NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE:AA) today reported a loss from continuing operations of $143 million, or $0.13 per share, which includes special items of $175 million, primarily related to environmental remediation of the Grasse River in New York State, and the settlement of a civil lawsuit brought by Aluminium Bahrain (Alba) that had been pending in the U.S. District Court in Pittsburgh. Excluding the negative impact of special items, income from continuing operations was $32 million, or $0.03 per share.
The Company reported performance improvements across all segments and solid revenue of $5.8 billion despite a 5 percent decline in realized aluminum prices sequentially and 17 percent year-on-year.
“Markets seem to be driven more by headlines than fundamentals right now, but Alcoa remains focused on the things within our control”, said Klaus Kleinfeld, Chairman and CEO.
“We’re capitalizing on pockets of strong growth and achieving record profitability in our mid and downstream businesses. We’re improving performance in the upstream while optimizing our assets, and across the board we’re driving productivity gains.”
Third quarter 2012 net loss of $143 million, or $0.13 per share, compared to a net loss of $2 million, or $0.00 per share, in second quarter 2012, and net income of $172 million, or $0.15 per share, in third quarter 2011. Adjusted EBITDA for the third quarter was $282 million, down 45 percent from second quarter 2012 mainly due to lower realized prices and special items.
Special items in third quarter 2012 included reserves for environmental remediation, a net discrete tax charge, uninsured losses related to a fire at the Massena, New York site, the negative impact of mark-to-market changes on certain energy contracts, and restructuring and other charges.
Additionally, Alcoa confirmed it has entered into a settlement agreement with Aluminium Bahrain B.S.C. ("Alba") resolving a civil lawsuit that had been pending in the U.S. District Court for the Western District of Pennsylvania since 2008. Without admitting any liability, Alcoa agreed to make a cash payment to Alba of $85 million payable in two installments. One half was made at settlement and the other half will be made one year later. The settlement amount is within the range Alcoa previously estimated as its reasonably possible losses, which it disclosed in its second quarter 2012 earnings announcement. Alcoa said the settlement with Alba represents the best possible outcome and avoids the time and expense of complex litigation.
Based on the settlement agreement with Alba, Alcoa recorded a $40 million charge ($15 million after-tax and non-controlling interest) in the third quarter in addition to the $45 million charge ($18 million after-tax and non-controlling interest) it recorded in the second quarter. Alcoa estimates an additional possible after-tax charge of approximately $25 to 30 million to reflect an agreement between the shareholders of Alcoa World Alumina LLC regarding the cash costs of the settlement of the Alba civil lawsuit; such charge would be recognized in the event that a settlement is reached with the Department of Justice and the Securities and Exchange Commission regarding their investigations.
Alcoa and Alba have also resumed a commercial relationship and have entered into an Alumina Price Index-based, long-term alumina supply agreement, demonstrating a mutual desire to work together going forward and the significant value that Alcoa brings to customers in the region through superior quality and optimal logistics of its alumina.
Third quarter 2012 revenue was $5.8 billion, down 9 percent compared with third quarter 2011, primarily due to a 17 and 20 percent year-on-year respective decline in the realized metal price and realized alumina price.
Alcoa continued to turn in strong performance in the third quarter, despite market turbulence.
Amidst challenging market conditions, Alcoa’s upstream businesses achieved significant performance improvement in the third quarter, delivering $98 million of combined sequential operational improvements across the Alumina and Primary Metals segments as higher volume, improved price and mix, and productivity gains more than offset cost headwinds.
In what is traditionally a weaker quarter, Alcoa’s midstream and downstream businesses continued to turn in record performance. Global Rolled Products continued to deliver strong profitability despite European weakness, achieving record third quarter ATOI of $98 million, up 3 percent sequentially, and 63 percent year-on-year. Adjusted EBITDA per metric ton for Global Rolled Products was a third quarter record at $395, and year-to-date record at $405, 72 percent higher than the 10-year average. Engineered Products and Solutions achieved a record adjusted EBITDA margin of 20 percent, a third consecutive quarterly record.
Alcoa is on track to deliver against its financial and operational targets in 2012. The Company continued strong productivity growth across the upstream and downstream segments this quarter, driven by higher utilization rates, process innovations, lower scrap rates, and usage reductions.
Following the record low in days working capital achieved for both the first quarter and second quarter of 2012, Alcoa also achieved a record low in days working capital for the third quarter at 33 days, five days lower than the previous third quarter record set in 2011. This is the 12th successive quarter the Company has demonstrated year-over-year improvement.
In third quarter 2012, the debt-to-capital ratio stood at 36.1 percent, with net debt-to-capital at 32.4 percent, and liquidity remained strong with $1.4 billion cash on hand. Following on the improved working capital performance, the Company generated cash from operations of $263 million in the quarter. Capital spending was $302 million in the quarter, compared to $291 million in second quarter 2012. Free cash flow in the third quarter was a negative $39 million. Expenditures on the Saudi Arabia joint venture project were also on track at $16 million.
