Fourth Quarter 2017 Highlights
- Revenue of $3.3 billion, up 10% year
over year; organic revenue1 up 6% year over year
- Net loss attributable to Arconic of
$727 million, or $1.51 per share, versus net loss of $1.3 billion,
or $2.91 per share, in the fourth quarter of 2016
- Excluding special items, adjusted
income of $152 million, or $0.31 per share, versus $71 million, or
$0.12 per share, in the fourth quarter of 2016
- Consolidated adjusted EBITDA2 of $436
million, up 54% year over year
- Excluding special items, consolidated
adjusted EBITDA of $446 million, up 24% year over year
- Net cost savings of 2.1% of
revenues
Full Year 2017 Highlights
- Revenue of $13.0 billion, up 5% year
over year; organic revenue up 5% year over year
- Net loss attributable to Arconic of $74
million, or $0.28 per share, versus net loss of $941 million, or
$2.31 per share, in the full year 2016
- Excluding special items, adjusted
income of $618 million, or $1.22 per share, versus $505 million, or
$0.98 per share, in 2016
- Consolidated adjusted EBITDA of $1.8
billion, up 17% year over year
- Excluding special items, consolidated
adjusted EBITDA of $1.9 billion, up 9% year over year
- Net cost savings of 1.8% of revenues;
reduced SG&A excluding special items by $111 million
- Strengthened balance sheet:
- $1.25 billion debt redemption in
2017
- Year-end cash balance of $2.15
billion
Guidance
- Issued Full Year 2018 Guidance*:
Revenue $13.4-$13.7 billion, Adjusted Earnings Per Share
$1.45-$1.55, Free Cash Flow ~$500 million
Key Announcements
- Announced share repurchase program of
up to $500 million and $500 million early debt reduction
- Initiated strategy and portfolio
review, expected to be complete by end of 2018
- Announced plans to relocate global
headquarters out of New York City in 2018
___________________________________
* Reconciliations of the forward-looking non-GAAP measures to
the most directly comparable GAAP measures are not available
without unreasonable efforts due to the variability and complexity
of the charges and other components excluded from the non-GAAP
measures – for further detail, see “Full Year 2018 Guidance.”
Arconic Inc. (NYSE: ARNC) today reported fourth quarter and
full-year 2017 results.
The Company recorded fourth quarter 2017 revenue of $3.3
billion, up 10% year over year, driven by higher volumes across all
segments and higher aluminum prices. Fourth quarter 2017 organic
revenue was up 6% year over year. For full year 2017, revenue was
$13.0 billion, up 5% year over year, driven by higher volumes
across all segments and higher aluminum prices, partially offset by
the impact of the planned ramp-down of the Company’s Tennessee
Packaging operations and unfavorable product pricing and mix. Full
year 2017 organic revenue was up 5% year over year.
Net loss attributable to Arconic in the fourth quarter was $727
million, or $1.51 per share. These results include $879 million in
special items, principally due to impairments of goodwill in the
forgings and extrusions business and assets in the Latin America
extrusions business, the impact of U.S. tax reform, and reduction
of liabilities for a contingent earn-out and a separation-related
guarantee. For the full year 2017, the Company reported 2017 net
loss attributable to Arconic of $74 million, or $0.28 per
share.
Excluding special items, fourth quarter 2017 adjusted income was
$152 million, or $0.31 per share, driven by net cost savings and
higher volumes, which were partially offset by unfavorable product
pricing and mix. Excluding the impact of special items, full year
2017 adjusted income was $618 million, or $1.22 per share.
Fourth quarter 2017 Consolidated adjusted EBITDA was $436
million, up 54% year over year. Consolidated adjusted EBITDA
excluding special items was $446 million, up 24% year over year.
Consolidated adjusted EBITDA margin excluding special items was
13.6%, up 150 basis points year over year, including a 190 basis
point negative impact of higher aluminum prices, last-in-first-out
(LIFO) and metal lag.
Full year 2017 Consolidated adjusted EBITDA was $1.8 billion, up
17% year over year. Consolidated adjusted EBITDA excluding special
items was $1.9 billion, up 9% year over year. Consolidated adjusted
EBITDA margin excluding special items was 14.3%, up 60 basis points
year over year, including a 110 basis point year-over-year negative
impact of higher aluminum prices, LIFO and metal lag.
Arconic continued its progress on cost reduction; in the fourth
quarter, the Company delivered net cost savings of $68 million or
2.1% of revenue, and for the full year 2017, net cost savings of
$232 million or 1.8% of revenue. Arconic delivered an improvement
of $111 million year over year in selling, general and
administrative expenses (SG&A) excluding special items.
Arconic Chief Executive Officer Chip Blankenship said, “In 2017,
Arconic made progress on growing revenue and profits and taking out
cost. However, a significant opportunity for improvement remains.
Our challenge is to reinforce strengths, close gaps and identify
new opportunities. My goal is to ensure that all of our businesses
execute consistently and deliver outstanding returns for our
shareholders.”
Blankenship continued, “Arconic has foundational strengths and
incredible potential. I am convinced that if we stay focused on
four priorities – customers, people, operational excellence and
technology – we will deliver on Arconic’s potential.”
In the fourth quarter 2017, cash from operations was $612
million; cash used for financing activities totaled $45 million;
and cash used for investing activities was $236 million. Free Cash
Flow for the quarter was $376 million. In 2017, Arconic redeemed
$1.25 billion of debt, ending the year with debt of $6.8 billion
and cash on hand of $2.15 billion. Cash from operations in 2017 was
$701 million. Free Cash Flow for the year was $105 million.
Fourth Quarter 2017 Segment Performance
Engineered Products and Solutions
(EP&S)
EP&S reported revenue of $1.5 billion, an increase of 6%
year over year, and Adjusted EBITDA of $296 million, up $31 million
year over year. Increased aerospace volume in both engines and
airframes coupled with strong net cost savings more than offset
unfavorable price and mix. Adjusted EBITDA margin was 19.9%, up 110
basis points year over year.
Continuing Arconic’s efforts to lower its cost profile, EP&S
consolidated its organizational structure, collapsing four business
units into three and reducing layers. These changes are expected to
save approximately $15 million in 2018 and create a streamlined
organization to accelerate progress and deliver for customers and
shareholders.
Global Rolled Products (GRP)
GRP reported revenue of $1.2 billion, an increase of 15% year
over year. Organic revenue was up 7%. Adjusted EBITDA was $124
million, up $8 million year over year, driven by strong automotive
volume and net cost savings, partially offset by reduced aerospace
wide-body build rates, airframe destocking, pricing pressure in
regional specialties, and the planned Tennessee Packaging ramp
down. Adjusted EBITDA margin was 10.0%, down 80 basis points year
over year, driven by a 160 basis point negative impact of higher
aluminum prices.
Transportation and Construction Solutions
(TCS)
TCS delivered revenue of $518 million, an increase of 14% year
over year. Organic revenue was up 8%. Adjusted EBITDA was $84
million, up $9 million year over year, as higher volume and cost
reductions more than offset headwinds, including unfavorable price
and mix and higher aluminum prices. Adjusted EBITDA margin was
16.2%, down 20 basis points year over year, including a 170 basis
point negative impact of higher aluminum prices.
