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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, 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 ☒
Indicate the number of shares outstanding of each of the registrant’s classes of stock, as of the latest practicable date.
Title or Class |
|
Outstanding Shares as of October 29, 2024 |
Common Stock, par value $0.01 per share |
|
258,354,828 |
Series A Convertible Preferred Stock, par value $0.01 per share |
|
4,041,989 |
TABLE OF CONTENTS
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1 |
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Item 1. |
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1 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
30 |
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Item 3. |
|
47 |
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Item 4. |
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47 |
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47 |
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Item 1. |
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47 |
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Item 1A. |
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48 |
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Item 2. |
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49 |
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Item 5. |
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50 |
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Item 6. |
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51 |
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52 |
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Cautionary Statement on 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 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 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: (1) the impact of global economic conditions on the aluminum industry and aluminum end-use markets; (2) 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; (3) the disruption of market-driven balancing of global aluminum supply and demand by non-market forces; (4) competitive and complex conditions in global markets; (5) our ability to obtain, maintain, or renew permits or approvals necessary for our mining operations; (6) rising energy costs and interruptions or uncertainty in energy supplies; (7) unfavorable changes in the cost, quality, or availability of raw materials or other key inputs, or by disruptions in the supply chain; (8) 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; (9) our ability to integrate and achieve intended results from joint ventures, other strategic alliances, and strategic business transactions, including the recent acquisition of Alumina Limited; (10) economic, political, and social conditions, including the impact of trade policies and adverse industry publicity; (11) fluctuations in foreign currency exchange rates and interest rates, inflation and other economic factors in the countries in which we operate; (12) changes in tax laws or exposure to additional tax liabilities; (13) global competition within and beyond the aluminum industry; (14) our ability to obtain or maintain adequate insurance coverage; (15) disruptions in the global economy caused by ongoing regional conflicts; (16) legal proceedings, investigations, or changes in foreign and/or U.S. federal, state, or local laws, regulations, or policies; (17) climate change, climate change legislation or regulations, and efforts to reduce emissions and build operational resilience to extreme weather conditions; (18) our ability to achieve our strategies or expectations relating to environmental, social, and governance