||||||||||||||||
| Third-party sales | $ | 482 | $ | 516 | $ | 523 | $ | 500 | $ | 2,021 | $ | 471 | $ | 492 | $ | 475 | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 10 | $ | 11 | $ | 10 | $ | 11 | $ | 42 | $ | 10 | $ | 11 | $ | 11 | ||||||||||||||||
| Income taxes(1) | $ | 16 | $ | 19 | $ | 20 | $ | 14 | $ | 69 | $ | 14 | $ | 17 | $ | 18 | ||||||||||||||||
| ATOI(1) | $ | 42 | $ | 50 | $ | 50 | $ | 38 | $ | 180 | $ | 38 | $ | 44 | $ | 44 | ||||||||||||||||
|
Reconciliation of total segment ATOI to consolidated net (loss) income attributable to Alcoa(2): |
||||||||||||||||||||||||||||||||
| Total segment ATOI(1) | $ | 320 | $ | 408 | $ | 581 | $ | 659 | $ | 1,968 | $ | 656 | $ | 567 | $ | 410 | ||||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||||||
| Impact of LIFO | (7 | ) | (8 | ) | (18 | ) | (21 | ) | (54 | ) | 7 | 36 | 50 | |||||||||||||||||||
| Metal price lag(1) | 7 | 11 | 38 | 22 | 78 | (23 | ) | (39 | ) | (48 | ) | |||||||||||||||||||||
| Interest expense | (78 | ) | (69 | ) | (81 | ) | (80 | ) | (308 | ) | (80 | ) | (80 | ) | (80 | ) | ||||||||||||||||
| Noncontrolling interests | 19 | 9 | 18 | 45 | 91 | (60 | ) | (67 | ) | (62 | ) | |||||||||||||||||||||
| Corporate expense | (65 | ) | (67 | ) | (72 | ) | (80 | ) | (284 | ) | (62 | ) | (65 | ) | (72 | ) | ||||||||||||||||
| Restructuring and other charges | (321 | ) | (77 | ) | (189 | ) | (307 | ) | (894 | ) | (161 | ) | (159 | ) | (48 | ) | ||||||||||||||||
| Other | (53 | ) | (69 | ) | (128 | ) | (79 | ) | (329 | ) | (82 | ) | (53 | ) | (106 | ) | ||||||||||||||||
| Consolidated net (loss) income attributable to Alcoa |
$ |
(178 |
) |
$ |
138 |
$ |
149 |
$ |
159 |
$ |
268 |
$ |
195 |
$ |
140 |
$ |
44 |
|||||||||||||||
|
The difference between certain segment totals and consolidated amounts is in Corporate. |
||
| (1) |
Effective in the second quarter of 2015, management removed the impact of metal price lag from the results of the Global Rolled Products and Engineered Products and Solutions (now Engineered Products and Solutions and Transportation and Construction Solutions – see footnote 2 below) segments in order to enhance the visibility of the underlying operating performance of these businesses. Metal price lag describes the timing difference created when the average price of metal sold differs from the average cost of the metal when purchased by the respective segment. The impact of metal price lag is now reported as a separate line item in Alcoa’s reconciliation of total segment ATOI to consolidated net (loss) income attributable to Alcoa. As a result, this change does not impact the consolidated results of Alcoa. Segment information for all prior periods presented was updated to reflect this change. |
|
| (2) |
In the third quarter of 2015, management approved a realignment of Alcoa’s Engineered Products and Solutions segment due to the expansion of this part of Alcoa’s business portfolio through both organic and inorganic growth. This realignment consisted of moving both the Alcoa Wheels and Transportation Products and Building and Constructions Systems business units to a new reportable segment named Transportation and Construction Solutions. Additionally, the Latin American extrusions business previously included in Corporate was moved into the new Transportation and Construction Solutions segment. The remaining Engineered Products and Solutions segment consists of the Alcoa Fastening Systems and Rings (renamed to include portions of the Firth Rixson business acquired in November 2014), Alcoa Power and Propulsion (includes the TITAL business acquired in March 2015), Alcoa Forgings and Extrusions (includes the other portions of Firth Rixson), and Alcoa Titanium and Engineered Products (a new business unit that represents the RTI International Metals business acquired in July 2015) business units. Segment information for all prior periods presented was revised to reflect the new segment structure. |
|
| Alcoa and subsidiaries | ||||||||||||||||||||
| Calculation of Financial Measures (unaudited) | ||||||||||||||||||||
| (in millions, except per-share amounts) | ||||||||||||||||||||
| Adjusted Income | Income | Diluted EPS | ||||||||||||||||||
| Quarter ended | Quarter ended | |||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
June 30, |
September 30, |
|||||||||||||||
| Net income attributable to Alcoa | $ | 149 | $ | 140 | $ | 44 | $ | 0.12 | $ | 0.10 | $ | 0.02 | ||||||||
| Restructuring and other charges |
175 |
141 |
30 |
|||||||||||||||||
| Discrete tax items(1) |
25 |
(5 |
) |
4 |
||||||||||||||||
| Other special items(2) |
21 |
(26 |
) |
31 |
||||||||||||||||
| Net income attributable to Alcoa – as adjusted |
$ |
370 |
$ |
250 |
$ |
109 |
0.31 |
0.19 |
0.07 |
|||||||||||
Net income 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 Net income attributable to Alcoa
determined under GAAP as well as Net income attributable to Alcoa – as
adjusted.
