Alcoa (AA) 8-K Alcoa Corporation Announces Proposed Debt Offering

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On November 30, 2020, Alcoa Corporation (the “Company”) entered into an agreement to sell (the “Sale”) its rolling mill (the “Warrick Rolling Mill”), held by Alcoa Warrick LLC, to Kaiser Aluminum Corporation (“Kaiser”) for total consideration of approximately $670 million, which includes $587 million in cash and the assumption of $83 million in other postretirement benefit liabilities. The Sale is expected to close by the end of the first quarter of 2021 and is subject to customary closing conditions. There can be no guarantee that the Sale will be completed. The assets and liabilities of the Warrick Rolling Mill were classified as held for sale in the Company’s consolidated balance sheet as of December 31, 2020.

The following unaudited pro forma condensed consolidated financial information is based on historical consolidated financial statements adjusted to give effect to the Sale. The unaudited pro forma condensed consolidated statement of operations has been prepared as if the Sale occurred on January 1, 2020 and the unaudited pro forma condensed consolidated balance sheet has been prepared as if the Sale occurred on December 31, 2020. The assumptions and estimates underlying the unaudited transaction accounting adjustments to the Company’s historical consolidated financial information are described in the accompanying notes, which should be read together with the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated financial information reflects certain assumptions and adjustments that the Company’s management believes are reasonable under the circumstances and as of the date of this Current Report on Form 8-K. The unaudited pro forma condensed consolidated financial information reflects adjustments that, in the opinion of the Company’s management, are necessary to present fairly the pro forma balance sheet as of December 31, 2020 and results of operations for the year ended December 31, 2020.

The unaudited pro forma condensed consolidated financial information has been provided for informational purposes only and does not purport to project the future financial position or operating results that the Company would have reported had the Sale been completed as of the dates set forth in this unaudited pro forma condensed consolidated financial information, and is not necessarily indicative of the future consolidated results of operations or financial position. The actual results may differ significantly from those reflected in the unaudited pro forma condensed consolidated financial information for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial information and actual amounts. These preliminary assumptions and estimates are subject to change upon the actual closing of the Sale.

The unaudited pro forma condensed consolidated financial information should be read together with the Company’s historical financial statements and the notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Alcoa Corporation and subsidiaries    

Pro Forma Statement of Condensed Consolidated Operations (unaudited)

(dollars in millions, except per-share amounts)

	December 31, 2020
	Registrant Historical			Transition Accounting Adjustments			Notes		Pro Forma
Sales	$	9,286		$	(793	)		(a)	$	8,493
Cost of goods sold (exclusive of expenses below)		7,969			(689	)		(b)		7,280
Selling, general administrative, and other expenses		206			(12	)		(c)		194
Research and development expenses		27			(2	)		(d)		25
Provision for depreciation, depletion, and amortization		653			(27	)		(e)		626
Restructuring and other charges, net		104			—					104
Interest expense		146			—					146
Other expenses (income), net		8			(41	)		(f)		(33	)
Total costs and expenses		9,113			(771	)				8,342
Income (loss) before income taxes		173			(22	)				151
Provision for income taxes		187			—			(g)		187
Net loss		(14	)		(22	)				(36	)
Less: Net income attributable to noncontrolling interest		156			—					156
NET LOSS ATTRIBUTABLE TO ALCOA CORPORATION	$	(170	)	$	(22	)			$	(192	)
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss	$	(0.91	)						$	(1.03	)
Average number of shares		185,875,964								185,875,964
Diluted:
Net loss	$	(0.91	)						$	(1.03	)
Average number of shares		185,875,964								185,875,964

Alcoa Corporation and subsidiaries    

Pro Forma Statement of Condensed Consolidated Balance Sheet (unaudited)

(dollars in millions, except per-share amounts)

	December 31, 2020
	Registrant Historical			Transition Accounting Adjustments			Notes		Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	1,607		$	500			(h)	$	2,107
Receivables from customers		471			—					471
Other receivables		85			—					85
Inventories		1,398			—					1,398
Assets held for sale		648			(648	)		(i)		—
Fair value of derivative instruments		21			—					21
Prepaid expenses and other current assets		290			—					290
Total current assets		4,520			(148	)				4,372
Properties, plants, and equipment		20,522			—					20,522
Less: accumulated depreciation, depletion, and amortization		13,332			—					13,332
Properties, plants, and equipment, net		7,190			—					7,190
Investments		1,051			—					1,051
Deferred income taxes		655			—					655
Other noncurrent assets		1,444			—					1,444
Total assets	$	14,860		$	(148	)			$	14,712
LIABILITIES
Current liabilities:
Accounts payable, trade	$	1,403		$	—				$	1,403
Accrued compensation and retirement costs		395			—					395
Taxes, including income taxes		91			—					91
Fair value of derivative instruments		103			—					103
Liabilities held for sale		242			(242	)		(i)		—
Other liabilities		525			8			(j)		533
Long-term debt due within one year		2			—					2
Total current liabilities		2,761			(234	)				2,527
Long-term debt, less amount due within one year		2,463			—					2,463
Accrued pension benefits		1,492			—					1,492
Accrued other postretirement benefits		744			—					744
Asset retirement obligations		625			—					625
Environmental remediation		293			—					293
Fair value of derivative instruments		742			—					742
Noncurrent income taxes		209			—					209
Other noncurrent liabilities and deferred credits		515			55			(k)		570
Total liabilities		9,844			(179	)				9,665
EQUITY
Alcoa Corporation shareholders’ equity:
Common stock		2			—					2
Additional capital		9,663			—					9,663
Retained earnings (deficit)		(725	)		31			(l)		(694	)
Accumulated other comprehensive loss		(5,629	)		—					(5,629	)
Total Alcoa Corporation shareholders’ equity		3,311			31					3,342
Noncontrolling interest		1,705			—					1,705
Total equity		5,016			31					5,047
Total liabilities and equity	$	14,860		$	(148	)			$	14,712

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

(in millions, except per share information)

Note 1 — Basis of Presentation

The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed consolidated financial information to give effect to pro forma adjustments. The pro forma condensed consolidated financial information does not necessarily reflect what the Company’s financial condition or results of operations would have been had the Sale occurred on the dates indicated. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Note 2 – Pro Forma Adjustments

(a) Represents the net impact to sales as a result of the Sale by removing $1,115 of historical third-party sales and adding $322 of new third-party sales of power and metal based on sales agreements with Kaiser.

(b) Represents the net impact to cost of goods sold as a result of the Sale by removing $1,025 related to historical cost of goods sold and adding $336 of cost of goods sold related to new power and metal sales to Kaiser.

(c) Represents the removal of selling, general administrative, and other expenses.

(d) Represents the removal of research and development expenses.

(e) Represents the removal of provision for depreciation, depletion and amortization.

(f) Represents the removal of other expenses of $10 and the recognition of an estimated gain on the Sale of $31.

(g) There is no income tax impact related to the pro forma adjustments for the year ended December 31, 2020. Alcoa Warrick LLC, the United States legal entity holding the Warrick Rolling Mill, has a full valuation allowance and has sufficient net operating losses to offset the estimated gain to be recorded upon the closing of the Sale.

(h) Represents the cash proceeds from the Sale of $587 less $87 for initial site separation and transaction costs, as well as working capital adjustments.

(i) Represents the removal of assets and liabilities held for the Sale as of December 31, 2020.

(j) Represents the recognition of a liability for transaction costs not paid at the closing of the Sale.

(k) Represents the recognition of additional obligations related to site separation costs which will be paid after the closing of the Sale.

(l) Represents the recognition of the estimated gain upon the closing of the Sale.