Full Year 2017 Segment Performance
Segment performance in 2017 included the following:
- EP&S revenue of $5.9 billion, up 4%
year over year, Adjusted EBITDA of $1.2 billion, up 2% year over
year, and an Adjusted EBITDA margin of 20.6%, down 30 basis points
year over year
- GRP revenue of $5.0 billion, up 3% year
over year, organic revenue up 5% year over year, Adjusted EBITDA of
$599 million, up 4% year over year, and an Adjusted EBITDA margin
of 12.0%, up 10 basis points year over year, including a 140 basis
point negative impact of higher aluminum prices
- TCS revenue of $2.0 billion, up 10%
year over year, organic revenue up 7% year over year, Adjusted
EBITDA of $321 million, up 10% year over year, and an Adjusted
EBITDA margin of 16.2%, up 10 basis points year over year,
including a 120 basis point negative impact of higher aluminum
prices
Share Repurchase Program and Early Debt Reduction
To further enhance the Company’s financial position and return
capital to shareholders, Arconic’s Board of Directors has
authorized a share repurchase program of up to $500 million of its
outstanding common stock and a $500 million early debt reduction.
Under the share repurchase program, the Company may repurchase
shares from time to time, in amounts, at prices, and at such times
as the Company deems appropriate. Repurchases will be subject to
market conditions, legal requirements and other considerations. The
Company is not obligated to repurchase any specific number of
shares or to do so at any particular time, and the share repurchase
program may be suspended, modified or terminated at any time
without prior notice. The Company currently has approximately 483
million shares of common stock outstanding.
In addition, Arconic intends to redeem in March 2018 all of its
outstanding 5.72% Notes due in 2019 in accordance with the terms of
the notes and the Indenture, dated as of September 30, 1993,
between Arconic and The Bank of New York Mellon Trust Company, N.A.
as trustee. As of February 5, 2018, the aggregate outstanding
principal amount of the Notes is $500 million.
Strategy and Portfolio Review
Chip Blankenship, who officially joined the Company on January
15, has initiated a review of Arconic’s strategy and portfolio. The
Company expects to complete this review by the end of the year.
Global Headquarters Relocation
As part of the Company’s continued drive to reduce corporate
overhead, Arconic announced that
it will relocate its global headquarters in 2018 out
of New York City to a more cost-effective location. The
Company expects to complete the move by the end of 2018.
Full Year 2018 Guidance*
Arconic is providing the following 2018 guidance:
Full Year 2018 Revenue
$13.4-$13.7
billion
Adjusted Earnings Per Share
$1.45-$1.55
Free Cash Flow
~$500 million
___________________________________
* Arconic has not provided a reconciliation of the
forward-looking financial measures of adjusted earnings per share
and free cash flow to the most directly comparable financial
measures prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP) because
Arconic is unable to quantify certain amounts that would be
required to be included in the GAAP measures without unreasonable
efforts, and Arconic believes such reconciliations would imply a
degree of precision that would be confusing or misleading to
investors. In particular, reconciliations of the forward-looking
non-GAAP financial measures to the most directly comparable GAAP
measures are not available without unreasonable efforts due to the
variability and complexity with respect to the charges and other
components excluded from the non-GAAP measures, such as the effects
of foreign currency movements, equity income, gains or losses on
sales of assets, taxes and any future restructuring or impairment
charges. These reconciling items are in addition to the inherent
variability already included in the GAAP measures, which includes,
but is not limited to, price/mix and volume.
Arconic will hold its quarterly conference call at 10:00 AM
Eastern Time on February 5, 2018 to present quarterly and full year
results. The meeting will be webcast via
www.arconic.com. Call information and related details are
available at www.arconic.com under “Investors;”
presentation materials will be available at approximately 8:00 AM
Eastern Time on February 5.
About Arconic
Arconic (NYSE: ARNC) creates breakthrough products that shape
industries. Working in close partnership with our customers, we
solve complex engineering challenges to transform the way we fly,
drive, build and power. Through the ingenuity of our people and
cutting-edge advanced manufacturing techniques, we deliver these
products at a quality and efficiency that ensure customer success
and shareholder value. For more information: www.arconic.com.
Follow @arconic: Twitter, Instagram, Facebook, LinkedIn and
YouTube.
Dissemination of Company Information
Arconic intends to make future announcements regarding Company
developments and financial performance through its website at
www.arconic.com.
Forward-Looking Statements
This release contains statements that relate to future events
and expectations and as such constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include those containing such
words as "anticipates," "believes," "could," "estimates,"
"expects," "forecasts," "goal," "guidance," "intends," "may,"
"outlook," "plans," "projects," "seeks," "sees," "should,"
"targets," "will," "would," or other words of similar meaning. All
statements that reflect Arconic’s expectations, assumptions or
projections about the future, other than statements of historical
fact, are forward-looking statements, including, without
limitation, forecasts and expectations relating to the growth of
the aerospace, automotive, commercial transportation and other end
markets; statements and guidance regarding future financial results
or operating performance; statements about Arconic's strategies,
outlook, business and financial prospects; and statements regarding
potential share gains. These statements reflect beliefs and
assumptions that are based on Arconic’s perception of historical
trends, current conditions and expected future developments, as
well as other factors management believes are appropriate in the
circumstances. Forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties, and
changes in circumstances that are difficult to predict. Although
Arconic believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) deterioration in global economic and
financial market conditions generally; (b) unfavorable changes in
the markets served by Arconic; (c) 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; (d)
changes in discount rates or investment returns on pension assets;
(e) Arconic’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; (f) the impact of cyber attacks and potential information
technology or data security breaches; (g) any manufacturing
difficulties or other issues that impact product performance,
quality or safety; (h) political, economic, and regulatory risks in
the countries in which Arconic operates or sells products; (i)
material adverse changes in aluminum industry conditions, including
fluctuations in London Metal Exchange-based aluminum prices; (j)
the impact of changes in foreign currency exchange rates on costs
and results; (k) the outcome of contingencies, including legal
proceedings, government or regulatory investigations, and
environmental remediation, which can expose Arconic to substantial
costs and liabilities; and (l) the other risk factors summarized in
Arconic’s Form 10-K for the year ended December 31, 2016, Arconic’s
Form 10-Q for the quarter ended June 30, 2017 and other reports
filed with the U.S. Securities and Exchange Commission (SEC).
Arconic disclaims any intention or obligation to update publicly
any forward-looking statements, whether in response to new
information, future events, or otherwise, except as required by
applicable law. Market projections are subject to the risks
discussed above and other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Arconic’s consolidated financial information but is not presented
in Arconic’s financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP). Certain of these data are considered “non-GAAP
financial measures” under SEC rules. These non-GAAP financial
measures supplement our GAAP disclosures and should not be
considered an alternative to the GAAP measure. Reconciliations to
the most directly comparable GAAP financial measures and
management’s rationale for the use of the non-GAAP financial
measures can be found in the schedules to this release and on our
website at www.arconic.com under the “Investors”
section.
