Solid Revenue of $5.8 Billion
Value-Add Businesses 57 Percent of Total Revenues,
79 Percent Segment ATOI Year-to-Date
Strong Operating Performance Helps Offset Lower Aluminum Prices
2013 Forecast of 7 Percent Global Aluminum Demand Growth Reaffirmed
3Q 2013 Highlights
- Net income of $24 million, or $0.02 per share; excluding special items, net income of $120 million, or $0.11 per share
- Solid revenue of $5.8 billion despite lower realized aluminum prices
- Engineered Products and Solutions after-tax operating income up 22 percent year-over-year; record quarterly adjusted EBITDA margin
- Primary Metals and Alumina after-tax operating income up sequentially and year-over-year
- Cash on hand of $1.0 billion
- New third quarter low days working capital, 5 day improvement over prior year, equal to approximately $300 million cash
- $825 million in productivity gains year-to-date, exceeding $750 million annual target
- 16 percent of Alcoa high cost global smelting capacity offline
Alcoa (NYSE:AA) today reported a sequential and year-over-year increase
in third quarter profit for 2013 driven by strong operating performance
and productivity gains, in spite of lower metal prices. Alcoa reported
third quarter 2013 net income of $24 million, or $0.02 per share, which
includes $96 million of special items primarily tied to optimizing the
Company’s upstream portfolio.
Excluding the impact of special items, net income was $120 million, or
$0.11 per share. Results were led by continued strength in Engineered
Products and Solutions and Global Rolled Products, despite traditional
third quarter weakness. Global Primary Products overcame falling metal
prices and lower premiums to deliver significant performance improvement
through productivity gains.
The Company reported third quarter 2013 revenue of $5.8 billion, steady
compared to second quarter 2013 and the year ago period, despite a 3
percent sequential and 7 percent year-over-year decline in the London
Metal Exchange (LME) cash price of aluminum.
“Our performance this quarter shows our repositioning of the Company is
on the right path,” said Klaus Kleinfeld, Alcoa Chairman and Chief
Executive Officer. “We continued to build our value-add businesses,
capturing demand for innovative material solutions across multiple
markets. Our commodity business delivered better performance in a
tougher market environment, and we continued to reshape the portfolio to
lower the cost base. Across the board, productivity was exceptional –
achieving our full year target in the first nine months.”
In the first three quarters of 2013, Alcoa’s value-add businesses,
comprising Engineered Products and Solutions and Global Rolled Products,
accounted for 57 percent of total revenues and 79 percent of segment
after-tax operating income (ATOI). Over the last 10 years, Alcoa has
grown its value-add businesses to be more meaningful contributors to the
Company’s overall profitability. ATOI for the value-add businesses has
nearly tripled since 2003.
Third quarter 2013 net income of $24 million, or $0.02 per share,
compares to a net loss of $119 million, or $0.11 per share, in second
quarter 2013, and a net loss of $143 million, or $0.13 per share, in
third quarter 2012.
In third quarter 2013, Alcoa recorded $109 million in after-tax
restructuring-related charges to improve upstream competitiveness. Alcoa
completed the previously announced closure of the two Soderberg potlines
at the Baie-Comeau smelter in Québec, representing 105,000 metric tons
per year of smelting capacity. Alcoa also closed one Soderberg potline,
representing 41,000 metric tons per year of smelting capacity, at the
Massena East plant in New York.
Other special items in third quarter 2013 included an insurance recovery
related to the March 2012 fire at the Massena, New York, location and a
positive impact of mark-to-market changes on certain energy contracts,
somewhat offset by a net discrete income tax charge. These items
provided a net benefit of $13 million.
Excluding special items, third quarter 2013 net income of $120 million,
or $0.11 per share, rose 58 percent compared to $76 million, or $0.07
per share, in second quarter 2013, despite lower realized aluminum
prices.
Year-over-year, third quarter 2013 net income excluding special items
was up $88 million compared to the same period last year. The
year-over-year increase was driven by strong operating performance,
productivity savings, and the favorable impact of foreign exchange
rates, partially offset by cost increases and lower LME-based pricing.
Continued Growth Across End Markets
Alcoa reaffirms its 7 percent global aluminum demand growth forecast for
2013 and sees essentially balanced alumina and aluminum markets.
Alcoa continues to project global growth this year across the aerospace
(9-10 percent), automotive (1-4 percent), packaging (1-2 percent),
commercial building and construction (4-5 percent), and industrial gas
turbine (3-5 percent) end markets. In the heavy truck and trailer
market, Alcoa is raising its 2013 growth expectation, (5-9 percent,
previously 3-8 percent), on improvements in the European market and a
stronger Chinese market.
Strong Execution on Capital Investments and Against Strategic Goals
Alcoa made progress on its capital investments to capture value-add
growth opportunities, and continued to take definitive actions in third
quarter 2013 to improve its position on the aluminum cost curve.
The $300 million automotive expansion of Alcoa’s Davenport, Iowa, plant
is set to be completed by the end of 2013 with the commissioning process
currently underway. Construction also began on the Company’s $275
million automotive expansion at its Alcoa, Tennessee, rolling mill. Both
will support the growing demand for aluminum sheet for automotive
production. Aluminum sheet per vehicle is expected to grow 10 fold by
2025 in North America alone. The projects will incorporate,
through Alcoa’s supply chain, the proprietary Alcoa 951 pretreatment
bonding technology, enabling the mass production of aluminum-intensive
vehicles. Much of the volume for the automotive expansions is secured
under long-term supply agreements.
