Fourth Quarter 2022 Highlights
- Sales of $1.9 billion, down 9% year over year, up 2%
organically
- Net loss of $273 million, or $2.70 per share, compared with net
loss of $38 million, or $0.36 per share, in fourth quarter 2021.
Fourth quarter 2022 includes a $304 million after-tax loss related
to the sale of the Company’s Russian operations
- Adjusted EBITDA of $154 million; Adjusted EBITDA excluding
Russian Operations of $145 million, down 5% year over year on a
comparable basis
- Repurchased approximately 2.1 million shares at a cost of $46
million
- Sale of Russian operations closed on November 15, 2022
Full Year 2022 Highlights
- Sales of $9.0 billion, up 19% year over year, up 10%
organically
- Net loss of $182 million, or $1.75 per share, compared with net
loss of $397 million, or $3.65 per share, in 2021. Full-year 2022
includes the after-tax loss related to Russia and an after-tax,
non-cash asset impairment charge of $70 million related to the
Extrusions segment business review
- Adjusted EBITDA of $706 million; Adjusted EBITDA excluding
Russian Operations of $635 million, up 2% year over year on a
comparable basis
- Repurchased approximately 6.9 million shares at a cost of $185
million; repurchased approximately 10% of shares outstanding for
$346 million since separation
Arconic Corporation (NYSE: ARNC) (“Arconic” or “the Company”)
today reported fourth quarter 2022 and full year 2022 results.
Fourth Quarter 2022 Results
The Company reported revenue of $1.9 billion, down 9% year over
year and up 2% organically due to growth in the aerospace,
packaging, building and construction, and ground transportation end
markets. The Company reported a net loss of $273 million, or $2.70
per share, in fourth quarter 2022 compared with a net loss of $38
million, or $0.36 per share, in fourth quarter 2021. The fourth
quarter 2022 net loss includes a $304 million after-tax loss
related to the sale of the Company’s Russian operations.
Fourth quarter 2022 Adjusted EBITDA was $154 million and
Adjusted EBITDA excluding Russian Operations was $145 million, down
5% year over year on a comparable basis, primarily due to
operational challenges in the quarter that impacted industrial
output. Cash provided from operations was $188 million and capital
expenditures were $70 million.
Full-Year 2022 Results
Revenues of $9.0 billion increased 19% from 2021 levels and 10%
organically primarily due to sales growth in aerospace, packaging,
building and construction, and ground transportation. A net loss of
$182 million, or $1.75 per share in 2022, compared with net loss of
$397 million, or $3.65 per share, in 2021. The full-year 2022 net
loss includes the after-tax loss related to Russia and an
after-tax, non-cash asset impairment charge related to
Extrusions.
Full-year 2022 Adjusted EBITDA was $706 million and Adjusted
EBITDA excluding Russian Operations was $635 million, up 2% year
over year on a comparable basis. The improvement was primarily
driven by strength in building and construction, aerospace, and
packaging. Cash used for operations was $338 million and capital
expenditures were $245 million.
Tim Myers, Chief Executive Officer, said, “We accomplished a lot
in 2022. We completed our re-entry into North American can sheet at
our facility in Tennessee. We navigated a challenging situation
with our facility in Russia and ultimately divested it for $230
million in cash proceeds. We delivered a record year in our
Building and Construction Systems segment profitability.
Additionally, we repurchased approximately 7 million shares and we
grew organic revenue across the business in the face of volatile
markets.”
Mr. Myers continued, “In 2023, we are focused on continuing to
grow across the markets we serve and improving operational
efficiency and equipment reliability at our key facilities.
Adjusted EBITDA excluding Russian Operations is expected to grow
despite adverse economic conditions in Europe and we expect to
deliver meaningful free cash flow that will allow us to continue
executing our disciplined capital allocation strategy.”
Fourth Quarter Segment
Performance
Revenue by Segment (in millions)
Quarter ended
December 31, 2022
December 31, 2021
Rolled Products
$
1,535
$
1,790
Building and Construction Systems
304
261
Extrusions
109
87
Adjusted EBITDA (in millions)
Quarter ended
December 31, 2022
December 31, 2021
Rolled Products
$
120
$
162
Building and Construction Systems
49
33
Extrusions
(17
)
(9
)
Subtotal
152
186
Corporate
2
(11
)
Adjusted EBITDA
$
154
$
175
Adjusted EBITDA excluding Russian
Operations (in millions)
Quarter ended
December 31, 2022
December 31,
2021
Rolled Products
$
111
$
140
Building and Construction Systems
49
33
Extrusions
(17
)
(9
)
Subtotal
143
164
Corporate
2
(11
)
Adjusted EBITDA
$
145
$
153
Outlook
The Company expects full-year 2023 revenue to be in a range of
$8.0 billion to $8.5 billion (assuming LME aluminum price of
$2,400/mt and Midwest Premium of $600/mt for the full year).
Adjusted EBITDA for the full-year 2023 is expected to be in a range
of $650 million to $700 million. Free cash flow for full-year 2023
is expected to be approximately $250 million.
Share Repurchase Program
The Company repurchased approximately 2.1 million shares in
fourth quarter 2022 for $46 million. In total, the Company has
repurchased approximately 10% of shares outstanding at separation
for $346 million.
Arconic will hold its quarterly conference call at 10:00 AM
Eastern Time on February 21, 2023, to present fourth quarter and
full year 2022 financial results. The call will be webcast on the
Arconic website. Call information and related details are available
at www.arconic.com under “Investors.”
About Arconic
Arconic Corporation (NYSE: ARNC), headquartered in Pittsburgh,
Pennsylvania, is a leading provider of aluminum sheet, plate, and
extrusions, as well as innovative architectural products, that
advance the ground transportation, aerospace, building and
construction, industrial and packaging end markets. For more
information: www.arconic.com.
