AA
$47.36
Alcoa
($.21)
(.44%)
Earnings Details
4th Quarter December 2017
Wednesday, January 17, 2018 4:10:00 PM
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Summary

Alcoa Misses

Alcoa (AA) reported 4th Quarter December 2017 earnings of $1.04 per share on revenue of $3.2 billion. The consensus earnings estimate was $1.23 per share on revenue of $3.4 billion. The Earnings Whisper number was $1.28 per share. Revenue grew 25.1% on a year-over-year basis.

Alcoa Inc manufactures and engineers lightweight metals. It products include aluminum, titanium, and nickel, which are used in aircraft, automobiles, commercial transportation, packaging, oil and gas, defense and industrial applications, among others.

Results
Reported Earnings
$1.04
Earnings Whisper
$1.28
Consensus Estimate
$1.23
Reported Revenue
$3.17 Bil
Revenue Estimate
$3.35 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Alcoa Corporation Reports Fourth Quarter and Full-Year 2017 Results

Fourth Quarter 2017

Net loss of $196 million, or $1.06 per share, includes the financial impacts of previously announced actions taken in line with the Company’s strategic priorities

Excluding special items, adjusted net income of $195 million, or $1.04 per share, up 44 percent sequentially

$775 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) excluding special items, up 38 percent sequentially, on higher alumina pricing

$3.2 billion revenue, up 7 percent sequentially, driven mostly by improved alumina pricing

$1.36 billion cash balance and $1.41 billion of debt, for net debt of $0.05 billion, as of December 31, 2017

--Full Year 2017

Full-year 2017 net income of $217 million, or $1.16 per share and adjusted net income of $563 million, or $3.01 per share

--Adjusted EBITDA excluding special items of $2.35 billion, more than double full-year 2016

--$11.7 billion revenue, up 25 percent from 2016, on higher alumina and aluminum pricing

--$1.2 billion cash from operations; $0.8 billion free cash flow

Company announces freeze of U.S. and Canada salaried defined benefit pension plans, effective January 1, 2021

Continuing progress on strategic priorities to reduce complexity, drive returns and strengthen the balance sheet

Alcoa Corporation (AA), a global leader in bauxite, alumina and aluminum products, today reported fourth quarter and full-year 2017 results.

M, except per share amounts
4Q16(1)
3Q17
4Q17
FY16(1)
FY17
Revenue
$2,537
$2,964
$3,174
$9,318
$11,652
Net (loss) income attributable to Alcoa Corporation
$(125 )
$113
$(196 )
$(400 )
$217
Earnings per share attributable to Alcoa Corporation
$(0.68 )
$0.60
$(1.06 )
$(2.19 )
$1.16
Adjusted net income (loss)
$26
$135
$195
$(227 )
$563
Adjusted earnings per share
$0.14
$0.72
$1.04
$(1.24 )
$3.01
Adjusted EBITDA excluding special items
$335
$561
$775
$1,108
$2,352

The quarter and the full-year reflect ongoing strength in alumina and aluminum pricing as management continued to execute on its strategic priorities to reduce complexity, drive returns and strengthen the balance sheet.

The Company closed the year with $1.36 billion cash, up $239 million sequentially and $505 million year-over-year.

Based on January 2018 market assumptions(2), Alcoa is projecting full-year 2018 adjusted EBITDA, excluding special items, to range between $2.6 billion and $2.8 billion.

"Solid market fundamentals allowed us to deliver our strongest adjusted EBITDA quarter since our launch as an independent, publicly-traded company," said Roy Harvey, President and Chief Executive Officer. "With a series of operating and asset decisions, we also purposefully delivered against our strategic priorities. Our first full year has been truly remarkable. By continuously focusing on our strategic priorities, and supported by favorable markets, we’ve been able to accelerate our plan to strengthen Alcoa’s foundation for an even brighter tomorrow. As we enter 2018, we will continue to execute on our objectives and look forward to delivering more in the new year."

Harvey also announced new actions: "In our continuous drive to strengthen the balance sheet, today we informed salaried employees in the United States and Canada of upcoming changes to their retirement benefits. The decisions were difficult and affect current employees who have been part of our Alcoa family the longest. But to reduce our liabilities, change is necessary; it will enable us to better prepare for an uncertain and cyclical environment as we position our Company for the future."

Fourth Quarter 2017 Results

In fourth quarter 2017, Alcoa reported a net loss of $196 million, or $1.06 per share, compared to net income of $113 million, or $0.60 per share, in third quarter 2017. The 2017 fourth quarter results include $391 million of special items primarily due to previously announced actions relating to the Rockdale Operations and the Portovesme smelter that are aligned with the Company’s strategic priorities to streamline and strengthen Alcoa.

(1)
Alcoa Corporation became an independent, publicly-traded
company on November 1, 2016. Prior to November 1, 2016, Alcoa
Corporation’s financial statements were prepared on a carve-out
basis, as the underlying operations of the Company were previously
consolidated as part of Alcoa Corporation’s former parent
company’s financial statements. Accordingly, the financial results
of Alcoa Corporation for the first ten months of 2016 (including
the first month of fourth quarter 2016) were prepared on such
basis. The carve-out financial statements of Alcoa Corporation are
not necessarily indicative of Alcoa Corporation’s consolidated
results of operations, financial position, and cash flows had it
been a standalone company during the referenced period. See the
Consolidated Financial Statements included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2016 filed
with the United States Securities and Exchange Commission on March
15, 2017 for additional information.
(2)
Based on unpriced sales at $2,200 LME and $390 API, and updated
regional premiums and foreign currencies.

