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Alcoa Reports Fourth Quarter Income From Continuing Operations of $0.21 Per Share; Income of $0.06 Per Share Excluding Special Items
Company Ends 2012 in Strong Liquidity Position; Record Results in Mid
and Downstream
Forecasting 7 Percent Growth in Global Aluminum Demand in 2013
4Q 2012 Highlights
Income from continuing operations of $242 million, or $0.21 per share;
excluding special items, income from continuing operations of $64
million, or $0.06 per share
Revenue of $5.9 billion, up 1 percent sequentially, down 2 percent
from 4Q 2011
Cash from operations of $933 million, up $670 million from 3Q 2012
Free cash flow of $535 million
Strong liquidity with cash on hand of $1.9 billion
Record low 24 days working capital
Record results in Global Rolled Products, Engineered Products &
Solutions
Forecasting 7 percent growth in global aluminum demand in 2013
Full-Year 2012 Highlights
Income from continuing operations of $191 million, or $0.18 per share;
excluding special items, income from continuing operations of $262
million, or $0.24 per share
Revenue of $23.7 billion, down 5 percent from 2011, on lower LME
pricing
Cash from operations of $1.5 billion
Free cash flow of $236 million
Debt-to-capital ratio 35 percent; Net debt-to-capital ratio 30 percent
Debt of $8.8 billion; Net debt of $7 billion, lowest level since 2006
Record results in Global Rolled Products, Engineered Products &
Solutions
531,000 metric tons of smelting capacity taken offline to improve
competitive position
NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE:AA) today reported income from continuing operations of $242
million, or $0.21 per share, in fourth quarter 2012. Excluding the net
positive impact of special items, income from continuing operations was
$64 million, or $0.06 per share.
Fourth quarter 2012 income compares to a loss from continuing operations
of $143 million in third quarter 2012, and a loss of $193 million in
fourth quarter 2011.
For the full-year 2012, Alcoa reported income from continuing operations
of $191 million, or $0.18 per share, compared with $614 million, or
$0.55 per share, in 2011. Year-on-year the realized aluminum price fell
12 percent, equating to roughly $1 billion in market impact.
Despite low aluminum prices, Alcoa generated full-year income and met
all of its cash sustainability targets for the fourth consecutive year,
ending 2012 in a strong cash position. The Company delivered $1.3
billion in productivity and overhead improvements, reduced days working
capital by three days, and ended the year in a strong liquidity position
with net debt at its lowest level since 2006 and $1.9 billion cash on
hand.
“Alcoa hit record profitability in our mid and downstream businesses,
and continued to drive efficiency in our upstream businesses in the
fourth quarter, all while cutting debt and maintaining our cash
position,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive
Officer.
“We overcame volatile metal prices and global economic instability to
deliver on our targets for the fourth year in a row. We enter 2013 in a
strong position to maximize profitable growth.”
In 2013, Alcoa sees global aluminum demand growth of 7 percent, up from
6 percent in 2012 and ahead of the 6.5 percent rate required to meet the
Company’s forecast of a doubling in global aluminum demand between 2010
and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent
growth in 2010.
In 2013, Alcoa projects global growth in the aerospace (9-10 percent),
automotive (1-4 percent), commercial transportation (2-7 percent),
packaging (2-3 percent), building and construction (4-5 percent), and
industrial gas turbine (3-5 percent) markets.
Fourth Quarter 2012
Alcoa reported fourth quarter 2012 net income of $242 million, or $0.21
per share, compared to a net loss of $143 million, or $0.13 per share,
in third quarter 2012 and $191 million, or $0.18 per share, in fourth
quarter 2011. Adjusted EBITDA in fourth quarter 2012 was $597 million,
an increase of $315 million over third quarter 2012 and an increase of
$152 million over fourth quarter 2011.
Special items in fourth quarter 2012 delivered a net gain of $178
million, primarily associated with the closing of the Tapoco
Hydroelectric Project asset sale, which resulted in a $161 million
after-tax gain. Another $78 million in gains, including those associated
with discrete income tax items and the positive impact of mark-to-market
changes on certain energy contracts, were mostly offset by the negative
impact of restructuring, primarily related to plant curtailments and
asset impairments, and the Massena, New York site fire.