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,
projections, beliefs or opinions about the future, other than
statements of historical fact, are forward-looking statements,
including, without limitation, statements, relating to the
condition of, or trends or developments in, the ground
transportation, aerospace, building and construction, industrial,
packaging and other end markets; Arconic’s future financial
results, operating performance, working capital, cash flows,
liquidity and financial position; cost savings and restructuring
programs; Arconic's strategies, outlook, business and financial
prospects; share repurchases; costs associated with pension and
other post-retirement benefit plans; projected sources of cash
flow; potential legal liability; the impact of inflationary price
pressures; and the potential impact of public health epidemics or
pandemics, including the COVID-19 pandemic. 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 Arconic believes are
appropriate in the circumstances. Forward-looking statements are
not guarantees of future performance, and actual results may differ
materially from those indicated by these forward-looking statements
due to a variety of risks, uncertainties and changes in
circumstances, many of which are beyond Arconic’s control. Such
risks and uncertainties include, but are not limited to: (a)
continuing uncertainty regarding the impact of the COVID-19
pandemic on our business and the businesses of our customers and
suppliers; (b) deterioration in global economic and financial
market conditions generally; (c) unfavorable changes in the end
markets we serve; (d) the inability to achieve the level of revenue
growth, cash generation, cost savings, benefits of our management
of legacy liabilities, improvement in profitability and margins,
fiscal discipline, or strengthening of competitiveness and
operations anticipated or targeted; (e) adverse changes in discount
rates or investment returns on pension assets; (f) competition from
new product offerings, disruptive technologies, industry
consolidation or other developments; (g) the loss of significant
customers or adverse changes in customers’ business or financial
condition; (h) manufacturing difficulties or other issues that
impact product performance, quality or safety; (i) the impact of
pricing volatility in raw materials and inflationary pressures on
our costs of production; (j) a significant downturn in the business
or financial condition of a key supplier or other supply chain
disruptions; (k) challenges to or infringements on our intellectual
property rights; (l) the inability to realize the expected benefits
of our re-entry into the U.S. packaging market or other strategic
initiatives or projects; (m) the inability to identify or
successfully respond to changing trends in our end markets; (n) the
impact of potential cyber attacks and information technology or
data security breaches; (o) geopolitical, economic, and regulatory
risks relating to our global operations, including compliance with
U.S. and foreign trade and tax laws and other regulations,
sanctions, embargoes, and renegotiation or nullification of
existing agreements; (p) the outcome of contingencies, including
legal proceedings, government or regulatory investigations, and
environmental remediation and compliance matters; (q) the impact of
the ongoing conflict between Russia and Ukraine on economic
conditions in general and on our business and operations, including
sanctions, tariffs, and increased energy prices; and (r) the other
risk factors summarized in Arconic’s Form 10-K for the year ended
December 31, 2022 and other reports filed with the U.S. Securities
and Exchange Commission (SEC). The above list of factors is not
exhaustive or necessarily in order of importance. Market
projections are subject to the risks discussed above and in this
release, and other risks in the market. The statements in this
release are made as of the date of this release, even if
subsequently made available by Arconic on its website or otherwise.
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.
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 financial measures 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 any measure of performance or
financial condition as determined in accordance with GAAP, and
investors should consider Arconic’s performance and financial
condition as reported under GAAP and all other relevant information
when assessing the performance or financial condition of Arconic.
Non-GAAP financial measures have limitations as analytical tools,
and investors should not consider them in isolation or as a
substitute for analysis of the results or financial condition as
reported under GAAP. Non-GAAP financial measures presented by
Arconic may not be comparable to non-GAAP financial measures
presented by other companies. 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. Arconic has not provided reconciliations
of any forward-looking non-GAAP financial measures, such as
adjusted EBITDA and free cash flow, to the most directly comparable
GAAP financial measures because such reconciliations 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 metal
price lag, foreign currency movements, 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 believes such
reconciliations would imply a degree of precision that would be
confusing or misleading to investors.
Arconic Corporation and
subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Quarter ended
December 31,
September 30,
December 31,
2022
2022
2021
Sales
$
1,942
$
2,280
$
2,138
Cost of goods sold (exclusive of expenses
below)(1)
1,744
2,074
1,899
Selling, general administrative, and other
expenses(1)
46
62
64
Research and development expenses
10
9
9
Provision for depreciation and
amortization
56
59
67
Impairment of goodwill(2)
–
–
65
Restructuring and other charges(3)
337
112
12
Operating (loss) income
(251
)
(36
)
22
Interest expense
26
27
26
Other expenses, net(4)
32
27
15
Loss before income taxes
(309
)
(90
)
(19
)
(Benefit) Provision for income taxes
(36
)
(25
)
19
Net loss
(273
)
(65
)
(38
)
Less: Net income attributable to
noncontrolling interest
–
–
–
NET LOSS ATTRIBUTABLE TO ARCONIC
CORPORATION
$
(273
)
$
(65
)
$
(38
)
EARNINGS PER SHARE ATTRIBUTABLE TO ARCONIC
CORPORATION COMMON STOCKHOLDERS:
Basic:
Net loss
$
(2.70
)
$
(0.64
)
$
(0.36
)
Weighted-average number of shares
100,956,393
101,483,656
106,262,953
Diluted:
Net loss
$
(2.70
)
$
(0.64
)
$
(0.36
)
Weighted-average number of shares(5)
100,956,393
101,483,656
106,262,953
COMMON STOCK OUTSTANDING AT THE END OF THE
PERIOD
99,432,194
101,484,590
105,326,885
(1)
In the quarter ended December 31, 2022,
Arconic recorded both a $61 charge and a $53 benefit in Cost of
goods sold to establish a liability for a potential settlement and
a receivable for an anticipated insurance reimbursement,
respectively, related to a litigation matter. Additionally, in the
quarter ended December 31, 2022, the Company recognized a $12
benefit in Selling, general administrative, and other expenses to
establish a receivable for an expected insurance reimbursement of
legal fees related to a litigation matter. See footnote 2 to the
Consolidated Balance Sheet included in this release.