The Ma’aden-Alcoa joint venture project that will create the world’s
lowest-cost integrated aluminum facility is on time and on budget. The
smelter is 99 percent complete and full operating capacity of 740,000
metric tons per year (mtpy) is expected in 2014. This smelter will be
the lowest-cost in the world. It will contribute an estimated two
percentage points toward the Company’s 2015 goal of lowering its
position on the world aluminum production cost curve by 10 percentage
points overall.
The joint venture’s 380,000 mtpy integrated rolling mill is 88 percent
complete. First hot coil for the rolling mill is anticipated in the
fourth quarter of this year. Construction of the alumina refinery and
bauxite mine are also on schedule. First alumina out of the facility and
bauxite out of the mine are expected in 2014.
To further improve competitiveness in the upstream, Alcoa
continues to review its global smelting capacity and take action on
higher-cost plants and plants with long-term risk due to factors such as
energy costs or regulatory uncertainties. In the first five months since
announcing the 460,000 metric ton smelting capacity review, Alcoa has
taken swift action and has closed or curtailed 274,000 metric tons,
equal to 60 percent, of the capacity under review. Most recent actions
include the permanent closure of one potline representing 41,000 metric
tons at the Massena East plant in New York and the temporary curtailment
of 128,000 metric tons of capacity in Brazil.
Alcoa now has 16 percent, or 651,000 metric tons, of smelting capacity
offline.
Performance Against 2013 Financial Targets
In third quarter 2013, days working capital, which ultimately equates to
cash, was a third quarter record low of 28 days, 5 days lower than third
quarter 2012. This milestone was the 16th successive
year-over-year improvement and equates to approximately $300 million in
cash. Cash from operations in third quarter 2013 was $214 million. Free
cash flow for the quarter was negative $36 million after a $173 million
cash contribution to the Company’s pension plan.
Through third quarter 2013, Alcoa achieved $825 million in productivity
savings against a $750 million annual target; managed growth capital
expenditures of $289 million against a $550 million annual plan; and
controlled sustaining capital expenditures of $482 million against a
$1.0 billion annual plan. Progress and expenditures on the Saudi Arabia
joint venture project were on track with $146 million year-to-date
invested against a $350 million annual plan. Alcoa’s debt-to-capital
ratio stood at 34.5 percent, flat with second quarter 2013, and 160
basis points lower than third quarter 2012. Net debt-to-capital stood at
31.6 percent. Alcoa ended the quarter with cash on hand of $1.0 billion.
Segment Performance
Engineered Products and Solutions
ATOI was a third quarter record of $192 million, essentially flat
sequentially and up $34 million, or 22 percent, year-over-year.
Sequentially, continued productivity improvements across all market
segments were offset by volume declines and cost increases. Innovation
continues to drive share gains across all markets. This segment reported
a record quarterly adjusted EBITDA margin of 22.5 percent, compared to
22.2 percent and 20 percent, respectively, for second quarter 2013 and
the same quarter last year.
Global Rolled Products
ATOI in the third quarter was $71 million compared to $79 million in
second quarter 2013 and $89 million in third quarter 2012. Sequentially,
lower metal prices continued to impact the segment, albeit less
significantly than the prior quarter. Strong automotive and seasonal
demand in packaging were offset by lower volume in aerospace and
industrial markets and price pressures in packaging. Adjusted EBITDA per
metric ton decreased to $312 from $322 in second quarter 2013. This
segment reported its best third quarter ever in days working capital,
which improved by 1 day compared with third quarter 2012.
Alumina
ATOI in the third quarter was $67 million, up from $64 million in second
quarter 2013, and up from negative $9 million in third quarter 2012. The
sequential increase was driven by the favorable impact of foreign
exchange rates, strong productivity savings, and sales at Alumina Price
Index-based pricing, despite lower LME-based prices. Strong performance
across the business also offset increased costs in mining due to the
operation of two crusher sites in Australia and higher bauxite costs in
Suriname. Adjusted EBITDA per metric ton was $44, down from $47 in
second quarter 2013 and up from $21 in third quarter 2012. Days working
capital remained at record lows, improving by 11 days compared with
third quarter 2012.
Primary Metals
ATOI in the third quarter was $8 million compared to negative $32
million in second quarter 2013 and negative $14 million in third quarter
2012. Despite lower metal prices, the sequential improvement was driven
by significant productivity gains, non-recurring power plant outages,
and the favorable impact of foreign exchange rates. Third-party realized
price in the third quarter was $2,180 per metric ton, down 3 percent
sequentially. Adjusted EBITDA per metric ton increased to $154 from $88
in second quarter 2013, and was up from $111 in third quarter 2012. Days
working capital improved by 2 days compared with third quarter 2012.
Alba Update
As previously disclosed, over five years ago, the Department of Justice
(“DOJ”) and the Securities and Exchange Commission (“SEC”) commenced
investigations of alleged corrupt payments in connection with contracts
for the sale of alumina to Alba. In the past year Alcoa has been seeking
settlements of both investigations. During the third quarter of 2013,
settlement discussions with the DOJ and the SEC continued, although no
settlements were reached. As previously reported, in the second quarter
of 2013 Alcoa proposed to settle the DOJ matter by offering a cash
payment of $103 million and recorded a charge of $103 million ($62
million after non-controlling interest); there is a reasonable
possibility of an additional charge of between $0 and approximately $200
million to settle the DOJ matter. Based on negotiations to date, Alcoa
expects any such settlement will be paid over several years. Also, as
previously reported, in the second quarter of 2013 Alcoa exchanged
settlement offers with the SEC, but the SEC staff rejected Alcoa’s offer
of $60 million and no charge was recorded. Alcoa expects that any
resolution through settlement with the SEC would be material to results
of operations for the relevant fiscal period.
