UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
OR
For the transition period from ____ to _____
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
(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 |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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,
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 |
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28 |
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Item 3. |
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45 |
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Item 4. |
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45 |
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46 |
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Item 1. |
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46 |
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Item 1A. |
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46 |
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Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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46 |
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Item 5. |
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47 |
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Item 6. |
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48 |
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49 |
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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)
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Third quarter ended |
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Nine months ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Sales (E) |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold (exclusive of expenses below) |
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Selling, general administrative, and other expenses |
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Research and development expenses |
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Provision for depreciation, depletion, and amortization |
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Restructuring and other charges, net (D) |
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Interest expense |
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Other expenses (income), net (R) |
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( |
) |
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Total costs and expenses |
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(Loss) income before income taxes |
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( |
) |
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( |
) |
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( |
) |
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(Benefit from) provision for income taxes |
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( |
) |
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Net (loss) income |
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( |
) |
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( |
) |
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( |
) |
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Less: Net (loss) income attributable to noncontrolling interest |
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( |
) |
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( |
) |
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( |
) |
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NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA |
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Basic |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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$ |
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Diluted |
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$ |
( |
) |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
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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)
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Alcoa Corporation |
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Noncontrolling interest |
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Total |
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Third quarter ended |
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Third quarter ended |
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Third quarter ended |
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2023 |
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2022 |
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2023 |
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2022 |
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2023 |
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2022 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Other comprehensive (loss) income, net of tax (G): |
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Change in unrecognized net actuarial loss and |
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( |
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Foreign currency translation adjustments |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net change in unrecognized gains/losses on cash |
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( |
) |
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— |
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— |
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( |
) |
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Total Other comprehensive (loss) income, net of tax |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Alcoa Corporation |
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Noncontrolling interest |
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Total |
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Nine months ended |
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Nine months ended |
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Nine months ended |
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2023 |
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2022 |
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2023 |
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2022 |
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2023 |
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2022 |
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||||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
|
$ |
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|||
Other comprehensive (loss) income, net of tax (G): |
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Change in unrecognized net actuarial loss and |
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( |
) |
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Foreign currency translation adjustments |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net change in unrecognized gains/losses on cash |
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— |
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|||||
Total Other comprehensive (loss) income, net of tax |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive (loss) income |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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|||
The accompanying notes are an integral part of the consolidated financial statements.
2
Alcoa Corporation and Subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
|
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September 30, |
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December 31, |
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ASSETS |
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Current assets: |
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Cash and cash equivalents (N) |
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$ |
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$ |
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Receivables from customers (I) |
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Other receivables |
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Inventories (J) |
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Fair value of derivative instruments (N) |
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Prepaid expenses and other current assets |
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Total current assets |
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Properties, plants, and equipment |
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Less: accumulated depreciation, depletion, and amortization |
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Properties, plants, and equipment, net |
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Investments (H) |
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Deferred income taxes |
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Fair value of derivative instruments (N) |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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LIABILITIES |
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Current liabilities: |
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Accounts payable, trade |
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$ |
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$ |
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Accrued compensation and retirement costs |
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Taxes, including income taxes |
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Fair value of derivative instruments (N) |
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Other current liabilities |
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Long-term debt due within one year (L & N) |
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Total current liabilities |
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Long-term debt, less amount due within one year (L & N) |
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Accrued pension benefits (M) |
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Accrued other postretirement benefits (M) |
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Asset retirement obligations (P) |
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Environmental remediation (Q) |
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Fair value of derivative instruments (N) |
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Noncurrent income taxes |
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Other noncurrent liabilities and deferred credits |
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Total liabilities |
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EQUITY |
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Alcoa Corporation shareholders’ equity: |
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Common stock |
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Additional capital |
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Accumulated deficit |
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( |
) |
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( |
) |
Accumulated other comprehensive loss (G) |
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( |
) |
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( |
) |
Total Alcoa Corporation shareholders’ equity |
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Noncontrolling interest |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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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)
|
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Nine months ended September 30, |
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|||||
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2023 |
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2022 |
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CASH FROM OPERATIONS |
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Net (loss) income |
|
$ |
( |
) |
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$ |
|
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Adjustments to reconcile net (loss) income to cash from operations: |
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Depreciation, depletion, and amortization |
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Deferred income taxes |
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( |
) |
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Equity loss (income), net of dividends |
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( |
) |
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Restructuring and other charges, net (D) |
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Net loss from investing activities – asset sales (R) |
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Net periodic pension benefit cost (M) |
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Stock-based compensation |
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Loss (gain) on mark-to-market derivative financial contracts |
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( |
) |
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Other |
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Changes in assets and liabilities, excluding effects of divestitures and |
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Decrease in receivables |
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Decrease (increase) in inventories |
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( |
) |
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Decrease (increase) in prepaid expenses and other current assets |
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( |
) |
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Decrease in accounts payable, trade |
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( |
) |
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( |
) |
Decrease in accrued expenses |
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( |
) |
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( |
) |
Decrease in taxes, including income taxes |
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( |
) |
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( |
) |
Pension contributions (M) |
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( |
) |
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( |
) |
Increase in noncurrent assets |
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( |
) |
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( |
) |
Decrease in noncurrent liabilities |
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( |
) |
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( |
) |
CASH (USED FOR) PROVIDED FROM OPERATIONS |
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( |
) |
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FINANCING ACTIVITIES |
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Additions to debt |
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— |
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Payments on debt |
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( |
) |
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— |
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Proceeds from the exercise of employee stock options |
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Repurchase of common stock |
|
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— |
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( |
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Dividends paid on Alcoa common stock |
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( |
) |
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( |
) |
Payments related to tax withholding on stock-based compensation awards |
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( |
) |
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( |
) |
Financial contributions for the divestiture of businesses (C) |
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( |
) |
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( |
) |
Contributions from noncontrolling interest |
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Distributions to noncontrolling interest |
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( |
) |
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( |
) |
Other |
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( |
) |
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CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES |
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( |
) |
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INVESTING ACTIVITIES |
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Capital expenditures |
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( |
) |
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( |
) |
Proceeds from the sale of assets |
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Additions to investments |
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( |
) |
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( |
) |
Sale of investments |
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— |
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Other |
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CASH USED FOR INVESTING ACTIVITIES |
|
|
( |
) |
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( |
) |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH |
|
|
— |
|
|
|
( |
) |
Net change in cash and cash equivalents and restricted cash |
|
|
( |
) |
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( |
) |
Cash and cash equivalents and restricted cash at beginning of year |
|
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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT |
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$ |
|
|
$ |
|
||
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 |
|
Additional |
|
Accumulated deficit |
|
Accumulated |
|
Non- |
|
Total |
|
||||||
Balance at January 1, 2022 |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||
Net income |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|||
Other comprehensive (loss) income (G) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Net effect of tax withholding for compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Repurchase of common stock |
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
( |
) |
|||
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Other |
|
— |
|
|
|
|
— |
|
|
— |
|
|
( |
) |
|
|
||
Balance at March 31, 2022 |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
Net income |
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|||
Other comprehensive income (loss) (G) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
|
||
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Net effect of tax withholding for compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Repurchase of common stock |
|
|
|
( |
) |
|
( |
) |
|
|
|
|
|
( |
) |
|||
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balance at June 30, 2022 |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
|||||
Net loss |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
Other comprehensive income (loss) (G) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
( |
) |
|
|
||
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Repurchase of common stock |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balance at September 30, 2022 |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at January 1, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||
Net loss |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
Other comprehensive (loss) income (G) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
( |
) |
|
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Net effect of tax withholding for compensation |
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Other |
|
— |
|
|
|
|
— |
|
|
— |
|
|
( |
) |
|
|
||
Balance at March 31, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||
Net loss |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
Other comprehensive income (G) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|||
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balance at June 30, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||
Net loss |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
( |
) |
Other comprehensive loss (G) |
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
|
( |
) |
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
||
Dividends paid on Alcoa common stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Contributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Distributions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balance at September 30, 2023 |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
|
||||