Alcoa continues to execute on previously announced curtailments in the upstream business, improving competitiveness and driving toward the Company’s stated goal of moving down the cost curve 10 percentage points in smelting and 7 percentage points in refining by 2015. In line with plans announced in January 2012, Alcoa has completed partial curtailments at La Coruña and Avilés, Spain, and the Portovesme, Italy curtailment is underway and will be complete by November 30, 2012. Additionally, Alcoa permanently closed its smelter at Alcoa, Tennessee, and two lines at Rockdale, Texas. When the Portovesme smelter is fully curtailed, Alcoa will have 14 percent of its highest-cost system smelting capacity offline.
Alcoa has moderated its 2012 global aluminum demand forecast to 6 percent, down from 7 percent, as a slowdown in China slightly impacts the second half outlook. The aluminum market grew 13 percent in 2010, and 10 percent in 2011, and is well ahead of the 6.5 percent compound annual growth rate needed to meet Alcoa’s projection of a doubling of aluminum demand 2010 to 2020.
In Alcoa’s global end markets, positive growth continues, particularly in the aerospace market where we see 13 to 14 percent year-on-year growth, and in the automotive market, where we have raised our 2012 North American forecast by 1 percent. Alcoa’s 2012 global growth outlook for packaging (2 to 3 percent), commercial building and construction (2.5 to 3.5 percent), and industrial gas turbine (3 to 5 percent) markets remains positive and unchanged. In the heavy truck and trailer market, Alcoa is lowering 2012 growth expectations (7 to 9 percent decline) in anticipation of a slowdown across all major regions.
Segment Information
Alumina
After-tax operating income (ATOI) in the third quarter was negative $9 million, down $32 million compared with second quarter 2012 and down $163 million compared with third quarter 2011. The sequential quarter decrease was driven by lower London Metal Exchange (LME)-based pricing and unfavorable currency impact, partially offset by stable Alumina Price Index-pricing, productivity gains, and higher volumes.
Primary Metals
ATOI in the third quarter was negative $14 million, down $11 million sequentially, and down $124 million year-on-year. LME-based pricing negatively impacted results by $36 million sequentially, in addition to higher alumina costs. Productivity gains, cost decreases, and improved regional premiums partially offset these negative impacts. Third-party realized price in the third quarter was $2,222 per metric ton, down 5 percent sequentially and down 17 percent year-on-year.
Global Rolled Products
ATOI for the third quarter was $98 million, up $3 million, or 3 percent, sequentially and up $38 million, or 63 percent, year-on-year. The sequential increase was mainly driven by improved price and mix, mostly offset by lower volume and increased costs. The year-on-year improvement was driven by better price and mix, higher volume, and strong productivity gains.
Engineered Products and Solutions
ATOI in the third quarter was $160 million, flat sequentially and up $22 million, or 16 percent, year-on-year. Sequentially, continued productivity improvements and favorable Massena impacts were offset by cost increases and unfavorable volume. The year-on-year improvement was driven primarily by productivity gains, partially offset by cost increases.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on October 9, 2012 to present quarterly results. The meeting will be webcast via alcoa.com. Call information and related details are available at www.alcoa.com under “Invest.”
About Alcoa
Alcoa is the world’s leading producer of primary aluminum and fabricated aluminum, as well as the world’s largest miner of bauxite and refiner of alumina. In addition to inventing the modern-day aluminum industry, Alcoa innovation has been behind major milestones in the aerospace, automotive, packaging, building and construction, commercial transportation, consumer electronics, and industrial markets over the past 120 years. Among the solutions Alcoa markets are flat-rolled products, hard alloy extrusions, and forgings, as well as Alcoa® wheels, fastening systems, precision and investment castings, and building systems in addition to its expertise in other light metals such as titanium and nickel-based superalloys. Sustainability is an integral part of Alcoa’s operating practices and the product design and engineering it provides to customers. Alcoa has been a member of the Dow Jones Sustainability Index for 11 consecutive years and approximately 75 percent of all of the aluminum ever produced since 1888 is still in active use today. Alcoa employs approximately 61,000 people in 31 countries across the world. More information can be found at www.alcoa.com.
