ALCOA CORPORATION (dollars in millions, except per-share amounts, average realized prices, and average cost amounts; dry metric tons in millions (mdmt); metric tons in thousands (kmt))
References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to ParentCo refer toAlcoa Inc. , aPennsylvania corporation, and its consolidated subsidiaries throughOctober 31, 2016 , at which time it was renamedArconic Inc. (and has since been subsequently renamed Howmet Aerospace Inc.). OnNovember 1, 2016 (the Separation Date), ParentCo separated into two standalone, publicly-traded companies,Alcoa Corporation andArconic Inc. (the Separation Transaction). In connection with the Separation Transaction, as ofOctober 31, 2016 , the Company andArconic Inc. entered into several agreements to affect the Separation Transaction, including a Separation and Distribution Agreement and a Tax Matters Agreement. See Overview in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 ofAlcoa Corporation's Annual Report on Form 10-K for the year endedDecember 31, 2019 for additional information regarding the Separation Transaction. Business Update Coronavirus In response to the ongoing coronavirus (COVID-19) pandemic,Alcoa continues to operate with comprehensive measures in place to protect the health of the Company's workforce, prevent infection in our locations, mitigate impacts, and safeguard business continuity. As a result of these measures and the aluminum industry being classified as an essential business, all ofAlcoa's bauxite mines, alumina refineries, and aluminum manufacturing facilities continue to remain in operation. Each location has implemented extensive preparedness and response plans which include social distancing protocols and other protective actions aligned with guidance from theU.S. Centers for Disease Control and Prevention , theWorld Health Organization , and all other relevant government agencies in countries where we operate. These actions remain in effect and include:
• Adjusted shift schedules and other work patterns to create separation for
the workforce and ensure redundancy for critical resources;
• Developed and implemented additional hygiene protocols and cleaning
routines at each location;
• Deployed communications to our suppliers, vendors, customers, and delivery
personnel on our comprehensive actions, including health and safety
protocols;
• Issued global communications to educate and update employees on public
health practices to mitigate the potential spread of the virus in our
communities;
• Implemented access restrictions; everyone must be free of the signs and
symptoms of COVID-19 before entering Alcoa sites;
• Implemented remote work procedures where practical; and,
• Eliminated non-essential travel.
The COVID-19 pandemic has resulted in certain negative impacts on the Company's
business, financial condition, operating results, and cash flows. For example,
due to the economic impacts of the COVID-19 pandemic, the restart at the
Bécancour (Canada ) smelter had been slowed at the end of the first quarter of
2020 but was safely and successfully completed during the third quarter of 2020.
Additionally, the COVID-19 pandemic has negatively impacted customer demand for
value-add aluminum products as customers have reduced production levels in
response to the economic impacts of the pandemic. This has resulted in lower
margins on aluminum products as sales shift from value-add products to
commodity-grade products. However, during the third quarter of 2020 value-add
sales volume increased 11 percent compared with the second quarter of 2020,
primarily due to increased demand from the automotive sector. Alcoa has
experienced challenges from low metal prices during 2020; however, metal prices
have recently been trending favorably. The Company has not experienced any
significant interruption from its supply sources, and the Company's locations
have had minimal contractor- and employee-related disruptions to date.
The Company continues, through its operations leadership team and global crisis
response team, to ensure that each location's preparedness and response plans
are up to date. The Company could experience negative impacts if there is an
increase in COVID-19 cases.
Alcoa and Alcoa Foundation continue to support the communities near our
operating locations, with special focus on Brazil communities that have been
more adversely affected by the pandemic. Alcoa Foundation has pledged more
than $1 to support COVID-19 relief efforts in the communities where Alcoa
operates through its humanitarian aid program. This is in addition to the
almost $3 the Foundation already committed to grantmaking in communities where
we operate, which is being used to provide needed support such as medical
supplies, equipment, and food.
As the ultimate impact of COVID-19 on the global economy continues to evolve,
the Company is constantly evaluating the broad impact of the pandemic on the
macroeconomic environment, including specific regions and end markets in which
the Company
27
-------------------------------------------------------------------------------- operates. As a result of the pandemic's impact on the macroeconomic environment, management evaluated the future recoverability of the Company's assets, including goodwill and long-lived assets, and the realizability of deferred tax assets while considering the Company's current market capitalization. Management concluded that no asset impairments and no additional valuation allowances were required in the third quarter and nine months endedSeptember 30, 2020 .
The magnitude and duration of the COVID-19 pandemic is unknown. The pandemic could have adverse future impacts on the Company's business, financial condition, operating results, and cash flows. Specifically, if this global health threat persists, it could adversely affect:
• Global demand for aluminum, negatively impacting our ability to generate
cash flows from operations;
• The liquidity of customers, which could negatively impact the
collectability of outstanding receivables and our cash flows;
• Commercial sustainability of key vendors within our supply chain which
could result in higher inventory costs and/or inability to fulfill customer
orders;
•
our facilities, which could negatively impact our ability to operate,
results of operations, and profitability;
• Global financial and credit markets and our ability to obtain additional
credit or financing upon acceptable terms or at all, which could negatively
affect our liquidity and financial condition;
• The Company's ability to meet covenants in our outstanding debt and credit
facility agreements;
• The financial condition of equity method investments and key joint venture
partners, negatively impacting the results of operations, cash flows, and
recoverability of investment balances;
•
impacting the realizability of our deferred tax assets;
• Investment return on pension assets, declining interest rates, and
contribution deferrals, resulting in increased required Companycontributions or unfavorable contribution timing, negatively impacting
future cash flows;
• The effectiveness of hedging instruments;
• The recoverability of certain long-lived and intangible assets, including
goodwill;
• Legal obligations resulting from employee claims related to health and
safety; and,
• The efficiency of production at our operating locations, negatively
impacting the results of operations.
The preceding list of potential adverse effects of the COVID-19 pandemic is not
all-inclusive or necessarily in order of importance or magnitude. The potential
impact(s) of the pandemic on the Company's business, financial condition,
operating results, cash flows and/or market capitalization is difficult to
predict and will continue to be monitored in subsequent periods. Further or
prolonged deterioration of adverse conditions could negatively impact our
financial condition and result in asset impairment charges, including long-lived
assets or goodwill, or affect the realizability of deferred tax assets.