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 2022 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, 2022, 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, portions of the São Luís refinery, and investment in Mineração Rio do Norte S.A. (MRN) until its sale in April 2022, all in Brazil) and a portion (
B. Recently Adopted and Recently Issued Accounting Guidance
On
C. Divestitures
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. The Company recorded a charge of $
6
D. Restructuring and Other Charges, Net
In the third quarter and the nine-month period of 2023, Alcoa Corporation recorded Restructuring and other charges, net, 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 $
In March 2023, Alcoa Corporation announced the closure of the previously curtailed Intalco aluminum smelter. The facility had been fully curtailed since 2020. Charges related to the closure totaled $
On February 3, 2023, the Company reached an updated viability agreement with the workers’ representatives to commence the restart process of the San Ciprián aluminum smelter in phases beginning in January 2024. Under the terms of the updated viability agreement, the Company is responsible for certain employee obligations during 2024 and 2025. As a result, the Company recorded charges of $
Alcoa Corporation recorded a net charge of $
7
In July 2022, Alcoa made the decision to permanently close the previously curtailed magnesium smelter in Addy. The facility has been fully curtailed since 2001. The Company recorded a charge of $
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 |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Alumina (1) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Aluminum |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
||
Segment total |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Restructuring and other charges, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Activity and reserve balances for restructuring charges were as follows:
|
|
Severance |
|
|
Other |
|
|
Total |
|
|||
Balance at December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Restructuring and other charges, net |
|
|
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reversals and other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
Restructuring and other charges, net |
|
|
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reversals and other |
|
|
— |
|
|
|
|
|
|
|
||
Balance at September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The activity and reserve balances include only Restructuring and other charges, net that impact the reserves for Severance and employee termination costs and Other costs. Restructuring and other charges, net that affected other liability accounts such as Investments (see Note H), Accrued pension benefits (see Note M), Asset retirement obligations (see Note P), and Environmental remediation (see Note Q) 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
E. Segment Information – Alcoa Corporation is a producer of bauxite, alumina, and aluminum products. Beginning in January 2023, the financial information provided to the chief operating decision maker (CODM) for the activities of the bauxite mines and the alumina refineries was combined, and accordingly the Company changed its operating segments. Beginning with the first quarter of 2023, the Company reported its financial results in the following
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, 2023 |
|
|
|
|
|
|
|
|
|
|
|||
Sales: |
|
|
|
|
|
|
|
|
|
|
|||
Third-party sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|||
Total sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Segment Adjusted EBITDA |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion, and amortization |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity loss |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Third quarter ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|||
Sales: |
|
|
|
|
|
|
|
|
|
|
|||
Third-party sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|||
Total sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Segment Adjusted EBITDA |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion, and amortization |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity loss |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
Alumina |
|
|
Aluminum |
|
|
Total |
|
|||
Nine months ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|||
Sales: |
|
|
|
|
|
|
|
|
|
|
|||
Third-party sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|||
Total sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Segment Adjusted EBITDA |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion, and amortization |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity loss |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Nine months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|||
Sales: |
|
|
|
|
|
|
|
|
|
|
|||
Third-party sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment sales |
|
|
|
|
|
|
|
|
|
|
|||
Total sales |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Segment Adjusted EBITDA |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|||
Depreciation, depletion, and amortization |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity (loss) income |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
9
The following table reconciles total Segment Adjusted EBITDA to Consolidated net (loss) income attributable to Alcoa Corporation:
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Total Segment Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transformation(1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Intersegment eliminations |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Corporate expenses(2) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Provision for depreciation, depletion, and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Restructuring and other charges, net (D) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other (expenses) income, net (R) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Other(3) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Consolidated (loss) income before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Benefit from (provision for) income taxes |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net loss (income) attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Consolidated net (loss) income attributable to Alcoa Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
The following table details Alcoa Corporation’s Sales by product division:
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Aluminum |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Alumina |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bauxite |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other(1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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):
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net (loss) income attributable to Alcoa Corporation |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Average shares outstanding – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Average shares outstanding – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
In the third quarter and nine-month period of 2023, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock was anti-dilutive. Had Alcoa generated net income in the third quarter or nine-month period of 2023,
10
In the third quarter of 2022, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock was anti-dilutive. Had Alcoa generated net income in the third quarter of 2022,
G. Accumulated Other Comprehensive Loss
The following table details the activity of the three components that comprise Accumulated other comprehensive loss for both Alcoa Corporation’s shareholders and Noncontrolling interest:
|
|
Alcoa Corporation |
|
|
Noncontrolling interest |
|
||||||||||
|
|
Third quarter ended |
|
|
Third quarter ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Pension and other postretirement benefits (M) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrecognized net actuarial loss and prior service |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
||
Tax expense(2) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Total Other comprehensive income |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
||
Amortization of net actuarial loss and prior |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Tax benefit(2) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
Total amount reclassified from Accumulated |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total Other comprehensive income |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Balance at end of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flow hedges (N) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net change from periodic revaluations |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Tax benefit (expense)(2) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Total Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Net amount reclassified to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aluminum contracts(3) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Interest rate contracts(5) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Foreign exchange contracts(6) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Sub-total |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Tax expense(2) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Total amount reclassified from Accumulated |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Total Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Accumulated other comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
11
|
|
Alcoa Corporation |
|
|
Noncontrolling interest |
|
||||||||||
|
|
Nine months ended |
|
|
Nine months ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Pension and other postretirement benefits (M) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrecognized net actuarial loss and prior service |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Tax benefit (expense)(2) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Total Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Amortization of net actuarial loss and prior |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Tax expense(2) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total amount reclassified from Accumulated |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Balance at end of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flow hedges (N) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net change from periodic revaluations |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Tax benefit (expense)(2) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Total Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Net amount reclassified to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aluminum contracts(3) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Financial contracts(4) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Interest rate contracts(5) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Foreign exchange contracts(6) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Sub-total |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Tax expense(2) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Total amount reclassified from Accumulated |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Total Other comprehensive income |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Accumulated other comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
12
H. Investments –
Third quarter ended September 30, 2023 |
|
Saudi Arabia |
|
|
Mining |
|
|
Energy |
|
|
Other |
|
||||
Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in net (loss) income of affiliated companies, |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Alcoa Corporation’s equity in net (loss) income of |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third quarter ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in net (loss) income of affiliated companies, |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Alcoa Corporation’s equity in net (loss) income of |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nine months ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in net (loss) income of affiliated companies, |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Alcoa Corporation’s equity in net (loss) income of |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nine months ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Equity in net income (loss) of affiliated companies, |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Alcoa Corporation’s equity in net income (loss) of |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
The results for the Saudi Arabia joint venture for the nine-month period of 2023 include an adjustment to the estimate for the settlement of a dispute with an industrial utility for periods in 2021 and 2022. Alcoa’s share of this adjustment is $
The Company’s basis in the ELYSISTM Limited Partnership (ELYSIS) as of September 30, 2023 and 2022, included in Other in the table above, has been reduced to
In February 2022, the Company signed an agreement to sell its share of its investment in MRN in Brazil for $
13
I. Receivables
On January 31, 2023, a wholly-owned special purpose entity (SPE) of the Company entered into a one-year agreement with a financial institution to sell up to $
Alcoa Corporation guarantees the performance obligations of the Company subsidiaries and unsold customer receivables are pledged as collateral to the financial institution to secure the sold receivables. At September 30, 2023, the SPE held unsold customer receivables of $
The Company continues to service the customer receivables that were transferred to the financial institution. As Alcoa collects customer payments, the SPE transfers additional receivables to the financial institution rather than remitting cash. In the third quarter of 2023, the Company sold gross customer receivables of $
J. Inventories
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Bauxite and alumina |
|
|
|
|
|
|
||
Purchased raw materials |
|
|
|
|
|
|
||
Operating supplies |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
K. Goodwill
As a result of the January 2023 segment change, the Company reviewed the recoverability of the carrying value of goodwill of its Alumina reporting unit in the first quarter of 2023. The estimated fair value of the Alumina reporting unit substantially exceeded the reporting unit’s carrying value, resulting in
Goodwill, which is included in Other noncurrent assets on the accompanying Consolidated Balance Sheet, was as follows:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Alumina |
|
$ |
|
|
$ |
|
||
Aluminum |
|
|
— |
|
|
|
— |
|
Corporate(1) |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
14
L. Debt
Short-term borrowings
Inventory Repurchase Agreements
During the nine-month period of 2023, the Company entered into multiple inventory repurchase agreements whereby the Company sold aluminum to a third party and agreed to subsequently repurchase substantially similar inventory. The Company did not record sales upon each shipment of inventory and the net cash received of $
During the third quarter and nine-month period of 2023, the Company recorded borrowings of $
The cash received and subsequently paid under the inventory repurchase agreements is included in Cash provided from (used for) financing activities on the Statement of Consolidated Cash Flows for the nine-month period of 2023.
Credit Facilities
Revolving Credit Facility
The Company has an unsecured $
As of September 30, 2023, the Company was in compliance with all covenants. The Company may access the entire amount of commitments under the Revolving Credit Facility. There were
Japanese Yen Revolving Credit Facility
In April 2023, the Company entered into a one-year unsecured revolving credit facility for $
As of September 30, 2023, the Company was in compliance with all covenants. The Company may access the entire amount of commitments under the facility. There were
M. Pension and Other Postretirement Benefits
The components of net periodic benefit cost were as follows:
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
Pension benefits |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets(1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Recognized net actuarial loss(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Settlements(2) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Net periodic benefit cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
Other postretirement benefits |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Service cost |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Interest cost(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recognized net actuarial loss(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of prior service benefit(1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net periodic benefit cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Plan Actions. In 2023, management initiated the following actions to certain pension and other postretirement plans:
Action #1 – In the second quarter of 2023, plan amendment accounting and related plan remeasurements were triggered within the Surinamese pension and other postretirement plans as a result of participants electing to prospectively convert their Surinamese dollar pension and Company-provided retiree medical to a United States dollar pension with no Company-provided retiree medical. As a result, Alcoa recorded a $
Action #2 – In the second quarter of 2023, settlement accounting and related plan remeasurements were triggered within certain Canadian pension plans as a result of the Company's purchase of group annuity contracts to transfer the obligation to pay the remaining retirement benefits of approximately
Action #3 – In the third quarter of 2023, settlement accounting and a related plan remeasurement was triggered within Alcoa’s Australian pension plan as a result of participants electing lump sum payments. As a result, Alcoa recorded a $
Action # |
|
Number of |
|
Weighted |
|
Plan |
|
Weighted |
|
Increase to |
|
|
Decrease to |
|
|
Decrease to accrued other |
|
|
Settlement |
|
||||
1 |
|
~ |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
||||
2 |
|
~ |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|||||
3 |
|
~ |
|
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|||
Funding and Cash Flows. It is Alcoa’s policy to fund amounts for defined benefit pension plans sufficient to meet the minimum requirements set forth in each applicable country's benefits laws and tax laws, including the Employee Retirement Income Security Act of 1974 (ERISA) for U.S. plans. From time to time, the Company contributes additional amounts as deemed appropriate.
Under ERISA regulations, a plan sponsor that establishes a pre-funding balance by making discretionary contributions to a U.S. defined benefit pension plan may elect to apply all or a portion of this balance toward its minimum required contribution obligations to the related plan in future years.
In the first, second and third quarters of 2023, management made such elections related to the Company’s U.S. plans and intends to do so for the remainder of 2023. As a result, Alcoa’s minimum required contribution to defined benefit pension plans in 2023 is estimated to be approximately $
In the third quarter of 2022, $
16
N. Derivatives and Other Financial Instruments
Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Derivatives
Alcoa Corporation is exposed to certain risks relating to its ongoing business operations, including the risks of changing commodity prices, foreign currency exchange rates and interest rates. Alcoa Corporation’s commodity and derivative activities include aluminum, energy, foreign exchange, and interest rate contracts which are held for purposes other than trading. They are used to mitigate uncertainty and volatility, and to cover underlying exposures. While Alcoa does not generally enter into derivative contracts to mitigate the risk associated with changes in aluminum price, the Company may do so in isolated cases to address discrete commercial or operational conditions. Alcoa is not involved in trading activities for energy, weather derivatives, or other nonexchange commodity trading activities.
Alcoa Corporation’s aluminum and foreign exchange contracts are predominantly classified as Level 1 under the fair value hierarchy. All of the Level 1 contracts are designated as either fair value or cash flow hedging instruments (except as described below). Alcoa Corporation also has several derivative instruments classified as Level 3 under the fair value hierarchy, which are either designated as cash flow hedges or undesignated. Alcoa includes the changes in its equity method investee’s Level 2 derivatives in Accumulated other comprehensive loss in the accompanying Consolidated Balance Sheet.