Other special items included charges for income tax valuation allowance and tax rate change adjustments, as well as certain impacts from new U.S. income tax legislation (see U.S. Tax Cuts and Jobs Act of 2017 below), and costs for the partial restart of the Warrick smelter in Indiana. These items were slightly offset by the reduction in a previously established reserve due to the settlement of an Italian energy tariff dispute.

Excluding the impact of special items, fourth quarter 2017 adjusted net income was $195 million, or $1.04 per share, up 44 percent sequentially from $135 million, or $0.72 per share. Adjusted EBITDA excluding special items rose 38 percent to $775 million in fourth quarter 2017 from $561 million in third quarter 2017. The improvement was primarily driven by increased pricing for both alumina and aluminum, somewhat offset by higher energy costs.

Alcoa reported fourth quarter 2017 revenue of $3.2 billion, up 7 percent sequentially, largely due to improved alumina and aluminum prices and increased alumina shipments.

Cash from operations in fourth quarter 2017 was $455 million and free cash flow was $305 million. Cash used for financing activities and investing activities was $53 million and $170 million, respectively, in the fourth quarter of 2017.

Alcoa ended fourth quarter 2017 with cash on hand of $1.36 billion with $1.41 billion of debt, for net debt of $0.05 billion. The Company reported 11 days working capital, a 3-day improvement year-over-year.

2017 Full-Year Results

For full year 2017, Alcoa reported net income of $217 million, or $1.16 per share, compared to a $400 million net loss, or $2.19 per share, for full-year 2016. Excluding special items, the Company reported adjusted net income of $563 million, or $3.01 per share, compared to a $227 million adjusted net loss, or $1.24 per share, in 2016.

Adjusted EBITDA excluding special items was $2.35 billion (Company’s projection was approximately $2.4 billion(3)), more than double the $1.11 billion earned in 2016. Strong alumina and aluminum pricing drove the increase, which was slightly offset by higher costs for energy and raw materials and unfavorable movements in foreign currency exchange rates.

Revenue in 2017 was $11.7 billion, up 25 percent from 2016, reflecting higher alumina and aluminum pricing.

Cash from operations in 2017 was $1.2 billion and free cash flow was $0.8 billion. In 2017, cash used for financing activities and investing activities was $506 million and $226 million, respectively. Alcoa invested $118 million in return-seeking capital projects and controlled sustaining capital expenditures to $287 million in 2017.

Market Update

For 2018, the Company projects balanced global bauxite and alumina markets and a global aluminum deficit of 300 thousand to 700 thousand metric tons. Alcoa is projecting 2018 global aluminum demand growth of 4.25 to 5.25 percent, following the Company’s final 2017 global demand growth rate of 5.25 percent.

Pension and OPEB

Alcoa today announces changes to its U.S. and Canada defined benefit pension plans, and to certain U.S. other post-employment benefits (OPEB), to support the Company’s strategic priority to strengthen the balance sheet by reducing its liabilities.

(3)
Projection as of October 18, 2017 based on: actual results for
September 2017 YTD, outlook for unpriced sales for 4Q17 at $2,100
LME, $470 API, and updated regional premiums and foreign
currencies.

Effective January 1, 2021:

Salaried employees in the United States and Canada, where the Company’s largest portion of liabilities for pension plans and OPEB reside, will cease accruing retirement benefits for future service under defined benefit pension plans.

In connection with this change, approximately 800 affected employees will be transitioned to country-specific defined contribution plans.

The Company will contribute 3 percent of affected participants’ eligible earnings to defined contribution plans in addition to its existing employer savings match.

Benefits earned from these defined benefit pension plans through Dec. 31, 2020 will be protected and included in benefits provided to the employees at the end of their employment with Alcoa or when becoming eligible for retirement, as defined by the plans.

Participants already collecting benefits under the pension plans and those currently covered by collective bargaining agreements are not impacted by these changes.

Alcoa also expects to make discretionary contributions, beyond required contributions, to the U.S. and Canada defined benefit pension plans in 2018 approximating a combined total of $300 million. In connection with the discretionary contributions, the Company intends to make annuity purchases to lower risk and cost while maintaining minimum required contribution levels.

Also, effective January 1, 2021, Alcoa will no longer contribute to pre-Medicare retiree medical coverage for U.S. salaried employees and retirees.

As a result of the above actions, Alcoa expects to both reduce its net pension and OPEB liability by $35 million and record non-cash nonoperating income of approximately $20 million in the first quarter of 2018.

U.S. Tax Cuts and Jobs Act of 2017

In fourth quarter 2017, the Company recorded a charge of $22 million in its income tax provision due to the remeasurement of its deferred income tax positions at the new corporate income tax rate of 21 percent (from 35 percent). Furthermore, Alcoa has completed an analysis determining its best estimate of the impact of the remaining tax reform provisions, which did not result in any additional impact to the Company’s 2017 financial results. The Company continues to finalize its analyses of the tax reform provisions in 2018, but it is not expected to have a material impact on the financial results.

Conference Call

Alcoa will hold its quarterly conference call at 5:00 p.m. Eastern Standard Time (EST) on Wednesday, January 17, 2018 to present fourth quarter and full year 2017 financial results, discuss the business and review market fundamentals.

The call will be webcast via the Company’s homepage on www.alcoa.com. Presentation materials for the call will be available for viewing at approximately 4:15 p.m. EST on January 17, 2018 on the same website. Call information and related details are available under the "Investors" section of www.alcoa.com.

Dissemination of Company Information

Alcoa intends to make future announcements regarding Company developments and financial performance through its website, www.alcoa.com.

About Alcoa Corporation

Alcoa (AA) is a global industry leader in bauxite, alumina and aluminum products built on a foundation of strong values and operating excellence dating back nearly 130 years to the world-changing discovery that made aluminum an affordable and vital part of modern life. Since inventing the aluminum industry, and throughout our history, our talented Alcoans have followed on with breakthrough innovations and best practices that have led to efficiency, safety, sustainability and stronger communities wherever we operate.