Although Alcoa seeks to resolve the Alba matter with the DOJ and the SEC
through settlements, there can be no assurance that settlements will be
reached. If settlements cannot be reached, Alcoa will proceed to trial.
Under those circumstances, the final outcome cannot be predicted and
there can be no assurance that it would not have a material adverse
effect on Alcoa.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on October 8, 2013 to present quarterly results. The meeting will be
webcast via alcoa.com. Call information and related details are
available at www.alcoa.com
under “Invest.”
About Alcoa
Alcoa is the world’s leading producer of primary 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 125 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 12 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 30
countries across the world. For more information, visit www.alcoa.com,
follow @Alcoa on Twitter at www.twitter.com/Alcoa,
and follow Alcoa 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,” “estimates,” “expects,” “forecasts,” “intends,”
“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 growth for
aluminum, end market conditions, supply/demand balances, and growth
opportunities for aluminum in automotive, aerospace, and other
applications, trend projections, targeted financial results or operating
performance, and statements about Alcoa’s strategies, outlook, and
business and financial prospects. Forward-looking statements are subject
to a number of known and unknown risks, uncertainties, and other factors
and are not guarantees of future performance. Important factors that
could cause actual results to differ materially from those expressed or
implied in the forward-looking statements include: (a) material adverse
changes in aluminum industry conditions, including global supply and
demand conditions and fluctuations in London Metal Exchange-based prices
(and premiums, as applicable) for primary aluminum, alumina, and other
products, and fluctuations in indexed-based and spot prices for alumina;
(b) deterioration in global economic and financial market conditions
generally; (c) unfavorable changes in the markets served by Alcoa,
including aerospace, automotive, commercial transportation, building and
construction, distribution, packaging, 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, euro, and Norwegian kroner; (e) increases in energy
costs, including electricity, natural gas, and fuel oil, or the
unavailability or interruption of energy supplies; (f) increases in the
costs of other raw materials, including calcined petroleum coke, caustic
soda, and liquid pitch; (g) Alcoa’s inability to achieve the level of
revenue growth, cash generation, cost savings, improvement in
profitability and margins, fiscal discipline, or strengthening of
competitiveness and operations (including moving its alumina refining
and aluminum smelting businesses down on the industry cost curves and
increasing revenues in its Global Rolled Products and Engineered
Products and Solutions segments) anticipated from its restructuring
programs, productivity improvement, cash sustainability, and other
initiatives; (h) Alcoa’s inability to realize expected benefits, in each
case as planned and by targeted completion dates, from sales of non-core
assets, or from newly constructed, expanded, or acquired facilities,
including facilities supplying aluminum-lithium capacity, or from
international joint ventures, including the joint venture in Saudi
Arabia; (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, or 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) adverse changes in tax rates or benefits; (m)
adverse changes in discount rates or investment returns on pension
assets; (n) the impact of cyber attacks and potential information
technology or data security breaches; and (o) the other risk factors
summarized in Alcoa’s Form 10-K for the year ended December 31, 2012,
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.
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 U.S. generally accepted
accounting principles (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 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, | ||||||||||
| 2012 | 2013 | 2013 | ||||||||||
| Sales | $ | 5,833 | $ | 5,849 | $ | 5,765 | ||||||
| Cost of goods sold (exclusive of expenses below) | 5,266 | 4,933 | 4,798 | |||||||||
| Selling, general administrative, and other expenses | 234 | 254 | 248 | |||||||||
| Research and development expenses | 51 | 46 | 44 | |||||||||