In addition to utilizing all preventative and mitigation options available to ensure continuity of operations, the Company has implemented various cash preservation initiatives. These measures include:
• Reducing non-critical capital expenditures planned for 2020 by$100 ;
• Deferring non-regulated environmental and asset retirement obligations
payments of
• Deferring approximately
1, 2021 and deferring employer payroll taxes of approximately
and 2022 in the
Economic Security (CARES) Act; and,
• Implementing hiring restrictions outside of critical production roles,
implementing and extending travel restrictions throughout the organization,
and utilizing other appropriate government support programs to save or
defer approximately $35 .
Strategic Actions
Alcoa continues to progress with its strategic actions to drive lower costs and
sustainable profitability, however, the global effects of the COVID-19 pandemic
may impact the timing of the previously announced strategic actions. In late
2019, Alcoa Corporation announced the following strategic actions:
• The implementation of a new operating model that results in a leaner, more
integrated, operator-centric organization with reduced overhead costs;
• The pursuit of non-core asset sales by early 2021 expected to generate an
estimated $500 to $1,000 in net proceeds in support of its updated
strategic priorities; and,
• The realignment of the operating portfolio over the next five years,
placing 1.5 million metric tons of smelting capacity and 4 million metric
tons of alumina refining capacity under review. The review will consider
opportunities for significant improvement, potential curtailments,
closures, or divestitures.
28
-------------------------------------------------------------------------------- The new operating model has been implemented and the Company is substantially complete with the transition of eliminated roles. AtSeptember 30, 2020 , approximately 235 of the 260 employees expected to be terminated in connection with the implementation of the new operating model were separated. In addition to the employees separated under severance programs, the Company eliminated 60 positions as open roles or retirements were not replaced. InJanuary 2020 , the Company announced the sale ofElemental Environmental Solutions LLC (EES), a wholly-ownedAlcoa subsidiary that operated the waste processing facility inGum Springs ,Arkansas , to a global environmental firm in a transaction valued at$250 . The transaction closed as ofJanuary 31, 2020 whereby the Company received$200 with another$50 held in escrow to be paid toAlcoa if certain post-closing conditions are satisfied, which would result in an additional gain being recorded. As a result of the transaction, the Company recognized a gain of$180 (pre- and after-tax) in the first quarter of 2020. During the second quarter of 2020, an additional$1 gain was recorded as a result of certain post-closing adjustments based on the terms of the agreement. OnApril 22, 2020 ,Alcoa announced that it will curtail the remaining 230 kmt of uncompetitive smelting capacity at its Intalco smelter inFerndale, Washington amid declining market conditions. The full curtailment of 279 kmt, which included 49 kmt of earlier-curtailed capacity, was completed during the third quarter of 2020. The completion of the curtailment, along with the completed restart of theBécancour (Canada ) smelter, bringsAlcoa's total curtailed smelting capacity to approximately 830 kmt, or approximately 30%, of its total global smelting capacity. During the nine-month period of 2020, the Company recorded restructuring charges of approximately$23 (pre- and after-tax) associated with the curtailment for employee-related costs and contract termination costs, which were all cash-based charges. AtSeptember 30, 2020 , approximately 590 of the 685 employees had been terminated with the remaining severance and employee termination costs expected to be paid primarily in the fourth quarter of 2020. OnOctober 8, 2020 ,Alcoa made the decision to curtail the 228 kmt of uncompetitive annual smelting capacity at the San Ciprián smelter inSpain . The decision followed a four-month consultation process with theSpanish Works Council and unsuccessful negotiations during a potential sale process. The Company expects to record cash-based restructuring charges of approximately$35 to$40 (pre- and after-tax) in the fourth quarter of 2020 associated with the curtailment, for employee-related costs, which are expected to be paid primarily in the first half of 2021. The San Ciprián aluminum facility employs approximately 630 people, and the workforce will be significantly reduced due to the curtailment. Approximately 100 employees will remain to operate a portion of the casthouse. FollowingAlcoa's announcement to curtail the San Ciprián smelter inSpain , the workers' representatives filed a lawsuit requesting the court to issue an injunction orderingAlcoa to cease the curtailment and collective dismissal actions. The court hearing on the injunction was held onOctober 28, 2020 ;Alcoa expects to receive the court's ruling within five business days after the conclusion of the hearing. Concurrently, the workers' representatives have stated publicly that they intend to challenge the collective dismissal process in a legal proceeding within 20 business days of Company's announced decision.Alcoa intends to defend its actions. The eventual outcome could impact the timing and amount of the charges discussed above. Although the San Ciprián alumina refinery was not included in the formal consultation process, onOctober 4, 2020 , the labor force at both the refinery and the aluminum facility initiated a strike which has reduced production and shipments. The Company does not expect the impact on net income (after-tax and noncontrolling interest) to exceed$5 to$10 for the fourth quarter of 2020. However, strike-related delays in shipments could have unfavorable impacts on the Company's working capital and operating cash flow. Discussions between the Company and the workers' representatives on minimum services to be provided during the strike continue. InDecember 2019 , the Company announced the permanent closure of its alumina refinery inPoint Comfort, Texas as its first action of the multi-year portfolio review. The site's 2.3 million metric tons of refining capacity had been fully curtailed since 2016. As a result of the decision to close the refinery, a$274 charge was recorded to Restructuring and other charges, net (see Note D to the Consolidated Financial Statements in Part II Item 8 ofAlcoa Corporation's Annual Report on Form 10-K for the year endedDecember 31, 2019 ).