Forward-Looking Statements

This press release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "goal," "intends," "may," "outlook," "plans," "projects," "seeks," "sees," "should," "targets," "will," "would," or other words of similar meaning. All statements by Alcoa Corporation that reflect 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 bauxite, alumina, and aluminum, and supply/demand balances; statements, projections or forecasts of future or targeted financial results or operating performance; and statements about strategies, outlook and business and financial prospects. These statements reflect beliefs and assumptions that are based on Alcoa Corporation’s perception of historical trends, current conditions and expected future developments, as well as other factors that management believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and changes in circumstances that are difficult to predict. Although Alcoa Corporation believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: (a) 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 Corporation; (d) the impact of changes in foreign currency exchange rates on costs and results; (e) increases in energy costs; (f) declines in the discount rates used to measure pension liabilities or lower-than-expected investment returns on pension assets, or unfavorable changes in laws or regulations that govern pension plan funding; (g) the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated from restructuring programs and productivity improvement, cash sustainability, technology advancements, and other initiatives; (h) the inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, restarts, expansions, or joint ventures; (i) political, economic and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (j) the outcome of contingencies, including legal proceedings, government or regulatory investigations and environmental remediation; (k) the impact of cyberattacks and potential information technology or data security breaches; and (l) the other risk factors discussed in Item 1A of Alcoa Corporation’s Form 10-K for the fiscal year ended December 31, 2016 and other reports filed by Alcoa Corporation with the U.S. Securities and Exchange Commission (SEC). Alcoa Corporation disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Market projections are subject to the risks discussed above and other risks in the market.

Non-GAAP Financial Measures

Some of the information included in this release is derived from Alcoa’s consolidated financial information but is not presented in Alcoa’s financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Certain of these data are considered "non-GAAP financial measures" under SEC rules. Alcoa Corporation believes that the presentation of non-GAAP financial measures is useful to investors because such measures provide both additional information about the operating performance of Alcoa Corporation and insight on the ability of Alcoa Corporation to meet its financial obligations by adjusting the most directly comparable GAAP financial measure for the impact of, among others, "special items" as defined by the Company, non-cash items in nature, and/or nonoperating expense or income items. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. 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.

This release includes a range of forecasted 2018 Adjusted EBITDA for the Company. Alcoa Corporation has not provided a reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable GAAP financial measure for the following reasons. The Company’s financial results are heavily dependent on market-driven factors, such as LME-based prices for aluminum, index- and spot-based prices for alumina, and foreign currency exchange rates. As such, the Company may experience significant volatility on a daily basis related to its forecasted Adjusted EBITDA. Management applies estimated sensitivities, such as relating to aluminum and alumina prices and foreign currency exchange rates, to the components that comprise Adjusted EBITDA. However, a similar analysis cannot be performed relating to the components necessary to reconcile Adjusted EBITDA to the most directly comparable GAAP financial measure without unreasonable effort due to the additional variability and complexity associated with forecasting such items. Consequently, management believes such reconciliation would imply a degree of precision that would be confusing and/or potentially misleading to investors.