| Provision for depreciation, depletion, and amortization | 366 | 362 | 348 | |||||||||
| Restructuring and other charges | 2 | 244 | 151 | |||||||||
| Interest expense | 124 | 118 | 108 | |||||||||
| Other (income) expenses, net | (2 | ) | 19 | (7 | ) | |||||||
| Total costs and expenses | 6,041 | 5,976 | 5,690 | |||||||||
| (Loss) income before income taxes | (208 | ) | (127 | ) | 75 | |||||||
| (Benefit) provision for income taxes | (33 | ) | 21 | 31 | ||||||||
| Net (loss) income | (175 | ) | (148 | ) | 44 | |||||||
| Less: Net (loss) income attributable to noncontrolling interests | (32 | ) | (29 | ) | 20 | |||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA | $ | (143 | ) | $ | (119 | ) | $ | 24 | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
||||||||||||
| Basic: | ||||||||||||
| Net (loss) income | $ | (0.13 | ) | $ | (0.11 | ) | $ | 0.02 | ||||
| Average number of shares | 1,067,000,575 | 1,069,480,834 | 1,069,565,824 | |||||||||
| Diluted: | ||||||||||||
| Net (loss) income | $ | (0.13 | ) | $ | (0.11 | ) | $ | 0.02 | ||||
| Average number of shares | 1,067,000,575 | 1,069,480,834 | 1,079,332,302 | |||||||||
| Shipments of aluminum products (metric tons) | 1,317,000 | 1,268,000 | 1,260,000 | |||||||||
|
Alcoa and subsidiaries Statement of Consolidated Operations (unaudited), continued (in millions, except per-share, share, and metric ton amounts) |
|||||||||
| Nine months ended | |||||||||
| September 30, | |||||||||
| 2012 | 2013 | ||||||||
| Sales | $ | 17,802 | $ | 17,447 | |||||
| Cost of goods sold (exclusive of expenses below) | 15,518 | 14,578 | |||||||
| Selling, general administrative, and other expenses | 720 | 753 | |||||||
| Research and development expenses | 141 | 135 | |||||||
| Provision for depreciation, depletion, and amortization | 1,098 | 1,071 | |||||||
| Restructuring and other charges | 27 | 402 | |||||||
| Interest expense | 370 | 341 | |||||||
| Other expenses (income), net | 4 | (15 | ) | ||||||
| Total costs and expenses | 17,878 | 17,265 | |||||||
| (Loss) income before income taxes | (76 | ) | 182 | ||||||
| Provision for income taxes | 19 | 116 | |||||||
| Net (loss) income | (95 | ) | 66 | ||||||
| Less: Net (loss) income attributable to noncontrolling interests | (44 | ) | 12 | ||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA | $ | (51 | ) | $ | 54 | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||
| Basic: | |||||||||
| Net (loss) income | $ | (0.05 | ) | $ | 0.05 | ||||
| Average number of shares | 1,066,482,064 | 1,069,253,636 | |||||||
| Diluted: | |||||||||
| Net (loss) income | $ | (0.05 | ) | $ | 0.05 | ||||
| Average number of shares | 1,066,482,064 | 1,079,406,557 | |||||||
| Common stock outstanding at the end of the period | 1,067,152,804 | 1,069,590,973 | |||||||
| Shipments of aluminum products (metric tons) | 3,917,000 | 3,752,000 | |||||||
|
Alcoa and subsidiaries Consolidated Balance Sheet (unaudited) (in millions) |
|||||||||
|
|
December 31, |
September 30, |
|||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,861 | $ | 1,017 | |||||
|
Receivables from customers, less allowances of $39 in 2012 and $21 |
1,399 | 1,422 | |||||||
| Other receivables | 340 | 616 | |||||||
| Inventories | 2,825 | 2,893 | |||||||
| Prepaid expenses and other current assets | 1,275 | 1,101 | |||||||
| Total current assets | 7,700 | 7,049 | |||||||
| Properties, plants, and equipment | 38,137 | 37,326 | |||||||
| Less: accumulated depreciation, depletion, and amortization | 19,190 | 19,465 | |||||||
| Properties, plants, and equipment, net | 18,947 | 17,861 | |||||||
| Goodwill | 5,170 | 5,144 | |||||||
| Investments | 1,860 | 1,908 | |||||||
| Deferred income taxes | 3,790 | 3,621 | |||||||
| Other noncurrent assets | 2,712 | 2,646 | |||||||
| Total assets | $ | 40,179 | $ | 38,229 | |||||
| LIABILITIES | |||||||||
| Current liabilities: | |||||||||
| Short-term borrowings | $ | 53 | $ | 59 | |||||
| Accounts payable, trade | 2,702 | 2,816 | |||||||
| Accrued compensation and retirement costs | 1,058 | 1,019 | |||||||
| Taxes, including income taxes | 366 | 398 | |||||||
| Other current liabilities | 1,298 | 1,093 | |||||||
| Long-term debt due within one year | 465 | 655 | |||||||
| Total current liabilities | 5,942 | 6,040 | |||||||
| Long-term debt, less amount due within one year | 8,311 | 7,630 | |||||||
| Accrued pension benefits | 3,722 | 3,407 | |||||||
| Accrued other postretirement benefits | 2,603 | 2,527 | |||||||
| Other noncurrent liabilities and deferred credits | 3,078 | 2,761 | |||||||
| Total liabilities | 23,656 | 22,365 | |||||||