Forward-Looking Statements
This release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “expects,” “forecasts,” “goal,” “outlook,” “plans,” “projects,” “should,” “targets,” “will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, forecasts concerning global demand for aluminum, end market conditions, growth opportunities for aluminum in automotive, aerospace, and other applications, or other trend projections, targeted financial results or operating performance, and statements about Alcoa’s strategies, outlook, and business and financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by Alcoa, including aerospace, automotive, commercial transportation, building and construction, packaging, and industrial gas turbine; (d) the impact of changes in foreign currency exchange rates on costs and results, particularly the Australian dollar, Brazilian real, Canadian dollar, euro, and Norwegian kroner; (e) increases in energy costs, including electricity, natural gas, and fuel oil, or the unavailability or interruption of energy supplies; (f) increases in the costs of other raw materials, including calcined petroleum coke, caustic soda, and liquid pitch; (g) Alcoa’s inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations (including moving its refining and smelting businesses down on the industry cost curves and increasing revenues in its Global Rolled Products and Engineered Products and Solutions segments), anticipated from its restructuring programs, productivity improvement, cash sustainability, and other initiatives; (h) Alcoa’s inability to realize expected benefits from newly constructed, expanded or acquired facilities or from international joint ventures as planned and by targeted completion dates, including the joint venture in Saudi Arabia or the upstream operations and investments in hydropower projects in Brazil; (i) political, economic, and regulatory risks in the countries in which Alcoa operates or sells products, including unfavorable changes in laws and governmental policies, civil unrest, and other events beyond Alcoa’s control; (j) the outcome of contingencies, including legal proceedings, government investigations, and environmental remediation; (k) the business or financial condition of key customers, suppliers, and business partners; (l) changes in tax rates or benefits; (m) adverse changes in discount rates or investment returns on pension assets; (n) the impact of cyber attacks and potential information technology or data security breaches; and (o) the other risk factors summarized in Alcoa’s Form 10-K for the year ended December 31, 2011 and other reports filed with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.
|
Alcoa and subsidiaries Statement of Consolidated Operations (unaudited) (in millions, except per-share, share, and metric ton amounts) |
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| Quarter ended | |||||||||||
| September 30, | June 30, | September 30, | |||||||||
| 2011 | 2012 | 2012 | |||||||||
| Sales | $ | 6,419 | $ | 5,963 | $ | 5,833 | |||||
| Cost of goods sold (exclusive of expenses below) | 5,290 | 5,154 | 5,266 | ||||||||
| Selling, general administrative, and other expenses | 261 | 245 | 234 | ||||||||
| Research and development expenses | 47 | 47 | 51 | ||||||||
| Provision for depreciation, depletion, and amortization | 376 | 363 | 366 | ||||||||
| Restructuring and other charges | 9 | 15 | 2 | ||||||||
| Interest expense | 125 | 123 | 124 | ||||||||
| Other expenses (income), net | 31 | 22 | (2 | ) | |||||||
| Total costs and expenses | 6,139 | 5,969 | 6,041 | ||||||||
| Income (loss) from continuing operations before income taxes | 280 | (6 | ) | (208 | ) | ||||||
| Provision (benefit) for income taxes | 55 | 13 | (33 | ) | |||||||
| Income (loss) from continuing operations | 225 | (19 | ) | (175 | ) | ||||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | 225 | (19 | ) | (175 | ) | ||||||
| Less: Net income (loss) attributable to noncontrolling interests | 53 | (17 | ) | (32 | ) | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA | $ | 172 | $ | (2 | ) | $ | (143 | ) | |||
|