The following tables present the detail for Level 1 and 3 derivatives (see additional Level 3 information in further tables below):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
||||
Level 1 derivative instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Level 3 derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: Current |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noncurrent |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
2023 |
|
|
2022 |
|
||||||||||
Third quarter ended September 30, |
|
Unrealized gain (loss) recognized in Other comprehensive loss |
|
|
Realized gain (loss) reclassed from Other comprehensive loss to earnings |
|
|
Unrealized gain recognized in Other comprehensive loss |
|
|
Realized gain (loss) reclassed from Other comprehensive loss to earnings |
|
||||
Level 1 derivative instruments |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Level 3 derivative instruments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Noncontrolling and equity interest (Level 2) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
For the third quarter of 2023, the realized gain of $
17
|
|
2023 |
|
|
2022 |
|
||||||||||
Nine months ended September 30, |
|
Unrealized gain (loss) recognized in Other comprehensive loss |
|
|
Realized gain (loss) reclassed from Other comprehensive loss to earnings |
|
|
Unrealized gain recognized in Other comprehensive loss |
|
|
Realized gain (loss) reclassed from Other comprehensive loss to earnings |
|
||||
Level 1 derivative instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Level 3 derivative instruments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Noncontrolling and equity interest (Level 2) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
For the nine-month period of 2023, the realized gain of $
The following table presents the outstanding quantities of derivative instruments classified as Level 1:
|
Classification |
|
September 30, 2023 |
|
|
September 30, 2022 |
|
||
Aluminum (in kmt) |
Commodity buy forwards |
|
|
|
|
|
|
||
Aluminum (in kmt) |
Commodity sell forwards |
|
|
|
|
|
|
||
Foreign currency (in millions of euro) |
Foreign exchange buy forwards |
|
|
|
|
|
|
||
Foreign currency (in millions of euro) |
Foreign exchange sell forwards |
|
|
|
|
|
— |
|
|
Foreign currency (in millions of Norwegian krone) |
Foreign exchange buy forwards |
|
|
|
|
|
|
||
Foreign currency (in millions of Brazilian real) |
Foreign exchange buy forwards |
|
|
|
|
|
|
||
Foreign currency (in millions of Brazilian real) |
Foreign exchange sell forwards |
|
|
— |
|
|
|
|
|
Foreign currency (in millions of Canadian dollar) |
Foreign exchange sell forwards |
|
|
|
|
|
— |
|
|
Alcoa routinely uses Level 1 aluminum derivative instruments to manage exposures to changes in the fair value of firm commitments for the purchases or sales of aluminum. Additionally, Alcoa uses Level 1 aluminum derivative instruments to manage exposures to changes in the LME associated with the Alumar (Brazil) restart (expires
Alcoa Corporation uses Level 1 foreign exchange forward contracts to mitigate the risk of foreign exchange exposure related to euro power purchases in Norway (expires
18
Additional Level 3 Disclosures
The following table presents quantitative information related to the significant unobservable inputs described above for Level 3 derivative instruments (megawatt hours in MWh):
|
|
September 30, 2023 |
|
|
Unobservable Input |
|
Unobservable Input Range |
||
Asset Derivatives |
|
|
|
|
|
|
|
|
|
Financial contract (undesignated) |
|
$ |
|
|
Interrelationship of forward energy price, LME forward price and the Consumer Price Index |
|
Electricity |
2023: $ |
|
|
|
|
|
|
|
|
LME (per mt) |
2023: $ |
|
|
|
|
|
|
|
|
|
2024: $ |
|
Power contract |
|
|
|
|
MWh of energy needed to produce the forecasted mt of aluminum |
|
LME (per mt) |
2023: $ |
|
|
|
|
|
|
|
|
Midwest premium |
2023: $ |
|
|
|
|
|
|
|
|
Electricity |
Rate of |
|
Total Asset Derivatives |
|
$ |
|
|
|
|
|
|
|
Liability Derivatives |
|
|
|
|
|
|
|
|
|
Power contract |
|
$ |
|
|
MWh of energy needed to produce the forecasted mt of aluminum |
|
LME (per mt) |
2023: $ |
|
|
|
|
|
|
|
|
Electricity |
Rate of |
|
Power contracts |
|
|
|
|
MWh of energy needed to produce the forecasted mt of aluminum |
|
LME (per mt) |
2023: $ |
|
|
|
|
|
|
|
|
Midwest premium |
2023: $ |
|
|
|
|
|
|
|
|
Electricity |
Rate of |
|
Power contract (undesignated) |
|
|
|
|
Estimated spread between the 30-year debt yield of Alcoa and the counterparty |
|
Credit spread |
||
Total Liability Derivatives |
|
$ |
|
|
|
|
|
|
|
In addition to the instruments presented above, Alcoa had a financial contract that expired on
The fair values of Level 3 derivative instruments recorded in the accompanying Consolidated Balance Sheet were as follows:
Asset Derivatives |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
||
Current—financial contract |
|
$ |
|
|
$ |
|
||
Total derivatives designated as hedging instruments |
|
$ |
|
|
$ |
|
||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
||
Current—financial contract |
|
$ |
|
|
$ |
|
||
Total derivatives not designated as hedging instruments |
|
$ |
|
|
$ |
|
||
Total Asset Derivatives |
|
$ |
|
|
$ |
|
||
Liability Derivatives |
|
|
|
|
|
|
||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
||
Current—power contracts |
|
$ |
|
|
$ |
|
||
Noncurrent—power contracts |
|
|
|
|
|
|
||
Total derivatives designated as hedging instruments |
|
$ |
|
|
$ |
|
||
Total Liability Derivatives |
|
$ |
|
|
$ |
|
||
Assuming market rates remain constant with the rates at September 30, 2023, a realized loss of $
At September 30, 2023 and December 31, 2022, the power contracts with embedded derivatives designated as cash flow hedges include hedges of forecasted aluminum sales of
19
The following tables present the reconciliation of activity for Level 3 derivative instruments:
|
|
Assets |
|
|||||
Third quarter ended September 30, 2023 |
|
Power contracts |
|
|
Financial contracts |
|
||
July 1, 2023 |
|
$ |
|
|
$ |
|
||
Total gains or losses included in: |
|
|
|
|
|
|
||
Sales (realized) |
|
|
( |
) |
|
|
|
|
Other expenses, net (unrealized/realized) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (unrealized) |
|
|
|
|
|
|
||
Settlements and other |
|
|
|
|
|
( |
) |
|
September 30, 2023 |
|
$ |
|
|
$ |
|
||
Change in unrealized gains or losses included in earnings |
|
|
|
|
|
|
||
Other expenses, net |
|
$ |
|
|
$ |
( |
) |
|
|
|
Liabilities |
|
|
Third quarter ended September 30, 2023 |
|
Power contracts |
|
|
July 1, 2023 |
|
$ |
|
|
Total gains or losses included in: |
|
|
|
|
|
|
( |
) |
|
|
|
|
||
September 30, 2023 |
|
$ |
|
|
|
|
Assets |
|
|||||
Nine months ended September 30, 2023 |
|
Power contracts |
|
|
Financial contracts |
|
||
January 1, 2023 |
|
$ |
|
|
$ |
|
||
Total gains or losses included in: |
|
|
|
|
|
|
||
Sales (realized) |
|
|
( |
) |
|
|
|
|
Cost of goods sold (realized) |
|
|
|
|
|
( |
) |
|
Other expenses, net (unrealized/realized) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (unrealized) |
|
|
|
|
|
|
||
Settlements and other |
|
|
|
|
|
( |
) |
|
September 30, 2023 |
|
$ |
|
|
$ |
|
||
Change in unrealized gains or losses included in earnings |
|
|
|
|
|
|
||
Other expenses, net |
|
$ |
|
|
$ |
( |
) |
|
|
|
Liabilities |
|
|
Nine months ended September 30, 2023 |
|
Power contracts |
|
|
January 1, 2023 |
|
$ |
|
|
Total gains or losses included in: |
|
|
|
|
|
|
( |
) |
|
|
|
|
||
September 30, 2023 |
|
$ |
|
|
There were no purchases, sales, or settlements of Level 3 derivative instruments in the periods presented.
Other Financial Instruments
The carrying values and fair values of Alcoa Corporation’s other financial instruments were as follows:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
Carrying value |
|
|
Fair value |
|
|
Carrying value |
|
|
Fair value |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt due within one year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt, less amount due within one year |
|
|
|
|
|
|
|
|
|
|
|
|
||||
20
The following methods were used to estimate the fair values of other financial instruments:
Cash and cash equivalents and Restricted cash. The carrying amounts approximate fair value because of the short maturity of the instruments. The fair value amounts for Cash and cash equivalents and Restricted cash were classified in Level 1 of the fair value hierarchy.
Short-term borrowings and Long-term debt, including amounts due within one year. The fair value of Long-term debt, less amounts due within one year was based on quoted market prices for public debt and on interest rates that are currently available to Alcoa Corporation for issuance of debt with similar terms and maturities for non-public debt. The fair value amounts for all Short-term borrowings and Long-term debt were classified in Level 2 of the fair value hierarchy.
O. Income Taxes – Alcoa Corporation’s estimated annualized effective tax rate (AETR) for 2023 as of September 30, 2023 differs from the U.S. federal statutory rate of
|
|
Nine months ended September 30, |
||||||||
|
|
2023 |
|
|
|
2022 |
|
|
||
(Loss) income before income taxes |
|
$ |
( |
) |
|
|
$ |
|
|
|
Estimated annualized effective tax rate |
|
|
( |
) |
% |
|
|
|
% |
|
Income tax expense |
|
$ |
|
|
|
$ |
|
|
||
Favorable tax impact related to losses in jurisdictions with no tax benefit |
|
|
— |
|
|
|
|
( |
) |
|
Discrete tax (benefit) expense |
|
|
( |
) |
|
|
|
|
|
|
Provision for income taxes |
|
$ |
|
|
|
$ |
|
|
||
The Company’s subsidiaries in Iceland had a full valuation allowance recorded against deferred tax assets, which was established in 2015 and 2017, as the Company believed it was more likely than not that these tax benefits would not be realized. During 2023, after considering all positive and negative evidence, including the expectation that the jurisdiction will remain in a
As of September 30, 2023, management’s position continues to be it is more likely than not that the deferred tax assets of AWAB will be realized. A valuation allowance has not been recorded against the deferred tax assets. However, if future losses are incurred by AWAB, it is reasonably possible that a valuation allowance could be established as a result of negative evidence to support the realization of such assets. AWAB’s net deferred tax assets were $
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (IRA), which includes a
The IRA contains a number of tax credits and other incentives for investments in renewable energy production, carbon capture, and other climate-related actions, as well as the production of critical minerals. These provisions may result in an incremental benefit to the Company. However, given the complexity and uncertainty around the applicability of the incentives to our specific facts and circumstances, we continue to analyze the IRA provisions and seek clarity from relevant government entities to identify and quantify potential opportunities and applicable benefits included in the legislation. At this time the applicability of those provisions to the Company’s specific facts and circumstances are uncertain, and an estimate of those benefits has not been recorded.
21
P. Asset Retirement Obligations
During the third quarter and nine-month period of 2023, the Company recorded liabilities of $
The Company recorded a liability of $
The Company recorded a liability of $
Q. Contingencies
Environmental Matters
Alcoa Corporation participates in environmental assessments and cleanups at several locations. These include currently or previously owned or operated facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)) sites.
Alcoa Corporation’s environmental remediation reserve balance reflects the most probable costs to remediate identified environmental conditions for which costs can be reasonably estimated.
Balance at December 31, 2021 |
|
$ |
|
|
Liabilities incurred |
|
|
|
|
Cash payments |
|
|
( |
) |
Reversals of previously recorded liabilities |
|
|
( |
) |
Foreign currency translation and other |
|
|
( |
) |
Balance at December 31, 2022 |
|
|
|
|
Liabilities incurred |
|
|
|
|
Cash payments |
|
|
( |
) |
Reversals of previously recorded liabilities |
|
|
( |
) |
Foreign currency translation and other |
|
|
( |
) |
Balance at September 30, 2023 |
|
$ |
|
At September 30, 2023 and December 31, 2022, the current portion of the environmental remediation reserve balance was $5
During the third quarter and nine-month period of 2023, the Company incurred liabilities of $
22
During the third quarter and nine-month period of 2022, the Company incurred liabilities of $
The estimated timing of cash outflows on the environmental remediation reserve at September 30, 2023 is as follows:
2023 (excluding the nine months ended September 30, 2023) |
$ |
|
|
2024 - 2028 |
|
|
|
Thereafter |
|
|
|
Total |
$ |
|
Reserve balances at September 30, 2023 and December 31, 2022, associated with significant sites with active remediation underway or for future remediation were $
Suriname—The reserve associated with the 2017 closure of the Suralco refinery and bauxite mine is for treatment and disposal of refinery waste and soil remediation. The work began in 2017 and is expected to be completed at the end of 2025.
