Highlights:
-
Income from continuing operations of $172 million, or $0.15 per share,
up 182 percent compared to third quarter 2010, down 47 percent from
second quarter 2011 -
Revenue of $6.4 billion, up 21 percent over third quarter 2010, down 3
percent from second quarter 2011 -
Cash from operations of $489 million in the quarter, $1.1 billion
year-to-date -
Free cash flow of $164 million in the quarter, $250 million
year-to-date - Debt-to-capital ratio of 33.7 percent and cash on hand of $1.3 billion
NEW YORK–Alcoa (NYSE: AA) today reported increased third quarter revenue and
earnings compared to the year-ago quarter, but lower results
sequentially, primarily due to lower metal prices, seasonal factors and
weakness in Europe.
Income from continuing operations was $172 million, or $0.15 per share,
in third quarter 2011, compared to $61 million, or $0.06 per share, in
third quarter 2010 and $326 million, or $0.28 per share, in second
quarter 2011.
“Aluminum prices fell in the third quarter, but most markets continued
to grow,” said Alcoa Chairman and CEO Klaus Kleinfeld. “With the
exception of Europe, we saw growth in our end markets, though at a
slower rate than in the first half, as confidence in the global recovery
faded.
“We continue to forecast a growth rate of 12 percent for 2011, with a
slower pace in the second half of the year, and reaffirm our long-term
forecast for a doubling of aluminum demand by 2020. Alcoa is a confident
company in a nervous world. We are well prepared for whatever lies
ahead, with more cash on hand, lower debt and continued focus on
profitable growth.”
Net income for third quarter 2011 was $172 million, or $0.15 per share,
compared to net income in third quarter 2010 of $61 million, or $0.06
per share, and net income in second quarter 2011 of $322 million, or
$0.28 per share.
Revenue was $6.4 billion in third quarter 2011, up 21 percent from the
$5.3 billion recorded in third quarter 2010 and down 3 percent compared
to $6.6 billion recorded in second quarter 2011.
On a year-over-year basis, Alcoa’s major end markets showed strong
revenue growth, led by commercial transportation (up 44 percent),
automotive (up 26 percent), packaging (up 21 percent), and aerospace (up
20 percent).
Sequentially, markets were mixed. Revenue was lower for both alumina and
aluminum, down 5 percent and 1 percent, respectively, driven by lower
alumina shipments and lower realized pricing in both businesses. In end
markets, revenue increased in commercial transportation (6 percent) and
aerospace (2 percent), while declines were seen in automotive (7
percent), industrial products (6 percent), building and construction (5
percent), and packaging (4 percent).
Excluding the impact of restructuring and other special items, income
from continuing operations was $165 million in third quarter 2011, an
increase of $69 million from the prior-year quarter’s $96 million, but a
decrease of $199 million from sequential quarter income from continuing
operations of $364 million.
In third quarter 2011, special items included the positive impact of
mark-to-market changes on certain energy contracts and a net discrete
income tax benefit, partially offset by the negative impact of net costs
associated with restructuring and uninsured losses, including losses
related to flood damage at Alcoa’s Bloomsburg, PA, plant.
For the quarter, adjusted EBITDA was $821 million, up 36 percent from
third quarter 2010, but down 21 percent from second quarter 2011.
Year-to-date, revenues were $19.0 billion, up 23 percent over the first
three quarters of 2010. Income from continuing operations year-to-date
was $807 million, or $0.71 per share, compared to $4 million in the
first three quarters of 2010. Net income year-to-date in 2011 was $802
million, or $0.71 per share.
Through the first three quarters of 2011, Alcoa continued to turn in
outstanding performance against the Company’s financial targets. Alcoa
generated $250 million in free cash flow while cash from operations was
$1.1 billion. Alcoa improved liquidity in third quarter 2011, with cash
on hand rising 6 percent to $1.3 billion compared to second quarter
2011. Capital spending through third quarter 2011 was $801 million, 53
percent of target. Year-to-date, Alcoa has invested $165 million in the
Company’s joint venture in Saudi Arabia, 41 percent of target. Alcoa’s
debt-to-capital ratio stands at 33.7 percent, 200 basis points lower
than third quarter 2010 and within the Company’s targeted range of 30 to
35 percent.
