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|
Filed on April 5, 2023 |
|
Filed on April 6, 2022 |
|
Filed on April 6, 2021 |
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
ARCONIC CORPORATION
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
|
84-2745636
|
|||
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
|||
|
|
|
|
|
|
201 Isabella Street,
|
Suite 400,
|
Pittsburgh,
|
Pennsylvania
|
|
15212-5872 |
(Address of principal executive offices)
|
|
(Zip code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $0.01 per share
|
ARNC
|
New York Stock Exchange
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☒
|
Smaller reporting company
|
☐
|
|
|
Emerging growth company
|
☐
|
PART I – FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 2.
|
||
|
|
|
Item 3.
|
||
|
|
|
Item 4.
|
||
|
|
|
PART II – OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
|
|
|
Item 1A.
|
Risk Factors
|
|
|
|
|
Item 6.
|
||
|
|
|
•
|
existing and any future adverse effects in connection with COVID-19, including, among other things, severe restrictions on economic activity as a result of reactions of governmental and other authorities (including shelter-in-place or stay-at-home orders), the impact on global supply and demand, the suspension or reduction of operations by our customers, suppliers and other commercial counterparties, the impact on our liquidity and financial flexibility, and the potential for COVID-19 related issues to significantly heighten the other risks customarily associated with our business (including those identified below);
|
•
|
unfavorable changes in the markets served by Arconic Corporation;
|
•
|
competition from new product offerings, disruptive technologies, industry consolidation or other developments;
|
•
|
the loss of key customers or significant changes in the business or financial condition of customers;
|
•
|
manufacturing difficulties or other issues that impact product performance, quality or safety;
|
•
|
the inability to meet increased program demand successfully or to mitigate the impact of program cancellations, reductions or delays;
|
•
|
the outcome of product liability, product safety, personal injury, property damage, and recall claims and investigations, which can expose Arconic Corporation to substantial costs, liabilities and reputational harm;
|
•
|
political, economic and regulatory risks relating to Arconic Corporation’s global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations;
|
•
|
a material disruption of Arconic Corporation’s operations, particularly at one or more of Arconic Corporation’s manufacturing facilities;
|
•
|
the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated or targeted;
|
•
|
the impact of potential cyber-attacks and information technology or data security breaches;
|
•
|
the inability to develop innovative new products or implement technology initiatives successfully;
|
•
|
challenges to Arconic Corporation’s intellectual property rights;
|
•
|
adverse changes in discount rates or investment returns on pension assets;
|
•
|
Arconic Corporation’s inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, expansions, or joint ventures;
|
•
|
increases in the cost of aluminum or volatility in the availability or costs of other raw materials;
|
•
|
a significant downturn in the business or financial condition of a significant supplier;
|
•
|
the impact of changes in foreign currency exchange rates on costs and results;
|
•
|
the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental compliance and remediation, which can expose Arconic Corporation to substantial costs and liabilities;
|
•
|
the expected benefits of the separation;
|
•
|
a determination by the IRS that the distribution or certain related transactions should be treated as taxable transactions;
|
•
|
risks associated with indebtedness;
|
•
|
the risk that dissynergy costs, costs of restructuring transactions and other costs incurred in connection with the separation, once fully realized, will exceed our estimates; and
|
•
|
the impact of operating our business separate from ParentCo (as defined herein), which could result in disruption of our ongoing business and diversion of management’s attention from other business concerns and impact our relationships with customers, suppliers, employees and other business counterparties.
