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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 September 30, 2023
OR
☐ 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)
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Delaware (State or other jurisdiction of incorporation or organization) |
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81-1789115 (I.R.S. Employer Identification No.) |
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201 Isabella Street, Suite 500, Pittsburgh, Pennsylvania (Address of principal executive offices) |
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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:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $0.01 per share |
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AA |
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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.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
Emerging growth company |
☐ |
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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. ☐
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 October 23, 2023, 178,471,908 shares of common stock, par value $0.01 per share, of the registrant were outstanding.
TABLE OF CONTENTS
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 “aims,” “ambition,” “anticipates,” “believes,” “could,” “develop,” “endeavors,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “potential,” “plans,” “projects,” “reach,” “seeks,” “sees,” “should,” “strive,” “targets,” “will,” “working,” “would,” or other words of similar meaning. All statements by Alcoa 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 (including our ability to execute on strategies related to environmental, social and governance matters); statements about strategies, outlook, and business and financial prospects; and statements about capital allocation and return of capital. These statements reflect beliefs and assumptions that are based on Alcoa’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 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) cyclicality of the aluminum industry and aluminum end use markets, including due to the influence of global economic conditions, and unfavorable changes in the markets served by Alcoa; (b) the effects of non-market forces, such as government policies and political instability, on global aluminum supply and demand; (c) volatility and declines in the aluminum industry, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum and other commodities, and fluctuations in indexed-based and spot prices for alumina; (d) legal, regulatory, economic, political, trade, public health and safety, and reputational risks and conditions, including changes in conditions beyond our control as a result of our participation in increasingly competitive and complex global markets; (e) our ability to obtain, maintain, or renew permits or approvals necessary for our mining operations; (f) unfavorable changes in cost, quality, or availability of key inputs, including energy and raw materials, or uncertainty of or disruption to the supply chain including logistics; (g) our ability to realize expected benefits or achieve intended results, including as planned and by targeted completion dates, from announced strategies, plans, programs, or initiatives relating to our portfolio, profitability, capital investments, and developing technologies, and from joint ventures or other strategic alliances or business transactions; (h) fluctuations in foreign currency exchange and tax rates on costs and results; (i) changes in tax laws or exposure to additional tax liabilities; (j) changes in global economic and financial market conditions generally, such as inflation, recessionary conditions, and interest rate increases, which may also affect Alcoa’s ability to obtain credit or financing upon acceptable terms or at all; (k) current and potential future impacts to the global economy and our industry, business and financial condition caused by various worldwide or macroeconomic events, such as the ongoing conflict between Russia and Ukraine; (l) global competition within and beyond the aluminum industry; (m) our ability to obtain or maintain adequate insurance coverage; (n) the outcomes of contingencies, including legal and tax proceedings, government or regulatory investigations, and environmental remediation, or changes in foreign and/or U.S. federal, state, or local laws, regulations, or policies; (o) the impacts of climate change, related legislation or regulations, and efforts to reduce greenhouse gas emissions and our ability to achieve strategies and expectations related to climate change and other environmental matters; (p) claims, costs and liabilities resulting from the impact of our operations, including impoundments, or from health, safety, and environmental laws, regulations, and requirements, in the areas where we operate; (q) the impact of cyberattacks and potential information technology or data