considerations; (19) claims, costs, and liabilities related to health, safety and environmental laws, regulations, and other requirements in the jurisdictions in which we operate; (20) liabilities resulting from impoundment structures, which could impact the environment or cause exposure to hazardous substances or other damage; (21) our ability to fund capital expenditures; (22) deterioration in our credit profile or increases in interest rates; (23) restrictions on our current and future operations due to our indebtedness; (24) our ability to continue to return capital to our stockholders through the payment of cash dividends and/or the repurchase of our common stock; (25) cyber attacks, security breaches, system failures, software or application vulnerabilities, or other cyber incidents; (26) labor market conditions, union disputes and other employee relations issues; (27) a decline in the liability discount rate or lower-than-expected investment returns on pension assets; and (28) 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)
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Sales (E) |
|
$ |
2,904 |
|
|
$ |
2,602 |
|
|
$ |
8,409 |
|
|
$ |
7,956 |
|
Cost of goods sold (exclusive of expenses below) |
|
|
2,393 |
|
|
|
2,469 |
|
|
|
7,330 |
|
|
|
7,388 |
|
Selling, general administrative, and other expenses |
|
|
66 |
|
|
|
56 |
|
|
|
195 |
|
|
|
162 |
|
Research and development expenses |
|
|
16 |
|
|
|
9 |
|
|
|
40 |
|
|
|
25 |
|
Provision for depreciation, depletion, and amortization |
|
|
159 |
|
|
|
163 |
|
|
|
483 |
|
|
|
469 |
|
Restructuring and other charges, net (D) |
|
|
30 |
|
|
|
22 |
|
|
|
250 |
|
|
|
195 |
|
Interest expense |
|
|
44 |
|
|
|
26 |
|
|
|
111 |
|
|
|
79 |
|
Other expenses, net (P) |
|
|
12 |
|
|
|
85 |
|
|
|
49 |
|
|
|
145 |
|
Total costs and expenses |
|
|
2,720 |
|
|
|
2,830 |
|
|
|
8,458 |
|
|
|
8,463 |
|
Income (loss) before income taxes |
|
|
184 |
|
|
|
(228 |
) |
|
|
(49 |
) |
|
|
(507 |
) |
Provision for (benefit from) income taxes |
|
|
86 |
|
|
|
(35 |
) |
|
|
129 |
|
|
|
39 |
|
Net income (loss) |
|
|
98 |
|
|
|
(193 |
) |
|
|
(178 |
) |
|
|
(546 |
) |
Less: Net income (loss) attributable to noncontrolling interest |
|
|
8 |
|
|
|
(25 |
) |
|
|
(36 |
) |
|
|
(45 |
) |
NET INCOME (LOSS) ATTRIBUTABLE TO ALCOA |
|
$ |
90 |
|
|
$ |
(168 |
) |
|
$ |
(142 |
) |
|
$ |
(501 |
) |
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.39 |
|
|
$ |
(0.94 |
) |
|
$ |
(0.72 |
) |
|
$ |
(2.81 |
) |
Diluted |
|
$ |
0.38 |
|
|
$ |
(0.94 |
) |
|
$ |
(0.72 |
) |
|
$ |
(2.81 |
) |
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 |
|
|
Third quarter ended |
|
|
Third quarter ended |
|
|||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||
Net income (loss) |
|
$ |
90 |
|
|
$ |
(168 |
) |
|
$ |
8 |
|
|
$ |
(25 |
) |
|
$ |
98 |
|
|
$ |
(193 |
) |
Other comprehensive income (loss), net of tax (G): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrecognized net actuarial gain/loss |
|
|
1 |
|
|
|
5 |
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
4 |
|
Foreign currency translation adjustments |
|
|
144 |
|
|
|
(67 |
) |
|
|
(35 |
) |
|
|
(47 |
) |
|
|
109 |
|
|
|
(114 |
) |
Net change in unrecognized gains/losses on cash |
|
|
(51 |
) |
|
|
(91 |
) |
|
|
1 |
|
|
|
— |
|
|
|
(50 |
) |
|
|
(91 |
) |
Total Other comprehensive income (loss), net of tax |
|
|
94 |
|
|
|
(153 |
) |
|
|
(36 |
) |
|
|
(48 |
) |
|
|
58 |
|
|
|
(201 |
) |
Comprehensive income (loss) |
|
$ |
184 |
|
|
$ |
(321 |
) |
|
$ |
(28 |
) |
|
$ |
(73 |
) |
|
$ |
156 |
|
|
$ |
(394 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Alcoa Corporation |
|
|
Noncontrolling interest |
|
|
Total |
|
|||||||||||||||
|
|
Nine months ended |
|
|