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Sales to unrelated parties
|
|
$
|
1,576
|
|
|
$
|
1,789
|
|
Sales to related parties (A)
|
|
35
|
|
|
52
|
|
||
Total Sales (C and D)
|
|
1,611
|
|
|
1,841
|
|
||
Cost of goods sold (exclusive of expenses below)
|
|
1,327
|
|
|
1,596
|
|
||
Selling, general administrative, and other expenses
|
|
80
|
|
|
86
|
|
||
Research and development expenses
|
|
11
|
|
|
14
|
|
||
Provision for depreciation and amortization
|
|
60
|
|
|
63
|
|
||
Restructuring and other charges (E)
|
|
(19
|
)
|
|
2
|
|
||
Operating income
|
|
152
|
|
|
80
|
|
||
Interest expense
|
|
35
|
|
|
28
|
|
||
Other expenses (income), net (F)
|
|
26
|
|
|
(14
|
)
|
||
Income before income taxes
|
|
91
|
|
|
66
|
|
||
Provision for income taxes (H)
|
|
31
|
|
|
25
|
|
||
Net income
|
|
60
|
|
|
41
|
|
||
Less: Net income attributable to noncontrolling interest
|
|
—
|
|
|
—
|
|
||
Net income attributable to Arconic Corporation
|
|
$
|
60
|
|
|
$
|
41
|
|
|
|
|
|
|
||||
Earnings per Share Attributable to Arconic Corporation
Common Shareholders (A): |
|
|
|
|
||||
Basic
|
|
$
|
0.55
|
|
|
$
|
0.38
|
|
Diluted
|
|
$
|
0.55
|
|
|
$
|
0.38
|
|
|
|
Arconic Corporation
|
|
Noncontrolling interest
|
|
Total
|
||||||||||||||
First quarter ended March 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income
|
|
$60
|
|
$41
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60
|
|
|
$
|
41
|
|
Other comprehensive income, net of tax (I):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits
|
|
25
|
|
—
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
||||
Foreign currency translation adjustments
|
|
—
|
|
57
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57
|
|
||||
Total Other comprehensive income, net of tax
|
|
25
|
|
57
|
|
—
|
|
|
—
|
|
|
25
|
|
|
57
|
|
||||
Comprehensive income
|
|
$85
|
|
$98
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
85
|
|
|
$
|
98
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|||
Cash and cash equivalents (L)
|
$
|
635
|
|
|
$
|
72
|
|
Restricted cash (L)
|
593
|
|
|
—
|
|
||
Receivables from customers, less allowances of $1 in 2020 and $2 in 2019 (A)
|
690
|
|
|
384
|
|
||
Other receivables
|
109
|
|
|
136
|
|
||
Inventories (J)
|
844
|
|
|
820
|
|
||
Prepaid expenses and other current assets
|
42
|
|
|
28
|
|
||
Total current assets
|
2,913
|
|
|
1,440
|
|
||
Properties, plants, and equipment
|
7,018
|
|
|
7,210
|
|
||
Less: accumulated depreciation and amortization
|
4,337
|
|
|
4,466
|
|
||
Properties, plants, and equipment, net
|
2,681
|
|
|
2,744
|
|
||
Goodwill
|
374
|
|
|
386
|
|
||
Operating lease right-of-use assets (K)
|
124
|
|
|
125
|
|
||
Deferred income taxes
|
327
|
|
|
14
|
|
||
Other noncurrent assets
|
50
|
|
|
32
|
|
||
Total assets
|
$
|
6,469
|
|
|
$
|
4,741
|
|
Liabilities
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable, trade
|
$
|
938
|
|
|
$
|
1,061
|
|
Accrued compensation and retirement costs
|
126
|
|
|
80
|
|
||
Taxes, including income taxes
|
34
|
|
|
21
|
|
||
Environmental remediation (N)
|
81
|
|
|
83
|
|
||
Operating lease liabilities (K)
|
33
|
|
|
33
|
|
||
Other current liabilities
|
61
|
|
|
63
|
|
||
Long-term debt due within one year (L)
|
6
|
|
|
—
|
|
||
Total current liabilities
|
1,279
|
|
|
1,341
|
|
||
Long-term debt, less amount due within one year (L)
|
1,419
|
|
|
250
|
|
||
Accrued pension benefits (G)
|
1,369
|
|
|
63
|
|
||
Accrued other postretirement benefits (G)
|
502
|
|
|
1
|
|
||
Environmental remediation (N)
|
127
|
|
|
125
|
|
||
Operating lease liabilities (K)
|
95
|
|
|
96
|
|
||
Deferred income taxes
|
9
|
|
|
87
|
|
||
Other noncurrent liabilities and deferred credits
|
43
|
|
|
50
|
|
||
Total liabilities
|
4,843
|
|
|
2,013
|
|
||
Contingencies and commitments (N)
|
|
|
|
|
|
||
Equity
|
|
|
|
||||
Parent Company net investment (A)
|
3,045
|
|
|
2,419
|
|
||
Accumulated other comprehensive (loss) income (I)
|
(1,432
|
)
|
|
295
|
|
||
Sub-total equity
|
1,613
|
|
|
2,714
|
|
||
Noncontrolling interest
|
13
|
|
|
14
|
|
||
Total equity
|
1,626
|
|
|
2,728
|
|
||
Total liabilities and equity
|
$
|
6,469
|
|
|
$
|
4,741
|
|
For the three months ended March 31,
|
|
