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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 March 31, 2024

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)

 

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.

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 April 29, 2024, 179,559,688 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

 

24

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

40

 

 

 

 

Item 4.

Controls and Procedures

 

40

 

 

 

 

PART II – OTHER INFORMATION

 

41

 

 

 

 

Item 1.

Legal Proceedings

 

41

 

 

 

 

Item 1A.

Risk Factors

 

41

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

42

 

 

 

 

Item 5.

Other Information

 

43

 

 

 

 

Item 6.

Exhibits

 

43

 

 

 

 

SIGNATURES

 

44

 


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 Corporation that reflect expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements regarding Alcoa Corporation’s proposed transaction to acquire Alumina Limited, an Australian public company limited by shares and listed on the Australian Securities Exchange (Alumina Limited) (the proposed transaction); the ability of the parties to complete the proposed transaction; the expected benefits of the proposed transaction, Alcoa Corporation’s competitive ability and position following completion of the proposed transaction; 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, such as our Green Finance Framework); 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 Corporations’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: (1) the non-satisfaction or non-waiver, on a timely basis or otherwise, of one or more closing conditions to the proposed transaction; (2) the prohibition or delay of the consummation of the proposed transaction by a governmental entity; (3) the risk that the proposed transaction may not be completed in the expected time frame or at all; (4) unexpected costs, charges or expenses resulting from the proposed transaction; (5) uncertainty of the expected financial performance following completion of the proposed transaction; (6) failure to realize the anticipated benefits of the proposed transaction; (7) the occurrence of any event that could give rise to termination of the proposed transaction; (8) potential litigation in connection with the proposed transaction or other settlements or investigations that may affect the timing or occurrence of the contemplated transaction or result in significant costs of defense, indemnification and liability; (9) the impact of global economic conditions on the aluminum industry and aluminum end-use markets; (10) volatility and declines in aluminum and alumina demand and pricing, including global, regional, and product-specific prices, or significant changes in production costs which are linked to London Metal Exchange (LME) or other commodities; (11) the disruption of market-driven balancing of global aluminum supply and demand by non-market forces; (12) competitive and complex conditions in global markets; (13) our ability to obtain, maintain, or renew permits or approvals necessary for our mining operations; (14) rising energy costs and interruptions or uncertainty in energy supplies; (15) unfavorable changes in the cost, quality, or availability of raw materials or other key inputs, or by disruptions in the supply chain; (16) our ability to execute on our strategy to be a lower cost, competitive, and integrated aluminum production business and to realize the anticipated benefits from announced plans, programs, initiatives relating to our portfolio, capital investments, and developing technologies; (17) our ability to integrate and achieve intended results from joint ventures, other strategic alliances, and strategic business transactions; (18) economic, political, and social conditions, including the impact of trade policies and adverse industry publicity; (19) fluctuations in foreign currency exchange rates and interest rates, inflation and other economic factors in the countries in which we operate; (20) changes in tax laws or exposure to additional tax liabilities; (21) global competition within and beyond the aluminum industry; (22) our ability to obtain or maintain adequate insurance coverage; (23) disruptions in the global economy caused by ongoing regional conflicts; (24) legal proceedings, investigations, or changes in foreign and/or U.S. federal, state, or local laws, regulations, or policies; (25) climate change, climate change legislation or regulations, and efforts to reduce emissions and build operational resilience to extreme weather conditions; (26) our ability to achieve our strategies or expectations relating to environmental, social, and governance considerations; (27) claims, costs, and liabilities related to health, safety and environmental laws, regulations, and other requirements in the jurisdictions in which we operate; (28) liabilities resulting from impoundment structures, which could impact the environment or cause exposure to hazardous substances or other damage; (29) our ability to fund capital expenditures; (30) deterioration in our credit profile or increases in interest rates; (31) restrictions on our current and future operations due to our indebtedness; (32) our ability to continue to return capital to our stockholders through the payment of cash dividends and/or the repurchase of our common stock; (33) cyber attacks, security breaches, system failures, software or application vulnerabilities, or other cyber incidents; (34) labor market conditions, union disputes and other employee relations issues; (35) a decline in the liability discount rate or lower-than-expected investment returns on pension assets; and (36) the other risk factors discussed in Alcoa’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and other reports filed by Alcoa with the SEC, including those described in this report. Alcoa cautions readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. 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. Neither Alcoa nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements and none of the information contained herein should be regarded as a representation that the forward-looking statements contained herein will be achieved.