(1) Discrete tax items include the following:
-
for the quarter ended September 30, 2015, a net charge for a number of
small items; -
for the quarter ended June 30, 2015, a net benefit for a number of
small items; and -
for the quarter ended September 30, 2014, a charge for the
remeasurement of certain deferred tax assets of a subsidiary in Brazil
due to a tax rate change ($34) and a net benefit for a number of small
items ($9).
(2) Other special items include the following:
-
for the quarter ended September 30, 2015, an unfavorable tax impact
resulting from the difference between Alcoa’s consolidated estimated
annual effective tax rate and the statutory rates applicable to
special items ($27), a gain on the sale of both land and an equity
investment in a China rolling mill ($25), costs associated with the
planned separation of Alcoa and the acquisition of RTI International
Metals ($22), a favorable tax impact related to the interim period
treatment of operational losses in certain foreign jurisdictions for
which no tax benefit was recognized ($16), a write-down of inventory
related to a refinery in Suriname ($13), and a net unfavorable change
in certain mark-to-market energy derivative contracts ($10); -
for the quarter ended June 30, 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 ($21), a gain on
the sale of land ($19), costs associated with the then-planned
acquisition of RTI International Metals ($5), an unfavorable tax
impact resulting from the difference between Alcoa’s consolidated
estimated annual effective tax rate and the statutory rates applicable
to special items ($4), a net unfavorable change in certain
mark-to-market energy derivative contracts ($3), and a write-down of
inventory related to the permanent closures of a smelter in Brazil and
a power station in Australia ($2); and -
for the quarter ended September 30, 2014, a favorable tax impact
resulting from the difference between Alcoa’s consolidated estimated
annual effective tax rate and the statutory rates applicable to
special items ($33), a write-down of inventory related to the
permanent closure of smelters in Italy and Australia ($27), costs
associated with the then-planned acquisition of Firth Rixson ($14), a
net unfavorable change in certain mark-to-market energy derivative
contracts ($14), a gain on the sale of an equity investment in a China
rolling mill ($9), and an unfavorable tax impact related to the
interim period treatment of operational losses in certain foreign
jurisdictions for which no tax benefit was recognized ($8).
| Alcoa and subsidiaries | ||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||
| Adjusted EBITDA |
Quarter ended |
Trailing twelve |
||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
|||||||||||||
| Net income attributable to Alcoa | $ | 149 | $ | 140 | $ | 44 | $ | 538 | ||||||||
| Add: | ||||||||||||||||
| Net (loss) income attributable to noncontrolling interests |
(18 |
) |
67 |
62 |
144 |
|||||||||||
| Provision for income taxes | 199 | 75 | 100 | 521 | ||||||||||||
| Other expenses (income), net | 23 | – | (15 | ) | (33 | ) | ||||||||||
| Interest expense | 126 | 124 | 123 | 491 | ||||||||||||
| Restructuring and other charges | 209 | 217 | 66 | 848 | ||||||||||||
| Provision for depreciation, depletion, and amortization |
347 |
319 |
318 |
1,293 |
||||||||||||
| Adjusted EBITDA | $ | 1,035 | $ | 942 | $ | 698 | $ | 3,802 | ||||||||
| Adjusted EBITDA Measures: | ||||||||||||||||
| Sales | $ | 6,239 | $ | 5,897 | $ | 5,573 | ||||||||||
| Adjusted EBITDA Margin | 16.6 | % | 16.0 | % | 12.5 | % | ||||||||||
| Total Debt | $ | 9,277 | ||||||||||||||
| Debt-to-Adjusted EBITDA Ratio | 2.44 | |||||||||||||||
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.
