REG-Alcoa Inc Alcoa Reports Fourth Quarter 2015 and Full-Year Results <Origin Href="QuoteRef">AA.N</Origin> - Part 2
01/04/2016 12:26
- Part 2: For the preceding part double click ID:nBw55qgTNa
(decrease) in accounts payable, trade 256 (70 )
(Decrease) in accrued expenses (451 ) (437 )
Increase (decrease) in taxes, including income taxes 7 (54 )
Pension contributions (501 ) (470 )
(Increase) in noncurrent assets(1),(2) (42 ) (370 )
(Decrease) in noncurrent liabilities(1) (209 ) (227 )
CASH PROVIDED FROM OPERATIONS 1,674 1,582
FINANCING ACTIVITIES
Net change in short-term borrowings (original maturities of three months or less) (2 ) (16 )
Additions to debt (original maturities greater than three months) 2,878 1,901
Debt issuance costs (17 ) (3 )
Payments on debt (original maturities greater than three months)(3) (1,723 ) (2,030 )
Proceeds from exercise of employee stock options 150 25
Excess tax benefits from stock-based payment arrangements 9 9
Issuance of mandatory convertible preferred stock 1,211 -
Dividends paid to shareholders (161 ) (223 )
Distributions to noncontrolling interests (120 ) (106 )
Contributions from noncontrolling interests 53 2
Acquisitions of noncontrolling interests (28 ) -
CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES 2,250 (441 )
INVESTING ACTIVITIES
Capital expenditures (1,219 ) (1,180 )
Acquisitions, net of cash acquired(4) (2,385 ) 97
Proceeds from the sale of assets and businesses(5) 253 112
Additions to investments (195 ) (134 )
Sales of investments 57 40
Net change in restricted cash (2 ) (20 )
Other 31 25
CASH USED FOR INVESTING ACTIVITIES (3,460 ) (1,060 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (24 ) (39 )
Net change in cash and cash equivalents 440 42
Cash and cash equivalents at beginning of year 1,437 1,877
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,877 $ 1,919
(1) In the first quarter of 2015, management decided to reflect the net periodic benefit cost related to Alcoa-sponsored defined benefit pension plans as a separate line item
in the Statement of Consolidated Cash Flows. In prior periods, a portion of this amount was reported in both the (Increase) in noncurrent assets (overfunded plans) and
the (Decrease) in noncurrent liabilities (underfunded plans) line items. As a result, the Statement of Consolidated Cash Flows for the year ended December 31, 2014 was
revised to conform to the current period presentation.
(2) The (Increase) in noncurrent assets line item for the year ended December 31, 2015 includes a $300 prepayment related to a natural gas supply agreement for three alumina
refineries in Western Australia, which are owned by Alcoa`s majority-owned subsidiary, Alcoa of Australia Limited.
(3) In the first quarter of 2014, holders of $575 principal amount of Alcoa`s 5.25% Convertible Notes due March 15, 2014 (the "Notes") exercised their option to convert the
Notes into 89 million shares of Alcoa common stock. This transaction was not reflected in the Statement of Consolidated Cash Flows for the year ended December 31, 2014 as
it represents a noncash financing activity.
(4) In the fourth quarter of 2014, Alcoa paid $2,995 (net of cash acquired) to acquire Firth Rixson. A portion of this consideration was paid through the issuance of 37
million shares in Alcoa common stock valued at $610. The issuance of common stock was not reflected in the Statement of Consolidated Cash Flows for the year ended
December 31, 2014 as it represents a noncash investing activity.
In the third quarter of 2015, Alcoa issued 87 million shares of its common stock valued at $870 to acquire RTI International Metals. The issuance of common stock was not
reflected in the Statement of Consolidated Cash Flows for the year ended December 31, 2015 as it represents a noncash investing activity. However, through this
acquisition, Alcoa acquired $302 in cash, which was reflected as a cash inflow in the Acquisitions, net of cash acquired line item on the Statement of Consolidated Cash
Flows for the year ended December 31, 2015.
(5) Proceeds from the sale of assets and businesses for the year ended December 31, 2015 includes a cash outflow for cash paid as a result of post-closing adjustments
associated with the December 2014 divestiture of three rolling mills in Spain and France.