| EQUITY | |||||||||
| Alcoa shareholders’ equity: | |||||||||
| Preferred stock | 55 | 55 | |||||||
| Common stock | 1,178 | 1,178 | |||||||
| Additional capital | 7,560 | 7,536 | |||||||
| Retained earnings | 11,689 | 11,611 | |||||||
| Treasury stock, at cost | (3,881 | ) | (3,810 | ) | |||||
| Accumulated other comprehensive loss | (3,402 | ) | (3,714 | ) | |||||
| Total Alcoa shareholders’ equity | 13,199 | 12,856 | |||||||
| Noncontrolling interests | 3,324 | 3,008 | |||||||
| Total equity | 16,523 | 15,864 | |||||||
| Total liabilities and equity | $ | 40,179 | $ | 38,229 | |||||
|
Alcoa and subsidiaries Statement of Consolidated Cash Flows (unaudited) (in millions) |
|||||||||
|
Nine months ended |
|||||||||
| 2012 | 2013 | ||||||||
| CASH FROM OPERATIONS | |||||||||
| Net (loss) income | $ | (95 | ) | $ | 66 | ||||
| Adjustments to reconcile net (loss) income to cash from operations: | |||||||||
| Depreciation, depletion, and amortization | 1,099 | 1,072 | |||||||
| Deferred income taxes | (195 | ) | (102 | ) | |||||
| Equity (income) loss, net of dividends | (3 | ) | 40 | ||||||
| Restructuring and other charges | 27 | 402 | |||||||
| Net gain from investing activities – asset sales | – | (7 | ) | ||||||
| Stock-based compensation | 54 | 59 | |||||||
| Excess tax benefits from stock-based payment arrangements | (1 | ) | – | ||||||
| Other | 100 | (10 | ) | ||||||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|||||||||
| (Increase) in receivables | (174 | ) | (347 | ) | |||||
| (Increase) in inventories | (65 | ) | (141 | ) | |||||
| (Increase) decrease in prepaid expenses and other current assets | (27 | ) | 16 | ||||||
| (Decrease) increase in accounts payable, trade | (109 | ) | 176 | ||||||
| (Decrease) in accrued expenses | (81 | ) | (395 | ) | |||||
| Increase in taxes, including income taxes | 22 | 40 | |||||||
| Pension contributions | (515 | ) | (354 | ) | |||||
| Decrease (increase) in noncurrent assets | 34 | (114 | ) | ||||||
| Increase in noncurrent liabilities | 498 | 257 | |||||||
| (Increase) in net assets held for sale | (3 | ) | – | ||||||
| CASH PROVIDED FROM CONTINUING OPERATIONS | 566 | 658 | |||||||
| CASH USED FOR DISCONTINUED OPERATIONS | (2 | ) | – | ||||||
| CASH PROVIDED FROM OPERATIONS | 564 | 658 | |||||||
| FINANCING ACTIVITIES | |||||||||
|
Net change in short-term borrowings (original maturities of three months or less) |
29 | 7 | |||||||
| Net change in commercial paper | (181 | ) | – | ||||||
| Additions to debt (original maturities greater than three months) | 886 | 1,527 | |||||||
| Debt issuance costs | (3 | ) | (2 | ) | |||||
| Payments on debt (original maturities greater than three months) | (793 | ) | (1,980 | ) | |||||
| Proceeds from exercise of employee stock options | 12 | 1 | |||||||
| Excess tax benefits from stock-based payment arrangements | 1 | – | |||||||
| Dividends paid to shareholders | (98 | ) | (99 | ) | |||||
| Distributions to noncontrolling interests | (71 | ) | (80 | ) | |||||
| Contributions from noncontrolling interests | 132 | 12 | |||||||
| CASH USED FOR FINANCING ACTIVITIES | (86 | ) | (614 | ) | |||||
| INVESTING ACTIVITIES | |||||||||
| Capital expenditures | (863 | ) | (771 | ) | |||||
| Proceeds from the sale of assets and businesses | 13 | 8 | |||||||
| Additions to investments | (241 | ) | (242 | ) | |||||
| Sales of investments | 11 | – | |||||||
| Net change in restricted cash | 51 | 130 | |||||||
| Other | 63 | 10 | |||||||
| CASH USED FOR INVESTING ACTIVITIES | (966 | ) | (865 | ) | |||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(19 |
) |
(23 |
) |
|||||
| Net change in cash and cash equivalents | (507 | ) | (844 | ) | |||||
| Cash and cash equivalents at beginning of year | 1,939 | 1,861 | |||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,432 | $ | 1,017 | |||||
|
Alcoa and subsidiaries |
||||||||||||||||||||||||||||||||
| 1Q12 | 2Q12 | 3Q12 | 4Q12 | 2012 | 1Q13 | 2Q13 | 3Q13 | |||||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||||||
| Alumina production (kmt) | 4,153 | 4,033 | 4,077 | 4,079 | 16,342 | 3,994 | 4,161 | 4,214 | ||||||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,293 | 2,194 | 2,368 | 2,440 | 9,295 | 2,457 | 2,328 | 2,603 | ||||||||||||||||||||||||
| Third-party sales | $ | 775 | $ | 750 | $ | 764 | $ | 803 | $ | 3,092 | $ | 826 | $ | 822 | $ | 846 | ||||||||||||||||
| Intersegment sales | $ | 617 | $ | 576 | $ | 575 | $ | 542 | $ | 2,310 | $ | 595 | $ | 581 | $ | 513 | ||||||||||||||||