Looking forward, Alcoa continues to project aluminum demand will grow 12
percent in 2011 on top of the 13 percent growth seen in 2010, well ahead
of the 6.5 percent compound annual growth rate needed to double aluminum
demand by 2020. Increasing demand in China, where the Company has raised
its 2011 growth projection two-percentage points to 17 percent, will
mostly offset declines in Europe and other regions.
On a global basis, Alcoa’s year-over-year end market outlook remains
positive.
Aerospace, where order backlogs top eight years, and automotive, where
increasing government requirements for fuel efficiency are driving more
demand for light-weight solutions, are expected to remain strong. Alcoa
projects aerospace demand will continue to grow in the second half of
2011 and the year-end growth rate will be between 6 and 7 percent. In
the automotive market, Alcoa projects continued growth in the second
half and a year-over-year improvement of 3 to 5 percent.
Growing demand for aluminum beverage cans in China, Europe, and the
Middle East will offset flat to declining markets in the United States
and drive overall packaging market growth of 2 to 3 percent in 2011
compared to 2010. The recovery in the industrial gas turbine market
continues to support a brighter long-term outlook and a 2011 growth
projection of 5 to 10 percent. The building and construction market
continues to struggle in North America and Europe, leading to a growth
projection of 1 to 3 percent, primarily due to continued strength in
non-residential construction in China.
The outlook for commercial transportation is mixed, with a weaker second
half of 2011, driven primarily by lower sales in Europe and China,
offsetting strong first-half results and continued gains in the North
American market. Alcoa projects heavy truck and trailer sales will range
from flat to 2 percent growth over 2010.
Segment Information
Alumina
After-tax operating income (ATOI) in the third quarter was $154 million,
up 120 percent compared to $70 million in third quarter 2010, but a
decrease of $32 million, or 17 percent, compared to second quarter 2011.
Adjusted EBITDA fell $24 million to $311 million, a sequential decrease
of 7 percent. Third-quarter results were impacted by lower pricing on
the London Metal Exchange (LME) and lower index pricing. Increased
energy and raw materials costs were offset by improved productivity,
higher volumes, and positive currency impact. Alumina production of 4.14
million metric tons in the third quarter was essentially flat from
second quarter 2011, with higher internal sales offsetting a slight
decrease in third-party shipments.
Primary Metals
ATOI in the third quarter was $110 million, an increase of $32 million,
or 41 percent, over third quarter 2010 and a decrease of $91 million, or
45 percent, from second quarter 2011. Third-party realized metal prices
decreased 5 percent sequentially on declining LME cash prices. Restarts
at smelters in Massena, NY, and Intalco and Wenatchee, WA, had a
positive impact of $6 million in the quarter compared to second quarter
2011.
Flat-Rolled Products
Third-party revenue in the third quarter was $2.0 billion, up 20 percent
year-over-year and down 5 percent sequentially. ATOI for the third
quarter was $60 million, down 9 percent, or $6 million, from third
quarter 2010 and down 39 percent, or $39 million, from second quarter
2011. The declining performance was driven by significant deterioration
in European markets, seasonal plant shutdowns and rising costs.
Engineered Products and Solutions
Revenue in the third quarter was $1.4 billion, up 17 percent over third
quarter 2010 and an increase of $3 million over second quarter 2011.