2020
|
|
2019
|
||||
Operating Activities
|
|
|
|
|
||||
Net income
|
|
$
|
60
|
|
|
$
|
41
|
|
Adjustments to reconcile net income to cash provided from operations:
|
|
|
|
|
||||
Depreciation and amortization
|
|
60
|
|
|
63
|
|
||
Deferred income taxes
|
|
26
|
|
|
7
|
|
||
Restructuring and other charges (E)
|
|
(19
|
)
|
|
2
|
|
||
Net periodic pension benefit cost (G)
|
|
21
|
|
|
1
|
|
||
Stock-based compensation
|
|
7
|
|
|
6
|
|
||
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
|
|
|
|
|
||||
(Increase) in receivables
|
|
(309
|
)
|
|
(83
|
)
|
||
(Increase) in inventories
|
|
(74
|
)
|
|
(65
|
)
|
||
(Increase) in prepaid expenses and other current assets
|
|
(17
|
)
|
|
(8
|
)
|
||
(Decrease) Increase in accounts payable, trade
|
|
(93
|
)
|
|
44
|
|
||
(Decrease) in accrued expenses
|
|
(38
|
)
|
|
(8
|
)
|
||
Increase (Decrease) in taxes, including income taxes
|
|
102
|
|
|
(13
|
)
|
||
Pension contributions
|
|
(32
|
)
|
|
(1
|
)
|
||
Decrease in noncurrent assets
|
|
10
|
|
|
6
|
|
||
Increase (Decrease) in noncurrent liabilities
|
|
1
|
|
|
(3
|
)
|
||
Cash used for operations
|
|
(295
|
)
|
|
(11
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Net transfers from Parent Company
|
|
216
|
|
|
14
|
|
||
Additions to debt (L)
|
|
1,200
|
|
|
—
|
|
||
Debt issuance costs
|
|
(42
|
)
|
|
—
|
|
||
Cash provided from financing activities
|
|
1,374
|
|
|
14
|
|
||
Investing Activities
|
|
|
|
|
||||
Capital expenditures
|
|
(23
|
)
|
|
(42
|
)
|
||
Proceeds from the sale of assets and businesses (M)
|
|
101
|
|
|
4
|
|
||
Cash provided from (used for) investing activities
|
|
78
|
|
|
(38
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents and restricted cash
|
|
(1
|
)
|
|
—
|
|
||
Net change in cash and cash equivalents and restricted cash
|
|
1,156
|
|
|
(35
|
)
|
||
Cash and cash equivalents and restricted cash at beginning of year
|
|
72
|
|
|
81
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
|
$
|
1,228
|
|
|
$
|
46
|
|
|
Parent
Company net
investment
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Noncontrolling
interest
|
|
Total
equity
|
||||||||
Balance at December 31, 2018
|
$
|
2,415
|
|
|
$
|
250
|
|
|
$
|
12
|
|
|
$
|
2,677
|
|
Adoption of accounting standard
|
73
|
|
|
—
|
|
|
—
|
|
|
73
|
|
||||
Net income
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||
Other comprehensive income (I)
|
—
|
|
|
57
|
|
|
—
|
|
|
57
|
|
||||
Change in ParentCo contribution
|
(27
|
)
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
||||
Balance at March 31, 2019
|
$
|
2,502
|
|
|
$
|
307
|
|
|
$
|
12
|
|
|
$
|
2,821
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2019
|
$
|
2,419
|
|
|
$
|
295
|
|
|
$
|
14
|
|
|
$
|
2,728
|
|
Net income
|
60
|
|
|
—
|
|
|
—
|
|
|
60
|
|
||||
Other comprehensive income (I)
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||
Establishment of defined benefit plans (G)
|
349
|
|
|
(1,752
|
)
|
|
—
|
|
|
(1,403
|
)
|
||||
Change in ParentCo contribution
|
217
|
|
|
—
|
|
|
—
|
|
|
217
|
|
||||
Other
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Balance at March 31, 2020
|
$
|
3,045
|
|
|
$
|
(1,432
|
)
|
|
$
|
13
|
|
|
$
|
1,626
|
|
A.
|
The Separation and Basis of Presentation
|
•
|
deferred initiating a dividend on common stock;
|
•
|
reduced the CEO’s salary and the Board of Directors’ cash compensation by
30%
;
|
•
|
reduced salaries for senior-level management by
20%
and for all other salaried employees by
10%
;
|
•
|
restructuring of the salaried workforce, targeting a
10%
reduction;
|
•
|
idling of various production facilities based on market conditions within the regions where the Company operates;
|
•
|
decreased production and operating with a reduced labor force through shortened work weeks, shift reductions, layoffs, and the elimination of temporary workers and contractors at U.S.-based rolling and extrusion facilities;
|
•
|
modified schedules, adjusted work hours, lower costs, and delayed raises at all rolling mill facilities in Europe, China and Russia;
|
•
|
suspended the 401K match program for U.S. salaried employees; and
|
•
|
reducing capital expenditures by approximately
$50
, or approximately
30%
.