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Alcoa Corporation and Subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)

 

 

 

First quarter ended
March 31,

 

 

 

2024

 

 

2023

 

Sales (E)

 

$

2,599

 

 

$

2,670

 

Cost of goods sold (exclusive of expenses below)

 

 

2,404

 

 

 

2,404

 

Selling, general administrative, and other expenses

 

 

60

 

 

 

54

 

Research and development expenses

 

 

11

 

 

 

10

 

Provision for depreciation, depletion, and amortization

 

 

161

 

 

 

153

 

Restructuring and other charges, net (D)

 

 

202

 

 

 

149

 

Interest expense

 

 

27

 

 

 

26

 

Other expenses, net (P)

 

 

59

 

 

 

54

 

Total costs and expenses

 

 

2,924

 

 

 

2,850

 

Loss before income taxes

 

 

(325

)

 

 

(180

)

(Benefit from) provision for income taxes

 

 

(18

)

 

 

52

 

Net loss

 

 

(307

)

 

 

(232

)

Less: Net loss attributable to noncontrolling interest

 

 

(55

)

 

 

(1

)

NET LOSS ATTRIBUTABLE TO ALCOA
   CORPORATION

 

$

(252

)

 

$

(231

)

EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
   CORPORATION COMMON SHAREHOLDERS (F):

 

 

 

 

 

 

Basic

 

$

(1.41

)

 

$

(1.30

)

Diluted

 

$

(1.41

)

 

$

(1.30

)

 

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

 

 

 

First quarter ended
March 31,

 

 

First quarter ended
March 31,

 

 

First quarter ended
March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net loss

 

$

(252

)

 

$

(231

)

 

$

(55

)

 

$

(1

)

 

$

(307

)

 

$

(232

)

Other comprehensive income (loss), net of tax (G):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrecognized net actuarial gain/loss
   and prior service cost/benefit related to pension
   and other postretirement benefits

 

 

9

 

 

 

4

 

 

 

1

 

 

 

 

 

 

10

 

 

 

4

 

Foreign currency translation adjustments

 

 

(122

)

 

 

2

 

 

 

(54

)

 

 

15

 

 

 

(176

)

 

 

17

 

Net change in unrecognized gains/losses on cash
   flow hedges

 

 

130

 

 

 

(122

)

 

 

 

 

 

 

 

 

130

 

 

 

(122

)

Total Other comprehensive income (loss), net of tax

 

 

17

 

 

 

(116

)

 

 

(53

)

 

 

15

 

 

 

(36

)

 

 

(101

)

Comprehensive (loss) income

 

$

(235

)

 

$

(347

)

 

$

(108

)

 

$

14

 

 

$

(343

)

 

$

(333

)

 

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

2


 

Alcoa Corporation and Subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents (M)

 

$

1,358

 

 

$

944

 

Receivables from customers (I)

 

 

869

 

 

 

656

 

Other receivables

 

 

132

 

 

 

152

 

Inventories (J)

 

 

2,048

 

 

 

2,158

 

Fair value of derivative instruments (M)

 

 

22

 

 

 

29

 

Prepaid expenses and other current assets

 

 

452

 

 

 

466

 

Total current assets

 

 

4,881

 

 

 

4,405

 

Properties, plants, and equipment

 

 

19,959

 

 

 

20,381

 