ATOI in the third quarter was $138 million, up $24 million, or 21
percent, from third quarter 2010 and down $11 million, or 7 percent,
compared to second quarter 2011. Sequentially, decreased ATOI was mainly
driven by unfavorable price and mix across most businesses as well as
the cost impact of flooding at the Bloomsburg, PA, plant. The ATOI
improvement from third quarter 2010 resulted from higher volumes across
all businesses supported by a strong portfolio of innovative products.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on October 11, 2011 to present the quarter’s 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 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 super alloys. 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 10 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
“estimates,” “expects,” “forecasts,” “foresees,” “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, aluminum
consumption rates, or other trend projections, targeted financial
results or operating performance, and statements about Alcoa’s
strategies, objectives, goals, targets, 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) global economic and
financial market conditions generally, including the risk of another
global economic downturn and uncertainties regarding the outcome or
effects of sovereign debt issues or government intervention into the
markets to address economic conditions; (c) unfavorable changes in the
markets served by Alcoa, including automotive and commercial
transportation, aerospace, building and construction, distribution,
packaging, oil and gas, defense, 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, and Euro; (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 caustic soda or carbon products; (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 operations (including moving its refining and smelting
businesses down on the industry cost curve and increasing revenues in
its Flat-Rolled Products and Engineered Products and Solutions
segments), anticipated from its 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 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; and (m) the other risk factors
summarized in Alcoa’s Form 10-K for the year ended December 31, 2010,
Forms 10-Q for the quarters ended March 31, 2011 and June 30, 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, | |||||||||
| 2010 | 2011 | 2011 | |||||||||
| Sales | $ | 5,287 | $ | 6,585 | $ | 6,419 | |||||
| Cost of goods sold (exclusive of expenses below) | 4,413 | 5,247 | 5,290 | ||||||||
| Selling, general administrative, and other expenses | 232 | 253 | 261 | ||||||||
| Research and development expenses | 40 | 46 | 47 | ||||||||
| Provision for depreciation, depletion, and amortization | 358 | 375 | 376 | ||||||||
| Restructuring and other charges | 2 | 34 | 9 | ||||||||
| Interest expense | 139 | 163 | 125 | ||||||||
| Other expenses (income), net | 43 | (50 | ) | 31 | |||||||
| Total costs and expenses | 5,227 | 6,068 | 6,139 | ||||||||
| Income from continuing operations before income taxes | 60 | 517 | 280 | ||||||||
| (Benefit) provision for income taxes | (49 | ) | 136 | 55 | |||||||
| Income from continuing operations | 109 | 381 | 225 | ||||||||
| Loss from discontinued operations | – | (4 | ) | – | |||||||
| Net income | 109 | 377 | 225 | ||||||||
| Less: Net income attributable to noncontrolling interests | 48 | 55 | 53 | ||||||||
| NET INCOME ATTRIBUTABLE TO ALCOA | $ | 61 | $ | 322 | $ | 172 | |||||
|
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Income from continuing operations | $ | 61 | $ | 326 | $ | 172 | |||||
| Loss from discontinued operations | – | (4 | ) | – | |||||||
| Net income | $ | 61 | $ | 322 | $ | 172 | |||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| Income from continuing operations | $ | 0.06 | $ | 0.31 | $ | 0.16 | |||||