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Income (loss) from continuing operations | $ | 172 | $ | (2 | ) | $ | (143 | ) | |||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | $ | 172 | $ | (2 | ) | $ | (143 | ) | |||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||||
| Basic: | |||||||||||
| Income (loss) from continuing operations | $ | 0.16 | $ | – | $ | (0.13 | ) | ||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | $ | 0.16 | $ | – | $ | (0.13 | ) | ||||
| Diluted: | |||||||||||
| Income (loss) from continuing operations | $ | 0.15 | $ | – | $ | (0.13 | ) | ||||
| Loss from discontinued operations | – | – | – | ||||||||
| Net income (loss) | $ | 0.15 | $ | – | $ | (0.13 | ) | ||||
| Average number of shares used to compute: | |||||||||||
| Basic earnings per common share | 1,064,226,988 | 1,066,763,022 | 1,067,000,575 | ||||||||
| Diluted earnings per common share | 1,164,085,935 | 1,066,763,022 | 1,067,000,575 | ||||||||
| Shipments of aluminum products (metric tons) | 1,277,000 | 1,305,000 | 1,317,000 | ||||||||
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Alcoa and subsidiaries Statement of Consolidated Operations (unaudited), continued (in millions, except per-share, share, and metric ton amounts) |
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| Nine months ended | |||||||||
| September 30, | |||||||||
| 2011 | 2012 | ||||||||
| Sales | $ | 18,962 | $ | 17,802 | |||||
| Cost of goods sold (exclusive of expenses below) | 15,252 | 15,518 | |||||||
| Selling, general administrative, and other expenses | 759 | 720 | |||||||
| Research and development expenses | 136 | 141 | |||||||
| Provision for depreciation, depletion, and amortization | 1,112 | 1,098 | |||||||
| Restructuring and other charges | 49 | 27 | |||||||
| Interest expense | 399 | 370 | |||||||
| Other (income) expenses, net | (47 | ) | 4 | ||||||
| Total costs and expenses | 17,660 | 17,878 | |||||||
| Income (loss) from continuing operations before income taxes | 1,302 | (76 | ) | ||||||
| Provision for income taxes | 329 | 19 | |||||||
| Income (loss) from continuing operations | 973 | (95 | ) | ||||||
| Loss from discontinued operations | (5 | ) | – | ||||||
| Net income (loss) | 968 | (95 | ) | ||||||
| Less: Net income (loss) attributable to noncontrolling interests | 166 | (44 | ) | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA | $ | 802 | $ | (51 | ) | ||||
| AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: | |||||||||
| Income (loss) from continuing operations | $ | 807 | $ | (51 | ) | ||||
| Loss from discontinued operations | (5 | ) | – | ||||||
| Net income (loss) | $ | 802 | $ | (51 | ) | ||||
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS: |
|||||||||
| Basic: | |||||||||
| Income (loss) from continuing operations | $ | 0.76 | $ | (0.05 | ) | ||||
| Loss from discontinued operations | (0.01 | ) | – | ||||||
| Net income (loss) | $ | 0.75 | $ | (0.05 | ) | ||||
| Diluted: | |||||||||
| Income (loss) from continuing operations | $ | 0.71 | $ | (0.05 | ) | ||||
| Loss from discontinued operations | – | – | |||||||
| Net income (loss) | $ | 0.71 | $ | (0.05 | ) | ||||
| Average number of shares used to compute: | |||||||||
| Basic earnings per common share | 1,059,945,523 | 1,066,482,064 | |||||||
| Diluted earnings per common share | 1,160,380,773 | 1,066,482,064 | |||||||
| Common stock outstanding at the end of the period | 1,064,276,127 | 1,067,152,804 | |||||||
| Shipments of aluminum products (metric tons) | 3,757,000 | 3,917,000 | |||||||
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Alcoa and subsidiaries Consolidated Balance Sheet (unaudited) (in millions) |
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|
December 31, |
September 30, |
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| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 1,939 | $ | 1,432 | |||||
|
Receivables from customers, less allowances of $46 in 2011 and $44 in 2012 |
1,571 | 1,619 | |||||||
| Other receivables | 371 | 448 | |||||||
| Inventories | 2,899 | 2,973 | |||||||
| Prepaid expenses and other current assets | 933 | 1,303 | |||||||
| Total current assets | 7,713 | 7,775 | |||||||
| Properties, plants, and equipment | 37,608 | 37,718 | |||||||
| Less: accumulated depreciation, depletion, and amortization | 18,326 | 18,860 | |||||||
