REG-Alcoa Inc Alcoa Reports Second Quarter 2016 Results <Origin Href="QuoteRef">AA.N</Origin> - Part 2
12/07/2016 07:05
- Part 2: For the preceding part double click ID:nBw700PfJa
1Q15 2Q15 3Q15 4Q15 2015 1Q16 2Q16
Alumina:
Alumina production (kmt) 3,933 3,977 3,954 3,856 15,720 3,330 3,316
Third-party alumina shipments (kmt) 2,538 2,706 2,798 2,713 10,755 2,168 2,266
Total alumina shipments (kmt) 4,040 3,993 4,078 4,054 16,165 3,426 3,402
Third-party sales $ 887 $ 924 $ 912 $ 732 $ 3,455 $ 545 $ 694
Intersegment sales $ 501 $ 431 $ 391 $ 364 $ 1,687 $ 292 $ 300
Equity loss $ (7 ) $ (11 ) $ (9 ) $ (14 ) $ (41 ) $ (14 ) $ (7 )
Depreciation, depletion, and amortization $ 80 $ 77 $ 71 $ 68 $ 296 $ 63 $ 66
Income taxes $ 92 $ 87 $ 85 $ 36 $ 300 $ 5 $ 40
After-tax operating income (ATOI) $ 221 $ 215 $ 212 $ 98 $ 746 $ 8 $ 109
Primary Metals:
Aluminum production (kmt) 711 701 700 699 2,811 655 595
Third-party aluminum shipments (kmt) 589 630 615 644 2,478 575 565
Total aluminum shipments (kmt) 864 877 860 879 3,480 832 807
Alcoa’s average realized price per metric ton of aluminum $ 2,420 $ 2,180 $ 1,901 $ 1,799 $ 2,069 $ 1,793 $ 1,849
Third-party sales $ 1,572 $ 1,534 $ 1,249 $ 1,236 $ 5,591 $ 1,123 $ 1,119
Intersegment sales $ 692 $ 562 $ 479 $ 437 $ 2,170 $ 475 $ 473
Equity (loss) income $ (3 ) $ (5 ) $ (7 ) $ 3 $ (12 ) $ 4 $ –
Depreciation, depletion, and amortization $ 109 $ 109 $ 106 $ 105 $ 429 $ 102 $ 101
Income taxes $ 57 $ 6 $ (49 ) $ (42 ) $ (28 ) $ (16 ) $ –
ATOI $ 187 $ 67 $ (59 ) $ (40 ) $ 155 $ 14 $ 41
Global Rolled Products:
Third-party aluminum shipments (kmt) 432 462 449 432 1,775 433 480
Third-party sales $ 1,621 $ 1,668 $ 1,527 $ 1,422 $ 6,238 $ 1,397 $ 1,550
Intersegment sales $ 36 $ 34 $ 29 $ 26 $ 125 $ 29 $ 29
Equity loss $ (9 ) $ (7 ) $ (8 ) $ (8 ) $ (32 ) $ (11 ) $ (10 )
Depreciation, depletion, and amortization $ 56 $ 56 $ 56 $ 59 $ 227 $ 56 $ 55
Income taxes $ 36 $ 25 $ 28 $ 20 $ 109 $ 34 $ 28
ATOI $ 54 $ 76 $ 62 $ 52 $ 244 $ 68 $ 68
Engineered Products and Solutions:
Third-party sales $ 1,257 $ 1,279 $ 1,397 $ 1,409 $ 5,342 $ 1,449 $ 1,465
Depreciation, depletion, and amortization $ 51 $ 54 $ 61 $ 67 $ 233 $ 65 $ 62
Income taxes $ 76 $ 81 $ 71 $ 54 $ 282 $ 78 $ 87
ATOI $ 156 $ 165 $ 151 $ 123 $ 595 $ 162 $ 180
Transportation and Construction Solutions:
Third-party sales $ 471 $ 492 $ 475 $ 444 $ 1,882 $ 429 $ 467
Depreciation, depletion, and amortization $ 10 $ 11 $ 11 $ 11 $ 43 $ 11 $ 12
Income taxes $ 14 $ 17 $ 18 $ 14 $ 63 $ 14 $ 18
ATOI $ 38 $ 44 $ 44 $ 40 $ 166 $ 39 $ 46
Reconciliation of total segment ATOI to consolidated net income (loss) attributable to Alcoa:
Total segment ATOI ((1)) $ 656 $ 567 $ 410 $ 273 $ 1,906 $ 291 $ 444
Unallocated amounts (net of tax):
Impact of LIFO 7 36 50 43 136 4 (10 )
Metal price lag (23 ) (39 ) (48 ) (23 ) (133 ) 1 7
Interest expense (80 ) (80 ) (80 ) (84 ) (324 ) (83 ) (84 )
Noncontrolling interests (60 ) (67 ) (62 ) 64 (125 ) 5 (43 )
Corporate expense (62 ) (65 ) (72 ) (67 ) (266 ) (55 ) (77 )
Impairment of goodwill – – – (25 ) (25 ) – –
Restructuring and other charges (161 ) (159 ) (48 ) (575 ) (943 ) (61 ) (15 )
Other (82 ) (53 ) (106 ) (307 ) (548 ) (86 ) (87 )
Consolidated net income (loss) attributable to Alcoa $ 195 $ 140 $ 44 $ (701 ) $ (322 ) $ 16 $ 135
The difference between certain segment totals and consolidated amounts is in Corporate.