Nine months ended |
|
|
Nine months ended |
|
|||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||
Net loss |
|
$ |
(142 |
) |
|
$ |
(501 |
) |
|
$ |
(36 |
) |
|
$ |
(45 |
) |
|
$ |
(178 |
) |
|
$ |
(546 |
) |
Other comprehensive income (loss), net of tax (G): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in unrecognized net actuarial gain/loss |
|
|
23 |
|
|
|
19 |
|
|
|
4 |
|
|
|
(3 |
) |
|
|
27 |
|
|
|
16 |
|
Foreign currency translation adjustments |
|
|
(38 |
) |
|
|
(40 |
) |
|
|
(105 |
) |
|
|
(21 |
) |
|
|
(143 |
) |
|
|
(61 |
) |
Net change in unrecognized gains/losses on cash |
|
|
17 |
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
|
|
13 |
|
Total Other comprehensive income (loss), net of tax |
|
|
2 |
|
|
|
(8 |
) |
|
|
(101 |
) |
|
|
(24 |
) |
|
|
(99 |
) |
|
|
(32 |
) |
Comprehensive loss |
|
$ |
(140 |
) |
|
$ |
(509 |
) |
|
$ |
(137 |
) |
|
$ |
(69 |
) |
|
$ |
(277 |
) |
|
$ |
(578 |
) |
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, |
|
|
December 31, |
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents (M) |
|
$ |
1,313 |
|
|
$ |
944 |
|
Receivables from customers (I) |
|
|
862 |
|
|
|
656 |
|
Other receivables |
|
|
145 |
|
|
|
152 |
|
Inventories (J) |
|
|
2,096 |
|
|
|
2,158 |
|
Fair value of derivative instruments (M) |
|
|
5 |
|
|
|
29 |
|
Prepaid expenses and other current assets |
|
|
445 |
|
|
|
466 |
|
Total current assets |
|
|
4,866 |
|
|
|
4,405 |
|
Properties, plants, and equipment |
|
|
20,535 |
|
|
|
20,381 |
|
Less: accumulated depreciation, depletion, and amortization |
|
|
13,814 |
|
|
|
13,596 |
|
Properties, plants, and equipment, net |
|
|
6,721 |
|
|
|
6,785 |
|
Investments (H) |
|
|
982 |
|
|
|
979 |
|
Deferred income taxes |
|
|
329 |
|
|
|
333 |
|
Fair value of derivative instruments (M) |
|
|
1 |
|
|
|
3 |
|
Other noncurrent assets |
|
|
1,643 |
|
|
|
1,650 |
|
Total assets |
|
$ |
14,542 |
|
|
$ |
14,155 |
|
LIABILITIES |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable, trade |
|
$ |
1,544 |
|
|
$ |
1,714 |
|
Accrued compensation and retirement costs |
|
|
363 |
|
|
|
357 |
|
Taxes, including income taxes |
|
|
109 |
|
|
|
88 |
|
Fair value of derivative instruments (M) |
|
|
267 |
|
|
|
214 |
|
Other current liabilities |
|
|
712 |
|
|
|
578 |
|
Long-term debt due within one year (K & M) |
|
|
464 |
|
|
|
79 |
|
Total current liabilities |
|
|
3,459 |
|
|
|
3,030 |
|
Long-term debt, less amount due within one year (K & M) |
|
|
2,469 |
|
|
|
1,732 |
|
Accrued pension benefits (L) |
|
|
258 |
|
|
|
278 |
|
Accrued other postretirement benefits (L) |
|
|
422 |
|
|
|
443 |
|
Asset retirement obligations |
|
|
789 |
|
|
|
772 |
|
Environmental remediation (O) |
|
|
182 |
|
|
|
202 |
|
Fair value of derivative instruments (M) |
|
|
1,007 |
|
|
|
1,092 |
|
Noncurrent income taxes |
|
|
74 |
|
|
|
193 |
|
Other noncurrent liabilities and deferred credits |
|
|
632 |
|
|
|
568 |
|
Total liabilities |
|
|
9,292 |
|
|
|
8,310 |
|
CONTINGENCIES AND COMMITMENTS (O) |
|
|
|
|
|
|
||
EQUITY |
|
|
|
|
|
|
||
Alcoa Corporation shareholders’ equity: |
|
|
|
|
|
|
||
Preferred stock |
|
|
— |
|
|
|
— |
|
Common stock |
|
|
3 |
|
|
|
2 |
|
Additional capital |
|
|
11,487 |
|
|
|
9,187 |
|
Accumulated deficit |
|
|
(1,498 |
) |
|
|
(1,293 |
) |
Accumulated other comprehensive loss (G) |
|
|
(4,742 |
) |
|
|
(3,645 |
) |
Total Alcoa Corporation shareholders’ equity |
|
|
5,250 |
|
|
|
4,251 |
|
Noncontrolling interest |
|
|
— |
|
|
|
1,594 |
|
Total equity |
|
|
5,250 |
|
|
|
5,845 |
|
Total liabilities and equity |
|
$ |
14,542 |
|
|
$ |
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)
|
|
Nine months ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
CASH FROM OPERATIONS |
|
|
|
|
|
|
||
