01—Abstract
Summary
Summary of the 10-K filed February 13, 2014. Cited figures are marked; the original filing is the authoritative source.
Howmet Aerospace Inc. (HWM), formerly Alcoa Inc. as of this filing, reported a net loss of $2.285 billiona for the year ended December 31, 2013, a significant decrease from a net income of $191 million in 2012.
This loss was primarily driven by a goodwill impairment of $1.731 billionb in the Primary Metals segment, a discrete income tax charge related to valuation allowances on deferred tax assets, and charges related to the resolution of a major legal matter. Despite the net loss, the company highlighted progress in productivity improvements and cost management across its operations. Its midstream and downstream segments (Global Rolled Products and Engineered Products and Solutions) continued to grow revenue and generate profits, driven by innovation and market share gains.
Management is focused on improving liquidity and strengthening the balance sheet by reducing debt and maintaining disciplined capital expenditures. The company projects continued growth in global aluminum demand for 2014, anticipating a balanced market, and is focused on achieving specific financial goals, including positive cash flow from operations exceeding capital spending and maintaining a healthy debt-to-capital ratio.
02—Key points
Key Highlights
- Reported a net loss of $2.285 billion for the year ended December 31, 2013, a substantial decline from a net income of $191 million in 2012, largely due to a significant goodwill impairment in the Primary Metals segment.
- Announced a $1.731 billion goodwill impairment charge primarily related to the Primary Metals segment, indicating a substantial decline in the carrying value of goodwill associated with this segment.
- Resolved significant legal matters with the Department of Justice and the Securities and Exchange Commission, including a plea agreement for violating the Foreign Corrupt Practices Act and a civil settlement, resulting in substantial fines and payments.
- Continued to focus on operational efficiency and cost reduction, with productivity improvements offsetting higher input costs in several segments.
- Invested in growth projects, including expansions in automotive sheet capacity and aluminum-lithium capabilities, and continued development of international ventures, notably the integrated aluminum complex in Saudi Arabia.
- Maintained a disciplined approach to capital expenditures, keeping them under $1.5 billion for the fourth consecutive year, and managed liquidity by maintaining over $1.4 billion in cash on hand.
- Addressed challenges in the Primary Metals segment by curtailing capacity and reviewing high-cost operations, reflecting a strategic response to weaker primary aluminum market conditions and pricing.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2013, Howmet Aerospace Inc. lost $0.10.
- Revenue$23.03B100.0%
- Cost of revenue−$19.29B83.7%
- Gross profit$3.75B16.3%
- Operating costs−$6.03B26.2%
- Operating income−$2.29B9.9%
- Interest, other & tax$-00.0%
- Net income−$2.29B9.9%
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 13, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $23.03B$23.70B | −2.8% |
| Cost of Revenue | $19.29B$20.40B | −5.5% |
| Gross Profit | $3.75B$3.30B | +13.5% |
| R&D Expenses | $192.00M$197.00M | −2.5% |
| SG&A Expenses | $1.01B$997.00M | +1.1% |
| Operating Expenses | $24.85B$23.38B | +6.3% |
| Operating Income | -$2.29B$191.00M | −1296.3% |
| Interest Expense | $453.00M$490.00M | −7.6% |
| Net Income | -$2.29B$191.00M | −1296.3% |
| EPS (Basic) | $-2.14$0.18 | −1288.9% |
| EPS (Diluted) | $-2.14$0.18 | −1288.9% |
| Shares Outstanding (Basic) | 1.07B1.07B | +0.3% |
| Shares Outstanding (Diluted) | 1.07B1.08B | −0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of Howmet Aerospace's (Alcoa's) net loss in 2013?
The primary driver of Howmet Aerospace's (Alcoa's) net loss of $2.285 billion in 2013 was a significant goodwill impairment charge of $1.731 billion within its Primary Metals segment. This was compounded by a discrete income tax charge related to valuation allowances on deferred tax assets and substantial charges incurred to resolve a major legal matter involving bribery allegations.
What is the company's outlook for global aluminum demand in 2014?
The company projects continued growth in global aluminum demand for 2014, estimating an increase of 7%, consistent with the growth experienced in the preceding two years. All regions, except Europe, are expected to see demand increases, with China anticipated to lead with the highest growth rate.
How is the company managing its debt and liquidity?
Howmet Aerospace (Alcoa) is focused on strengthening its balance sheet by managing liquidity and reducing debt. In 2013, total debt decreased by $510 million, and the company maintained over $1.4 billion in cash on hand for the fifth consecutive year. Capital expenditures remained disciplined, and management aims to generate cash flow from operations that exceeds capital spending.
What significant legal or regulatory issues did the company resolve in 2013?
In January 2014, Alcoa resolved investigations by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) related to bribery allegations concerning its former Alba business. This resolution included a plea agreement for violating the Foreign Corrupt Practices Act, resulting in substantial fines and a civil settlement payment, totaling hundreds of millions of dollars.
06—Continue