(2)
In the quarter ended December 31, 2021,
Arconic completed its annual review of goodwill for impairment for
each of its three reporting units: Rolled Products, Building and
Construction Systems, and Extrusions. The results of this review
indicated that the carrying value of the Extrusions reporting
unit’s goodwill was fully impaired. Accordingly, in the quarter
ended December 31, 2021, the Company recognized an impairment
charge of $65. This impairment was primarily driven by a
combination of market-based factors, including delays in aerospace
market improvement and significant cost inflation, resulting in
increasingly limited margin expansion. The Company had not
previously identified any triggering events during 2021 prior to
the annual review.
(3)
On November 15, 2022, Arconic completed
the sale of 100% of its operations in Russia to Promishlennie
Investitsii LLC, the majority owner of VSMPO-AVISMA Corporation,
for cash proceeds of $230. The transaction closed after the Company
received all required approvals, resulting in the receipt of the
cash consideration in exchange for all of Arconic’s net assets in
Russia. These net assets included $203 of cash held in Russia that
was not available for distribution to the parent company because of
injunctions imposed as a result of litigation initiated in March
2020 by the Federal Antimonopoly Service of The Russian Federation
(“FAS”). The Company recorded a loss of $306 ($304 after-tax) in
connection with this transaction. At a hearing on December 22,
2022, the Samara Court dismissed the litigation.
In the quarter ended September 30, 2022,
the Company updated its five-year strategic plan, the results of
which indicated that there was a decline in the forecasted
financial performance for the Extrusions segment (and asset group).
As such, management evaluated the recoverability of the long-lived
assets of the Extrusions asset group and, ultimately, determined
that such assets were impaired. Accordingly, in the quarter ended
September 30, 2022, the Company recorded an impairment charge of
$92, composed of $90 for Properties, plants, and equipment and $2
for intangible assets.
Also, in the quarters ended December 31,
2022, September 30, 2022, and December 31, 2021, Restructuring and
other charges includes $31, $15, and $11, respectively, related to
the settlement of a portion of the Company’s U.S. defined benefit
pension plan obligations as a result of elections by certain plan
participants to receive lump-sum benefit payments.
(4)
In the quarter ended September 30, 2022,
Other expenses, net includes an $11 loss for the remeasurement of
monetary balances, primarily cash, related to the Company’s former
operations in Russia (see Note 3) from rubles to the U.S. dollar.
This loss was the result of a significant weakening of the Russian
ruble against the U.S. dollar in the period.
(5)
For periods in which the Company generates
net income, the diluted weighted-average number of shares include
common share equivalents associated with outstanding employee stock
awards. For periods in which the Company generates a net loss, the
diluted weighted-average number of shares does not include any
common share equivalents as their effect is anti-dilutive.
Arconic Corporation and
subsidiaries
Statement of Consolidated Operations
(unaudited), continued
(dollars in millions, except per-share
amounts)
Year ended
December 31,
2022
2021
Sales
$
8,961
$
7,504
Cost of goods sold (exclusive of expenses
below)(1)
8,032
6,573
Selling, general administrative, and other
expenses(1)
246
247
Research and development expenses
37
34
Provision for depreciation and
amortization
237
253
Impairment of goodwill(2)
–
65
Restructuring and other charges(3)
456
624
Operating loss
(47
)
(292
)
Interest expense
104
100
Other expenses, net(4)
41
67
Loss before income taxes
(192
)
(459
)
Benefit for income taxes
(11
)
(62
)
Net loss
(181
)
(397
)
Less: Net income attributable to
noncontrolling interest
1
–
NET LOSS ATTRIBUTABLE TO ARCONIC
CORPORATION
$
(182
)
$
(397
)
EARNINGS PER SHARE ATTRIBUTABLE TO ARCONIC
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net loss
$
(1.75
)
$
(3.65
)
Weighted-average number of shares
103,555,875
108,692,910
Diluted:
Net loss
$
(1.75
)
$
(3.65
)
Weighted-average number of shares(5)
103,555,875
108,692,910
COMMON STOCK OUTSTANDING AT THE END OF THE
PERIOD
99,432,194
105,326,885
(1)
In the quarter ended December 31, 2022,
Arconic recorded both a $61 charge and a $53 benefit in Cost of
goods sold to establish a liability for a potential settlement and
a receivable for an anticipated insurance reimbursement,
respectively, related to a litigation matter. Additionally, in the
quarter ended December 31, 2022, the Company recognized a $12
benefit in Selling, general administrative, and other expenses to
establish a receivable for an expected insurance reimbursement of
legal fees related to a litigation matter. See footnote 2 to the
Consolidated Balance Sheet included in this release.
(2)
In the quarter ended December 31, 2021,
Arconic completed its annual review of goodwill for impairment for
each of its three reporting units: Rolled Products, Building and
Construction Systems, and Extrusions. The results of this review
indicated that the carrying value of the Extrusions reporting
unit’s goodwill was fully impaired. Accordingly, in the quarter
ended December 31, 2021, the Company recognized an impairment
charge of $65. This impairment was primarily driven by a
combination of market-based factors, including delays in aerospace
market improvement and significant cost inflation, resulting in
increasingly limited margin expansion. The Company had not
previously identified any triggering events during 2021 prior to
the annual review.