Alcoa Corporation and subsidiaries
Statement of Consolidated Operations (unaudited)
(dollars in millions, except per-share amounts)
Quarter ended
December 31,
September 30,
December 31,
2016(1)
2017
2017
Sales
$
2,537
$
2,964
$
3,174
Cost of goods sold (exclusive of expenses below)
2,123
2,361
2,359
Selling, general administrative, and other expenses
92
70
70
Research and development expenses
7
8
9
Provision for depreciation, depletion, and amortization
182
194
187
Restructuring and other charges
209
(10 )
297
Interest expense
46
26
27
Other expenses, net
1
27
9
Total costs and expenses
2,660
2,676
2,958
(Loss) income before income taxes
(123 )
288
216
Provision for income taxes
6
119
272
Net (loss) income
(129 )
169
(56 )
Less: Net (loss) income attributable to noncontrolling interest
(4 )
56
140
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION
$
(125 )
$
113
$
(196 )
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON
SHAREHOLDERS:
Basic:
Net (loss) income
$
(0.68 )
$
0.61
$
(1.06 )
Average number of shares
182,688,806
184,594,233
185,078,245
Diluted:
Net (loss) income
$
(0.68 )
$
0.60
$
(1.06 )
Average number of shares
182,688,806
187,155,231
185,078,245
(1)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
month of October 2016 included in the quarter ended December 31,
2016 were prepared on such basis. The carve-out financial statements
of Alcoa Corporation are not necessarily indicative of Alcoa
Corporation’s consolidated results of operations had it been a
standalone company during the referenced period. See the Combined
Financial Statements included in Exhibit 99.1 to Alcoa Corporation’s
Form 10 Registration Statement and the Consolidated Financial
Statements included in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2016 filed with the United States
Securities and Exchange Commission on October 11, 2016 and March 15,
2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations (unaudited), continued
(dollars in millions, except per-share amounts)
Year ended
December 31,
2016(1)
2017
Sales
$
9,318
$
11,652
Cost of goods sold (exclusive of expenses below)
7,898
9,072
Selling, general administrative, and other expenses
359
284
Research and development expenses
33
32
Provision for depreciation, depletion, and amortization
718
750
Restructuring and other charges
318
309
Interest expense
243
104
Other income, net
(89 )
(58 )
Total costs and expenses
9,480
10,493
(Loss) income before income taxes
(162 )
1,159
Provision for income taxes
184
600
Net (loss) income
(346 )
559
Less: Net income attributable to noncontrolling interest
54
342
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION
$
(400 )
$
217
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON
SHAREHOLDERS:
Basic:
Net (loss) income
$
(2.19 )
$
1.18
Average number of shares
182,538,152
184,420,404
Diluted:
Net (loss) income
$
(2.19 )
$
1.16
Average number of shares
182,538,152
186,981,665
Common stock outstanding at the end of the period
182,930,995
185,200,713
(1)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
first ten months included in the year ended December 31, 2016 were
prepared on such basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
consolidated results of operations had it been a standalone company
during the referenced period. See the Combined Financial Statements
included in Exhibit 99.1 to Alcoa Corporation’s Form 10 Registration
Statement and the Consolidated Financial Statements included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2016 filed with the United States Securities and Exchange Commission
on October 11, 2016 and March 15, 2017, respectively, for additional
information.
Alcoa Corporation and subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
December 31,
December 31,
2016
2017
ASSETS
Current assets:
Cash and cash equivalents
$
853
$
1,358
Receivables from customers
668
811
Other receivables
166
232
Inventories
1,160
1,453
Fair value of derivative contracts
51
113
Prepaid expenses and other current assets
283
271
Total current assets
3,181
4,238
Properties, plants, and equipment
22,550
23,046
Less: accumulated depreciation, depletion, and amortization
13,225
13,908
Properties, plants, and equipment, net
9,325
9,138
Investments
1,358
1,410
Deferred income taxes
741
814
Fair value of derivative contracts
468
128
Other noncurrent assets
1,668
1,719
Total assets
$ 16,741
$ 17,447
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,455
$
1,898
Accrued compensation and retirement costs
456
459
Taxes, including income taxes
147
282
Fair value of derivative contracts
35
185
Other current liabilities
707
412
Long-term debt due within one year
21
16
Total current liabilities
2,821
3,252
Long-term debt, less amount due within one year
1,424
1,388
Accrued pension benefits
1,851
2,335
Accrued other postretirement benefits
1,166
1,100
Asset retirement obligations
604
617
Environmental remediation
264
258
Fair value of derivative contracts
234
1,105
Noncurrent income taxes
310
318
Other noncurrent liabilities and deferred credits
370
279
Total liabilities
9,044
10,652
EQUITY
Alcoa Corporation shareholders’ equity:
Common stock
2
2
Additional capital
9,531
9,590
Retained (deficit) earnings
(104 )
113
Accumulated other comprehensive loss
(3,775 )
(5,185 )
Total Alcoa Corporation shareholders’ equity
5,654
4,520
Noncontrolling interest
2,043
2,275
Total equity
7,697
6,795
Total liabilities and equity
$ 16,741
$ 17,447
Alcoa Corporation and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
Year ended
December 31,
2016(6)
2017
CASH FROM OPERATIONS
Net (loss) income
$
(346 )
$
559
Adjustments to reconcile net (loss) income to cash from operations:
Depreciation, depletion, and amortization
718
752
Deferred income taxes
(46 )
176
Equity earnings, net of dividends
48
9
Restructuring and other charges
318
309
Net gain from investing activities - asset sales
(164 )
(116 )
Net periodic pension benefit cost
66
111
Stock-based compensation
28
24
Other
(16 )
32
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments:
(Increase) in receivables
(234 )
(118 )
Decrease (Increase) in inventories
1
(238 )
(Increase) Decrease in prepaid expenses and other current assets
(52 )
43
Increase in accounts payable, trade
6
377
(Decrease) in accrued expenses(1)
(320 )
(563 )
(Decrease) Increase in taxes, including income taxes
(148 )
111
Pension contributions
(66 )
(106 )
(Increase) in noncurrent assets(2)
(184 )
(99 )
Increase (Decrease) in noncurrent liabilities
80
(39 )
CASH (USED FOR) PROVIDED FROM OPERATIONS
(311 )
1,224
FINANCING ACTIVITIES
Net transfers from former parent company
802
-
Cash paid to former parent company related to separation(3),(4)
(1,072 )
(247 )