Revenue for fourth quarter 2012 was $5.9 billion, up 1 percent compared
with third quarter 2012, but down 2 percent compared with fourth quarter
2011 revenue of $6 billion.
Sequentially, the higher fourth quarter revenues were primarily due to
improved realized pricing for aluminum (up 5 percent).
Alcoa delivered outstanding results across all businesses in the fourth
quarter. Alcoa’s Primary Metals business delivered After-Tax Operating
Income (ATOI) of $316 million in the fourth quarter, up $348 million
over fourth quarter 2011 despite a 2 percent drop in realized metal
prices. Fourth quarter 2012 ATOI was favorably impacted by the closing
of the Tapoco asset sale. At the end of fourth quarter 2012, Global
Primary Products had moved down the smelting cost curve by 4 percentage
points.
The Company’s midstream and downstream businesses continued to turn in
record performance, hitting new profitability highs. Global Rolled
Products achieved record fourth quarter ATOI of $69 million, up $43
million year-on-year, and record fourth quarter adjusted EBITDA per
metric ton of $344. Engineered Products and Solutions delivered record
fourth quarter ATOI of $137 million, up 12 percent year-on-year, and
achieved record fourth quarter adjusted EBITDA margin of 17.7 percent,
the fourth consecutive quarter a year-over-year record was established.
Alcoa ended the quarter with strong cash results. The Company generated
$535 million in free cash flow in the quarter, with cash from operations
of $933 million, up $670 million sequentially. Alcoa also maintained its
strong liquidity position, ending the quarter with cash on hand of $1.9
billion.
Following the record low in days working capital achieved in each
quarter throughout 2012, the Company also achieved an all-time low for
the fourth quarter at 24 days, three days lower than the previous fourth
quarter record set in 2011, and 19 days lower than fourth quarter 2008.
This is the 13th successive quarter the Company has demonstrated
year-over-year improvement.
In fourth quarter 2012, the debt-to-capital ratio stood at 34.8 percent,
130 basis points lower than the sequential quarter, while net
debt-to-capital stood at 29.7 percent.
2012 Full-Year
For the year 2012, revenue was $23.7 billion, compared to $25 billion in
2011. Income from continuing operations was $191 million, or $0.18 per
share, in 2012 compared with $614 million, or $0.55 per share, in 2011.
Excluding the impact of special items, income from continuing operations
was $262 million, or $0.24 per share, for 2012, compared to $812
million, or $0.72 per share, for 2011.
Full-year 2012 net income was $191 million, or $0.18 per share, compared
to $611 million, or $0.55 per share, in 2011.
Alcoa’s midstream and downstream businesses achieved record performance
in 2012 with ATOI of $358 million and $612 million, respectively.
Adjusted EBITDA per metric ton for Global Rolled Products was a
full-year record at $390, 66 percent higher than the 10-year average and
19 percent higher than 2011. Engineered Products and Solutions ended the
year with a record annual adjusted EBITDA margin of 19.2 percent, more
than double where it was 10 years ago.
Alcoa turned in strong performance against its financial targets in
2012, delivering strong cash results in a challenging market. Despite a
drop in both realized alumina prices and realized aluminum prices
year-on-year, and $561 million in cash contributions to the pension
plan, the Company generated $1.5 billion in cash from operations and
$236 million of free cash flow in 2012. At the same time, Alcoa reduced
net debt by over $450 million to its lowest level since 2006 ($7
billion), while maintaining a strong cash position of $1.9 billion.
Alcoa ended 2012 with a debt-to-capital ratio of 34.8 percent, within
its 30 to 35 percent target range.
Alcoa exceeded its productivity and overhead target for 2012, delivering
$1.3 billion in productivity and overhead improvements, 52 percent more
than target.
Capital spending for 2012 was $1.26 billion, $89 million below the
annual target. For the year, capital expenditures and cash investment in
the Saudi Arabia joint venture were approximately $1.4 billion, more
than $270 million below the 2012 target.
Sustainable improvements in days working capital reached an all-time low
of 24 days. This reflects a year-over-year improvement of 3 days, twice
Alcoa’s target of 1.5 days.
Alcoa has taken significant action in the past four years to protect its
investment grade rating and is in a stronger financial position today
than 2008. Through a disciplined approach to capital spending and focus
on liquidity in the past four years, the Company has generated $5
billion in productivity gains, reduced working capital by 19 days,
contributed stock to the pension plan two of the last four years, and
successfully monetized assets.
