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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)

 

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 October 23, 2023, 178,471,908 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

 

28

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

45

 

 

 

 

Item 4.

Controls and Procedures

 

45

 

 

 

 

PART II – OTHER INFORMATION

 

46

 

 

 

 

Item 1.

Legal Proceedings

 

46

 

 

 

 

Item 1A.

Risk Factors

 

46

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

46

 

 

 

 

Item 5.

Other Information

 

47

 

 

 

 

Item 6.

Exhibits

 

48

 

 

 

 

SIGNATURES

 

49

 


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