2020 Programs
InFebruary 2020 ,Alcoa announced 2020 programs to drive leaner working capital and improved productivity. First, by utilizing a holistic solution for managing the supply chain across procurement, operations, and the commercial team, the Company is targeting a working capital benefit between$75 to$100 during 2020 to improve its operating cash flows. Second, the Company is targeting greater productivity and lower costs of approximately$100 which will be achieved through operational efficiency programs and specific initiatives taken throughout 2020. 29
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Liquidity Levers
Through a combination of the COVID-19 response initiatives, the strategic
actions, and the 2020 programs discussed above, the Company is targeting
approximately
Additionally, management has taken several measures to improve and maintainAlcoa's liquidity levers. These include amending the Company's Revolving Credit Agreement to temporarily provide a more favorable leverage ratio calculation, permanently adjusting the calculation of Consolidated EBITDA, and temporarily adjusting for up to the next consecutive three full fiscal quarters the manner in which Consolidated Cash Interest Expense and Total Indebtedness are calculated. During the first quarter of 2020, the Company also amended a three-year revolving credit facility agreement of one of its wholly-owned subsidiaries secured by certain customer receivables, converting it to a Receivables Purchase Agreement that provides the option for faster liquidation of certain customer receivables. OnApril 8, 2020 , the Company's wholly-owned subsidiary,Alcoa Norway ANS , drew$100 against its one-year, multicurrency revolving credit facility, and may do so from time to time in the future, in the ordinary course of business. Repayment of the drawn amount, including interest accrued at 2.93%, occurred upon maturity onJune 29, 2020 . OnJuly 3, 2020 ,Alcoa Norway ANS amended the revolving credit facility agreement to align the terms of the agreement with the amendments to the Revolving Credit Agreement (discussed above). OnSeptember 30, 2020 ,Alcoa Norway ANS entered into an Amendment and Restatement Agreement (the A&R Agreement) to the multicurrency revolving credit facility agreement. The A&R Agreement extended the maturity one year from the original maturity date toOctober 2, 2021 , unless further extended or terminated early in accordance with the provisions of the A&R Agreement. The A&R Agreement also amended certain financial ratio covenants, specifying calculations based upon the results ofAlcoa Norway ANS rather than the calculations outlined in the Revolving Credit Agreement. InJuly 2020 , ANHBV, a wholly-owned subsidiary ofAlcoa Corporation , issued$750 aggregate principal amount of 5.500% Senior Notes due 2027 (the 2027 Notes) in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act). The net proceeds of this issuance were approximately$736 reflecting a discount to the initial purchasers of the 2027 Notes as well as issuance costs.
See Credit Facilities under the Liquidity and Capital Resources section of Management's Discussion and Analysis for additional details on the above described liquidity measures.
Section 232 Tariffs InAugust 2020 , theU.S. government reinstated 10 percent tariffs on certain aluminum imports fromCanada under Section 232 of the Trade Expansion Act of 1962. InSeptember 2020 , theU.S. announced that it would not impose this tariff fromSeptember 2020 toDecember 2020 if total aluminum imports of non-alloyed, unwrought aluminum fromCanada that would be subject to the tariff did not exceed 105 percent of a government-set volume for any individual month during the four-month period. The Company has accrued for the tariffs related toSeptember 2020 unwrought metal shipments from its Canadian smelters into theU.S , as volumes were expected to exceed 105 percent of the predetermined threshold for September. (See Aluminum under Segment Information below). OnOctober 27, 2020 , theU.S. government fully reinstated the exemption on aluminum imports fromCanada retroactive toSeptember 1, 2020 . Tariffs collected or accrued sinceSeptember 1, 2020 are expected to be reimbursed or reversed in the fourth quarter of 2020. 30
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Results of Operations
Selected Financial Data:
Third quarter ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
Sales $ 2,365 $ 2,567 $ 6,894 $ 7,997
Net loss attributable to Alcoa
Corporation $ (49 ) $ (221 ) $ (166 ) $ (822 )
Diluted loss per share attributable to
Alcoa
Corporation common shareholders
(0.89 ) $ (4.43 )
Third-party shipments of alumina (kmt) 2,549 2,381 7,329 7,009
Third-party shipments of aluminum
products (kmt) 767 708 2,281 2,141
Average realized price per metric ton of
alumina $ 274 $ 324 $ 274 $ 361
Average realized price per metric ton of
primary aluminum $ 1,904 $ 2,138 $ 1,858 $ 2,175
Overview-Net loss attributable to Alcoa Corporation was $49 in the third quarter
of 2020 compared with a Net loss attributable to Alcoa Corporation of $221 in
the third quarter of 2019. Net loss attributable to Alcoa Corporation was $166
in the nine-month period of 2020 compared with $822 in the nine-month period of
2019. The improvement in results in the quarterly and nine-month comparable
periods of $172 and $656 , respectively, were principally related to:
• Lower Restructuring and other charges, net;
• Lower Provision for income taxes;
• Lower Net income attributable to noncontrolling interest;
• Lower raw material costs; and,
• Favorable results from the restart of the Bécancour smelter.
Partially offset by:
• Lower alumina and aluminum prices; and,
• Lower product premiums as a result of reduced demand for value-add aluminum
products.
Additionally, favorable foreign currency impacts, mainly due to changes in the
Australian dollar and Brazilian real, a gain on the divestiture of a waste
processing facility in Gum Springs , Arkansas , and the avoidance of losses due to
the July 2019 divestiture of two smelters in Spain had favorable impacts on the
comparable 2020 nine-month period.
Sales - Sales declined $202 , or 8%, in the third quarter of 2020 compared with
the third quarter of 2019, and $1,103 , or 14%, in the nine-month period of 2020
compared with the nine-month period of 2019. The decline in both periods was
principally related to:
• Lower alumina and aluminum prices;
• Lower revenue resulting from the curtailment of the Intalco smelter;
• Lower revenue resulting from the divestiture of two Spanish facilities in
• Lower product premiums as a result of reduced demand for value-add aluminum
products.
Partially offset by:
• Higher sales resulting from the restart of the
and,
• Higher alumina shipment volume.
Cost of goods sold- As a percentage of Sales, Cost of goods sold was 86% and 87%
in the third quarter and nine-month period of 2020, respectively, compared with
83% and 81% in the third quarter and nine-month period of 2019, respectively.
The 2020 third quarter and nine-month period percentages were negatively
impacted by lower prices for alumina and aluminum products and lower product
premiums, which were partially offset by favorable changes in raw material
costs, including lower alumina input costs. The nine-month period of 2020 was
also favorably impacted by foreign currency.
Selling, general administrative, and other expenses- Selling, general
administrative, and other expenses decreased by $19 , or 29%, in the third
quarter of 2020 compared with the third quarter of 2019, and $67 , or 31%, in the
comparable nine-month periods. Both periods were favorably impacted by cost
savings from the new operating model, lower fees for professional services, and
lower travel expenses. The 2019 nine-month period was also unfavorably impacted
by a bad debt reserve recorded against a Canadian customer receivable due to
bankruptcy.
