10-QPeriod: Q1 FY2012

Howmet Aerospace Inc. Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 26, 2012For Securities:HWM

Summary

Alcoa Inc. reported its first-quarter 2012 financial results, indicating a significant decline in net income attributable to Alcoa common shareholders, falling to $94 million ($0.09 per diluted share) from $308 million ($0.27 per diluted share) in the prior year's quarter. This decline was primarily driven by lower realized prices for alumina and aluminum, influenced by decreased London Metal Exchange (LME) prices, coupled with higher input costs, particularly for carbon and energy. Despite a slight increase in overall sales by 1% to $6,006 million, largely due to higher volumes across all segments, the cost of goods sold as a percentage of sales rose considerably. The company also incurred $10 million in restructuring and other charges, primarily related to employee layoffs. Alcoa's liquidity remained a focus, with cash used for operations totaling $236 million, a level consistent with the prior year, but the company took steps to bolster its financing by entering into new credit facilities totaling $450 million. Significant legal matters, including a potential reimbursement demand from Italian energy regulators of approximately $115 million, continue to pose risks.

Financial Highlights

53 data points
Beta

Revenue

$6.01B

15.1% Gross Margin

Net Income

$94.00M

1.6% Net Margin

EPS (Diluted)

$0.09

Total Assets

$40.70B

Cash & Equivalents

$1.75B

Free Cash Flow

-$506.00M

Financial Statements
Beta
Revenue$6.01B
Cost of Revenue$5.10B
Gross Profit$908.00M
R&D Expenses$43.00M
SG&A Expenses$241.00M
Operating Income$94.00M
Interest Expense$123.00M
Net Income$94.00M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)1.07B
Shares Outstanding (Diluted)1.16B

Key Highlights

  • 1Net income attributable to Alcoa common shareholders decreased significantly to $94 million in Q1 2012 from $308 million in Q1 2011.
  • 2Diluted Earnings Per Share (EPS) fell to $0.09 in Q1 2012 from $0.27 in Q1 2011.
  • 3Sales saw a modest increase of 1% year-over-year, reaching $6,006 million, driven by higher volumes across segments.
  • 4Cost of Goods Sold (COGS) as a percentage of sales increased from 79.1% in Q1 2011 to 84.9% in Q1 2012, indicating pressure on margins.
  • 5The company incurred $10 million in restructuring and other charges, primarily for employee layoffs.
  • 6Cash used for operations was $236 million in Q1 2012, consistent with the prior year's figure.
  • 7Alcoa secured new credit facilities totaling $450 million to support working capital needs.

Frequently Asked Questions

The primary drivers for the substantial decrease in net income were lower realized prices for alumina and aluminum, which were influenced by a decline in London Metal Exchange (LME) prices. Additionally, higher input costs, particularly for carbon and energy, and increased restructuring and other charges contributed to the reduced profitability.

Alcoa utilized $236 million in cash for operations, consistent with the previous year. To manage liquidity, the company entered into new credit facilities totaling $450 million, consisting of term loans and a revolving credit agreement, primarily to support working capital and general corporate purposes.

A notable ongoing legal matter involves Italian energy regulators seeking reimbursement of approximately $115 million, plus interest, related to energy tariffs. The company is disputing this demand, but the outcome remains uncertain. Additionally, there are other ongoing litigation matters, including the Aluminium Bahrain (Alba) lawsuit and various environmental proceedings, the outcomes of which are not yet predictable but could potentially be material.

The Alumina segment saw a significant decline in After-Tax Operating Income (ATOI) due to lower prices and higher input costs. The Primary Metals segment experienced a dramatic drop in ATOI, primarily driven by lower realized prices and higher input costs. The Global Rolled Products segment showed improved ATOI due to productivity gains, and the Engineered Products and Solutions segment reported higher sales and ATOI, driven by increased volumes, particularly in aerospace.