Alcoa and subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized prices; production and shipments in thousands of metric tons kmt )
4Q14 2014 1Q15 2Q15 3Q15 4Q15 2015
Alumina:
Alumina production (kmt) 4,161 16,606 3,933 3,977 3,954 3,856 15,720
Third-party alumina shipments (kmt) 2,928 10,652 2,538 2,706 2,798 2,713 10,755
Third-party sales $ 1,017 $ 3,509 $ 887 $ 924 $ 912 $ 732 $ 3,455
Intersegment sales $ 469 $ 1,941 $ 501 $ 431 $ 391 $ 364 $ 1,687
Equity loss $ (10 ) $ (29 ) $ (7 ) $ (11 ) $ (9 ) $ (14 ) $ (41 )
Depreciation, depletion, and amortization $ 90 $ 387 $ 80 $ 77 $ 71 $ 68 $ 296
Income taxes $ 75 $ 153 $ 92 $ 87 $ 85 $ 36 $ 300
After-tax operating income (ATOI) $ 178 $ 370 $ 221 $ 215 $ 212 $ 98 $ 746
Primary Metals:
Aluminum production (kmt) 731 3,125 711 701 700 699 2,811
Third-party aluminum shipments (kmt) 637 2,534 589 630 615 644 2,478
Alcoa`s average realized price per metric ton of aluminum $ 2,578 $ 2,405 $ 2,420 $ 2,180 $ 1,901 $ 1,799 $ 2,069
Third-party sales $ 1,852 $ 6,800 $ 1,572 $ 1,534 $ 1,249 $ 1,236 $ 5,591
Intersegment sales $ 749 $ 2,931 $ 692 $ 562 $ 479 $ 437 $ 2,170
Equity income (loss) $ 11 $ (34 ) $ (3 ) $ (5 ) $ (7 ) $ 3 $ (12 )
Depreciation, depletion, and amortization $ 117 $ 494 $ 109 $ 109 $ 106 $ 105 $ 429
Income taxes $ 89 $ 203 $ 57 $ 6 $ (49 ) $ (42 ) $ (28 )
ATOI $ 267 $ 594 $ 187 $ 67 $ (59 ) $ (40 ) $ 155
Global Rolled Products:
Third-party aluminum shipments (kmt) 487 1,964 432 462 449 432 1,775
Third-party sales $ 1,888 $ 7,351 $ 1,621 $ 1,668 $ 1,527 $ 1,422 $ 6,238
Intersegment sales $ 46 $ 185 $ 36 $ 34 $ 29 $ 26 $ 125
Equity loss $ (8 ) $ (27 ) $ (9 ) $ (7 ) $ (8 ) $ (8 ) $ (32 )
Depreciation, depletion, and amortization $ 57 $ 235 $ 56 $ 56 $ 56 $ 59 $ 227
Income taxes(1) $ 16 $ 89 $ 36 $ 25 $ 28 $ 20 $ 109
ATOI(1) $ 52 $ 245 $ 54 $ 76 $ 62 $ 52 $ 244
Engineered Products and Solutions(2):
Third-party sales $ 1,114 $ 4,217 $ 1,257 $ 1,279 $ 1,397 $ 1,409 $ 5,342
Depreciation, depletion, and amortization $ 42 $ 137 $ 51 $ 54 $ 61 $ 67 $ 233
Income taxes(1) $ 64 $ 298 $ 76 $ 81 $ 71 $ 54 $ 282
ATOI(1) $ 124 $ 579 $ 156 $ 165 $ 151 $ 123 $ 595
Transportation and Construction Solutions(2):
Third-party sales $ 500 $ 2,021 $ 471 $ 492 $ 475 $ 444 $ 1,882
Depreciation, depletion, and amortization $ 11 $ 42 $ 10 $ 11 $ 11 $ 11 $ 43
Income taxes(1) $ 14 $ 69 $ 14 $ 17 $ 18 $ 14 $ 63
ATOI(1) $ 38 $ 180 $ 38 $ 44 $ 44 $ 40 $ 166
Reconciliation of total segment ATOI to consolidated net income (loss) attributable to Alcoa(2):
Total segment ATOI(1) $ 659 $ 1,968 $ 656 $ 567 $ 410 $ 273 $ 1,906
Unallocated amounts (net of tax):
Impact of LIFO (21 ) (54 ) 7 36 50 43 136
Metal price lag(1) 22 78 (23 ) (39 ) (48 ) (23 ) (133 )
Interest expense (80 ) (308 ) (80 ) (80 ) (80 ) (84 ) (324 )
Noncontrolling interests 45 91 (60 ) (67 ) (62 ) 64 (125 )
Corporate expense (80 ) (284 ) (62 ) (65 ) (72 ) (67 ) (266 )
Impairment of goodwill - - - - - (25 ) (25 )
Restructuring and other charges (307 ) (894 ) (161 ) (159 ) (48 ) (374 ) (742 )
Other (79 ) (329 ) (82 ) (53 ) (106 ) (307 ) (548 )
Consolidated net income (loss) attributable to Alcoa $ 159 $ 268 $ 195 $ 140 $ 44 $ (500 ) $ (121 )
The difference between certain segment totals and consolidated amounts is in Corporate.