Provision for depreciation, depletion, and amortization- Provision for
depreciation, depletion, and amortization decreased $23 , or 13%, and $47 , or 9%,
in the third quarter and nine-month period of 2020, respectively, compared with
the corresponding
31
-------------------------------------------------------------------------------- periods of 2019. The decrease in both periods is principally attributed to favorable foreign exchange impacts from the Brazilian real, the nonrecurrence of write offs of assets in 2019 for projects no longer being pursued, and changes in weighted-average useful lives of assets. Additional favorable impacts from foreign currency occurred during the comparable three-month period related to the Canadian dollar and the nine-month period related to the Australian dollar. Restructuring and other charges, net- In the third quarter and nine-month period of 2020,Alcoa Corporation recorded Restructuring and other charges, net, of$5 and$44 , respectively, which were primarily comprised of costs related to:
•
the Intalco (
•
curtailed Wenatchee (Washington ) smelter; and,
• $5 (both periods) related to settlements of certain pension benefits.
In the third quarter and nine-month period of 2019, Alcoa Corporation recorded
Restructuring and other charges, net of $185 and $668 , respectively, which were
primarily comprised of the following components:
•
subsequent divestiture of the Avilés and La Coruña Spanish facilities;
• $319 (nine-month period only) related to the divestiture of Alcoa
Corporation's interest in MRC;
•
benefits; and,
•
related to the new operating model.
See Note D to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional detail on the above net charges.
Interest expense - Interest expense was$41 in the third quarter of 2020 compared with$30 in the third quarter of 2019, and$103 in the 2020 nine-month period compared with$90 in the 2019 nine-month period. The increase in both periods relates to the issuance of$750 aggregate principal amount of 2027 Notes by ANHBV inJuly 2020 . Other expenses (income), net- Other expenses (income), net was$45 in the third quarter of 2020 compared with$27 in the third quarter of 2019, and ($36 ) in the 2020 nine-month period compared with$118 in the 2019 nine-month period. The increase in expense of$18 in the third quarter of 2020 was largely attributable to unfavorable changes inAlcoa Corporation's share of equity method investment results and net losses on asset sales, partially offset by favorable changes in foreign currency impacts. The favorable change of$154 in the comparable nine-month period was primarily attributable to the gain on divestiture of a waste processing facility inGum Springs ,Arkansas recorded in 2020, partially offset by higher net losses on mark-to-market derivative instruments, and unfavorable changes inAlcoa's share of equity method investment results. Noncontrolling interest- Net income attributable to noncontrolling interest was$29 and$135 in the third quarter and nine-month period of 2020, respectively, compared with$74 and$324 in the third quarter and nine-month period of 2019, respectively. These amounts are entirely related to Alumina Limited's 40% ownership interest in several affiliated operating entities. See Note A to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q. In the third quarter and nine-month periods of 2020 these combined entities, particularly the Alumina segment entities, generated lower net income compared with the third quarter and nine-month periods of 2019. The unfavorable change in earnings was mainly driven by lower alumina prices partially offset by higher alumina shipments (see Alumina under Segment Information below). 32
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Segment Information
Bauxite
Third quarter ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
Production (mdmt) 12.0 12.1 35.8 35.3
Third-party shipments (mdmt) 1.6 2.0 4.6 4.7
Intersegment shipments (mdmt) 10.5 10.6 31.8 31.1
Total shipments (mdmt) 12.1 12.6 36.4 35.8
Third-party sales $ 56 $ 100 $ 193 $ 232
Intersegment sales 236 251 716 733
Total sales $ 292 $ 351 $ 909 $ 965
Segment Adjusted EBITDA $ 124 $ 134 $ 375 $ 372
Operating costs $ 196 $ 242 $ 618 $ 657
Average cost per dry metric ton of bauxite $ 16 $ 19 $ 17 $ 18
Production in the above table can vary from Total shipments due primarily to
differences between the equity allocation of production and off-take agreements
with the respective equity investment. Operating costs in the table above
includes all production-related costs: conversion costs, such as labor,
materials, and utilities; depreciation, depletion, and amortization; and plant
administrative expenses.
Bauxite production decreased 1% and increased 1% in the third quarter and
nine-month period of 2020, respectively, compared with the corresponding periods
of 2019. In the third quarter of 2020, the slight decrease is primarily due to
the Juruti (Brazil ) mine. The Bauxite segment achieved a year to date production
record for the nine-month period of 2020 primarily attributable to the Boké
(Guinea ), Willowdale (Australia ), and Juruti (Brazil ) mines.
Third-party sales for the Bauxite segment decreased 44% and 17% in the third
quarter and nine-month period of 2020, respectively, compared with the
corresponding periods of 2019. The decrease in both periods was mainly driven by
a lower average realized price, primarily due to freight, and a decrease in
shipments.
Intersegment sales decreased 6% and 2% in the third quarter and nine-month
period of 2020, respectively, compared with the corresponding periods of 2019,
primarily due to a lower average realized price on intersegment sales for both
periods. Higher shipments caused by increased demand from the Alumina segment
partially offset the lower average realized price for the comparable nine-month
period.
Segment Adjusted EBITDA decreased $10 and increased $3 in the third quarter and
nine-month period of 2020, respectively, compared with the corresponding periods
of 2019. Both periods were unfavorably impacted by a lower average realized
price on intersegment sales, partially offset by favorable foreign currency
movements primarily from the Brazilian real. The nine-month period of 2020 was
also favorably impacted by increased intersegment shipments compared with the
corresponding period of 2019.
For the fourth quarter of 2020 in comparison with the fourth quarter of 2019, a lower average realized price for intersegment sales is expected.
33--------------------------------------------------------------------------------
Alumina
Third quarter ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
Production (kmt) 3,435 3,380 10,104 9,929
Third-party shipments (kmt) 2,549 2,381 7,329 7,009
Intersegment shipments (kmt) 1,135 1,049 3,197 3,091
Total shipments (kmt) 3,684 3,430 10,526 10,100
Third-party sales 697 $ 771 2,007 $ 2,532
Intersegment sales 329 369 954 1,231
Total sales $ 1,026 $ 1,140 $ 2,961 $ 3,763
Segment Adjusted EBITDA $ 119 $ 223 $ 400 $ 964
Average realized third-party price per
metric ton of alumina $ 274 $ 324 $ 274 $ 361
Operating costs $ 906 $ 902 $ 2,538 $ 2,750
Average cost per metric ton of alumina $ 246 $ 263 $ 241 $ 272
Total 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 customer. Additionally,
operating costs in the table above includes all production-related costs: raw
materials consumed; conversion costs, such as labor, materials, and utilities;
depreciation and amortization; and plant administrative expenses.