Net loss |
|
$ |
(178 |
) |
|
$ |
(546 |
) |
Adjustments to reconcile net loss to cash from operations: |
|
|
|
|
|
|
||
Depreciation, depletion, and amortization |
|
|
483 |
|
|
|
469 |
|
Deferred income taxes |
|
|
(8 |
) |
|
|
(156 |
) |
Equity loss, net of dividends |
|
|
2 |
|
|
|
161 |
|
Restructuring and other charges, net (D) |
|
|
250 |
|
|
|
195 |
|
Net loss from investing activities – asset sales (P) |
|
|
18 |
|
|
|
18 |
|
Net periodic pension benefit cost (L) |
|
|
8 |
|
|
|
4 |
|
Stock-based compensation |
|
|
31 |
|
|
|
27 |
|
Loss on mark-to-market derivative financial contracts |
|
|
16 |
|
|
|
31 |
|
Other |
|
|
33 |
|
|
|
67 |
|
Changes in assets and liabilities, excluding effects of divestitures and |
|
|
|
|
|
|
||
(Increase) decrease in receivables |
|
|
(202 |
) |
|
|
108 |
|
Decrease in inventories |
|
|
79 |
|
|
|
166 |
|
(Increase) decrease in prepaid expenses and other current assets |
|
|
(12 |
) |
|
|
53 |
|
Decrease in accounts payable, trade |
|
|
(149 |
) |
|
|
(275 |
) |
Decrease in accrued expenses |
|
|
(88 |
) |
|
|
(119 |
) |
Increase (decrease) in taxes, including income taxes |
|
|
55 |
|
|
|
(52 |
) |
Pension contributions (L) |
|
|
(14 |
) |
|
|
(20 |
) |
Increase in noncurrent assets |
|
|
(4 |
) |
|
|
(179 |
) |
Decrease in noncurrent liabilities |
|
|
(113 |
) |
|
|
(59 |
) |
CASH PROVIDED FROM (USED FOR) OPERATIONS |
|
|
207 |
|
|
|
(107 |
) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Additions to debt |
|
|
989 |
|
|
|
80 |
|
Payments on debt |
|
|
(285 |
) |
|
|
(39 |
) |
Proceeds from the exercise of employee stock options |
|
|
— |
|
|
|
1 |
|
Dividends paid on Alcoa preferred stock |
|
|
— |
|
|
|
— |
|
Dividends paid on Alcoa common stock |
|
|
(63 |
) |
|
|
(54 |
) |
Payments related to tax withholding on stock-based compensation awards |
|
|
(15 |
) |
|
|
(34 |
) |
Financial contributions for the divestiture of businesses (C) |
|
|
(19 |
) |
|
|
(44 |
) |
Contributions from noncontrolling interest |
|
|
65 |
|
|
|
164 |
|
Distributions to noncontrolling interest |
|
|
(49 |
) |
|
|
(24 |
) |
Acquisition of noncontrolling interest (C) |
|
|
(23 |
) |
|
|
— |
|
Other |
|
|
(5 |
) |
|
|
1 |
|
CASH PROVIDED FROM FINANCING ACTIVITIES |
|
|
595 |
|
|
|
51 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Capital expenditures |
|
|
(411 |
) |
|
|
(343 |
) |
Proceeds from the sale of assets |
|
|
2 |
|
|
|
2 |
|
Additions to investments |
|
|
(30 |
) |
|
|
(51 |
) |
Other |
|
|
5 |
|
|
|
4 |
|
CASH USED FOR INVESTING ACTIVITIES |
|
|
(434 |
) |
|
|
(388 |
) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH |
|
|
(5 |
) |
|
|
— |
|
Net change in cash and cash equivalents and restricted cash |
|
|
363 |
|
|
|
(444 |
) |
Cash and cash equivalents and restricted cash at beginning of year |
|
|
1,047 |
|
|
|
1,474 |
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT |
|
$ |
1,410 |
|
|
$ |
1,030 |
|
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 |
|
Preferred |
|
Additional |
|
Accumulated deficit |
|
Accumulated |
|
Non- |
|
Total |
|
|||||||
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 |
|
— |
|
|
— |
|
|
(33 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(33 |
) |
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
— |
|
|
(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 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(102 |
) |
|
— |
|
|
(19 |
) |
|
(121 |
) |
Other comprehensive income (G) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
261 |
|
|
9 |
|
|
270 |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
11 |
|
|
— |
|
|
— |
|
|
— |
|
|
11 |
|
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
— |
|
|
(18 |
) |
|
— |
|
|
— |
|
|