security breaches, including disruptions to our operations, liability, and reputational harm; (r) our ability to fund capital expenditures; (s) risks associated with long-term debt obligations including restrictions on our current and future operations as a result of our indebtedness; (t) our ability to continue to return capital to stockholders through cash dividends and/or share repurchases; (u) the impact of labor disputes, work stoppages and strikes, or other employee relations issues, as well as labor market conditions; (v) declines in the discount rates used to measure pension and other postretirement benefit liabilities or lower-than-expected investment returns on pension assets, or unfavorable changes in laws or regulations that govern pension plan funding; and (w) the other risk factors discussed in Part I Item IA of Alcoa’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and other reports filed by Alcoa with the SEC. 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. 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third quarter ended
September 30, |
|
|
Nine months ended
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Sales (E) |
|
$ |
2,602 |
|
|
$ |
2,851 |
|
|
$ |
7,956 |
|
|
$ |
9,788 |
|
Cost of goods sold (exclusive of expenses below) |
|
|
2,469 |
|
|
|
2,668 |
|
|
|
7,388 |
|
|
|
7,616 |
|
Selling, general administrative, and other expenses |
|
|
56 |
|
|
|
44 |
|
|
|
162 |
|
|
|
140 |
|
Research and development expenses |
|
|
9 |
|
|
|
7 |
|
|
|
25 |
|
|
|
23 |
|
Provision for depreciation, depletion, and amortization |
|
|
163 |
|
|
|
149 |
|
|
|
469 |
|
|
|
470 |
|
Restructuring and other charges, net (D) |
|
|
22 |
|
|
|
652 |
|
|
|
195 |
|
|
|
702 |
|
Interest expense |
|
|
26 |
|
|
|
25 |
|
|
|
79 |
|
|
|
80 |
|
Other expenses (income), net (R) |
|
|
85 |
|
|
|
35 |
|
|
|
145 |
|
|
|
(185 |
) |
Total costs and expenses |
|
|
2,830 |
|
|
|
3,580 |
|
|
|
8,463 |
|
|
|
8,846 |
|
(Loss) income before income taxes |
|
|
(228 |
) |
|
|
(729 |
) |
|
|
(507 |
) |
|
|
942 |
|
(Benefit from) provision for income taxes |
|
|
(35 |
) |
|
|
40 |
|
|
|
39 |
|
|
|
484 |
|
Net (loss) income |
|
|
(193 |
) |
|
|
(769 |
) |
|
|
(546 |
) |
|
|
458 |
|
Less: Net (loss) income attributable to noncontrolling interest |
|
|
(25 |
) |
|
|
(23 |
) |
|
|
(45 |
) |
|
|
186 |
|
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION |
|
$ |
(168 |
) |
|
$ |
(746 |
) |
|
$ |
(501 |
) |
|
$ |
272 |
|
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS (F): |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.94 |
) |
|
$ |
(4.17 |
) |
|
$ |
(2.81 |
) |
|
$ |
1.50 |
|
Diluted |
|
$ |
(0.94 |
) |
|
$ |
(4.17 |
) |
|
$ |
(2.81 |
) |
|
$ |
1.47 |
|
The accompanying notes are an integral part of the consolidated financial statements.
1
Alcoa Corporation and Subsidiaries
Statement of Consolidated Comprehensive Income (unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcoa Corporation |
|
|
Noncontrolling interest |
|
|
Total |
|
|
|
Third quarter ended
September 30, |
|
|
Third quarter ended
September 30, |
|
|
Third quarter ended
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net loss |
|
$ |
(168 |
) |
|
$ |
(746 |
) |
|
$ |
(25 |
) |
|
$ |
(23 |
) |
|
$ |
(193 |
) |
|
$ |
(769 |
) |
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 |
|
|
5 |
|
|
|
656 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
4 |
|
|
|
662 |
|
Foreign currency translation adjustments |
|
|
(67 |
) |
|
|
(173 |
) |
|
|
(47 |
) |
|
|
(81 |
) |
|
|
(114 |
) |
|
|
(254 |
) |
Net change in unrecognized gains/losses on cash
flow hedges |
|
|
(91 |
) |
|
|
128 |
|
|
|
— |
|
|
|
— |
|
|
|
(91 |
) |
|
|
128 |
|
Total Other comprehensive (loss) income, net of tax |
|
|
(153 |
) |
|
|
611 |
|
|
|
(48 |
) |
|
|
(75 |
) |
|
|
(201 |
) |
|
|
536 |
|
Comprehensive loss |
|
$ |
(321 |
) |
|
$ |
(135 |
) |
|
$ |
(73 |
) |
|
$ |
(98 |
) |
|
$ |
(394 |
) |
|
$ |
(233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcoa Corporation |
|
|
Noncontrolling interest |
|
|
Total |
|
|
|
Nine months ended
September 30, |
|
|
Nine months ended
September 30, |
|
|
Nine months ended
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net (loss) income |
|
$ |
(501 |
) |
|
$ |
272 |
|
|
$ |
(45 |
) |
|
$ |
186 |
|
|
$ |
(546 |
) |
|
$ |
458 |
|
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 |
|
|
19 |
|
|
|
730 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
16 |
|
|
|
737 |
|
Foreign currency translation adjustments |
|
|
(40 |
) |
|
|
(217 |
) |
|
|
(21 |
) |
|
|
(115 |
) |
|
|
(61 |
) |
|
|
(332 |
) |
Net change in unrecognized gains/losses on cash
flow hedges |
|
|
13 |
|
|
|
435 |
|
|
|
— |
|
|
|
2 |
|
|
|
13 |
|
|
|
437 |
|
Total Other comprehensive (loss) income, net of tax |
|
|
(8 |
) |
|
|
948 |
|
|
|
(24 |
) |
|
|
(106 |
) |
|
|
(32 |
) |
|
|
842 |
|
Comprehensive (loss) income |
|
$ |
(509 |
) |
|
$ |
1,220 |
|
|
$ |
(69 |
) |
|
$ |
80 |
|
|
$ |
(578 |
) |
|
$ |
1,300 |
|
The accompanying notes are an integral part of the consolidated financial statements.