In addition, Alcoa has taken action to manage its debt maturity
schedule. Excluding 2014 convertible debt, bond maturities have been
minimized to $422 million over the next four years.
Alcoa has now completed its planned closure or curtailment of 531,000
metric tons, or 12 percent, of its highest-cost system smelting
capacity, further improving the Company’s competitive position.
Segment Information
Alumina
ATOI in the fourth quarter was $41 million, up $50 million sequentially
and down $84 million from fourth quarter 2011. The sequential increase
was driven by continued productivity gains and positive London Metal
Exchange (LME)-based pricing, somewhat offset by a slower rise in
Alumina Price Index-pricing.
Primary Metals
ATOI in the fourth quarter was $316 million, up sequentially from
negative $14 million, and up from negative $32 million in fourth quarter
2011. The $330 million sequential improvement was driven primarily by
the closing of the Tapoco Hydroelectric Project asset sale, productivity
gains within the segment, and positive LME-based pricing. Third-party
realized price in the fourth quarter was $2,325 per metric ton, up 5
percent sequentially, but down 2 percent year-on-year.
Global Rolled Products
ATOI in the fourth quarter was $69 million, down from $98 million in the
third quarter of 2012, but up from $26 million in fourth quarter 2011, a
165 percent year-on-year improvement. Sequentially, seasonal volume
declines in packaging were somewhat offset by productivity improvements.
The $43 million year-on-year improvement was driven by volume,
productivity gains, and better price and mix, somewhat offset by cost
increases. Global Rolled Products had record fourth quarter ATOI and
adjusted EBITDA per metric ton. Days working capital was a record at 30
days, an improvement of 8 days compared with fourth quarter 2011.
Engineered Products and Solutions
ATOI in the fourth quarter was $137 million, down $23 million
sequentially and up $15 million, or 12 percent, year-on-year.
Sequentially, cost increases and unfavorable volume and price/mix were
somewhat offset by continued productivity improvements. The year-on-year
improvement was driven primarily by productivity gains, partially offset
by cost increases.
Alba Update
Alcoa is actively negotiating with the Department of Justice (DOJ) and
the Securities and Exchange Commission (SEC) to reach a resolution of
their investigations of the Alba matter; however, we have not reached
any agreement with either agency. Given the uncertainty regarding
whether a settlement can be reached and, if reached, on what terms, we
are not able to estimate a range of reasonably possible loss with regard
to any such settlement. If a settlement of the government investigations
is reached, we believe that the settlement amount would be material to
Alcoa’s results of operations for the relevant fiscal period. If a
settlement cannot be reached, Alcoa will proceed to trial with the DOJ
and the SEC and under those circumstances is unable to predict an
outcome or to estimate its reasonably possible loss. There can be no
assurance that the final outcome of the government’s investigations will
not have a material adverse effect on Alcoa.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on January 8, 2013 to present the quarter and full-year results. The
meeting will be webcast via alcoa.com. Call information and related
details are available at www.alcoa.com
under “Invest.”
About Alcoa
Alcoa is the world’s leading producer of primary and fabricated
aluminum, as well as the world’s largest miner of bauxite and refiner of
alumina. In addition to inventing the modern-day aluminum industry,
Alcoa innovation has been behind major milestones in the aerospace,
automotive, packaging, building and construction, commercial
transportation, consumer electronics and industrial markets over the
past 125 years. Among the solutions Alcoa markets are flat-rolled
products, hard alloy extrusions, and forgings, as well as Alcoa® wheels,
fastening systems, precision and investment castings, and building
systems in addition to its expertise in other light metals such as
titanium and nickel-based super alloys. Sustainability is an integral
part of Alcoa’s operating practices and the product design and
engineering it provides to customers. Alcoa has been a member of the Dow
Jones Sustainability Index for 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. For more information, visit www.alcoa.com
and follow @Alcoa on Twitter
at twitter.com/Alcoa.
Forward-Looking Statements
This release contains statements that relate to future events and
expectations and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
“anticipates,” “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, Forms 10-Q for the
quarters ended March 31, 2012, June 30, 2012 and September 30, 2012, and
other reports filed with the Securities and Exchange Commission. Alcoa
disclaims any obligation to update publicly any forward-looking
statements, whether in response to new information, future events or
otherwise, except as required by applicable law.