___________________________________
1 Organic revenue is U.S. GAAP revenue adjusted for Tennessee
Packaging (due to its planned phase-down), divestitures, and
changes in aluminum prices and foreign currency exchange rates
relative to prior year period.
2 Arconic’s definition of Adjusted EBITDA (earnings before
interest, taxes, depreciation, and amortization) is net margin plus
an add-back for depreciation and amortization. Net margin is
equivalent to sales minus the following items: cost of goods sold;
selling, general administrative and other expenses; research and
development expenses; and provision for depreciation and
amortization. The Adjusted EBITDA presented may not be comparable
to similarly titled measures of other companies.
Arconic and subsidiaries Statement of Consolidated
Operations (unaudited) (in millions, except per-share and
share amounts) Quarter ended December 31,
September 30, December 31,
2017 2017
2016 (1)
Sales $ 3,271 $ 3,236 $ 2,967 Cost of goods sold
(exclusive of expenses below) 2,656 2,626 2,375 Selling, general
administrative, and other expenses 151 155 269 Research and
development expenses 28 25 39 Provision for depreciation and
amortization 141 140 133 Impairment of goodwill 719 - -
Restructuring and other charges
47
19 122
Operating (loss) income (471 ) 271 29 Interest expense 98
100 128 Other income, net (2)
(114
) (1 )
(54
) (Loss) income from continuing operations before
income taxes (455 ) 172 (45 ) Provision for income taxes
272 53
1,246 (Loss) income from continuing
operations after income taxes (727 ) 119 (1,291 ) Income from
discontinued operations after income taxes
(1)
- -
38 Net (loss) income (727 ) 119 (1,253 )
Less: Net income from discontinued operations attributable
to noncontrolling interests
(1) -
- 5
NET (LOSS) INCOME ATTRIBUTABLE TO ARCONIC
$
(727 ) $ 119
$ (1,258 )
(LOSS) EARNINGS PER SHARE ATTRIBUTABLE
TO ARCONIC COMMON SHAREHOLDERS:
Basic(4)(5): Continuing operations $ (1.51 ) $ 0.23 $ (2.98 )
Discontinued operations
-
- 0.07 Net (loss)
income $ (1.51 ) $ 0.23 $ (2.91 ) Average number of
shares(3)(5) 481,339,090 441,512,709 438,486,935
Diluted(4)(5): Continuing operations $ (1.51 ) $ 0.22 $ (2.98 )
Discontinued operations
-
- 0.07 Net (loss)
income $ (1.51 ) $ 0.22 $ (2.91 ) Average number of
shares(3)(5) 481,339,090 462,055,864 438,486,935
(1)
On November 1, 2016, the former Alcoa Inc. was separated
into two standalone, publicly-traded companies, Arconic and Alcoa
Corporation, by means of a pro rata distribution of 80.1 percent of
the outstanding common stock of Alcoa Corporation to Alcoa Inc.
shareholders. Accordingly, the results of operations of Alcoa
Corporation have been reflected as discontinued operations for the
quarter ended December 31, 2016.
(2)
Other income, net for the quarter ended December 31, 2017 included
an adjustment of $81 to the contingent earn-out liability related
to the 2014 acquisition of Firth Rixson (Firth Rixson earn-out) and
an adjustment of $25 to a separation-related guarantee liability.
Other income, net for the quarter ended December 31, 2016 included
an adjustment of $56 to the Firth Rixson earn-out.
(3)
In the fourth quarter of 2017, all outstanding depositary shares
(each depositary share representing a 1/10 interest in a share of
the mandatory convertible preferred stock) were converted into 39
million common shares. As a result, the basic and diluted average
number of shares for the quarter ended December 31, 2017 includes
the 39 million common shares.
(4)
In order to calculate both basic and
diluted (loss) earnings per share, preferred stock dividends of $18
and $17 for the quarters ended September 30, 2017 and December 31,
2016, respectively, need to be subtracted from Net (loss) income
attributable to Arconic.
(5)
In the quarters ended December 31, 2017 and December 31, 2016, the
diluted average number of shares does not include any share
equivalents (21 million and 18 million, respectively) related to
outstanding employee stock options and awards and shares underlying
outstanding convertible debt (acquired through the acquisition of
RTI International Metals, Inc (“RTI”)) as their effect was
anti-dilutive. In the quarter ended September 30, 2017, the
difference between the respective diluted average number of shares
and the respective basic average number of shares relates to share
equivalents (20 million) on outstanding employee stock options and
awards and shares underlying outstanding convertible debt (acquired
through the acquisition of RTI).
Arconic and
subsidiaries Statement of Consolidated Operations
(unaudited) (in millions, except per-share and share
amounts) Year ended December 31,
December 31, 2017
2016 (1)
Sales $ 12,960 $ 12,394 Cost of goods sold (exclusive
of expenses below) 10,357 9,811 Selling, general administrative,
and other expenses 731 942 Research and development expenses 111
132 Provision for depreciation and amortization 551 535 Impairment
of goodwill 719 - Restructuring and other charges
165 155 Operating
income 326 819 Interest expense(2) 496 499 Other income,
net(3)
(640 )
(94 ) Income from continuing
operations before income taxes 470 414 Provision for income taxes
544 1,476
Loss from continuing operations after income taxes (74 )
(1,062 )
Income from discontinued operations after
income taxes(1)
- 184
Net loss (74 ) (878 )
Less: Net income from discontinued
operations attributable to noncontrolling interests(1)
- 63
NET LOSS ATTRIBUTABLE TO ARCONIC
$ (74
) $ (941 )
LOSS PER SHARE ATTRIBUTABLE TO ARCONIC COMMON SHAREHOLDERS:
Basic(5): Continuing operations $ (0.28 ) $ (2.58 ) Discontinued
operations
- 0.27
Net loss $ (0.28 ) $ (2.31 ) Average number of
shares(4)(6) 450,875,943 438,275,079 Diluted(5): Continuing
operations $ (0.28 ) $ (2.58 ) Discontinued operations
- 0.27 Net loss $
(0.28 ) $ (2.31 ) Average number of shares(4)(6) 450,875,943
438,275,079 Common stock outstanding at the end of the
period(4) 481,416,537 438,519,780
(1)
On November 1, 2016, the former Alcoa Inc. was separated
into two standalone, publicly-traded companies, Arconic and Alcoa
Corporation, by means of a pro rata distribution of 80.1 percent of
the outstanding common stock of Alcoa Corporation to Alcoa Inc.
shareholders. Accordingly, the results of operations of Alcoa
Corporation have been reflected as discontinued operations for the
year ended December 31, 2016. (2) Interest expense for year
ended December 31, 2017 included $76 related to the early
redemption of the Company’s outstanding 6.500% Senior Notes due
2018 and 6.750% Senior Notes due 2018 (collectively, the “2018
Senior Notes”) and a portion of the Company’s outstanding 5.720%
Senior Notes due 2019. (3) Other income, net for the year
ended December 31, 2017 included:
• a $351 gain on the sale of a portion of
Arconic’s investment in Alcoa Corporation common stock;
• a $167 gain on the exchange of Arconic’s
remaining investment in Alcoa Corporation common stock for a
portion of the Company’s outstanding 2018 Senior Notes;
• an adjustment of $81 to the Firth Rixson
earn-out; and
• an adjustment of $25 to a
separation-related guarantee liability.