(1) Effective in the second quarter of 2015, management removed the impact of metal price lag from the results of the Global Rolled Products and Engineered Products and
Solutions (now Engineered Products and Solutions and Transportation and Construction Solutions - see footnote 2 below) segments in order to enhance the visibility of the
underlying operating performance of these businesses. 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 the respective segment. The impact of metal price lag is now reported as a separate line item in Alcoa`s reconciliation of
total segment ATOI to consolidated net income (loss) attributable to Alcoa. As a result, this change does not impact the consolidated results of Alcoa. Segment
information for all prior periods presented was updated to reflect this change.
(2) In the third quarter of 2015, management approved a realignment of Alcoa`s Engineered Products and Solutions segment due to the expansion of this part of Alcoa`s business
portfolio through both organic and inorganic growth. This realignment consisted of moving both the Alcoa Wheel and Transportation Products and Building and Construction
Systems business units to a new reportable segment named Transportation and Construction Solutions. Additionally, the Latin American soft alloy extrusions business
previously included in Corporate was moved into the new Transportation and Construction Solutions segment. The remaining Engineered Products and Solutions segment
consists of the Alcoa Fastening Systems and Rings (renamed to include portions of the Firth Rixson business acquired in November 2014), Alcoa Power and Propulsion
(includes the TITAL business acquired in March 2015), Alcoa Forgings and Extrusions (includes the other portions of Firth Rixson), and Alcoa Titanium and Engineered
Products (a new business unit that represents the RTI International Metals business acquired in July 2015) business units. Segment information for all prior periods
presented was updated to reflect the new segment structure.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions, except per-share amounts)
Adjusted Income Quarter ended Year ended
December 31, September 30, December 31, December 31, December 31,
2014
2015
2015
2014
2015
Net income (loss) attributable to Alcoa $ 159 $ 44 $ (500 ) $ 268 $ (121 )
Restructuring and other charges 200 30 306 703 635
Discrete tax items(1) 16 4 187 33 186
Other special items(2) 57 31 72 112 87
Net income attributable to Alcoa - as adjusted $ 432 $ 109 $ 65 $ 1,116 $ 787
Diluted EPS(3):
Net income (loss) attributable to Alcoa common shareholders $ 0.11 $ 0.02 $ (0.39 ) $ 0.21 $ (0.15 )
Net income attributable to Alcoa common shareholders - as adjusted 0.33 0.07 0.04 0.92 0.56
Net income (loss) attributable to Alcoa - as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special items (collectively, "special items"). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is
appropriate to consider both Net income (loss) attributable to Alcoa determined under GAAP as well as Net income attributable to Alcoa - as adjusted.
(1) Discrete tax items include the following:
• for the quarter ended December 31, 2015, a charge for valuation allowances related to certain U.S. and Iceland deferred tax assets ($190) and a net benefit for a number
of small items ($3);
• for the quarter ended September 30, 2015, a net charge for a number of small items;
• for the quarter ended December 31, 2014, a charge for the remeasurement of certain deferred tax assets of a subsidiary in Spain due to a tax rate change ($16), a benefit
for an adjustment to the remeasurement of certain deferred tax assets of a subsidiary in Brazil due to a tax rate change ($3), and a net charge for a number of small
items ($3);
• for the year ended December 31, 2015, a charge for valuation allowances related to certain U.S. and Iceland deferred tax assets ($190) and a net benefit for a number of
small items ($4); and
• for the year ended December 31, 2014, a charge for the remeasurement of certain deferred tax assets of a subsidiary in Brazil due to a tax rate change ($31), a charge for
the remeasurement of certain deferred tax assets of a subsidiary in Spain due to a tax rate change ($16), and a net benefit for a number of other items ($14).