| Loss from discontinued operations | – | (0.01 | ) | – | |||||||
| Net income | $ | 0.06 | $ | 0.30 | $ | 0.16 | |||||
| Diluted: | |||||||||||
| Income from continuing operations | $ | 0.06 | $ | 0.28 | $ | 0.15 | |||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income | $ | 0.06 | $ | 0.28 | $ | 0.15 | |||||
| Average number of shares used to compute: | |||||||||||
| Basic earnings per common share | 1,021,260,553 | 1,063,850,843 | 1,064,226,988 | ||||||||
| Diluted earnings per common share | 1,026,774,598 | 1,165,059,389 | 1,164,085,935 | ||||||||
| Shipments of aluminum products (metric tons) | 1,223,000 | 1,268,000 | 1,277,000 | ||||||||
| Alcoa and subsidiaries | |||||||||||
| Statement of Consolidated Operations (unaudited), continued | |||||||||||
| (in millions, except per-share, share, and metric ton amounts) | |||||||||||
| Nine months ended | |||||||||||
| September 30, | |||||||||||
| 2010 | 2011 | ||||||||||
| Sales | $ | 15,361 | $ | 18,962 | |||||||
| Cost of goods sold (exclusive of expenses below) | 12,636 | 15,252 | |||||||||
| Selling, general administrative, and other expenses | 679 | 759 | |||||||||
| Research and development expenses | 124 | 136 | |||||||||
| Provision for depreciation, depletion, and amortization | 1,079 | 1,112 | |||||||||
| Restructuring and other charges | 219 | 49 | |||||||||
| Interest expense | 376 | 399 | |||||||||
| Other expenses (income), net | 48 | (47 | ) | ||||||||
| Total costs and expenses | 15,161 | 17,660 | |||||||||
| Income from continuing operations before income taxes | 200 | 1,302 | |||||||||
| Provision for income taxes | 92 | 329 | |||||||||
| Income from continuing operations | 108 | 973 | |||||||||
| Loss from discontinued operations | (8 | ) | (5 | ) | |||||||
| Net income | 100 | 968 | |||||||||
| Less: Net income attributable to noncontrolling interests | 104 | 166 | |||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA | $ | (4 | ) | $ | 802 | ||||||
| AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: | |||||||||||
| Income from continuing operations | $ | 4 | $ | 807 | |||||||
| Loss from discontinued operations | (8 | ) | (5 | ) | |||||||
| Net (loss) income | $ | (4 | ) | $ | 802 | ||||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| Income from continuing operations | $ | – | $ | 0.76 | |||||||
| Loss from discontinued operations | (0.01 | ) | (0.01 | ) | |||||||
| Net (loss) income | $ | (0.01 | ) | $ | 0.75 | ||||||
| Diluted: | |||||||||||
| Income from continuing operations | $ | – | $ | 0.71 | |||||||
| Loss from discontinued operations | (0.01 | ) | – | ||||||||
| Net (loss) income | $ | (0.01 | ) | $ | 0.71 | ||||||
| Average number of shares used to compute: | |||||||||||
| Basic earnings per common share | 1,016,516,286 | 1,059,945,523 | |||||||||
| Diluted earnings per common share | 1,022,836,762 | 1,160,380,773 | |||||||||
| Common stock outstanding at the end of the period | 1,021,350,038 | 1,064,276,127 | |||||||||
| Shipments of aluminum products (metric tons) | 3,539,000 | 3,757,000 | |||||||||
| Alcoa and subsidiaries | |||||||||||
| Consolidated Balance Sheet (unaudited) | |||||||||||
| (in millions) | |||||||||||
|
December 31,
2010 |
September 30,
2011 |
||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,543 | $ | 1,332 | |||||||
|
Receivables from customers, less allowances of $45 in 2010 and $39 |
1,565 | 1,915 | |||||||||
| Other receivables | 326 | 386 | |||||||||
| Inventories | 2,562 | 3,172 | |||||||||
| Prepaid expenses and other current assets | 873 | 865 | |||||||||
| Total current assets | 6,869 | 7,670 | |||||||||
| Properties, plants, and equipment | 37,446 | 37,343 | |||||||||
| Less: accumulated depreciation, depletion, and amortization | 17,285 | 17,872 | |||||||||
