QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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
AA
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 26, 2019, 185,557,343 shares of common stock, par value $0.01 per share, of the registrant were outstanding.
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 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) 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; (b) 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; (c) unfavorable changes in the markets served by Alcoa Corporation; (d) the impact of changes in foreign currency exchange and tax rates on costs and results; (e) increases in energy costs or uncertainty of energy supply; (f) 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; (g) 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 operational and productivity improvements, cash sustainability, technology advancements, and other initiatives; (h) the inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, restarts, expansions, or joint ventures; (i) political, economic, trade, legal, and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (j) labor disputes and/or work stoppages; (k) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation; (l) the impact of cyberattacks and potential information technology or data security breaches; and (m) the other risk factors discussed in Item 1A of Alcoa Corporation’s Form 10-K for the fiscal year ended December 31, 2018 and other reports filed by Alcoa Corporation with the U.S. Securities and Exchange Commission, including those described in this report. 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,
2019
2018
2019
2018
Sales (D)
$
2,711
$
3,579
$
5,430
$
6,669
Cost of goods sold (exclusive of expenses below) (H)
2,189
2,753
4,369
5,055
Selling, general administrative, and other expenses
68
64
152
131
Research and development expenses
7
9
14
17
Provision for depreciation, depletion, and amortization
174
192
346
386
Restructuring and other charges, net (C)
370
231
483
212
Interest expense
30
32
60
58
Other expenses, net (N)
50
9
91
30
Total costs and expenses
2,888
3,290
5,515
5,889
(Loss) income before income taxes
(177
)
289
(85
)
780
Provision for income taxes
116
158
266
309
Net (loss) income
(293
)
131
(351
)
471
Less: Net income attributable to noncontrolling interest
109
121
250
266
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$
(402
)
$
10
$
(601
)
$
205
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS (E):
Basic
$
(2.17
)
$
0.05
$
(3.24
)
$
1.10
Diluted
$
(2.17
)
$
0.05
$
(3.24
)
$
1.09
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
Second quarter ended
June 30,
Second quarter ended
June 30,
Second quarter ended
June 30,
2019
2018
2019
2018
2019
2018
Net (loss) income (H)
$
(402
)
$
10
$
109
$
121
$
(293
)
$
131
Other comprehensive income (loss), net of tax (F):
Change in unrecognized net actuarial loss and
prior service cost/benefit related to pension
and other postretirement benefits
10
183
(2
)
2
8
185
Foreign currency translation adjustments
40
(445
)
4
(151
)
44
(596
)
Net change in unrecognized gains/losses on cash
flow hedges
79
(175
)
(1
)
(10
)
78
(185
)
Total Other comprehensive income (loss), net of tax
129
(437
)
1
(159
)
130
(596
)
Comprehensive (loss) income
$
(273
)
$
(427
)
$
110
$
(38
)
$
(163
)
$
(465
)
Alcoa Corporation
Noncontrolling
interest
Total
Six months ended
June 30,
Six months ended
June 30,
Six months ended
June 30,
2019
2018
2019
2018
2019
2018
Net (loss) income (H)
$
(601
)
$
205
$
250
$
266
$
(351
)
$
471
Other comprehensive (loss) income, net of tax (F):
Change in unrecognized net actuarial loss and
prior service cost/benefit related to pension
and other postretirement benefits
51
284
(1
)
3
50
287
Foreign currency translation adjustments
18
(444
)
6
(165
)
24
(609
)
Net change in unrecognized gains/losses on
cash flow hedges
(209
)
375
5
(30
)
(204
)
345
Total Other comprehensive (loss) income, net of tax
(140
)
215
10
(192
)
(130
)
23
Comprehensive (loss) income
$
(741
)
$
420
$
260
$
74
$
(481
)
$
494
The accompanying notes are an integral part of the consolidated financial statements.
2
Alcoa Corporation and Subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
June 30,
2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents (J)
$
834
$
1,113
Receivables from customers
684
830
Other receivables
203
173
Inventories (H)
1,767
1,819
Fair value of derivative instruments (J)
80
73
Prepaid expenses and other current assets (H)
250
320
Total current assets
3,818
4,328
Properties, plants, and equipment
22,126
21,807
Less: accumulated depreciation, depletion, and amortization
13,853
13,480
Properties, plants, and equipment, net
8,273
8,327
Investments (G & M)
1,141
1,360
Deferred income taxes
599
560
Fair value of derivative instruments (J)
55
82
Other noncurrent assets
1,463
1,475
Total assets
$
15,349
$
16,132
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,523
$
1,663
Accrued compensation and retirement costs
409
400
Taxes, including income taxes
100
426
Fair value of derivative instruments (J)
71
82
Other current liabilities
427
347
Long-term debt due within one year (J)
1
1
Total current liabilities
2,531
2,919
Long-term debt, less amount due within one year (J)
1,804
1,801
Accrued pension benefits (I)
1,388
1,407
Accrued other postretirement benefits (I)
835
868
Asset retirement obligations
529
529
Environmental remediation (M)
237
236
Fair value of derivative instruments (J)
506
261
Noncurrent income taxes
320
301
Other noncurrent liabilities and deferred credits
340
222
Total liabilities
8,490
8,544
CONTINGENCIES AND COMMITMENTS (M)
EQUITY
Alcoa Corporation shareholders’ equity:
Common stock
2
2
Additional capital
9,629
9,611
Retained (deficit) earnings (H)
(31
)
570
Accumulated other comprehensive loss (F)
(4,705
)
(4,565
)
Total Alcoa Corporation shareholders’ equity
4,895
5,618
Noncontrolling interest (H)
1,964
1,970
Total equity
6,859
7,588
Total liabilities and equity
$
15,349
$
16,132
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)
Six Months Ended June 30,
2019
2018
CASH FROM OPERATIONS
Net (loss) income (H)
$
(351
)
$
471
Adjustments to reconcile net (loss) income to cash from operations:
Depreciation, depletion, and amortization
346
387
Deferred income taxes (H)
64
(40
)
Equity earnings, net of dividends
14
(11
)
Restructuring and other charges, net (C)
483
212
Net gain from investing activities – asset sales (N)
(1
)
(3
)
Net periodic pension benefit cost (I)
60
81
Stock-based compensation
21
20
Provision for bad debt expense
20
—
Other
24
(32
)
Changes in assets and liabilities, excluding effects of foreign currency
translation adjustments:
Decrease (Increase) in receivables
94
(209
)
Decrease (Increase) in inventories (H)
53
(225
)
Decrease (Increase) in prepaid expenses and other current assets
68
(8
)
(Decrease) in accounts payable, trade
(144
)
(105
)
(Decrease) in accrued expenses
(51
)
(243
)
(Decrease) Increase in taxes, including income taxes
(342
)
101
Pension contributions (I)
(55
)
(692
)
(Increase) in noncurrent assets
(32
)
(49
)
(Decrease) in noncurrent liabilities
(21
)
(30
)
CASH PROVIDED FROM (USED FOR) OPERATIONS
250
(375
)
FINANCING ACTIVITIES
Additions to debt (original maturities greater than three months)
—
553
Payments on debt (original maturities greater than three months)
—
(7
)
Proceeds from the exercise of employee stock options