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Cost of goods sold
(1)
|
|
$
|
—
|
|
|
$
|
3
|
|
Selling, general administrative, and other expenses
(2)
|
|
25
|
|
|
24
|
|
||
Research and development expenses
|
|
—
|
|
|
5
|
|
||
Provision for depreciation and amortization
|
|
1
|
|
|
2
|
|
||
Restructuring and other charges (E)
|
|
2
|
|
|
(9
|
)
|
||
Interest expense
|
|
28
|
|
|
28
|
|
||
Other (income), net (F)
|
|
(5
|
)
|
|
(8
|
)
|
(1)
|
For all periods presented, amount principally relates to an allocation of expenses for ParentCo’s retained pension and other postretirement benefit obligations associated with closed and sold operations.
|
(2)
|
In the
first quarter of 2020
, amount includes an allocation of
$18
for costs incurred by ParentCo associated with the separation transaction (see The Separation above).
|
B.
|
Recently Adopted and Recently Issued Accounting Guidance
|
C.
|
Revenue from Contracts with Customers
|
First quarter ended March 31,
|
|
Rolled
Products |
|
Extrusions
|
|
Building and
Construction Systems |
|
Arconic Corporation
|
||||||||
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ground Transportation
|
|
$
|
499
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
529
|
|
Building and Construction
|
|
35
|
|
|
—
|
|
|
256
|
|
|
291
|
|
||||
Aerospace
|
|
225
|
|
|
75
|
|
|
—
|
|
|
300
|
|
||||
Industrial Products
|
|
275
|
|
|
23
|
|
|
—
|
|
|
298
|
|
||||
Packaging
|
|
178
|
|
|
—
|
|
|
—
|
|
|
178
|
|
||||
Other
|
|
10
|
|
|
5
|
|
|
—
|
|
|
15
|
|
||||
Total end-market revenue
|
|
$
|
1,222
|
|
|
$
|
133
|
|
|
$
|
256
|
|
|
$
|
1,611
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ground Transportation
|
|
$
|
651
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
682
|
|
Building and Construction
|
|
49
|
|
|
—
|
|
|
281
|
|
|
330
|
|
||||
Aerospace
|
|
246
|
|
|
74
|
|
|
—
|
|
|
320
|
|
||||
Industrial Products
|
|
248
|
|
|
32
|
|
|
—
|
|
|
280
|
|
||||
Packaging
|
|
210
|
|
|
—
|
|
|
—
|
|
|
210
|
|
||||
Other
|
|
7
|
|
|
12
|
|
|
—
|
|
|
19
|
|
||||
Total end-market revenue
|
|
$
|
1,411
|
|
|
$
|
149
|
|
|
$
|
281
|
|
|
$
|
1,841
|
|
D.
|
Segment and Related Information
|
First quarter ended March 31,
|
|
Rolled
Products |
|
Extrusions
|
|
Building and
Construction Systems |
|
Total
|
||||||||
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third-party sales-unrelated party
|
|
$
|
1,201
|
|
|
$
|
119
|
|
|
$
|
256
|
|
|
$
|
1,576
|
|
Third-party sales-related party
|
|
21
|
|
|
14
|
|
|
—
|
|
|
35
|
|
||||
Intersegment sales
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
Total sales
|
|
$
|
1,229
|
|
|
$
|
133
|
|
|
$
|
256
|
|
|
$
|
1,618
|
|
Segment operating profit
|
|
$
|
125
|
|
|
$
|
6
|
|
|
$
|
28
|
|
|
$
|
159
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
||||||||
Provision for depreciation and amortization
|
|
$
|
46
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
56
|
|
Restructuring and other charges (E)
|
|
9
|
|
|
(31
|
)
|
|
1
|
|
|
(21
|
)
|
||||
2019
|
|
|
|
|
|
|
|
|
||||||||
Sales:
|
|
|
|
|
|
|
|
|
||||||||
Third-party sales-unrelated party
|
|
$
|
1,376
|
|
|
$
|
132
|
|
|
$
|
281
|
|
|
$
|
1,789
|
|
Third-party sales-related party
|
|
35
|
|
|
17
|
|
|
—
|
|
|
52
|
|
||||
Intersegment sales
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
Total sales
|
|
$
|
1,418
|
|
|
$
|
149
|
|
|
$
|
281
|
|
|
$
|
1,848
|
|
Segment operating profit
|
|
$
|
91
|
|
|
$
|
(4
|
)
|
|
$
|
22
|
|
|
$
|
109
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
||||||||
Provision for depreciation and amortization
|
|
$
|
47
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
59
|
|
Restructuring and other charges (E)
|
|
6
|
|
|
—
|
|
|
5
|
|
|
11
|
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Total segment operating profit
|
|
$
|
159
|
|
|
$
|
109
|
|
Unallocated amounts:
|
|
|
|
|
|
|
||
Cost allocations (A)
|
|
(26
|
)
|
|
(34
|
)
|
||
Restructuring and other charges (E)
|
|
19
|
|
|
(2
|
)
|
||
Other
|
|
—
|
|
|
7
|
|
||
Combined operating income
|
|
152
|
|
|
80
|
|
||
Interest expense
|
|
(35
|
)
|
|
(28
|
)
|
||
Other (expenses) income, net (F)
|
|
(26
|
)
|
|
14
|
|
||
Combined income before income taxes
|
|
$
|
91
|
|
|
$
|
66
|
|
E.