| Equity income (loss) | $ | 1 | $ | 1 | $ | 2 | $ | 1 | $ | 5 | $ | 1 | $ | (1 | ) | $ | (2 | ) | ||||||||||||||
| Depreciation, depletion, and amortization | $ | 114 | $ | 114 | $ | 120 | $ | 107 | $ | 455 | $ | 109 | $ | 115 | $ | 100 | ||||||||||||||||
| Income taxes | $ | (1 | ) | $ | (6 | ) | $ | (22 | ) | $ | 2 | $ | (27 | ) | $ | 14 | $ | 14 | $ | 17 | ||||||||||||
| After-tax operating income (ATOI) | $ | 35 | $ | 23 | $ | (9 | ) | $ | 41 | $ | 90 | $ | 58 | $ | 64 | $ | 67 | |||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||||||
| Aluminum production (kmt) | 951 | 941 | 938 | 912 | 3,742 | 891 | 896 | 897 | ||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 771 | 749 | 768 | 768 | 3,056 | 705 | 693 | 686 | ||||||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,433 |
$ |
2,329 |
$ |
2,222 |
$ |
2,325 |
$ |
2,327 |
$ |
2,398 |
$ |
2,237 |
$ |
2,180 |
||||||||||||||||
| Third-party sales | $ | 1,944 | $ | 1,804 | $ | 1,794 | $ | 1,890 | $ | 7,432 | $ | 1,758 | $ | 1,620 | $ | 1,600 | ||||||||||||||||
| Intersegment sales | $ | 761 | $ | 782 | $ | 691 | $ | 643 | $ | 2,877 | $ | 727 | $ | 677 | $ | 691 | ||||||||||||||||
| Equity loss | $ | (2 | ) | $ | (9 | ) | $ | (5 | ) | $ | (11 | ) | $ | (27 | ) | $ | (9 | ) | $ | (7 | ) | $ | (13 | ) | ||||||||
| Depreciation, depletion, and amortization | $ | 135 | $ | 133 | $ | 130 | $ | 134 | $ | 532 | $ | 135 | $ | 132 | $ | 131 | ||||||||||||||||
| Income taxes | $ | (13 | ) | $ | (19 | ) | $ | (19 | ) | $ | 157 | $ | 106 | $ | 1 | $ | (25 | ) | $ | (16 | ) | |||||||||||
| ATOI | $ | 10 | $ | (3 | ) | $ | (14 | ) | $ | 316 | $ | 309 | $ | 39 | $ | (32 | ) | $ | 8 | |||||||||||||
| Global Rolled Products: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 452 | 484 | 483 | 448 | 1,867 | 450 | 502 | 499 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,845 | $ | 1,913 | $ | 1,849 | $ | 1,771 | $ | 7,378 | $ | 1,779 | $ | 1,877 | $ | 1,805 | ||||||||||||||||
| Intersegment sales | $ | 44 | $ | 44 | $ | 42 | $ | 33 | $ | 163 | $ | 51 | $ | 43 | $ | 47 | ||||||||||||||||
| Equity loss | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | $ | (2 | ) | $ | (6 | ) | $ | (4 | ) | $ | (2 | ) | $ | (3 | ) | ||||||||
| Depreciation, depletion, and amortization | $ | 57 | $ | 57 | $ | 57 | $ | 58 | $ | 229 | $ | 57 | $ | 55 | $ | 56 | ||||||||||||||||
| Income taxes* | $ | 51 | $ | 34 | $ | 39 | $ | 35 | $ | 159 | $ | 39 | $ | 32 | $ | 32 | ||||||||||||||||
| ATOI* | $ | 102 | $ | 78 | $ | 89 | $ | 77 | $ | 346 | $ | 81 | $ | 79 | $ | 71 | ||||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 58 | 59 | 53 | 52 | 222 | 55 | 58 | 60 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,390 | $ | 1,420 | $ | 1,367 | $ | 1,348 | $ | 5,525 | $ | 1,423 | $ | 1,468 | $ | 1,437 | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 40 | $ | 39 | $ | 39 | $ | 40 | $ | 158 | $ | 40 | $ | 39 | $ | 40 | ||||||||||||||||
| Income taxes* | $ | 73 | $ | 76 | $ | 77 | $ | 71 | $ | 297 | $ | 84 | $ | 94 | $ | 91 | ||||||||||||||||
| ATOI* | $ | 157 | $ | 157 | $ | 158 | $ | 140 | $ | 612 | $ | 173 | $ | 193 | $ | 192 | ||||||||||||||||
|
Reconciliation of ATOI to consolidated net income (loss) attributable to Alcoa: |
||||||||||||||||||||||||||||||||
| Total segment ATOI* | $ | 304 | $ | 255 | $ | 224 | $ | 574 | $ | 1,357 | $ | 351 | $ | 304 | $ | 338 | ||||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||||||
| Impact of LIFO | – | 19 | (7 | ) | 8 | 20 | (2 | ) | 5 | 9 | ||||||||||||||||||||||
| Interest expense | (80 | ) | (80 | ) | (81 | ) | (78 | ) | (319 | ) | (75 | ) | (76 | ) | (70 | ) | ||||||||||||||||
| Noncontrolling interests | (5 | ) | 17 | 32 | (15 | ) | 29 | (21 | ) | 29 | (20 | ) | ||||||||||||||||||||
| Corporate expense | (64 | ) | (69 | ) | (62 | ) | (87 | ) | (282 | ) | (67 | ) | (71 | ) | (74 | ) | ||||||||||||||||
| Restructuring and other charges | (7 | ) | (10 | ) | (2 | ) | (56 | ) | (75 | ) | (5 | ) | (211 | ) | (108 | ) | ||||||||||||||||
| Other* | (54 | ) | (134 | ) | (247 | ) | (104 | ) | (539 | ) | (32 | ) | (99 | ) | (51 | ) | ||||||||||||||||
| Consolidated net income (loss) attributable to Alcoa |
$ |
94 |
$ |
(2 |
) |
$ |
(143 |
) |
$ |
242 |
$ |
191 |
$ |
149 |
$ |
(119 |
) |
$ |
24 |
|||||||||||||
The difference between certain segment totals and consolidated amounts
is in Corporate.
* On January 1, 2013, management revised the inventory-costing method
used by certain locations within the Global Rolled Products and
Engineered Products and Solutions segments, which affects the
determination of the respective segment’s profitability measure, ATOI.