(2) Other special items include the following:
• for the quarter ended December 31, 2015, a write-down of inventory related to the permanent closure or temporary curtailment of various facilities in Suriname and the
United States ($28), an impairment of goodwill related to the soft alloy extrusions business in Brazil ($25), costs associated with the planned separation of Alcoa ($12),
a net unfavorable change in certain mark-to-market energy derivative contracts ($5), and an unfavorable tax impact related to the interim period treatment of operational
losses in certain foreign jurisdictions for which no tax benefit was recognized ($2);
• for the quarter ended September 30, 2015, an unfavorable tax impact resulting from the difference between Alcoa`s consolidated estimated annual effective tax rate and the
statutory rates applicable to special items ($27), a gain on the sale of land in the United States and an equity investment in a China rolling mill ($25), costs
associated with the planned separation of Alcoa and the acquisition of RTI International Metals ($22), a favorable tax impact related to the interim period treatment of
operational losses in certain foreign jurisdictions for which no tax benefit was recognized ($16), a write-down of inventory related to a refinery in Suriname ($13), and
a net unfavorable change in certain mark-to-market energy derivative contracts ($10);
• for the quarter ended December 31, 2014, an unfavorable tax impact resulting from the difference between Alcoa`s consolidated estimated annual effective tax rate and the
statutory rates applicable to special items ($81), a favorable tax impact related to the interim period treatment of operational losses in certain foreign jurisdictions
for which no tax benefit was recognized ($44), costs associated with the acquisition of Firth Rixson and the then-planned acquisition of TITAL ($22), and a net favorable
change in certain mark-to-market energy derivative contracts ($2);
• for the year ended December 31, 2015, costs associated with the planned separation of Alcoa and the acquisitions of RTI International Metals and TITAL ($46), a gain on
the sale of land in the United States and an equity investment in a China rolling mill ($44), a write-down of inventory related to the permanent closure or temporary
curtailment of various facilities in Suriname, the United States, Brazil, and Australia ($43), an impairment of goodwill related to the soft alloy extrusions business in
Brazil ($25), and a net unfavorable change in certain mark-to-market energy derivative contracts ($17); and
• for the year ended December 31, 2014, a write-down of inventory related to the permanent closure of various facilities in Italy, Australia, and the United States ($47),
costs associated with the acquisition of Firth Rixson and the then-planned acquisition of TITAL ($47), a gain on the sale of both a mining interest in Suriname and an
equity investment in a China rolling mill ($20), an unfavorable impact related to the restart of one potline at the joint venture in Saudi Arabia that was previously shut
down due to a period of pot instability ($19), costs associated with preparation for and ratification of a new labor agreement with the United Steelworkers ($11), a net
unfavorable change in certain mark-to-market energy derivative contracts ($6), and a loss on the write-down of an asset to fair value ($2).
(3) The average number of shares applicable to diluted EPS for Net income (loss) attributable to Alcoa common shareholders excludes certain share equivalents as their effect
was anti-dilutive (see footnote 3 to the Statement of Consolidated Operations). However, certain of these share equivalents may become dilutive in the EPS calculation
applicable to Net income attributable to Alcoa common shareholders - as adjusted due to a larger and/or positive numerator. Specifically:
• for the quarter ended December 31, 2015, share equivalents associated with outstanding employee stock options and awards were dilutive based on Net income attributable to
Alcoa common shareholders - as adjusted, resulting in a diluted average number of shares of 1,324,378,133;
• for the quarter ended September 30, 2015, no additional share equivalents were dilutive based on Net income attributable to Alcoa common shareholders - as adjusted,
resulting in a diluted average number of shares of 1,294,392,945;
• for the quarter ended December 31, 2014, share equivalents associated with mandatory convertible preferred stock were dilutive based on Net income attributable to Alcoa
common shareholders - as adjusted, resulting in a diluted average number of shares of 1,294,701,805 (the subtraction of preferred stock dividends declared from the
numerator (see footnote 1 to the Statement of Consolidated Operations) needs to be reversed since the related mandatory convertible preferred stock was dilutive);
• for the year ended December 31, 2015, share equivalents associated with both outstanding employee stock options and awards and convertible notes related to the
acquisition of RTI International Metals were dilutive based on Net income attributable to Alcoa common shareholders - as adjusted, resulting in a diluted average number
of shares of 1,288,633,988 (after-tax interest expense of $8 needs to be added back to the numerator since the convertible notes were dilutive); and
• for the year ended December 31, 2014, share equivalents associated with both Alcoa`s 5.25% convertible notes and mandatory convertible preferred stock were dilutive based
on Net income attributable to Alcoa common shareholders - as adjusted, resulting in a diluted average number of shares of 1,217,720,724 (after-tax interest expense of $6
needs to be added back to the numerator since the convertible notes were dilutive and the subtraction of $19 of the preferred stock dividends declared from the numerator
(see footnote 1 to the Statement of Consolidated Operations) needs to be reversed since the related mandatory convertible preferred stock was dilutive).