Alcoa and subsidiaries
Statement of Consolidated Operations (unaudited)
(in millions, except per-share, share, and metric ton amounts)
Quarter ended
December 31,
September 30,
December 31,
2011
2012
2012
Sales
$
5,989
$
5,833
$
5,898
Cost of goods sold (exclusive of expenses below)
5,228
5,266
4,968
Selling, general administrative, and other expenses
268
234
277
Research and development expenses
48
51
56
Provision for depreciation, depletion, and amortization
367
366
362
Restructuring and other charges
232
2
60
Interest expense
125
124
120
Other income, net
(40
)
(2
)
(345
)
Total costs and expenses
6,228
6,041
5,498
(Loss) income from continuing operations before income taxes
(239
)
(208
)
400
(Benefit) provision for income taxes
(74
)
(33
)
143
(Loss) income from continuing operations
(165
)
(175
)
257
Income from discontinued operations
2
–
–
Net (loss) income
(163
)
(175
)
257
Less: Net income (loss) attributable to noncontrolling interests
28
(32
)
15
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
$
(191
)
$
(143
)
$
242
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON
SHAREHOLDERS:
(Loss) income from continuing operations
$
(193
)
$
(143
)
$
242
Income from discontinued operations
2
–
–
Net (loss) income
$
(191
)
$
(143
)
$
242
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON
SHAREHOLDERS:
Basic:
(Loss) income from continuing operations
$
(0.18
)
$
(0.13
)
$
0.23
Income from discontinued operations
–
–
–
Net (loss) income
$
(0.18
)
$
(0.13
)
$
0.23
Diluted:
(Loss) income from continuing operations
$
(0.18
)
$
(0.13
)
$
0.21
Income from discontinued operations
–
–
–
Net (loss) income
$
(0.18
)
$
(0.13
)
$
0.21
Average number of shares used to compute:
Basic earnings per common share
1,064,363,032
1,067,000,575
1,067,197,166
Diluted earnings per common share
1,064,363,032
1,067,000,575
1,167,549,803
Shipments of aluminum products (metric tons)
1,280,000
1,317,000
1,280,000
Alcoa and subsidiaries
Statement of Consolidated Operations (unaudited), continued
(in millions, except per-share, share, and metric ton amounts)
Year ended
December 31,
2011
2012
Sales
$
24,951
$
23,700
Cost of goods sold (exclusive of expenses below)
20,480
20,486
Selling, general administrative, and other expenses
1,027
997
Research and development expenses
184
197
Provision for depreciation, depletion, and amortization
1,479
1,460
Restructuring and other charges
281
87
Interest expense
524
490
Other income, net
(87
)
(341
)
Total costs and expenses
23,888
23,376
Income from continuing operations before income taxes
1,063
324
Provision for income taxes
255
162
Income from continuing operations
808
162
Loss from discontinued operations
(3
)
–
Net income
805
162
Less: Net income (loss) attributable to noncontrolling interests
194
(29
)
NET INCOME ATTRIBUTABLE TO ALCOA
$
611
$
191
AMOUNTS ATTRIBUTABLE TO ALCOA COMMON SHAREHOLDERS:
Income from continuing operations
$
614
$
191
Loss from discontinued operations
(3
)
–
Net income
$
611
$
191
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA COMMON
SHAREHOLDERS:
Basic:
Income from continuing operations
$
0.58
$
0.18
Loss from discontinued operations
(0.01
)
–
Net income
$
0.57
$
0.18
Diluted:
Income from continuing operations
$
0.55
$
0.18
Loss from discontinued operations
–
–
Net income
$
0.55
$
0.18
Average number of shares used to compute:
Basic earnings per common share
1,061,039,969
1,066,650,500
Diluted earnings per common share
1,160,695,735
1,076,478,519
Common stock outstanding at the end of the period
1,064,412,066
1,067,211,953
Shipments of aluminum products (metric tons)
5,037,000
5,197,000
Alcoa and subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
December 31,
December 31,
2011
2012
ASSETS
Current assets:
Cash and cash equivalents
$
1,939
$
1,861