On October 4, 2020 , the labor force at both the refinery and the aluminum
facility at San Ciprián (Spain ) initiated a strike which has reduced production
and shipments. Discussions between the Company and the workers' representatives
continue and the ultimate outcome is unknown.
At September 30, 2020 , the Alumina segment had base capacity of 12,759 kmt with
214 kmt of curtailed refining capacity compared with a base capacity of 15,064
kmt and curtailed refining capacity of 2,519 kmt at September 30, 2019 . The
decrease in base and curtailed capacity was due to the permanent closure of the
previously curtailed Point Comfort (Texas ) alumina refinery.
Alumina production increased by 2% in both the third quarter and nine-month
period of 2020 compared with the corresponding periods of 2019. Both increases
were principally due to operating efficiencies obtained across the refining
system. During the third quarter of 2020, the Alumina segment achieved a record
quarterly production rate (tonnes per day), an increase from record last set
during the second quarter of 2020.
Third-party sales for the Alumina segment decreased 10% and 21% in the third
quarter and nine-month period of 2020, respectively, compared with the
corresponding periods in 2019. The decrease in both periods was primarily due to
a decline in average realized price which was principally driven by a lower
average alumina index price (on 30-day lag). Both price decreases were partially
offset by an increase in shipments. Third-party shipments increased 7% and 5% in
the third quarter and nine-month period of 2020, respectively, compared with the
corresponding periods in 2019.
Intersegment sales declined 11% and 23% in the third quarter and nine-month
period of 2020, respectively, compared with the corresponding periods in 2019.
The decrease in both periods was due to a lower average realized price partially
offset by increased demand from the Aluminum segment. The increased demand from
the Aluminum segment was primarily driven by the restart at the Bécancour
(Canada ) smelter partially offset by the curtailment of the Intalco smelter (see
Aluminum below).
Segment Adjusted EBITDA decreased $104 and $564 in the third quarter and
nine-month period of 2020 compared with the corresponding periods of 2019. The
decline in both periods was primarily attributable to the decline in average
realized price of alumina and higher energy costs in Australia , partially offset
by lower costs for bauxite and caustic soda, as well as increased total
shipments. The 2020 nine-month period was also favorably impacted by foreign
currency movements due to a stronger U.S. dollar (particularly against the
Australian dollar and Brazilian real).
For the fourth quarter of 2020 in comparison with the fourth quarter of 2019,
lower costs for both bauxite and caustic soda partially offset by higher energy
costs, primarily natural gas costs in Australia , are expected. Additionally,
although the ultimate impact is currently unknown, the strike at the San Ciprián
(Spain ) alumina refinery may negatively affect the segment's operating and
financial results.
34
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Aluminum
Third quarter ended Nine months ended
September 30, September 30,
Total Aluminum information 2020 2019 2020 2019
Third-party aluminum shipments (kmt) 767 708 2,281 2,141
Third-party sales $ 1,607 $ 1,677 $ 4,680 $ 5,169
Intersegment sales 2 4 7 11
Total sales $ 1,609 $ 1,681 $ 4,687 $ 5,180
Segment Adjusted EBITDA $ 116 $ 43 $ 144 $ (50 )
Primary aluminum information 2020 2019 2020 2019
Production (kmt) 559 530 1,704 1,600
Third-party shipments (kmt) 688 627 2,050 1,893
Third-party sales $ 1,311 $ 1,341 $ 3,810 $ 4,117
Average realized third-party price per
metric ton $ 1,904 $ 2,138 $ 1,858 $ 2,175
Total shipments (kmt) 708 651 2,101 1,946
Operating costs $ 1,308 $ 1,425 $ 3,941 $ 4,505
Average cost per metric ton $ 1,847 $ 2,189 $ 1,875 $ 2,315
Total aluminum third-party shipments and total primary aluminum 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. Total
aluminum information includes flat-rolled aluminum while Primary aluminum
information does not. 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.
The average realized third-party price per metric ton of primary 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.
The following table provides annual consolidated base and idle capacity (each in
kmt) for each smelter owned by
September 30, 2020 September 30, 2019
Facility Country Base Capacity Idle Capacity Base Capacity Idle Capacity Base Change Idle Change
Portland (1) Australia 197 30 197 30 - -
São Luís
(Alumar) (1) Brazil 268 268 268 268 - -
Baie Comeau Canada 280 - 280 - - -
Bécancour (1) Canada 310 - 310 259 - (259 )
Deschambault Canada 260 - 260 - - -
Fjarðaál Iceland 344 - 344 - - -
Lista Norway 94 - 94 - - -
Mosjøen Norway 188 - 188 - - -
San Ciprián
(2) Spain 228 - 228 - - -
Intalco (3) U.S. 279 279 279 49 - 230
Massena West U.S. 130 - 130 - - -
Warrick U.S. 269 108 269 108 - -
Wenatchee U.S. 146 146 146 146 - -
2,993 831 2,993 860 - (29 )
(1) These figures represent
based on its ownership interest in the respective smelter.
(2) On October 8, 2020 , Alcoa made the decision to curtail the 228 kmt of
uncompetitive annual smelting capacity at the San Ciprián smelter in
The smelter is expected to be fully curtailed during the first quarter of
2021.
35
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(3) On
of smelting capacity at the Intalco smelter. The full curtailment of 279
kmt, which includes 49 kmt of earlier-curtailed capacity, was completed
during the third quarter of 2020.
Idle capacity at the Bécancour (Canada ) smelter decreased by 259 kmt from the
third quarter 2019 to the third quarter 2020 as a result of the restart process.
Due to the economic impacts of the COVID-19 pandemic, the restart at the
Bécancour smelter had been slowed. The restart, which was originally expected to
be complete by the end of the second quarter of 2020, was completed during the
third quarter of 2020.
Idle capacity at the Intalco (Washington ) smelter increased by 230 kmt from the
third quarter of 2019 to the third quarter of 2020 as a result of the
curtailment process, which was announced April 22, 2020 and completed during the
third quarter of 2020. The Intalco smelter is now fully curtailed.
On October 4, 2020 , the labor force at both the refinery and the aluminum
facility at San Ciprián (Spain ) initiated a strike which has reduced shipments.
Discussions between the Company and the workers' representatives continue and
the ultimate outcome is unknown.