((1)) Total segment ATOI is the summation of the respective ATOI of Alcoa’s five reportable segments, which represent the two components of the Company, an Upstream business
and a Value-Add business. Upstream is composed of the Alumina and Primary Metals segments and Value-Add is composed of the Global Rolled Products, Engineered Products and
Solutions, and Transportation and Construction Solutions segments. As such, in all periods presented, ATOI of the Upstream business is equivalent to the summation of the
respective ATOI of the Alumina and Primary Metals segments, and, likewise, ATOI of the Value-Add business is equivalent to the summation of the respective ATOI of the
Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions segments.
On September 28, 2015, Alcoa announced that its Board of Directors approved a plan to separate into two standalone, publicly-traded companies. One such company will be
named Alcoa Corporation and will include Upstream. Additionally, the future Alcoa Corporation will include the Warrick, IN rolling operations and the equity interest in
the rolling mill at the joint venture in Saudi Arabia, both of which are currently part of the Global Rolled Products segment of Alcoa Inc. The other such company will be
named Arconic and will include Value-Add, except for the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(dollars in millions, except per-share amounts)
Adjusted Income Income Diluted EPS ((5))
Quarter ended Quarter ended
June 30, March 31, June 30, June 30, March 31, June 30,
2015 2016 2016 2015 2016 2016
Net income attributable to Alcoa $ 140 $ 16 $ 135 $ 0.10 $ 0.00 $ 0.09
Special items ((1)):
Restructuring and other charges 217 93 23
Discrete tax items ((2)) (4 ) 4 (5 )
Other special items ((3)) (31 ) 31 62
Tax impact ((4)) (52 ) (34 ) (7 )
Noncontrolling interests impact ((4)) (20 ) (2 ) 5
Net income attributable to Alcoa – as adjusted $ 250 $ 108 $ 213 0.19 0.07 0.15
Net income attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges, discrete tax items, and other special items (collectively, “special items”). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate
to consider both Net income attributable to Alcoa determined under GAAP as well as Net income attributable to Alcoa – as adjusted.
((1)) In the second quarter of 2016, management changed the manner in which special items are presented in Alcoa’s reconciliation of Adjusted Income. This change resulted in special items being presented on a pretax basis and the related tax and noncontrolling interests impacts on special items being aggregated into separate respective line items. The special items for all prior periods presented were updated to conform
to the current period presentation.
((2)) Discrete tax items include the following:
• for the quarter ended June 30, 2015, a net benefit for a number of small items;
• for the quarter ended March 31, 2016, a net charge for a number of small items; and
• for the quarter ended June 30, 2016, a benefit for one item.
((3)) Other special items include the following:
• for the quarter ended June 30, 2015, a gain on the sale of land in the United States ($29), a
favorable tax impact related to the interim period treatment of operational losses in certain foreign
jurisdictions for which no tax benefit was recognized ($21), costs associated with the then-planned
acquisition of RTI International Metals ($6), a net unfavorable change in certain mark-to-market
energy derivative contracts ($5), 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 ($4), and a write-down of inventory related to the permanent closure of both a smelter
in Brazil and a power station in Australia ($4);
• for the quarter ended March 31, 2016, costs associated with the planned separation of Alcoa ($18), 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 ($8), a write-down of inventory
related to the permanent closure of a smelter in the United States ($3), 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); and
• for the quarter ended June 30, 2016, 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 ($60), costs associated with the planned separation of Alcoa ($45), 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), a favorable tax impact related to the
interim period treatment of operational losses in certain foreign jurisdictions for which no tax
benefit was recognized ($11), a net unfavorable change in certain mark-to-market energy derivative
contracts ($6), and a write-down of inventory related to two previously curtailed facilities ($3).