Other income, net for the year ended December 31, 2016
included:
• an adjustment of $56 to the Firth Rixson
earn-out; and
• a post-closing adjustment of $20 related
to the Firth Rixson acquisition.
(4) In the fourth quarter of 2017, all outstanding
depositary shares (each depositary share representing a 1/10
interest in a share of the mandatory convertible preferred stock)
were converted into 39 million common shares. As a result, the
basic and diluted average number of shares for the year ended
December 31, 2017 includes 10 million shares representing the
weighted average number of shares for the length of time the 39
million shares were outstanding during 2017. (5) In order to
calculate both basic and diluted loss per share for the years ended
December 31, 2017 and December 31, 2016, preferred stock dividends
declared of $52 and $69, respectively, in each period need to be
subtracted from Net loss attributable to Arconic. (6) In the
years ended December 31, 2017 and December 31, 2016, the diluted
average number of shares does not include any share equivalents (20
million and 15 million, respectively) related to outstanding
employee stock options and awards and shares underlying outstanding
convertible debt (acquired through the acquisition of RTI) as their
effect was anti-dilutive.
Arconic and subsidiaries Consolidated Balance Sheet
(unaudited) (in millions) December 31,
December 31, 2017 2016 ASSETS Current assets:
Cash and cash equivalents $ 2,150 $ 1,863
Receivables from customers, less
allowances of $8 in 2017 and $13 in 2016
1,035 974 Other receivables 339 477 Inventories 2,480 2,253 Prepaid
expenses and other current assets
374
325 Total current assets
6,378 5,892
Properties, plants, and equipment 11,986 11,572 Less: accumulated
depreciation and amortization
6,392
6,073 Properties, plants, and equipment,
net
5,594 5,499
Goodwill 4,535 5,148 Deferred income taxes 743 1,234
Investment in common stock of Alcoa Corporation - 1,020
Intangibles, net 987 988 Other noncurrent assets
481 257 Total assets
$ 18,718 $
20,038 LIABILITIES Current liabilities:
Short-term borrowings $ 37 $ 36 Accounts payable, trade 1,839 1,744
Accrued compensation and retirement costs 399 398 Taxes, including
income taxes 75 85 Accrued interest payable 124 153 Other current
liabilities 349 329 Long-term debt due within one year
1 4 Total current
liabilities
2,824
2,749 Long-term debt, less amount due within
one year 6,806 8,044 Accrued pension benefits 2,564 2,345 Accrued
other postretirement benefits 841 889 Other noncurrent liabilities
and deferred credits
759
870 Total liabilities
13,794 14,897
EQUITY Arconic shareholders’ equity: Preferred stock 55 55
Mandatory convertible preferred stock - 3 Common stock 481 438
Additional capital 8,266 8,214 Accumulated deficit (1,248 ) (1,027
) Accumulated other comprehensive loss
(2,644
) (2,568 ) Total
Arconic shareholders' equity 4,910 5,115 Noncontrolling interests
14 26 Total
equity
4,924 5,141
Total liabilities and equity
$
18,718 $ 20,038
Arconic and subsidiaries
Statement of Consolidated Cash Flows (unaudited) (in
millions) Year ended December 31,
2017
2016(1)
CASH FROM OPERATIONS Net loss $ (74 ) $ (878 ) Adjustments to
reconcile net loss to cash from operations: Depreciation,
depletion, and amortization 551 1,132 Deferred income taxes 434
1,125 Equity income, net of dividends - 42 Impairment of goodwill
719 - Restructuring and other charges 165 257 Net gain from
investing activities – asset sales(2) (513 ) (156 ) Net periodic
pension benefit cost 217 304 Stock-based compensation 67 86 Other
61 60 Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency translation
adjustments: (Increase) in receivables (124 ) (238 ) (Increase) in
inventories (192 ) (29 ) Decrease (increase) in prepaid expenses
and other current assets 11 (76 ) Increase in accounts payable,
trade 62 232 (Decrease) in accrued expenses (116 ) (394 )
(Decrease) increase in taxes, including income taxes (23 ) 93
Pension contributions (310 ) (290 ) (Increase) in noncurrent assets
(41 ) (152 ) (Decrease) in noncurrent liabilities
(193 ) (248
) CASH PROVIDED FROM OPERATIONS
701 870
FINANCING ACTIVITIES Net change in short-term borrowings (original
maturities of three months or less) (2 ) (3 ) Additions to debt
(original maturities greater than three months) 816 1,962 Payments
on debt (original maturities greater than three months) (1,634 )
(2,734 ) Proceeds from exercise of employee stock options 50 4
Dividends paid to shareholders (162 ) (228 ) Distributions to
noncontrolling interests (14 ) (226 ) Contributions from
noncontrolling interests - 51 Net cash transferred from Alcoa
Corporation at separation - 421 Other
(17
) (1 ) CASH USED FOR
FINANCING ACTIVITIES
(963 )
(754 ) INVESTING ACTIVITIES
Capital expenditures (596 ) (1,125 ) Acquisitions, net of cash
acquired - 10 Proceeds from the sale of assets and businesses (9 )
692 Additions to investments (2 ) (52 ) Sales of investments(2) 890
280 Net change in restricted cash 12 14 Other(3)
245 16 CASH PROVIDED
FROM (USED FOR) INVESTING ACTIVITIES
540
(165 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
9
(7
)
Net change in cash and cash equivalents 287 (56 ) Cash and cash
equivalents at beginning of year
1,863
1,919 CASH AND CASH EQUIVALENTS AT END
OF YEAR
$ 2,150 $
1,863 (1) On November 1, 2016, the
former Alcoa Inc. separated into two standalone, publicly-traded
companies, Arconic and Alcoa Corporation, by means of a pro rata
distribution of 80.1 percent of the outstanding common stock of
Alcoa Corporation to Alcoa Inc. shareholders. Cash flow information
has not been restated for discontinued operations and therefore the
year ended December 31, 2016 includes the result of operations for
Arconic and the results of operations for Alcoa Corporation.
(2) On February 14, 2017, Arconic sold 23,353,000 of its shares of
Alcoa Corporation common stock at $38.03 per share which resulted
in $888 in cash proceeds. (3) Other investing activities for
the year ended December 31, 2017 included $243 of proceeds received
from Alcoa Corporation’s sale of the Yadkin Hydroelectric Project.