Net change in short-term borrowings (original maturities of three
(4 )
7
months or less)
Additions to debt (original maturities greater than three months)(3)
-
21
Payments on debt (original maturities greater than three months)
(34 )
(60 )
Proceeds from the exercise of employee stock options
10
43
Contributions from noncontrolling interest
48
80
Distributions to noncontrolling interest
(233 )
(342 )
Other
-
(8 )
CASH USED FOR FINANCING ACTIVITIES
(483 )
(506 )
INVESTING ACTIVITIES
Capital expenditures
(404 )
(405 )
Proceeds from the sale of assets and businesses(5)
112
245
Additions to investments
(3 )
(66 )
Sales of investments
146
-
Net change in restricted cash(3)
1,226
-
CASH PROVIDED FROM (USED FOR) INVESTING ACTIVITIES
1,077
(226 )
13
13
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
Net change in cash and cash equivalents
296
505
Cash and cash equivalents at beginning of year
557
853
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
853
$
1,358
(1)
The (Decrease) in accrued expenses line item for the year ended
December 31, 2017 includes a $238 payment for the early
termination of a power supply contract related to Alcoa’s Rockdale
(Texas) smelter, which has been curtailed since the end of 2008.
(2)
The (Increase) in noncurrent assets line item for the year ended
December 31, 2016 includes a $200 prepayment related to a natural
gas supply agreement for three alumina refineries in Western
Australia, which are owned by Alcoa Corporation’s majority-owned
subsidiary, Alcoa of Australia Limited.
(3)
In September 2016, Alcoa Nederland Holding B.V., a wholly-owned
subsidiary of Alcoa Corporation, issued $1,250 in new senior notes
in preparation for the separation of the Company from its former
parent company (completed on November 1, 2016). The net proceeds
of $1,228 from the debt issuance, along with $81 of cash on hand
(see below) from the former parent company, were required to be
placed in escrow contingent on completion of the separation
transaction. As a result, the $1,228 of escrowed cash was recorded
as restricted cash on Alcoa Corporation’s Combined Balance Sheet
as of September 30, 2016. The issuance of the debt and the
increase in restricted cash both in the amount of $1,228 were not
reflected in the Statement of Consolidated Cash Flows for the year
ended December 31, 2016 as these represent noncash financing and
investing activities, respectively. The $81 represented the
necessary cash to fund the redemption of the notes, pay all
regularly scheduled interest on the notes through a specified date
defined in the notes, and a premium on the principal of the notes
if the separation had not been completed by a certain time as
defined in the notes. The subsequent release of the $1,228 from
escrow was reflected in the Statement of Consolidated Cash Flows
for the year ended December 31, 2016 as a cash inflow in the Net
change in restricted cash line item. Of this amount, $1,072 was
paid to Alcoa Corporation’s former parent company in conjunction
with the completion of the separation transaction.
(4)
In accordance with the terms of the Separation and Distribution
Agreement related to Alcoa Corporation’s separation from its
former parent company into a standalone, publicly-traded company,
the Company paid $243 of the net after-tax proceeds from the sale
of the Yadkin Hydroelectric Project to the former parent company.
(5)
Proceeds from the sale of assets and businesses for the year ended
December 31, 2016 includes a cash outflow for cash paid as a
result of a post-closing adjustment associated with the December
2014 divestiture of an ownership stake in a smelter in the United
States.
(6)
Prior to November 1, 2016, Alcoa Corporation’s financial
statements were prepared on a carve-out basis, as the underlying
operations of the Company were previously consolidated as part of
Alcoa Corporation’s former parent company’s financial statements.
Accordingly, the cash flows of Alcoa Corporation for the first ten
months included in the year ended December 31, 2016 were prepared
on such basis. The carve-out financial statements of Alcoa
Corporation are not necessarily indicative of Alcoa Corporation’s
consolidated cash flows had it been a standalone company during
the referenced period. See the Combined Financial Statements
included in Exhibit 99.1 to Alcoa Corporation’s Form 10
Registration Statement and the Consolidated Financial Statements
included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2016 filed with the United States Securities
and Exchange Commission on October 11, 2016 and March 15, 2017,
respectively, for additional information.
Alcoa Corporation and subsidiaries
Segment Information(1) (unaudited)
(dollars in millions; bauxite production and shipments in
millions of dry metric tons (mdmt);
alumina and aluminum production and shipments in thousands of
metric tons (kmt))
4Q16(8)
2016(8)
1Q17
2Q17
3Q17
4Q17
2017
Bauxite:
Production(2),(3) (mdmt)
11.8
45.0
11.1
11.0
11.6
12.1
45.8
Total shipments (mdmt)
12.2
46.9
11.6
11.5
12.3
12.3
47.7
Third-party sales
$
91
$
315
$
70
$
80
$
104
$
79
$
333
Intersegment sales
$
202
$
751
$
219
$
208
$
221
$
227
$
875
Adjusted EBITDA
$
102
$
375
$
110
$
98
$
113
$
106
$
427
Depreciation, depletion, and amortization
$
20
$
77
$
18
$
19
$
24
$
21
$
82
Alumina:
Production (kmt)
3,295
13,251
3,211
3,249
3,305
3,331
13,096
Third-party shipments (kmt)
2,276
9,071
2,255
2,388
2,271
2,306
9,220
Intersegment shipments (kmt)
1,169
4,703
947
1,152
1,153
1,223
4,475
Third-party sales
$
618
$
2,300
$
734
$
749
$
713
$
937
$
3,133
Intersegment sales
$
377
$
1,307
$
361
$
384
$
398
$
580
$
1,723
Adjusted EBITDA
$
171
$
378
$
297
$
227
$
203
$
562
$
1,289
Depreciation and amortization
$
47
$
186
$
49
$
53
$
53
$
52
$
207
Equity (loss) income
$
(10 )
$
(40 )
$
1
$
(6 )
$
(5 )
$
5
$
(5 )
Aluminum:
Primary aluminum production (kmt)
587
2,368
559
575
596
598
2,328
Third-party aluminum shipments(4) (kmt)
852
3,147
801
833
868
854
3,356
Third-party sales
$
1,782
$
6,531
$ 1,806
$ 1,988
$ 2,090
$ 2,143
$
8,027
Intersegment sales
$
4
$
42
$
4
$
3
$
9
$
5
$
21
Adjusted EBITDA
$
152
$
680
$
206
$
221
$
303
$
234
$
964
Depreciation and amortization
$
104
$
414
$
101
$
108
$
106
$
104
$
419
Equity (loss) income
$ -
$
(24 )
$
(7 )
$
3
$
(7 )
$
(8 )
$
(19 )
Reconciliation of total segment Adjusted EBITDA to consolidated
net (loss) income attributable to Alcoa Corporation:
Total segment Adjusted EBITDA
$
425
$
1,433
$
613
$
546
$
619
$
902
$
2,680
Unallocated amounts:
Impact of LIFO
(28 )
(10 )
(14 )
(8 )
(14 )
(55 )
(91 )
Metal price lag(5)
4
9
6
11
5
4
26
Corporate expense(6)
(44 )
(177 )
(34 )
(36 )
(34 )
(32 )
(136 )
Provision for depreciation, depletion, and amortization
(182 )
(718 )