(3)
In the year ended December 31, 2022,
Restructuring and other charges includes a loss of $306 ($304
after-tax) related to the sale of the Company’s operations in
Russia and an impairment charge of $92 related to a business review
of Arconic’s Extrusions segment (see footnote 3 to the Statement of
Consolidated Operations for the quarters ended December 31, 2022
and September 30, 2022 included in this release), as well as a
charge of $46 related to the settlement of a portion of the
Company’s U.S. defined benefit pension plan obligations as a result
of elections by certain plan participants to receive lump-sum
benefit payments. In the year ended December 31, 2021,
Restructuring and other charges includes $584 related to the
settlement of a portion of the Company’s U.S. defined benefit
pension plan obligations as a result of the purchase of a group
annuity contract ($549) and elections by certain plan participants
to receive lump-sum benefit payments ($35).
(4)
In the year ended December 31, 2022, Other
expenses, net includes a $39 gain for the remeasurement of monetary
balances, primarily cash, related to the Company’s former
operations in Russia (see Note 3) from rubles to the U.S. dollar.
This gain was the result of a significant strengthening of the
Russian ruble against the U.S. dollar in the period.
(5)
For periods in which the Company generates
net income, the diluted weighted-average number of shares include
common share equivalents associated with outstanding employee stock
awards. For periods in which the Company generates a net loss, the
diluted weighted-average number of shares does not include any
common share equivalents as their effect is anti-dilutive.
Arconic Corporation and
subsidiaries
Consolidated Balance Sheet
(unaudited)
(in millions)
December 31,
2022(1)
December 31,
2021(1)
ASSETS
Current assets:
Cash and cash equivalents
$
261
$
335
Receivables from customers, less
allowances of
$1 in both 2022 and 2021
791
922
Other receivables
183
226
Inventories
1,622
1,630
Fair value of hedging instruments and
derivatives
21
1
Prepaid expenses and other current
assets(2)
124
54
Total current assets
3,002
3,168
Properties, plants, and equipment
6,957
7,529
Less: accumulated depreciation and
amortization
4,596
4,878
Properties, plants, and equipment,
net(3)
2,361
2,651
Goodwill
292
322
Operating lease right-of-use-assets
115
122
Deferred income taxes
188
229
Other noncurrent assets
57
88
Total assets
$
6,015
$
6,580
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,578
$
1,718
Accrued compensation and retirement
costs
119
116
Taxes, including income taxes
43
61
Environmental remediation
40
15
Operating lease liabilities
34
35
Fair value of hedging instruments and
derivatives
7
23
Other current liabilities(2)
150
95
Total current liabilities
1,971
2,063
Long-term debt
1,597
1,594
Accrued pension benefits
586
717
Accrued other postretirement benefits
302
411
Environmental remediation
45
49
Operating lease liabilities
83
90
Deferred income taxes
3
12
Other noncurrent liabilities
71
85
Total liabilities
4,658
5,021
EQUITY
Arconic Corporation stockholders’
equity:
Common stock
1
1
Additional capital
3,373
3,368
Accumulated deficit
(734
)
(552
)
Treasury stock(4)
(346
)
(161
)
Accumulated other comprehensive loss
(937
)
(1,111
)
Total Arconic Corporation stockholders’
equity
1,357
1,545
Noncontrolling interest
–
14
Total equity
1,357
1,559
Total liabilities and equity
$
6,015
$
6,580
(1)
On November 15, 2022, Arconic
completed the sale of 100% of its operations in Russia to
Promishlennie Investitsii LLC, the majority owner of VSMPO-AVISMA
Corporation, for cash proceeds of $230. The transaction closed
after the Company received all required approvals, resulting in the
receipt of the cash consideration in exchange for all of Arconic’s
net assets in Russia. Accordingly, the Company’s Consolidated
Balance Sheet as of December 31, 2022 does not include the related
assets and liabilities subject to this transaction. The assets and
liabilities related to Arconic’s now former operations in Russia
were reported in the respective line items on the Company’s
Consolidated Balance as of December 31, 2021, including the
following: Cash and cash equivalents of $79; Receivables from
customers of $120; Inventories of $102; Properties, plants, and
equipment, net of $200; and Accounts payable, trade of $47. See
footnote 3 to the Statement of Consolidated Operations for each of
the quarter and year ended December 31, 2022 and footnote 6 to the
Statement of Consolidated Cash Flows included in this release.
(2)
In the quarter ended December 31,
2022, Arconic established both a liability of $61 (reported in
Other current liabilities) for a potential settlement and a
receivable of $65 (reported in Prepaid expenses and other current
assets) for an anticipated insurance reimbursement of the potential
settlement and related legal fees with respect to a litigation
matter. See footnote 1 to the Statement of Consolidated Operations
for each of the quarter and year ended December 31, 2022 included
in this release.
(3)
In 2022 third quarter, the
Company recorded an impairment charge of $92, including $90 for
Properties, plants, and equipment. See footnote 3 to the Statement
of Consolidated Operations for the quarter ended September 30, 2022
included in this release.
(4)
On November 16, 2022, Arconic
announced that its Board of Directors approved a new share
repurchase program authorizing the Company to repurchase shares of
its outstanding common stock up to an aggregate transactional value
of $200 over a two-year period expiring November 17, 2024. Since
inception, the Company has repurchased 2,071,835 shares of its
common stock for $46 under this program. In August 2022, Arconic
completed its previous share repurchase program, which was
authorized in May 2021, under which the Company repurchased
9,776,177 shares of its common stock for $300. In connection with
the authorization of the new program, Arconic’s previous share
repurchase program was terminated.