| Properties, plants, and equipment, net | 19,282 | 18,858 | |||||||
| Goodwill | 5,157 | 5,175 | |||||||
| Investments | 1,626 | 1,831 | |||||||
| Deferred income taxes | 3,546 | 3,494 | |||||||
| Other noncurrent assets | 2,796 | 3,058 | |||||||
| Total assets | $ | 40,120 | $ | 40,191 | |||||
| LIABILITIES | |||||||||
| Current liabilities: | |||||||||
| Short-term borrowings | $ | 62 | $ | 591 | |||||
| Commercial paper | 224 | 43 | |||||||
| Accounts payable, trade | 2,692 | 2,590 | |||||||
| Accrued compensation and retirement costs | 985 | 1,018 | |||||||
| Taxes, including income taxes | 438 | 405 | |||||||
| Other current liabilities | 1,167 | 1,344 | |||||||
| Long-term debt due within one year | 445 | 540 | |||||||
| Total current liabilities | 6,013 | 6,531 | |||||||
| Long-term debt, less amount due within one year | 8,640 | 8,350 | |||||||
| Accrued pension benefits | 3,261 | 2,754 | |||||||
| Accrued other postretirement benefits | 2,583 | 2,516 | |||||||
| Other noncurrent liabilities and deferred credits | 2,428 | 3,186 | |||||||
| Total liabilities | 22,925 | 23,337 | |||||||
| EQUITY | |||||||||
| Alcoa shareholders’ equity: | |||||||||
| Preferred stock | 55 | 55 | |||||||
| Common stock | 1,178 | 1,178 | |||||||
| Additional capital | 7,561 | 7,549 | |||||||
| Retained earnings | 11,629 | 11,447 | |||||||
| Treasury stock, at cost | (3,952 | ) | (3,882 | ) | |||||
| Accumulated other comprehensive loss | (2,627 | ) | (2,777 | ) | |||||
| Total Alcoa shareholders' equity | 13,844 | 13,570 | |||||||
| Noncontrolling interests | 3,351 | 3,284 | |||||||
| Total equity | 17,195 | 16,854 | |||||||
| Total liabilities and equity | $ | 40,120 | $ | 40,191 | |||||
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Alcoa and subsidiaries Statement of Consolidated Cash Flows (unaudited) (in millions) |
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|
Nine months ended |
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| 2011 (a) | 2012 | ||||||||
| CASH FROM OPERATIONS | |||||||||
| Net income (loss) | $ | 968 | $ | (95 | ) | ||||
| Adjustments to reconcile net income (loss) to cash from operations: | |||||||||
| Depreciation, depletion, and amortization | 1,113 | 1,099 | |||||||
| Deferred income taxes | (78 | ) | (195 | ) | |||||
| Equity income, net of dividends | (28 | ) | (3 | ) | |||||
| Restructuring and other charges | 49 | 27 | |||||||
| Net loss from investing activities – asset sales | 1 | – | |||||||
| Loss from discontinued operations | 5 | – | |||||||
| Stock-based compensation | 70 | 54 | |||||||
| Excess tax benefits from stock-based payment arrangements | (6 | ) | (1 | ) | |||||
| Other | 35 | 100 | |||||||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|||||||||
| (Increase) in receivables | (419 | ) | (174 | ) | |||||
| (Increase) in inventories | (608 | ) | (65 | ) | |||||
| Decrease (increase) in prepaid expenses and other current assets | 13 | (18 | ) | ||||||
| Increase (decrease) in accounts payable, trade | 170 | (109 | ) | ||||||
| (Decrease) in accrued expenses | (195 | ) | (82 | ) | |||||
| Increase in taxes, including income taxes | 116 | 13 | |||||||
| Pension contributions | (217 | ) | (515 | ) | |||||
| (Increase) decrease in noncurrent assets | (92 | ) | 34 | ||||||
| Increase in noncurrent liabilities | 160 | 499 | |||||||
| (Increase) in net assets held for sale | – | (3 | ) | ||||||
| CASH PROVIDED FROM CONTINUING OPERATIONS | 1,057 | 566 | |||||||
| CASH USED FOR DISCONTINUED OPERATIONS | (6 | ) | (2 | ) | |||||
| CASH PROVIDED FROM OPERATIONS | 1,051 | 564 | |||||||
| FINANCING ACTIVITIES | |||||||||
| Net change in short-term borrowings (original maturities of three months or less) | (36 | ) | 29 | ||||||
| Net change in commercial paper | 107 | (181 | ) | ||||||
| Additions to debt (original maturities greater than three months) | 1,254 | 886 | |||||||
| Debt issuance costs | (17 | ) | (3 | ) | |||||
| Payments on debt (original maturities greater than three months) | (1,122 | ) | (793 | ) | |||||
| Proceeds from exercise of employee stock options | 36 | 12 | |||||||
| Excess tax benefits from stock-based payment arrangements | 6 | 1 | |||||||
| Dividends paid to shareholders | (98 | ) | (98 | ) | |||||