|
Restructuring and Other Charges
|
|
Layoff costs
|
|
Other costs
|
|
Total
|
||||||
Reserve balances at December 31, 2018
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
4
|
|
Cash payments
|
(12
|
)
|
|
(3
|
)
|
|
(15
|
)
|
|||
Restructuring charges
|
30
|
|
|
2
|
|
|
32
|
|
|||
Other
(1)
|
1
|
|
|
(1
|
)
|
|
—
|
|
|||
Reserve balances at December 31, 2019
|
20
|
|
|
1
|
|
|
21
|
|
|||
Cash payments
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
|||
Restructuring charges
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other
(1)
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Reserve balances at March 31, 2020
(2)
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
16
|
|
(1)
|
Other includes reversals of previously recorded restructuring charges and the effects of foreign currency translation.
|
(2)
|
The remaining reserves are expected to be paid in cash during the remainder of 2020.
|
F.
|
Other Expenses (Income), Net
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Interest income
|
|
(2
|
)
|
|
(5
|
)
|
||
Foreign currency losses (gains), net
|
|
13
|
|
|
(14
|
)
|
||
Non-service costs - Pension and OPEB (G)
|
|
21
|
|
|
—
|
|
||
Other, net
|
|
(6
|
)
|
|
5
|
|
||
|
|
$
|
26
|
|
|
$
|
(14
|
)
|
G.
|
Pension and Other Postretirement Benefits
|
|
|
|
|
Pension benefits
|
|
Other postretirement
benefits |
||||||||||||
|
|
|
|
First quarter ended March 31,
|
|
First quarter ended March 31,
|
||||||||||||
Type of Plan
|
|
Type of Expense
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Cumulative Direct Plans
|
|
Net periodic benefit cost
|
|
$
|
21
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
—
|
|
Shared Plans
|
|
Multiemployer contribution
|
|
—
|
|
|
16
|
|
|
—
|
|
|
5
|
|
||||
Shared Plans
|
|
Cost allocation
|
|
(1
|
)
|
|
5
|
|
|
—
|
|
|
1
|
|
||||
|
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
$
|
6
|
|
|
$
|
6
|
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Pension benefits
|
|
|
|
|
||||
Service cost
|
|
$
|
5
|
|
|
$
|
—
|
|
Interest cost
|
|
26
|
|
|
1
|
|
||
Expected return on plan assets
|
|
(40
|
)
|
|
(1
|
)
|
||
Recognized net actuarial loss
|
|
30
|
|
|
1
|
|
||
Net periodic benefit cost*
|
|
$
|
21
|
|
|
$
|
1
|
|
|
|
|
|
|
||||
Other postretirement benefits
|
|
|
|
|
||||
Service cost
|
|
$
|
1
|
|
|
$
|
—
|
|
Interest cost
|
|
4
|
|
|
—
|
|
||
Recognized net actuarial loss
|
|
2
|
|
|
—
|
|
||
Amortization of prior service benefit
|
|
(1
|
)
|
|
—
|
|
||
Net periodic benefit cost*
|
|
$
|
6
|
|
|
$
|
—
|
|
*
|
Service cost was included within Cost of goods sold and all other cost components were included in Other expenses (income), net on the accompanying Statement of Combined Operations.
|
H.
|
Income Taxes
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Pretax income at estimated annual effective income tax rate before discrete items
|
|
$
|
26
|
|
|
$
|
24
|
|
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized*
|
|
1
|
|
|
(1
|
)
|
||
Other discrete items
|
|
4
|
|
|
2
|
|
||
Provision for income taxes
|
|
$
|
31
|
|
|
$
|
25
|
|
*
|
The interim period impact related to operational losses in foreign jurisdictions for which no tax benefit is recognized will reverse by the end of the calendar year.
|
I.
|
Accumulated Other Comprehensive (Loss) Income
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Pension and other postretirement benefits (G)
|
|
|
|
|
|
|
||
Balance at beginning of period
|
|
$
|
(43
|
)
|
|
$
|
(32
|
)
|
Establishment of defined benefit plans
|
|
(1,752
|
)
|
|
—
|
|
||
Other comprehensive income:
|
|
|
|
|
||||
Unrecognized net actuarial loss and prior service cost/benefit
|
|
2
|
|
|
(1
|
)
|
||
Tax expense
|
|
(1
|
)
|
|
—
|
|
||
Total Other comprehensive income (loss) before reclassifications, net of tax
|
|
1
|
|
|
(1
|
)
|
||
Amortization of net actuarial loss and prior service cost/benefit
(1)
|
|
31
|
|
|
1
|
|
||
Tax expense
(2)
|
|
(7
|
)
|
|
—
|
|
||
Total amount reclassified from Accumulated other comprehensive loss, net of tax
(4)
|
|
24
|
|
|
1
|
|
||
Total Other comprehensive income
|
|
25
|
|
|
—
|
|
||
Balance at end of period
|
|
$
|
(1,770
|
)
|
|
$
|
(32
|
)
|
Foreign currency translation
|
|
|
|
|
||||
Balance at beginning of period
|
|
$
|
338
|
|
|
$
|
282
|
|
Foreign currency translation
(3)
|
|
(22
|
)
|
|
57
|
|
||
Net amount reclassified to earnings from Accumulated other comprehensive income
(3)(4)
|
|
22
|
|
|
—
|
|
||
Other comprehensive income
|
|
—
|
|
|
57
|
|
||
Balance at end of period
|
|
$
|
338
|
|
|
$
|
339
|
|
Accumulated other comprehensive (loss) income
|
|
$
|
(1,432
|
)
|
|
$
|
307
|
|
(1)
|
These amounts were included in the non-service component of net periodic benefit cost for pension and other postretirement benefits (see Note G).