(179 )
(190 )
(194 )
(187 )
(750 )
Restructuring and other charges
(209 )
(318 )
(10 )
(12 )
10
(297 )
(309 )
Interest expense
(46 )
(243 )
(26 )
(25 )
(26 )
(27 )
(104 )
Other (expenses) income, net
(1 )
89
100
(6 )
(27 )
(9 )
58
Other(7)
(42 )
(227 )
(38 )
(43 )
(51 )
(83 )
(215 )
Consolidated (loss) income before income taxes
(123 )
(162 )
418
237
288
216
1,159
Provision for income taxes
(6 )
(184 )
(110 )
(99 )
(119 )
(272 )
(600 )
Net loss (income) attributable to noncontrolling interest
4
(54 )
(83 )
(63 )
(56 )
(140 )
(342 )
Consolidated net (loss) income attributable to Alcoa Corporation
$
(125 )
$
(400 )
$
225
$
75
$
113
$
(196 )
$
217
================================================================= ==================== ==================== ============== ==================== ==================== ==================== ====== ==================== ==================== ==================== ===== ==================== ==================== ==================== ===== ==================== ==================== ==================== ===== ==================== ==================== ==================== ===== ==================== ==================== ==================== ====== ====================
The difference between certain segment totals and consolidated
amounts is in Corporate.
(1)
Effective in the first quarter of 2017, management elected to change
the profit and loss measure of Alcoa Corporation’s reportable
segments from After-tax operating income (ATOI) to Adjusted EBITDA
(Earnings before interest, taxes, depreciation, and amortization)
for internal reporting and performance measurement purposes. This
change was made to enhance the transparency and visibility of the
underlying operating performance of each segment. Alcoa Corporation
calculates Adjusted EBITDA for each of its segments as Total sales
(third-party and intersegment) minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses; and
Research and development expenses. Previously, Alcoa Corporation
calculated ATOI for each of its segments as Adjusted EBITDA minus
(plus) the following items: Provision for depreciation, depletion,
and amortization; Equity loss (income); Loss (gain) on certain asset
sales; and Income taxes. The Adjusted EBITDA for each of Alcoa
Corporation’s segments may not be comparable to similarly titled
measures of other companies’ reportable segments.
Also effective in the first quarter of 2017, management combined
Alcoa Corporation’s aluminum smelting, casting, and rolling
businesses, along with the majority of the energy business, into a
new Aluminum business unit. This new business unit is managed as a
single operating segment. Prior to this change, each of these
businesses were managed as individual operating segments and
comprised the Aluminum, Cast Products, Energy, and Rolled Products
segments. As a result, Alcoa Corporation’s operating and reportable
segments are Bauxite, Alumina, and Aluminum.
Segment information for all prior periods presented was revised to
reflect the new segment structure, as well as the new measure of
profit and loss.
(2)
The production amounts do not include additional bauxite
(approximately 3 million metric tons per annum) that Alcoa
Corporation is entitled to receive (i.e. an amount in excess of its
equity ownership interest) from certain other partners at the mine
in Guinea.
(3)
In the second quarter of 2017, Alcoa Corporation revised the
respective production amount for the 2016 first, second, and third
quarters to reflect refinements to individual mine data. As a
result, the production reflected in this table for the referenced
quarters was revised from prior period reports. Total bauxite
production for annual 2016 remains unchanged at 45.0 mdmt.
(4)
The Aluminum segment’s third-party aluminum shipments are composed
of both its primary aluminum and rolling operations.
(5)
Metal price lag describes the timing difference created when the
average price of metal sold differs from the average cost of the
metal when purchased by Alcoa Corporation’s rolled aluminum
operations. In general, when the price of metal increases, metal
price lag is favorable, and when the price of metal decreases, metal
price lag is unfavorable.
(6)
Corporate expense is primarily composed of general administrative
and other expenses of operating the corporate headquarters and other
global administrative facilities.
(7)
Other includes, among other items, the Adjusted EBITDA of previously
closed operations as applicable, pension and other postretirement
benefit expenses associated with closed and sold operations, and
intersegment profit elimination.
(8)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
month of October 2016 included in the quarter ended December 31,
2016 and for the first ten months included in the year ended
December 31, 2016 were prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s consolidated results of operations
had it been a standalone company during the referenced periods. See
the Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2016 filed with the United
States Securities and Exchange Commission on October 11, 2016 and
March 15, 2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions, except per-share amounts)
Adjusted Income (Loss)
Quarter ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2016(5)
2017
2017
2016(5)
2017
Net (loss) income attributable to Alcoa Corporation
$
(125 )
$
113
$
(196 )
$
(400 )
$
217
Special items:
Restructuring and other charges
209
(10 )
297
318
309
Discrete tax items(1)
(11 )
13
82
-
93
Other special items(2)
30
36
31
(65 )
(9 )
Tax impact(3)
(22 )
(11 )
(7 )
(25 )
(24 )
Noncontrolling interest impact(3)
(55 )
(6 )
(12 )
(55 )
(23 )
Subtotal
151
22
391
173
346
Net income (loss) attributable to Alcoa Corporation - as adjusted
$
26
$
135
$
195
$
(227 )
$
563
Diluted EPS(4):
Net (loss) income attributable to Alcoa Corporation common
$ (0.68 )
$ 0.60
$ (1.06 )
$
(2.19 )
$
1.16
shareholders
Net income (loss) attributable to Alcoa Corporation common
0.14
0.72
1.04
(1.24 )
3.01
shareholders - as adjusted
Net income (loss) attributable to Alcoa Corporation - 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 Corporation 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
Corporation determined under GAAP as well as Net income (loss)
attributable to Alcoa Corporation - as adjusted.
(1)
Discrete tax items include the following:
?
for the quarter ended December 31, 2016, a benefit for the
remeasurement of certain deferred income tax assets of a subsidiary
in Brazil due to a tax rate change;
?
for the quarter ended September 30, 2017, a net charge for several
small items;
?
for the quarter ended December 31, 2017, a charge for a valuation