(18 |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
36 |
|
|
36 |
|
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16 |
) |
|
(16 |
) |
Balance at June 30, 2023 |
$ |
2 |
|
$ |
— |
|
$ |
9,173 |
|
$ |
(939 |
) |
$ |
(3,394 |
) |
$ |
1,616 |
|
$ |
6,458 |
|
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(168 |
) |
|
— |
|
|
(25 |
) |
|
(193 |
) |
Other comprehensive loss (G) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(153 |
) |
|
(48 |
) |
|
(201 |
) |
Stock-based compensation |
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
— |
|
|
(18 |
) |
|
— |
|
|
— |
|
|
(18 |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
42 |
|
|
42 |
|
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2 |
) |
|
(2 |
) |
Balance at September 30, 2023 |
$ |
2 |
|
$ |
— |
|
$ |
9,179 |
|
$ |
(1,125 |
) |
$ |
(3,547 |
) |
$ |
1,583 |
|
$ |
6,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
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 |
|
— |
|
|
— |
|
|
(15 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(15 |
) |
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
— |
|
|
(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 |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
20 |
|
|
— |
|
|
11 |
|
|
31 |
|
Other comprehensive loss (G) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(109 |
) |
|
(12 |
) |
|
(121 |
) |
Stock-based compensation |
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
— |
|
|
(18 |
) |
|
— |
|
|
— |
|
|
(18 |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4 |
|
|
4 |
|
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(26 |
) |
|
(26 |
) |
Balance at June 30, 2024 |
$ |
2 |
|
$ |
— |
|
$ |
9,196 |
|
$ |
(1,562 |
) |
$ |
(3,737 |
) |
$ |
1,517 |
|
$ |
5,416 |
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
90 |
|
|
— |
|
|
8 |
|
|
98 |
|
Other comprehensive income (loss) (G) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
94 |
|
|
(36 |
) |
|
58 |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
9 |
|
|
— |
|
|
— |
|
|
— |
|
|
9 |
|
Dividends paid on Alcoa preferred stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
— |
|
|
(26 |
) |
|
— |
|
|
— |
|
|
(26 |
) |
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17 |
) |
|
(17 |
) |
Acquisition of noncontrolling interest (C) |
|
1 |
|
|
— |
|
|
2,282 |
|
|
— |
|
|
(1,099 |
) |
|
(1,472 |
) |
|
(288 |
) |
Balance at September 30, 2024 |
$ |
3 |
|
$ |
— |
|
$ |
11,487 |
|
$ |
(1,498 |
) |
$ |
(4,742 |
) |
$ |
— |
|
$ |
5,250 |
|
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. 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.
Prior to Alcoa’s acquisition of Alumina Limited on August 1, 2024 (see Note C), Alcoa consolidated its 60% ownership in the entities comprising the Alcoa World Alumina & Chemicals (AWAC) joint venture and Alumina Limited’s interest in the equity of such entities was reflected as Noncontrolling interest on the accompanying Consolidated Balance Sheet. 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. Operating entities include Alcoa of Australia Limited (AofA), Alcoa World Alumina LLC (AWA), Alcoa World Alumina Brasil Ltda. (AWAB), and Alúmina Española, S.A. (Española).
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 August 1, 2024, Alcoa completed the acquisition of all of the ordinary shares of Alumina Limited (Alumina Shares) through a wholly owned subsidiary, AAC Investments Australia 2 Pty Ltd. Alumina Limited holds a 40% ownership interest in the AWAC joint venture. The acquisition enhances Alcoa’s position as a leading pure play, upstream aluminum company globally, while simplifying the Company’s corporate structure and governance, resulting in greater flexibility and strategic optionality.