Management made the change in order to improve internal consistency and
enhance industry comparability. This revision does not impact the
consolidated results of Alcoa. Segment information for all prior periods
presented was revised to reflect this change.
|
Alcoa and subsidiaries |
||||||||||||
| Adjusted EBITDA Margin | Quarter ended | |||||||||||
|
September 30, |
June 30, |
September 30, |
||||||||||
| Net (loss) income attributable to Alcoa | $ | (143 | ) | $ | (119 | ) | $ | 24 | ||||
| Add: | ||||||||||||
| Net (loss) income attributable to noncontrolling interests |
(32 |
) |
(29 |
) |
20 |
|||||||
| (Benefit) provision for income taxes | (33 | ) | 21 | 31 | ||||||||
| Other (income) expenses, net | (2 | ) | 19 | (7 | ) | |||||||
| Interest expense | 124 | 118 | 108 | |||||||||
| Restructuring and other charges | 2 | 244 | 151 | |||||||||
| Provision for depreciation, depletion, and amortization | 366 | 362 | 348 | |||||||||
| Adjusted EBITDA | $ | 282 | $ | 616 | $ | 675 | ||||||
| Sales | $ | 5,833 | $ | 5,849 | $ | 5,765 | ||||||
| Adjusted EBITDA Margin | 4.8 | % | 10.5 | % | 11.7 | % | ||||||
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for
depreciation, depletion, and amortization. Net margin is equivalent to
Sales minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development expenses;
and Provision for depreciation, depletion, and amortization. Adjusted
EBITDA is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because Adjusted EBITDA provides
additional information with respect to Alcoa’s operating performance and
the Company’s ability to meet its financial obligations. The Adjusted
EBITDA presented may not be comparable to similarly titled measures of
other companies.
| Free Cash Flow | Quarter ended | ||||||||||||||||
|
September 30, |
June 30, |
September 30, |
|||||||||||||||
| Cash from operations | $ | 263 | $ | 514 | $ | 214 | |||||||||||
| Capital expenditures |
(302 |
) |
(286 |
) |
(250 |
) |
|||||||||||
| Free cash flow | $ | (39 | ) | $ | 228 | $ | (36 | ) | |||||||||
Free Cash Flow is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management reviews cash
flows generated from operations after taking into consideration capital
expenditures due to the fact that these expenditures are considered
necessary to maintain and expand Alcoa’s asset base and are expected to
generate future cash flows from operations. It is important to note that
Free Cash Flow does not represent the residual cash flow available for
discretionary expenditures since other non-discretionary expenditures,
such as mandatory debt service requirements, are not deducted from the
measure.
|
Alcoa and subsidiaries |
||||||||||||||||||||||||
| Adjusted Income | (Loss) Income | Diluted EPS | ||||||||||||||||||||||
| Quarter ended | Quarter ended | |||||||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
June 30, |
September 30, |
|||||||||||||||||||
| Net (loss) income attributable to Alcoa | $ | (143 | ) | $ | (119 | ) | $ | 24 | $ | (0.13 | ) | $ | (0.11 | ) | $ | 0.02 | ||||||||
| Restructuring and other charges |
2 |
170 |
108 |
|||||||||||||||||||||
| Discrete tax items* |
26 |
11 |
7 |
|||||||||||||||||||||
| Other special items** |
147 |
14 |
(19 |
) |
||||||||||||||||||||
| Net income attributable to Alcoa – as adjusted |
$ |
32 |
$ |
76 |
$ |
120 |
0.03 |
0.07 |
0.11 |
|||||||||||||||
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 (loss) income attributable
to Alcoa determined under GAAP as well as Net income attributable to
Alcoa – as adjusted.
* Discrete tax items include the following:
-
for the quarter ended September 30, 2013, an unfavorable impact
related to the interim period treatment of losses in jurisdictions for
which no tax benefit was recognized ($6) and a net charge for other
miscellaneous items ($1); -
for the quarter ended June 30, 2013, a charge related to prior year
taxes in Spain and Australia ($10), a benefit for a tax rate change in
Jamaica ($2), and a net charge for other miscellaneous items ($3); and -
for the quarter ended September 30, 2012, an unfavorable impact
related to the interim period treatment of losses in jurisdictions for
which no tax benefit was recognized ($35), a benefit as a result of
including the anticipated gain from the sale of the Tapoco
Hydroelectric Project in the calculation of the estimated annual
effective tax rate ($12), and a net charge for other miscellaneous
items ($3).
** Other special items include the following:
-
for the quarter ended September 30, 2013, insurance recovery related
to the 2012 fire at the Massena, NY location ($12), a net favorable
change in certain mark-to-market energy derivative contracts ($8), and
the write off of inventory related to the permanent closure of two
potlines at a smelter in Canada ($1); -
for the quarter ended June 30, 2013, a net unfavorable change in
certain mark-to-market energy derivative contracts ($9) and the write
off of inventory related to the permanent closure of two potlines at a
smelter in Canada and a smelter in Italy ($5); and -
for the quarter ended September 30, 2012, an increase in the
environmental reserve mostly related to the Grasse River remediation
in Massena, NY and two new remediation projects at the smelter sites
in Baie Comeau, Quebec, Canada and Mosjøen, Norway ($120), a
litigation reserve ($15), uninsured losses related to fire damage to
the cast house at the Massena, NY location ($9), and a net unfavorable
change in certain mark-to-market energy derivative contracts ($3).
|
Alcoa and subsidiaries |
|||||||||
| Days Working Capital | Quarter ended | ||||||||
|
September 30, |
June 30, |
September 30, |
|||||||
| Receivables from customers, less allowances | $ | 1,619 | $ | 1,354 | $ | 1,422 | |||
| Add: Deferred purchase price receivable* | 81 | 377 | 285 | ||||||
| Receivables from customers, less allowances, as adjusted |
1,700 |
1,731 |
1,707 |
||||||
| Add: Inventories | 2,973 | 2,905 | 2,893 | ||||||
| Less: Accounts payable, trade | 2,590 | 2,920 | 2,816 | ||||||
| Working Capital | $ | 2,083 | $ | 1,716 | $ | 1,784 | |||
| Sales | $ | 5,833 | $ | 5,849 | $ | 5,765 | |||
| Days Working Capital |
33 |
27 | 28 | ||||||
Days Working Capital = Working Capital divided by (Sales/number of days
in the quarter).