allowance related to certain non-U.S. deferred income tax assets
($60), a charge for the remeasurement of certain non-U.S. deferred
income tax assets due to a tax rate change ($16), a charge for the
remeasurement of U.S. deferred income tax assets and liabilities at
the new corporate income tax rate of 21% (from 35%) under the 2017
Tax Cuts and Jobs Act signed into law on December 22, 2017 ($22),
and a net benefit for several other items ($16);
?
for the year ended December 31, 2016, a benefit for the
remeasurement of certain deferred income tax assets of a subsidiary
in Brazil due to a tax rate change ($11) and a net charge for
several other items ($11); and
?
for the year ended December 31, 2017, a charge for a valuation
allowance related to certain non-U.S. deferred income tax assets
($60), a charge for the remeasurement of certain non-U.S. deferred
income tax assets due to a tax rate change ($26), a charge for the
remeasurement of U.S. deferred income tax assets and liabilities at
the new corporate income tax rate of 21% (from 35%) under the 2017
Tax Cuts and Jobs Act signed into law on December 22, 2017 ($22),
and a net benefit for several other items ($15).
(2)
Other special items include the following:
?
for the quarter ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company
($19), interest expense incurred in October 2016 related to debt
that was issued in September 2016 in preparation for the separation
of Alcoa Corporation from its former parent company (completed on
November 1, 2016) ($8), a net unfavorable change in certain
mark-to-market energy derivative contracts ($2), and an inventory
adjustment at a curtailed refinery in the United States ($1);
?
for the quarter ended September 30, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($17), settlement
of legacy tax matters in Brazil ($11), a net unfavorable change in
certain mark-to-market energy derivative contracts ($11), a
favorable tax impact related to the interim period treatment of
operational losses in certain jurisdictions for which no tax benefit
was recognized ($8), an unfavorable impact due to the near-term
power market exposure as a result of renegotiating a hedging
contract related to forecasted future spot market power purchases
for the Portland (Australia) smelter ($8), and a favorable tax
impact resulting from the difference between Alcoa Corporation’s
consolidated estimated annual effective tax rate and the statutory
rates applicable to special items ($3);
?
for the quarter ended December 31, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($29), a favorable
tax impact resulting from the difference between Alcoa Corporation’s
consolidated estimated annual effective tax rate and the statutory
rates applicable to special items ($13), a write-down of inventory
related to the permanent closure of the Rockdale (Texas) smelter
($6), an unfavorable tax impact related to the interim period
treatment of operational losses in certain jurisdictions for which
no tax benefit was recognized ($6), preparation and contingency
costs for a potential work stoppage (lockout commenced on January
11, 2018) at a non-U.S. smelter ($4), an additional gain on the sale
of the Yadkin Hydroelectric Project in the United States ($2), and a
net unfavorable change in certain mark-to-market energy derivative
contracts ($1);
?
for the year ended December 31, 2016, a gain on the sale of wharf
property near the Intalco (Washington) smelter ($118), costs
associated with the separation of Alcoa Corporation from its former
parent company ($73), a gain on the sale of an equity investment in
a natural gas pipeline in Australia ($27), a benefit for an
arbitration recovery related to a 2010 fire at the Iceland smelter
($14), interest expense incurred in October 2016 related to debt
that was issued in September 2016 in preparation for the separation
of Alcoa Corporation from its former parent company (completed on
November 1, 2016) ($8), a write-down of inventory related to the
permanent closure of a smelter in the United States and adjustments
at two previously curtailed facilities ($7), and a net unfavorable
change in certain mark-to-market energy derivative contracts ($6);
and
?
for the year ended December 31, 2017, a gain on the sale of the
Yadkin Hydroelectric Project in the United States ($122), costs
related to the partial restart of the Warrick (Indiana) smelter
($46), a net unfavorable change in certain mark-to-market energy
derivative contracts ($25), an unfavorable impact due to the
near-term power market exposure as a result of renegotiating a
hedging contract related to forecasted future spot market power
purchases for the Portland (Australia) smelter ($21), settlement of
legacy tax matters in Brazil ($11), a write-down of inventory
related to the permanent closure of the Rockdale (Texas) smelter
($6), and preparation and contingency costs for a potential work
stoppage (lockout commenced on January 11, 2018) at a non-U.S.
smelter ($4).
(3)
The tax impact on special items is based on the applicable statutory
rates in the jurisdictions where the special items occurred. The
noncontrolling interest impact on special items represents Alcoa
Corporation’s partner’s share of certain special items.
(4)
In any given period, the average number of shares applicable to
diluted EPS for Net (loss) income attributable to Alcoa Corporation
common shareholders may exclude certain share equivalents as their
effect is anti-dilutive. However, certain of these share equivalents
may become dilutive in the EPS calculation applicable to Net income
(loss) attributable to Alcoa Corporation common shareholders - as
adjusted due to a larger and/or positive numerator. Specifically:
?
for the quarter ended December 31, 2016, share equivalents
associated with outstanding employee stock options and awards were
dilutive based on Net income attributable to Alcoa Corporation
common shareholders - as adjusted, resulting in a diluted average
number of shares of 184,448,353;
?
for the quarter ended September 30, 2017, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders - as adjusted, resulting in a
diluted average number of shares of 187,155,231;
?
for the quarter ended December 31, 2017, share equivalents
associated with outstanding employee stock options and awards were
dilutive based on Net income attributable to Alcoa Corporation
common shareholders - as adjusted, resulting in a diluted average
number of shares of 188,027,654;
?
for the year ended December 31, 2016, no additional share
equivalents were dilutive based on Net loss attributable to Alcoa
Corporation common shareholders - as adjusted, resulting in a
diluted average number of shares of 182,538,152; and