| Distributions to noncontrolling interests | (253 | ) | (71 | ) | |||||
| Contributions from noncontrolling interests | 136 | 132 | |||||||
| CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES | 13 | (86 | ) | ||||||
| INVESTING ACTIVITIES | |||||||||
| Capital expenditures | (801 | ) | (863 | ) | |||||
| Acquisitions, net of cash acquired | (240 | ) | – | ||||||
| Proceeds from the sale of assets and businesses | (6 | ) | 13 | ||||||
| Additions to investments | (216 | ) | (241 | ) | |||||
| Sales of investments | 5 | 11 | |||||||
| Net change in short-term investments and restricted cash | – | 51 | |||||||
| Other | (11 | ) | 63 | ||||||
| CASH USED FOR INVESTING ACTIVITIES | (1,269 | ) | (966 | ) | |||||
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(6 |
) |
(19 |
) |
|||||
| Net change in cash and cash equivalents | (211 | ) | (507 | ) | |||||
| Cash and cash equivalents at beginning of year | 1,543 | 1,939 | |||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,332 | $ | 1,432 | |||||
| (a) | The Statement of Consolidated Cash Flows for the nine months ended September 30, 2011 was revised to reflect the movement of the Global Foil business (one remaining plant located in Brazil) from held for sale classification in the fourth quarter of 2011. Management is no longer committed to a plan to sell the location and has refocused their efforts to drive higher profitability and is evaluating expanding the functionality of the plant so that it can manufacture certain products aimed at capturing new growth in Brazil. |
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Alcoa and subsidiaries |
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| 1Q11 | 2Q11 | 3Q11 | 4Q11 | 2011 | 1Q12 | 2Q12 | 3Q12 | |||||||||||||||||||||||||
| Alumina: | ||||||||||||||||||||||||||||||||
| Alumina production (kmt) | 4,024 | 4,144 | 4,140 | 4,178 | 16,486 | 4,153 | 4,033 | 4,077 | ||||||||||||||||||||||||
| Third-party alumina shipments (kmt) | 2,206 | 2,378 | 2,256 | 2,378 | 9,218 | 2,293 | 2,194 | 2,368 | ||||||||||||||||||||||||
| Third-party sales | $ | 810 | $ | 926 | $ | 879 | $ | 847 | $ | 3,462 | $ | 775 | $ | 750 | $ | 764 | ||||||||||||||||
| Intersegment sales | $ | 633 | $ | 723 | $ | 751 | $ | 620 | $ | 2,727 | $ | 617 | $ | 576 | $ | 575 | ||||||||||||||||
| Equity income (loss) | $ | 3 | $ | 22 | $ | 2 | $ | (2 | ) | $ | 25 | $ | 1 | $ | 1 | $ | 2 | |||||||||||||||
| Depreciation, depletion, and amortization | $ | 103 | $ | 112 | $ | 117 | $ | 112 | $ | 444 | $ | 114 | $ | 114 | $ | 120 | ||||||||||||||||
| Income taxes | $ | 44 | $ | 60 | $ | 42 | $ | 33 | $ | 179 | $ | (1 | ) | $ | (6 | ) | $ | (22 | ) | |||||||||||||
| After-tax operating income (ATOI) | $ | 142 | $ | 186 | $ | 154 | $ | 125 | $ | 607 | $ | 35 | $ | 23 | $ | (9 | ) | |||||||||||||||
| Primary Metals: | ||||||||||||||||||||||||||||||||
| Aluminum production (kmt) | 904 | 945 | 964 | 962 | 3,775 | 951 | 941 | 938 | ||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 698 | 724 | 754 | 805 | 2,981 | 771 | 749 | 768 | ||||||||||||||||||||||||
| Alcoa’s average realized price per metric ton of aluminum |
$ |
2,682 |
$ |
2,830 |
$ |
2,689 |
$ |
2,374 |
$ |
2,636 |
$ |
2,433 |
$ |
2,329 |
$ |
2,222 |
||||||||||||||||
| Third-party sales | $ | 1,980 | $ | 2,145 | $ | 2,124 | $ | 1,991 | $ | 8,240 | $ | 1,944 | $ | 1,804 | $ | 1,794 | ||||||||||||||||
| Intersegment sales | $ | 839 | $ | 922 | $ | 798 | $ | 633 | $ | 3,192 | $ | 761 | $ | 782 | $ | 691 | ||||||||||||||||
| Equity income (loss) | $ | 1 | $ | (1 | ) | $ | (4 | ) | $ | (3 | ) | $ | (7 | ) | $ | (2 | ) | $ | (9 | ) | $ | (5 | ) | |||||||||
| Depreciation, depletion, and amortization | $ | 141 | $ | 142 | $ | 137 | $ | 136 | $ | 556 | $ | 135 | $ | 133 | $ | 130 | ||||||||||||||||
| Income taxes | $ | 53 | $ | 55 | $ | 21 | $ | (37 | ) | $ | 92 | $ | (13 | ) | $ | (19 | ) | $ | (19 | ) | ||||||||||||
| ATOI | $ | 202 | $ | 201 | $ | 110 | $ | (32 | ) | $ | 481 | $ | 10 | $ | (3 | ) | $ | (14 | ) | |||||||||||||
| Global Rolled Products: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 446 | 473 | 454 | 407 | 1,780 | 452 | 484 | 483 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,892 | $ | 2,085 | $ | 1,974 | $ | 1,691 | $ | 7,642 | $ | 1,845 | $ | 1,913 | $ | 1,849 | ||||||||||||||||