Arconic
and subsidiaries Segment Information (unaudited)
(dollars in millions, shipments in thousands of metric tons
[kmt]) 4Q16 2016
1Q17 2Q17
3Q17 4Q17
2017
Engineered
Products and Solutions:
Third-party sales $ 1,408 $ 5,728 $ 1,485 $ 1,484 $ 1,476 $ 1,490 $
5,935 Depreciation and amortization $ 65 $ 255 $ 64 $ 66 $ 68 $ 70
$ 268 Adjusted EBITDA $ 265 $ 1,195
$ 306 $ 310 $ 312
$ 296 $ 1,224
Global Rolled
Products (1):
Third-party aluminum shipments (kmt) 276 1,339 310 307 297 283
1,197 Third-party sales $ 1,079 $ 4,864 $ 1,249 $ 1,268 $ 1,234 $
1,241 $ 4,992 Intersegment sales $ 30 $ 118 $ 34 $ 37 $ 36 $ 41 $
148 Depreciation and amortization $ 49 $ 201 $ 50 $ 51 $ 52 $ 52 $
205 Adjusted EBITDA $ 116 $ 577
$ 171 $ 164 $ 140 $ 124
$ 599
Transportation
and Construction Solutions:
Third-party sales $ 456 $ 1,802 $ 449 $ 501 $ 517 $ 518 $ 1,985
Depreciation and amortization $ 13 $ 48 $ 12 $ 12 $ 13 $ 13 $ 50
Adjusted EBITDA $ 75 $ 291 $ 72
$ 82 $ 83 $ 84
$ 321
Reconciliation of combined segment
adjusted EBITDA to consolidated net income (loss) attributable to
Arconic: Combined segment adjusted EBITDA(2) $ 456 $ 2,063 $
549 $ 556 $ 535 $ 504 $ 2,144 Unallocated amounts: Depreciation and
amortization (133 ) (535 ) (133 ) (137 ) (140 ) (141 ) (551 )
Restructuring and other charges (122 ) (155 ) (73 ) (26 ) (19 ) (47
) (165 )
Impairment of goodwill
-
-
-
-
-
(719
)
(719
)
Impact of LIFO 8 (18 ) (19 ) (11 ) (48 ) (32 ) (110 ) Metal price
lag 17 27 22 19 2 29 72 Corporate expense (150 ) (454 ) (91 ) (91 )
(42 ) (50 ) (274 ) Other (47 ) (109 )
(10 ) (29 ) (17 )
(15 ) (71 ) Operating income (loss) $ 29 $ 819
$ 245 $ 281 $ 271 $ (471 ) $ 326 Other income, net(3) 54 94 354 171
1 114 640 Interest expense(4) (128 ) (499 ) (115 ) (183 ) (100 )
(98 ) (496 ) Income taxes (1,246 ) (1,476 ) (162 ) (57 ) (53 ) (272
) (544 ) Discontinued operations(5) 33
121 - -
- - -
Consolidated net income (loss) attributable to Arconic
$ (1,258 ) $ (941 ) $ 322 $ 212
$ 119 $ (727 ) $ (74 )
Arconic’s definition of Combined segment adjusted EBITDA (Earnings
before interest, taxes, depreciation and amortization) is net
margin plus an add-back for depreciation and amortization. Net
margin is equivalent to Sales minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
Research and development expenses; and Provision for depreciation
and amortization. The Combined segment adjusted EBITDA presented
may not be comparable to similarly titled measures of other
companies. The difference between certain segment totals and
consolidated amounts is Corporate.
(1)
On November 1, 2016, the former Alcoa Inc. completed its
separation into two standalone, publicly-traded companies. Arconic
includes the former Alcoa Inc. segments: Engineered Products and
Solutions, Transportation and Construction Solutions, and Global
Rolled Products, except for the Warrick, IN rolling operations and
the equity interest in the rolling mill at the joint venture in
Saudi Arabia, both of which became part of Alcoa Corporation. The
Global Rolled Products segment information has been updated to
exclude the Warrick, IN rolling operations and the equity interest
in the rolling mill at the joint venture in Saudi Arabia.
(2)
Combined segment adjusted EBITDA is the summation of the respective
Adjusted EBITDA of Arconic’s three reportable segments.
(3)
Other income, net included:
•
For the quarter ended December 31, 2016, an adjustment of $56 to
the Firth Rixson earn-out;
•
For the quarter ended March 31, 2017, a $351 gain on the sale of a
portion of Arconic’s investment in Alcoa Corporation common stock;
•
For the quarter ended June 30, 2017, a $167 gain on the exchange of
Arconic’s remaining investment in Alcoa Corporation common stock
for a portion of the Company’s outstanding 2018 Senior Notes; and
•
For the quarter ended December 31, 2017, an adjustment of $81 to
the Firth Rixson earn-out and an adjustment of $25 to a
separation-related guarantee liability.
(4)
Interest expense for the quarter ended June 30, 2017 includes $76
related to the early redemption of the Company’s outstanding 2018
Senior Notes and a portion of the Company’s outstanding 5.720%
Senior Notes due 2019.
(5)
The reconciliation of Combined segment adjusted EBITDA to
Consolidated net income (loss) attributable to Arconic has been
updated for all periods presented to exclude the results of
operations for Alcoa Corporation, which have been reflected as
discontinued operations for all periods presented.
Arconic and subsidiaries Calculation of
Financial Measures (unaudited) (in millions, except
per-share amounts) Adjusted income
Quarter ended Year ended
December
31,2017
September
30,2017
December
31,2016
December
31,2017
December
31,2016
Net (loss) income attributable to Arconic $ (727 ) $ 119 $
(1,258 ) $ (74 ) $ (941 ) Discontinued operations(1) - - (33
) - (121 ) Special items: Restructuring and other charges 47
19
122
165
155
Discrete tax items(2) 220 2 1,280 223 1,290 Other
special items(3) 612 - 4 264 196 Tax impact(4)
- (8 )
(44 ) 40
(74 ) Net income
attributable to Arconic – as adjusted
$
152
$
132
$ 71
$
618
$
505
Diluted EPS: Net (loss) income attributable to
Arconic common shareholders
$
(1.51
)
$
0.22
$
(2.91
)
$
(0.28
)
$
(2.31
)
Net income attributable to Arconic common shareholders – as
adjusted
$
0.31
$
0.25
$
0.12
$
1.22
$
0.98
Net income attributable to Arconic – as adjusted is a
non-GAAP financial measure. Management believes that this measure
is meaningful to investors because management reviews the operating
results of Arconic excluding the impacts of restructuring and other
charges, discrete tax items, and other special items (collectively,
“special items”). There can be no assurances that additional
special items will not occur in future periods. To compensate for
this limitation, management believes that it is appropriate to
consider both Net (loss) income attributable to Arconic determined
under GAAP as well as Net income attributable to Arconic – as
adjusted. (1) On November 1, 2016, the former Alcoa
Inc. was separated into two standalone, publicly-traded companies,
Arconic and Alcoa Corporation, by means of a pro rata distribution
of 80.1 percent of the outstanding common stock of Alcoa
Corporation to Alcoa Inc. shareholders. Accordingly, the results of
operations of Alcoa Corporation have been reflected as discontinued
operations for the quarter and year ended December 31, 2016.
