Alcoa Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

aa-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to _____

Commission File Number 1-37816

ALCOA CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

81-1789115

(I.R.S. Employer

Identification No.)

201 Isabella Street, Suite 500,

Pittsburgh, Pennsylvania

(Address of principal executive offices)

15212-5858

(Zip Code)

412-315-2900

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 24, 2020, 185,924,291 shares of common stock, par value $0.01 per share, of the registrant were outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	41

PART II – OTHER INFORMATION		42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 4.	Mine Safety Disclosures	43

Item 6.	Exhibits	44

SIGNATURES		45

Forward-Looking Statements

This report 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; statements about strategies, outlook, and business and financial prospects; and statements about return of capital. 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) current and potential future impacts of the coronavirus (COVID-19) pandemic on the global economy and our business, financial condition, results of operations, or cash flows and judgments and assumptions used in our estimates; (b) 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 and other products, and fluctuations in indexed-based and spot prices for alumina; (c) deterioration in global economic and financial market conditions generally and which may also affect Alcoa Corporation’s ability to obtain credit or financing upon acceptable terms or at all; (d) unfavorable changes in the markets served by Alcoa Corporation; (e) the impact of changes in foreign currency exchange and tax rates on costs and results; (f) increases in energy costs or uncertainty of energy supply; (g) 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; (h) the inability to achieve improvement in profitability and margins, cost savings, cash generation, revenue growth, fiscal discipline, or strengthening of competitiveness and operations anticipated from portfolio actions, operational and productivity improvements, cash sustainability, technology advancements, and other initiatives; (i) the inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, restructuring activities, facility closures, curtailments, restarts, expansions, or joint ventures; (j) political, economic, trade, legal, public health and safety, and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (k) labor disputes and/or and work stoppages; (l) the outcome of contingencies, including legal and tax proceedings (including the Australian Taxation Office Matter), government or regulatory investigations, and environmental remediation; (m) the impact of cyberattacks and potential information technology or data security breaches; and (n) the other risk factors discussed in Item 1A of Alcoa Corporation’s Form 10-K for the fiscal year ended December 31, 2019, Form 10-Q for the quarter ended March 31, 2020, and this Quarterly Report on Form 10-Q, 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 described above and other risks in the market.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Alcoa Corporation and Subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)

	Second quarter ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
Sales (E)	$	2,148		$	2,711		$	4,529		$	5,430
Cost of goods sold (exclusive of expenses below)		1,932			2,189			3,957			4,369
Selling, general administrative, and other expenses		44			68			104			152
Research and development expenses		5			7			12			14
Provision for depreciation, depletion, and amortization		152			174			322			346
Restructuring and other charges, net (D)		37			370			39			483
Interest expense		32			30			62			60
Other expenses (income), net (Q)		51			50			(81	)		91
Total costs and expenses		2,253			2,888			4,415			5,515
(Loss) income before income taxes		(105	)		(177	)		114			(85	)
Provision for income taxes		45			116			125			266
Net loss		(150	)		(293	)		(11	)		(351	)
Less: Net income attributable to noncontrolling interest		47			109			106			250
NET LOSS ATTRIBUTABLE TO ALCOA CORPORATION	$	(197	)	$	(402	)	$	(117	)	$	(601	)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS (F):
Basic	$	(1.06	)	$	(2.17	)	$	(0.63	)	$	(3.24	)
Diluted	$	(1.06	)	$	(2.17	)	$	(0.63	)	$	(3.24	)

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and Subsidiaries

Statement of Consolidated Comprehensive Income (unaudited)

(in millions)

	Alcoa Corporation						Noncontrolling interest						Total
	Second quarter ended June 30,						Second quarter ended June 30,						Second quarter ended June 30,
	2020			2019			2020			2019			2020			2019
Net (loss) income	$	(197	)	$	(402	)	$	47		$	109		$	(150	)	$	(293	)
Other comprehensive (loss) income, net of tax (G):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits		(127	)		10			2			(2	)		(125	)		8
Foreign currency translation adjustments		135			40			94			4			229			44
Net change in unrecognized gains/losses on cash flow hedges		(390	)		79			(1	)		(1	)		(391	)		78
Total Other comprehensive (loss) income, net of tax		(382	)		129			95			1			(287	)		130
Comprehensive (loss) income	$	(579	)	$	(273	)	$	142		$	110		$	(437	)	$	(163	)


	Alcoa Corporation						Noncontrolling interest						Total
	Six months ended June 30,						Six months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019			2020			2019
Net (loss) income	$	(117	)	$	(601	)	$	106		$	250		$	(11	)	$	(351	)
Other comprehensive (loss) income, net of tax (G):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits		(89	)		51			2			(1	)		(87	)		50
Foreign currency translation adjustments		(528	)		18			(151	)		6			(679	)		24
Net change in unrecognized gains/losses on cash flow hedges		311			(209	)		(21	)		5			290			(204	)
Total Other comprehensive (loss) income, net of tax		(306	)		(140	)		(170	)		10			(476	)		(130	)
Comprehensive (loss) income	$	(423	)	$	(741	)	$	(64	)	$	260		$	(487	)	$	(481	)