|
(2)
|
These amounts were included in Provision for income taxes on the accompanying Statement of Combined Operations.
|
(3)
|
In all periods presented, there were no tax impacts related to rate changes. In the first quarter of 2020, the net amount reclassified to earnings was included in Restructuring and other charges on the accompanying Statement of Combined Operations related to the sale of certain foreign subsidiaries.
|
(4)
|
A positive amount indicates a corresponding charge to earnings and a negative amount indicates a corresponding benefit to earnings. These amounts were reflected on the accompanying Statement of Combined Operations in the line items indicated in footnotes 1 through 3.
|
J.
|
Inventories
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Finished goods
|
$
|
259
|
|
|
$
|
237
|
|
Work-in-process
|
738
|
|
|
738
|
|
||
Purchased raw materials
|
72
|
|
|
85
|
|
||
Operating supplies
|
68
|
|
|
69
|
|
||
|
1,137
|
|
|
1,129
|
|
||
LIFO reserve
|
(293
|
)
|
|
(309
|
)
|
||
|
$
|
844
|
|
|
$
|
820
|
|
K.
|
Leases
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
2020
|
$
|
30
|
|
|
$
|
38
|
|
2021
|
32
|
|
|
29
|
|
||
2022
|
25
|
|
|
22
|
|
||
2023
|
18
|
|
|
17
|
|
||
2024
|
14
|
|
|
14
|
|
||
Thereafter
|
37
|
|
|
38
|
|
||
Total lease payments
|
$
|
156
|
|
|
$
|
158
|
|
Less: imputed interest
|
28
|
|
|
29
|
|
||
Present value of lease liabilities
|
$
|
128
|
|
|
$
|
129
|
|
L.
|
Debt
|
•
|
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
•
|
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
•
|
Level 3—Inputs that are both significant to the fair value measurement and unobservable.
|
M.
|
Acquisitions and Divestitures
|
N.
|
Contingencies and Commitments
|
O.
|
Subsequent Events
|
First quarter ended March 31,
|
|
2020
|
|
2019
|
||||
Cost of goods sold
(1)
|
|
$
|
—
|
|
|
$
|
3
|
|
Selling, general administrative, and other expenses
(2)
|
|
25
|
|
|
24
|
|
||
Research and development expenses
|
|
—
|
|
|
5
|
|
||
Provision for depreciation and amortization
|
|
1
|
|
|
2
|
|
||
Restructuring and other charges
|
|
2
|
|
|
(9
|
)
|
||
Interest expense
|
|
28
|
|
|
28
|
|
||
Other (income), net
|
|
(5
|
)
|
|
(8
|
)
|
(1)
|
For all periods presented, amount principally relates to an allocation of expenses for ParentCo’s retained pension and other postretirement benefit obligations associated with closed and sold operations.
|
(2)
|
In the
first quarter of 2020
, amount includes an allocation of $18 for costs incurred by ParentCo associated with the Separation (see above).
|
•
|
deferred initiating a dividend on common stock;
|
•
|
reduced the CEO’s salary and the Board of Directors’ cash compensation by
30%
;
|
•
|
reduced salaries for senior-level management by
20%
and for all other salaried employees by
10%
;
|
•
|
restructuring of the salaried workforce, targeting a
10%
reduction;
|
•
|
idling of various production facilities based on market conditions within the regions where the Company operates;
|
•
|
decreased production and operating with a reduced labor force through shortened work weeks, shift reductions, layoffs, and the elimination of temporary workers and contractors at U.S.-based rolling and extrusion facilities;
|
•
|
modified schedules, adjusted work hours, lower costs, and delayed raises at all rolling mill facilities in Europe, China and Russia;
|
•
|
suspended the 401K match program for U.S. salaried employees; and
|
•
|
reducing capital expenditures by approximately
$50
, or approximately
30%
.
