EX-99.1 21 tv531454_ex99-1.htm EXHIBIT 99.1 tv531454_ex99-1 - none - 29.195457s
 Exhibit 99.1​
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[         ], 2020
Dear Arconic Inc. Stockholder:
In February 2019, we announced our plan to separate into two independent, publicly traded companies. The separation will occur through a distribution by Arconic Inc. (“ParentCo”) of all of the outstanding shares of a newly formed company named Arconic Rolled Products Corporation (“Arconic Corporation”), consisting of the Rolled Products, Extrusions, and Building and Construction Systems businesses, which we expect will continue to be a global leader in manufacturing aluminum sheet, plate, extrusions and architectural products and systems, serving primarily the ground transportation, aerospace, building and construction, industrial, and packaging end-markets.
In conjunction with the separation, ParentCo, the existing publicly traded company, will remain publicly traded and will change its name to “Howmet Aerospace Inc.” (“Howmet Aerospace”) and its stock symbol from “ARNC” to “HWM”, and “Arconic Rolled Products Corporation” will change its name to “Arconic Corporation” and will apply for authorization to list its common stock on the New York Stock Exchange under the symbol “ARNC.” Howmet Aerospace will consist of the Engines, Fastening Systems, Engineered Structures, and Forged Wheels businesses, and will be a developer and manufacturer of high performance products mainly for the aerospace (commercial and defense), commercial transportation, and industrial end markets.
The separation is expected to create two industry-leading, independent public companies with distinct product portfolios and corporate strategies. The companies will have distinct business profiles, and the separation will allow each company to effectively allocate resources and deploy capital in line with their individual growth priorities and cash flow profiles. As separate entities, each company will be positioned to pursue its own independent strategies and capture opportunities in increasingly competitive and rapidly evolving markets.
Upon completion of the separation, each ParentCo stockholder as of  [           ], 2020, the record date for the distribution, will continue to own shares of ParentCo (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace shares) and will receive a pro rata share of the outstanding common stock of Arconic Corporation. Each ParentCo stockholder will receive [      ] shares of Arconic Corporation common stock for every share of ParentCo common stock held as of the close of business on the record date. Arconic Corporation common stock will be issued in book-entry form only, which means that no physical share certificates will be issued. For U.S. federal income tax purposes, the distribution is intended to be generally tax free to ParentCo stockholders. No vote of ParentCo stockholders is required for the distribution. You do not need to take any action to receive shares of Arconic Corporation to which you are entitled as a ParentCo stockholder, and you do not need to pay any consideration or surrender or exchange your ParentCo common stock.
We encourage you to read the attached information statement, which is being provided to all ParentCo stockholders that held shares on the record date for the distribution. The information statement describes the distribution in respect of Arconic Corporation in detail and contains important business and financial information about Arconic Corporation. The included financial statements of Arconic Corporation are prepared from ParentCo’s historical accounting records and contain certain allocations of ParentCo costs as required, and we encourage you to read them together with the pro forma financial information included in the attached information statement, which gives effect to the separation and reflects Arconic Corporation’s anticipated post-separation capital structure, including the assignment of certain assets and assumption of certain liabilities not included in the historical financial statements.

We believe the separation provides tremendous opportunities for our businesses, as we work to continue to build long-term value. We appreciate your continuing support of Arconic Inc., and look forward to your future support of Howmet Aerospace and Arconic Corporation.
Sincerely,
[          ]
John C. Plant
Chairman and Chief Executive Officer
Arconic Inc.

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[         ], 2020
Dear Future Arconic Corporation Stockholder:
I am excited to welcome you as a future stockholder of Arconic Rolled Products Corporation (“Arconic Corporation”). Arconic Corporation is a global leader in manufacturing aluminum sheet, plate, extrusions and architectural products and systems, serving primarily the ground transportation, aerospace, building and construction, industrial, and packaging end-markets. We have a leading position in the growing North American automotive aluminum sheet market, and we are a leading supplier of aluminum sheet and plate to the aerospace market. We supply industrial and commercial transportation products to customers around the world. Our Building and Construction Systems products carry recognized brand names and hold strong market positions in North America and Europe.
We believe we will be attractively positioned to:

Serve target markets — ground transportation, aerospace, building and construction, industrial and packaging — in which we have market-leading positions and long-standing, collaborative relationships with customers;

Build on our demonstrated track record developing differentiated products backed by advanced expertise and technological capabilities, focusing on technologically advanced products that facilitate long-term relationships as a key supplier to our customers;

Serve our customers’ needs for advanced lightweight materials through a global network of efficient facilities with a broad range of capabilities operated by a highly skilled workforce;

Grow by continuing to target investment in high-return opportunities in core market segments that exhibit attractive characteristics, including growing demand for high-strength, lightweight aluminum; and

Drive capital efficiency and operational performance by pursuing highly efficient operations through smart manufacturing.
Upon completion of the separation, “Arconic Rolled Products Corporation” will be renamed “Arconic Corporation,” and we intend to list Arconic Corporation’s common stock on the New York Stock Exchange under the symbol “ARNC.” ParentCo, to be renamed “Howmet Aerospace Inc.,” will change its stock symbol from “ARNC” to “HWM” in connection with the separation.
Arconic Corporation has a rich history and our vision for the future is clear. We intend to build innovative solutions and create value for our customers, strengthening our partnership with them. We plan to ensure operational excellence, invest in the growth of our company and generate strong cash flow, providing the best outcomes for our stockholders. We will strive to attract and maintain superior talent, treat our employees with respect and operate with the highest of ethical values. We look forward to our future as an independent, publicly traded company and to your support as a holder of Arconic Corporation common stock.
Sincerely,
[          ]
[       ]
Chief Executive Officer
Arconic Rolled Products Corporation

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended.
Preliminary and Subject to Completion, Dated December 16, 2019
INFORMATION STATEMENT
Arconic Rolled Products Corporation
This information statement is being furnished in connection with the distribution by Arconic Inc. (“ParentCo”) to its stockholders of the outstanding shares of common stock of Arconic Rolled Products Corporation (“Arconic Corporation”), a wholly owned subsidiary of ParentCo that will hold the assets and liabilities associated with ParentCo’s Rolled Products, Extrusions, and Building and Construction Systems businesses. To implement the separation, ParentCo currently plans to distribute all of the shares of Arconic Corporation common stock on a pro rata basis to ParentCo stockholders in a distribution that is intended to qualify as generally tax-free to the ParentCo stockholders for U.S. federal income tax purposes.
For every share of common stock of ParentCo held of record by you as of the close of business on [           ], 2020, which is the record date for the distribution, you will receive [      ] shares of Arconic Corporation common stock. You will receive cash in lieu of any fractional shares of Arconic Corporation common stock that you would have received after application of the above ratio. As discussed under “The Separation and Distribution — Trading Between the Record Date and the Distribution Date,” if you sell your shares of ParentCo common stock in the “regular-way” market after the record date up to, and including through, the distribution date, you also will be selling your right to receive shares of Arconic Corporation common stock in connection with the distribution. We expect the shares of Arconic Corporation common stock to be distributed by ParentCo to you at [  ], Eastern Time, on [           ], 2020. We refer to the date of the distribution of the Arconic Corporation common stock as the “distribution date.”
Until the separation occurs, Arconic Corporation will be a wholly owned subsidiary of ParentCo, and consequently, ParentCo will have the sole and absolute discretion to determine and change the terms of the separation (or to terminate the separation), including the establishment of the record date for the distribution and the distribution date, as well as to modify the amount of outstanding shares of common stock of Arconic Corporation that it will retain, if any, following the distribution.
No vote of ParentCo stockholders is required for the distribution. Therefore, you are not being asked for a proxy, and you are requested not to send ParentCo a proxy, in connection with the distribution. You do not need to pay any consideration, exchange or surrender your existing shares of ParentCo common stock or take any other action to receive your shares of Arconic Corporation common stock.
There is no current trading market for Arconic Corporation common stock, although we expect that a limited market, commonly known as a “when-issued” trading market, will develop on or shortly before the record date for the distribution, and we expect “regular-way” trading of Arconic Corporation common stock to begin on the first trading day following the completion of the distribution. “Arconic Rolled Products Corporation” will change its name to “Arconic Corporation” and intends to have its common stock authorized for listing on the New York Stock Exchange (the “NYSE”) under the symbol “ARNC.” ParentCo will be renamed “Howmet Aerospace Inc.”(“Howmet Aerospace”) and will change its stock symbol from “ARNC” to “HWM” in connection with the separation.
In reviewing this information statement, you should carefully consider the matters described under the section entitled “Risk Factors” beginning on page 21.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
The date of this information statement is [           ], 2020.
This information statement was first made available to ParentCo stockholders on or about [      ], 2020.

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F-1
Presentation of Information
Unless the context otherwise requires:

The information included in this information statement about Arconic Corporation, including the Combined Financial Statements of Arconic Corporation, which primarily comprise the assets and liabilities of ParentCo’s Arconic Corporation Businesses, assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution.

References in this information statement to “Arconic Corporation,” “we,” “us,” “our,” “our Company” and “the Company” refer to Arconic Rolled Products Corporation, a Delaware corporation, and its consolidated subsidiaries.

References in this information statement to “ParentCo” refer to Arconic Inc., a Delaware corporation, and its consolidated subsidiaries, including the Arconic Corporation Businesses, prior to completion of the separation and the distribution, and refer to Howmet Aerospace and its consolidated subsidiaries after the completion of the separation and the distribution, unless otherwise specified.

References in this information statement to the “Arconic Corporation Businesses” refer to the rolled aluminum products, aluminum extrusions, and architectural products operations of ParentCo, as well as the Latin America extrusions operations sold in April 2018.
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References in this information statement to “Howmet Aerospace” refer to ParentCo after the completion of the separation and the distribution, following which ParentCo will change its name to “Howmet Aerospace Inc.” and its business will comprise the Howmet Aerospace Businesses.

References in this information statement to the “Howmet Aerospace Businesses” refer to the engines, engineered structures, fastening systems, and forged wheels operations of ParentCo.

References in this information statement to the “separation” refer to the separation of the Arconic Corporation Businesses from ParentCo’s other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Arconic Corporation, to hold the assets and liabilities associated with the Arconic Corporation Businesses after the distribution.