Hurricane Creek, Arkansas—The reserve associated with the 1990 closure of two mining areas and refineries near Hurricane Creek, Arkansas is for ongoing monitoring and maintenance for water quality surrounding the mine areas and residue disposal areas.
Massena, New York—The reserve associated with the 2015 closure of the Massena East smelter by the Company’s subsidiary, Reynolds Metals Company, is for subsurface soil remediation to be performed after demolition of the structures. Remediation work commenced in 2021 and will take to
Point Comfort, Texas—The reserve associated with the 2019 closure of the Point Comfort alumina refinery is for disposal of industrial wastes contained at the site, subsurface remediation, and post-closure monitoring and maintenance. The final remediation plan is currently being developed, which may result in a change to the existing reserve.
Sherwin, Texas—In connection with the 2018 settlement of a dispute related to the previously-owned Sherwin alumina refinery, the Company’s subsidiary, Copano Enterprises LLC, accepted responsibility for the final closure of four bauxite residue waste disposal areas (known as the Copano facility). Work commenced on the first residue disposal area in 2018 and will take up to three additional years to complete, depending on the nature of its potential re-use. Other than ongoing maintenance and repair activities, work on the next three areas has not commenced but is expected to be completed by 2048, depending on its potential re-use.
Longview, Washington—In connection with a 2018 Consent Decree and Cleanup Action Plan with the State of Washington Department of Ecology, the Company’s subsidiary, Northwest Alloys as landowner, accepted certain responsibilities for future remediation of contaminated soil and sediments at the site located near Longview, Washington. In December 2020, the lessee of the land, who was a partner in the remediation of the site, filed for bankruptcy and exited the site in January 2021. The full site remediation project design, long-term and post-closure monitoring and maintenance at the site was approved in March 2023. In the third quarter of 2023, changes in scope and cost increases for remediation resulted in an increase to the reserve. The project is planned to be completed in the next two years.
Addy, Washington—The reserve associated with the 2022 closure of the Addy magnesium smelter facility is for site-wide remediation and investigation and post-closure monitoring and maintenance. Remediation work is not expected to begin until 2024 and will take to
Ferndale, Washington—The reserve associated with the 2023 closure of the Intalco aluminum smelter in Ferndale, Washington is for below grade site remediation and
Other Sites—The Company is in the process of decommissioning various other plants and remediating sites in several countries for potential redevelopment or to return the land to a natural state. In aggregate, there are remediation projects at
23
Tax
Brazil (AWAB)—In March 2013, AWAB was notified by the Brazilian Federal Revenue Office (RFB) that approximately $
Australia (AofA)—In December 2019, AofA received a statement of audit position (SOAP) from the Australian Taxation Office (ATO) related to the pricing of certain historic third-party alumina sales. The SOAP proposed adjustments that would result in additional income tax payable by AofA. During 2020, the SOAP was the subject of an independent review process within the ATO. At the conclusion of this process, the ATO determined to continue with the proposed adjustments and issued Notices of Assessment (the Notices) that were received by AofA on July 7, 2020. The Notices asserted claims for income tax payable by AofA of approximately $
On September 17, 2020, the ATO issued a position paper with its preliminary view on the imposition of administrative penalties related to the tax assessment issued to AofA. This paper proposed penalties of approximately $
AofA disagreed with the Notices and with the ATO’s proposed position on penalties. In September 2020, AofA lodged formal objections to the Notices. In the fourth quarter of 2020, AofA provided a submission on the ATO’s imposition of interest and also submitted a response to the ATO’s position paper on penalties. After the ATO completes its review of AofA’s response to the penalties position paper, the ATO could issue a penalty assessment.
To date, AofA has not received a response to its submission on the ATO’s imposition of interest or its response to the ATO’s position paper on penalties.
Through February 1, 2022, AofA did not receive a response from the ATO on AofA’s formal objections to the Notices and, on that date, AofA submitted statutory notices to the ATO requiring the ATO to make decisions on AofA’s objections within a 60-day period. On April 1, 2022, the ATO issued its decision disallowing the Company’s objections related to the income tax assessment, while the position on penalties and interest remains outstanding.
On April 29, 2022, AofA filed proceedings in the Australian Administrative Appeals Tribunal (AAT) against the ATO to contest the Notices, a process which could last several years. The AAT held the first directions hearing on July 25, 2022 ordering AofA to file its evidence and related materials by November 4, 2022, ATO to file its materials by April 14, 2023 and AofA to file reply materials by May 26, 2023. AofA filed its evidence and related materials on November 4, 2022. The ATO did not file its materials by April 14, 2023. At a directions hearing on May 17, 2023, the ATO was granted an extension to file its materials by August 18, 2023. At a directions hearing on September 26, 2023, the ATO was granted an additional extension to file its materials by November 3, 2023. There will be a directions hearing on November 22, 2023 to set a timeline to allow for AofA’s response. The substantive hearing is scheduled for June 2024.
The Company maintains that the sales subject to the ATO’s review, which were ultimately sold to Aluminium Bahrain B.S.C., were the result of arm’s length transactions by AofA over two decades and were made at arm’s length prices consistent with the prices paid by other third-party alumina customers.
24
In accordance with the ATO’s dispute resolution practices, AofA paid
Further interest on the unpaid tax will continue to accrue during the dispute. The initial interest assessment and the additional interest accrued are deductible against taxable income by AofA but would be taxable as income in the year the dispute is resolved if AofA is ultimately successful. AofA applied this deduction beginning in the third quarter of 2020, reducing cash tax payments. At September 30, 2023 and December 31, 2022, total reductions in cash tax payments were $
The Company continues to believe it is more likely than not that AofA’s tax position will be sustained and therefore is not recognizing any tax expense in relation to this matter. However, because the ultimate resolution of this matter is uncertain at this time, the Company cannot predict the potential loss or range of loss associated with the outcome, which may materially affect its results of operations and financial condition. References to any assessed U.S. dollar amounts presented in connection with this matter have been converted into U.S. dollars from Australian dollars based on the exchange rate in the respective period.
AofA is part of the Company’s joint venture with Alumina Limited, an Australian public company listed on the Australian Securities Exchange. The Company and Alumina Limited own
Other
Spain—In July 2019, the Company completed the divestiture of the Avilés and La Coruña aluminum facilities to PARTER Capital Group AG (PARTER) in a sale process endorsed by the Spanish government and supported by the workers’ representatives following a collective dismissal process.
In early 2020, PARTER sold a majority stake in the facilities to an unrelated party. Alcoa had no knowledge of the subsequent transaction prior to its announcement and on August 28, 2020, Alcoa filed a lawsuit with the Court of First Instance in Madrid, Spain asserting that the sale was in breach of the sale agreement between Alcoa and PARTER. In June 2023, the Court of First Instance in Madrid issued a declaratory judgement in Alcoa’s favor ruling that the transaction between PARTER and the unrelated party was a breach of the sale agreement. There was no financial compensation to the Company as a result of this ruling.
Related to this subsequent sale transaction, certain proceedings and investigations have been initiated by or at the request of the employees of the facilities against their current employers, the new owners of the current employers, and Alcoa, alleging that certain agreements from the 2019 collective dismissal process remain in force and that, under such agreements, Alcoa remains liable for certain related employment benefits. One such proceeding is a collective case before the Spanish National Court, filed on November 10, 2020, wherein the workers’ representatives and employees are seeking to have the terms of a Collective Dismissal Agreement signed between Alcoa and the workers in January 2019 be fulfilled. Other proceedings include: a second collective claim filed in National Court on behalf of employees that were not affected by the 2019 collective dismissal process, numerous individual labor claims filed in the labor courts of Avilés and La Coruña and the initiation of a separate criminal investigation by the National Court.
On June 15, 2021, the Spanish National Court ruled that the collective dismissal agreement for the divested Avilés and La Coruña aluminum facilities should be applied to the situation of the claimant workers, and that Alcoa should be liable for the severance of those employees to the extent they were affected by the 2019 collective dismissal process. Alcoa appealed this ruling to the Supreme Court of Spain.
In July 2021, the Spanish National Court appointed a judicial director to oversee the facilities and later declared the facilities insolvent. In early 2022, the insolvency administrators appointed by the courts (one for each facility) announced their intention to collectively dismiss all employees at the two facilities.
In April 2022, the Company received unanimous acceptance of an offer made to all then-active workers of the divested Avilés and La Coruña facilities to settle various legal disputes related to the 2019 divestiture and a Global Settlement Agreement (GSA) was fully executed. Alcoa recorded $
On July 6, 2023, the Supreme Court of Spain ratified the GSA. Upon completion of the remaining administrative and judicial approvals, the Company made cash payments of $
25
General
In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against Alcoa Corporation, including those pertaining to environmental, safety and health, commercial, tax, product liability, intellectual property infringement, employment, and employee and retiree benefit matters, and other actions and claims arising out of the normal course of business. While the amounts claimed in these other matters may be substantial, the ultimate liability is not readily determinable because of the considerable uncertainties that exist. Accordingly, it is possible that the Company’s liquidity or results of operations in a particular period could be materially affected by one or more of these other matters. However, based on facts currently available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the financial position of the Company.
R. Other Financial Information
Other Expenses (Income), Net
|
|
Third quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Equity loss (income) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Foreign currency losses (gains), net |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Net (gain) loss from asset sales |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Net loss (gain) on mark-to-market derivative instruments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Non-service costs – pension and other postretirement benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Other Noncurrent Assets
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Value added tax credits |
|
$ |
|
|
$ |
|
||
Prepaid gas transmission contract |
|
|
|
|
|
|
||
Gas supply prepayment |
|
|
|
|
|
|
||
Deferred mining costs, net |
|
|
|
|
|
|
||
Prepaid pension benefit |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Noncurrent prepaid tax asset |
|
|
|
|
|
|
||
Noncurrent restricted cash |
|
|
|
|
|
|
||
Intangibles, net |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Value added tax credits—In the fourth quarter of 2018, after an assessment of the future realizability of Brazil state VAT credits recorded, the Company established an allowance on the accumulated state VAT credit balances and stopped recording any future credit benefits. With the restart of the Alumar smelter in São Luís, Brazil and its first metal sales in June 2022, the Company had the ability to monetize these credits. In June 2022, the Company reversed the allowance with a credit of $
Cash and Cash Equivalents and Restricted Cash
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Current restricted cash |
|
|
|
|
|
|
||
Noncurrent restricted cash |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
26
S. Supplier Finance Programs
The Company has various supplier finance programs with third-party financial institutions that are made available to suppliers to facilitate payment term negotiations. Under the terms of these agreements, participating suppliers receive payment in advance of the payment date from third-party financial institutions for qualifying invoices. Alcoa’s obligations to its suppliers, including amounts due and payment terms, are not impacted by its suppliers’ participation in these programs. The Company does not pledge any assets as security or provide any guarantees beyond payment of outstanding invoices at maturity under these arrangements. The Company does not pay fees to the financial institutions under these arrangements. At September 30, 2023 and December 31, 2022, qualifying supplier invoices outstanding under these programs were $
27
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(dollars in millions, except per-share amounts, average realized prices, and average cost amounts; metric tons in thousands (kmt); dry metric tons in millions (mdmt))
Business Update
During the third quarter of 2023, Alcoa remained focused on improving operating performance and stability, while pursuing cost reduction measures and initiating productivity programs across its operations. The Company’s Canadian smelters set year-to-date production records, and the Alumar smelter established stability and increased operating capacity to approximately 65 percent despite interruptions from a nation-wide power outage in mid-August. The first announced action under the productivity programs was initiated at the Kwinana refinery in Australia. Additionally, Alcoa continued to make progress with relevant state government agencies in support of its annual mine plan approvals process for bauxite mining at the Huntly and Willowdale bauxite mines in Australia.
