Second Quarter 2023 Highlights
- Sales of $2.0 billion, down 22% year over year, up 1%
organically year over year, up 3% from prior quarter
- Net income of $59 million, or $0.58 per share, compared with
$114 million, or $1.05 per share, in second quarter 2022
- Adjusted EBITDA of $198 million, up 10% from second quarter
2022 on a comparable basis excluding Russian Operations
Arconic Corporation (NYSE: ARNC) (“Arconic” or the “Company”)
today reported second quarter 2023 results. Sales were $2.0
billion, down 22% year over year due to lower aluminum prices and
the divestiture of Russian Operations and up 1% organically driven
by strength in aerospace and ground transportation offset by
declines in industrial, packaging, and building and construction.
The Company reported net income of $59 million, or $0.58 per share,
compared with $114 million, or $1.05 per share, in second quarter
2022.
Second quarter 2023 Adjusted EBITDA was $198 million, up 10%
year over year on a comparable basis excluding Russian Operations.
Cash provided from operations was $189 million and capital
expenditures were $57 million.
Second Quarter Segment Performance
Sales by Segment (in millions)
Quarter ended
June 30, 2023
June 30, 2022
As
reported
As
reported
Russia
As
recast
Rolled Products
$
1,529
$
2,113
$
314
$
1,799
Building and Construction Systems
319
329
-
329
Extrusions
125
105
-
105
Adjusted EBITDA (in millions)
Quarter ended
June 30, 2023
June 30, 2022
As
reported
As
reported
Russia
As
recast
Rolled Products
$
158
$
174
$
24
$
150
Building and Construction Systems
53
53
-
53
Extrusions
(1
)
(12
)
-
(12
)
Subtotal
210
215
24
191
Corporate
(12
)
(11
)
-
(11
)
Adjusted EBITDA
$
198
$
204
$
24
$
180
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 the Company’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; the Company’s future financial
results, operating performance, working capital, cash flows,
liquidity and financial position; cost savings and restructuring
programs; the Company’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 the Company’s
perception of historical trends, current conditions and expected
future developments, as well as other factors the Company 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 the Company’s control. Such
risks and uncertainties include, but are not limited to: (i)
continuing uncertainty regarding the impact of the COVID-19
pandemic on our business and the businesses of our customers and
suppliers; (ii) deterioration in global economic and financial
market conditions generally; (iii) unfavorable changes in the end
markets we serve; (iv) 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; (v) adverse changes in discount
rates or investment returns on pension assets; (vi) competition
from new product offerings, disruptive technologies, industry
consolidation or other developments; (vii) the loss of significant
customers or adverse changes in customers’ business or financial
condition; (viii) manufacturing difficulties or other issues that
impact product performance, quality or safety or timely delivery;
(ix) the impact of pricing volatility in raw materials and
inflationary pressures on our costs of production, including
energy; (x) a significant downturn in the business or financial
condition of a key supplier or other supply chain disruptions; (xi)
challenges to or infringements on our intellectual property rights;
(xii) the inability to successfully implement or to realize the
expected benefits of strategic initiatives or projects; (xiii) the
inability to identify or successfully respond to changing trends in
our end markets; (xiv) the impact of potential cyber attacks and
information technology or data security breaches; (xv)
geopolitical, economic, and regulatory risks relating to our global
operations, including compliance with U.S. and foreign trade and
tax laws and other regulations, potential expropriation of
properties located outside the U.S., sanctions, tariffs, embargoes,
and renegotiation or nullification of existing agreements; (xvi)
the outcome of contingencies, including legal proceedings,
government or regulatory investigations, and environmental
remediation and compliance matters; (xvii) 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; (xviii) the timing, receipt
and terms and conditions of any required governmental and
regulatory approvals of the proposed transaction that could reduce
anticipated benefits or cause the parties to abandon the proposed
transaction; (xix) the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement entered into pursuant to the proposed transaction; (xx)