| Properties, plants, and equipment, net | 20,161 | 19,471 | |||||||||
| Goodwill | 5,119 | 5,271 | |||||||||
| Investments | 1,340 | 1,521 | |||||||||
| Deferred income taxes | 3,184 | 3,060 | |||||||||
| Other noncurrent assets | 2,521 | 2,527 | |||||||||
| Assets held for sale | 99 | 78 | |||||||||
| Total assets | $ | 39,293 | $ | 39,598 | |||||||
| LIABILITIES | |||||||||||
| Current liabilities: | |||||||||||
| Short-term borrowings | $ | 92 | $ | 57 | |||||||
| Commercial paper | – | 107 | |||||||||
| Accounts payable, trade | 2,322 | 2,480 | |||||||||
| Accrued compensation and retirement costs | 929 | 956 | |||||||||
| Taxes, including income taxes | 461 | 510 | |||||||||
| Other current liabilities | 1,201 | 1,024 | |||||||||
| Long-term debt due within one year | 231 | 489 | |||||||||
| Total current liabilities | 5,236 | 5,623 | |||||||||
| Long-term debt, less amount due within one year | 8,842 | 8,658 | |||||||||
| Accrued pension benefits | 2,923 | 2,081 | |||||||||
| Accrued other postretirement benefits | 2,615 | 2,555 | |||||||||
| Other noncurrent liabilities and deferred credits | 2,560 | 2,373 | |||||||||
| Liabilities of operations held for sale | 31 | 25 | |||||||||
| Total liabilities | 22,207 | 21,315 | |||||||||
| EQUITY | |||||||||||
| Alcoa shareholders’ equity: | |||||||||||
| Preferred stock | 55 | 55 | |||||||||
| Common stock | 1,141 | 1,178 | |||||||||
| Additional capital | 7,087 | 7,545 | |||||||||
| Retained earnings | 11,149 | 11,820 | |||||||||
| Treasury stock, at cost | (4,146 | ) | (3,954 | ) | |||||||
| Accumulated other comprehensive loss | (1,675 | ) | (1,725 | ) | |||||||
| Total Alcoa shareholders’ equity | 13,611 | 14,919 | |||||||||
| Noncontrolling interests | 3,475 | 3,364 | |||||||||
| Total equity | 17,086 | 18,283 | |||||||||
| Total liabilities and equity | $ | 39,293 | $ | 39,598 | |||||||
| Alcoa and subsidiaries | |||||||||||
| Statement of Consolidated Cash Flows (unaudited) | |||||||||||
| (in millions) | |||||||||||
|
Nine months ended
September 30, |
|||||||||||
| 2010 | 2011 | ||||||||||
| CASH FROM OPERATIONS | |||||||||||
| Net income | $ | 100 | $ | 968 | |||||||
| Adjustments to reconcile net income to cash from operations: | |||||||||||
| Depreciation, depletion, and amortization | 1,080 | 1,113 | |||||||||
| Deferred income taxes | 62 | (78 | ) | ||||||||
| Equity income, net of dividends | (25 | ) | (28 | ) | |||||||
| Restructuring and other charges | 219 | 49 | |||||||||
| Net (gain) loss from investing activities – asset sales | (8 | ) | 1 | ||||||||
| Loss from discontinued operations | 8 | 5 | |||||||||
| Stock-based compensation | 70 | 70 | |||||||||
| Excess tax benefits from stock-based payment arrangements | (1 | ) | (6 | ) | |||||||
| Other | 121 | 35 | |||||||||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|||||||||||
| (Increase) in receivables | (467 | ) | (415 | ) | |||||||
| (Increase) in inventories | (94 | ) | (606 | ) | |||||||
| Decrease in prepaid expenses and other current assets | 34 | 11 | |||||||||
| Increase in accounts payable, trade | 16 | 171 | |||||||||
| (Decrease) in accrued expenses | (384 | ) | (195 | ) | |||||||
| Increase in taxes, including income taxes | 167 | 117 | |||||||||
| Pension contributions | (70 | ) | (217 | ) | |||||||
| (Increase) in noncurrent assets | (56 | ) | (96 | ) | |||||||
| Increase in noncurrent liabilities | 136 | 160 | |||||||||
| (Increase) in net assets held for sale | (24 | ) | (2 | ) | |||||||
| CASH PROVIDED FROM CONTINUING OPERATIONS | 884 | 1,057 | |||||||||
| CASH PROVIDED FROM (USED FOR) DISCONTINUED OPERATIONS | 7 | (6 | ) | ||||||||
| CASH PROVIDED FROM OPERATIONS | 891 | 1,051 | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Net change in short-term borrowings | (57 | ) | (36 | ) | |||||||
| Net change in commercial paper | – | 107 | |||||||||