| Intersegment sales | $ | 69 | $ | 62 | $ | 48 | $ | 39 | $ | 218 | $ | 44 | $ | 44 | $ | 42 | ||||||||||||||||
| Equity loss | $ | – | $ | – | $ | – | $ | (3 | ) | $ | (3 | ) | $ | (1 | ) | $ | (2 | ) | $ | (1 | ) | |||||||||||
| Depreciation, depletion, and amortization | $ | 58 | $ | 60 | $ | 61 | $ | 58 | $ | 237 | $ | 57 | $ | 57 | $ | 57 | ||||||||||||||||
| Income taxes | $ | 33 | $ | 35 | $ | 26 | $ | 10 | $ | 104 | $ | 49 | $ | 43 | $ | 44 | ||||||||||||||||
| ATOI | $ | 81 | $ | 99 | $ | 60 | $ | 26 | $ | 266 | $ | 96 | $ | 95 | $ | 98 | ||||||||||||||||
| Engineered Products and Solutions: | ||||||||||||||||||||||||||||||||
| Third-party aluminum shipments (kmt) | 55 | 57 | 56 | 53 | 221 | 58 | 59 | 53 | ||||||||||||||||||||||||
| Third-party sales | $ | 1,247 | $ | 1,370 | $ | 1,373 | $ | 1,355 | $ | 5,345 | $ | 1,390 | $ | 1,420 | $ | 1,367 | ||||||||||||||||
| Equity income | $ | 1 | $ | – | $ | – | $ | – | $ | 1 | $ | – | $ | – | $ | – | ||||||||||||||||
| Depreciation, depletion, and amortization | $ | 38 | $ | 41 | $ | 40 | $ | 39 | $ | 158 | $ | 40 | $ | 39 | $ | 39 | ||||||||||||||||
| Income taxes | $ | 62 | $ | 72 | $ | 67 | $ | 59 | $ | 260 | $ | 72 | $ | 77 | $ | 79 | ||||||||||||||||
| ATOI | $ | 130 | $ | 149 | $ | 138 | $ | 122 | $ | 539 | $ | 155 | $ | 160 | $ | 160 | ||||||||||||||||
| Reconciliation of ATOI to consolidated net income (loss) attributable to Alcoa: | ||||||||||||||||||||||||||||||||
| Total segment ATOI | $ | 555 | $ | 635 | $ | 462 | $ | 241 | $ | 1,893 | $ | 296 | $ | 275 | $ | 235 | ||||||||||||||||
| Unallocated amounts (net of tax): | ||||||||||||||||||||||||||||||||
| Impact of LIFO | (24 | ) | (27 | ) | 2 | 11 | (38 | ) | – | 19 | (7 | ) | ||||||||||||||||||||
| Interest expense | (72 | ) | (106 | ) | (81 | ) | (81 | ) | (340 | ) | (80 | ) | (80 | ) | (81 | ) | ||||||||||||||||
| Noncontrolling interests | (58 | ) | (55 | ) | (53 | ) | (28 | ) | (194 | ) | (5 | ) | 17 | 32 | ||||||||||||||||||
| Corporate expense | (67 | ) | (76 | ) | (76 | ) | (71 | ) | (290 | ) | (64 | ) | (69 | ) | (62 | ) | ||||||||||||||||
| Restructuring and other charges | (6 | ) | (22 | ) | (7 | ) | (161 | ) | (196 | ) | (7 | ) | (10 | ) | (2 | ) | ||||||||||||||||
| Discontinued operations | (1 | ) | (4 | ) | – | 2 | (3 | ) | – | – | – | |||||||||||||||||||||
| Other | (19 | ) | (23 | ) | (75 | ) | (104 | ) | (221 | ) | (46 | ) | (154 | ) | (258 | ) | ||||||||||||||||
| Consolidated net income (loss) attributable to Alcoa |
$ |
308 |
$ |
322 |
$ |
172 |
$ |
(191 |
) |
$ |
611 |
$ |
94 |
$ |
(2 |
) |
$ |
(143 |
) |
|||||||||||||
The difference between certain segment totals and consolidated amounts is in Corporate.
|
Alcoa and subsidiaries |
||||||||||||
| Adjusted EBITDA Margin | Quarter ended | |||||||||||
|
September 30, |
June 30, |
September 30, |
||||||||||
| Net income (loss) attributable to Alcoa | $ | 172 | $ | (2 | ) | $ | (143 | ) | ||||
| Add: | ||||||||||||
| Net income (loss) attributable to noncontrolling interests |
53 |
(17 |
) |
(32 |
) |
|||||||
| Provision (benefit) for income taxes | 55 | 13 | (33 | ) | ||||||||
| Other expenses (income), net | 31 | 22 | (2 | ) | ||||||||
| Interest expense | 125 | 123 | 124 | |||||||||
| Restructuring and other charges | 9 | 15 | 2 | |||||||||
| Provision for depreciation, depletion, and amortization | 376 | 363 | 366 | |||||||||
| Adjusted EBITDA | $ | 821 | $ | 517 | $ | 282 | ||||||
| Sales | $ | 6,419 | $ | 5,963 | $ | 5,833 | ||||||
| Adjusted EBITDA Margin | 12.8 | % | 8.7 | % | 4.8 | % | ||||||
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation, depletion, and amortization. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
| Free Cash Flow | Quarter ended | ||||||||||||||||||
|
September 30, |
June 30, |
September 30, |
|||||||||||||||||
| Cash from operations | $ | 489 | $ | 537 | $ | 263 | |||||||||||||
| Capital expenditures |
(325 |
) |
(291 |
) |
(302 |
) |
|||||||||||||
| Free cash flow | $ | 164 | $ | 246 | $ | (39 | ) | ||||||||||||
Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand Alcoa’s asset base and are expected to generate future cash flows from operations. It is important to note that Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.