((4)) The tax impact on special items is based on the applicable statutory rates whereby the difference between such rates and Alcoa’s consolidated estimated annual effective tax rate is itself a special item (see footnote 3 above). The noncontrolling interests impact on special items represents Alcoa’s partners’ share of certain special items.
((5)) The average number of shares applicable to diluted EPS for Net income 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 June 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 1,236,918,280;
• for the quarter ended March 31, 2016, 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 1,324,558,308; and
• for the quarter ended June 30, 2016, 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 1,356,158,542.
Operational Tax Rate Quarter ended June 30, 2016
As Special As
r eported items ((1)) a djusted
Income before income taxes $ 330 $ 36 $ 366
Provision for income taxes $ 152 $ (37 ) $ 115
Tax rate 46.1 % 31.4 %
Operational Tax Rate 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 the
Effective Tax Rate determined under GAAP as well as the Operational Tax Rate.
((1))See Adjusted Income reconciliation above for a description of special items.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions)
Adjusted EBITDA Quarter ended
June 30, March 31, June 30,
2015 2016 2016
Net income attributable to Alcoa $ 140 $ 16 $ 135
Add:
Net income (loss) attributable to noncontrolling interests 67 (5 ) 43
Provision for income taxes 75 30 152
Other expenses (income), net – 34 (37 )
Interest expense 124 127 129
Restructuring and other charges 217 93 23
Provision for depreciation, depletion, and amortization 319 309 309
Adjusted EBITDA $ 942 $ 604 $ 754
Sales $ 5,897 $ 4,947 $ 5,295
Adjusted EBITDA Margin 16.0 % 12.2 % 14.2 %
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
June 30, March 31, June 30, June 30, March 31, June 30,
2015 2016 2016 2015 2016 2016
After-tax operating income (ATOI) $ 215 $ 8 $ 109 $ 67 $ 14 $ 41
Add:
Depreciation, depletion, and amortization 77 63 66 109 102 101
Equity loss (income) 11 14 7 5 (4 ) –
Income taxes 87 5 40 6 (16 ) –
Other – – (7 ) – (1 ) 1
Adjusted EBITDA $ 390 $ 90 $ 215 $ 187 $ 95 $ 143
Production (thousand metric tons) (kmt) 3,977 3,330 3,316 701 655 595
Adjusted EBITDA / Production ($ per metric ton) $ 98 $ 27 $ 65 $ 267 $ 145 $ 240
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
(in millions)
Segment Measures Upstream ((1))
Adjusted EBITDA Quarter ended
June 30, March 31, June 30,
2015 2016 2016
After-tax operating income (ATOI) $ 282 $ 22 $ 150
Add:
Depreciation, depletion, and amortization 186 165 167
Equity loss 16 10 7
Income taxes 93 (11 ) 40
Other – (1 ) (6 )
Adjusted EBITDA $ 577 $ 185 $ 358
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.
((1)) Upstream is composed of the Alumina and Primary Metals segments. On September 28, 2015, Alcoa announced that its Board of Directors approved a plan to separate into two standalone, publicly-traded companies. One such company will be named Alcoa Corporation and will include Upstream. Additionally, the future Alcoa Corporation will include the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia, both of
which are currently part of the Global Rolled Products segment of Alcoa Inc. See Segment Information for a reconciliation of Alcoa Inc.’s total segment ATOI, which includes the Upstream ATOI presented in the table above, to its consolidated net income.
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions, except per metric ton amounts)
Segment Measures Global Rolled Products
Adjusted EBITDA Quarter ended
June 30, March 31, June 30,
2015 2016 2016
After-tax operating income (ATOI) $ 76 $ 68 $ 68
Add:
Depreciation, depletion, and amortization 56 56 55
Equity loss 7 11 10
Income taxes 25 34 28
Other – (1 ) 1
Adjusted EBITDA $ 164 $ 168 $ 162
Total shipments (thousand metric tons) (kmt) 479 449 497
Adjusted EBITDA / Total shipments ($ per metric ton) $ 342 $ 374 $ 326
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)
Segment Measures Engineered Products and Solutions Transportation and Construction
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