Under the Scheme Implementation Deed (the Agreement) entered into in March 2024, as amended in May 2024, holders of Alumina Shares received 0.02854 Alcoa CHESS Depositary Interests (CDIs) for each Alumina Share (the Agreed Ratio), except that i) holders of Alumina Shares represented by American Depositary Shares, each of which represented 4 Alumina Shares, received 0.02854 shares of Alcoa common stock and ii) a certain shareholder received, for certain of their Alumina Shares, 0.02854 shares of Alcoa non-voting convertible preferred stock. The Alcoa CDIs are quoted on the Australian Stock Exchange.
At closing, Alumina Shares outstanding of 2,760,056,014 and 141,625,403 were exchanged for 78,772,422 and 4,041,989 shares of Alcoa common stock and Alcoa preferred stock, respectively. Based on Alcoa’s closing share price as of July 31, 2024, the Agreed Ratio implied a value of A$1.45 per Alumina Share and aggregate purchase consideration of approximately $2,700 for Alumina Limited.
The transaction consisted in substance of the acquisition of Alumina Limited’s noncontrolling interest in AWAC ($1,472), the assumption of Alumina Limited’s indebtedness ($385, see Note K), the recognition of deferred tax assets ($121, see Note N), and the acquisition of cash ($9) and other current liabilities ($1). The transaction was accounted for as an equity transaction where net assets acquired ($1,216) and transaction costs ($32) were reflected as an increase to Additional capital. Amounts related to Accumulated other comprehensive loss previously attributable to and included within Noncontrolling interest ($1,099) were reclassified to Accumulated other comprehensive loss.
Net income attributable to noncontrolling interest was recognized through July 31, 2024 and was $8 in the third quarter of 2024.
Saudi Arabia Joint Venture
On September 15, 2024, Alcoa entered into a share purchase and subscription agreement with Saudi Arabian Mining Company (Ma’aden), pursuant to which Alcoa agreed to sell its full ownership interest of 25.1% in the Saudi Arabia joint venture, comprised of the Ma’aden Bauxite and Alumina Company and the Ma’aden Aluminium Company, to Ma’aden in exchange for issuance by Ma’aden of 85,977,547 shares and $150 in cash. The implied value of the shares was $950 as of September 12, 2024, based on the volume-weighted average share price of Ma’aden for the previous 30 calendar days. The shares of Ma’aden will be subject to transfer and sale restrictions. Alcoa will hold its Ma’aden shares for a minimum of three years, with one-third of the shares becoming transferable after each of the third, fourth, and fifth anniversaries of closing of the transaction (the holding period). During the holding period, Alcoa would be permitted to hedge and borrow against its Ma’aden shares. Under certain circumstances, such minimum holding period would be reduced. The transaction is subject to regulatory approvals, approval by Ma’aden’s shareholders, and other customary closing conditions and is expected to close in the first half of 2025. The carrying value of Alcoa’s investment was $538 as of September 30, 2024.
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 nine-month period of 2024, the Company recorded charges of $15 in Other expenses, net on the accompanying Statement of Consolidated Operations related to these commitments. During the third quarter and the nine-month period of 2024, the Company spent $7 and $19 against the reserve, respectively.
In the nine-month period of 2023, the Company recorded a charge of $17 in Other expenses, net on the accompanying Statement of Consolidated Operations related to these commitments. During the third quarter and the nine-month period of 2023, the Company spent $19 and $44 against the reserve, respectively.
The remaining balance of $7 at September 30, 2024 is expected to be spent through early 2025.
7
D. Restructuring and Other Charges, Net
In the third quarter and the nine-month period of 2024, Alcoa Corporation recorded Restructuring and other charges, net, of $30 and $250, respectively, which were primarily comprised of:
In June 2024, Alcoa completed the full curtailment of the Kwinana refinery, as planned, which was announced in January 2024. As of March 2024, the refinery had approximately 780 employees and this number was reduced to approximately 300 in the third quarter of 2024 to manage certain processes that are expected to continue into 2025. At that time, the employee number will be further reduced to approximately 50. In addition to the employees separating as a result of the curtailment, approximately 250 employees have terminated through the productivity program announced in the third quarter of 2023 or redeployed to other Alcoa operations. Approximately 50 additional employees are expected to redeploy to other Alcoa operations. Charges related to the curtailment totaled $205 in the nine-month period of 2024 and included charges of $129 for water management costs, $41 for severance and employee termination costs for the separation of approximately 430 employees, $15 for asset retirement obligations, $13 for take-or-pay contracts, $5 for asset impairments and $2 for contract terminations.