Receivables from customers, less allowances of $46 in 2011 and $39
in 2012
1,571
1,322
Other receivables
371
405
Inventories
2,899
2,825
Prepaid expenses and other current assets
933
1,328
Total current assets
7,713
7,741
Properties, plants, and equipment
37,608
38,137
Less: accumulated depreciation, depletion, and amortization
18,326
19,190
Properties, plants, and equipment, net
19,282
18,947
Goodwill
5,157
5,170
Investments
1,626
1,860
Deferred income taxes
3,546
3,738
Other noncurrent assets
2,796
2,707
Total assets
$
40,120
$
40,163
LIABILITIES
Current liabilities:
Short-term borrowings
$
62
$
53
Commercial paper
224
–
Accounts payable, trade
2,692
2,692
Accrued compensation and retirement costs
985
1,058
Taxes, including income taxes
438
389
Other current liabilities
1,167
1,283
Long-term debt due within one year
445
465
Total current liabilities
6,013
5,940
Long-term debt, less amount due within one year
8,640
8,311
Accrued pension benefits
3,261
3,746
Accrued other postretirement benefits
2,583
2,603
Other noncurrent liabilities and deferred credits
2,428
3,056
Total liabilities
22,925
23,656
EQUITY
Alcoa shareholders’ equity:
Preferred stock
55
55
Common stock
1,178
1,178
Additional capital
7,561
7,560
Retained earnings
11,629
11,689
Treasury stock, at cost
(3,952
)
(3,881
)
Accumulated other comprehensive loss
(2,627
)
(3,418
)
Total Alcoa shareholders' equity
13,844
13,183
Noncontrolling interests
3,351
3,324
Total equity
17,195
16,507
Total liabilities and equity
$
40,120
$
40,163
Alcoa and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
Year ended
December 31,
2011
2012
CASH FROM OPERATIONS
Net income
$
805
$
162
Adjustments to reconcile net income to cash from operations:
Depreciation, depletion, and amortization
1,481
1,462
Deferred income taxes
(181
)
(105
)
Equity (income) loss, net of dividends
(26
)
2
Restructuring and other charges
281
87
Net gain from investing activities – asset sales
(41
)
(321
)
Loss from discontinued operations
3
–
Stock-based compensation
83
67
Excess tax benefits from stock-based payment arrangements
(6
)
(1
)
Other
53
89
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments:
(Increase) decrease in receivables
(115
)
117
(Increase) decrease in inventories
(339
)
96
Decrease (increase) in prepaid expenses and other current assets
74
(49
)
Increase (decrease) in accounts payable, trade
394
(22
)
(Decrease) in accrued expenses
(38
)
(97
)
Increase in taxes, including income taxes
118
15
Pension contributions
(336
)
(561
)
(Increase) in noncurrent assets
(154
)
(13
)
Increase in noncurrent liabilities
147
572
CASH PROVIDED FROM CONTINUING OPERATIONS
2,203
1,500
CASH USED FOR DISCONTINUED OPERATIONS
(10
)
(3
)
CASH PROVIDED FROM OPERATIONS
2,193
1,497
FINANCING ACTIVITIES
Net change in short-term borrowings (original maturities of three
months or less)
(31
)
(10
)
Net change in commercial paper
224
(224
)
Additions to debt (original maturities greater than three months)
1,256
1,072
Debt issuance costs
(17
)
(5
)
Payments on debt (original maturities greater than three months)
(1,194
)
(1,589
)
Proceeds from exercise of employee stock options
37
12
Excess tax benefits from stock-based payment arrangements
6
1
Dividends paid to shareholders
(131
)
(131
)
Distributions to noncontrolling interests
(257
)
(95
)
Contributions from noncontrolling interests
169
171
CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES
62
(798
)
INVESTING ACTIVITIES
Capital expenditures
(1,287
)
(1,261
)
Acquisitions, net of cash acquired
(240
)
–
Proceeds from the sale of assets and businesses
38
615
Additions to investments
(374
)
(300
)
Sales of investments
54
31
Net change in restricted cash
(4
)
87
Other
(39
)
69
CASH USED FOR INVESTING ACTIVITIES
(1,852
)
(759
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(7
)
(18
)