Arconic Corporation and
subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(dollars in millions)
Quarter ended
December 31,
September 30,
December 31,
2022
2022
2021
OPERATING ACTIVITIES
Net loss
$
(273
)
$
(65
)
$
(38
)
Adjustments to reconcile net loss to cash
provided from operations:
Depreciation and amortization
56
59
67
Impairment of goodwill(1)
–
–
65
Deferred income taxes
(29
)
(42
)
11
Restructuring and other charges(2)
337
112
12
Net periodic pension benefit cost
28
19
13
Stock-based compensation
(4
)
6
7
Amortization of debt issuance costs
1
2
1
Other
13
5
(1
)
Changes in assets and liabilities,
excluding effects of acquisitions, divestitures, and foreign
currency translation adjustments:
(Increase) Decrease in receivables(3)
(32
)
207
(74
)
Decrease (Increase) in inventories
21
134
(108
)
(Increase) Decrease in prepaid expenses
and other current assets
(49
)
(12
)
6
Increase (Decrease) in accounts payable,
trade
76
(339
)
193
Increase (Decrease) in accrued
expenses
63
(8
)
(74
)
(Decrease) Increase in taxes, including
income taxes
(17
)
14
6
Pension contributions
(9
)
(9
)
(2
)
(Increase) Decrease in noncurrent
assets
(9
)
2
(3
)
Increase in noncurrent liabilities
15
6
15
CASH PROVIDED FROM OPERATIONS
188
91
96
FINANCING ACTIVITIES
Net change in short term borrowings
(original maturities of three months or less)(4)
(150
)
100
–
Repurchases of common stock(5)
(46
)
(86
)
(55
)
Other
(1
)
1
–
CASH (USED FOR) PROVIDED FROM FINANCING
ACTIVITIES
(197
)
15
(55
)
INVESTING ACTIVITIES
Capital expenditures
(70
)
(47
)
(61
)
Proceeds from the sale of assets and
businesses(6)
27
3
1
Other
–
–
4
CASH USED FOR INVESTING ACTIVITIES
(43
)
(44
)
(56
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
1
(2
)
1
Net change in cash and cash equivalents
and restricted cash
(51
)
60
(14
)
Cash and cash equivalents and restricted
cash at beginning of period(7)
312
252
349
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD(7)
$
261
$
312
$
335
(1)
See footnote 2 to the Statement of
Consolidated Operations for the quarter ended December 31, 2021
included in this release.
(2)
See footnote 3 to the Statement of
Consolidated Operations for the quarterly periods presented
included in this release.
(3)
In January 2022, the Company entered into
a one-year arrangement with a financial institution to sell certain
customer receivables outright without recourse on a continuous
basis. All such sales are at Arconic's discretion. Under this
arrangement, the Company serves in an administrative capacity,
including collection of the receivables from the respective
customers and remittance of these cash collections to the financial
institution. Accordingly, upon the sale of customer receivables to
the financial institution, Arconic removes the underlying trade
receivables from the Consolidated Balance Sheet and includes the
reduction as a positive amount in the (Increase) Decrease in
receivables line item within Operating Activities on the Statement
of Consolidated Cash Flows. In the quarters ended December 31, 2022
and September 30, 2022, the Company sold customer receivables of
$156 and $413, respectively, and remitted cash to the financial
institution of $314 and $380, respectively.
(4)
Arconic maintains a five-year credit
agreement, dated May 13, 2020, with a syndicate of lenders named
therein and Deutsche Bank AG New York Branch as administrative
agent (the “ABL Credit Agreement”). The ABL Credit Agreement
provides for a senior secured asset-based revolving credit facility
(the “ABL Credit Facility”) to be used, generally, for working
capital or other general corporate purposes. On February 16, 2022,
the ABL Credit Agreement was amended to increase the revolving
commitments under the ABL Credit Facility to $1,200 from $800. In
the quarters ended December 31, 2022 and September 30, 2022, the
Company borrowed $25 and $150, respectively, and repaid $175 and
$50, respectively, under the ABL Credit Facility.
(5)
In the quarter ended December 31, 2022,
the Company repurchased 2,071,835 shares of its common stock under
a $200 program. In the quarters ended September 30, 2022 and
December 31, 2021, the Company repurchased 3,033,663 and 1,803,800,
respectively, shares of its common stock under a $300 program. See
footnote 4 to the Consolidated Balance Sheet included in this
release.
(6)
In the quarter ended December 31, 2022,
the Company received $230 in cash proceeds related to the sale of
its operations in Russia less $203 in cash held by its operations
in Russia that was not available for distribution to the parent
company because of injunctions imposed as a result of litigation
initiated in March 2020. See footnote 3 to the Statement of
Consolidated Operations for the quarter ended December 31, 2022
included in this release.
(7)
Cash and cash equivalents and restricted
cash at beginning of period for all periods presented and Cash and
cash equivalents and restricted cash at end of period for all
periods presented includes Restricted cash of less than $0.03.
Arconic Corporation and
subsidiaries
Segment Adjusted EBITDA Reconciliation
(unaudited)
(in millions)
Quarter ended
December 31,
September 30,
December 31,
2022
2022
2021
Total Segment Adjusted EBITDA(1)
$
152
$
147
$
186
Unallocated amounts:
Corporate expenses(2)
(6
)
(4
)
(7
)
Stock-based compensation expense
4
(6
)
(7
)
Metal price lag(3)
8
15
11
Unrealized losses on mark-to-market
hedging instruments and derivatives
(10
)
(7
)
–
Provision for depreciation and
amortization
(56
)
(59
)
(67
)
Impairment of goodwill(4)
–
–
(65
)
Restructuring and other charges(5)
(337
)
(112
)
(12
)
Other(6)
(6
)
(10
)
(17
)
Operating (loss) income
(251
)
(36
)
22
Interest expense
(26
)
(27
)
(26
)
Other expenses, net(7)
(32
)
(27
)
(15
)
Benefit (Provision) for income taxes
36
25
(19
)
Net income attributable to noncontrolling
interest
–
–
–
Consolidated net loss attributable to
Arconic Corporation
$
(273
)
$
(65
)
$
(38
)
(1)
Arconic’s profit or loss measure
for its reportable segments is Segment Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization). The
Company calculates Segment Adjusted EBITDA as Total sales
(third-party and intersegment) minus each of (i) Cost of goods
sold, (ii) Selling, general administrative, and other expenses, and
(iii) Research and development expenses, plus each of (i)
Stock-based compensation expense, (ii) Metal price lag (see
footnote 3), and (iii) Unrealized (gains) losses on mark-to-market
hedging instruments and derivatives (see below). Arconic’s Segment
Adjusted EBITDA may not be comparable to similarly titled measures
of other companies’ reportable segments.