Primary aluminum production increased 5% and 7% in the third quarter and the
nine-month period of 2020, respectively, compared with the corresponding periods
in 2019, principally due to the Bécancour smelter restart partially offset by
the Intalco smelter curtailment discussed above.
Third-party sales for the Aluminum segment decreased 4% and 9% in the third
quarter and nine-month period of 2020, respectively, compared with the
corresponding periods in 2019, primarily due to a reduction in realized metal
prices. The change in average realized price of primary aluminum was mainly
driven by a 5% and 10% lower average LME price (on 15-day lag) for the
comparable third quarter and nine-month periods, respectively, combined with
decreases in regional and product premiums for both comparable periods. The
reduction in product premiums was due to reduced demand for value-add aluminum
products. The unfavorable impact of lower metal prices and product premiums was
partially offset by an increase in sales volume driven primarily from the
restart of the Bécancour smelter, which exceeded the volume decrease from the
Intalco curtailment, in both comparable periods.
Segment Adjusted EBITDA increased $73 and $194 in the third quarter and
nine-month period of 2020, respectively, compared with the corresponding periods
in 2019. The increase for both periods is mainly the result of lower alumina,
carbon, and energy costs outweighing the negative impact from lower metal prices
and unfavorable mix of value-add products. Additionally, the combined impact
from the divestiture of the Avilés and La Coruña facilities in the third quarter
of 2019, the restart of the Bécancour smelter, and the curtailment of the
Intalco smelter had favorable Adjusted EBITDA impacts in both comparable
periods. Adjusted EBITDA for the nine-month period of 2020 also increased due to
favorable foreign currency impacts and the non-recurrence of a bad debt reserve
recorded in 2019 against a Canadian customer receivable due to bankruptcy.
Additionally, expenses related to the Section 232 tariffs recorded in both the
third quarter and nine-month period of 2020 were $7 , compared with $0 and $26 in
third quarter and nine-month period of 2019, respectively. Tariff rebates
recorded in nine-month periods of 2020 and 2019 were $5 and $2 , respectively.
For the fourth quarter of 2020 compared with the fourth quarter of 2019, lower
alumina costs and favorable impacts from the Bécancour smelter restart and
Intalco smelter curtailment are expected to be partially offset by unfavorable
energy prices. Additionally, although the ultimate impact is currently unknown,
the strike at the San Ciprián (Spain ) aluminum facility may negatively affect
the segment's operating and financial results.
36
--------------------------------------------------------------------------------Reconciliation of Certain Segment Information
Reconciliation of Total Segment Third-Party Sales to Consolidated Sales
Third quarter ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
Bauxite $ 56 $ 100 $ 193 $ 232
Alumina 697 771 2,007 2,532
Aluminum:
Primary aluminum 1,311 1,341 3,810 4,117
Other(1) 296 336 870 1,052Total segment third-party sales 2,360 2,548 6,880
7,933
Other 5 19 14 64
Consolidated sales $ 2,365 $ 2,567 $ 6,894 $ 7,997 (1) Other includes third-party sales of flat-rolled aluminum and energy, as well
as realized gains and losses related to embedded derivative instruments
designated as cash flow hedges of forward sales of aluminum.
Reconciliation of Total Segment Operating Costs to Consolidated Cost of Goods
Sold
Third quarter ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
Bauxite $ 196 $ 242 $ 618 $ 657
Alumina 906 902 2,538 2,750
Primary aluminum 1,308 1,425 3,941 4,505
Other(1) 285 333 911 1,060
Total segment operating costs 2,695 2,902 8,008 8,972
Eliminations(2) (532 ) (649 ) (1,664 ) (2,035 )
Provision for depreciation, depletion,
amortization(3) (154 ) (177 ) (463 ) (507 )
Other(4) 29 44 114 59
Consolidated cost of goods sold $ 2,038 $ 2,120 $ 5,995 $ 6,489 (1) Other largely relates to the Aluminum segment's flat-rolled aluminum product
division.
(2) This line item represents the elimination of cost of goods sold related to
intersegment sales between Bauxite and Alumina and between Alumina and
Aluminum.
(3) Depreciation, depletion, and amortization is included in the operating costs
used to calculate average cost for each of the bauxite, alumina, and primary
aluminum product divisions (see Bauxite, Alumina, and Aluminum above).
However, for financial reporting purposes, depreciation, depletion, and
amortization is presented as a separate line item on
Statement of Consolidated Operations.
(4) Other includes costs related to Transformation and certain other items that
impact Cost of goods sold on
Operations that are not included in the operating costs of segments (see
footnotes 1 and 3 in the Reconciliation of Total Segment Adjusted EBITDA to
Consolidated Net Loss Attributable to Alcoa Corporation below).
37
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Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net Loss
Attributable to
Third quarter ended Nine months ended
September 30, September 30,
2020 2019 2020 2019
Total Segment Adjusted EBITDA $ 359 $ 400 $ 919 $ 1,286
Unallocated amounts:
Transformation(1) (11 ) (6 ) (37 ) (1 )
Intersegment eliminations (35 ) 25 (13 ) 110
Corporate expenses(2) (24 ) (27 ) (72 ) (79 )
Provision for depreciation, depletion,
and amortization (161 ) (184 ) (483 ) (530 )
Restructuring and other charges, net (5 ) (185 ) (44 ) (668 )
Interest expense (41 ) (30 ) (103 ) (90 )
Other (expenses) income, net (45 ) (27 ) 36 (118 )
Other(3) (15 ) (18 ) (67 ) (47 )
Consolidated income (loss) before income
taxes 22 (52 ) 136 (137 )
Provision for income taxes (42 ) (95 ) (167 ) (361 )
Net income attributable to
noncontrolling interest (29 ) (74 ) (135 ) (324 )
Consolidated net loss attributable to
Alcoa Corporation $ (49 ) $ (221 ) $ (166 ) $ (822 )
(1) Transformation includes, among other items, the Adjusted EBITDA of
previously closed operations.
(2) Corporate expenses are composed of general administrative and other expenses
of operating the corporate headquarters and other global administrative
facilities, as well as research and development expenses of the corporate
technical center.
(3) Other includes certain items that impact Cost of goods sold and Selling,
general administrative, and other expenses on
of Consolidated Operations that are not included in the Adjusted EBITDA of
the reportable segments.