Net change in cash and cash equivalents
396
(78
)
Cash and cash equivalents at beginning of year
1,543
1,939
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
1,939
$
1,861
Alcoa and subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized prices; production and
shipments in thousands of metric tons [kmt])
4Q11
2011
1Q12
2Q12
3Q12
4Q12
2012
Alumina:
Alumina production (kmt)
4,178
16,486
4,153
4,033
4,077
4,079
16,342
Third-party alumina shipments (kmt)
2,378
9,218
2,293
2,194
2,368
2,440
9,295
Third-party sales
$
847
$
3,462
$
775
$
750
$
764
$
803
$
3,092
Intersegment sales
$
620
$
2,727
$
617
$
576
$
575
$
542
$
2,310
Equity (loss) income
$
(2
)
$
25
$
1
$
1
$
2
$
1
$
5
Depreciation, depletion, and amortization
$
112
$
444
$
114
$
114
$
120
$
107
$
455
Income taxes
$
33
$
179
$
(1
)
$
(6
)
$
(22
)
$
2
$
(27
)
After-tax operating income (ATOI)
$
125
$
607
$
35
$
23
$
(9
)
$
41
$
90
Primary Metals:
Aluminum production (kmt)
962
3,775
951
941
938
912
3,742
Third-party aluminum shipments (kmt)
805
2,981
771
749
768
768
3,056
Alcoa’s average realized price per metric ton of aluminum
$
2,374
$
2,636
$
2,433
$
2,329
$
2,222
$
2,325
$
2,327
Third-party sales
$
1,991
$
8,240
$
1,944
$
1,804
$
1,794
$
1,890
$
7,432
Intersegment sales
$
633
$
3,192
$
761
$
782
$
691
$
643
$
2,877
Equity loss
$
(3
)
$
(7
)
$
(2
)
$
(9
)
$
(5
)
$
(11
)
$
(27
)
Depreciation, depletion, and amortization
$
136
$
556
$
135
$
133
$
130
$
134
$
532
Income taxes
$
(37
)
$
92
$
(13
)
$
(19
)
$
(19
)
$
157
$
106
ATOI
$
(32
)
$
481
$
10
$
(3
)
$
(14
)
$
316
$
309
Global Rolled Products:
Third-party aluminum shipments (kmt)
407
1,780
452
484
483
448
1,867
Third-party sales
$
1,691
$
7,642
$
1,845
$
1,913
$
1,849
$
1,771
$
7,378
Intersegment sales
$
39
$
218
$
44
$
44
$
42
$
33
$
163
Equity loss
$
(3
)
$
(3
)
$
(1
)
$
(2
)
$
(1
)
$
(2
)
$
(6
)
Depreciation, depletion, and amortization
$
58
$
237
$
57
$
57
$
57
$
58
$
229
Income taxes
$
10
$
104
$
49
$
43
$
44
$
31
$
167
ATOI
$
26
$
266
$
96
$
95
$
98
$
69
$
358
Engineered Products and Solutions:
Third-party aluminum shipments (kmt)
53
221
58
59
53
52
222
Third-party sales
$
1,355
$
5,345
$
1,390
$
1,420
$
1,367
$
1,348
$
5,525
Equity income
$
–
$
1
$
–
$
–
$
–
$
–
$
–
Depreciation, depletion, and amortization
$
39
$
158
$
40
$
39
$
39
$
40
$
158
Income taxes
$
59
$
260
$
72
$
77
$
79
$
69
$
297
ATOI
$
122
$
539
$
155
$
160
$
160
$
137
$
612
Reconciliation of ATOI to consolidated net (loss) income
attributable to Alcoa:
Total segment ATOI
$
241
$
1,893
$
296
$
275
$
235
$
563
$
1,369
Unallocated amounts (net of tax):
Impact of LIFO
11
(38
)
–
19
(7
)
8
20
Interest expense
(81
)
(340
)
(80
)
(80
)
(81
)
(78
)
(319
)
Noncontrolling interests
(28
)
(194
)
(5
)
17
32
(15
)
29
Corporate expense
(71
)
(290
)
(64
)
(69
)
(62
)
(87
)
(282
)
Restructuring and other charges
(161
)
(196
)
(7
)
(10
)
(2
)
(56
)
(75
)
Discontinued operations
2
(3
)
–
–
–
–
–
Other
(104
)
(221
)
(46
)
(154
)
(258
)
(93
)
(551
)
Consolidated net (loss) income attributable to Alcoa
$
(191
)
$
611
$
94
$
(2
)
$
(143
)
$
242
$
191
The difference between certain segment totals and consolidated amounts
is in Corporate.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(dollars in millions)
Adjusted EBITDA Margin
Quarter ended
Year ended
December 31, 2011
September 30, 2012
December 31, 2012
December 31, 2011
December 31, 2012
Net (loss) income attributable to Alcoa
$
(191
)
$
(143
)
$
242
$
611
$
191
Add:
Net income (loss) attributable to noncontrolling interests
28
(32
)
15
194
(29
)
(Income) loss from discontinued operations
(2
)
–
–
3
–
(Benefit) provision for income taxes
(74
)
(33
)
143
255
162
Other income, net
(40
)
(2
)
(345
)
(87
)
(341
)
Interest expense
125
124
120
524
490
Restructuring and other charges
232
2
60
281
87
Provision for depreciation, depletion, and amortization