Effective in the first quarter of
2022, management modified the Company’s definition of Segment
Adjusted EBITDA to exclude the impact of unrealized gains and
losses on mark-to-market hedging instruments and derivatives. This
modification was deemed appropriate as Arconic is considering
entering into additional hedging instruments in future reporting
periods if favorable conditions exist to mitigate cost inflation.
Certain of these instruments may not qualify for hedge accounting
resulting in unrealized gains and losses being recorded directly to
Sales or Cost of goods sold, as appropriate (i.e., mark-to-market).
Additionally, this change was also applied to derivatives that do
not qualify for hedge accounting for consistency purposes. The
Company does not have a regular practice of entering into contracts
that are treated as derivatives for accounting purposes.
Ultimately, this change was made to maintain the transparency and
visibility of the underlying operating performance of Arconic’s
reportable segments. Prior to this change, the Company had a
limited number of hedging instruments and derivatives that did not
qualify for hedge accounting, the unrealized impact of which was
not material to Arconic’s Segment Adjusted EBITDA performance
measure. Accordingly, periods prior to the effective date of this
change were not recast to reflect this change.
Total Segment Adjusted EBITDA is
the sum of the respective Segment Adjusted EBITDA for each of the
Company’s three reportable segments: Rolled Products, Building and
Construction Systems, and Extrusions. This amount is being
presented for the sole purpose of reconciling Segment Adjusted
EBITDA to the Company’s Consolidated net loss.
(2)
Corporate expenses are composed
of general administrative and other expenses of operating the
corporate headquarters and other global administrative
facilities.
(3)
Metal price lag represents the
financial impact of the timing difference between when aluminum
prices included in Sales are recognized and when aluminum purchase
prices included in Cost of goods sold are realized. This adjustment
aims to remove the effect of the volatility in metal prices and the
calculation of this impact considers applicable metal hedging
transactions.
(4)
See footnote 2 to the Statement
of Consolidated Operations for the quarter ended December 31, 2021
included in this release.
(5)
See footnote 3 to the Statement
of Consolidated Operations for the quarterly periods presented
included in this release.
(6)
Other includes certain items that
impact Cost of goods sold and Selling, general administrative, and
other expenses on the Company’s Statement of Consolidated
Operations that are not included in Segment Adjusted EBITDA,
including those described as “Other special items” (see footnote 5
to the reconciliation of Adjusted EBITDA within Calculation of
Non-GAAP Financial Measures included in this release).
(7)
See footnote 4 to the Statement
of Consolidated Operations for the quarter ended September 30, 2022
included in this release.
Arconic Corporation and
subsidiaries
Calculation of Non-GAAP Financial
Measures (unaudited)
(in millions)
Adjusted EBITDA
Quarter ended
Year ended
December 31,
September 30,
December 31,
December 31,
December 31,
2022
2022
2021
2022
2021
Net loss attributable to Arconic
Corporation
$
(273
)
$
(65
)
$
(38
)
$
(182
)
$
(397
)
Add:
Net income attributable to noncontrolling
interest
–
–
–
1
–
(Benefit) Provision for income taxes
(36
)
(25
)
19
(11
)
(62
)
Other expenses, net(1)
32
27
15
41
67
Interest expense
26
27
26
104
100
Restructuring and other charges(2)
337
112
12
456
624
Impairment of goodwill(3)
–
–
65
–
65
Provision for depreciation and
amortization
56
59
67
237
253
Stock-based compensation
(4
)
6
7
15
22
Metal price lag(4)
(8
)
(15
)
(11
)
(17
)
16
Unrealized losses (gains) on
mark-to-market hedging instruments and derivatives
10
7
–
(6
)
–
Other special items(5)
14
10
13
68
24
Adjusted EBITDA
$
154
$
143
$
175
$
706
$
712
Sales
$
1,942
$
2,280
$
2,138
$
8,961
$
7,504
Adjusted EBITDA Margin
7.9
%
6.3
%
8.2
%
7.9
%
9.5
%
Arconic’s definition of Adjusted EBITDA
(Earnings before interest, taxes, depreciation, and amortization)
is net margin plus an add-back for the following items: Provision
for depreciation and amortization; Stock-based compensation; Metal
price lag (see footnote 4); Unrealized (gains) losses on
mark-to-market hedging instruments and derivatives (see below); and
Other special items. 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. Special
items are composed of restructuring and other charges, discrete
income tax items, and other items as deemed appropriate by
management. There can be no assurances that additional special
items will not occur in future periods. 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.
Effective in the first quarter of 2022,
management modified the Company’s definition of Adjusted EBITDA to
exclude the impact of unrealized gains and losses on mark-to-market
hedging instruments and derivatives. This modification was deemed
appropriate as Arconic is considering entering into additional
hedging instruments in future reporting periods if favorable
conditions exist to mitigate cost inflation. Certain of these
instruments may not qualify for hedge accounting resulting in
unrealized gains and losses being recorded directly to Sales or
Cost of goods sold, as appropriate (i.e., mark-to-market).
Additionally, this change was also applied to derivatives that do
not qualify for hedge accounting for consistency purposes. The
Company does not have a regular practice of entering into contracts
that are treated as derivatives for accounting purposes.
Ultimately, this change was made to maintain the transparency and
visibility of the underlying operating performance of Arconic.
Prior to this change, the Company had a limited number of hedging
instruments and derivatives that did not qualify for hedge
accounting, the unrealized impact of which was not material to
Arconic’s Adjusted EBITDA. Accordingly, periods prior to the
effective date of this change were not recast to reflect this
change.