2
Alcoa Corporation and Subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
September 30,
2023 |
|
|
December 31,
2022 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents (N) |
|
$ |
926 |
|
|
$ |
1,363 |
|
Receivables from customers (I) |
|
|
691 |
|
|
|
778 |
|
Other receivables |
|
|
105 |
|
|
|
131 |
|
Inventories (J) |
|
|
2,190 |
|
|
|
2,427 |
|
Fair value of derivative instruments (N) |
|
|
33 |
|
|
|
134 |
|
Prepaid expenses and other current assets |
|
|
420 |
|
|
|
417 |
|
Total current assets |
|
|
4,365 |
|
|
|
5,250 |
|
Properties, plants, and equipment |
|
|
19,836 |
|
|
|
19,605 |
|
Less: accumulated depreciation, depletion, and amortization |
|
|
13,304 |
|
|
|
13,112 |
|
Properties, plants, and equipment, net |
|
|
6,532 |
|
|
|
6,493 |
|
Investments (H) |
|
|
1,004 |
|
|
|
1,122 |
|
Deferred income taxes |
|
|
395 |
|
|
|
296 |
|
Fair value of derivative instruments (N) |
|
|
3 |
|
|
|
2 |
|
Other noncurrent assets |
|
|
1,618 |
|
|
|
1,593 |
|
Total assets |
|
$ |
13,917 |
|
|
$ |
14,756 |
|
LIABILITIES |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable, trade |
|
$ |
1,472 |
|
|
$ |
1,757 |
|
Accrued compensation and retirement costs |
|
|
337 |
|
|
|
335 |
|
Taxes, including income taxes |
|
|
110 |
|
|
|
230 |
|
Fair value of derivative instruments (N) |
|
|
204 |
|
|
|
200 |
|
Other current liabilities |
|
|
500 |
|
|
|
481 |
|
Long-term debt due within one year (L & N) |
|
|
1 |
|
|
|
1 |
|
Total current liabilities |
|
|
2,624 |
|
|
|
3,004 |
|
Long-term debt, less amount due within one year (L & N) |
|
|
1,809 |
|
|
|
1,806 |
|
Accrued pension benefits (M) |
|
|
225 |
|
|
|
213 |
|
Accrued other postretirement benefits (M) |
|
|
440 |
|
|
|
480 |
|
Asset retirement obligations (P) |
|
|
830 |
|
|
|
711 |
|
Environmental remediation (Q) |
|
|
225 |
|
|
|
226 |
|
Fair value of derivative instruments (N) |
|
|
927 |
|
|
|
1,026 |
|
Noncurrent income taxes |
|
|
207 |
|
|
|
215 |
|
Other noncurrent liabilities and deferred credits |
|
|
538 |
|
|
|
486 |
|
Total liabilities |
|
|
7,825 |
|
|
|
8,167 |
|
CONTINGENCIES AND COMMITMENTS (Q) |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
Alcoa Corporation shareholders’ equity: |
|
|
|
|
|
|
Common stock |
|
|
2 |
|
|
|
2 |
|
Additional capital |
|
|
9,179 |
|
|
|
9,183 |
|
Accumulated deficit |
|
|
(1,125 |
) |
|
|
(570 |
) |
Accumulated other comprehensive loss (G) |
|
|
(3,547 |
) |
|
|
(3,539 |
) |
Total Alcoa Corporation shareholders’ equity |
|
|
4,509 |
|
|
|
5,076 |
|
Noncontrolling interest |
|
|
1,583 |
|
|
|
1,513 |
|
Total equity |
|
|
6,092 |
|
|
|
6,589 |
|
Total liabilities and equity |
|
$ |
13,917 |
|
|
$ |
14,756 |
|
The accompanying notes are an integral part of the consolidated financial statements.