Less: accumulated depreciation, depletion, and amortization

 

 

13,382

 

 

 

13,596

 

Properties, plants, and equipment, net

 

 

6,577

 

 

 

6,785

 

Investments (H)

 

 

969

 

 

 

979

 

Deferred income taxes

 

 

295

 

 

 

333

 

Fair value of derivative instruments (M)

 

 

1

 

 

 

3

 

Other noncurrent assets

 

 

1,605

 

 

 

1,650

 

Total assets

 

$

14,328

 

 

$

14,155

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, trade

 

$

1,586

 

 

$

1,714

 

Accrued compensation and retirement costs

 

 

331

 

 

 

357

 

Taxes, including income taxes

 

 

94

 

 

 

88

 

Fair value of derivative instruments (M)

 

 

205

 

 

 

214

 

Other current liabilities

 

 

746

 

 

 

578

 

Long-term debt due within one year (K & M)

 

 

79

 

 

 

79

 

Total current liabilities

 

 

3,041

 

 

 

3,030

 

Long-term debt, less amount due within one year (K & M)

 

 

2,469

 

 

 

1,732

 

Accrued pension benefits (L)

 

 

267

 

 

 

278

 

Accrued other postretirement benefits (L)

 

 

437

 

 

 

443

 

Asset retirement obligations

 

 

718

 

 

 

772

 

Environmental remediation (O)

 

 

197

 

 

 

202

 

Fair value of derivative instruments (M)

 

 

925

 

 

 

1,092

 

Noncurrent income taxes

 

 

134

 

 

 

193

 

Other noncurrent liabilities and deferred credits

 

 

606

 

 

 

568

 

Total liabilities

 

 

8,794

 

 

 

8,310

 

CONTINGENCIES AND COMMITMENTS (O)

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Alcoa Corporation shareholders’ equity:

 

 

 

 

 

 

Common stock

 

 

2

 

 

 

2

 

Additional capital

 

 

9,184

 

 

 

9,187

 

Accumulated deficit

 

 

(1,564

)

 

 

(1,293

)

Accumulated other comprehensive loss (G)

 

 

(3,628

)

 

 

(3,645

)

Total Alcoa Corporation shareholders’ equity

 

 

3,994

 

 

 

4,251

 

Noncontrolling interest

 

 

1,540

 

 

 

1,594

 

Total equity

 

 

5,534

 

 

 

5,845

 

Total liabilities and equity

 

$

14,328

 

 

$

14,155

 

 

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)

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

CASH FROM OPERATIONS

 

 

 

 

 

 

Net loss

 

$

(307

)

 

$

(232

)

Adjustments to reconcile net loss to cash from operations:

 

 

 

 

 

 

Depreciation, depletion, and amortization

 

 

161

 

 

 

153

 

Deferred income taxes

 

 

(63

)

 

 

(24

)

Equity loss, net of dividends

 

 

23

 

 

 

93

 

Restructuring and other charges, net (D)

 

 

202

 

 

 

149

 

Net loss from investing activities – asset sales (P)

 

 

11

 

 

 

18

 

Net periodic pension benefit cost (L)

 

 

3

 

 

 

1

 

Stock-based compensation

 

 

10

 

 

 

10

 

Loss (gain) on mark-to-market derivative financial contracts

 

 

2

 

 

 

(18

)

Other

 

 

20

 

 

 

48

 

Changes in assets and liabilities, excluding effects of divestitures and
   foreign currency translation adjustments:

 

 

 

 

 

 

(Increase) decrease in receivables

 

 

(212

)

 

 

40

 

Decrease in inventories

 

 

71

 

 

 

17

 

(Increase) decrease in prepaid expenses and other current assets

 

 

(6

)

 

 

4

 

Decrease in accounts payable, trade

 

 

(98

)

 

 

(273

)

Decrease in accrued expenses

 

 

(22

)

 

 

(45

)

Increase (decrease) in taxes, including income taxes

 