(2) Discrete tax items for each period included the following:
•
for the quarter ended December 31, 2017, a charge resulting from
the enactment of the US Tax Cuts and Jobs Acts of 2017 that
principally relates to the revaluation of US deferred tax assets
and liabilities from 35% to 21% ($272), charge for a reserve
against a foreign attribute resulting from the Company’s Delaware
reincorporation ($23), partially offset by a benefit for the
reversal of state valuation allowances ($69) and a number of small
items ($6);
•
for the quarter ended September 30, 2017, a number of small items;
•
for the quarter ended December 31, 2016, a charge for valuation
allowances related to the November 1, 2016 separation (see Note 1
above) ($1,267), a net charge for the remeasurement of certain
deferred tax assets due to tax rate and tax law changes ($51), a
net benefit for valuation allowances not associated with the
separation ($29), and a net benefit for a number of small items
($9);
•
for the year ended December 31, 2017, a charge resulting from the
enactment of the US Tax Cuts and Jobs Acts of 2017 that principally
relates to the revaluation of US deferred tax assets and
liabilities from 35% to 21% ($272), charge for a reserve against a
foreign attribute resulting from the Company’s Delaware
reincorporation ($23), partially offset by a benefit for the
reversal of state valuation allowances ($69) and a number of small
items ($3); and
•
for the year ended December 31, 2016, a charge for valuation
allowances related to the November 1, 2016 separation (see Note 1
above) ($1,267), a net charge for the remeasurement of certain
deferred tax assets due to tax rate and tax law changes ($51), a
net benefit for valuation allowances not associated with the
separation ($18), and a net benefit for a number of small items
($10). (3) Other special items included the following:
•
for the quarter ended December 31, 2017, an impairment of goodwill
related to the forgings and extrusions business ($719), a favorable
adjustment to the Firth Rixson earn-out ($81), a favorable
adjustment to a separation-related guarantee liability ($25), legal
and other advisory costs related to Grenfell Tower ($7), costs
associated with the Company’s Delaware reincorporation ($3), a
favorable tax impact resulting from the difference between
Arconic’s consolidated estimated annual effective tax rate and the
statutory rate applicable to special items ($6), a favorable tax
impact related to the interim period treatment of operational
income in certain foreign jurisdictions for which no tax expense
was recognized ($5);
•
for the quarter ended September 30, 2017, legal and other advisory
costs related to Grenfell Tower ($7) and a favorable tax impact
resulting from the difference between Arconic’s consolidated
estimated annual effective tax rate and the statutory rate
applicable to special items ($7);
•
for the quarter ended December 31, 2016, costs associated with the
separation of Alcoa Inc. ($87), a favorable adjustment to the Firth
Rixson earn-out ($56), a favorable tax benefit related to the
currency impacts of a distribution of previously taxed income
($38), an unfavorable tax impact related to the interim period
treatment of operational losses in certain foreign jurisdictions
for which no tax benefit was recognized ($37), and a favorable tax
impact resulting from the difference between Arconic’s consolidated
estimated annual effective tax rate and the statutory rates
applicable to special items ($26);
•
for the year ended December 31, 2017, an impairment of goodwill
related to the forgings and extrusions business ($719), a gain on
the sale of a portion of Arconic’s investment in Alcoa Corporation
common stock ($351), and a gain on the exchange of the remaining
portion of Arconic’s investment in Alcoa Corporation common stock
($167), a favorable adjustment to the Firth Rixson earn-out ($81),
costs associated with the Company’s early redemption of $1,250 of
outstanding senior notes ($76), proxy, advisory, and
governance-related costs ($58), a favorable adjustment to a
separation-related guarantee liability ($25), costs associated with
the separation of Alcoa Inc. ($18), legal and other advisory costs
related to Grenfell Tower ($14), and costs associated with the
Company’s Delaware reincorporation ($3); and
•
for the year ended December 31, 2016, costs associated with the
separation of Alcoa Inc. ($205), unfavorable tax costs associated
with the redemption of company-owned life insurance policies
($100), a favorable adjustment to the contingent earn-out liability
and a post-closing adjustment both of which related to the 2014
acquisition of Firth Rixson ($76), a favorable tax benefit related
to the currency impacts of a distribution of previously taxed
income ($49), and unfavorable tax costs associated with the sale of
a US subsidiary with book goodwill ($16). (4) The tax impact
on special items is based on the applicable statutory rates whereby
the difference between such rates and Arconic’s consolidated
estimated annual effective tax rate is itself a special item (see
Note 3 above). The average number of shares applicable to
diluted EPS for Net income attributable to Arconic - as adjusted,
includes certain share equivalents as their effect was dilutive.
Specifically:
•
for the quarter ended December 31, 2017, share equivalents
associated with outstanding employee stock options and awards and
shares underlying outstanding convertible debt (acquired through
the acquisition of RTI) were dilutive based on Net income
attributable to Arconic common shareholders – as adjusted,
resulting in a diluted average number of shares of 502,109,950;
•
for the quarter ended September 30, 2017, share equivalents
associated with outstanding employee stock options and awards and
shares underlying outstanding convertible debt (acquired through
the acquisition of RTI) were dilutive based on Net income
attributable to Arconic common shareholders – as adjusted,
resulting in a diluted average number of shares of 462,055,864;
•
for the quarter ended December 31, 2016, share equivalents
associated with outstanding employee stock options and awards and
shares underlying outstanding convertible debt (acquired through
the acquisition of RTI) were dilutive based on Net income
attributable to Arconic common shareholders – as adjusted,
resulting in a diluted average number of shares of 443,779,820;
•
for the year ended December 31, 2017, share equivalents associated
with outstanding employee stock options and awards and shares
underlying outstanding convertible debt (acquired through the
acquisition of RTI) were dilutive based on Net income attributable
to Arconic common shareholders – as adjusted, resulting in a
diluted average number of shares of 471,472,729; and
•
for the year ended December 31, 2016, share equivalents associated
with outstanding employee stock options and awards and shares
underlying outstanding convertible debt (acquired through the
acquisition of RTI) were dilutive based on Net income attributable
to Arconic common shareholders – as adjusted, resulting in a
diluted average number of shares of 453,118,372.
Operational Tax Rate
Quarter endedDecember 31,
2017
Year endedDecember 31,
2017
As
reported
Special
items(1)
As
adjusted
As
reported
Special
items(1)
As
adjusted
(Loss) income from continuing operations before income taxes
$ (455) $ 671 $ 216 $ 470 $ 430 $ 900 Provision for income
taxes $ 272 $ (208) $ 64 $ 544 $ (262) $ 282 Tax rate
N/A 29.6% 115.7% 31.3% Operational tax rate is a non-GAAP financial
measure. Management believes that this measure is meaningful to
investors because management reviews the operating results of
Arconic excluding the impacts of restructuring and other charges,
discrete tax items, and other special items (collectively, “special
items”). There can be no assurances that additional special items
will not occur in future periods. To compensate for this
limitation, management believes that it is appropriate to consider
both the Effective tax rate determined under GAAP as well as the
Operational tax rate. (1) See Adjusted Income reconciliation
above for a description of special items.