3
Alcoa Corporation and Subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
CASH FROM OPERATIONS |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(546 |
) |
|
$ |
458 |
|
Adjustments to reconcile net (loss) income to cash from operations: |
|
|
|
|
|
|
Depreciation, depletion, and amortization |
|
|
469 |
|
|
|
470 |
|
Deferred income taxes |
|
|
(156 |
) |
|
|
93 |
|
Equity loss (income), net of dividends |
|
|
161 |
|
|
|
(35 |
) |
Restructuring and other charges, net (D) |
|
|
195 |
|
|
|
702 |
|
Net loss from investing activities – asset sales (R) |
|
|
18 |
|
|
|
7 |
|
Net periodic pension benefit cost (M) |
|
|
4 |
|
|
|
39 |
|
Stock-based compensation |
|
|
27 |
|
|
|
28 |
|
Loss (gain) on mark-to-market derivative financial contracts |
|
|
31 |
|
|
|
(84 |
) |
Other |
|
|
67 |
|
|
|
30 |
|
Changes in assets and liabilities, excluding effects of divestitures and
foreign currency translation adjustments: |
|
|
|
|
|
|
Decrease in receivables |
|
|
108 |
|
|
|
23 |
|
Decrease (increase) in inventories |
|
|
166 |
|
|
|
(580 |
) |
Decrease (increase) in prepaid expenses and other current assets |
|
|
53 |
|
|
|
(10 |
) |
Decrease in accounts payable, trade |
|
|
(275 |
) |
|
|
(10 |
) |
Decrease in accrued expenses |
|
|
(119 |
) |
|
|
(122 |
) |
Decrease in taxes, including income taxes |
|
|
(52 |
) |
|
|
(103 |
) |
Pension contributions (M) |
|
|
(20 |
) |
|
|
(12 |
) |
Increase in noncurrent assets |
|
|
(179 |
) |
|
|
(94 |
) |
Decrease in noncurrent liabilities |
|
|
(59 |
) |
|
|
(96 |
) |
CASH (USED FOR) PROVIDED FROM OPERATIONS |
|
|
(107 |
) |
|
|
704 |
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
Additions to debt |
|
|
80 |
|
|
|
— |
|
Payments on debt |
|
|
(39 |
) |
|
|
— |
|
Proceeds from the exercise of employee stock options |
|
|
1 |
|
|
|
22 |
|
Repurchase of common stock |
|
|
— |
|
|
|
(500 |
) |
Dividends paid on Alcoa common stock |
|
|
(54 |
) |
|
|
(55 |
) |
Payments related to tax withholding on stock-based compensation awards |
|
|
(34 |
) |
|
|
(19 |
) |
Financial contributions for the divestiture of businesses (C) |
|
|
(44 |
) |
|
|
(19 |
) |
Contributions from noncontrolling interest |
|
|
164 |
|
|
|
150 |
|
Distributions to noncontrolling interest |
|
|
(24 |
) |
|
|
(319 |
) |
Other |
|
|
1 |
|
|
|
(3 |
) |
CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES |
|
|
51 |
|
|
|
(743 |
) |
INVESTING ACTIVITIES |
|
|
|
|
|
|
Capital expenditures |
|
|
(343 |
) |
|
|
(309 |
) |
Proceeds from the sale of assets |
|
|
2 |
|
|
|
5 |
|
Additions to investments |
|
|
(51 |
) |
|
|
(32 |
) |
Sale of investments |
|
|
— |
|
|
|
10 |
|
Other |
|
|
4 |
|
|
|
2 |
|
CASH USED FOR INVESTING ACTIVITIES |
|
|
(388 |
) |
|
|
(324 |
) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
— |
|
|
|
(20 |
) |
Net change in cash and cash equivalents and restricted cash |
|
|
(444 |
) |
|
|
(383 |
) |
Cash and cash equivalents and restricted cash at beginning of year |
|
|
|