 

18

 

 

 

(13

)

Pension contributions (L)

 

 

(6

)

 

 

(4

)

Decrease (increase) in noncurrent assets

 

 

9

 

 

 

(29

)

Decrease in noncurrent liabilities

 

 

(39

)

 

 

(58

)

CASH USED FOR OPERATIONS

 

 

(223

)

 

 

(163

)

FINANCING ACTIVITIES

 

 

 

 

 

 

Additions to debt

 

 

965

 

 

 

25

 

Payments on debt

 

 

(221

)

 

 

(1

)

Proceeds from the exercise of employee stock options

 

 

 

 

 

1

 

Dividends paid on Alcoa common stock

 

 

(19

)

 

 

(18

)

Payments related to tax withholding on stock-based compensation awards

 

 

(15

)

 

 

(34

)

Financial contributions for the divestiture of businesses (C)

 

 

(7

)

 

 

(14

)

Contributions from noncontrolling interest

 

 

61

 

 

 

86

 

Distributions to noncontrolling interest

 

 

(6

)

 

 

(6

)

Other

 

 

(4

)

 

 

1

 

CASH PROVIDED FROM FINANCING ACTIVITIES

 

 

754

 

 

 

40

 

INVESTING ACTIVITIES

 

 

 

 

 

 

Capital expenditures

 

 

(101

)

 

 

(83

)

Proceeds from the sale of assets

 

 

1

 

 

 

1

 

Additions to investments

 

 

(17

)

 

 

(20

)

CASH USED FOR INVESTING ACTIVITIES

 

 

(117

)

 

 

(102

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
   EQUIVALENTS AND RESTRICTED CASH

 

 

(6

)

 

 

2

 

Net change in cash and cash equivalents and restricted cash

 

 

408

 

 

 

(223

)

Cash and cash equivalents and restricted cash at beginning of year

 

 

1,047

 

 

 

1,474

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT
   END OF PERIOD

 

$

1,455

 

 

$

1,251

 

 

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

4


 

Alcoa Corporation and Subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(in millions)

 

Alcoa Corporation shareholders

 

 

 

 

 

 

Common
stock

 

Additional
capital

 

Accumulated deficit

 

Accumulated
other
comprehensive
(loss) income

 

Non-
controlling
interest

 

Total
equity

 

Balance at January 1, 2023

$

2

 

$

9,183

 

$

(570

)

$

(3,539

)

$

1,513

 

$

6,589

 

Net loss

 

 

 

 

 

(231

)

 

 

 

(1

)

 

(232

)

Other comprehensive (loss) income (G)

 

 

 

 

 

 

 

(116

)

 

15

 

 

(101

)

Stock-based compensation

 

 

 

10

 

 

 

 

 

 

 

 

10

 

Net effect of tax withholding for compensation
   plans and exercise of stock options

 

 

 

(33

)

 

 

 

 

 

 

 

(33

)

Dividends paid on Alcoa common stock
   ($
0.10 per share)

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Contributions

 

 

 

 

 

 

 

 

 

86

 

 

86

 

Distributions

 

 

 

 

 

 

 

 

 

(6

)

 

(6

)

Other

 

 

 

2

 

 

 

 

 

 

(1

)

 

1

 

Balance at March 31, 2023

$

2

 

$

9,162

 

$

(819

)

$

(3,655

)

$

1,606

 

$

6,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2024

$

2

 

$

9,187

 

$

(1,293

)

$

(3,645

)

$

1,594

 

$

5,845

 

Net loss

 

 

 

 

 

(252

)

 

 

 

(55

)

 

(307

)

Other comprehensive income (loss) (G)

 

 

 

 

 

 

 

17

 

 

(53

)

 

(36

)

Stock-based compensation

 

 

 

10

 

 

 

 

 

 

 

 

10

 

Net effect of tax withholding for compensation
   plans and exercise of stock options

 

 

 

(15

)