(1)
See footnote 4 for the quarter
ended September 30, 2022 and for the year ended December 31, 2022
to the respective Statement of Consolidated Operations included in
this release.
(2)
See footnote 3 for the quarterly
and annual periods presented to the respective Statement of
Consolidated Operations included in this release.
(3)
See footnote 2 for the quarter
and year ended December 31, 2021 to the respective Statement of
Consolidated Operations included in this release.
(4)
Metal price lag represents the
financial impact of the timing difference between when aluminum
prices included in Sales are recognized and when aluminum purchase
prices included in Cost of goods sold are realized. This adjustment
aims to remove the effect of the volatility in metal prices and the
calculation of this impact considers applicable metal hedging
transactions.
(5)
Other special items include the
following:
- for the quarter ended December 31, 2022, a charge related
to environmental remediation matters ($9), costs related to several
legal matters ($1), and other items ($4);
- for the quarter ended September 30, 2022, a charge related to
the Grasse River environmental remediation matter ($9), costs
related to the Grenfell Tower legal matter ($3), and other items
($(2));
- for the quarter ended December 31, 2021, costs related to
several legal matters, including Grenfell Tower ($4) and other
($2), costs related to both an equipment fire and packaging restart
at the Tennessee rolling mill ($5), and other items ($2);
- for the year ended December 31, 2022, a charge related to
several environmental remediation matters ($27), costs related to a
new labor agreement with the United Steelworkers ($19), costs
related to several legal matters, including Grenfell ($9) and other
($4), and other items ($9); and
- for the year ended December 31, 2021, costs related to several
legal matters, including Grenfell Tower ($8) and other ($13), a
partial reversal of a previously established reserve related to the
Grasse River environmental remediation ($11), costs related to both
the packaging restart and an equipment fire at the Tennessee
rolling mill ($7), a write-down of inventory related to the idling
of both the remaining operations at the Chandler (Arizona)
extrusions facility and the casthouse operations at the Lafayette
(Indiana) extrusions facility ($4), and other items
($3).
Arconic Corporation and
subsidiaries
Calculation of Non-GAAP Financial
Measures (unaudited)
(in millions)
Adjusted EBITDA
excluding Russia(1)
Quarter ended
Quarter ended
December 31, 2022
December 31, 2021
As
reported
Russia(1)
As
recast(1)
As
reported
Russia(1)
As
recast(1)
Net (loss) income attributable to Arconic
Corporation
$
(273
)
$
7
$
(280
)
$
(38
)
$
11
$
(49
)
Add:
Net income attributable to noncontrolling
interest
–
–
–
–
–
–
(Benefit) Provision for income taxes
(36
)
–
(36
)
19
3
16
Other expenses (income), net
32
(1
)
33
15
2
13
Interest expense
26
–
26
26
–
26
Restructuring and other charges(2)
337
–
337
12
–
12
Impairment of goodwill(3)
–
–
–
65
–
65
Provision for depreciation and
amortization
56
3
53
67
6
61
Stock-based compensation
(4
)
–
(4
)
7
–
7
Metal price lag(4)
(8
)
–
(8
)
(11
)
–
(11
)
Unrealized losses on mark-to-market
hedging instruments and derivatives
10
–
10
–
–
–
Other special items(5)
14
–
14
13
–
13
Adjusted EBITDA
$
154
$
9
$
145
$
175
$
22
$
153
Sales
$
1,942
$
116
$
1,826
$
2,138
$
280
$
1,858
Adjusted EBITDA Margin
7.9
%
7.8
%
7.9
%
8.2
%
7.9
%
8.2
%
Adjusted EBITDA
excluding Russia(1)
Year ended
Year ended
December 31, 2022
December 31, 2021
As
reported
Russia(1)
As
recast(1)
As
reported
Russia(1)
As
recast(1)
Net (loss) income attributable to Arconic
Corporation
$
(182
)
$
75
$
(257
)
$
(397
)
$
46
$
(443
)
Add:
Net income attributable to noncontrolling
interest
1
1
–
–
–
–
(Benefit) Provision for income taxes
(11
)
17
(28
)
(62
)
14
(76
)
Other expenses (income), net(6)
41
(44
)
85
67
2
65
Interest expense
104
–
104
100
–
100
Restructuring and other charges(2)
456
–
456
624
–
624
Impairment of goodwill(3)
–
–
–
65
–
65
Provision for depreciation and
amortization
237
22
215
253
25
228
Stock-based compensation
15
–
15
22
–
22
Metal price lag(4)
(17
)
–
(17
)
16
–
16
Unrealized gains on mark-to-market hedging
instruments and derivatives
(6
)
–
(6
)
–
–
–
Other special items(5)
68
–
68
24
–
24
Adjusted EBITDA
$
706
$
71
$
635
$
712
$
87
$
625
Sales
$
8,961
$
903
$
8,058
$
7,504
$
968
$
6,536
Adjusted EBITDA Margin
7.9
%
7.9
%
7.9
%
9.5
%
9.0
%
9.6
%
(1)
Adjusted EBITDA is a non-GAAP
financial measure. See the reconciliation of Adjusted EBITDA
included in this release for (i) the Company’s definition of
Adjusted EBITDA and (ii) management’s rationale for the
presentation of this non-GAAP measure. The “As reported” column
presents a reconciliation of this non-GAAP measure to the most
directly comparable GAAP measure.
Adjusted EBITDA excluding Russia
is also a non-GAAP financial measure. On November 15, 2022, Arconic
completed the sale of 100% of its operations in Russia (see
footnote 3 to the Statement of Consolidated Operations for the
quarter ended December 31, 2022 included in this release).
Accordingly, management believes the presentation of Adjusted
EBITDA excluding Russia is meaningful to investors because such
measure provides context as to the contribution made by the
Company’s former operations in Russia relative to Arconic’s total
financial performance. Additionally, this measure provides a
historical basis with which to compare the Company’s financial
performance in future periods.