Australia Mine Plan Approvals
The Company seeks annual approvals from the Western Australian State Government for a rolling five-year mine plan to maintain continued operations at the Huntly and Willowdale bauxite mines. This statutory annual mine approvals process is currently taking longer than it has taken historically due to increased requirements and expectations from stakeholders. In April 2023, Alcoa began mining lower grade bauxite in areas already permitted under Mine Management Programs (MMPs) at the Huntly mine (that supplies the Pinjarra and Kwinana refineries), which impacts the refineries by increasing the use of caustic, energy, and bauxite and decreasing alumina output.
During the third quarter of 2023, the Company submitted a revised MMP for the period 2023-2027 with enhancements meant to address stakeholder needs and expectations. The submission to regulators includes additional controls for the protection of drinking water, including distances from reservoirs, and biodiversity that includes a plan to accelerate rehabilitation. The Company is working toward an MMP approval during the fourth quarter of 2023.
Separately, following a public comment period that concluded in August 2023, the Western Australian Environmental Protection Authority (WA EPA) continues to consider a third-party request on whether to formally assess all or part of the current and next MMPs and, if so, at what level. The WA EPA has indicated it expects to make a decision before the end of 2023.
The Company supports moving toward a modernized approvals framework for new major mine regions. In June 2020, Alcoa proactively requested an assessment by the WA EPA on two new mine regions (Myara North and Holyoake) for the Huntly mine.
The Company expects the bauxite quality at Myara North and Holyoake to be more consistent with the historic higher quality at the existing Myara Central. Alcoa continues to work to secure approvals for these new regions, and anticipates mining in the new regions no earlier than 2027. Until then, the Company expects bauxite quality similar to recent grades.
During the third quarter of 2023, the first announced action under the productivity programs was initiated at the Kwinana refinery to mitigate the financial impacts of lower bauxite grade. In connection with this program, the Company recorded a charge of $6 in Restructuring and other charges, net on the Statement of Consolidated Operations in the third quarter of 2023 for employee termination and severance costs for approximately 90 employees at the Kwinana refinery to be paid through the first quarter of 2024. The Company anticipates approximately $10 ($6 Alcoa share) in annual cash savings from this action. The Kwinana refinery has been operating four of its five digesters since January 2023 in response to a state-wide shortage of natural gas from key suppliers in Western Australia. On April 19, 2023, the Company announced its decision to keep the one digester offline due to the prolonged annual mine plan approvals process.
28
Portfolio Actions
During the third quarter of 2023, the Company continued the controlled pace for the restart of the Alumar smelter in São Luís, Brazil and improved the operating stability of restarted pots. The site was operating at approximately 65 percent of the site’s total annual capacity of 268 kmt (Alcoa share) as of September 30, 2023.
In March 2023, the Company reduced production at the Portland smelter to approximately 75 percent of the site’s annual capacity of 197 kmt (Alcoa share) due to instability and challenges related to the production of rodded anodes. As of April 2023, the Company regained operational stability at the site and continues to operate at approximately 75 percent of its capacity.
The Company announced the closure of the previously curtailed Intalco aluminum smelter after evaluating various options for the asset in March 2023. The facility has been fully curtailed since 2020.
In February 2023, the Company reached an updated viability agreement with the workers’ representatives of the San Ciprián aluminum smelter to commence the phased restart of the smelter beginning in January 2024. Alcoa plans to operate an initial complement of approximately 6 percent of total pots, to then restart additional pots based on favorable market conditions, and to restart all pots by October 1, 2025. From October 1, 2025 until the end of 2026, the planned minimum production will be 75 percent of the annual capacity of 228 kmt. The updated viability agreement includes increased investments in the facility and protections for the workforce.
Other Matters
In July 2023, the Supreme Court of Spain ratified the GSA to settle various legal disputes related to the 2019 divestiture of the Avilés and La Coruña aluminum facilities. The Company made cash payments of $75 to the former employees of the facilities in the third quarter of 2023 upon completion of the remaining administrative and judicial approvals in accordance with the GSA.
In early July 2023, the repair of the ship-to-shore conveyance system that failed on March 25, 2023 and other unplanned maintenance was completed at the Alumar (Brazil) refinery. As a result of the conveyance system event, bauxite discharge at the Alumar port was temporarily halted and the refinery operated on existing inventory until initial repairs were completed on April 8, 2023. Bauxite flows to the refinery were fully restored by the end of April 2023. The pier was not damaged and could still berth vessels.
In May 2023, members of the United Steelworkers ratified a new three-year collective bargaining agreement that covers more than 800 active employees at the smelter at Warrick Operations (Indiana) and the smelter at Massena Operations (New York).
In April 2023, the Company purchased group annuity contracts to transfer approximately $235 of pension obligations and assets associated with defined benefit pension plans for approximately 530 Canadian retirees and beneficiaries. As a result, Alcoa recognized a non-cash settlement loss of $21 ($16 after-tax) in Restructuring and other charges, net on the Statement of Consolidated Operations in the second quarter of 2023. See Part I Item I of this Form 10-Q in Note M to the Consolidated Financial Statements for additional information.
In April 2023, the Company entered into a one-year unsecured revolving credit facility for $250 (available to be drawn in Japanese yen).
In the first quarter of 2023, the Company recorded an adjustment related to the Company’s Ma’aden Aluminum joint venture for the settlement of a dispute with an industrial utility for periods in 2021 and 2022. Alcoa’s share of this adjustment was $41 which is included in Other expenses (income), net on the Statement of Consolidated Operations for the nine-month period of 2023. Alcoa’s total share of this dispute of $62 includes $21 that was recorded in the fourth quarter of 2022.
The Company paid a quarterly cash dividend of $0.10 per share of the Company’s common stock in August 2023, totaling $18.
See the below sections for additional details on the above-described actions.
29
Results of Operations
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the quarterly and year-to-date periods outlined in the table below.
Selected Financial Data:
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
Sequential |
|
|
Year-to-date |
|
||||||||||
Statement of Operations |
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Sales |
|
$ |
2,602 |
|
|
$ |
2,684 |
|
|
$ |
7,956 |
|
|
$ |
9,788 |
|
Cost of goods sold (exclusive of expenses below) |
|
|
2,469 |
|
|
|
2,515 |
|
|
|
7,388 |
|
|
|
7,616 |
|
Selling, general administrative, and other expenses |
|
|
56 |
|
|
|
52 |
|
|
|
162 |
|
|
|
140 |
|
Research and development expenses |
|
|
9 |
|
|
|
6 |
|
|
|
25 |
|
|
|
23 |
|
Provision for depreciation, depletion, and amortization |
|
|
163 |
|
|
|
153 |
|
|
|
469 |
|
|
|
470 |
|
Restructuring and other charges, net |
|
|
22 |
|
|
|
24 |
|
|
|
195 |
|
|
|
702 |
|
Interest expense |
|
|
26 |
|
|
|
27 |
|
|
|
79 |
|
|
|
80 |
|
Other expenses (income), net |
|
|
85 |
|
|
|
6 |
|
|
|
145 |
|
|
|
(185 |
) |
Total costs and expenses |
|
|
2,830 |
|
|
|
2,783 |
|
|
|
8,463 |
|
|
|
8,846 |
|
(Loss) income before income taxes |
|
|
(228 |
) |
|
|
(99 |
) |
|
|
(507 |
) |
|
|
942 |
|
(Benefit from) provision for income taxes |
|
|
(35 |
) |
|
|
22 |
|
|
|
39 |
|
|
|
484 |
|
Net (loss) income |
|
|
(193 |
) |
|
|
(121 |
) |
|
|
(546 |
) |
|
|
458 |
|
Less: Net (loss) income attributable to noncontrolling interest |
|
|
(25 |
) |
|
|
(19 |
) |
|
|
(45 |
) |
|
|
186 |
|
Net (loss) income attributable to Alcoa Corporation |
|
$ |
(168 |
) |
|
$ |
(102 |
) |
|
$ |
(501 |
) |
|
$ |
272 |
|
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
Selected Financial Metrics |
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Diluted (loss) income per share attributable to Alcoa |
|
$ |
(0.94 |
) |
|
$ |
(0.57 |
) |
|
$ |
(2.81 |
) |
|
$ |
1.47 |
|
Third-party shipments of alumina (kmt) |
|
|
2,374 |
|
|
|
2,136 |
|
|
|
6,439 |
|
|
|
6,959 |
|
Third-party shipments of aluminum (kmt) |
|
|
630 |
|
|
|
623 |
|
|
|
1,853 |
|
|
|
1,929 |
|
Average realized price per metric ton of alumina |
|
$ |
354 |
|
|
$ |
363 |
|
|
$ |
362 |
|
|
$ |
397 |
|
Average realized price per metric ton of aluminum |
|
$ |
2,647 |
|
|
$ |
2,924 |
|
|
$ |
2,880 |
|
|
$ |
3,646 |
|
Average Alumina Price Index (API)(1) |
|
$ |
335 |
|
|
$ |
355 |
|
|
$ |
346 |
|
|
$ |
378 |
|
Average London Metal Exchange (LME) 15-day lag(2) |
|
$ |
2,147 |
|
|
$ |
2,283 |
|
|
$ |
2,270 |
|
|
$ |
2,870 |
|
30
Overview
Sequential period comparison
Net (loss) income attributable to Alcoa Corporation decreased $66 primarily as a result of:
Partially offset by:
Year-to-date comparison
Net (loss) income attributable to Alcoa Corporation decreased $773 primarily as a result of:
Partially offset by:
Sales
Sequential period comparison
Sales decreased $82 primarily as a result of:
Partially offset by:
Year-to-date comparison
Sales decreased $1,832 primarily as a result of:
Partially offset by:
Cost of goods sold
Sequential period comparison
Cost of goods sold as a percentage of sales increased 1% primarily as a result of:
Partially offset by:
Year-to-date comparison
Cost of goods sold as a percentage of sales increased 15% primarily as a result of:
Partially offset by:
31
Selling, general administrative, and other expenses
Sequential period comparison
Selling, general administrative, and other expenses increased $4 primarily as a result of:
Year-to-date comparison
Selling, general administrative, and other expenses increased $22 primarily as a result of:
Provision for depreciation, depletion, and amortization
Sequential period comparison
Depreciation increased $10 primarily as a result of:
Year-to-date comparison
Depreciation decreased $1 primarily as a result of:
Partially offset by:
Interest expense
Interest expense decreased $1 in comparison to both the second quarter of 2023 and nine-month period of 2022.