 

 

 

 

 

 

 

(15

)

Dividends paid on Alcoa common stock
   ($
0.10 per share)

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Contributions

 

 

 

 

 

 

 

 

 

61

 

 

61

 

Distributions

 

 

 

 

 

 

 

 

 

(6

)

 

(6

)

Other

 

 

 

2

 

 

 

 

 

 

(1

)

 

1

 

Balance at March 31, 2024

$

2

 

$

9,184

 

$

(1,564

)

$

(3,628

)

$

1,540

 

$

5,534

 

 

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

5


 

Alcoa Corporation and Subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

(dollars in millions, except per-share amounts; metric tons in thousands (kmt))

A. Basis of Presentation – The interim Consolidated Financial Statements of Alcoa Corporation and its subsidiaries (Alcoa Corporation, Alcoa, or the Company) are unaudited. These Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The 2023 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which includes disclosures required by GAAP.

In accordance with GAAP, certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They also may affect the reported amounts of revenues and expenses during the reporting periods. Management uses historical experience and all available information to make these estimates. Management regularly evaluates the judgments and assumptions used in its estimates, and results could differ from those estimates upon future events and their effects or new information.

Principles of Consolidation. The Consolidated Financial Statements of Alcoa Corporation include the accounts of Alcoa Corporation and companies in which Alcoa Corporation has a controlling interest, including those that comprise the Alcoa World Alumina & Chemicals (AWAC) joint venture (see below). Intercompany transactions have been eliminated. The equity method of accounting is used for investments in affiliates and other joint ventures over which Alcoa Corporation has significant influence but does not have effective control. Investments in affiliates in which Alcoa Corporation cannot exercise significant influence are accounted for at cost less any impairment, a measurement alternative in accordance with GAAP.

AWAC is an unincorporated global joint venture between Alcoa Corporation and Alumina Limited and consists of several affiliated operating entities, which own, have an interest in, or operate the bauxite mines and alumina refineries within Alcoa Corporation’s Alumina segment (except for the Poços de Caldas mine and refinery and portions of the São Luís refinery, all in Brazil) and a portion (55%) of the Portland smelter (Australia) within Alcoa Corporation’s Aluminum segment. Alcoa Corporation owns 60% and Alumina Limited owns 40% of these individual entities, which are consolidated by the Company for financial reporting purposes and include Alcoa of Australia Limited (AofA), Alcoa World Alumina LLC (AWA), Alcoa World Alumina Brasil Ltda. (AWAB), and Alúmina Española, S.A. (Española). Alumina Limited’s interest in the equity of such entities is reflected as Noncontrolling interest on the accompanying Consolidated Balance Sheet.

B. Recently Adopted and Recently Issued Accounting Guidance

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023-09 which includes changes to income tax disclosures, including greater disaggregation of information in the rate reconciliation and disclosure of taxes paid by jurisdiction. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The adoption of this guidance will provide enhanced disclosures regarding income taxes and will not have a material impact on the Company’s financial statements.

In November 2023, the FASB issued ASU 2023-07 which requires disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM), other segment items (not included in significant segment expenses for each reportable segment), the title and position of the CODM, and an explanation of how the CODM uses the reported measure of segment profit or loss to assess segment performance and allocate resources. The adoption of this guidance will not have a material impact on the Company’s financial statements and will provide enhanced disclosures regarding reportable segments beginning in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

 

6


 

 

C. Acquisitions and Divestitures

Alumina Limited Acquisition

On March 11, 2024, the Company and Alumina Limited entered into a Scheme Implementation Deed (the Agreement) for Alcoa’s acquisition of all Alumina Limited ordinary shares (the Transaction), following an agreement reached on February 26, 2024, between Alcoa and Alumina Limited, on terms and process for the acquisition of Alumina Limited (the Process Deed). Alumina Limited holds a 40% ownership interest in the AWAC joint venture. The acquisition is intended to enhance Alcoa’s position as a leading pure play, upstream aluminum company globally, while simplifying the Company’s corporate structure and governance, resulting in greater operational flexibility and strategic optionality.