References in this information statement to the “2016 Separation Transaction” refer to the separation of Alcoa Inc. into two standalone, publicly traded companies, Arconic Inc. and Alcoa Corporation, on November 1, 2016.

References in this information statement to the “distribution” refer to the distribution of all of Arconic Corporation’s issued and outstanding shares of common stock to ParentCo stockholders as of the close of business on the record date for the distribution.

References in this information statement to Arconic Corporation’s per share data assume a distribution ratio of  [      ] shares of Arconic Corporation common stock for every share of ParentCo common stock.

References in this information statement to Arconic Corporation’s historical assets, liabilities, products, businesses or activities generally refer to the historical assets, liabilities, products, businesses or activities of the Arconic Corporation Businesses as the businesses were conducted as part of ParentCo prior to the completion of the separation.
Trademarks and Trade Names
Among the trademarks that Arconic Corporation owns or has rights to use that appear in this information statement are the names “Arconic,” “Arconic 951,” “A951,” “Kawneer,” “Reynobond” and “Reynolux.” Solely for convenience, we only use the ® symbol the first time any trademark or trade name is mentioned. Each trademark or trade name of any other company appearing in this information statement is, to our knowledge, owned by such other company.
Industry and Market Information
Unless indicated otherwise, the information concerning the industries and markets in which Arconic Corporation participates contained in this information statement is based on Arconic Corporation’s general knowledge of and expectations concerning the industry. The market positions, shares, market sizes and growth estimates included in this information statement are based on estimates using Arconic Corporation’s internal data and estimates, based on data from various industry analyses, our internal research and adjustments and assumptions that we believe to be reasonable. Arconic Corporation has not independently verified data from industry analyses and cannot guarantee their accuracy or completeness. In addition, Arconic Corporation believes that data regarding the industry, market positions, shares, market sizes and growth estimates provide general guidance but are inherently imprecise. Further, Arconic Corporation’s estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in the “Risk Factors” section. These and other factors could cause results to differ materially from those expressed in the estimates and assumptions. Accordingly, investors should not place undue reliance on this information.
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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION
What is Arconic Corporation and why is ParentCo separating the Arconic Corporation Businesses and distributing Arconic Corporation common stock?
Arconic Corporation, which is currently a wholly owned subsidiary of ParentCo, was formed to own and operate ParentCo’s Arconic Corporation Businesses. The separation of Arconic Corporation from ParentCo and the distribution of Arconic Corporation common stock is intended, among other things, to enable the management of the two companies to pursue opportunities for long-term growth and profitability unique to each company’s business and to allow each business to more effectively implement its own distinct capital structure and capital allocation strategies. ParentCo expects that the separation will result in enhanced long-term performance of each business for the reasons discussed in the section entitled “The Separation and Distribution — Reasons for the Separation.”
Why am I receiving this document?
ParentCo is delivering this document to you because you are a holder of shares of ParentCo common stock. If you are a holder of shares of ParentCo common stock as of the close of business on [           ], 2020, the record date of the distribution, you will be entitled to receive [      ] shares of Arconic Corporation common stock for every share of ParentCo common stock that you hold at the close of business on such date. This document will help you understand how the separation and distribution will affect your post-separation ownership in Howmet Aerospace and Arconic Corporation.
How will the separation of Arconic Corporation from ParentCo work?
As part of the separation, and prior to the distribution, ParentCo and its subsidiaries expect to complete an internal reorganization (which we refer to as the “internal reorganization”) in order to transfer the Arconic Corporation Businesses that Arconic Corporation will own following the separation to Arconic Corporation. To accomplish the separation, ParentCo will distribute all of the outstanding shares of Arconic Corporation common stock to ParentCo stockholders on a pro rata basis in a distribution intended to be generally tax-free to ParentCo stockholders for U.S. federal income tax purposes. Following the separation, the number of shares of ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace shares) you own will not change as a result of the separation.
What is the record date for the distribution?
The record date for the distribution will be [           ], 2020.
When will the distribution occur?
We expect that all of the outstanding shares of Arconic Corporation common stock will be distributed by ParentCo at [           ], Eastern Time, on [           ], 2020, to holders of record of shares of ParentCo common stock at the close of business on [           ], 2020, the record date for the distribution.
What do stockholders need to do to participate in the distribution?
Stockholders of ParentCo as of the record date for the distribution will not be required to take any action to receive Arconic Corporation common stock in the distribution, but you are urged to read this entire information statement carefully. No stockholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or
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surrender your existing shares of ParentCo common stock or take any other action to receive your shares of Arconic Corporation common stock. Please do not send in your ParentCo stock certificates. The distribution will not affect the number of outstanding shares of ParentCo common stock or any rights of ParentCo stockholders, although it will affect the market value of each outstanding share of ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace shares).
How will shares of Arconic Corporation common stock be issued?
You will receive shares of Arconic Corporation common stock through the same channels that you currently use to hold or trade shares of ParentCo common stock, whether through a brokerage account, 401(k) plan or other channel. Receipt of Arconic Corporation shares will be documented for you in the same manner that you typically receive stockholder updates, such as monthly broker statements and 401(k) statements.
If you own shares of ParentCo common stock as of the close of business on the record date for the distribution, including shares owned in certificate form, ParentCo, with the assistance of Computershare Trust Company, N.A., the distribution agent for the distribution (the “distribution agent” or “Computershare”), will electronically distribute shares of Arconic Corporation common stock to you or to your brokerage firm on your behalf in book-entry form. Computershare will mail you a book-entry account statement that reflects your shares of Arconic Corporation common stock, or your bank or brokerage firm will credit your account for the shares.
How many shares of Arconic Corporation common stock will I receive in the distribution?
ParentCo will distribute to you [       ] shares of Arconic Corporation common stock for every share of ParentCo common stock held by you as of close of business on the record date for the distribution. Based on approximately [      ] shares of ParentCo common stock outstanding as of  [           ], 2020, a total of approximately [      ] shares of Arconic Corporation common stock will be distributed to ParentCo’s stockholders. For additional information on the distribution, see “The Separation and Distribution.”
Will Arconic Corporation issue fractional shares of its common stock in the distribution?
No. Arconic Corporation will not issue fractional shares of its common stock in the distribution. Fractional shares that ParentCo stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts paid in lieu of fractional shares.
What are the conditions to the distribution?
The distribution is subject to the satisfaction (or waiver by ParentCo in its sole and absolute discretion) of the following conditions:

the U.S. Securities and Exchange Commission (the “SEC”) declaring effective the registration statement of which this information statement forms a part; there being no order
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suspending the effectiveness of the registration statement in effect; and no proceedings for such purposes having been instituted or threatened by the SEC;

this information statement having been made available to ParentCo stockholders;

the receipt by ParentCo and continuing validity of an opinion of its outside counsel, satisfactory to the ParentCo Board of Directors, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”);

the internal reorganization having been completed and the transfer of assets and liabilities of the Arconic Corporation Businesses from ParentCo to Arconic Corporation, and the transfer of assets and liabilities of the Howmet Aerospace Businesses from Arconic Corporation to ParentCo, having been completed in accordance with the separation and distribution agreement, which is described below in this information statement (the “separation agreement”);

the receipt of one or more opinions from an independent appraisal firm to the ParentCo Board of Directors as to the solvency of Howmet Aerospace and Arconic Corporation after the completion of the distribution, in each case in a form and substance acceptable to the ParentCo Board of Directors in its sole and absolute discretion;

all actions necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder having been taken or made and, where applicable, having become effective or been accepted;

the execution of certain agreements contemplated by the separation agreement;

no order, injunction or decree issued by any government authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions being in effect;

the shares of Arconic Corporation common stock to be distributed having been accepted for listing on the NYSE, subject to official notice of distribution;

ParentCo having received certain proceeds from the financing arrangements described under “Description of Material Indebtedness” and being satisfied in its sole and absolute discretion that, as of the effective time of the distribution, it will have no further liability under such arrangements; and