Arconic and subsidiaries Calculation of Financial
Measures (unaudited), continued (dollars in millions)
Consolidated Adjusted EBITDA Quarter ended
Year ended
December
31,2017
September 30,
2017
December 31,
2016
December
31,2017
December
31,2016
Net (loss) income attributable to Arconic $ (727) $ 119 $
(1,258) $ (74) $ (941) Discontinued operations(1)
- - (33)
- (121)
(Loss) income from
continuing operations after income taxes
and noncontrolling interests
(727) 119 (1,291) (74) (1,062) Add: Provision for income
taxes 272 53 1,246 544 1,476 Other income, net (114) (1) (54) (640)
(94) Interest expense 98 100 128 496 499 Restructuring and other
charges 47 19 122 165 155 Impairment of goodwill 719 - - 719 -
Provision for depreciation and amortization
141
140 133
551 535 Consolidated
adjusted EBITDA
$ 436 $
430 $ 284 $
1,761 $ 1,509 Add:
Separation costs - - 76 18 193 Proxy, advisory and
governance-related costs - - - 58 - Delaware reincorporation costs
3 - - 3 - Legal and other advisory costs related to Grenfell Tower
7 7 -
14 -
Consolidated adjusted EBITDA, excluding special items
$ 446 $ 437
$ 360 $ 1,854
$ 1,702 Sales $ 3,271 $ 3,236 $
2,967 $ 12,960 $ 12,394 Adjusted EBITDA margin 13.3% 13.3% 9.6%
13.6% 12.2% Adjusted EBITDA margin, excluding special items 13.6%
13.5% 12.1% 14.3% 13.7% Arconic’s definition of Adjusted EBITDA
(Earnings before interest, taxes, depreciation and amortization) is
net margin plus an add-back for depreciation and amortization. Net
margin is equivalent to Sales minus the following items: Cost of
goods sold; Selling, general administrative, and other expenses;
Research and development expenses; and Provision for depreciation
and amortization. Adjusted EBITDA is a non-GAAP financial measure.
Management believes that this measure is meaningful to investors
because Adjusted EBITDA provides additional information with
respect to Arconic’s operating performance and the Company’s
ability to meet its financial obligations. The Adjusted EBITDA
presented may not be comparable to similarly titled measures of
other companies. Additionally, Adjusted EBITDA,
excluding special items is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because
management reviews the operating results of Arconic excluding the
impacts of special items, such as costs associated with the
separation of Alcoa Inc and proxy, advisory and governance-related
costs and legal and other advisory costs related to Grenfell Tower
(collectively “special items”). This measure provides additional
information with respect to Arconic’s operating performance and the
Company’s ability to meet its financial obligations excluding such
costs. (1) On November 1, 2016, the former Alcoa Inc. was
separated into two standalone, publicly-traded companies, Arconic
and Alcoa Corporation, by means of a pro rata distribution of 80.1
percent of the outstanding common stock of Alcoa Corporation to
Alcoa Inc. shareholders. Accordingly, the results of operations of
Alcoa Corporation have been reflected as discontinued operations
for all periods presented.
Arconic and
subsidiaries Calculation of Financial Measures (unaudited),
continued (dollars in millions, except per metric ton
amounts) Segment Measures Engineered Products
and Solutions Quarter ended Year ended
December
31,2017
September
30,2017
December
31,2016
December
31,2017
December
31,2016
Adjusted EBITDA $ 296 $ 312 $ 265 $ 1,224 $ 1,195
Third-party sales $ 1,490 $ 1,476 $ 1,408 $ 5,935 $ 5,728
Adjusted EBITDA Margin 19.9% 21.1% 18.8% 20.6% 20.9%
Global Rolled Products(1) Quarter ended
Year ended
December
31,2017
September
30,2017
December
31,2016
December
31,2017
December
31,2016
Adjusted EBITDA $ 124 $ 140 $ 116 $ 599 $ 577 Total
shipments(2) (thousand metric tons) (kmt) 360 387 353 1,566 1,587
Adjusted EBITDA / Total shipments ($ per metric ton) $ 344 $
362 $ 329 $ 383 $ 364 Third-party sales $ 1,241 $ 1,234 $
1,079 $ 4,992 $ 4,864 Adjusted EBITDA Margin 10.0% 11.3%
10.8% 12.0% 11.9%
Transportation and Construction
Solutions Quarter ended Year ended
December
31,2017
September
30,2017
December
31,2016
December
31,2017
December
31,2016
Adjusted EBITDA $ 84 $ 83 $ 75 $ 321 $ 291
Third-party sales $ 518 $ 517 $ 456 $ 1,985 $ 1,802 Adjusted
EBITDA Margin 16.2% 16.1% 16.4% 16.2% 16.1%
Arconic
Combined Segments Quarter ended Year ended
December
31,2017
September
30,2017
December
31,2016
December
31,2017
December
31,2016
Combined segment adjusted EBITDA $ 504 $ 535 $ 456 $ 2,144 $
2,063 Combined segment third-party sales $ 3,249 $ 3,227 $
2,943 $ 12,912 $ 12,394 Combined segment adjusted EBITDA
margin 15.5% 16.6% 15.5% 16.6% 16.6% Arconic’s definition of
Adjusted EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation and amortization. The Adjusted EBITDA presented
may not be comparable to similarly titled measures of other
companies. (1) Excludes the Warrick, IN rolling
operations and the equity interest in the rolling mill at the joint
venture in Saudi Arabia, both of which were previously part of the
Global Rolled Products segment but became part of Alcoa Corporation
effective November 1, 2016. (2) Includes 54 thousand metric
tons (kmt), 65 kmt, and 54 kmt for the quarters ended December 31,
2017, September 30, 2017, and December 31, 2016, respectively, and
267 kmt and 54 kmt for the years ended December 31, 2017 and
December 31, 2016, respectively, for the Tennessee packaging
business. These amounts represent the volume at Arconic’s Tennessee
operations associated with the toll processing and services
agreement that Arconic and Alcoa Corporation entered into in
connection with the separation of the companies. Pursuant to this
agreement, this amount is not reported in Arconic’s shipments but
has been included in the calculation of Adjusted EBITDA / Total
shipments for historical comparative purposes.