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and Subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents (M)	$	965		$	879
Receivables from customers (I)		402			546
Other receivables		105			114
Inventories (J)		1,419			1,644
Fair value of derivative instruments (M)		24			59
Prepaid expenses and other current assets		264			288
Total current assets		3,179			3,530
Properties, plants, and equipment		20,877			21,715
Less: accumulated depreciation, depletion, and amortization		13,588			13,799
Properties, plants, and equipment, net		7,289			7,916
Investments (H)		1,037			1,113
Deferred income taxes		482			642
Fair value of derivative instruments (M)		5			18
Other noncurrent assets		1,308			1,412
Total assets	$	13,300		$	14,631
LIABILITIES
Current liabilities:
Accounts payable, trade	$	1,253		$	1,484
Accrued compensation and retirement costs		393			413
Taxes, including income taxes		96			104
Fair value of derivative instruments (M)		47			67
Other current liabilities		451			494
Long-term debt due within one year (K & M)		1			1
Total current liabilities		2,241			2,563
Long-term debt, less amount due within one year (K & M)		1,800			1,799
Accrued pension benefits (L)		1,602			1,505
Accrued other postretirement benefits (L)		711			749
Asset retirement obligations		565			606
Environmental remediation (P)		277			296
Fair value of derivative instruments (M)		203			581
Noncurrent income taxes		245			276
Other noncurrent liabilities and deferred credits		332			370
Total liabilities		7,976			8,745
CONTINGENCIES AND COMMITMENTS (P)
EQUITY
Alcoa Corporation shareholders’ equity:
Common stock		2			2
Additional capital		9,655			9,639
Accumulated deficit		(672	)		(555	)
Accumulated other comprehensive loss (G)		(5,280	)		(4,974	)
Total Alcoa Corporation shareholders’ equity		3,705			4,112
Noncontrolling interest		1,619			1,774
Total equity		5,324			5,886
Total liabilities and equity	$	13,300		$	14,631

The accompanying notes are an integral part of the consolidated financial statements.

Alcoa Corporation and Subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)

	Six months ended June 30,
	2020			2019
CASH FROM OPERATIONS
Net loss	$	(11	)	$	(351	)
Adjustments to reconcile net loss to cash from operations:
Depreciation, depletion, and amortization		322			346
Deferred income taxes		(6	)		64
Equity earnings, net of dividends		15			14
Restructuring and other charges, net (D)		39			483
Net gain from investing activities – asset sales (Q)		(176	)		(1	)
Net periodic pension benefit cost (L)		67			60
Stock-based compensation		17			21
Provision for bad debt expense		2			20
Other		5			24
Changes in assets and liabilities, excluding effects of divestitures and foreign currency translation adjustments:

Price	21.49	EPS	-4
Shares	186	P/E	-5
MCap	3,988	P/FCF	6
Net Debt	917	EBIT	-265
TEV	4,905	TEV/EBIT	-19
TTM 2019-12-31, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-29
10-Q	2020-03-31	Filed 2020-04-29
10-K	2019-12-31	Filed 2020-02-21
10-Q	2019-09-30	Filed 2019-10-31
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-09
10-K	2017-12-31	Filed 2018-02-26
10-Q	2017-09-30	Filed 2017-10-27
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-10
S-1	2017-01-18	Public Filing
10-K	2016-12-31	Filed 2017-03-15
S-1	2016-10-26	Public Filing
10-Q	2016-09-30	Filed 2016-12-01

8-K	2020-07-15	Earnings, Exhibits
8-K	2020-07-13	Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K	2020-07-08	Regulation FD, Exhibits
8-K	2020-07-08	Earnings, Regulation FD, Exhibits
8-K	2020-07-07	Other Events
8-K	2020-06-24
8-K	2020-05-06
8-K	2020-04-21
8-K	2020-02-03
8-K	2020-01-15
8-K	2019-12-16
8-K	2019-12-11
8-K	2019-12-04
8-K	2019-10-16
8-K	2019-09-20
8-K	2019-09-07
8-K	2019-07-17
8-K	2019-07-03
8-K	2019-07-02
8-K	2019-06-26
8-K	2019-05-08
8-K	2019-04-17
8-K	2019-01-16
8-K	2018-11-21
8-K	2018-10-11
8-K	2018-09-11
8-K	2018-08-08
8-K	2018-07-18
8-K	2018-06-18
8-K	2018-05-17
8-K	2018-05-14
8-K	2018-05-14
8-K	2018-05-09
8-K	2018-04-18
8-K	2018-04-03
8-K	2018-01-17

EX-31.1	aa-ex311_9.htm
EX-31.2	aa-ex312_11.htm
EX-32.1	aa-ex321_10.htm
EX-32.2	aa-ex322_7.htm
EX-95.1	aa-ex951_152.htm

AA 10Q Quarterly Report

Alcoa Earnings 2020-06-30