?
for the year ended December 31, 2017, no additional share
equivalents were dilutive based on Net income attributable to Alcoa
Corporation common shareholders - as adjusted, resulting in a
diluted average number of shares of 186,981,665.
(5)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
month of October 2016 included in the quarter ended December 31,
2016 and for the first ten months included in the year ended
December 31, 2016 were prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s consolidated results of operations
had it been a standalone company during the referenced periods. See
the Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2016 filed with the United
States Securities and Exchange Commission on October 11, 2016 and
March 15, 2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2016(2)
2017
2017
2016(2)
2017
Net (loss) income attributable to Alcoa Corporation
$ (125 )
$
113
$ (196 )
$
(400 )
$
217
Add:
Net (loss) income attributable to noncontrolling interest
(4 )
56
140
54
342
Provision for income taxes
6
119
272
184
600
Other expenses (income), net
1
27
9
(89 )
(58 )
Interest expense
46
26
27
243
104
Restructuring and other charges
209
(10 )
297
318
309
Provision for depreciation, depletion, and amortization
182
194
187
718
750
Adjusted EBITDA
$
315
$
525
$
736
$ 1,028
$
2,264
Special items(1)
20
36
39
80
88
Adjusted EBITDA, excluding special items
$
335
$
561
$
775
$ 1,108
$
2,352
Alcoa Corporation’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 Corporation’s operating performance and the
Company’s ability to meet its financial obligations. The Adjusted
EBITDA presented may not be comparable to similarly titled measures
of other companies.
(1)
Special items include the following (see reconciliation of Adjusted
Income (Loss) above for additional information):
?
for the quarter ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company ($19)
and an inventory adjustment at a curtailed refinery in the United
States ($1);
?
for the quarter ended September 30, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($17), settlement
of legacy tax matters in Brazil ($11), and an unfavorable impact due
to the near-term power market exposure as a result of renegotiating
a hedging contract related to forecasted future spot market power
purchases for the Portland (Australia) smelter ($8);
?
for the quarter ended December 31, 2017, costs related to the
partial restart of the Warrick (Indiana) smelter ($29), a write-down
of inventory related to the permanent closure of the Rockdale
(Texas) smelter ($6), and preparation and contingency costs for a
potential work stoppage (lockout commenced on January 11, 2018) at a
non-U.S. smelter ($4);
?
for the year ended December 31, 2016, costs associated with the
separation of Alcoa Corporation from its former parent company ($73)
and a write-down of inventory related to the permanent closure of a
smelter in the United States and adjustments at two previously
curtailed facilities ($7); and
?
for the year ended December 31, 2017, costs related to the partial
restart of the Warrick (Indiana) smelter ($46), an unfavorable
impact due to the near-term power market exposure as a result of
renegotiating a hedging contract related to forecasted future spot
market power purchases for the Portland (Australia) smelter ($21),
settlement of legacy tax matters in Brazil ($11), a write-down of
inventory related to the permanent closure of the Rockdale (Texas)
smelter ($6), and preparation and contingency costs for a potential
work stoppage (lockout commenced on January 11, 2018) at a non-U.S.
smelter ($4).
(2)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the results of operations of Alcoa Corporation for the
month of October 2016 included in the quarter ended December 31,
2016 and for the first ten months included in the year ended
December 31, 2016 were prepared on such basis. The carve-out
financial statements of Alcoa Corporation are not necessarily
indicative of Alcoa Corporation’s consolidated results of operations
had it been a standalone company during the referenced periods. See
the Combined Financial Statements included in Exhibit 99.1 to Alcoa
Corporation’s Form 10 Registration Statement and the Consolidated
Financial Statements included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2016 filed with the United
States Securities and Exchange Commission on October 11, 2016 and
March 15, 2017, respectively, for additional information.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2016(1)
2017
2017
2016(1)
2017
Cash from operations
$
239
$
384
$
455
$ (311 )
$
1,224
Capital expenditures
(146 )
(96 )
(150 )
(404 )
(405 )
Free cash flow
$
93
$
288
$
305
$ (715 )
$
819
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, which are both necessary to
maintain and expand Alcoa Corporation’s asset base and 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.
(1)
Prior to November 1, 2016, Alcoa Corporation’s financial statements
were prepared on a carve-out basis, as the underlying operations of
the Company were previously consolidated as part of Alcoa
Corporation’s former parent company’s financial statements.
Accordingly, the cash flows of Alcoa Corporation for the month of
October 2016 included in the quarter ended December 31, 2016 and for
the first ten months included in the year ended December 31, 2016
were prepared on such basis. The carve-out financial statements of
Alcoa Corporation are not necessarily indicative of Alcoa
Corporation’s consolidated cash flows had it been a standalone
company during the referenced periods. See the Combined Financial
Statements included in Exhibit 99.1 to Alcoa Corporation’s Form 10
Registration Statement and the Consolidated Financial Statements
included in the Company’s Annual Report on Form 10-K for the period
ended December 31, 2016 filed with the United States Securities and
Exchange Commission on October 11, 2016 and March 15, 2017,
respectively, for additional information.
Net Debt
December 31,
September 30,
December 31,
2016
2017
2017
Short-term borrowings
$
1
$
3
$
8
Long-term debt due within one year
21
17
16
Long-term debt, less amount due within one year
1,424
1,384
1,388
Total debt
$
1,446
$
1,404
$
1,412
Less: Cash and cash equivalents
853
1,119
1,358
Net debt
$
593
$
285
$
54
Net debt is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after considering available
cash that could be used to repay outstanding debt.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20180117006355/en/

SOURCE: Alcoa Corporation

Alcoa Corporation
Investor Contact:
James Dwyer,+1 412-992-5450
James.Dwyer@alcoa.com
or
Media Contact:
Monica Orbe, +1 412-315-2896
Monica.Orbe@alcoa.com