Other expenses (income), net
Sequential period comparison
Other expenses (income), net was $85 in the third quarter of 2023 compared with $6 in the second quarter of 2023. The unfavorable change of $79 was primarily a result of:
Year-to-date comparison
Other expenses (income), net was $145 in the nine-month period of 2023, compared with $(185) in the nine-month period of 2022. The unfavorable change of $330 was primarily a result of:
Partially offset by:
32
Restructuring and other charges, net
Sequential period comparison
In the third quarter of 2023, Restructuring and other charges, net of $22 primarily related to:
In the second quarter of 2023, Restructuring and other charges, net of $24 primarily related to:
Year-to-date comparison
In the nine-month period of 2023, Restructuring and other charges, net of $195 primarily related to:
In the nine-month period of 2022, Restructuring and other charges, net of $702 primarily related to:
Partially offset by:
(Benefit from) provision for income taxes
Sequential period comparison
The Benefit from income taxes in the third quarter of 2023 was $(35) on a loss before taxes of $(228) or 15.4%. In comparison, the second quarter of 2023 Provision for income taxes was $22 on a loss before taxes of $(99) or (22.2)%.
The decrease in tax expense of $57 is primarily attributable to a tax benefit recognized for the full reversal of the valuation allowance recorded against the deferred tax assets of the Company’s subsidiaries in Iceland and lower income in the jurisdictions where taxes are paid.
The Company’s subsidiaries in Iceland had a full valuation allowance recorded against deferred tax assets, which was established in 2015 and 2017, as the Company believed it was more likely than not that these tax benefits would not be realized. During 2023, after considering all positive and negative evidence, including the expectation that the jurisdiction will remain in a three-year cumulative income position, the Company determined that it is more likely than not that the net deferred tax assets will be realized. Based on this conclusion, the Company reversed the valuation allowance totaling $58 during the third quarter of 2023, generating a non-cash benefit from income taxes.
Year-to-date comparison
The Provision for income taxes in the nine-month period of 2023 was $39 on a loss before taxes of $(507) or (7.7)%. In comparison, the nine-month period of 2022 Provision for income taxes was $484 on income before taxes of $942 or 51.4%.
The decrease in tax expense of $445 is primarily attributable to lower income in the jurisdictions where taxes are paid and a tax benefit recognized for the full reversal of the valuation allowance recorded against the deferred tax assets of the Company’s subsidiaries in Iceland.
33
Noncontrolling interest
Sequential period comparison
Net (loss) income attributable to noncontrolling interest was $(25) in the third quarter of 2023 compared with $(19) in the second quarter of 2023. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities.
The change is primarily a result of lower average realized price of alumina, higher elimination of intercompany profit in inventory, unfavorable currency revaluation impacts, and higher taxes, partially offset by lower raw material costs and production costs.
Year-to-date comparison
Net (loss) income attributable to noncontrolling interest was $(45) in the nine-month period of 2023 compared with $186 in the nine-month period of 2022. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities.
The change is primarily a result of higher production costs, higher raw material costs, lower average realized price of alumina, unfavorable mark-to-market results on derivative instruments, higher elimination of intercompany profit in inventory, partially offset by lower taxes.
Segment Information
Alcoa Corporation is a producer of bauxite, alumina, and aluminum products. In January 2023, the financial information provided to the Chief Operating Decision Maker (CODM) for the activities of the bauxite mines and the alumina refineries was combined, and accordingly the Company changed its operating segments. Beginning in the first quarter of 2023, the Company’s operations consisted of two worldwide reportable segments: Alumina and Aluminum. Segment information for all prior periods presented was updated to reflect the new segment structure.
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.
Alumina
Business Update. The average API of $335 per metric ton trended unfavorably compared to the prior quarter reflecting a 6% sequential decrease.
During the third quarter, the Alumina segment also experienced lower production and raw material costs compared to the second quarter of 2023.
Alumina production increased 10% in the third quarter in comparison to the second quarter of 2023 primarily due to the conclusion of unplanned maintenance at the Alumar refinery and higher output in Australia as the refineries adapted to lower grade bauxite.
In the second quarter of 2023, Alcoa began mining lower grade bauxite in areas at the Huntly mine (that supplies the Pinjarra and Kwinana refineries) as it continued to work through the annual mine approvals process. The reduction in grade increases the use of caustic, energy, and bauxite and decreases alumina output. During the third quarter of 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 bauxite grade and to optimize current operating levels. The first announced action under the productivity programs was initiated at the Kwinana refinery, and the Company recorded Restructuring and other charges, net of $6 for employee termination and severance costs for approximately 90 employees. The restructuring actions and corresponding cash outlays are expected to be complete by the end of the first quarter of 2024. The Company anticipates approximately $10 ($6 Alcoa share) in annual cash savings as a result of this program.
On March 25, 2023, a ship-to-shore conveyance system at the Alumar refinery failed, temporarily halting bauxite discharge at the Alumar port. The Alumar refinery operated on existing inventory until initial repairs were completed on April 8, 2023, and bauxite flows to the refinery were restored by the end of April 2023. The pier was not damaged and could still berth vessels.
34
In January 2023, in response to a state-wide shortage of natural gas from key suppliers in Western Australia, the Company reduced production at the Kwinana refinery by decreasing process flows and taking offline one of five digesters. While the supply of natural gas improved, in April 2023, the Company announced its decision to keep the one digester offline due to the prolonged annual mine plan approvals process.
Mining operations are relocated periodically in support of optimizing the value extracted from bauxite reserves. In the first quarter of 2023, the Company completed the process of moving the Juruti mining operations and incurred $4 related to the mining operation relocation.
Capacity. The Alumina segment had a base capacity of 13,843 kmt with 1,452 kmt of curtailed refining capacity. There was no change in curtailed capacity during the quarter.
Total alumina shipments include metric tons that were not produced by the Alumina segment. Such alumina was purchased to satisfy certain customer commitments. The Alumina segment bears the risk of loss of the purchased alumina until control of the product has been transferred to this segment’s customers. Additionally, operating costs in the table below includes all production related costs: raw materials consumed; conversion costs, such as labor, materials, and utilities; depreciation and amortization; and plant administrative expenses.
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Bauxite production (mdmt) |
|
|
10.7 |
|
|
|
10.0 |
|
|
|
30.6 |
|
|
|
31.5 |
|
Third-party bauxite shipments (mdmt) |
|
|
1.9 |
|
|
|
1.8 |
|
|
|
5.6 |
|
|
|
2.4 |
|
Alumina production (kmt) |
|
|
2,805 |
|
|
|
2,559 |
|
|
|
8,119 |
|
|
|
9,527 |
|
Third-party alumina shipments (kmt) |
|
|
2,374 |
|
|
|
2,136 |
|
|
|
6,439 |
|
|
|
6,959 |
|
Intersegment alumina shipments (kmt) |
|
|
966 |
|
|
|
944 |
|
|
|
2,949 |
|
|
|
2,929 |
|
Total alumina shipments (kmt) |
|
|
3,340 |
|
|
|
3,080 |
|
|
|
9,388 |
|
|
|
9,888 |
|
Third-party bauxite sales |
|
$ |
111 |
|
|
$ |
113 |
|
|
$ |
360 |
|
|
$ |
136 |
|
Third-party alumina sales |
|
|
846 |
|
|
|
781 |
|
|
|
2,348 |
|
|
|
2,764 |
|
Total segment third-party sales |
|
$ |
957 |
|
|
$ |
894 |
|
|
$ |
2,708 |
|
|
$ |
2,900 |
|
Intersegment alumina sales |
|
|
381 |
|
|
|
397 |
|
|
|
1,199 |
|
|
|
1,308 |
|
Total sales |
|
$ |
1,338 |
|
|
$ |
1,291 |
|
|
$ |
3,907 |
|
|
$ |
4,208 |
|
Segment Adjusted EBITDA |
|
$ |
53 |
|
|
$ |
33 |
|
|
$ |
189 |
|
|
$ |
738 |
|
Average realized third-party price per metric ton of alumina |
|
$ |
354 |
|
|
$ |
363 |
|
|
$ |
362 |
|
|
$ |
397 |
|
Operating costs |
|
$ |
1,299 |
|
|
$ |
1,269 |
|
|
$ |
3,742 |
|
|
$ |
3,482 |
|
Average cost per metric ton of alumina shipped |
|
$ |
389 |
|
|
$ |
412 |
|
|
$ |
399 |
|
|
$ |
352 |
|
35
Production
Sequential period comparison
Alumina production increased 10% primarily as a result of:
Year-to-date comparison
Alumina production decreased 15% primarily as a result of:
Third-party sales
Sequential period comparison
Third-party sales increased $63 primarily as a result of:
Partially offset by:
Year-to-date comparison
Third-party sales decreased $192 primarily as a result of:
Partially offset by:
Intersegment sales
Sequential period comparison
Intersegment sales decreased $16 primarily as a result of:
Partially offset by:
Year-to-date comparison
Intersegment sales decreased $109 primarily as a result of:
Partially offset by:
36
Segment Adjusted EBITDA
Sequential period comparison
Segment Adjusted EBITDA increased $20 primarily as a result of:
Partially offset by:
Year-to-date comparison
Segment Adjusted EBITDA decreased $549 primarily as a result of:
Partially offset by:
Forward Look. For the fourth quarter in comparison to the third quarter of 2023, the Alumina segment anticipates lower raw material prices, lower production costs and higher volumes to be partially offset by higher energy costs.
The Company expects total alumina 2023 shipments to remain unchanged from the prior projection, ranging between 12.7 and 12.9 million metric tons.
Aluminum
Business Update. Aluminum prices decreased sequentially with LME prices on a 15-day lag averaging $2,147 per metric ton in the third quarter of 2023. During the third quarter, the Aluminum segment also experienced lower raw materials and production costs compared to the second quarter of 2023.
In conjunction with the previously announced restart of the Alumar smelter in São Luís, Brazil, Alcoa incurred restart expenses of $1 and $33 during the third quarter and nine-month period of 2023, respectively. During the third quarter of 2023, operational stability of the restarted pots was established and the smelter was operating at approximately 65 percent of the site’s total annual capacity of 268 kmt (Alcoa share) despite interruptions from a nation-wide power outage in mid-August 2023.
In March 2023, Alcoa announced the closure of 279 kmt of previously curtailed capacity at the Intalco aluminum smelter. Charges related to the closure totaled $117 in the first quarter of 2023 and included a charge of $16 for the write down of remaining inventories to net realizable value recorded in Cost of goods sold on the Statement of Consolidated Operations and a charge of $101 recorded in Restructuring and other charges, net on the Statement of Consolidated Operations. The restructuring charges were comprised of $50 of asset impairments, $50 to establish reserves related to environmental and demolition obligations, and $1 of severance and employee termination costs. Cash outlays related to the permanent closure of the site are expected to be approximately $85 in 2024 and 2025.
In March 2023, the Company reduced production at the Portland smelter to approximately 75 percent of the site’s total annual capacity of 197 kmt (Alcoa share) due to instability and challenges related to the production of rodded anodes. As of April 2023, the Company regained operational stability at the site and continues to operate at approximately 75 percent of its capacity.