no other event or development existing or having occurred that, in the judgment of ParentCo’s Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and the other related transactions.
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ParentCo and Arconic Corporation cannot assure you that any or all of these conditions will be met, or that the separation or distribution will be consummated even if all of the conditions are met. ParentCo can decline at any time to go forward with the separation or distribution. In addition, ParentCo may waive any of the conditions to the distribution. To the extent that the ParentCo Board of Directors determines that any modifications by ParentCo, including any waivers of any conditions to the distribution, materially change the terms of the distribution, ParentCo will notify ParentCo stockholders in a manner reasonably calculated to inform them about the modifications as may be required by law, by publishing a press release, filing a current report on Form 8-K and/or circulating a supplement to this information statement. For a complete discussion of all of the conditions to the distribution, see “The Separation and Distribution — Conditions to the Distribution.”
What is the expected date of completion of the separation?
The completion and timing of the separation are dependent upon a number of conditions. We expect that the shares of Arconic Corporation common stock will be distributed by ParentCo at [       ], Eastern Time, on [           ], 2020, to the holders of record of shares of ParentCo common stock at the close of business on [           ], 2020, the record date for the distribution. However, no assurance can be provided as to the timing of the separation or distribution or that all conditions to the distribution will be met.
Will ParentCo and Arconic Corporation be renamed in conjunction with the separation?
Yes. In conjunction with the separation, ParentCo will change its name to “Howmet Aerospace Inc.” and its stock symbol from “ARNC” to “HWM” and “Arconic Rolled Products Corporation” will change its name to “Arconic Corporation” and will apply for authorization to list its common stock on the NYSE under the symbol “ARNC.”
Can ParentCo decide to cancel the distribution of Arconic Corporation common stock even if all the conditions have been met?
Yes. Until the distribution has occurred, the ParentCo Board of Directors has the right to terminate the distribution, even if all of the conditions are satisfied.
What if I want to sell my ParentCo common stock or my Arconic Corporation common stock?
You should consult with your financial advisors, such as your stock broker, bank or tax advisor. If you sell your shares of ParentCo common stock in the “regular-way” market after the record date and before the distribution date, you also will be selling your right to receive shares of Arconic Corporation common stock in connection with the distribution.
What is “regular-way” and “ex-distribution” trading of ParentCo common stock?
Beginning on or shortly before the record date for the distribution and continuing up to and through the distribution date, we expect that there will be two markets in ParentCo common stock: a “regular-way” market and an “ex-distribution” market. ParentCo common stock that trades in the “regular-way” market will trade with an entitlement to shares of Arconic Corporation common stock distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to Arconic Corporation common stock distributed pursuant to the distribution. If you decide to sell any shares of ParentCo common stock before the distribution date, you should make sure your stockbroker, bank
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or other nominee understands whether you want to sell your ParentCo common stock with or without your entitlement to Arconic Corporation common stock pursuant to the distribution.
Where will I be able to trade shares of Arconic Corporation common stock?
Arconic Corporation intends to apply for authorization to list its common stock on the NYSE under the symbol “ARNC.” ParentCo will change its name to Howmet Aerospace and its stock symbol from “ARNC” to “HWM” upon completion of the separation. Arconic Corporation anticipates that trading in shares of its common stock will begin on a “when-issued” basis on or shortly before the record date for the distribution and will continue up to and through the distribution date, and that “regular-way” trading in Arconic Corporation common stock will begin on the first trading day following the completion of the distribution. If trading begins on a “when-issued” basis, you may purchase or sell Arconic Corporation common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. Arconic Corporation cannot predict the trading prices for its common stock before, on or after the distribution date.
What will happen to the listing of ParentCo common stock?
ParentCo common stock will continue to trade on the NYSE after the distribution but will be traded as Howmet Aerospace common stock due to ParentCo’s name change to Howmet Aerospace and under the stock symbol “HWM” instead of  “ARNC.”
Will the number of shares of ParentCo common stock that I own change as a result of the distribution?
No. The number of shares of ParentCo common stock that you own will not change as a result of the distribution. Following the separation, ParentCo common stock will be Howmet Aerospace common stock as a result of ParentCo’s name change to Howmet Aerospace.
Will the distribution affect the market price of my ParentCo common stock?
Yes. As a result of the distribution, ParentCo expects the trading price of shares of ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace common stock) immediately following the distribution to be different from the “regular-way” trading price of such shares immediately prior to the distribution because the trading price will no longer reflect the value of the Arconic Corporation Businesses. There can be no assurance whether the aggregate market value of the Howmet Aerospace common stock and the Arconic Corporation common stock following the separation will be higher or lower than the market value of ParentCo common stock if the separation did not occur. This means, for example, that the combined trading prices of a share of Howmet Aerospace common stock and [      ] shares of Arconic Corporation common stock after the distribution may be equal to, greater than or less than the trading price of a share of ParentCo common stock before the distribution.
What are the material U.S. federal income tax consequences of the separation and the distribution?
It is a condition to the distribution that ParentCo receive an opinion of its outside counsel, satisfactory to the ParentCo Board of Directors, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Code.
If the distribution, together with certain related transactions, so qualifies, generally no gain or loss will be recognized by you, and no
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amount will be included in your income, for U.S. federal income tax purposes upon your receipt of Arconic Corporation common stock in the distribution. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of Arconic Corporation common stock.
You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as any non-U.S. tax laws. For more information regarding the material U.S. federal income tax consequences of the distribution, see the section entitled “Material U.S. Federal Income Tax Consequences.”
What will Arconic Corporation’s relationship be with Howmet Aerospace following the separation?
After the distribution, Howmet Aerospace and Arconic Corporation will be separate companies with separate management teams and separate boards of directors. Arconic Corporation will enter into a separation agreement with ParentCo to effect the separation and to provide a framework for Arconic Corporation’s relationship with Howmet Aerospace after the separation, and will enter into certain other agreements, including a tax matters agreement, an employee matters agreement, intellectual property license agreements, metal supply agreements and real estate and office leases. These agreements will provide for the allocation between Arconic Corporation and Howmet Aerospace of the assets, employees, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of ParentCo and its subsidiaries attributable to periods prior to, at and after the separation and will govern the relationship between Arconic Corporation and Howmet Aerospace subsequent to the completion of the separation. For additional information regarding the separation agreement and other transaction agreements, see the sections entitled “Risk Factors — Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.”
Who will manage Arconic Corporation after the separation?
Arconic Corporation will benefit from a management team with an extensive background in the Arconic Corporation Businesses. For more information regarding Arconic Corporation’s management and directors, see “Management” and “Directors.”
Are there risks associated with owning Arconic Corporation common stock?
Yes. Ownership of Arconic Corporation common stock is subject to both general and specific risks relating to the Arconic Corporation Businesses, the industry in which it operates, its ongoing contractual relationships with Howmet Aerospace and its status as a separate, publicly traded company. Ownership of Arconic Corporation common stock is also subject to risks relating to the separation. Certain of these risks are described in the “Risk Factors” section of this information statement. We encourage you to read that section carefully.
Does Arconic Corporation plan to pay dividends?
The declaration and payment of any dividends in the future by Arconic Corporation will be subject to the sole discretion of its Board of Directors and will depend upon many factors. See “Dividend Policy.”
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Will Arconic Corporation incur any indebtedness prior to or at the time of the distribution?
Yes. Arconic Corporation expects to complete one or more financing transactions before the distribution is completed, with approximately $[      ] of the proceeds of such financings expected to be distributed to ParentCo. As a result of such transactions, Arconic Corporation anticipates having approximately $[      ] of indebtedness upon completion of the distribution. See “Description of Material Indebtedness” and “Risk Factors — Risks Related to Our Business.”
Who will be the distribution agent for the distribution and transfer agent and registrar for Arconic Corporation common stock?
The distribution agent, transfer agent and registrar for the Arconic Corporation common stock will be Computershare. For questions relating to the transfer or mechanics of the stock distribution, you should contact [      ] toll free at [      ] or non-toll free at [      ].
Where can I find more information about ParentCo and Arconic Corporation?
Before the distribution, if you have any questions relating to ParentCo, you should contact:
Arconic Inc.
390 Park Avenue
New York, NY 10022
Attention: Investor Relations Department
After the distribution, Arconic Corporation stockholders who have any questions relating to Arconic Corporation should contact:
Arconic Corporation
201 Isabella Street
Pittsburgh, PA 15212
Attention: Investor Relations Department
The Arconic Corporation investor website (www.[           ].com) will be operational on or around [           ], 2020. The Arconic Corporation website and the information contained therein or connected thereto are not incorporated into this information statement or the registration statement of which this information statement forms a part, or in any other filings with, or any information furnished or submitted to, the SEC.
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INFORMATION STATEMENT SUMMARY
The following is a summary of selected information discussed in this information statement. This summary may not contain all of the details concerning the separation or other information that may be important to you. To better understand the separation and our business and financial position, you should carefully review this entire information statement. Unless the context otherwise requires, the information included in this information statement about Arconic Corporation, including the Combined Financial Statements of Arconic Corporation, assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, or when otherwise specified, references in this information statement to “Arconic Corporation,” “we,” “us,” “our,” “our Company” and “the Company” refer to Arconic Rolled Products Corporation, a Delaware corporation, and its consolidated subsidiaries. Unless the context otherwise requires, references in this information statement to “ParentCo” refer to Arconic Inc., a Delaware corporation, and its consolidated subsidiaries, including the Arconic Corporation Businesses prior to completion of the separation.
Unless the context otherwise requires, or when otherwise specified, references in this information statement to our historical assets, liabilities, products, businesses or activities of our businesses are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the Arconic Corporation Businesses as they were conducted as part of ParentCo prior to completion of the separation.
Our Company
Overview
Arconic Corporation is a global leader in manufacturing aluminum sheet, plate, extrusions and architectural products, serving primarily the ground transportation, aerospace, building and construction, industrial, and packaging end-markets. We were previously part of Alcoa Inc. (which was renamed Arconic Inc. in 2016), which created the modern aluminum industry more than 125 years ago. Our technical expertise, long-standing, collaborative customer relationships and history in the lightweight metals industry as an innovator positions us as a supplier of choice to “blue-chip” customers in high-growth markets that require value-added products with performance-critical applications. Our product portfolio is diverse and most of our products command premium pricing as compared to more commoditized fabricated aluminum products. We maintain a leadership position in our targeted markets through our global footprint of 46 manufacturing, sales and service facilities located across North America, Europe, the United Kingdom, Russia and Asia.
We operate through three reportable segments: Rolled Products, Extrusions, and BCS. We strive to make our portfolio of integrated facilities among the most operationally efficient in the industry. We are well positioned in attractive markets that exhibit trends favorable to our industry, and our long-term contracts with customers enhance the strength and stability of our business and our earnings. We will strive to generate strong returns through growth in operating profit, disciplined capital deployment, increasing cash flow and continued optimization of working capital levels. We believe our more than 125 years of manufacturing experience and our commitment to quality and innovation have put us in a leadership position among our primary competitors.
