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Alcoa Reports Fourth Quarter Income From Continuing Operations Of $0.21 Per Share; Income Of $0.06 Per Share Excluding Special Items

* Discrete tax items include the following:

  • for the quarter ended December 31, 2012, a benefit related to the interim period treatment of losses in jurisdictions for which no tax benefit was recognized during the nine months ended September 30, 2012 ($39); a benefit for a capital loss on an investment ($13); and a net benefit for other miscellaneous items ($6);
  • for the year ended December 31, 2012, a benefit for a capital loss on an investment ($13); a benefit as a result of including the then anticipated gain from the sale of the Tapoco Hydroelectric Project in the calculation of the estimated annual effective tax rate applied to the results for the nine months ended September 30, 2012 ($12); a charge related to prior year U.S. taxes on certain depletable assets ($8); and a net benefit for other miscellaneous items ($5); and
  • for the year ended December 31, 2011, charges for a tax rate change in Hungary and a tax law change regarding the utilization of net operating losses in Italy ($8); a charge related to the 2010 change in the tax treatment of federal subsidies received related to prescription drug benefits provided under certain retiree health benefit plans ($7); a net benefit for adjustments made related to the filing of 2010 tax returns in various jurisdictions ($5); and a net benefit for other miscellaneous items ($8).

** Other special items include the following:
  • for the quarter ended December 31, 2012, a gain on the sale of the Tapoco Hydroelectric Project ($161: $275 is included in the Primary Metals segment and $(114) is included in Corporate); a net favorable change in certain mark-to-market energy derivative contracts ($12); interest income on an escrow deposit ($8); and uninsured losses related to fire damage to the cast house at the Massena, NY location ($7);
  • for the year ended December 31, 2012, a gain on the sale of the Tapoco Hydroelectric Project ($161: $275 is included in the Primary Metals segment and $(114) is included in Corporate); a net increase in the environmental reserve related to the Grasse River remediation in Massena, NY, remediation at two former locations, East St. Louis, IL and Sherwin, TX, and two new remediation projects at the smelter sites in Baie Comeau, Quebec, Canada and Mosjøen, Norway ($133); a litigation reserve ($33); uninsured losses related to fire damage to the cast house at the Massena, NY location ($28); interest income on an escrow deposit ($8); and a net favorable change in certain mark-to-market energy derivative contracts ($5); and
  • for the year ended December 31, 2011, a net favorable change in certain mark-to-market energy derivative contracts ($36); a net charge comprised of expenses for the early repayment of Notes set to mature in 2013 due to the premiums paid under the tender offers and call option and gains from the termination of related “in-the-money” interest rate swaps ($32); uninsured losses, including costs related to flood damage to a plant in Pennsylvania caused by Hurricane Irene, ($25); a gain on the sale of land in Australia ($18); costs related to acquisitions of the aerospace fastener business of TransDigm Group Inc. and full ownership of carbothermic smelting technology from ORKLA ASA ($8); and the write off of inventory related to the permanent closure of a smelter in the U.S. ($4).
 
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions)
 
Days Working Capital     Quarter ended

December 31, 2011
   

September 30, 2012
   

December 31, 2012
 
Receivables from customers, less allowances $ 1,571 $ 1,619 $ 1,322
Add: Deferred purchase price receivable *     81   71

Receivables from customers, less allowances, as adjusted

1,571

1,700

1,393
Add: Inventories 2,899 2,973 2,825
Less: Accounts payable, trade   2,692   2,590   2,692
Working Capital $ 1,778 $ 2,083 $ 1,526
 
Sales $ 5,989 $ 5,833 $ 5,898
 
Days Working Capital 27 33 24
 

Days Working Capital = Working Capital divided by (Sales/number of days in the quarter).

* The deferred purchase price receivable relates to an arrangement to sell certain customer receivables to a financial institution on a  recurring basis. Alcoa is adding back this receivable for the purposes of the Days Working Capital calculation.
   
Net Debt-to-Capital December 31, 2012

Debt-to- C apital
   

Cash and Cash Equivalents
   

Net Debt-to- Capital
 
Total Debt
Short-term borrowings $   53
Commercial paper
Long-term debt due within one year 465
Long-term debt, less amount due within one year     8,311  
Numerator $ 8,829 $ 1,861 $ 6,968
 
Total Capital
Total debt $ 8,829
Total equity     16,507  
Denominator $ 25,336 $ 1,861 $ 23,475
 
 
Ratio 34.8 % 29.7 %
 

Net debt-to-capital is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management assesses Alcoa’s leverage position after factoring in available cash that could be used to repay outstanding debt.
       
Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions, except per metric ton amounts)
 
Segment Measures Alumina   Primary Metals   Global Rolled Products  

Engineered Products and Solutions
Adjusted EBITDA

Quarter ended
 

Quarter ended
 

Quarter ended
 

Year ended
 

Quarter ended
 

Year ended

September 30, 2012
 

December 31, 2012

September 30, 2012
 

December 31, 2012

December 31, 2012
 

December 31, 2012

December 31, 2012
 

December 31, 2012
 
After-tax operating income (ATOI) $ (9 ) $ 41 $ (14 ) $ 316 $ 69 $ 358 $ 137 $ 612
 
Add:
Depreciation, depletion, and amortization

 

 

120

 

 

107

 

 

130

 

 

134

 

 

58

 

 

229

 

 

40

 

 

158
Equity (income) loss

 

(2

 

)

 

(1

 

)

 

5

 

11

 

2

 

6

 

 

Income taxes (22 ) 2 (19 ) 157 31 167 69 297
Other   (1 )   (4 )   2     (423 )     (2 )   (7 )   (8 )
 
Adjusted EBITDA

$

86
 

$

145
 

$

104
 

$

195
 

$

160

$

758
 

$

239
 

$

1,059
 
 
Production (thousand metric tons) (kmt)

 

 

4,077

 

 

4,079

 

 

938

 

 

912
 
Adjusted EBITDA / Production ($ per metric ton)

 

 

 

$

 

 

 

21

 

 

 

$

 

 

 

36

 

 

 

$

 

 

 

111

 

 

 

$

 

 

 

214
 
Total shipments (thousand metric tons) (kmt)

 

 

 

465

 

 

 

1,943
 
Adjusted EBITDA / Total shipments ($ per metric ton)

 

 

 

 

$

 

 

 

 

344

 

 

 

 

$

 

 

 

 

390
 
Total sales $ 1,348 $ 5,525
 
Adjusted EBITDA Margin

 

18

 

%

 

19

 

%
 

Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation, depletion, and amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.

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