the risk that the parties to the merger agreement may not be able
to satisfy the conditions to the proposed transaction in a timely
manner or at all; (xxi) risks related to disruption of management
time from ongoing business operations due to the proposed
transaction; (xxii) the risk that any announcements relating to the
proposed transaction could have adverse effects on the market price
of the Company’s common stock; (xxiii) the risk of any unexpected
costs or expenses resulting from the proposed transaction; (xxiv)
the risk of any litigation relating to the proposed transaction;
(xxv) the risk that the proposed transaction and its announcement
could have an adverse effect on the ability of the Company to
retain customers and retain and hire key personnel and maintain
relationships with customers, suppliers, employees, stockholders
and other business relationships and on its operating results and
business generally; and (xxvi) the other risk factors summarized in
the Company’s Annual Report on Form 10-K for the year ended
December 31, 2022 and other documents filed by the Company with the
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 set forth
above, even if subsequently made available by the Company on its
website or otherwise. The Company disclaims any intention or
obligation to update 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 Corporation and
subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Quarter ended
June 30,
March 31,
June 30,
2023
2023
2022
Sales
$
1,990
$
1,929
$
2,548
Cost of goods sold (exclusive of expenses
below)(1)
1,724
1,724
2,258
Selling, general administrative, and other
expenses
79
72
73
Research and development expenses
9
9
9
Provision for depreciation and
amortization
52
53
62
Restructuring and other charges(2)
9
—
2
Operating income
117
71
144
Interest expense
25
25
26
Other expenses (income), net(3)
16
11
(35
)
Income before income taxes
76
35
153
Provision for income taxes
17
10
38
Net income
59
25
115
Less: Net income attributable to
noncontrolling interest(4)
—
—
1
NET INCOME ATTRIBUTABLE TO ARCONIC
CORPORATION
$
59
$
25
$
114
EARNINGS PER SHARE ATTRIBUTABLE TO ARCONIC
CORPORATION COMMON STOCKHOLDERS:
Basic:
Net income
$
0.59
$
0.25
$
1.08
Weighted-average number of shares
100,129,944
99,408,330
105,650,970
Diluted:
Net income
$
0.58
$
0.24
$
1.05
Weighted-average number of shares(5)
102,101,982
102,084,961
108,044,957
COMMON STOCK OUTSTANDING AT THE END OF THE
PERIOD
100,343,437
99,424,955
104,499,058
__________________
(1)
In the quarter ended March 31, 2023, Arconic recorded both a $74
charge and a $74 benefit in Cost of goods sold to establish a
liability for a settlement in principle and a receivable for
insurance reimbursement, respectively, related to a litigation
matter.
On May 14, 2022, the Company and the
United Steelworkers reached a tentative four-year labor agreement
covering approximately 3,300 employees at four U.S. locations; the
previous labor agreement expired on May 15, 2022. The tentative
agreement was ratified by the union employees on June 1, 2022. In
the quarter ended June 30, 2022, Arconic recognized $19 in Cost of
goods sold primarily for a one-time signing bonus for the covered
employees.
(2)
On May 4, 2023, Arconic entered into an Agreement and Plan of
Merger to be acquired by funds managed by affiliates of Apollo
Global Management, Inc., as well as a minority investment from
funds managed by affiliates of Irenic Capital Management LP. The
transaction is expected to close in the second half of 2023,
subject to customary closing conditions, including approval by the
Company’s stockholders. Accordingly, in the quarter ended June 30,
2023, Restructuring and other charges includes $11 for costs
incurred related to the proposed merger.
(3)
In the quarter ended June 30, 2022, Other income, net includes a
$54 gain for the remeasurement of monetary balances, primarily
cash, related to the Company’s former operations in Russia 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.
(4)
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 the fourth
quarter of 2022 in connection with this transaction. At a hearing
on December 22, 2022, the Samara Court dismissed the
litigation.
Prior to the sale of Arconic’s operations
in Russia, VSMPO-AVISMA Corporation owned a limited portion of one
of the legal entities included in the sale. VSMPO-AVISMA
Corporation’s share of net income (loss) of this legal entity was
reported in this line item. Subsequent to the sale, there is no
longer a noncontrolling interest in Arconic Corporation and its
subsidiaries.