|
Alcoa and subsidiaries |
|||||||||||||||
| Adjusted Income | Quarter ended | ||||||||||||||
|
September 30, |
|||||||||||||||
|
(Loss) |
Diluted |
||||||||||||||
| Net loss attributable to Alcoa | $ | (143 | ) | $ | (0.13 | ) | |||||||||
| Loss from discontinued operations | – | ||||||||||||||
| Loss from continuing operations attributable to Alcoa |
(143 |
) |
(0.13 |
) |
|||||||||||
| Restructuring and other charges | 2 | ||||||||||||||
| Discrete tax items* | 26 | ||||||||||||||
| Other special items** | 147 | ||||||||||||||
| Income from continuing operations attributable to Alcoa – as adjusted |
$ |
32 |
0.03 |
||||||||||||
| Income from continuing operations attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special items (collectively, “special items”). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Loss from continuing operations attributable to Alcoa determined under GAAP as well as Income from continuing operations attributable to Alcoa – as adjusted. | |
| * | Discrete tax items include unbenefitted losses in Italy, China, and Suriname ($35); a benefit as a result of including the anticipated gain from the sale of the Tapoco Hydroelectric Project in the calculation of the estimated annual effective tax rate ($12); and a net charge for other miscellaneous items ($3). |
| ** | Other special items include an increase in the environmental reserve mostly related to the Grasse River remediation in Massena, NY and two new remediation projects at the smelter sites in Baie Comeau, Canada and Mosjøen, Norway ($120); a litigation reserve ($15); uninsured losses related to fire damage to the cast house at the Massena, NY location ($9); and a net unfavorable change in certain mark-to-market energy derivative contracts ($3). |
|
Alcoa and subsidiaries Calculation of Financial Measures (unaudited), continued (dollars in millions) |
||||||||||||
| Days Working Capital | Quarter ended | |||||||||||
|
September 30, |
June 30, |
September 30, |
||||||||||
| Receivables from customers, less allowances | $ | 1,943 | $ | 1,575 | $ | 1,619 | ||||||
| Add: Deferred purchase price receivable* | – | 141 | 81 | |||||||||
| Receivables from customers, less allowances, as adjusted |
1,943 |
1,716 |
1,700 |
|||||||||
| Add: Inventories | 3,194 | 3,051 | 2,973 | |||||||||
| Less: Accounts payable, trade | 2,488 | 2,633 | 2,590 | |||||||||
| Working Capital | $ | 2,649 | $ | 2,134 | $ | 2,083 | ||||||
| Sales | $ | 6,419 | $ | 5,963 | $ | 5,833 | ||||||
| Days Working Capital | 38 | 33 | 33 | |||||||||
| Days Working Capital = Working Capital divided by (Sales/number of days in the quarter). | |
| * | The deferred purchase price receivable relates to an arrangement to sell certain customer receivables to a financial institution on a recurring basis. Alcoa is adding back this receivable for the purposes of the Days Working Capital calculation. |
| Net Debt-to-Capital | Quarter ended September 30, 2012 | |||||||||||||
|
Debt-to- |
Cash and |
Net Debt-to- |
||||||||||||
| Total Debt | ||||||||||||||
| Short-term borrowings | $ | 591 | ||||||||||||
| Commercial paper | 43 | |||||||||||||
| Long-term debt due within one year | 540 | |||||||||||||
| Long-term debt, less amount due within one year | 8,350 | |||||||||||||
| Numerator | $ | 9,524 | $ | 1,432 | $ | 8,092 | ||||||||
| Total Capital | ||||||||||||||
| Total debt | $ | 9,524 | ||||||||||||
| Total equity | 16,854 | |||||||||||||
| Denominator | $ | 26,378 | $ | 1,432 | $ | 24,946 | ||||||||
| Ratio | 36.1 | % | 32.4 | % | ||||||||||
Net debt-to-capital is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management assesses Alcoa’s leverage position after factoring in available cash that could be used to repay outstanding debt.
|
Alcoa and subsidiaries Calculation of Financial Measures (unaudited), continued (dollars in millions, except per metric ton amounts) |
||||||||||||||||||||||||||||||
| Segment Measures | Alumina | Primary Metals | Global Rolled Products |
Engineered |
||||||||||||||||||||||||||
| Adjusted EBITDA | Quarter ended | |||||||||||||||||||||||||||||
|
June 30, |
September 30, |
June 30, |
September 30, |
March 31, |
June 30, |
September 30, |
September 30, |
|||||||||||||||||||||||
| After-tax operating income (ATOI) | $ | 23 | $ | (9 | ) | $ | (3 | ) | $ | (14 | ) | $ | 96 | $ | 95 | $ | 98 | $ | 160 | |||||||||||
| Add: | ||||||||||||||||||||||||||||||
|
Depreciation, depletion, and amortization |
114 |
120 |
133 |
130 |
57 |
57 |
57 |
39 |
||||||||||||||||||||||
| Equity (income) loss |
(1 |
) |
(2 |
) |
9 |
5 |
1 |
2 |
1 |
– |
||||||||||||||||||||
| Income taxes | (6 | ) | (22 | ) | (19 | ) | (19 | ) | 49 | 43 | 44 | 79 | ||||||||||||||||||
| Other | (3 | ) | (1 | ) | (1 | ) | 2 | – | – | (2 | ) | (1 | ) | |||||||||||||||||
| Adjusted EBITDA |
$ |
127 |
$ |
86 |
$ |
119 |
$ |
104 |
$ |
203 |
$ |
197 |
$ |
198 |
$ |
277 |
||||||||||||||
| Production (thousand metric tons) (kmt) |
4,033 |
4,077 |
941 |
938 |
||||||||||||||||||||||||||
| Adjusted EBITDA / Production ($ per metric ton) |
$ |
31 |
$ |
21 |
$ |
126 |
$ |
111 |
||||||||||||||||||||||
| Total shipments (thousand metric tons) (kmt) |
472 |
505 |
501 |
|||||||||||||||||||||||||||
| Adjusted EBITDA/Total shipments ($ per metric ton) |
$ |
430 |
$ |
390 |
$ |
395 |
||||||||||||||||||||||||
| Total sales | $ | 1,367 | ||||||||||||||||||||||||||||
| Adjusted EBITDA Margin |
20 |
% |
||||||||||||||||||||||||||||
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation, depletion, and amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.