Arconic and subsidiaries Calculation of Financial
Measures (unaudited), continued (dollars in millions)
Organic Revenue Quarter ended Quarter
ended Year ended
December
31,2017
December
31,2016
September
30,2017
September
30,2016
December
31,2017
December
31,2016
Arconic
Sales – Arconic $ 3,271 $ 2,967 $ 3,236 $ 3,138 $ 12,960 $ 12,394
Less: Sales – Tennessee packaging 40 37 45 176 190 552 Sales
– Fusina rolling mill - 37 - 39 54 165 Sales – Remmele Medical - -
- - - 23 Aluminum price impact 124 n/a 115 n/a 407 n/a Foreign
currency impact
40 n/a
17 n/a
30 n/a Arconic Organic
revenue
$ 3,067 $
2,893 $ 3,059 $
2,923 $ 12,279
$ 11,654
Global Rolled
Products Segment (GRP)(1)
Sales – GRP $ 1,241 $ 1,079 $ 1,234 $ 1,285 $ 4,992 $ 4,864
Less: Sales – Tennessee packaging 40 37 45 176 190 552 Sales –
Fusina rolling mill - 37 - 39 54 165 Aluminum price impact 113 n/a
102 n/a 372 n/a Foreign currency impact
10
n/a 5
n/a 21 n/a
GRP Organic revenue
$ 1,078
$ 1,005 $ 1,082
$ 1,070 $ 4,355
$ 4,147
Transportation and
Construction Solutions (TCS)
Sales – TCS $ 518 $ 456 $ 517 $ 450 $ 1,985 $ 1,802 Less:
Aluminum price impact 11 n/a 13 n/a 35 n/a Foreign currency impact
15 n/a
8 n/a 15
n/a TCS Organic revenue
$
492 $ 456 $
496 $ 450 $
1,935 $ 1,802 Organic
revenue is a non-GAAP financial measure. Management believes this
measure is meaningful to investors as it presents revenue on a
comparable basis for all periods presented due to the impact of the
ramp-down and Toll Processing and Services Agreement with Alcoa
Corporation at the North America packaging business at its
Tennessee operations, the sale of the Fusina, Italy rolling mill,
the sale of the Remmele Medical business, and the impact of changes
in aluminum prices and foreign currency fluctuations relative to
the prior year periods.
(1)
Excludes the Warrick, IN rolling
operations and the equity interest in the rolling mill at the joint
venture in Saudi Arabia, both of which were previously part of the
Global Rolled Products segment but became part of Alcoa Corporation
effective November 1, 2016.
Arconic and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions)
Reconciliation of
Adjusted SG&A Excluding Special Items
Quarter ended Year ended
December
31,2017
September 30,
2017
December 31,
2016(1)
December
31,2017
December
31,2016(1)
Sales $ 3,271 $ 3,236 $ 2,967 $ 12,960 $ 12,394
Selling, general administrative,and other
expenses (SG&A)
151 155 269 731 942 SG&A % of sales 4.6% 4.8% 9.1% 5.6%
7.6% Special items: Separation costs - - 76 18 193 Proxy,
advisory and governance-related costs - - - 58 - Delaware
reincorporation costs 3 - - 3 -
Legal and other advisory costsrelated to
Grenfell Tower
7 7 -
14 - Adjusted
SG&A excluding special items
$ 141
$ 148 $ 193
$ 638 $ 749
Adjusted SG&A excludingspecial items
as a % of sales
4.3% 4.6% 6.5% 4.9% 6.1% Adjusted SG&A excluding special items
is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because Adjusted SG&A
excluding special items is more reflective of historical SG&A
cost performance.
(1)
On November 1, 2016, the former Alcoa Inc.
was separated into two standalone, publicly-traded companies,
Arconic and Alcoa Corporation, by means of a pro rata distribution
of 80.1 percent of the outstanding common stock of Alcoa
Corporation to Alcoa Inc. shareholders. Accordingly, the results of
operations of Alcoa Corporation have been reflected as discontinued
operations for all periods presented.
Arconic and subsidiaries Calculation
of Financial Measures (unaudited), continued (dollars in
millions) Free Cash Flow (1) Quarter
ended Year ended
December 31,
2017
September 30,
2017
December 31,
2016
December
31,2017
December 31,
2016
Cash from operations $ 612 $ 172 $ 662 $ 701 $ 870
Capital expenditures
(236 )
(131 ) (311
) (596 )
(1,125 ) Free cash flow
$ 376 $
41 $ 351
$ 105 $
(255 )
Free cash flow is a non-GAAP financial
measure. Management believes that this measure is meaningful to
investors because management reviews cash flows generated from
operations after taking into consideration capital expenditures due
to the fact that these expenditures are considered necessary to
maintain and expand Arconic’s asset base and are expected to
generate future cash flows from operations. It is important to note
that Free cash flow does not represent the residual cash flow
available for discretionary expenditures since other
non-discretionary expenditures, such as mandatory debt service
requirements, are not deducted from the measure.
(1) On November 1, 2016, the former Alcoa Inc. was separated
into two standalone, publicly-traded companies, Arconic and Alcoa
Corporation, by means of a pro rata distribution of 80.1 percent of
the outstanding common stock of Alcoa Corporation to Alcoa Inc.
shareholders. Cash from operations and Capital expenditures for
Alcoa Corporation have not been segregated and are included in this
table for all periods prior to November 1, 2016.
Net Debt
December
31,2017
September
30,2017
June
30,2017
March
31,2017
December 31,
2016
Short-term borrowings $ 37 $ 54 $ 48 $ 47 $ 36 Long-term
debt due within one year 1 1 - - 4 Long-term debt, less amount due
within one year
6,806 6,802
6,796 8,046
8,044 Total debt $ 6,844 $ 6,857 $ 6,844 $ 8,093 $
8,084 Less: Cash and cash equivalents
2,150 1,815
1,785 2,553
1,863 Net debt
$
4,694 $ 5,042 $
5,059 $ 5,540 $
6,221 Net debt is a non-GAAP financial measure.
Management believes that this measure is meaningful to investors
because management assesses Arconic’s leverage position after
factoring in available cash that could be used to repay outstanding
debt.
Arconic and subsidiaries
Calculation of Financial Measures (unaudited), continued
(dollars in millions) Return on Net Assets
(RONA) Year ended December 31, 2017 Net loss
attributable to Arconic $ (74 ) Special items(1) 692
Net income attributable to Arconic – as adjusted $ 618
Net Assets:
December 31, 2017
Add: Receivables from customers, less allowances $ 1,035 Add:
Deferred purchase program(2) 187 Add: Inventories 2,480 Less:
Accounts payable, trade 1,839 Working capital 1,863
Properties, plants, and equipment, net 5,594 Net
assets - total $ 7,457 RONA 8.3 % RONA is a non-GAAP
financial measure. RONA is calculated as adjusted net income
divided by working capital and net PP&E. Management believes
that this measure is meaningful to investors as RONA helps
management and investors determine the percentage of net income the
company is generating from its assets. This ratio tells how
effectively and efficiently the company is using its assets to
generate earnings. (1) See Reconciliation of Adjusted Income
for a description of special items. (2) The Deferred
purchase program relates to an arrangement to sell certain customer
receivables to several financial institutions on a recurring basis.
Arconic is adding back the receivable for the purposes of the
Working capital calculation.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180205005470/en/
Arconic Inc.Investor ContactPatricia Figueroa,
212-836-2758Patricia.Figueroa@arconic.comorMedia
ContactChrista Zipf, 212-836-2605Christa.Zipf@arconic.com
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