| Alcoa and subsidiaries | |||||||||||||
| Calculation of Financial Measures (unaudited), continued | |||||||||||||
| (dollars in millions, except per metric ton amounts) | |||||||||||||
| Segment Measures | Alumina | Primary Metals | |||||||||||
| Adjusted EBITDA | Quarter ended | ||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
June 30, |
September 30, |
||||||||
| After-tax operating income (ATOI) | $ 62 | $ 215 | $ 212 | $ 245 | $ 67 | $ (59) | |||||||
| Add: | |||||||||||||
| Depreciation, depletion, and amortization |
100 |
77 |
71 |
124 |
109 |
106 |
|||||||
| Equity loss | 7 | 11 | 9 | – | 5 | 7 | |||||||
| Income taxes | 26 | 87 | 85 | 95 | 6 | (49) | |||||||
| Other | (2) | – | (1) | 1 | – | (2) | |||||||
| Adjusted EBITDA |
$ 193 |
$ 390 |
$ 376 |
$ 465 |
$ 187 |
$ 3 |
|||||||
| Production (thousand metric tons) (kmt) |
4,196 |
3,977 |
3,954 |
760 |
701 |
700 |
|||||||
| Adjusted EBITDA / Production ($ per metric ton) |
$ 46 |
$ 98 |
$ 95 |
$ 612 |
$ 267 |
$ 4 |
|||||||
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 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 | ||||||||||
|
September 30, |
June 30, |
September 30, |
|||||||||
| After-tax operating income (ATOI) | $ | 69 | $ | 76 | $ | 62 | |||||
| Add: | |||||||||||
| Depreciation, depletion, and amortization |
62 |
56 |
56 |
||||||||
| Equity loss | 8 | 7 | 8 | ||||||||
| Income taxes | 26 | 25 | 28 | ||||||||
| Other | (1 | ) | – | (1 | ) | ||||||
| Adjusted EBITDA |
$ |
164 |
$ |
164 |
$ |
153 |
|||||
| Total shipments (thousand metric tons) (kmt) |
526 |
479 |
464 |
||||||||
| Adjusted EBITDA / Total shipments ($ per metric ton) |
$ |
312 |
$ |
342 |
$ |
330 |
|||||
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.
| (1) |
Effective in the second quarter of 2015, management removed the impact of metal price lag from the results of the Global Rolled Products segment in order to enhance the visibility of the underlying operating performance of this business. Metal price lag describes the timing difference created when the average price of metal sold differs from the average cost of the metal when purchased by this segment. The impact of metal price lag is now reported as a separate line item in Alcoa’s reconciliation of total segment ATOI to consolidated net (loss) income attributable to Alcoa. As a result, this change does not impact the consolidated results of Alcoa. Segment information for all prior periods presented was updated to reflect this change. See Segment Information above for additional information. |
|
| Alcoa and subsidiaries | ||||||||||||||||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||||||||
| Segment Measures | Engineered Products and Solutions(1),(2) | Transportation and Construction Solutions(1),(2) | ||||||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
June 30, |
September 30, |
|||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 155 | $ | 165 | $ | 151 | $ | 50 | $ | 44 | $ | 44 | ||||||||||||||
| Add: | ||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
32 |
54 |
61 |
10 |
11 |
11 |
||||||||||||||||||||
| Income taxes | 78 | 81 | 71 | 20 | 17 | 18 | ||||||||||||||||||||
| Other | 1 | 1 | – | 1 | (1 | ) | (1 | ) | ||||||||||||||||||
| Adjusted EBITDA |
$ |
266 |
$ |
301 |
$ |
283 |
$ |
81 |
$ |
71 |
$ |
72 |
||||||||||||||
| Third-party sales |
$ |
1,034 |
$ |
1,279 |
$ |
1,397 |
$ |
523 |
$ |
492 |
$ |
475 |
||||||||||||||
| Adjusted EBITDA Margin |
25.7 |
% |
23.5 |
% |
20.3 |
% |
15.5 |
% |
14.4 |
% |
15.2 |
% |
||||||||||||||
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.