San Ciprián Smelter
The San Ciprián smelter was curtailed in January 2022 as a result of an agreement that was reached with the workers’ representatives in December 2021. On February 3, 2023, the Company reached an updated viability agreement with the workers’ representatives to commence the restart process in phases beginning in January 2024. The Company recorded charges of $47 in the first quarter of 2023 in Restructuring and other charges, net on the Statement of Consolidated Operations for certain employee obligations during the extended curtailment period. The Company also made additional commitments of $78 for capital improvements at the site. Cash outlays related to the employee obligations and capital improvements are expected in 2024 and 2025.
In connection with the agreements, the Company has restricted cash of $93 remaining at September 30, 2023 to be made available for $125 in capital improvements at the site and $35 in smelter restart costs. The Company incurred $8 and $21 of capital investment expenditures against the commitments during the third quarter and nine-month period of 2023.
37
During the first quarter of 2023, relevant authorities denied some permits related to the development of windfarms included in two long-term power purchase agreements (PPAs) signed in 2022 with renewable energy providers. As a result, those PPAs are now expected to supply up to 50 percent of the smelter’s future power needs at its full capacity; the supply of energy will continue to depend on the permitting and development of the remaining windfarms included in the PPAs. The Company continues to negotiate with other suppliers to secure the remaining power supply needs for the smelter.
Total aluminum third-party shipments include metric tons that were not produced by the Aluminum segment. Such aluminum was purchased by this segment to satisfy certain customer commitments. The Aluminum segment bears the risk of loss of the purchased aluminum until control of the product has been transferred to this segment’s customer. Additionally, Total shipments includes offtake from a joint venture supply agreement.
The average realized third-party price per metric ton of aluminum includes three elements: a) the underlying base metal component, based on quoted prices from the LME; b) the regional premium, which represents the incremental price over the base LME component that is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for metal sold in the United States); and c) the product premium, which represents the incremental price for receiving physical metal in a particular shape (e.g., billet, slab, rod, etc.) or alloy.
Operating costs includes all production-related costs: raw materials consumed; conversion costs, such as labor, materials, and utilities; depreciation and amortization; and plant administrative expenses.
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Production (kmt) |
|
|
532 |
|
|
|
523 |
|
|
|
1,573 |
|
|
|
1,494 |
|
Total shipments (kmt) |
|
|
630 |
|
|
|
623 |
|
|
|
1,853 |
|
|
|
1,929 |
|
Third-party aluminum sales |
|
$ |
1,666 |
|
|
$ |
1,824 |
|
|
$ |
5,336 |
|
|
$ |
7,033 |
|
Other(1) |
|
|
(22 |
) |
|
|
(36 |
) |
|
|
(94 |
) |
|
|
(130 |
) |
Total segment third-party sales |
|
$ |
1,644 |
|
|
$ |
1,788 |
|
|
$ |
5,242 |
|
|
$ |
6,903 |
|
Intersegment sales |
|
|
4 |
|
|
|
4 |
|
|
|
11 |
|
|
|
25 |
|
Total sales |
|
$ |
1,648 |
|
|
$ |
1,792 |
|
|
$ |
5,253 |
|
|
$ |
6,928 |
|
Segment Adjusted EBITDA |
|
$ |
79 |
|
|
$ |
110 |
|
|
$ |
373 |
|
|
$ |
1,461 |
|
Average realized third-party price per metric ton |
|
$ |
2,647 |
|
|
$ |
2,924 |
|
|
$ |
2,880 |
|
|
$ |
3,646 |
|
Operating costs |
|
$ |
1,553 |
|
|
$ |
1,665 |
|
|
$ |
4,834 |
|
|
$ |
5,483 |
|
Average cost per metric ton of aluminum shipped |
|
$ |
2,467 |
|
|
$ |
2,669 |
|
|
$ |
2,609 |
|
|
$ |
2,843 |
|
38
Production
Sequential period comparison
Production increased 2% primarily as a result of:
Year-to-date comparison
Production increased 5% primarily as a result of:
Partially offset by:
Third-party sales
Sequential period comparison
Third-party sales decreased $144 primarily as a result of:
Partially offset by:
Year-to-date comparison
Third-party sales decreased $1,661 primarily as a result of:
Partially offset by:
Segment Adjusted EBITDA
Sequential period comparison
Segment Adjusted EBITDA decreased $31 primarily as a result of:
Partially offset by:
Year-to-date comparison
Segment Adjusted EBITDA decreased $1,088 primarily as a result of:
Partially offset by:
39
The following table provides consolidated capacity and curtailed capacity (each in kmt) for each smelter owned by Alcoa Corporation:
|
|
|
|
September 30, 2023 |
|
|
June 30, 2023 |
|
|
September 30, 2022 |
|
|||||||||||||||
Facility |
|
Country |
|
Capacity(1) |
|
|
Curtailed |
|
|
Capacity(1) |
|
|
Curtailed |
|
|
Capacity(1) |
|
|
Curtailed |
|
||||||
Portland(2) |
|
Australia |
|
|
197 |
|
|
|
49 |
|
|
|
197 |
|
|
|
49 |
|
|
|
197 |
|
|
|
22 |
|
São Luís (Alumar)(3) |
|
Brazil |
|
|
268 |
|
|
|
94 |
|
|
|
268 |
|
|
|
118 |
|
|
|
268 |
|
|
|
204 |
|
Baie Comeau |
|
Canada |
|
|
314 |
|
|
|
— |
|
|
|
314 |
|
|
|
— |
|
|
|
312 |
|
|
|
— |
|
Bécancour |
|
Canada |
|
|
350 |
|
|
|
— |
|
|
|
350 |
|
|
|
— |
|
|
|
347 |
|
|
|
— |
|
Deschambault |
|
Canada |
|
|
287 |
|
|
|
— |
|
|
|
287 |
|
|
|
— |
|
|
|
287 |
|
|
|
— |
|
Fjarðaál |
|
Iceland |
|
|
351 |
|
|
|
— |
|
|
|
351 |
|
|
|
— |
|
|
|
351 |
|
|
|
— |
|
Lista |
|
Norway |
|
|
95 |
|
|
|
31 |
|
|
|
95 |
|
|
|
31 |
|
|
|
94 |
|
|
|
31 |
|
Mosjøen |
|
Norway |
|
|
200 |
|
|
|
— |
|
|
|
200 |
|
|
|
— |
|
|
|
200 |
|
|
|
— |
|
San Ciprián(4) |
|
Spain |
|
|
228 |
|
|
|
228 |
|
|
|
228 |
|
|
|
228 |
|
|
|
228 |
|
|
|
228 |
|
Intalco(5) |
|
U.S. |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
279 |
|
|
|
279 |
|
Massena West |
|
U.S. |
|
|
130 |
|
|
|
— |
|
|
|
130 |
|
|
|
— |
|
|
|
130 |
|
|
|
— |
|
Warrick |
|
U.S. |
|
|
269 |
|
|
|
162 |
|
|
|
269 |
|
|
|
162 |
|
|
|
269 |
|
|
|
162 |
|
|
|
|
|
|
2,689 |
|
|
|
564 |
|
|
|
2,689 |
|
|
|
588 |
|
|
|
2,962 |
|
|
|
926 |
|
Forward Look. For the fourth quarter in comparison to the third quarter of 2023, the Aluminum segment expects lower raw material costs to be offset by lower value add product sales and higher production costs.
Additionally, in October 2023, the Norwegian government issued a budget proposal that increases the floor for the carbon dioxide compensation scheme to be paid in 2024 based on 2023 power purchased. Upon Norwegian government approval, the Company will record an adjustment of approximately $18 in the fourth quarter of 2023 to reverse amounts accrued in Cost of goods sold for 2023 credits earned through September 30, 2023. The total impact of this budget proposal on the Company’s full year results is approximately $24.
The Company expects total Aluminum segment shipments to remain unchanged from the prior projection, ranging between 2.5 and 2.6 million metric tons in 2023.
Reconciliations of Certain Segment Information
Reconciliation of Total Segment Third-Party Sales to Consolidated Sales
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Alumina |
|
$ |
957 |
|
|
$ |
894 |
|
|
$ |
2,708 |
|
|
$ |
2,900 |
|
Aluminum |
|
|
1,644 |
|
|
|
1,788 |
|
|
|
5,242 |
|
|
|
6,903 |
|
Total segment third-party sales |
|
$ |
2,601 |
|
|
$ |
2,682 |
|
|
$ |
7,950 |
|
|
$ |
9,803 |
|
Other |
|
|
1 |
|
|
|
2 |
|
|
|
6 |
|
|
|
(15 |
) |
Consolidated sales |
|
$ |
2,602 |
|
|
$ |
2,684 |
|
|
$ |
7,956 |
|
|
$ |
9,788 |
|
40
Reconciliation of Total Segment Operating Costs to Consolidated Cost of Goods Sold
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Alumina |
|
$ |
1,299 |
|
|
$ |
1,269 |
|
|
$ |
3,742 |
|
|
$ |
3,482 |
|
Aluminum |
|
|
1,553 |
|
|
|
1,665 |
|
|
|
4,834 |
|
|
|
5,483 |
|
Other(1) |
|
|
128 |
|
|
|
120 |
|
|
|
377 |
|
|
|
356 |
|
Total segment operating costs |
|
|
2,980 |
|
|
|
3,054 |
|
|
|
8,953 |
|
|
|
9,321 |
|
Eliminations(2) |
|
|
(381 |
) |
|
|
(431 |
) |
|
|
(1,228 |
) |
|
|
(1,465 |
) |
Provision for depreciation, depletion, and amortization(3) |
|
|
(158 |
) |
|
|
(148 |
) |
|
|
(453 |
) |
|
|
(452 |
) |
Other(4) |
|
|
28 |
|
|
|
40 |
|
|
|
116 |
|
|
|
212 |
|
Consolidated cost of goods sold |
|
$ |
2,469 |
|
|
$ |
2,515 |
|
|
$ |
7,388 |
|
|
$ |
7,616 |
|
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net (Loss) Income Attributable to Alcoa Corporation
|
|
Quarter ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
June 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
Total Segment Adjusted EBITDA |
|
$ |
132 |
|
|
$ |
143 |
|
|
$ |
562 |
|
|
$ |
2,199 |
|
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transformation(1) |
|
|
(29 |
) |
|
|
(17 |
) |
|
|
(54 |
) |
|
|
(44 |
) |
Intersegment eliminations |
|
|
(4 |
) |
|
|
31 |
|
|
|
19 |
|
|
|
133 |
|
Corporate expenses(2) |
|
|
(33 |
) |
|
|
(24 |
) |
|
|
(87 |
) |
|
|
(91 |
) |
Provision for depreciation, depletion, and amortization |
|
|
(163 |
) |
|
|
(153 |
) |
|
|
(469 |
) |
|
|
(470 |
) |
Restructuring and other charges, net |
|
|
(22 |
) |
|
|
(24 |
) |
|
|
(195 |
) |
|
|
(702 |
) |
Interest expense |
|
|
(26 |
) |
|
|
(27 |
) |
|
|
(79 |
) |
|
|
(80 |
) |
Other (expenses) income, net |
|
|
(85 |
) |
|
|
(6 |
) |
|
|
(145 |
) |
|
|
185 |
|
Other(3) |
|
|
2 |
|
|
|
(22 |
) |
|
|
(59 |
) |
|
|
(188 |
) |
Consolidated (loss) income before income taxes |
|
|
(228 |
) |
|
|
(99 |
) |
|
|
(507 |
) |
|
|
942 |
|
Benefit from (provision for) income taxes |
|
|
35 |
|
|
|
(22 |
) |
|
|
(39 |
) |
|
|
(484 |
) |
Net loss (income) attributable to noncontrolling interest |
|
|
25 |
|
|
|
19 |
|
|
|
45 |
|
|
|
(186 |
) |
Consolidated net (loss) income attributable to Alcoa |
|
$ |
(168 |
) |
|
$ |
(102 |
) |
|
$ |
(501 |
) |
|
$ |
272 |
|
Environmental Matters
See the Environmental Matters section of Note Q to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
41
Liquidity and Capital Resources
Management believes that the Company’s cash on hand, future operating cash flows, and liquidity options, combined with its strategic actions, are adequate to fund its short term and long term operating and investing needs for at least twelve months and the foreseeable future thereafter. Further, the Company has flexibility related to its use of cash; the Company has no significant debt maturities until 2027 and no significant cash contribution requirements related to its U.S. pension plan obligations for the foreseeable future.