* The deferred purchase price receivable relates to an
arrangement to sell certain customer receivables to several financial
institutions on a recurring basis. Alcoa is adding back this receivable
for the purposes of the Days Working Capital calculation.
| Net Debt-to-Capital | September 30, 2013 | ||||||||||
|
Debt-to- |
Cash and |
Net Debt-to- |
|||||||||
| Total Debt | |||||||||||
| Short-term borrowings | $ | 59 | |||||||||
| Commercial paper | – | ||||||||||
| Long-term debt due within one year | 655 | ||||||||||
| Long-term debt, less amount due within one year | 7,630 | ||||||||||
| Numerator | $ | 8,344 | $ | 1,017 | $ | 7,327 | |||||
| Total Capital | |||||||||||
| Total debt | $ | 8,344 | |||||||||
| Total equity | 15,864 | ||||||||||
| Denominator | $ | 24,208 | $ | 1,017 | $ | 23,191 | |||||
| Ratio | 34.5 | % | 31.6 | % | |||||||
Net debt-to-capital is a non-GAAP financial measure. Management believes
that this measure is meaningful to investors because management assesses
Alcoa’s leverage position after factoring in available cash that could
be used to repay outstanding debt.
|
Alcoa and subsidiaries |
|||||||||||||||||||||||||||||||
| Segment Measures | Alumina | Primary Metals | |||||||||||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | ||||||||||||||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
December 31, |
March 31, |
June 30, |
September 30, |
||||||||||||||||||||||||
| After-tax operating income (ATOI) | $ | (9 | ) | $ | 64 | $ | 67 | $ | (14 | ) | $ | 316 | $ | 39 | $ | (32 | ) | $ | 8 | ||||||||||||
| Add: | |||||||||||||||||||||||||||||||
| Depreciation, depletion, and amortization |
120 |
115 |
100 |
130 |
134 |
135 |
132 |
131 |
|||||||||||||||||||||||
| Equity (income) loss |
(2 |
) |
1 |
2 |
5 |
11 |
9 |
7 |
13 |
||||||||||||||||||||||
| Income taxes | (22 | ) | 14 | 17 | (19 | ) | 157 | 1 | (25 | ) | (16 | ) | |||||||||||||||||||
| Other | (1 | ) | – | (2 | ) | 2 | (423 | ) | (1 | ) | (3 | ) | 2 | ||||||||||||||||||
| Adjusted EBITDA |
$ |
86 |
$ |
194 |
$ |
184 |
$ |
104 |
$ |
195 |
$ |
183 |
$ |
79 |
$ |
138 |
|||||||||||||||
| Production (thousand metric tons) (kmt) |
4,077 |
4,161 |
4,214 |
938 |
912 |
891 |
896 |
897 |
|||||||||||||||||||||||
| Adjusted EBITDA / Production ($ per metric ton) |
$ |
21 |
$ |
47 |
$ |
44 |
$ |
111 |
$ |
214 |
$ |
205 |
$ |
88 |
$ |
154 |
|||||||||||||||
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 |
||||||||||||||||||||||
| Segment Measures | Global Rolled Products* | Engineered Products and Solutions* | ||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
September 30, |
June 30, |
September 30, |
|||||||||||||||||
| After-tax operating income (ATOI) | $ | 89 | $ | 79 | $ | 71 | $ | 158 | $ | 193 | $ | 192 | ||||||||||
| Add: | ||||||||||||||||||||||
| Depreciation, depletion, and amortization |
57 |
55 |
56 |
39 |
39 |
40 |
||||||||||||||||
| Equity loss | 1 | 2 | 3 | – | – | – | ||||||||||||||||
| Income taxes | 39 | 32 | 32 | 77 | 94 | 91 | ||||||||||||||||
| Other | (3 | ) | – | – | – | – | – | |||||||||||||||
| Adjusted EBITDA |
$ |
183 |
$ |
168 |
$ |
162 |
$ |
274 |
$ |
326 |
$ |
323 |
||||||||||
| Total shipments (thousand metric tons) (kmt) |
501 |
521 |
519 |
|||||||||||||||||||
| Adjusted EBITDA / Total shipments ($ per metric ton) |
$ |
365 |
$ |
322 |
$ |
312 |
||||||||||||||||
| Third-party sales |
$ |
1,367 |
$ |
1,468 |
$ |
1,437 |
||||||||||||||||
| Adjusted EBITDA Margin |
20 |
% |
22 |
% |
22 |
% |
||||||||||||||||
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.
* On January 1, 2013, management revised the inventory-costing method
used by certain locations within the Global Rolled Products and
Engineered Products and Solutions segments, which affects the
determination of the respective segment’s profitability measure, ATOI.
Management made the change in order to improve internal consistency and
enhance industry comparability. This revision does not impact the
consolidated results of Alcoa. Segment information for all prior periods
presented was revised to reflect this change.
Alcoa
Investor Contact:
Kelly Pasterick, 212-836-2674
Kelly.Pasterick@alcoa.com
or
Media Contact:
Monica Orbe, 212-836-2632
Monica.Orbe@alcoa.com