| (1) |
Effective in the second quarter of 2015, management removed the impact of metal price lag from the results of the Engineered Products and Solutions (now Engineered Products and Solutions and Transportation and Construction Solutions – see footnote 2 below) segment in order to enhance the visibility of the underlying operating performance of this business. Metal price lag describes the timing difference created when the average price of metal sold differs from the average cost of the metal when purchased by this segment. The impact of metal price lag is now reported as a separate line item in Alcoa’s reconciliation of total segment ATOI to consolidated net (loss) income attributable to Alcoa. As a result, this change does not impact the consolidated results of Alcoa. Segment information for all prior periods presented was updated to reflect this change. See Segment Information above for additional information. |
|
| (2) |
In the third quarter of 2015, management approved a realignment of Alcoa’s Engineered Products and Solutions segment due to the expansion of this part of Alcoa’s business portfolio through both organic and inorganic growth. This realignment consisted of moving both the Alcoa Wheels and Transportation Products and Building and Constructions Systems business units to a new reportable segment named Transportation and Construction Solutions. Additionally, the Latin American extrusions business previously included in Corporate was moved into the new Transportation and Construction Solutions segment. The remaining Engineered Products and Solutions segment consists of the Alcoa Fastening Systems and Rings (renamed to include portions of the Firth Rixson business acquired in November 2014), Alcoa Power and Propulsion (includes the TITAL business acquired in March 2015), Alcoa Forgings and Extrusions (includes the other portions of Firth Rixson), and Alcoa Titanium and Engineered Products (a new business unit that represents the RTI International Metals business acquired in July 2015) business units. Segment information for all prior periods presented was revised to reflect the new segment structure. |
|
| Alcoa and subsidiaries | ||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||
| (dollars in millions) | ||||||||||||
| Free Cash Flow | Quarter ended | |||||||||||
|
September 30, |
June 30, |
September 30, |
||||||||||
| Cash from operations | $ | 249 | $ | 472 | $ | 420 | ||||||
| Capital expenditures |
(283 |
) |
(267 |
) |
(268 |
) |
||||||
| Free cash flow | $ | (34 | ) | $ | 205 | $ | 152 | |||||
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.
| Days Working Capital | Quarter ended | ||||||||
|
September 30, |
June 30 |
September 30, |
|||||||
| Receivables from customers, less allowances | $ | 1,526 | $ | 1,548 | $ | 1,489 | |||
| Add: Deferred purchase price receivable(1) | 438 | 421 | 382 | ||||||
| Receivables from customers, less allowances, as adjusted |
1,964 |
1,969 |
1,871 |
||||||
| Add: Inventories | 3,194 | 3,230 | 3,443 | ||||||
| Less: Accounts payable, trade | 3,016 | 2,978 | 2,871 | ||||||
| Working Capital(2) | $ | 2,142 | $ | 2,221 | $ | 2,443 | |||
| Sales | $ | 6,239 | $ | 5,897 | $ | 5,573 | |||
| Days Working Capital | 32 | 34 | 40 | ||||||
Days Working Capital = Working Capital divided by (Sales/number of days
in the quarter).
| (1) |
The deferred purchase price receivable relates to an arrangement to sell certain customer receivables to several financial institutions on a recurring basis. Alcoa is adding back this receivable for the purposes of the Days Working Capital calculation. |
|
| (2) |
The Working Capital for each period presented represents an average quarter Working Capital, which reflects the capital tied up during a given quarter. As such, the components of Working Capital for each period presented represent the average of the ending balances in each of the three months during the respective quarter. |
|
| (3) |
In the quarters ended June 30, 2015 and September 30, 2015, Working Capital and Sales include $315 and $268, respectively, and $708 and $387 respectively, related to three acquisitions, Firth Rixson (November 2014), TITAL (March 2015), and RTI International Metals (July 2015). Excluding these amounts, Days Working Capital was 31 for both the quarters ended June 30, 2015 and September 30, 2015. |
|
Alcoa
Investor Contact:
Nahla Azmy, 212-836-2674
Nahla.Azmy@alcoa.com
or
Media Contact
Monica Orbe, 212- 836-2632
Monica.Orbe@alcoa.com