Under the Agreement, Alumina Limited shareholders would receive consideration of 0.02854 Alcoa common shares for each Alumina Limited share (the Agreed Ratio). Upon completion of the transaction, Alumina Limited shareholders would own 31.25%, and Alcoa shareholders would own 68.75% of the combined company, on a fully diluted basis. Based on Alcoa’s closing share price as of February 23, 2024, the last trading day prior to the announcement of the Process Deed, the Agreed Ratio implies a value of A$1.15 per Alumina Limited share and an equity value of approximately $2,200 for Alumina Limited.

Under the terms of the Agreement, Alcoa also agreed to provide a shareholder loan to AWAC in place of required capital contributions by Alumina Limited if Alumina Limited’s net debt position exceeds $420. Subject to certain accelerated repayment triggers, Alumina Limited would be required to pay its equity calls (plus accrued interest) no later than September 1, 2025 in the event the transaction is not completed. Alcoa and Alumina Limited are also subject to termination fees in the event the transaction is not completed.

Warrick Rolling Mill Divestiture

In conjunction with the sale of its rolling mill located at Warrick Operations (Warrick Rolling Mill) in March 2021, the Company recorded estimated liabilities for site separation commitments. In the first quarters of 2024 and 2023, the Company spent $7 and $14 against the reserve, respectively. The Company recorded an additional charge of $11 in the first quarter of 2024 in Other expenses, net on the Statement of Consolidated Operations related to these commitments. In the first quarter of 2023, the Company recorded a charge of $17 in Other expenses, net on the Statement of Consolidated Operations related to these commitments. The remaining balance of $15 at March 31, 2024 is expected to be spent in 2024.

D. Restructuring and Other Charges, Net

In the first quarter of 2024, Alcoa Corporation recorded Restructuring and other charges, net, of $202 which were primarily comprised of a charge of $197 for the curtailment of the Kwinana (Australia) alumina refinery.

In January 2024, Alcoa Corporation announced the full curtailment of the Kwinana alumina refinery which will be completed in the second quarter of 2024. The refinery currently has approximately 780 employees and this number will be reduced to approximately 250 in the third quarter of 2024, after alumina production has ceased. Certain processes will continue until about the third quarter of 2025, when the employee number will be further reduced to approximately 50. In addition to the employees separating as a result of the curtailment, approximately 150 employees will either terminate through the productivity program announced in the third quarter of 2023 or redeploy to other Alcoa operations. The charge of $197 includes $123 for water management costs, $41 for severance and employee termination costs for the separation of approximately 580 employees, $15 for asset retirement obligations, $13 for take-or-pay contracts, and $5 for asset impairments. Related cash outlays of approximately $215 (which includes existing employee related liabilities and asset retirement obligations) are expected through 2025, with approximately $140 to be spent in 2024. During the first quarter of 2024, cash outlays were $2.

Alcoa Corporation recorded a net charge of $149 in the first quarter of 2023 in Restructuring and other charges, net, which were primarily comprised of:

A charge of $101 for asset impairments and to establish reserves for environmental, demolition and employee severance costs related to the permanent closure of the Intalco (Washington) aluminum smelter; and,
A charge of $47 for increased reserves for certain employee obligations related to the updated agreement for the San Ciprián (Spain) aluminum smelter.

 

7


 

In March 2023, Alcoa Corporation announced the closure of the Intalco aluminum smelter, which had been fully curtailed since 2020. The Company recorded charges of $117 related to the closure, including a charge of $16 in Cost of goods sold on the Statement of Consolidated Operations to write-down remaining inventories to net realizable value and a charge of $101 in Restructuring and other charges, net on the Statement of Consolidated Operations. The restructuring charges were comprised of asset impairments of $50, environmental and demolition obligation reserves of $50, and severance and employee termination costs of $1 for the separation of approximately 12 employees. Cash outlays related to the permanent closure of the site are expected to be $80 over the next three years with approximately $45 to be spent in 2024. During the first quarter of 2024, cash outlays were $4.