367
366
362
1,479
1,460
Adjusted EBITDA
$
445
$
282
$
597
$
3,260
$
2,020
Sales
$
5,989
$
5,833
$
5,898
$
24,951
$
23,700
Adjusted EBITDA Margin
7.4
%
4.8
%
10.1
%
13.1
%
8.5
%
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
Year ended
December 31, 2011
September 30, 2012
December 31, 2012
December 31, 2011
December 31, 2012
Cash from operations
$
1,142
$
263
$
933
$
2,193
$
1,497
Capital expenditures
(486
)
(302
)
(398
)
(1,287
)
(1,261
)
Free cash flow
$
656
$
(39
)
$
535
$
906
$
236
Free Cash Flow is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management reviews cash
flows generated from operations after taking into consideration capital
expenditures due to the fact that these expenditures are considered
necessary to maintain and expand Alcoa’s asset base and are expected to
generate future cash flows from operations. It is important to note that
Free Cash Flow does not represent the residual cash flow available for
discretionary expenditures since other non-discretionary expenditures,
such as mandatory debt service requirements, are not deducted from the
measure.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions, except per-share amounts)
Adjusted Income
Quarter ended
Year ended
December 31, 2012
December 31, 2011
December 31, 2012
Income
Diluted EPS
Income
Diluted EPS
Income
Diluted EPS
Net income attributable to Alcoa
$
242
$
0.21
$
611
$
0.55
$
191
$
0.18
Loss from discontinued operations
–
(3
)
–
Income from continuing operations attributable to Alcoa
242
0.21
614
0.55
191
0.18
Restructuring and other charges
54
181
73
Discrete tax items*
(58
)
2
(22
)
Other special items**
(174
)
15
20
Income from continuing operations attributable to Alcoa – as adjusted
$
64
0.06
$
812
0.72
$
262
0.24
Income from continuing operations attributable to Alcoa – as adjusted is
a non-GAAP financial measure. Management believes that this measure is
meaningful to investors because management reviews the operating results
of Alcoa excluding the impacts of restructuring and other charges,
discrete tax items, and other special items (collectively, “special
items”). There can be no assurances that additional special items will
not occur in future periods. To compensate for this limitation,
management believes that it is appropriate to consider both Income from
continuing operations attributable to Alcoa determined under GAAP as
well as Income from continuing operations attributable to Alcoa – as
adjusted.
* Discrete tax items include the following:
for the quarter ended December 31, 2012, a benefit related to the
interim period treatment of losses in jurisdictions for which no tax
benefit was recognized during the nine months ended September 30, 2012
($39); a benefit for a capital loss on an investment ($13); and a net
benefit for other miscellaneous items ($6);
for the year ended December 31, 2012, a benefit for a capital loss on
an investment ($13); a benefit as a result of including the then
anticipated gain from the sale of the Tapoco Hydroelectric Project in
the calculation of the estimated annual effective tax rate applied to
the results for the nine months ended September 30, 2012 ($12); a
charge related to prior year U.S. taxes on certain depletable assets
($8); and a net benefit for other miscellaneous items ($5); and
for the year ended December 31, 2011, charges for a tax rate change in
Hungary and a tax law change regarding the utilization of net
operating losses in Italy ($8); a charge related to the 2010 change in
the tax treatment of federal subsidies received related to
prescription drug benefits provided under certain retiree health
benefit plans ($7); a net benefit for adjustments made related to the
filing of 2010 tax returns in various jurisdictions ($5); and a net
benefit for other miscellaneous items ($8).