Related cash outlays of approximately $225 (which includes existing employee related liabilities and asset retirement obligations) are expected through 2025, with approximately $145 to be spent in 2024. The Company spent $72 and $96 against the reserve in the third quarter and nine-month period of 2024, respectively.
In the third quarter and the nine-month period of 2023, Alcoa Corporation recorded Restructuring and other charges, net, of $22 and $195, respectively, which were primarily comprised of:
In September 2023, the Company continued to pursue cost reduction measures and initiated productivity programs across its operations in Australia to mitigate the financial impacts of lower grade bauxite and to optimize current operating levels. In connection with this program, the Company recorded Restructuring and other charges, net of $6 for employee termination and severance costs for approximately 90 employees at the Kwinana refinery. This program was completed in September 2024.
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 $85 over the next three years with approximately $45 to be spent in 2024. The Company spent $1 and $14 against the reserve in the third quarter and nine-month period of 2024, respectively.
8
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 from 2023 through September 2025 and made additional commitments for capital improvements of $78. The Company recorded charges of $47 in Restructuring and other charges, net on the Statement of Consolidated Operations to establish the related reserve for employee obligations in the nine-month period of 2023. Cash outlays related to employee obligations are expected to be $47 through 2025, with approximately $35 to be spent in 2024. The Company spent $8 and $26 against the reserve in the third quarter and nine-month period of 2024, respectively. At September 30, 2024, the Company had restricted cash of $86 to be made available for remaining capital improvement commitments at the site of $109 and smelter restart costs of $31 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:
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Alumina |
|
$ |
— |
|
|
$ |
6 |
|
|
$ |
205 |
|
|
$ |
8 |
|
Aluminum |
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
|
162 |
|
Segment total |
|
|
— |
|
|
|
3 |
|
|
|
205 |
|
|
|
170 |
|
Corporate |
|
|
30 |
|
|
|
19 |
|
|
|
45 |
|
|
|
25 |
|
Total Restructuring and other charges, net |
|
$ |
30 |
|
|
$ |
22 |
|
|
$ |
250 |
|
|
$ |
195 |
|
Activity and reserve balances for restructuring charges were as follows:
|
|
Severance |
|
|
Other |
|
|
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 |
|
|
|
173 |
|
|
|
216 |
|
Cash payments |
|
|
(35 |
) |
|
|
(105 |
) |
|
|
(140 |
) |
Reversals and other |
|
|
1 |
|
|
|
6 |
|
|
|
7 |
|
Balance at September 30, 2024 |
|
$ |
15 |
|
|
$ |
131 |
|
|
$ |
146 |
|
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 $8 and $15 at September 30, 2024 and December 31, 2023, respectively.
9
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 reported to the CODM 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 |
|
|||
Third quarter ended September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|||
Sales: |
|
|
|
|
|
|
|
|
|
|
|||
Third-party sales |
|
|
$ |
1,096 |
|
|
$ |
1,802 |
|
|
$ |
2,898 |
|
Intersegment sales |
|
|
|
565 |
|
|
|
5 |
|
|
|
570 |
|
Total sales |
|
|
$ |
1,661 |
|
|
$ |
1,807 |
|
|
$ |
3,468 |
|
Segment Adjusted EBITDA |
|
|
$ |
367 |
|
|
$ |
180 |
|
|
$ |
547 |
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion, and amortization |
|
|
$ |
85 |
|
|
$ |
68 |
|
|
$ |
153 |
|
Equity income (loss) |
|
|
$ |
6 |
|
|
$ |
(11 |
) |
|
$ |
(5 |
) |
Third quarter ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|||
Sales: |
|
|
|
|
|
|
|
|
|
|
|||
Third-party sales |
|
|
$ |
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