In February 2023, the Company reached an updated viability agreement with the workers’ representatives of the San Ciprián smelter to commence the restart process in phases beginning in January 2024. The smelter was curtailed in January 2022 as a result of an agreement reached with the workers’ representatives in December 2021. Under the terms of the updated viability agreement, the Company is responsible for certain employee obligations during 2023 through 2025 and made additional commitments for capital improvements of $78. The Company recorded charges of $53 in Restructuring and other charges, net on the Statement of Consolidated Operations to establish the related reserve for employee obligations in 2023. Cash outlays related to employee obligations are expected to be $38 through 2025, with approximately $25 to be spent in 2024. During the first quarter of 2024, cash outlays were $8. At March 31, 2024, the Company had restricted cash of $86 to be made available for remaining capital improvement commitments at the site of $115 and smelter restart costs of $33 for both the agreement reached with the worker’s representatives in December 2021 and the updated viability agreement in February 2023. Restricted cash is included in Prepaid expenses and other current assets and Other noncurrent assets on the Consolidated Balance Sheet (see Note P).

Alcoa Corporation does not include Restructuring and other charges, net in the results of its reportable segments. The impact of allocating such charges to segment results would have been as follows:

 

 

 

First quarter ended
March 31,

 

 

 

2024

 

 

2023

 

Alumina

 

$

197

 

 

$

1

 

Aluminum

 

 

 

 

 

146

 

Segment total

 

 

197

 

 

 

147

 

Corporate

 

 

5

 

 

 

2

 

Total Restructuring and other charges, net

 

$

202

 

 

$

149

 

 

Activity and reserve balances for restructuring charges were as follows:

 

 

 

Severance
and
employee
termination
costs

 

 

Other
costs

 

 

Total

 

Balance at December 31, 2022

 

$

1

 

 

$

116

 

 

$

117

 

Restructuring and other charges, net

 

 

11

 

 

 

55

 

 

 

66

 

Cash payments

 

 

(6

)

 

 

(118

)

 

 

(124

)

Reversals and other

 

 

 

 

 

4

 

 

 

4

 

Balance at December 31, 2023

 

 

6

 

 

 

57

 

 

 

63

 

Restructuring and other charges, net

 

 

43

 

 

 

139

 

 

 

182

 

Cash payments

 

 

(1

)

 

 

(15

)

 

 

(16

)

Reversals and other

 

 

 

 

 

(1

)

 

 

(1

)

Balance at March 31, 2024

 

$

48

 

 

$

180

 

 

$

228

 

The activity and reserve balances include only Restructuring and other charges, net that impacted the reserves for Severance and employee termination costs and Other costs. Restructuring and other charges, net that affected other liability accounts such as Accrued pension benefits (see Note L), Asset retirement obligations, and Environmental remediation (see Note O) are excluded from the above activity and balances. Reversals and other includes reversals of previously recorded liabilities and foreign currency translation impacts.

The noncurrent portion of the reserve was $45 and $15 at March 31, 2024 and December 31, 2023, respectively.

8


 

E. Segment Information – Alcoa Corporation is a producer of bauxite, alumina, and aluminum products. The Company has two operating and reportable segments: (i) Alumina and (ii) Aluminum. Segment performance under Alcoa Corporation’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is the Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) for each segment. The Company calculates Segment Adjusted EBITDA as Total sales (third-party and intersegment) minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; and Research and development expenses. Alcoa Corporation’s Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. The CODM function regularly reviews the financial information, including Adjusted EBITDA, of these two operating segments to assess performance and allocate resources.