Our business focuses on producing rolled and extruded products used principally for the following five market segments: (i) ground transportation, (ii) aerospace, (iii) building and construction, (iv) industrial and (v) packaging. Our primary market segments present attractive characteristics, including (i) demand for products that command premium pricing due to technical requirements; (ii) stability through economic cycles due to portfolio diversity; (iii) favorable secular growth trends, such as the substitution of heavier materials with aluminum in the automotive market (“aluminum lightweighting”), strong passenger growth in the commercial aerospace market and population growth driving urbanization for increased demand in the building and construction industry; and (iv) favorable trade conditions in the United States resulting from the Department of Commerce’s ruling on anti-dumping and countervailing duties imposed on imported Chinese common alloy products. We have a leading position in the growing North American automotive aluminum sheet market, and we are a leading supplier of aluminum sheet and plate to the aerospace market. We supply industrial and commercial transportation products to customers around the world. Our BCS products carry recognized brand names and hold strong market positions in North America and Europe.
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Our customer base includes market leading companies. A sampling of our top customers includes Ford, General Motors, FCA, Airbus, Boeing, Daimler, Paccar, Ball and CANPACK. We predominantly focus on high-value-added products that we believe we are particularly well-suited to developing and manufacturing for our customers due to our technical and R&D capabilities, our ability to supply materials in the volume customers need, our unique manufacturing capabilities and the complex qualification processes that we have passed and are required for many of our products. Our core products require ongoing close collaboration and, in many instances, joint development with our customers.
Prices for rolled products and extrusions are generally based on the price of metal plus a premium for adding value to the aluminum to produce a semi-finished product, resulting in a business model in which the underlying price of metal is contractually passed-through to customers, or hedged. The financial performance of producers of rolled and extruded aluminum products, such as Arconic Corporation, is driven by the dynamics in the end markets that they serve, the degree of technical specification required for the products sold, the companies’ relative positioning in those markets and the efficiency of their industrial operations.
For the year ended December 31, 2018, we shipped approximately 1,308 thousand metric tons of finished products and generated revenues of  $7.4 billion and operating income of  $365 million.
The following charts present our revenues by market segment and by geography for the year ended December 31, 2018:
[MISSING IMAGE: tv531264-pc_ourcompany4clr.jpg]
Our Strengths
We believe several key attributes add to the strength of our business: growing demand for high-strength, lightweight aluminum in our targeted markets; our leading positions in the markets we serve; our track record developing differentiated products backed by advanced expertise and technological capabilities; our collaborative and long-standing customer relationships; our global network of efficient facilities with a broad range of advanced manufacturing capabilities operated by a highly skilled workforce; and our healthy financial position, which positions us for future growth. Each of these attributes are described in more detail below.
Growing demand for high-strength, lightweight aluminum in our target markets.
Demand for aluminum and other lightweight products continues to grow at a steady pace. With unique properties that increase performance, improve efficiency and provide a lower carbon footprint throughout its life cycle, aluminum continues to draw demand from industries that require lightweight yet strong material. According to CRU International Limited, the projected annual growth rate from 2019 to 2023 of flat rolled aluminum products is 3.6%, and projected growth in the air and ground transportation market segment is 5.3%.
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Projected Demand for Flat Rolled Products from 2019-2023 (in thousand metric tons)
[MISSING IMAGE: tv531264-bc_projected4clr.jpg]
Transportation consumption 2019:
4,761 and 2023: 6,161 CAGR 5.3%
Source: CRU International Limited
Asia Pacific includes: Japan, China, South East Asia and Middle East
Other includes: Africa, Australia, Central and South America
In the ground transportation market, even as vehicle production remains flat, we continue to benefit from growth in automotive aluminum applications, with automotive body sheet forecasted to grow at a 9% annual growth rate from 2019 through 2026 in North America. Acceleration of aluminum adoption and product penetration, noted by third-party research firm Ducker Worldwide in July 2017, continue to advance as automakers are increasingly selecting aluminum as the material of choice for vehicle design solutions that aid in meeting fuel consumption and greenhouse gas emissions regulations while delivering better performance, higher safety ratings and a lower carbon footprint than steel.
We continue to see interest in aluminum lightweighting from a growing customer base, and we currently have material on more than 60 programs with eight automotive original equipment manufacturers (“OEMs”), as well as many of their tier-one suppliers. We have significant forward revenue under contract across multiple OEMs. Our A951™ coating and bonding technology underpinned Ford’s design decision to go aluminum-intensive on the F-150 truck, which has since been expanded to Ford’s Super Duty, Navigator and Expedition vehicle platforms. In fact, all vehicles that have converted to aluminum-intensive structures have received 5-star safety ratings, better performance ratings, and increased fuel efficiency as a result of aluminum lightweighting. Additionally, in North America, demand for larger vehicles (small trucks and SUVs) — where the volume of aluminum use is greater — is increasing while demand for smaller vehicles is decreasing.
In the aerospace market, large commercial aircraft have an approximate seven-year backlog in their order book, driven by global population growth, increasing per capita incomes and higher penetration of air-travel. We have significant forward revenue under contract with major commercial aircraft OEMs or framers, such as Boeing, Airbus, Spirit AeroSystems and Embraer. In defense, spending under the current U.S. administration has been increasing and we have secured new contracts on multiple applications.
In the building and construction market, several secular trends — global warming, urbanization, and increased needs for personal security — are increasing demand for the products and solutions we provide, both in North America and in Europe. Population is expected to grow from 7.2 to 8 billion people by 2025, with more than 50% of population growth in urban areas that drive construction demand. With global energy demand expected to increase by more than 25% by 2040, energy efficiency is another strong market driver for our building and construction products and systems.
The industrial market in North America is closely tied to the U.S. GDP level, which indicates that the overall industrial flat rolled products segment is poised to grow 2% to 3% in 2019. The common alloy sheet market, which is a significant portion of the total industrial products market, continues to be significantly
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influenced by imports of common alloys into the United States. With the implementation of anti-dumping and countervailing duties imposed on Chinese common alloy sheet during 2018, the volume of imports from China has significantly decreased. Although there has been an increase of imports of common alloy into the United States from other countries as a result of the duties imposed on China, prices for common alloy sheet have significantly improved in North America during the first half of 2019. We expect these duties to remain in place for at least the next five years.
In the packaging market, we are continuing to see positive trends in both demand and supply dynamics. As it relates to demand, trends are positive as a result of consumer preferences for more sustainable packaging options, driving a broad-based shift from plastic to aluminum. On the other hand, supply for aluminum packaging has tightened as more aluminum rolled products manufacturers redirect rolling mill capacity to supply the automotive end-market. As a result, manufacturers that continued to supply aluminum packaging are able to achieve more favorable pricing for packaging products relative to historical norms. Additionally, the packaging market can be expected to provide relatively steady demand, with resiliency evidenced by trends throughout past economic cycles.
Leading positions in our key markets.
In our core market segments — ground transportation, aerospace, building and construction, industrial and packaging — we have strong market positions and long-standing, collaborative relationships with customers. Within these attractive and diverse segments, we are particularly focused on product lines that require our expertise and advanced technical capabilities to produce efficiently.
In the ground transportation market, we captured a leading position in the North American automotive aluminum market when we invested a combined $600 million in 2014 to expand our automotive rolling capacity in Davenport, Iowa and Alcoa, Tennessee, and we continue to maintain that position by expanding capabilities to meet demand. In February 2019, we announced a $100 million investment in Tennessee to provide additional capacity to support automotive and industrial growth, and that capacity is expected to come online in late 2020. We have already secured customer commitments in support of this additional capacity in North America. Our position in this market segment also benefits from the natural characteristics of automotive aluminum sheet, which make importing of aluminum sheet more difficult as it hardens and strengthens with age and as a result is not as easily formed or stamped into parts as time progresses.
In the aerospace market, we have a growing position secured by long-term contracts, totaling more than $4 billion over the next several years, with some of the biggest players in the industry, including Boeing, Airbus, Embraer, Mitsubishi Heavy Industries and Spirit AeroSystems. In July 2018, we announced that we signed our largest multi-year supply contract with Boeing to supply aluminum sheet and plate for all models produced by Boeing Commercial Airplanes. The agreement expanded on our collaboration with Boeing for wing skins on all of its metallic structure airplanes and included polished fuselage skins and wing ribs. In addition, Boeing awarded us new business for the supply of structural plate used in a variety of other applications, including wing ribs for carbon fiber platforms such as the 787 and 777X.
In the building and construction market, we are differentiated through scale, expertise and a broad range of building envelope products. We have strong market positions in North America and Europe as a supplier of well-known, leading brands with differentiated products and service offerings that we believe enable us to deliver industry-leading service and performance. In total, BCS has more than 270 active patent matters. These are spread across multiple technology areas including: doors, windows, fixed fenestrations and material interfaces/coatings. Our products, which are offered as systems and are localized to address functional and building code requirements, span the range of building end-use and building complexities, making us a go-to provider for architects, general contractors and fabricators.
In the industrial market, we have a strong position, particularly in North America. Our recent $100 million investment in our Tennessee facility to expand our industrial and automotive capacity is aimed to capture favorable pricing in the North American market for industrial products as well as the anticipated resulting growth. With our diverse industrial portfolio, providing high quality mill finish product, we are positioned to capture opportunities in the industrial market segment.
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In the packaging market, we have strong positions in the regions we serve. Our rolling mill in Samara, Russia, serves various markets with its wide range of capabilities, including production of a full range of canstock products, from coated end and tab stock to body stock. Packaging volumes have increased year over year in Samara for the past five years, where demand for canstock is steadily increasing. To further differentiate among packaging suppliers in the region, Arconic Samara’s flagship coil coating line product portfolio was recently expanded with the start of commercial production of black-lacquered end stock, along with coil coated with gold and clear lacquers. Arconic Corporation also supplies canstock to the packaging market in China from its plant in Qinhuangdao.
Track record developing differentiated products backed by advanced expertise and technological capabilities.
Built on a heritage of innovation and operational excellence, Arconic Corporation develops and produces quality materials and technologies efficiently for customers of lightweight metals. In each of the markets we serve, we collaborate with our customers to deliver solutions that meet performance-critical specifications and give our customers a competitive advantage in terms of meeting fuel efficiency, strength and safety requirements. We believe that our ability to produce tailored, high-value-added products fosters longer-term and synergistic relationships with a customer base that includes well-established, blue-chip companies. We regard our relationships with our customers as partnerships in which we work together to utilize our unique technological capabilities to develop customized solutions to meet evolving requirements. This includes developing products together through long-term partnerships.
We have made substantial investments to develop unique technological capabilities, which we believe provide us with a competitive advantage as a supplier of the high-value-added, specialty products that make up the majority of our product portfolio. The Arconic Technology Center, located in New Kensington, Pennsylvania, serves as the headquarters for our Research and Development efforts, and we also have R&D facilities in Norcross, Georgia; Merxheim, France; Vendargues, France; and Harderwijk, Netherlands. These facilities focus on innovation and have given us a leading position in the development of proprietary next-generation specialty alloys and manufacturing processes as evidenced by our robust intellectual property portfolio, which includes over 900 granted or pending patents. We also have a significant number of trade secrets, mostly regarding manufacturing processes and material compositions that give us important advantages in our markets. We continue to strive to improve those processes and generate new material compositions that provide additional benefits.
Recent examples of collaborative and industry redefining innovations include:

Arconic Corporation’s Very Thick Plate Stretcher (VTPS). No supplier in the industry can currently produce plate as wide or as thick as we can. With our 220” mill and the VTPS, we are able to supply the exterior of large metallic planes as well as the most challenging structural plate applications on both metallic and carbon fiber aircrafts. Combined with a new horizontal heat treat furnace in Davenport, Iowa, scheduled to come online in late 2019, Arconic Corporation will be able to offer expanded capabilities and capacity in thick plate products.

Arconic 951® adhesive bonding technology. One of our most notable hallmark R&D achievements was the development of the breakthrough Arconic 951 adhesive bonding technology that is enabling the automotive industry’s historic shift to aluminum-intensive vehicles. One of the first customers to utilize this technology was Ford, for its flagship vehicle, the F-150, which — since going aluminum-intensive in 2015 — has increased its lead as America’s #1 best-selling vehicle, a position it has held for more than 40 years in a row.

High strength aerospace and automotive alloys. We continue to work with automotive and aerospace customers to develop solutions with innovative aluminum and aluminum lithium alloys. Working with automotive customer FCA US LLC, for example, our engineers developed a new, highly formable aluminum to enable FCA to shed weight and boost performance of its 2018 Jeep® Wrangler, one of the automaker’s top selling vehicles.
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Diverse, entrenched and collaborative customer relationships.
We have a diverse customer base that includes hundreds of companies that span our key market segments. A sampling of our top customers includes:
Key Markets
Key Customers
Ground Transportation Ford, FCA, General Motors, Daimler, Paccar, Entrans/Heil
Aerospace Boeing, Airbus, Spirit AeroSystems, Embraer
Building and Construction Fabricators, installers, architects and developers around the world
Industrial Ryerson, Thyssenkrupp MA, Reliance, Kloeckner, Champagne Metals
Packaging Ball, CANPACK
The average length of our relationships with our top 20 customers exceeds 25 years, and in some cases goes back as far as the beginning of their existence, particularly with our aerospace, automotive and building and construction customers. We have long-term contracts with many of our major customers, and we have partnered with some of them for substantial investments that support new product launches, increased capacity or unique capabilities that solve key challenges. 56% of 2019 Global Rolled Products revenue is under a long-term agreement, and only 6% of the Global Rolled Products long-term agreements are expected to be up for renewal in 2020 and 2021. In addition, we frequently collaborate with our customers to complete a rigorous process for qualifying our products, which requires substantial time and investment and imposes high costs for customers to switch suppliers.
Global network of efficient facilities with a broad range of capabilities operated by a highly skilled workforce.
We operate a network of strategically located facilities within close proximity to our customers and/or raw materials, which we believe allows us to compete effectively in our selected end-markets across numerous geographies. Our facilities, which in many cases have been in operation for decades and are continuously assessed for optimal efficiency, enable us to reliably produce a broad range of high-quality products. Our production lines are operated by a highly skilled workforce with decades of accumulated operational experience. We believe this collective knowledge base would be very difficult to replicate and is a key contributing factor in our ability to produce consistently high-quality products.
Our production sites feature industry-leading manufacturing capabilities with required industry qualifications that are, in our view, difficult for market outsiders to accomplish. We believe our portfolio of facilities provides us with a strong platform to retain and grow our global customer base.
Our capabilities include the development, alloying, and casting of standard and patented Arconic aluminum and aluminum-lithium alloys that provide superior mechanical properties using continuous heat treat and batch heat treat processes. We also have continuous cast capability, as well as hot and cold rolling of aluminum coil, sheet and plate products of different thicknesses and widths. We have the world’s largest thick plate stretcher, which can stretch the thickest plate in the world, and we have state-of-the-art metallurgical laboratories.
Our processes include coil and sheet leveling, straightening, and trimming capabilities, indirect aluminum extrusion piercing press capabilities and non-destructive inspection and testing capabilities.
Healthy financial position.
We believe the following factors will contribute to our long-term financial stability and future growth:

Our revenue diversification in terms of geography, customers and end-markets gives Arconic Corporation a healthy financial position.

Approximately 50% of our revenue is under long-term agreements, which provides earnings visibility.
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Our contracts are typically structured to contractually pass-through movements in underlying metal price, which, combined with our hedging program, helps to insulate us from commodity price volatility and generate earnings stability.

Profitability has improved due to targeted mix shift to more specialized, more engineered, higher margin products, as well as cost optimization initiatives.

We manage our business through a disciplined capital allocation framework.

Over the last two years, we have undertaken several cost cutting initiatives in a relentless pursuit of cost reduction, while consistently delivering productivity improvements through smart manufacturing (physical and digital automation), cast house optimization, lower procurement costs, and labor and equipment efficiency.

Our improved capital efficiency is delivering higher returns on our existing asset base. Our disciplined capital allocation with priority on high-return uses driving return on net assets (RONA) expansion has built an attractive margin profile and we believe we are positioned for future profitable growth upside. Examples include the automotive and industrial expansions in Alcoa, Tennessee to seek to capture future market growth, as well as expanding capabilities in Davenport, Iowa to capture demand in aerospace.
Our Business Strategies
Our objective is to expand our leading position as the industry’s supplier of choice for high-value-added, technologically advanced products for which we believe that we have a competitive advantage. Our strategy to achieve this objective has two primary pillars: (i) selective participation in attractive markets and (ii) continuing focus on capital efficiency and operational performance.
Selective Participation in Attractive Markets
Continue to target investment in high-return opportunities in our core market segments
We are focused on five strategic market segments (ground transportation, aerospace, building and construction, industrial and packaging) that we believe have attractive growth prospects for aluminum and a solid long-term outlook. These are also markets where we believe that we can differentiate ourselves through high-value-added products, strong customer relationships and R&D and advanced technical capabilities. We selectively pursue capital projects in response to specific volume requirements from long-term customer contracts, aiming for relatively short payback periods and good visibility into return on investment.
For example, in February 2019, in order to seek to capture the growing industrial and automotive aluminum demand in North America, we announced an investment of approximately $100 million to expand our hot mill capability and add downstream equipment capabilities to manufacture industrial and automotive aluminum products in our Tennessee Operations facility near Knoxville, Tennessee. The project is already underway and is expected to be completed by the fourth quarter of 2020.
Focus on technologically advanced products that facilitate long-term relationships as a key supplier to our customers
Our product portfolio is predominantly focused on high-value-added products that we believe we are particularly well-suited to developing and manufacturing for our customers. These products tend to require close collaboration with our customers to develop tailored solutions, as well as significant effort and investment to adhere to rigorous qualification procedures, which enables us to foster long-term relationships with our customers. Our products typically command premium prices and are supplied to end-markets that we believe have highly attractive characteristics and long-term growth trends.
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Focus on Capital Efficiency and Operational Performance
Pursuit of highly efficient operations through smart manufacturing
We believe that there are significant opportunities to improve our quality and to reduce our manufacturing costs by implementing smart manufacturing initiatives, which involve physical and digital automation. We continually evaluate the processes and flowpaths of our operations in order to work to improve our production efficiency. Sharing best practices throughout our network enables us to apply advanced manufacturing techniques globally to improve existing equipment and processes. We aim to establish highly efficient operations and achieve cost reductions by standardizing manufacturing processes and the associated production elements where possible, while still allowing the flexibility to respond to local market demands and volatility.
To focus our efforts, we have launched a smart manufacturing program, sponsored at the executive level that is designed to optimize productivity of our plants with the goal of delivering value to customers through quality and efficiency.
To advance manufacturing improvements and optimize capital efficiency, Arconic Corporation has developed teams made up of cross-functional experts working on projects that provide an impact across the network. These teams each have a primary focus, seeking to improve efficiencies for optimal operational performance, as follows:

Driving Operational Equipment Efficiency (OEE) on bottlenecked equipment, including cold mills, hot mills, annealing furnaces and finishing equipment.

Maximizing internal ingot production, minimizing third party ingot purchase, and managing outside scrap sales to deliver the best solution for our North American network.

Managing scrap charge solutions and driving scrap utilization in order to offset the need to purchase high cost primary alloy.

Driving down transportation costs by combining routes, eliminating surcharges, and finding lower cost transportation solutions.

Leveraging the excess internal process capabilities within the North American network to offset the need for expensive outside providers to perform key operations.

Managing energy contracts, leveraging volume purchases, and implementing energy conservation activities.
Along with these initiatives, Arconic Corporation has standing teams working on overall equipment effectiveness, cast house capacity improvements, and reduction improvements in planned and un-planned scrap.
Our Portfolio
We manage our business operations through three segments: Rolled Products, Extrusions, and BCS. These segments contributed approximately 77%, 7% and 15%, respectively, of the 2018 revenues for the businesses that comprise Arconic Corporation. For additional information regarding our three operating segments and our business, see “Business.”
Summary of Risk Factors
An investment in our Company is subject to a number of risks, including risks relating to our business, risks related to the distribution and risks related to our common stock. Set forth below is a high-level summary of some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” of this information statement, for a more thorough description of these and other risks.
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Risks Related to Our Business

The markets for Arconic Corporation’s products are highly cyclical and are influenced by a number of factors, including global economic conditions.

Arconic Corporation faces significant competition.

Arconic Corporation could be adversely affected by the loss of key customers or significant changes in the business or financial condition of its customers.

Arconic Corporation could encounter manufacturing difficulties or other issues that impact product performance, quality or safety.

Arconic Corporation’s business depends, in part, on its ability to meet increased program demand successfully and to mitigate the impact of program cancellations, reductions and delays.

Product liability, product safety, personal injury, property damage, and recall claims and investigations may materially affect Arconic Corporation’s financial condition and damage Arconic Corporation’s reputation.

Arconic Corporation’s global operations expose Arconic Corporation to risks.

A material disruption of Arconic Corporation’s operations, particularly at one or more of Arconic Corporation’s manufacturing facilities, could adversely affect Arconic Corporation’s business.

Arconic Corporation may be unable to realize future targets or goals established for its business segments, or complete projects, at the levels, projected costs or by the dates targeted.

Information technology system failures, cyber-attacks and security breaches may threaten the integrity of Arconic Corporation’s intellectual property and other sensitive information, disrupt its business operations, and result in reputational harm and other negative consequences.

Arconic Corporation may be unable to develop innovative new products or implement technology initiatives successfully.

Arconic Corporation may face challenges to its intellectual property rights.

A decline in Arconic Corporation’s financial performance or outlook or a deterioration in its credit profile could negatively impact Arconic Corporation’s access to the capital markets and commercial credit, reduce its liquidity, and increase its borrowing costs.

Arconic Corporation’s business could be adversely affected by increases in the cost of aluminum or volatility in the availability or cost of other raw materials.
Risks Related to the Distribution

We have no recent history of operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

Following the separation, our financial profile will change, and we will be a smaller, less diversified company than ParentCo prior to the separation.

We may not achieve some or all of the expected benefits of the distribution.

ParentCo’s plan to separate into two independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense.
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If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we, as well as ParentCo and ParentCo’s stockholders, could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify ParentCo for material taxes and other related amounts.