Environmental Matters
See the Environmental Matters section of Note P to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
Liquidity and Capital Resources
Changes in market conditions caused by the COVID-19 pandemic could have adverse effects onAlcoa'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 the COVID-19 pandemic could adversely affect the liquidity ofAlcoa's customers, suppliers, and joint venture partners and equity method investments, which could negatively impact the collectability of outstanding receivables and our cash flows. In addition to utilizing all preventative and mitigation options available to ensure continuity of operations during the COVID-19 pandemic, the Company has implemented various cash preservation initiatives. These measures include: • Reducing non-critical capital expenditures planned for 2020 by$100 ;
• Deferring non-regulated environmental and asset retirement obligations
payments of
• Deferring approximately
1, 2021 and employer payroll taxes of approximately $14 million into 2021
and 2022 in the U.S. , as permitted under the CARES Act; and,
• Implementing hiring restrictions outside of critical production roles,
implementing and extending travel restrictions throughout the organization,
and utilizing other appropriate government support programs to save or
defer approximately $35 .
The Company's liquidity options discussed below, including the credit facilities
and the Receivables Purchase Agreement, provide flexibility in managing cash
flows. Management believes that the Company's cash on hand, future operating
cash flows, and liquidity options, combined with its strategic actions and cash
preservation initiatives, are adequate to fund its near term operating and
investing needs.
Alcoa Corporation's cost of borrowing and ability to access the capital markets
are affected not only by market conditions but also by the short- and long-term
debt ratings assigned to Alcoa Corporation's debt by the major credit rating
agencies.
On April 9, 2020 , Moody's Investor Service (Moody's) affirmed a Ba1 rating of
Alcoa's long-term debt. Additionally, Moody's affirmed the current outlook as
stable. On July 7 , Moody's reaffirmed the Ba1 rating of Alcoa's long-term debt
as well as the stable outlook.
38
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On April 29, 2020 , Fitch Ratings (Fitch) affirmed a BB+ rating for Alcoa
Corporation's long-term debt. Additionally, Fitch affirmed the current outlook
as stable. On July 7 , Fitch reaffirmed the BB+ rating of Alcoa's long-term debt
as well as the stable outlook.
On
Cash from Operations Cash provided from operations was$356 in the 2020 nine-month period compared with$424 for the same period of 2019, resulting in a decrease in cash provided of$68 . Notable changes to sources and (uses) of cash include:
•
accounts payable, trade);
• ($50 ) due to timing of the collection of value added tax receivables;
• (
payment on the AofA tax matter (see below);
•
application of interest deductions in 2020 related to the AofA tax matter
(see below);
• (
timing of customer advances, employee compensation payments, and the 2020
recognition of the state grant revenue at the
relieving the previous deferred credit recorded during the 2019 nine-month
period, partially offset by favorable timing of restructuring related
payments and other postretirement benefit payments; and,
•
cash includes changes related to lower tax payments made in the 2020
nine-month period compared with the 2019 nine-month period, primarily
payments on income taxes, and changes in the underlying tax accounts.
The remaining change in Cash provided from operations is primarily attributable to the changes in related Statement of Consolidated Operations amounts.
In the third quarter of 2020, AofA paid approximately$74 (A$107 ) to the ATO related to the tax dispute described in Note P to the Consolidated Financial Statements in Part I Item I of this Form 10-Q. Upon payment, AofA recorded a noncurrent prepaid tax asset, as 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. In accordance with Australian tax laws, the initial interest assessment and additional interest are deductible against AofA's 2020 taxable income resulting in approximately$156 (A$219 ) lower cash tax payments in the second half of 2020. Interest compounded in future years is also deductible against AofA's income in the respective periods. If AofA is ultimately successful, the interest deduction would become taxable as income in the year the dispute is resolved. In addition, should the ATO decide in the interim to reduce any interest already assessed, the reduction would be taxable as income at that point in time. During 2020, AofA will continue to record its tax provision and tax liability without effect of the ATO assessment, since it expects to prevail. The 2020 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. AtSeptember 30, 2020 , the noncurrent liability resulting from the cumulative interest deductions was approximately$153 (A$215 ). Financing Activities Cash provided from financing activities was$577 in the 2020 nine-month period compared with cash used for financing activities of$351 in the 2019 nine-month period, resulting in a favorable change of$928 . The source of cash in the 2020 nine-month period was primarily due to the issuance of$750 aggregate principal amount of 2027 Notes by ANHBV inJuly 2020 resulting in net proceeds of$736 . The net proceeds were partially offset by$128 in net cash paid to Alumina Limited (see Noncontrolling interest in Results of Operations above) and$30 in financial contributions related to the divested Spanish facilities. The use of cash in the 2019 nine-month period was primarily the result of$347 in net cash paid to Alumina Limited (see Noncontrolling interest in Results of Operations above). Credit Facilities The Revolving Credit Facility provides a$1,500 senior secured revolving credit facility to be used for working capital and/or other general corporate purposes ofAlcoa Corporation and its subsidiaries. The Revolving Credit Agreement includes a number of covenants, including financial covenants, that require maintenance of a specified interest expense coverage ratio and a leverage ratio. The leverage ratio compares total indebtedness to a calculated earnings metric as defined in the credit facility agreement to determine 39
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compliance with the financial covenant. The leverage ratio calculation also determines the maximum indebtedness the Company can have based on the defined earnings metric.