| Additions to long-term debt | 1,082 | 1,254 | |||||||||
| Debt issuance costs | (5 | ) | (17 | ) | |||||||
| Payments on long-term debt | (1,587 | ) | (1,122 | ) | |||||||
| Proceeds from exercise of employee stock options | 8 | 36 | |||||||||
| Excess tax benefits from stock-based payment arrangements | 1 | 6 | |||||||||
| Dividends paid to shareholders | (94 | ) | (98 | ) | |||||||
| Distributions to noncontrolling interests | (154 | ) | (253 | ) | |||||||
| Contributions from noncontrolling interests | 121 | 136 | |||||||||
| Acquisitions of noncontrolling interests | (66 | ) | – | ||||||||
| CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES | (751 | ) | 13 | ||||||||
| INVESTING ACTIVITIES | |||||||||||
| Capital expenditures | (650 | ) | (801 | ) | |||||||
| Acquisitions, net of cash acquired (a) | (72 | ) | (240 | ) | |||||||
| Proceeds from the sale of assets and businesses (b) | (6 | ) | (6 | ) | |||||||
| Additions to investments | (224 | ) | (216 | ) | |||||||
| Sales of investments | 138 | 5 | |||||||||
| Other | 16 | (11 | ) | ||||||||
| CASH USED FOR INVESTING ACTIVITIES | (798 | ) | (1,269 | ) | |||||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
20 |
(6 |
) |
||||||||
| Net change in cash and cash equivalents | (638 | ) | (211 | ) | |||||||
| Cash and cash equivalents at beginning of year | 1,481 | 1,543 | |||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 843 | $ | 1,332 | |||||||
| (a) |
Acquisitions, net of cash acquired for the nine months ended September 30, 2010 includes a cash inflow for cash received as a result of post-closing adjustments related to the acquisition of a BHP Billiton subsidiary that holds interests in four bauxite mines and one refining facility in the Republic of Suriname, which was completed on July 31, 2009. |
|
| (b) |
Proceeds from the sale of assets and businesses for the nine months ended September 30, 2011 was a cash outflow as this line item includes cash paid to settle claims filed in 2010 against Alcoa by Platinum Equity (buyer of the wire harness and electrical portion of the former Electrical and Electronic Solutions business) in an insolvency proceeding in Germany. Proceeds from the sale of assets and businesses for the nine months ended September 30, 2010 was a cash outflow as this line item includes cash paid to settle former customer contracts of the divested Electrical and Electronic Solutions and Automotive Castings businesses. |
|
| Alcoa and subsidiaries | ||||||||||||||||||||||||||||||||
| Segment Information (unaudited) | ||||||||||||||||||||||||||||||||
|
(dollars in millions, except realized prices; production and shipments in thousands of metric tons [kmt]) |
||||||||||||||||||||||||||||||||
|
1Q10 |
2Q10 | 3Q10 | 4Q10 | 2010 | 1Q11 | 2Q11 | 3Q11 | |||||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||||||
| Alumina production (kmt) | 3,866 | 3,890 | 4,047 | 4,119 | 15,922 | 4,024 | 4,144 | 4,140 | ||||||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,126 | 2,264 | 2,423 | 2,433 | 9,246 | 2,206 | 2,378 | 2,256 | ||||||||||||||||||||||||
| Third-party sales | $ | 638 | $ | 701 | $ | 717 | $ | 759 | $ | 2,815 | $ | 810 | $ | 926 | $ | 879 | ||||||||||||||||
| Intersegment sales | $ | 591 | $ | 530 | $ | 506 | $ | 585 | $ | 2,212 | $ | 633 | $ | 723 | $ | 751 | ||||||||||||||||
| Equity income | $ | 2 | $ | 4 | $ | 1 | $ | 3 | $ | 10 | $ | 3 | $ | 22 | $ | 2 | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 92 | $ | 107 | $ | 100 | $ | 107 | $ | 406 | $ | 103 | $ | 112 | $ | 117 | ||||||||||||||||
| Income taxes | $ | 27 | $ | 41 | $ | (22 | ) | $ | 14 | $ | 60 | $ | 44 | $ | 60 | $ | 42 | |||||||||||||||
| After-tax operating income (ATOI) | $ | 72 | $ | 94 | $ | 70 | $ | 65 | $ | 301 | $ | 142 | $ | 186 | $ | 154 | ||||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||||||