Until the distribution occurs, the ParentCo Board of Directors has sole and absolute discretion to change the terms of the separation in ways which may be unfavorable to us.
Risks Related to Our Common Stock

We cannot be certain that an active trading market for our common stock will develop or be sustained after the distribution and, following the distribution, our stock price may fluctuate significantly.

A significant number of shares of our common stock may be sold following the distribution, which may cause our stock price to decline.

Your percentage of ownership in Arconic Corporation may be diluted in the future.

We cannot guarantee the timing, amount or payment of dividends on our common stock.

Anti-takeover provisions could enable Arconic Corporation to resist a takeover attempt by a third party and limit the power of our stockholders.
The Separation and Distribution
In February 2019, we announced our plan to separate into two independent, publicly traded companies. The separation will occur through a pro rata distribution to ParentCo stockholders of 100% of the outstanding shares of common stock of Arconic Corporation, which was formed to hold the Arconic Corporation Businesses.
On [           ], 2020, the ParentCo Board of Directors approved the distribution of all of Arconic Corporation’s issued and outstanding shares of common stock on the basis of  [      ] shares of Arconic Corporation common stock for every share of ParentCo common stock held as of the close of business on [           ], 2020, the record date for the distribution.
Arconic Corporation’s Post-Separation Relationship with Howmet Aerospace
After the distribution, Howmet Aerospace and Arconic Corporation will each be separate companies with separate management teams and separate boards of directors. Prior to the distribution, ParentCo and Arconic Corporation will enter into the separation agreement. In connection with the separation, we will also enter into various other agreements to effect the separation and to provide a framework for our relationship with Howmet Aerospace after the separation, including a tax matters agreement, an employee matters agreement, intellectual property license agreements, an agreement relating to the Davenport plant, metal supply agreements and real estate and office leases. These agreements will provide for the allocation between Arconic Corporation and Howmet Aerospace of the assets, employees, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of ParentCo and its subsidiaries attributable to periods prior to, at and after the separation and will govern the relationship between us and Howmet Aerospace subsequent to the completion of the separation. For additional information regarding the separation agreement and other transaction agreements, see the sections entitled “Risk Factors — Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.”
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Reasons for the Separation
The ParentCo Board of Directors believes that the separation of ParentCo into two independent, publicly traded companies through the separation of the Arconic Corporation Businesses from the Howmet Aerospace Businesses is in the best interests of ParentCo and its stockholders for a number of reasons, including:

Management Focus on Core Business and Distinct Opportunities.   The separation will permit each company to more effectively pursue its own distinct business, operating priorities and strategies, with Howmet Aerospace focusing primarily on aerospace and Arconic Corporation focusing on rolled products, extrusions, and building and construction systems. The separation will enable the management teams of each of the two companies to focus on strengthening its core business and operations, more effectively address unique operating and other needs, and pursue distinct and targeted opportunities for long-term growth and profitability.

Allocation of Financial Resources and Separate Capital Structures.   The separation will permit each company to allocate its financial resources to meet the unique needs of its own business, which will allow each company to intensify its focus on its distinct strategic priorities. The separation will also allow each business to more effectively pursue its own distinct capital structures and capital allocation strategies. In addition, after the separation, the respective businesses within each company will no longer compete internally with the businesses of the other company for capital and other corporate resources.

Simplified Business Structure.   The separation will separate and simplify the structures currently required to manage a number of distinct and differing underlying businesses. These differences include exposure to industry cycles, manufacturing and procurement methods, customer base, research and development activities, and overhead structures.

Targeted Investment Opportunity.   The separation will create two companies with more focused, aligned businesses, which will allow each company to more effectively articulate a clear investment thesis to attract a long-term investor base suited to its businesses and the industries in which it operates and serves, and will facilitate each company’s access to capital by providing investors with two distinct and targeted investment opportunities.

Employee Incentives, Recruitment and Retention.   The separation will allow each company to more effectively recruit, retain and motivate employees through the use of stock-based compensation that more closely reflects and aligns management and employee incentives with specific growth objectives, financial goals and business performance. In addition, the separation will allow incentive structures and targets at each company to be better aligned with each underlying business. Similarly, recruitment and retention will be enhanced by more consistent talent requirements across the businesses, allowing both recruiters and applicants greater clarity and understanding of talent needs and opportunities associated with the core business activities, principles and risks of each company.

Creation of Independent Equity Currencies.   The separation will create independent equity securities, affording Arconic Corporation direct access to the capital markets, enabling it to use its own industry-focused stock to consummate future acquisitions or other transactions. As a result, Arconic Corporation will have more flexibility to capitalize on its unique strategic opportunities.
The ParentCo Board of Directors also considered a number of potentially negative factors in evaluating the separation, including:

Risk of Failure to Achieve Anticipated Benefits of the Separation.    We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating our business; and following the separation, we may be more susceptible to market fluctuations, and other adverse events than if we were still a part of ParentCo because our business will be less diversified than ParentCo’s business prior to the completion of the separation.
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Disruptions and Costs Related to the Separation.   The actions required to separate the Arconic Corporation Businesses and the Howmet Aerospace Businesses could disrupt our operations. In addition, we will incur substantial costs in connection with the separation and the transition to being a standalone, public company, which may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel who are new to Arconic Corporation, tax costs, and costs to separate information systems.

Loss of Scale and Increased Administrative Costs.   As a current part of ParentCo, Arconic Corporation takes advantage of ParentCo’s size and purchasing power in procuring certain goods and services. After the separation, as a standalone company, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those ParentCo obtained prior to completion of the separation. In addition, as part of ParentCo, Arconic Corporation benefits from certain functions performed by ParentCo, such as accounting, tax, legal, human resources and other general and administrative functions. After the separation, Howmet Aerospace will not perform these functions for us and, because of our smaller scale as a standalone company, our cost of performing such functions could be higher than the amounts reflected in our historical financial statements, which would cause our profitability to decrease.

Limitations on Strategic Transactions.   Under the terms of the tax matters agreement that we will enter into with ParentCo, we will be restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free under applicable law. These restrictions may limit for a period of time our ability to pursue certain strategic transactions and equity issuances or engage in other transactions that might increase the value of our business.