OnApril 21, 2020 , the Company and ANHBV entered into Amendment No. 2 to the Revolving Credit Agreement that temporarily adjusts the Leverage Ratio requirement to 3.00 to 1.00 from 2.50 to 1.00 for the next four consecutive fiscal quarters, beginning in the second quarter of 2020 (the Amendment Period). The Leverage Ratio requirement will return to 2.50 to 1.00 starting in the second quarter of 2021. The temporary revision positively impacts the maximum indebtedness calculation for the Company during the Amendment Period. Additionally, during the Amendment Period, the Company, ANHBV, and any restricted subsidiaries will be restricted from making certain restricted payments or incurring incremental secured loans under the Revolving Credit Agreement. OnJune 24, 2020 , the Company and ANHBV entered into Amendment No. 3 to the Revolving Credit Agreement that (i) permanently adjusts the calculation of Consolidated EBITDA as defined in the Revolving Credit Agreement by allowing the add back of certain additional non-cash costs and (ii) temporarily adjusts, for the remaining fiscal quarters in 2020, the manner in which Consolidated Cash Interest Expense and Total Indebtedness (each as defined in the Revolving Credit Agreement) are calculated with respect to certain senior notes issuances during the fiscal year endingDecember 31, 2020 , inclusive of theJuly 2020 issuance described below. ANHBV has the option to extend the periods under Amendment No. 3 to apply to either or both fiscal quarters endingMarch 31, 2021 andJune 30, 2021 . However, doing so would also reduce the borrowing availability under the Revolving Credit Facility during the respective fiscal quarters by one-third of the net proceeds of such note issuances during the fiscal year endingDecember 31, 2020 . If ANHBV extends the temporary amendments, the 2027 Notes issued inJuly 2020 would reduce the aggregate amount of commitments under the Revolving Credit Facility by approximately$245 during the applicable fiscal quarters. AtSeptember 30, 2020 , the maximum additional borrowing capacity available to the Company to remain in compliance with the Leverage Ratio financial covenant was approximately$1,230 . The aggregate amount of commitments under the Revolving Credit Facility remains at$1,500 , which the Company still has the ability to access through a combination of the borrowing capacity and issuances of letters of credit. As ofSeptember 30, 2020 ,Alcoa Corporation was in compliance with all covenants. There were no borrowings outstanding atSeptember 30, 2020 , and there were no amounts borrowed during the nine-month period of 2020 related to this facility. OnOctober 2, 2019 ,Alcoa Norway ANS , a wholly-owned subsidiary ofAlcoa Corporation , entered into a one-year, multicurrency revolving credit facility agreement forNOK 1.3 billion (approximately$137 ) which is fully and unconditionally guaranteed on an unsecured basis byAlcoa Corporation . OnApril 8, 2020 ,Alcoa Norway ANS drew$100 against this facility, and may do so from time to time in the future, in the ordinary course of business. Repayment of the drawn amount, including interest accrued at 2.93%, occurred upon maturity onJune 29, 2020 . OnJuly 3, 2020 ,Alcoa Norway ANS amended the revolving credit facility agreement to align the terms of the agreement with Amendment No. 2 and Amendment No. 3 of the Revolving Credit Agreement discussed above. OnSeptember 30, 2020 ,Alcoa Norway ANS entered into the A&R Agreement to the multicurrency revolving credit facility agreement. The A&R Agreement extended the maturity one year from the original maturity date toOctober 2, 2021 , unless further extended or terminated early in accordance with the provisions of the A&R Agreement. The A&R Agreement also amended certain financial ratio covenants, specifying calculations based upon the results ofAlcoa Norway ANS rather than the calculations outlined in the Revolving Credit Agreement. As ofSeptember 30, 2020 ,Alcoa Norway ANS was in compliance with all such covenants. AtSeptember 30, 2020 , there were no amounts outstanding against this facility. OnOctober 25, 2019 , a wholly-owned subsidiary of the Company entered into a$120 three-year revolving credit facility agreement secured by certain customer receivables. OnApril 20, 2020 , the Company amended this agreement converting it to a Receivables Purchase Agreement to sell up to$120 of the receivables previously secured by the credit facility without recourse on a revolving basis. The unsold portion of specified receivable pool will be pledged as collateral to the purchasing bank to secure the sold receivables. During both the third quarter and nine-month period of 2020, no receivables were sold under this agreement.Alcoa's maximum additional borrowing capacity discussed above can be used through any combination ofAlcoa's two credit facilities or through additional indebtedness. The Company may draw on these facilities periodically to ensure working capital needs are met. See Note K to the Consolidated Financial Statements in this Form 10-Q and Note L to the Consolidated Financial Statements in Part II Item 8 of the 2019 Annual Report on Form 10-K for additional information related toAlcoa's credit facilities. InJuly 2020 , ANHBV, a wholly-owned subsidiary ofAlcoa Corporation , issued$750 aggregate principal amount of 2027 Notes in a private transaction exempt from the registration requirements of the Securities Act. The net proceeds of this issuance were approximately$736 reflecting a discount to the initial purchasers of the 2027 Notes as well as issuance costs. The Company intends to 40 -------------------------------------------------------------------------------- use the net proceeds for general corporate purposes, including adding cash to its balance sheet. The discount to the initial purchasers, as well as costs to complete the financing, was deferred and is being amortized to interest expense over the term of the 2027 Notes. Interest on the 2027 Notes is paid semi-annually in June and December, and will commenceDecember 15, 2020 . Investing Activities
Cash used for investing activities was
In the 2020 nine-month period, the use of cash was primarily attributable to capital expenditures of$242 , composed of$208 in sustaining projects and$34 in return-seeking projects, partially offset by proceeds from the sale of assets of$198 , primarily from theGum Springs waste treatment facility. In the 2019 nine-month period, the use of cash was largely attributable to$245 in capital expenditures, composed of$181 in sustaining projects and$64 in return-seeking projects, and additions to investments of$112 , partially offset by proceeds from the sale of assets of$23 .
Contractual Obligations
As permitted under the CARES Act, the Company is deferring approximately$200 of pension contributions, primarily for theU.S. plans, from 2020 toJanuary 1, 2021 . As a result, as ofSeptember 30, 2020 ,Alcoa's minimum required contribution to defined benefit pension plans in 2020 is now estimated to be approximately$95 , of which approximately$49 and$34 was contributed toU.S. and non-U.S. plans, respectively, during the 2020 nine-month period.Alcoa's estimated minimum required contribution to defined benefit pension plans in 2021 is now estimated to be approximately$490 . Under ERISA regulations, a plan sponsor that establishes a pre-funding balance by making discretionary contributions to aU.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 2021, management will consider making such election related to the Company'sU.S. plans. Management expects to have approximately$380 of pre-funding balance available to apply against the 2021 minimum required contributions, subject to change based on the year-end valuation. InJuly 2020 , ANHBV, a wholly-owned subsidiary ofAlcoa Corporation , issued$750 aggregate principal amount of 2027 Notes in a private transaction exempt from the registration requirements of the Securities Act. As a result, as ofSeptember 30, 2020 ,Alcoa's Interest related to total debt is expected to be$136 for 2020,$317 for the 2021-2022 period,$315 for the 2023-2024 period, and$301 thereafter for a combined total of$1,069 . Further, contractual obligations related to Total debt after theJuly 2020 issuance is expected to be$1 for 2020,$80 for the 2021-2022 period,$752 for the 2023-2024 period, and$1,751 thereafter for a combined total of$2,584 .
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
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