| Aluminum production (kmt) | 889 | 893 | 891 | 913 | 3,586 | 904 | 945 | 964 | ||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 695 | 699 | 708 | 743 | 2,845 | 698 | 724 | 754 | ||||||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,331 |
$ |
2,309 |
$ |
2,261 |
$ |
2,512 |
$ |
2,356 |
$ |
2,682 |
$ |
2,830 |
$ |
2,689 |
||||||||||||||||
| Third-party sales | $ | 1,702 | $ | 1,710 | $ | 1,688 | $ | 1,970 | $ | 7,070 | $ | 1,980 | $ | 2,145 | $ | 2,124 | ||||||||||||||||
| Intersegment sales | $ | 623 | $ | 693 | $ | 589 | $ | 692 | $ | 2,597 | $ | 839 | $ | 922 | $ | 798 | ||||||||||||||||
| Equity income (loss) | $ | – | $ | 1 | $ | – | $ | – | $ | 1 | $ | 1 | $ | (1 | ) | $ | (4 | ) | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 147 | $ | 142 | $ | 142 | $ | 140 | $ | 571 | $ | 141 | $ | 142 | $ | 137 | ||||||||||||||||
| Income taxes | $ | 18 | $ | – | $ | (3 | ) | $ | 81 | $ | 96 | $ | 53 | $ | 55 | $ | 21 | |||||||||||||||
| ATOI | $ | 123 | $ | 109 | $ | 78 | $ | 178 | $ | 488 | $ | 202 | $ | 201 | $ | 110 | ||||||||||||||||
| Flat-Rolled Products: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 379 | 420 | 448 | 411 | 1,658 | 446 | 473 | 454 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,435 | $ | 1,574 | $ | 1,645 | $ | 1,623 | $ | 6,277 | $ | 1,892 | $ | 2,085 | $ | 1,974 | ||||||||||||||||
| Intersegment sales | $ | 46 | $ | 40 | $ | 46 | $ | 48 | $ | 180 | $ | 69 | $ | 62 | $ | 48 | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 59 | $ | 57 | $ | 57 | $ | 65 | $ | 238 | $ | 58 | $ | 60 | $ | 61 | ||||||||||||||||
| Income taxes | $ | 18 | $ | 28 | $ | 26 | $ | 20 | $ | 92 | $ | 33 | $ | 35 | $ | 26 | ||||||||||||||||
| ATOI | $ | 30 | $ | 71 | $ | 66 | $ | 53 | $ | 220 | $ | 81 | $ | 99 | $ | 60 | ||||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 46 | 50 | 51 | 50 | 197 | 55 | 57 | 56 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,074 | $ | 1,122 | $ | 1,173 | $ | 1,215 | $ | 4,584 | $ | 1,247 | $ | 1,370 | $ | 1,373 | ||||||||||||||||
| Equity income | $ | 1 | $ | – | $ | 1 | $ | – | $ | 2 | $ | 1 | $ | – | $ | – | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 41 | $ | 38 | $ | 37 | $ | 38 | $ | 154 | $ | 38 | $ | 41 | $ | 40 | ||||||||||||||||
| Income taxes | $ | 31 | $ | 48 | $ | 63 | $ | 53 | $ | 195 | $ | 62 | $ | 72 | $ | 67 | ||||||||||||||||
| ATOI | $ | 81 | $ | 107 | $ | 114 | $ | 113 | $ | 415 | $ | 130 | $ | 149 | $ | 138 | ||||||||||||||||
|
Reconciliation of ATOI to consolidated net (loss) income attributable to Alcoa: |
||||||||||||||||||||||||||||||||
| Total segment ATOI | $ | 306 | $ | 381 | $ | 328 | $ | 409 | $ | 1,424 | $ | 555 | $ | 635 | $ | 462 | ||||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||||||
| Impact of LIFO | (14 | ) | (3 | ) | (2 | ) | 3 | (16 | ) | (24 | ) | (27 | ) | 2 | ||||||||||||||||||
| Interest expense | (77 | ) | (77 | ) | (91 | ) | (76 | ) | (321 | ) | (72 | ) | (106 | ) | (81 | ) | ||||||||||||||||
| Noncontrolling interests | (22 | ) | (34 | ) | (48 | ) | (34 | ) | (138 | ) | (58 | ) | (55 | ) | (53 | ) | ||||||||||||||||
| Corporate expense | (67 | ) | (59 | ) | (71 | ) | (94 | ) | (291 | ) | (67 | ) | (76 | ) | (76 | ) | ||||||||||||||||
| Restructuring and other charges | (122 | ) | (21 | ) | 1 | 8 | (134 | ) | (6 | ) | (22 | ) | (7 | ) | ||||||||||||||||||
| Discontinued operations | (7 | ) | (1 | ) | – | – | (8 | ) | (1 | ) | (4 | ) | – | |||||||||||||||||||
| Other | (198 | ) | (50 | ) | (56 | ) | 42 | (262 | ) | (19 | ) | (23 | ) | (75 | ) | |||||||||||||||||
| Consolidated net (loss) income attributable to Alcoa |
$ |
(201 |
) |
$ |
136 |
$ |
61 |
$ |
258 |
$ |
254 |
$ |
308 |
$ |
322 |
$ |
172 |
|||||||||||||||
The difference between certain segment totals and consolidated amounts
is in Corporate.