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions)
Adjusted EBITDA Quarter ended Year ended
December 31, September 30, December 31, December 31, December 31,
2014
2015
2015
2014
2015
Net income (loss) attributable to Alcoa $ 159 $ 44 $ (500 ) $ 268 $ (121 )
Add:
Net (loss) income attributable to noncontrolling interests (45 ) 62 (64 ) (91 ) 125
Provision for income taxes 120 100 44 320 445
Other (income) expenses, net (6 ) (15 ) 29 47 2
Interest expense 122 123 129 473 498
Restructuring and other charges 388 66 534 1,168 994
Impairment of goodwill - - 25 - 25
Provision for depreciation, depletion, and amortization 335 318 322 1,371 1,280
Adjusted EBITDA $ 1,073 $ 698 $ 519 $ 3,556 $ 3,248
Adjusted EBITDA Measures:
Sales $ 6,377 $ 5,573 $ 5,245 $ 23,906 $ 22,534
Adjusted EBITDA Margin 16.8 % 12.5 % 9.9 % 14.9 % 14.4 %
Total Debt $ 8,852 $ 9,103
Debt-to-Adjusted EBITDA Ratio 2.49 2.80
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.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions, except per metric ton amounts)
Segment Measures Alumina Primary Metals
Adjusted EBITDA Quarter ended Year ended Quarter ended Year ended
December 31, September 30, December 31, December 31, December 31, December 31, September 30, December 31, December 31, December 31,
2014
2015
2015
2014
2015
2014
2015
2015
2014
2015
After-tax operating income (ATOI) $ 178 $ 212 $ 98 $ 370 $ 746 $ 267 $ (59 ) $ (40 ) $ 594 $ 155
Add:
Depreciation, depletion, and amortization 90 71 68 387 296 117 106 105 494 429
Equity loss (income) 10 9 14 29 41 (11 ) 7 (3 ) 34 12
Income taxes 75 85 36 153 300 89 (49 ) (42 ) 203 (28 )
Other 2 (1 ) 2 (28 ) 1 (2 ) (2 ) 1 (6 ) (2 )
Adjusted EBITDA $ 355 $ 376 $ 218 $ 911 $ 1,384 $ 460 $ 3 $ 21 $ 1,319 $ 566
Production (thousand metric tons) (kmt) 4,161 3,954 3,856 16,606 15,720 731 700 699 3,125 2,811
Adjusted EBITDA / Production ($ per metric ton) $ 85 $ 95 $ 57 $ 55 $ 88 $ 629 $ 4 $ 30 $ 422 $ 201
Alcoa`s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation, depletion, and amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items.
Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa`s operating performance and the Company`s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions, except per metric ton amounts)
Segment Measures Global Rolled Products(1)
Adjusted EBITDA Quarter ended Year ended
December 31, September 30, December 31, December 31, December 31,
2014
2015
2015
2014
2015
After-tax operating income (ATOI) $ 52 $ 62 $ 52 $ 245 $ 244
Add:
Depreciation, depletion, and amortization 57 56 59 235 227
Equity loss 8 8 8 27 32
Income taxes 16 28 20 89 109
Other - (1 ) - (1 ) (1 )
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