(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)
June 30,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
266
$
261
Receivables from customers, less
allowances of $2 in 2023 and $1 in 2022
907
791
Other receivables
138
183
Inventories
1,544
1,622
Fair value of hedging instruments and
derivatives
56
21
Prepaid expenses and other current
assets(1)
158
124
Total current assets
3,069
3,002
Properties, plants, and equipment
7,037
6,957
Less: accumulated depreciation and
amortization
4,688
4,596
Properties, plants, and equipment, net
2,349
2,361
Goodwill
294
292
Operating lease right-of-use-assets
110
115
Deferred income taxes
170
188
Other noncurrent assets
54
57
Total assets
$
6,046
$
6,015
LIABILITIES
Current liabilities:
Accounts payable, trade
1,489
1,578
Accrued compensation and retirement
costs
112
119
Taxes, including income taxes
34
43
Environmental remediation
34
40
Operating lease liabilities
36
34
Fair value of hedging instruments and
derivatives
13
7
Other current liabilities(1)
181
150
Total current liabilities
1,899
1,971
Long-term debt
1,598
1,597
Accrued pension benefits
582
586
Accrued other postretirement benefits
295
302
Environmental remediation
38
45
Operating lease liabilities
78
83
Deferred income taxes
6
3
Other noncurrent liabilities
66
71
Total liabilities
4,562
4,658
STOCKHOLDERS’ EQUITY
Common stock
1
1
Additional capital
3,379
3,373
Accumulated deficit
(650
)
(734
)
Treasury stock
(347
)
(346
)
Accumulated other comprehensive loss
(899
)
(937
)
Total stockholders’ equity
1,484
1,357
Total liabilities and stockholders’
equity
$
6,046
$
6,015
__________________
(1)
At December 31, 2022, Arconic established
both a liability of $61 (reported in Other current liabilities) for
a potential settlement and a receivable of $53 (reported in Prepaid
expenses and other current assets) for an anticipated insurance
reimbursement of the potential settlement with respect to certain
U.K. litigation in the Grenfell Tower matter. In the quarter ended
March 31, 2023, the Company paid $43 for legal settlements applied
against the liability and received insurance proceeds of $41. Also,
in the quarter ended March 31, 2023, Arconic established both a
liability of $74 (reported in Other current liabilities) for a
settlement in principle and a receivable of $74 (reported in
Prepaid expenses and other current assets) for an anticipated
insurance reimbursement of the settlement in principle with respect
to separate but related litigation in the Grenfell Tower matter
(see footnote 1 to the Statement of Consolidated Operations
included in this release).
Arconic Corporation and
subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(dollars in millions)
Quarter ended
June 30,
March 31,
June 30,
2023
2023
2022
OPERATING ACTIVITIES
Net income
$
59
$
25
$
115
Adjustments to reconcile net income to
cash provided from (used for) operations:
Depreciation and amortization
52
53
62
Deferred income taxes
3
20
30
Restructuring and other charges(1)
9
—
2
Net periodic pension benefit cost
17
17
18
Stock-based compensation
12
6
8
Other
1
22
(24
)
Changes in assets and liabilities,
excluding effects of acquisitions, divestitures, and foreign
currency translation adjustments:
Decrease (Increase) in receivables(2)
23
(107
)
(31
)
Decrease (Increase) in inventories
116
(34
)
(98
)
(Increase) in prepaid expenses and other
current assets
(16
)
(24
)
(9
)
(Decrease) Increase in accounts payable,
trade
(48
)
5
80
(Decrease) Increase in accrued
expenses
(28
)
(9
)
11
(Decrease) Increase in taxes, including
income taxes
(4
)
(22
)
4
Pension contributions
(9
)
(10
)
(9
)
Decrease in noncurrent assets
1
8
—
Increase in noncurrent liabilities
1
11
3
CASH PROVIDED FROM (USED FOR)
OPERATIONS
189
(39
)
162
FINANCING ACTIVITIES
Net change in short term borrowings
(original maturities of three months or less)(3)
(50
)
50
(50
)
Repurchases of common stock(4)
—
(1
)
(37
)
Other
(12
)
—
1
CASH (USED FOR) PROVIDED FROM FINANCING
ACTIVITIES
(62
)
49
(86
)
INVESTING ACTIVITIES
Capital expenditures
(57
)
(82
)
(33
)
Proceeds from the sale of assets and
businesses
—
7
—
CASH USED FOR INVESTING ACTIVITIES
(57
)
(75
)
(33
)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(1
)
1
(1
)
Net change in cash and cash equivalents
and restricted cash
69
(64
)
42
Cash and cash equivalents and restricted
cash at beginning of period(5)
197
261
210
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD(5)
266
197
252
__________________
(1)
See footnote 2 to the Statement of
Consolidated Operations for the quarter ended June 30, 2023
included in this release.