The “Russia” column presents the
unaudited combined financial information of Arconic’s subsidiaries
that held the Company’s former operations in Russia prepared from
the historical accounting records of these legal entities. This
information is not equivalent to that which would be presented as
consolidated financial information prepared in accordance with
accounting principles generally accepted in the United States of
America if these subsidiaries were to be presented as a standalone
consolidated reporting entity. Other amounts related to Arconic’s
former operations in Russia recorded in the historical accounting
records of other legal entities included in the Company’s
consolidated group, such as the loss on the sale of the previously
mentioned former subsidiaries recorded by the direct parent company
of these legal entities, were presented in the “As recast” column.
However, the amount presented as Adjusted EBITDA excluding Russia
is the same whether these other amounts related to Arconic’s former
operations in Russia are presented in the “Russia” column or the
“As recast” column.
The amounts in the “As recast”
column are equal to the amounts in the “As reported” column less
the amounts in the “Russia” column. Consequently, there are
limitations in the usefulness of the amounts presented in the “As
recast” column for Net (loss) income attributable to Arconic
Corporation and (Benefit) Provision for income taxes. For example,
the (Benefit) Provision for income taxes would need to be
recalculated on a “without” approach to consider the consolidated
company excluding the former operations in Russia, the impact of
which may extend beyond subtracting the amount for (Benefit)
Provision for income taxes presented in the “Russia” column from
the consolidated amount in the “As reported” column. Conversely,
the amount presented for Adjusted EBITDA excluding Russia does not
contain any such limitations.
(2)
See footnote 3 for the quarterly
and annual periods presented to the respective Statement of
Consolidated Operations included in this release.
(3)
See footnote 2 for the quarter
and year ended December 31, 2021 to the respective Statement of
Consolidated Operations included in this release.
(4)
See footnote 4 for the quarterly
and annual periods presented to the reconciliation of Adjusted
EBITDA included in this release.
(5)
See footnote 5 for the quarterly
and annual periods presented to the reconciliation of Adjusted
EBITDA included in this release.
(6)
See footnote 4 for the year ended
December 31, 2022 to the Statement of Consolidated Operations
included in this release.
Adjusted EBITDA to
Free Cash Flow Bridge
Quarter ended
December 31,
September 30,
June 30,
March 31,
December 31,
2022
2022
2022
2022
2021
Adjusted EBITDA(1)
$
154
$
143
$
204
$
205
$
175
Change in working capital(2)
65
2
(49
)
(200
)
11
Cash payments for:
Environmental remediation
(4
)
(1
)
(2
)
(4
)
(40
)
Pension contributions
(9
)
(9
)
(9
)
(4
)
(2
)
Other postretirement benefits
(7
)
(7
)
(8
)
(8
)
(10
)
Restructuring actions
–
(2
)
(1
)
(2
)
(4
)
Interest
(24
)
(30
)
(23
)
(29
)
(22
)
Income taxes
1
(3
)
(23
)
(4
)
(10
)
Capital expenditures
(70
)
(47
)
(33
)
(95
)
(61
)
Other(3)
12
(2
)
73
(57
)
(2
)
Free Cash Flow(4)
$
118
$
44
$
129
$
(198
)
$
35
(1)
Adjusted EBITDA is a non-GAAP
financial measure. See the reconciliation of Adjusted EBITDA
included in this release for (i) Arconic’s definition of Adjusted
EBITDA, (ii) management’s rationale for the presentation of this
non-GAAP measure, and (iii) a reconciliation of this non-GAAP
measure to the most directly comparable GAAP measure.
(2)
Arconic’s definition of working
capital is Receivables plus Inventories less Accounts payable,
trade.
(3)
Other includes the impact of
metal price lag as follows: 4Q22-$8; 3Q22-$15; 2Q22-$30;
1Q22-$(36); and 4Q21-$11. See footnote 4 in reconciliation of
Adjusted EBITDA included in this release for additional information
on metal price lag.
(4)
Arconic’s definition of Free Cash
Flow is Cash from operations less capital expenditures. 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, which are both necessary to maintain and
expand the Company’s asset base and 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.
- 4Q22: Cash provided from
operations of $188 less capital expenditures of $70 = free cash
flow of $118
- 3Q22: Cash provided from operations of $91 less capital
expenditures of $47 = free cash flow of $44
- 2Q22: Cash provided from operations of $162 less capital
expenditures of $33 = free cash flow of $129
- 1Q22: Cash used for operations of $(103) less capital
expenditures of $95 = free cash flow of $(198)
- 4Q21: Cash provided from operations of $96 less capital
expenditures of $61 = free cash flow of $35
Reconciliation of Organic
Revenue
(in millions)
Quarter Ended
December 31, 2021
Total
Revenue
$2,138
Less:
Sales – Samara
280
Organic Revenue
$1,858
Quarter Ended
December 31, 2022
Revenue
$1,948
Less:
Sales - Samara
116
Aluminum price impact
(35)
Foreign currency impact
(31)
Organic Revenue
$1,898
Year Ended
December 31, 2021
Total
Revenue
$7,504
Less:
Sales – Samara
280
Organic Revenue
$7,224
Year Ended
December 31, 2022
Revenue
$8,967
Less:
Sales - Samara
116
Aluminum price impact
969
Foreign currency impact
(83)
Organic Revenue
$7,965
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 divestitures, changes in
aluminum prices and foreign currency fluctuations relative to the
prior year period.
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Investor Contact Shane Rourke (412) 315-2984
Investor.Relations@arconic.com Media Contact Tracie Gliozzi
(412) 992-2525 Tracie.Gliozzi@arconic.com
Arconic (NYSE:ARNC)
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Arconic (NYSE:ARNC)
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부터 12월(12) 2023 으로 12월(12) 2024