|
|
First quarter ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Third-party sales*
|
$
|
1,222
|
|
|
$
|
1,411
|
|
Intersegment sales
|
7
|
|
|
7
|
|
||
Total sales
|
$
|
1,229
|
|
|
$
|
1,418
|
|
Segment operating profit
|
$
|
125
|
|
|
$
|
91
|
|
Third-party aluminum shipments (kmt)*
|
319
|
|
|
333
|
|
*
|
In the
first quarter of 2020
and
2019
, third-party sales included
$21
and
$35
, respectively, and third-party aluminum shipments included
19
kmt and
16
kmt, respectively, related to sales to ParentCo's Howmet Aerospace Businesses. These sales are deemed to be related-party sales and are presented as such on Arconic Corporation's Statement of Combined Operations.
|
|
First quarter ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Third-party sales*
|
$
|
133
|
|
|
$
|
149
|
|
Segment operating profit
|
$
|
6
|
|
|
$
|
(4
|
)
|
Third-party aluminum shipments (kmt)*
|
14
|
|
|
16
|
|
*
|
In the
first quarter of 2020
and
2019
, third-party sales included
$14
and
$17
, respectively, and third-party aluminum shipments included
2
kmt (both periods) related to sales to ParentCo's Howmet Aerospace Businesses. These sales are deemed to be related-party sales and are presented as such on Arconic Corporation's Statement of Combined Operations.
|
|
First quarter ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Third-party sales
|
$
|
256
|
|
|
$
|
281
|
|
Segment operating profit
|
$
|
28
|
|
|
$
|
22
|
|
First quarter ended March 31,
|
2020
|
|
2019
|
||
Total segment operating profit
|
159
|
|
|
109
|
|
Unallocated amounts:
|
|
|
|
||
Cost allocations
(1)
|
(26
|
)
|
|
(34
|
)
|
Restructuring and other charges
(2)
|
19
|
|
|
(2
|
)
|
Other
|
—
|
|
|
7
|
|
Combined operating income
|
152
|
|
|
80
|
|
Interest expense
(2)
|
(35
|
)
|
|
(28
|
)
|
Other (expenses) income, net
(2)
|
(26
|
)
|
|
14
|
|
Combined income before income taxes
|
91
|
|
|
66
|
|
(1)
|
Cost allocations are composed of an allocation of ParentCo's general administrative and other expenses related to operating its corporate headquarters and other global administrative facilities, as well as an allocation of ParentCo's research and development expenses associated with its corporate technical center (see Cost Allocations under The Separation above).
|
(2)
|
See same titled sections under Earnings Summary in Results of Operations above for a description of notable changes.
|
•
|
Business and operations risks: We continue to monitor the evolving situation relating to COVID-19 to determine whether we will need to significantly modify our business practices or take actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and shareholders. On April 8, 2020, we announced that we would idle or decrease production at certain of our manufacturing facilities. While we have since resumed some of these manufacturing operations, future shutdowns will be dependent on facts and circumstances as they unfold, including based on the restrictions and limitations noted above. Furthermore, additional shutdowns, which are not required by governmental authorities, may be necessary to match our production of materials to the reduced demand of our customers. In addition, given these factors and potential further disruptions, we may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. We may also face challenges in restoring our production levels if and when COVID-19 abates, including as a result of government-imposed or other limitations that prevent the return of all or a portion of our workforce and/or continue to disrupt demand and limit the capabilities of our suppliers. As a result of COVID-19 and its potential impact on the markets we serve, the possibility exists that a sustained impact to our operations and financial results may require material impairments of our assets including, but not limited to, goodwill, intangible assets, long-lived assets, and right-of-use assets. During the first quarter of 2020, the Company performed a qualitative assessment to evaluate whether it is more likely than not that the fair value of any of its reporting units is less than the respective carrying values, including goodwill of $386 million. As a result of this assessment, the Company concluded that it is not more likely than not that the fair value of any of its reporting units is less than the respective carrying values. If Arconic Corporation’s actual results or external market factors further decline significantly, future goodwill impairment charges may be necessary and could be material. While we have already commenced plans to reduce costs, including announcing certain headcount and salary reductions, deferring the initiation of post-separation dividends and reducing the levels of our capital expenditures, we cannot at this time predict with certainty the longer term impact of the COVID-19 pandemic, but it could have a material adverse effect on our business, results of operations, financial
|
•
|
Customer and supplier risks: We have limited visibility into future demand given the disruptions resulting from COVID19. Several of our customers, including our significant ground transportation and aerospace customers, have temporarily suspended operations or taken cost-cutting actions, including Arconic Corporation’s largest customer, Ford, which suspended its North American operations beginning on March 19, 2020. It is not possible to predict with certainty when such operations, or parts thereof, may be restarted. In addition, even if restarted, such operations may need to be suspended again on one or more occasions. Due to the impacts of COVID-19 on our customers, we are experiencing, and expect to continue experiencing, lower demand and volume for our products. These trends may lead to charges, impairments and other adverse financial impacts over time. Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. If our suppliers’ operations were to be impacted, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows. The duration of the current disruptions to our customers and to our supply chain, and related financial impact to us, is uncertain. Should such disruption continue for an extended period of time, the impact will have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
|
•
|
Market risks: The current financial market dynamics and volatility pose heightened risks to our financial position. For example, dramatically lowered interest rates and lower expected asset valuations and returns can materially impact the calculation of long-term liabilities such as our pension obligations. In addition, extreme volatility in financial and commodities markets has had and may continue to have adverse impacts on other asset valuations, such as the value of the investment portfolios supporting our pension obligations. Our long-term liabilities are sensitive to numerous factors and assumptions that can move in offsetting directions and should be considered as of the time of a relevant measurement event.