(2)
Arconic has two separate arrangements,
each with a single financial institution, to sell certain customer
receivables outright without recourse on a continuous basis. All
such sales are at the Company’s discretion. The first arrangement,
which was executed in January 2022, relates to certain of Arconic’s
U.S. operations and automatically renews each year unless
terminated in accordance with the provisions of the underlying
purchase agreement. The second arrangement, which was executed in
July 2022, relates to certain of the Company’s European operations.
Under both arrangements, Arconic serves in an administrative
capacity, including collection of the receivables from the
respective customers and remittance of these cash collections to
the respective financial institution. Accordingly, upon the sale of
customer receivables to the financial institutions, the Company
removes the underlying trade receivables from its Consolidated
Balance Sheet and includes the reduction as a positive amount in
the Decrease (Increase) in receivables line item within Operating
Activities on its Statement of Consolidated Cash Flows. In the
quarters ended June 30, 2023, March 31, 2023, and June 30, 2022,
the Company sold customer receivables of $33, $151, and $329,
respectively, and remitted cash to the financial institutions of
$66, $116, and $267, respectively.
(3)
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 $1,200 senior secured asset-based revolving credit
facility (the “ABL Credit Facility”) to be used, generally, for
working capital or other general corporate purposes. In the
quarters ended June 30, 2023 and March 31, 2023, the Company
borrowed $25 and $150, respectively, and in the quarters ended June
30, 2023, March 31, 2023 and June 30, 2022, repaid $75, $100, and
$50, respectively, under the ABL Credit Facility.
(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. In the quarter ended
March 31, 2023, the Company repurchased 35,615 shares of its common
stock under this program.
In the quarter ended June 30, 2022, the
Company repurchased 1,324,027 shares of its common stock under its
previous share repurchase program, which was authorized in May 2021
and completed in August 2022. Cumulatively, the Company repurchased
9,776,177 shares of its common stock for $300 under this program.
In connection with the authorization of the new program, Arconic’s
previous repurchase program was terminated.
(5)
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
June 30,
March 31,
June 30,
2023
2023
2022
Total Segment Adjusted EBITDA(1)
$
210
$
167
$
215
Unallocated amounts:
Corporate expenses(2)
(11
)
(9
)
(10
)
Stock-based compensation expense
(12
)
(6
)
(8
)
Metal price lag(3)
(20
)
—
30
Unrealized gains (losses) on
mark-to-market hedging instruments and derivatives
18
(20
)
21
Provision for depreciation and
amortization
(52
)
(53
)
(62
)
Restructuring and other charges(4)
(9
)
—
(2
)
Other(5)
(7
)
(8
)
(40
)
Operating income
117
71
144
Interest expense
(25
)
(25
)
(26
)
Other expenses, net(6)
(16
)
(11
)
35
Provision for income taxes
(17
)
(10
)
(38
)
Net income attributable to noncontrolling
interest(7)
—
—
(1
)
Consolidated net income attributable to
Arconic Corporation
$
59
$
25
$
114
__________________
(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. Arconic’s Segment Adjusted EBITDA may not be
comparable to similarly titled measures of other companies’
reportable segments.
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 income.
(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 June 30, 2023
included in this release.
(5)
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).
(6)
See footnote 3 to the Statement of
Consolidated Operations for the quarter ended June 30, 2022
included in this release.
(7)
See footnote 4 to the Statement of
Consolidated Operations included in this release.
Arconic Corporation and
subsidiaries
Calculation of Non-GAAP Financial
Measures (unaudited)
(in millions)
Adjusted EBITDA
Quarter ended
June 30,
March 31,
June 30,
2023
2023
2022
Net income attributable to Arconic
Corporation
$
59
$
25
$
114
Add:
Net income attributable to noncontrolling
interest(1)
—
—
1
Provision for income taxes
17
10
38
Other expenses (income), net(2)
16
11
(35
)
Interest expense
25
25
26
Restructuring and other charges(3)
9
—
2
Provision for depreciation and
amortization
52
53
62
Stock-based compensation
12
6
8
Metal price lag(4)
20
—
(30
)
Unrealized (gains) losses on
mark-to-market hedging instruments and derivatives
(18
)
20
(21
)
Other special items(5)
6
7
39
Adjusted EBITDA
$
198
$
157
$
204
Sales
$
1,990
$
1,929
$
2,548
Adjusted EBITDA Margin
9.9
%
8.1
%
8.0
%
__________________
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; 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 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.
(1)
See footnote 4 to the Statement of
Consolidated Operations included in this release.