Although management believes that Alcoa’s future cash from operations and other liquidity options will provide adequate resources to fund operating and investing needs, the Company’s access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including: (i) Alcoa Corporation’s credit rating; (ii) the liquidity of the overall capital markets; (iii) the current state of the economy and commodity markets, and (iv) short- and long-term debt ratings. There can be no assurances that the Company will continue to have access to capital markets on terms acceptable to Alcoa Corporation.
Changes in market conditions caused by global or macroeconomic events, such as ongoing regional conflicts, high inflation, and changing global monetary policies could have adverse effects on Alcoa’s ability to obtain additional financing and cost of borrowing. Inability to generate sufficient earnings could impact the Company’s ability to meet the financial covenants in our outstanding debt and revolving credit facility agreements and limit our ability to access these sources of liquidity or refinance or renegotiate our outstanding debt or credit agreements on terms acceptable to the Company. Additionally, the impact on market conditions from such events could adversely affect the liquidity of Alcoa’s customers, suppliers, and joint venture partners and equity method investments, which could negatively impact the collectability of outstanding receivables and our cash flows.
Cash from Operations
Cash used for operations was $107 in the nine-month period of 2023 compared with cash provided from operations of $704 in the same period of 2022. Notable changes to sources and (uses) of cash include:
During 2023, AofA will continue to record its tax provision and tax liability without effect of the ATO assessment, since it expects to prevail. The tax payable will remain on AofA’s balance sheet as a noncurrent liability, increased by the tax effect of subsequent periods’ interest deductions, until dispute resolution, which is expected to take several years. At September 30, 2023, the noncurrent liability resulting from the cumulative interest deductions was $182 (A$284). See description of the tax dispute in Note Q to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
The Company utilizes a Receivables Purchase Agreement facility to sell up to $130 of certain receivables through an SPE to a financial institution on a revolving basis. Alcoa Corporation guarantees the performance obligations of the Company subsidiaries, and unsold customer receivables are pledged as collateral to the financial institution to secure the sold receivables. At September 30, 2023, the SPE held unsold customer receivables of $91 pledged as collateral against the sold receivables.
The Company continues to service the customer receivables that were transferred to the financial institution. As Alcoa collects customer payments, the SPE transfers additional receivables to the financial institution rather than remitting cash. In the nine-month period of 2023, the Company sold gross customer receivables of $320, and reinvested collections of $221 from previously sold receivables, resulting in net cash proceeds from the financial institution of $99. Cash collections from previously sold receivables yet to be reinvested of $79 were included in Accounts payable, trade on the accompanying Consolidated Balance Sheet as of September 30, 2023. Cash received from sold receivables under the agreement are presented within operating activities in the Statement of Consolidated Cash Flows. See Note I to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
42
Financing Activities
Cash provided from financing activities was $51 in the nine-month period of 2023 compared to cash used for financing activities of $743 in the same period of 2022.
The source of cash in the nine-month period of 2023 was primarily $140 of net contributions from Alumina Limited (see Noncontrolling interest in Results of Operations above) and $41 primarily related to the net issuance of short-term borrowings (see below), partially offset by $54 of dividends paid, $44 in financial contributions primarily related to the sale of the Warrick Rolling Mill, and $34 for payments related to tax withholding on stock-based compensation awards.
During the nine-month period of 2023, the Company entered into multiple agreements with a financial institution for the sale and subsequent repurchase of aluminum inventory. The Company did not record sales upon each shipment of inventory, and the net cash received of $42 was recorded in Short-term borrowings within Other current liabilities on the Consolidated Balance Sheet.
During nine-month period of 2023, the Company recorded borrowings of $80 and repurchased $38 of inventory related to these agreements. The cash received and subsequently paid under the inventory repurchase agreements is included in Cash provided from (used for) financing activities on the Statement of Consolidated Cash Flows for the nine-month period of 2023.
The use of cash in the nine-month period of 2022 was primarily $169 of net cash paid to Alumina Limited, $500 from the repurchase of common stock, and $55 of dividends paid.
Credit Facilities
The Company has an unsecured $1,250 revolving credit and letter of credit facility in place for working capital and/or other general corporate purposes (the Revolving Credit Facility). The Revolving Credit Facility, established on September 16, 2016, and amended and restated in 2022, is scheduled to mature in June 2027. Subject to the terms and conditions under the Revolving Credit Facility, the Company or ANHBV may borrow funds or issue letters of credit. See Part II Item 8 of Alcoa Corporation’s Annual Report on Form 10-K in Note M to the Consolidated Financial Statements for the year ended December 31, 2022 for more information on the Revolving Credit Facility.
In April 2023, the Company entered into a one-year unsecured revolving credit facility for $250 (available to be drawn in Japanese yen). Subject to the terms and conditions under the facility, the Company or ANHBV may borrow funds. The facility includes covenants that are substantially the same as those included in the Revolving Credit Facility. If Alcoa Corporation or ANHBV, as applicable, fails to have a rating of at least Ba1 from Moody’s and BB+ from S&P, then no lending party to this facility would have any commitment or obligation to lend.
As of September 30, 2023, the Company was in compliance with all covenants and may access the entire amount of commitments under both of these facilities. There were no borrowings outstanding at September 30, 2023 and December 31, 2022, and no amounts were borrowed during the nine-month period of 2023 and 2022 under either of these facilities.
Dividend
On July 27, 2023, the Board of Directors declared a quarterly cash dividend of $0.10 per share of the Company’s common stock to stockholders of record as of the close of business on August 8, 2023. On August 24, 2023, the Company paid cash dividends of $18.
Investing Activities
Cash used for investing activities was $388 in the nine-month period of 2023 compared to cash used for investing activities of $324 for the same period of 2022.
In the nine-month period of 2023, the use of cash was primarily attributable to $343 related to capital expenditures and $51 of cash contributions to the ELYSIS joint venture.
In the nine-month period of 2022, the use of cash was primarily attributable to $309 related to capital expenditures and $32 of cash contributions to the ELYSIS joint venture, partially offset by the sale of the Company’s interest in the MRN mine of $10.
43
Recently Adopted and Recently Issued Accounting Guidance
See Note B to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
Dissemination of Company Information
Alcoa Corporation intends to make future announcements regarding company developments and financial performance through its website, http://www.alcoa.com, as well as through press releases, filings with the Securities and Exchange Commission, conference calls, and webcasts.
44
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
See Part II Item 7A Quantitative and Qualitative Disclosures About Market Risk of Alcoa Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022. Our exposure to market risk has not changed materially since December 31, 2022. Refer to Part I Item 1 of this Form 10-Q in Note N to the Consolidated Financial Statements under caption Derivatives for additional information.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Alcoa Corporation’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the U.S. Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report, and they have concluded that these controls and procedures were effective as of September 30, 2023.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the third quarter of 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
45
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of its business, Alcoa is involved in a number of lawsuits and claims, both actual and potential. Various lawsuits, claims, and proceedings have been or may be instituted or asserted against Alcoa Corporation, including those pertaining to environmental, safety and health, commercial, tax, product liability, intellectual property infringement, employment, employee and retiree benefit matters, and other actions and claims arising out of the normal course of business. While the amounts claimed in these other matters may be substantial, the ultimate liability is not readily determinable because of the considerable uncertainties that exist. Accordingly, it is possible that the Company’s liquidity or results of operations in a particular period could be materially affected by one or more of these other matters. However, based on facts currently available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the financial position of the Company.
A discussion of our material pending lawsuits and claims can be found in Part I Item 3 Legal Proceedings of Alcoa Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. See Part I Item 1 of this Form 10-Q in Note Q to the Consolidated Financial Statements for additional information regarding legal proceedings.
Item 1A. Risk Factors.
We face a number of risks that could materially and adversely affect our business, results of operations, cash flow, liquidity, or financial condition. A full discussion of our risk factors can be found in Part I Item 1A. Risk Factors of Alcoa Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
Issuer Purchases of Equity Securities
The table below sets forth information regarding the repurchase of shares of our common stock during the periods indicated.
Period |
|
Total Number of Shares Purchased |
|
|
Weighted Average Price Paid Per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Program |
|
|
Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (1) |
|
||||
July 1 to July 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
500,000,000 |
|
August 1 to August 31 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
500,000,000 |
|
September 1 to September 30 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
500,000,000 |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
As of the date of this report, the Company is currently authorized to repurchase up to a total of $500, in the aggregate, of its outstanding shares of common stock under the July 2022 authorization. Repurchases under this program may be made using a variety of methods, which may include open market purchases, privately negotiated transactions, or pursuant to a Rule 10b5-1 plan. This program may be suspended or discontinued at any time and does not have a predetermined expiration date. Alcoa Corporation intends to retire repurchased shares of common stock.
46
Item 5. Other Information.
Trading Arrangements
47
Item 6. Exhibits.
|
|
10.1 |
|
|
|
31.1 |
Certification of Principal Executive Officer required by Rule 13a-14(a) or 15d-14(a) |
|
|
31.2 |
Certification of Principal Financial Officer required by Rule 13a-14(a) or 15d-14(a) |
|
|
32.1 |
|
|
|
32.2 |
|
|
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Denotes management contracts or compensatory plans or arrangements required to be filed as Exhibits to this Form 10-Q.
48
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
Alcoa Corporation |
|
|
|
|
|||
October 26, 2023 |
|
|
|
|
|
/s/ Molly S. Beerman |
Date |
|
|
|
|
|
Molly S. Beerman |
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
|
|
|
|
|||
October 26, 2023 |
|
|
|
|
|
/s/ Renee R. Henry |
Date |
|
|
|
|
|
Renee R. Henry |
|
|
|
|
|
|
Senior Vice President and Controller |
|
|
|
|
|
|
(Principal Accounting Officer) |
49