|
•
|
Liquidity and credit risks: In connection with the issuance of $700 million aggregate principal amount of 6.000% Senior Secured First-Lien Notes due 2025 (the “2025 Notes”), we terminated our revolving credit facility, repaid in full the obligations outstanding under our senior secured first-lien term loan facility, and entered into a new ABL Credit Agreement providing for an $800 million asset-based revolving credit facility. Availability under the ABL Credit Agreement is based on a borrowing base calculation. Initially, until completion of an initial inventory appraisal and field examination, availability will be based on a deemed borrowing base of $500 million for a period not expected to exceed 90 days after entry into the facility. A prolonged period of generating lower financial results and cash from operations could adversely affect our ability to draw under the ABL Credit Agreement, could also adversely affect our financial condition, including in respect of satisfying both required and voluntary pension funding requirements, and could otherwise negatively affect our ability to achieve our strategic objectives. These factors could also adversely affect our ability to maintain compliance with the springing financial maintenance covenant included in the ABL Credit Facility to the extent such covenant becomes applicable, including as a result of potential increases in our net debt or future reductions in our EBITDA. There can also be no assurance that we will not face credit rating downgrades as a result of weaker than anticipated performance of our businesses or other factors, including overall market conditions. Future downgrades could further adversely affect our cost of funding and related margins, liquidity, competitive position and access to capital markets, and have an adverse commercial impact on our business. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding or our ability to refinance certain of our indebtedness, which could adversely affect our business, financial position, results of operations and/or cash flows. Although the U.S. federal and other governments have announced a number of funding programs to support businesses, our ability or willingness to access funding under such programs may be limited by regulations or other guidance, including eligibility criteria, or by further change or uncertainty related to the terms of these programs.
|
•
|
Employees: We may face risks associated with the actions we have taken in connection with the outbreak, including those associated with workforce reductions, the safety and welfare of our employees and the reduction of capital expenditures. For example, we may experience difficulties associated with hiring additional employees or replacing employees following the COVID-19 pandemic, in particular with respect to specialized roles.
|
•
|
Air travel: In particular, the interruption of regional and international air travel from COVID-19 has resulted in a significant decrease in business and leisure traffic and is having a material adverse effect on our air transportation customers, the viability of their businesses, and their demand for our services and products. Many countries have shut down their airspace and a large number of airlines have grounded a significant portion of their fleet. Changes in passenger air travel trends arising from COVID-19 may continue to develop or persist over time and further contribute to this adverse effect.
|
•
|
requiring a substantial portion of our cash flow from operations to make interest payments;
|
•
|
making it more difficult to satisfy debt service and other obligations;
|
•
|
increasing the risk of a future downgrade of our credit ratings or the credit ratings of debt, which could increase future debt costs and limit the future availability of debt financing;
|
•
|
increasing our vulnerability to general adverse economic and industry conditions;
|
•
|
reducing the cash flow available to fund our capital expenditures and other corporate purposes and to grow our business;
|
•
|
limiting our flexibility in planning for, or reacting to, changes in our business and the industry;
|
•
|
placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt;
|
•
|
limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase securities; and
|
•
|
inhibit our ability to refinance our indebtedness on terms acceptable to us or at all.
|
•
|
make investments, loans, advances, guarantees and acquisitions;
|
•
|
dispose of assets;
|
•
|
incur or guarantee additional debt and issue certain disqualified equity interests and preferred stock;
|
•
|
make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness;
|
•
|
engage in transactions with affiliates;
|
•
|
enter into certain restrictive agreements;
|
•
|
create liens on assets to secure debt; and
|
•
|
consolidate, merge, sell or otherwise dispose of all or substantially all of our or a subsidiary Guarantor’s assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Arconic Corporation
|
|
|
May 18, 2020
|
/s/
Erick R. Asmussen
|
Date
|
Erick R. Asmussen
|
|
Executive Vice President,
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
|
|
May 18, 2020
|
/s/
Mary E. Zik
|
Date
|
Mary E. Zik
|
|
Vice President, Controller
|
|
(Principal Accounting Officer)
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
---|
DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
---|
No information found
Customers
Customer name | Ticker |
---|---|
The Timken Company | TKR |
No Suppliers Found
Price
Yield
Owner | Position | Direct Shares | Indirect Shares |
---|