| Alcoa and subsidiaries | ||||||||||||||
| Calculation of Financial Measures (unaudited) | ||||||||||||||
| (dollars in millions) | ||||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||||
|
September 30,
2010 |
June 30,
2011 |
September 30,
2011 |
||||||||||||
| Net income attributable to Alcoa | $ | 61 | $ | 322 | $ | 172 | ||||||||
| Add: | ||||||||||||||
| Net income attributable to noncontrolling interests | 48 | 55 | 53 | |||||||||||
| Loss from discontinued operations | – | 4 | – | |||||||||||
| (Benefit) provision for income taxes | (49 | ) | 136 | 55 | ||||||||||
| Other expenses (income), net | 43 | (50 | ) | 31 | ||||||||||
| Interest expense | 139 | 163 | 125 | |||||||||||
| Restructuring and other charges | 2 | 34 | 9 | |||||||||||
| Provision for depreciation, depletion, and amortization | 358 | 375 | 376 | |||||||||||
| Adjusted EBITDA | $ | 602 | $ | 1,039 | $ | 821 | ||||||||
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 |
Nine months |
||||||||||
|
September 30,
2011 |
||||||||||||
| Cash provided from operations | $ | 489 | $ | 1,051 | ||||||||
| Capital expenditures |
(325 |
) |
(801 |
) |
||||||||
| Free cash flow | $ | 164 | $ | 250 | ||||||||
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 | |||||||||||||||
| Calculation of Financial Measures (unaudited), continued | |||||||||||||||
| (in millions, except per-share amounts) | |||||||||||||||
| Adjusted Income | Quarter ended | ||||||||||||||
|
September 30,
2010 |
June 30,
2011 |
September 30,
2011 |
|||||||||||||
| Net income attributable to Alcoa | $ | 61 | $ | 322 | $ | 172 | |||||||||
| Loss from discontinued operations | – | (4 | ) | – | |||||||||||
| Income from continuing operations attributable to Alcoa |
61 |
326 |
172 |
||||||||||||
| Restructuring and other charges | (1 | ) | 16 | 5 | |||||||||||
| Discrete tax items* | (38 | ) | – | (10 | ) | ||||||||||
| Other special items** | 74 | 22 | (2 | ) | |||||||||||
| Income from continuing operations attributable to Alcoa – as adjusted |
$ |
96 |
$ |
364 |
$ |
165 |
|||||||||
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 Income 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 the following:
-
for the quarter ended September 30, 2011, a net benefit for
adjustments made related to the filing of 2010 tax returns in various
jurisdictions ($5) and a net benefit for other miscellaneous items
($5); and -
for the quarter ended September 30, 2010, a benefit for the reversal
of a valuation allowance related to net operating losses of an
international subsidiary that are now realizable due to a settlement
with a tax authority ($41), a charge for a tax rate change in Brazil
($11), and a benefit for the recovery of a portion of the unfavorable
impact included in the quarter ended March 31, 2010 related to
unbenefitted losses in Russia, China, and Italy ($8).
** Other special items include the following:
-
for the quarter ended September 30, 2011, favorable mark-to-market
changes in certain power derivative contracts ($13) and uninsured
losses, including costs related to flood damage to a plant in
Pennsylvania caused by Hurricane Irene, ($11); -
for the quarter ended June 30, 2011, a net charge comprised of
expenses for the early repayment of Notes set to mature in 2013 due to
the premiums paid under the tender offers and call option and gains
from the termination of related “in-the-money” interest rate swaps
($32) and favorable mark-to-market changes in certain power derivative
contracts ($10); and -
for the quarter ended September 30, 2010, unfavorable mark-to-market
changes in certain power derivative contracts ($29), recovery costs
associated with the São Luís, Brazil facility due to a power outage
and failure of a ship unloader in the first half of 2010 ($23),
restart costs and lost volumes related to a June 2010 flood at the
Avilés smelter in Spain ($13), and a net charge comprised of expenses
for the early repayment of Notes set to mature in 2011 through 2013
due to the premiums paid under the tender offers and call option and
gains from the termination of related “in-the-money” interest rate
swaps ($9).
| Alcoa and subsidiaries | ||||||||||||
| Calculation of Financial Measures (unaudited), continued | ||||||||||||
| (dollars in millions) | ||||||||||||
| Alumina Segment | ||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||
|
June 30,
2011 |
September 30,
2011 |
|||||||||||
| After-tax operating income (ATOI) | $ | 186 | $ | 154 | ||||||||
| Add: | ||||||||||||
| Depreciation, depletion, and amortization | 112 | 117 | ||||||||||
| Equity income | (22 | ) | (2 | ) | ||||||||
| Income taxes | 60 | 42 | ||||||||||
| Other | (1 | ) | – | |||||||||
| Adjusted EBITDA | $ | 335 | $ | 311 | ||||||||
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.