ALCOA CORPORATION (NASDAQ:AA) Files An 8-K Results of Operations and Financial Condition
Item2.02
|
Results of Operation and Financial Condition. |
On January3, 2017, Alcoa Corporation (Alcoa) issued a press
release announcing the permanent closure of the Suralco refinery
and other actions that will impact fourth quarter 2016 results. A
copy of the press release is attached as Exhibit 99 and is
incorporated herein by reference. The information contained in
this Item 2.02, including Exhibit 99, is being furnished in
accordance with the provisions of General Instruction B.2 of Form
8-K.
Item2.05 |
Costs Associated with Exit or Disposal Activities. |
On December30, 2016, management of Alcoa approved the permanent
closure of the Suralco refinery (capacity of 2,207,000
metric-tons-per-year) in Suriname effective immediately. The
Suralco refinery has been fully curtailed since November 2015.
Management of Alcoas former parent company, Alcoa Inc.
(ParentCo), decided to curtail the remaining operating capacity
of the Suralco refinery during 2015 in an effort to improve the
position of ParentCos refining operations on the global alumina
cost curve. Since that time, management of ParentCo (through
October31, 2016) and then separately management of Alcoa (from
November1, 2016 through the end of 2016) had been in discussions
with the Government of the Republic of Suriname to determine the
best long-term solution for Suralco due to limited bauxite
reserves and the absence of a long-term energy alternative. The
decision to permanently close the Suralco refinery was based on
the ultimate conclusion of those discussions. Demolition and
remediation activities related to this action will begin in 2017
and are expected to be completed by the end of 2021. The related
bauxite mines in Suriname will also be permanently closed while
the hydroelectric facility that supplied power to the Suralco
refinery, known as Afobaka, will continue to operate and supply
power to the Government of the Republic of Suriname.
As a result of this decision, Alcoa expects to record
restructuring-related charges of $132million ($90million
after-tax and
noncontrolling interest, or $0.49 per diluted share) in the
fourth quarter of 2016. These charges include $116million for
asset retirement obligations and environmental remediation
resulting from the decision to permanently close and demolish
this facility and related infrastructure and $16million for asset
impairments to write off the remaining book value of various
assets. In 2015, ParentCo recorded significant
restructuring-related charges as a result of the curtailment of
the Suralco refinery for accelerated depreciation and asset
impairments, layoff costs, contract terminations, and asset
retirement obligations. Additionally, Alcoa expects to record
demolition expenses and holding costs of $49million ($30million
after-tax and noncontrolling interest) as incurred during the
subsequent five-year timeframe (2017 through2022).
Expected future
cash outlays related to the closure of the refining and mining
operations in Suriname total $224million (Alcoas share is
estimated to be $151 million), including $36million in 2017
(Alcoas share is estimated to be $24 million). The $224million is
comprised of the $116million in 2016 fourth quarter charges for
asset retirement obligations and environmental remediation,
$59million related to previously accrued asset retirement
obligations and environmental remediation liabilities, and the
$49million in estimated future demolition expenses and holding
costs.
Amounts related to
this action are still being finalized. Additional details will be
provided in Alcoas Form 10-K for the year ended
December31, 2016. Also, it is possible that charges in addition
to those described above may be recognized in future
periods.
The Suralco operations are
owned by legal entities that are part of the Alcoa World Alumina
and Chemicals (AWAC) group of companies owned 60% by Alcoa and
40% by Alumina Limited of Australia.
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Item2.06 |
Material Impairments. |
Also on December30, 2016,
management of Alcoa concluded that an interest in certain gas
exploration assets in Western Australia has been impaired. Alcoas
majority-owned subsidiary, Alcoa of Australia (AofA), which is
part of AWAC, owns an interest in a gas exploration project that
was initially entered into in 2007 as a potential source of
low-cost gas to supply AofAs refineries in Western Australia.
This interest, now at 43%, relates to four separate gas wells
and, prior to managements conclusion, had a carrying value of
$74million. In the fourth quarter of 2016, AofA received the
results of a technical analysis performed earlier in the year for
two of the wells and an updated analysis for a third well that
concluded that the cost of gas recovery would be significantly
higher than the market price of gas. For the fourth well, the
results of a technical analysis performed prior to 2016 indicated
that the cost of gas recovery would be lower than the market
price of gas and, therefore, would require additional investment
to move to the next phase of commercial evaluation, which
management previously supported. In the fourth quarter of 2016,
management re-evaluated its options related to the fourth well
and decided it is not economical to make such a commitment for
the foreseeable future. As a result, AofA fully impaired its
$74million interest resulting in Alcoa recording a $31million
non-cash charge
(after-tax and noncontrolling interest), or $0.17 per diluted
share, in the fourth quarter of 2016.
Item8.01 |
Other Events. |
As previously disclosed in
Alcoas Quarterly Report on Form 10-Q for the period ended
September30, 2016, Alcoas Portland smelter in Australia
experienced a power outage on December1, 2016, resulting in a
production stoppage on one of the potlines and a reduction in
full operating capacity of the other potline. The financial
impact of this event was unknown at that time; however,
management has since been able to assess this matter and has
determined that the financial impact is not expected to be
significant in the fourth quarter of
2016.
Item9.01 |
Financial Statements and Exhibits. |
(d) |
Exhibits. |
The following is furnished as
an exhibit to this report:
| Alcoa Corporation press release dated January3, 2017 |
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Forward-Looking
Statements
This Current Report on Form
8-K 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 anticipates, believes, could, estimates, expects,
forecasts, intends, may, outlook, plans, projects, seeks, sees,
should, targets, will, would, or other words of similar meaning.
All statements that reflect the Companys expectations,
assumptions or projections about the future, other than
statements of historical fact, are forward-looking statements.
Forward-looking statements are not guarantees of future
performance and are subject to risks, uncertainties, and changes
in circumstances that are difficult to predict. Although the
Company 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) the inability to complete
the closure, demolition and/or remediation activities as planned
or within the time periods anticipated, whether due to changes in
regulations, technology or other factors; (b) changes in
preliminary accounting estimates due to the significant judgments
and assumptions required; and (c) the other risk factors
disclosed in Alcoas registration statement on Form 10 and other
reports filed with the Securities and Exchange Commission. The
Company 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.
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ALCOA CORPORATION (NASDAQ:AA) Recent Trading Information
ALCOA CORPORATION (NASDAQ:AA) closed its last trading session at with 3,339,520 shares trading hands.