(2)
See footnote 3 to the Statement of
Consolidated Operations for the quarter ended June 30, 2022
included in this release.
(3)
See footnote 2 to the Statement of
Consolidated Operations for the quarter ended June 30, 2023
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 June 30, 2023, costs related to several
legal matters, including Grenfell Tower ($4) and other ($2);
- for the quarter ended March 31, 2023, costs related to several
legal matters, including Grenfell Tower ($3) and other ($1), and
other items ($3);
- for the quarter ended June 30, 2022, costs related to a new
labor agreement with the United Steelworkers ($19), a charge for
two environmental remediation matters ($9), costs related to
several legal matters, including Grenfell Tower ($3) and other
($4), and other items ($4).
Adjusted EBITDA excluding Russian
operations(1)
Quarter ended
June 30, 2022
As reported
Russia(1)
As recast(1)
Net income attributable to Arconic
Corporation
$
114
$
57
$
57
Add:
Net income attributable to noncontrolling
interest(2)
1
1
—
Provision for income taxes
38
17
21
Other (income) expenses, net(3)
(35
)
(58
)
23
Interest expense
26
—
26
Restructuring and other charges
2
—
2
Provision for depreciation and
amortization
62
7
55
Stock-based compensation
8
—
8
Metal price lag(4)
(30
)
—
(30
)
Unrealized (gains) losses on
mark-to-market hedging instruments and derivatives
(21
)
—
(21
)
Other special items(5)
39
—
39
Adjusted EBITDA
$
204
$
24
$
180
Sales
$
2,548
$
314
$
2,234
Adjusted EBITDA Margin
8.0
%
7.6
%
8.1
%
__________________
(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 Russian
operations is also a non-GAAP financial measure. On November 15,
2022, Arconic completed the sale of 100% of its operations in
Russia (see footnote 4 to the Statement of Consolidated Operations
included in this release). Accordingly, management believes the
presentation of Adjusted EBITDA excluding Russian operations 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 Russian
operations is the same whether these 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 income attributable to Arconic Corporation and Provision for
income taxes. For example, the 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
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 4 to the Statement of
Consolidated Operations included in this release.
(3)
See footnote 3 to the Statement of
Consolidated Operations included in this release.
(4)
See footnote 4 to the reconciliation of
Adjusted EBITDA included in this release.
(5)
See footnote 5 to the reconciliation of
Adjusted EBITDA included in this release.
Adjusted EBITDA to
Quarter ended
Free Cash Flow Bridge
June 30,
March 31,
December 31,
September 30,
June 30,
2023
2023
2022
2022
2022
Adjusted EBITDA(1)
$
198
$
157
$
154
$
143
$
204
Change in working capital(2)
91
(136
)
65
2
(49
)
Cash payments for:
Environmental remediation
(4
)
(10
)
(4
)
(1
)
(2
)
Pension contributions
(9
)
(10
)
(9
)
(9
)
(9
)
Other postretirement benefits
(7
)
(7
)
(7
)
(7
)
(8
)
Restructuring actions
—
—
—
(2
)
(1
)
Interest
(23
)
(29
)
(24
)
(30
)
(23
)
Income taxes
(14
)
(4
)
1
(3
)
(23
)
Capital expenditures
(57
)
(82
)
(70
)
(47
)
(33
)
Other(3)
(43
)
—
12
(2
)
73
Free Cash Flow(4)
$
132
$
(121
)
$
118
$
44
$
129
__________________
(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: 2Q23-$(20); 1Q23-$—; 4Q22-$8; 3Q22-$15; and
2Q22-$30. See footnote 4 to the 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.
- 2Q23: Cash provided from operations of $189 less capital
expenditures of $57 = free cash flow of $132
- 1Q23: Cash used for operations of $(39) less capital
expenditures of $82 = free cash flow of $(121)
- 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
Reconciliation of Organic
Revenue
Quarter Ended
June 30, 2022
Total
Revenue
$2,548
Less:
Sales – Russian Operations
314
Organic Revenue
$2,234
Quarter Ended
June 30, 2023
Revenue
$1,990
Less:
Sales – Russian Operations
n/a
Aluminum price impact
(255)
Foreign currency impact
(2)
Organic Revenue
$2,247
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230731084489/en/
Investor Contact Shane Rourke (412) 315-2984
Investor.Relations@arconic.com
Media Contact Tracie Gliozzi (412) 992-2525
Tracie.Gliozzi@arconic.com
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