** Other special items include the following:
for the quarter ended December 31, 2012, a gain on the sale of the
Tapoco Hydroelectric Project ($161: $275 is included in the Primary
Metals segment and $(114) is included in Corporate); a net favorable
change in certain mark-to-market energy derivative contracts ($12);
interest income on an escrow deposit ($8); and uninsured losses
related to fire damage to the cast house at the Massena, NY location
($7);
for the year ended December 31, 2012, a gain on the sale of the Tapoco
Hydroelectric Project ($161: $275 is included in the Primary Metals
segment and $(114) is included in Corporate); a net increase in the
environmental reserve related to the Grasse River remediation in
Massena, NY, remediation at two former locations, East St. Louis, IL
and Sherwin, TX, and two new remediation projects at the smelter sites
in Baie Comeau, Quebec, Canada and Mosjøen, Norway ($133); a
litigation reserve ($33); uninsured losses related to fire damage to
the cast house at the Massena, NY location ($28); interest income on
an escrow deposit ($8); and a net favorable change in certain
mark-to-market energy derivative contracts ($5); and
for the year ended December 31, 2011, a net favorable change in
certain mark-to-market energy derivative contracts ($36); a net charge
comprised of expenses for the early repayment of Notes set to mature
in 2013 due to the premiums paid under the tender offers and call
option and gains from the termination of related “in-the-money”
interest rate swaps ($32); uninsured losses, including costs related
to flood damage to a plant in Pennsylvania caused by Hurricane Irene,
($25); a gain on the sale of land in Australia ($18); costs related to
acquisitions of the aerospace fastener business of TransDigm Group
Inc. and full ownership of carbothermic smelting technology from ORKLA
ASA ($8); and the write off of inventory related to the permanent
closure of a smelter in the U.S. ($4).
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions)
Days Working Capital
Quarter ended
December 31, 2011
September 30, 2012
December 31, 2012
Receivables from customers, less allowances
$
1,571
$
1,619
$
1,322
Add: Deferred purchase price receivable*
–
81
71
Receivables from customers, less allowances, as adjusted
1,571
1,700
1,393
Add: Inventories
2,899
2,973
2,825
Less: Accounts payable, trade
2,692
2,590
2,692
Working Capital
$
1,778
$
2,083
$
1,526
Sales
$
5,989
$
5,833
$
5,898
Days Working Capital
27
33
24
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
December 31, 2012
Debt-to- Capital
Cash and Cash Equivalents
Net Debt-to- Capital
Total Debt
Short-term borrowings
$
53
Commercial paper
–
Long-term debt due within one year
465
Long-term debt, less amount due within one year
8,311
Numerator
$
8,829
$
1,861
$
6,968
Total Capital
Total debt
$
8,829
Total equity
16,507
Denominator
$
25,336
$
1,861
$
23,475
Ratio
34.8
%
29.7
%
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 Products and Solutions
Adjusted EBITDA
Quarter ended
Quarter ended
Quarter ended
Year ended
Quarter ended
Year ended
September 30, 2012
December 31, 2012
September 30, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
December 31, 2012
After-tax operating income (ATOI)
$
(9
)
$
41
$
(14
)
$
316
$
69
$
358
$
137
$
612
Add:
Depreciation, depletion, and amortization
120
107
130
134
58
229
40
158
Equity (income) loss
(2
)
(1
)
5
11
2
6
–
–
Income taxes
(22
)
2
(19
)
157
31
167
69
297
Other
(1
)
(4
)
2
(423
)
–
(2
)
(7
)
(8
)
Adjusted EBITDA
$
86
$
145
$
104
$
195
$
160
$
758
$
239
$
1,059
Production (thousand metric tons) (kmt)
4,077
4,079
938
912
Adjusted EBITDA / Production ($ per metric ton)
$
21
$
36
$
111
$
214
Total shipments (thousand metric tons) (kmt)
465
1,943
Adjusted EBITDA / Total shipments ($ per metric ton)
$
344
$
390
Total sales
$
1,348
$
5,525
Adjusted EBITDA Margin
18
%
19
%
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.
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