The operating results of Alcoa Corporation’s reportable segments were as follows (differences between segment totals and consolidated amounts are in Corporate):

 

 

 

 

Alumina

 

 

Aluminum

 

 

Total

 

First quarter ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

Sales:

 

 

 

 

 

 

 

 

 

 

Third-party sales

 

 

$

961

 

 

$

1,638

 

 

$

2,599

 

Intersegment sales

 

 

 

395

 

 

 

4

 

 

 

399

 

Total sales

 

 

$

1,356

 

 

$

1,642

 

 

$

2,998

 

Segment Adjusted EBITDA

 

 

$

139

 

 

$

50

 

 

$

189

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion, and amortization

 

 

$

87

 

 

$

68

 

 

$

155

 

Equity (loss) income

 

 

$

(11

)

 

$

2

 

 

$

(9

)

First quarter ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

Sales:

 

 

 

 

 

 

 

 

 

 

Third-party sales

 

 

$

857

 

 

$

1,810

 

 

$

2,667

 

Intersegment sales

 

 

 

421

 

 

 

3

 

 

 

424

 

Total sales

 

 

$

1,278

 

 

$

1,813

 

 

$

3,091

 

Segment Adjusted EBITDA

 

 

$

103

 

 

$

184

 

 

$

287

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion, and amortization

 

 

$

77

 

 

$

70

 

 

$

147

 

Equity loss

 

 

$

(17

)

 

$

(57

)

 

$

(74

)

The following table reconciles total Segment Adjusted EBITDA to Consolidated net loss attributable to Alcoa Corporation:

 

 

First quarter ended
March 31,

 

 

 

2024

 

 

2023

 

Total Segment Adjusted EBITDA

 

$

189

 

 

$

287

 

Unallocated amounts:

 

 

 

 

 

 

Transformation(1)

 

 

(14

)

 

 

(8

)

Intersegment eliminations

 

 

(8

)

 

 

(8

)

Corporate expenses(2)

 

 

(34

)

 

 

(30

)

Provision for depreciation, depletion, and amortization

 

 

(161

)

 

 

(153

)

Restructuring and other charges, net (D)

 

 

(202

)

 

 

(149

)

Interest expense

 

 

(27

)

 

 

(26

)

Other expenses, net (P)

 

 

(59

)

 

 

(54

)

Other(3)

 

 

(9

)

 

 

(39

)

Consolidated loss before income taxes

 

 

(325

)

 

 

(180

)

Benefit from (provision for) income taxes

 

 

18

 

 

 

(52

)

Net loss attributable to noncontrolling interest

 

 

55

 

 

 

1

 

Consolidated net loss attributable to Alcoa Corporation

 

$

(252

)

 

$

(231

)

 

(1)
Transformation includes, among other items, the Adjusted EBITDA of previously closed operations.
(2)
Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities, as well as research and development expenses of the corporate technical center.
(3)
Other includes certain items that are not included in the Adjusted EBITDA of the reportable segments.

9


 

The following table details Alcoa Corporation’s Sales by product division:

 

 

 

First quarter ended
March 31,

 

 

 

2024

 

 

2023

 

Aluminum

 

$

1,661

 

 

$

1,846

 

Alumina

 

 

890

 

 

 

714

 

Energy

 

 

33

 

 

 

28

 

Bauxite

 

 

61

 

 

 

127

 

Other(1)

 

 

(46

)

 

 

(45

)

 

$

2,599

 

 

$

2,670

 

 

 

 

 

 

 

 

(1)
Other includes realized gains and losses related to embedded derivative instruments designated as cash flow hedges of forward sales of aluminum.

F. Earnings Per Share – Basic earnings per share (EPS) amounts are computed by dividing earnings by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.

The share information used to compute basic and diluted EPS attributable to Alcoa Corporation common shareholders was as follows (shares in millions):

 

 

 

First quarter ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss attributable to Alcoa Corporation

 

$

(252

)

 

$

(231

)

Average shares outstanding – basic

 

 

179