Uncertainty Regarding Stock Prices. We cannot predict the effect of the separation on the trading prices of Arconic Corporation or Howmet Aerospace common stock or know with certainty whether the combined market value of  [      ] shares of our common stock and one share of Howmet Aerospace common stock will be less than, equal to or greater than the market value of one share of ParentCo common stock prior to the distribution.
In determining to pursue the separation, the ParentCo Board of Directors concluded the potential benefits of the separation outweighed the foregoing factors. See the sections entitled “The Separation and Distribution — Reasons for the Separation” and “Risk Factors” included elsewhere in this information statement.
Corporate Information
Arconic Corporation was incorporated in Delaware on August 14, 2019 for the purpose of holding the Arconic Corporation Businesses in connection with the separation and distribution described herein. Prior to the transfer of the Arconic Corporation Businesses to us by ParentCo, which will occur prior to the distribution, Arconic Corporation will have no operations other than those incidental to the separation. The address of our principal executive offices will be 201 Isabella Street, Pittsburgh, Pennsylvania 15212. Our telephone number after the distribution will be [         ]. We maintain an Internet site at www.[          ].com. Our website and the information contained therein or connected thereto are not incorporated into this information statement or the registration statement of which this information statement forms a part, or in any other filings with, or any information furnished or submitted to, the SEC.
Reason for Furnishing this Information Statement
This information statement is being furnished solely to provide information to ParentCo stockholders who will receive shares of Arconic Corporation common stock in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Arconic Corporation’s securities. The information contained in this information statement is believed by Arconic Corporation to be accurate as of the date set forth on its cover. Changes may occur after that date, and neither ParentCo nor Arconic Corporation will update the information except as may be required in the normal course of their respective disclosure obligations and practices.
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SUMMARY OF HISTORICAL AND UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
The following summary financial data reflects the combined operations of Arconic Corporation. We derived the summary combined income statement data for the years ended December 31, 2018, 2017, and 2016, and summary combined balance sheet data as of December 31, 2018 and 2017, as set forth below, from our audited Combined Financial Statements, which are included in the “Index to Financial Statements” section of this information statement. We derived the summary combined income statement data for the nine months ended September 30, 2019 and 2018, and summary combined balance sheet data as of September 30, 2019, as set forth below, from our unaudited Combined Financial Statements, included elsewhere in this information statement. To ensure a full understanding of this summary financial data, you should read the summary combined financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Combined Financial Statements and accompanying notes included elsewhere in this information statement. The historical results do not necessarily indicate the results expected for any future period.
The summary unaudited pro forma combined financial data for the year ended December 31, 2018 and for the nine months ended September 30, 2019 has been prepared to reflect the separation, including the incurrence of indebtedness of approximately $[      ] million and the distribution of approximately $[      ] million of cash to ParentCo. The Unaudited Pro Forma Condensed Combined Statement of Operations presented for the year ended December 31, 2018 and for the nine months ended September 30, 2019 assumes the separation occurred on January 1, 2018. The Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2019 assumes the separation occurred on September 30, 2019. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information and we believe such assumptions are reasonable under the circumstances.
The Unaudited Pro Forma Condensed Combined Financial Information is not necessarily indicative of our results of operations or financial condition had the distribution and our anticipated post-separation capital structure been completed on the dates assumed. It may not reflect the results of operations or financial condition that would have resulted had we been operating as an independent, publicly traded company during such periods. In addition, it is not necessarily indicative of our future results of operations or financial condition.
You should read this summary financial data together with “Unaudited Pro Forma Condensed Combined Financial Information,” “Capitalization,” “Selected Historical Combined Financial Data of Arconic Corporation,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Combined Financial Statements and accompanying notes included elsewhere in this information statement.
Summary of Historical and Unaudited Pro Forma
Combined Financial Data
As of and for the nine months ended September 30,
As of and for the year ended December 31,
(in millions)
Pro forma
2019
2019
2018
Pro forma
2018
2018
2017
2016
Sales
[   ] $ 5,569 5,633 [   ] $ 7,442 $ 6,824 $ 6,661
Net income
[   ] 39 71 [   ] 170 209 155
Total assets
[   ] 4,790 4,968 [   ] 4,795 4,902 4,705
Total debt
[   ] 250 260 [   ] 250 255 256
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RISK FACTORS
You should carefully consider the following risks and other information in this information statement in evaluating Arconic Corporation and Arconic Corporation common stock. Any of the following risks and uncertainties could materially adversely affect our business, financial condition or results of operations.
Risks Related to Our Business
The markets for Arconic Corporation’s products are highly cyclical and are influenced by a number of factors, including global economic conditions.
Arconic Corporation is subject to cyclical fluctuations in global economic conditions and lightweight metals end-use markets. Arconic Corporation sells many products to industries that are cyclical, such as the aerospace, automotive, commercial transportation and building and construction industries, and the demand for its products is sensitive to, and quickly impacted by, demand for the finished goods manufactured by its customers in these industries, which may change as a result of changes in regional or worldwide economies, currency exchange rates, energy prices or other factors beyond its control.
In particular, Arconic Corporation derives a significant portion of its revenue from products sold to the aerospace industry, which can be highly cyclical and reflective of changes in the general economy. The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft. The U.S. and international commercial aviation industries may face challenges arising from competitive pressures and fuel costs. Demand for commercial aircraft is influenced by airline industry profitability, trends in airline passenger traffic, the state of U.S., regional and world economies, the ability of aircraft purchasers to obtain required financing and numerous other factors, including the effects of terrorism, health and safety concerns, environmental constraints imposed upon aircraft operators, the retirement of older aircraft, the performance and cost of alternative materials, and technological improvements to aircraft.
Further, the demand for Arconic Corporation’s automotive and ground transportation products is driven by the number of vehicles produced by automotive and commercial transportation manufacturers and volume of aluminum content per vehicle. The automotive industry is sensitive to general economic conditions, including credit markets and interest rates, and consumer spending and preferences regarding vehicle ownership and usage, vehicle size, configuration and features. Automotive and commercial transportation sales and production can also be affected by other factors, including the age of the vehicle fleet and related scrappage rates, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements and levels of competition both within and outside of the aluminum industry.
Arconic Corporation’s products are used in a variety of industrial applications, including mold and tooling plate for semiconductors; general engineering/machinery and injection molding applications; specialty finishes for appliances, cosmetic packaging, and vehicle components; tread plate and sheet; and building and construction products. The common alloy sheet market, which is a significant portion of the total industrial products market, is particularly sensitive to the volume imports of common alloys into the United States. The implementation of anti-dumping and countervailing duties imposed on Chinese common alloy sheet during 2018 has led to a significant decrease in the volume of imports from China. However, that decrease has resulted in a significant increase in imports of common alloy into the United States from other countries, which could lead to softening prices and market saturation.
We are unable to predict the future course of industry variables, the strength of the U.S., regional or global economies, or the effects of government actions. Negative economic conditions, such as a major economic downturn, a prolonged recovery period, or disruptions in the financial markets, could have a material adverse effect on Arconic Corporation’s business, financial condition or results of operations.
Arconic Corporation faces significant competition, which may have an adverse effect on profitability.
As discussed in the sections entitled “Business — Rolled Products — Competitive Conditions,” “Business — Extrusions — Competitive Conditions,” and “Business — BCS — Competitive Conditions,” the markets for Arconic Corporation’s products are highly competitive. Arconic Corporation’s competitors include a variety of both U.S. and non-U.S. companies in all major markets. New product offerings, new
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technologies in the marketplace or new facilities may compete with or replace Arconic Corporation products. The willingness of customers to accept substitutes for the products sold by Arconic Corporation, the ability of large customers to exert leverage in the marketplace to affect the pricing for Arconic Corporation’s products, and technological advancements or other developments by or affecting Arconic Corporation’s competitors or customers could adversely affect Arconic Corporation’s business, financial condition or results of operations.
In addition, Arconic Corporation may face increased competition due to industry consolidation. As companies attempt to strengthen or maintain their market positions in an evolving industry, companies could be acquired or merged. Companies that are strategic alliance partners in some areas of Arconic Corporation’s business may acquire or form alliances with Arconic Corporation’s competitors, thereby reducing their business with Arconic Corporation. Industry consolidation may result in stronger competitors who are better able to obtain favorable terms from suppliers or who are better able to compete as sole-source vendors for customers. Consolidation within Arconic Corporation’s customer base may result in customers who are better able to command increased leverage in negotiating prices and other terms of sale, which could adversely affect Arconic Corporation’s profitability. Moreover, if, as a result of increased leverage, customers require Arconic Corporation to reduce its pricing such that its gross margins are diminished, Arconic Corporation could decide not to sell certain products to a particular customer, or not to sell certain products at all, which would decrease our revenue. Consolidation within Arconic Corporation’s customer base may also lead to reduced demand for Arconic Corporation’s products, a combined entity replacing Arconic Corporation’s products with those of Arconic Corporation’s competitors, and cancellations of orders. The result of these developments could have a material adverse effect on Arconic Corporation’s business, operating results and financial condition.
Arconic Corporation could be adversely affected by the loss of key customers or significant changes in the business or financial condition of its customers.
Arconic Corporation has long-term contracts with a significant number of its customers, some of which are subject to renewal, renegotiation or re-pricing at periodic intervals or upon changes in competitive supply conditions. Arconic Corporation’s failure to successfully renew, renegotiate or favorably re-price such agreements, or a material deterioration in or termination of these customer relationships, could result in a reduction or loss in customer purchase volume or revenue. Additionally, a significant downturn or deterioration in the business or financial condition or loss of a key customer supplied by Arconic Corporation could affect Arconic Corporation’s financial results in a particular period. Arconic Corporation’s customers may experience delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, or other difficulties in their businesses. Arconic Corporation’s customers may also change their business strategies or modify their business relationships with Arconic Corporation, including to reduce the amount of Arconic Corporation’s products they purchase or to switch to alternative suppliers. If Arconic Corporation is unsuccessful in replacing business lost from customers or if lost customers are replaced with less profitable business, our financial condition and results of operations may be adversely affected.
Arconic Corporation could encounter manufacturing difficulties or other issues that impact product performance, quality or safety, which could affect Arconic Corporation’s reputation, business and financial statements.
The manufacture of many of Arconic Corporation’s products is a highly exacting and complex process. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols, specifications and procedures, including those related to quality or safety, problems with raw materials, supply chain interruptions, natural disasters, labor unrest, and environmental factors. Such problems could have an adverse impact on Arconic Corporation’s ability to fulfill orders or on product quality or performance. Product manufacturing or performance issues could result in recalls, customer penalties, contract cancellation and product liability exposure. Because of approval, license and qualification requirements applicable to manufacturers and/or their suppliers, alternatives to mitigate manufacturing disruptions may not be readily available to us or our customers. Accordingly, manufacturing problems, product defects or other risks associated with our products, could result in significant costs to and liability for us that could have a material adverse effect on our business,
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financial condition or results of operations, including the payment of potentially substantial monetary damages, fines or penalties, as well as negative publicity and damage to our reputation, which could adversely impact product demand and customer relationships.
Arconic Corporation’s business depends, in part, on its ability to meet increased program demand successfully and to mitigate the impact of program cancellations, reductions and delays.
Arconic Corporation is currently under contract to supply aluminum sheet, plate and extrusions for a number of new and existing commercial and general aviation aircraft programs, as well as aluminum sheet and extrusions for a number of aluminum-intensive automotive vehicle programs. Many of these programs are scheduled for production increases over the next several years. If Arconic Corporation fails to meet production levels or encounters difficulty or unexpected costs in meeting such levels, it could have a material adverse effect on Arconic Corporation’s business, financial condition or results of operations. Similarly, program cancellations, reductions or delays could also have a material adverse effect on Arconic Corporation’s business.
Product liability, product safety, personal injury, property damage, and recall claims and investigations may materially affect Arconic Corporation’s financial condition and damage Arconic Corporation’s reputation.
The manufacture and sale of our products exposes Arconic Corporation to potential product liability, personal injury, property damage and related claims. These claims may arise from failure to meet product specifications, design flaws in our products, malfunction of our products, misuse of our products, use of our products in an unintended, unapproved or unrecommended manner, or use of our products with systems not manufactured or sold by us. New data and information, including information about the ways in which Arconic Corporation’s products are used, may lead Arconic Corporation, regulatory authorities, government agencies or other entities or organizations to publish guidelines or recommendations, or impose restrictions, related to the manufacturing or use of Arconic Corporation’s products.
In the event that an Arconic Corporation product fails to perform as expected, regardless of fault, or is used in an unexpected manner, and such failure or use results in, or is alleged to result in, bodily injury and/or property damage or other losses, Arconic Corporation may be subject to product liability lawsuits and other claims, or may be required or requested by its customers to participate in a recall or other corrective action involving such product. In addition, if an Arconic Corporation product is perceived to be defective or unsafe, sales of Arconic Corporation’s products could be diminished, Arconic Corporation’s reputation could be adversely impacted and Arconic Corporation could be subject to further liability claims. Moreover, events that give rise to actual, potential or perceived product safety concerns could expose Arconic Corporation to government investigations or regulatory enforcement action.
There can be no assurance that Arconic Corporation will be successful in defending any such proceedings or that insurance available to Arconic Corporation will be sufficient to cover any losses associated with such proceedings. An adverse outcome in one or more of these proceedings or investigations could have a material adverse effect on Arconic Corporation’s business, financial condition or profitability; impose substantial monetary damages and/or non-monetary penalties; result in additional litigation, regulatory investigations or other proceedings involving Arconic Corporation; result in loss of customers; require changes to our products or business operations; damage Arconic Corporation’s reputation and/or negatively impact the market price of Arconic Corporation’s common stock. Even if Arconic Corporation successfully defends against these types of claims, Arconic Corporation could still be required to spend a substantial amount of money in connection with legal proceedings or investigations with respect to such claims; Arconic Corporation’s management could be required to devote significant time, attention and operational resources responding to and defending against these claims and responding to these investigations; and Arconic Corporation’s reputation could suffer. Product liability claims and related lawsuits and investigations, product recalls, and allegations of product safety or quality issues, regardless of their validity or ultimate outcome, may have a material adverse effect on Arconic Corporation’s business, financial condition and reputation and on our ability to attract and retain customers.
For further discussion of potential liability associated with some of our products, including proceedings and investigations relating to the June 13, 2017 fire at the Grenfell Tower in London, U.K., see the section entitled “Business — Legal Proceedings.”
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Arconic Corporation’s global operations expose Arconic Corporation to risks that could adversely affect Arconic Corporation’s business, financial condition, results of operations, cash flows or the market price of its securities.
Arconic Corporation has operations or activities in numerous countries and regions outside the United States, including Europe, the United Kingdom, Canada, China and Russia. As a result, Arconic Corporation’s global operations are affected by economic, political and other conditions in the foreign countries in which Arconic Corporation does business as well as U.S. laws regulating international trade, including:

economic and commercial instability risks, including those caused by sovereign and private debt default, corruption, and changes in local government laws, regulations and policies, such as those related to tariffs, sanctions and trade barriers (including tariffs imposed by the United States as well as

retaliatory tariffs imposed by China or other foreign entities), taxation, exchange controls, employment regulations and repatriation of assets or earnings;

geopolitical risks such as political instability, civil unrest, expropriation, nationalization of properties by a government, imposition of sanctions, and renegotiation or nullification of existing agreements;

war or terrorist activities;

kidnapping of personnel;

major public health issues such as an outbreak of a pandemic or epidemic (such as Sudden Acute Respiratory Syndrome, Avian Influenza, H7N9 virus, or the Ebola virus), which could cause disruptions in Arconic Corporation’s operations or workforce;

difficulties enforcing contractual rights and intellectual property, including a lack of remedies for misappropriation, in certain jurisdictions;

changes in trade and tax laws that may result in our customers being subjected to increased taxes, duties and tariffs and reduce their willingness to use our services in countries in which we are currently manufacturing their products;

rising labor costs;

labor unrest, including strikes;

compliance with antitrust and competition regulations;

compliance with foreign labor laws, which generally provide for increased notice, severance and consultation requirements compared to U.S. laws;

aggressive, selective or lax enforcement of laws and regulations by national governmental authorities;

compliance with the Foreign Corrupt Practices Act and other anti-bribery and corruption laws;

compliance with U.S. laws concerning trade, including the International Traffic in Arms Regulations, the Export Administration Regulations, and the sanctions, regulations and embargoes administered by the U.S. Department of Treasury’s Office of Foreign Assets Control;

imposition of currency controls; and

adverse tax audit rulings.
Although the effect of any of the foregoing factors is difficult to predict, any one or more of them could adversely affect Arconic Corporation’s business, financial condition, or results of operations. The Company’s international operations subject Arconic Corporation to complex and dynamic laws and regulations that, in some cases, could result in conflict or inconsistency between applicable laws and/or legal obligations. While Arconic Corporation believes it has adopted appropriate risk management, compliance
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programs and insurance arrangements to address and reduce the associated risks, such measures may provide inadequate protection against costs, penalties, liabilities or other potential risks such as loss of export privileges or repatriation of assets that may arise from such events.
A material disruption of Arconic Corporation’s operations, particularly at one or more of Arconic Corporation’s manufacturing facilities, could adversely affect Arconic Corporation’s business.
If Arconic Corporation’s operations, particularly one of Arconic Corporation’s manufacturing facilities, were to be disrupted as a result of significant equipment failures, natural disasters, power outages, fires, explosions, terrorism, theft, sabotage, adverse weather conditions, public health crises, labor disputes or other reasons, Arconic Corporation may be unable to effectively meet its obligations to or demand from its customers, which could adversely affect Arconic Corporation’s financial performance.
Interruptions in production could increase Arconic Corporation’s costs and reduce its sales. Any interruption in production capability could require Arconic Corporation to incur costs for premium freight, make substantial capital expenditures or purchase alternative material at higher costs to fill customer orders, which could negatively affect Arconic Corporation’s profitability and financial condition. Furthermore, because customers may be dependent on planned deliveries from us, customers that have to reschedule their own production due to our delivery delays may be able to pursue financial claims against us, and we may incur costs to correct such problems in addition to any liability resulting from such claims. Arconic Corporation maintains property damage insurance that Arconic Corporation believes to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from significant production interruption or shutdown caused by an insured loss. However, any recovery under Arconic Corporation’s insurance policies may not offset the lost profits or increased costs that may be experienced during the disruption of operations, which could adversely affect Arconic Corporation’s business, results of operations, financial condition and cash flow.
Arconic Corporation may be unable to realize future targets or goals established for its business segments, or complete projects, at the levels, projected costs or by the dates targeted.
From time to time, Arconic Corporation may announce future targets or goals for its business, which are based on Arconic Corporation’s then current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Arconic Corporation operates. Future targets and goals reflect Arconic Corporation’s beliefs and assumptions and its perception of historical trends, then current conditions and expected future developments, as well as other factors appropriate in the circumstances. As such, targets and goals are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events, including the risks discussed in this information statement. The actual outcome may be materially different. There can be no assurance that any targets or goals established by Arconic Corporation will be accomplished at the levels or by the dates targeted, if at all. Failure to achieve the targets or goals by Arconic Corporation may have a material adverse effect on its business, financial condition, results of operations or the market price of its securities.
In addition, the implementation of Arconic Corporation’s business strategy may involve the entry into and the execution of complex projects, which place significant demands on Arconic Corporation’s management and personnel, and may depend on numerous factors beyond Arconic Corporation’s control. There can be no assurance that such projects will be completed within budgeted costs, on a timely basis, or at all, whether due to the risks described in this information statement, or other factors. The failure to complete a material project as planned, or a significant delay in a material project, whatever the cause, could have an adverse effect on Arconic Corporation’s business, financial condition, or results of operations.
Information technology system failures, cyber-attacks and security breaches may threaten the integrity of Arconic Corporation’s intellectual property and other sensitive information, disrupt its business operations, and result in reputational harm and other negative consequences that could have a material adverse effect on its financial condition and results of operations.
Arconic Corporation relies on its information technology systems to manage and operate its business, process transactions, and summarize its operating results. Arconic Corporation’s information technology systems are subject to damage or interruption from power outages, computer, network and
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telecommunications failures, computer viruses, and catastrophic events, such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism, and usage errors by employees. If Arconic Corporation’s information technology systems are damaged or cease to function properly, Arconic Corporation may have to make a significant investment to fix or replace them, and Arconic Corporation may suffer loss of critical data and interruptions or delays in its operations. Any material disruption in Arconic Corporation’s information technology systems, or delays or difficulties in implementing or integrating new systems or enhancing current systems, could have an adverse effect on Arconic Corporation’s business, financial condition or results of operations.
Arconic Corporation also faces global cybersecurity threats, which may range from uncoordinated individual attempts to sophisticated and targeted measures, known as advanced persistent threats, directed at Arconic Corporation. Cyber-attacks and security breaches may include, but are not limited to, attempts to access information, computer viruses, denial of service and other electronic security breaches.
Arconic Corporation believes that it faces the threat of cyber-attacks due to the industries it serves, the locations of its operations and its technological innovations. Arconic Corporation has experienced cybersecurity attacks in the past, including breaches of its information technology systems in which information was taken, and may experience them in the future, potentially with more frequency or sophistication. Based on information known to date, past attacks have not had a material impact on Arconic Corporation’s financial condition or results of operations. However, due to the evolving nature of cybersecurity threats, the scope and impact of any future incident cannot be predicted. Arconic Corporation employs a number of measures to protect and defend against cyber-attacks, including technical security controls, data encryption, firewalls, intrusion prevention systems, anti-virus software and frequent backups. Additionally, Arconic Corporation conducts regular periodic training of its employees regarding the protection of sensitive information which includes training intended to prevent the success of “phishing” attacks. While Arconic Corporation continually works to safeguard its systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cyber-attacks or security breaches that manipulate or improperly use its systems or networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt its operations. The occurrence of such events could negatively impact Arconic Corporation’s reputation and its competitive position and could result in litigation with third parties, regulatory action, loss of business, potential liability and increased remediation costs, any of which could have a material adverse effect on its financial condition and results of operations. In addition, such attacks or breaches could require significant management attention and resources and could result in the diminution of the value of Arconic Corporation’s investment in research and development.
Arconic Corporation’s enterprise risk management program and disclosure controls and procedures address cybersecurity and include elements intended to ensure that there is an analysis of potential disclosure obligations arising from cyber-attacks and security breaches. Arconic Corporation also maintains compliance programs to address the potential applicability of restrictions against trading while in possession of material, nonpublic information generally and in connection with a cyber-attack or security breach. However, a breakdown in existing controls and procedures around Arconic Corporation’s cybersecurity environment may prevent Arconic Corporation from detecting, reporting or responding to cyber incidents in a timely manner and could have a material adverse effect on Arconic Corporation’s financial condition or the market price of its securities.
Arconic Corporation may be unable to develop innovative new products or implement technology initiatives successfully.
Arconic Corporation’s competitive position and future performance depends, in part, on Arconic Corporation’s ability to:

identify and evolve with emerging technological and broader industry trends in Arconic Corporation’s target end-markets;

identify and successfully execute on a strategy to remain an essential and sustainable element of its customers’ supply chains;
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fund, develop, manufacture and bring innovative new products and services to market quickly and cost-effectively;

monitor disruptive technologies and understand customers’ and competitors’ abilities to deploy those disruptive technologies; and

achieve sufficient return on investment for new products based on capital expenditures and research and development spending.
Arconic Corporation is working on new developments for a number of strategic projects, including alloy development, engineered finishes and product design, high speed continuous casting and rolling technology and other advanced manufacturing technologies. For more information on Arconic Corporation’s research and development programs, see the section entitled “Business — Research and Development.”
While Arconic Corporation intends to continue to commit substantial financial resources and effort to the development of innovative new products and services, it may not be able to successfully differentiate its products or services from those of its competitors or match the level of research and development spending of its competitors, including those developing technology to displace Arconic Corporation’s current products. In addition, Arconic Corporation may not be able to adapt to evolving markets and technologies or achieve and maintain technological advantages. There can be no assurance that any of Arconic Corporation’s new products or services, development programs or technologies will be commercially adopted or beneficial to Arconic Corporation.
Arconic Corporation may face challenges to its intellectual property rights which could adversely affect Arconic Corporation’s reputation, business and competitive position.
Arconic Corporation owns important intellectual property, including patents, trademarks, copyrights and trade secrets. Arconic Corporation’s intellectual property plays an important role in maintaining Arconic Corporation’s competitive position in a number of the markets that Arconic Corporation serves. Arconic Corporation’s competitors may develop technologies that are similar or superior to Arconic Corporation’s proprietary technologies or design around the patents Arconic Corporation owns or licenses. Despite its controls and safeguards, Arconic Corporation’s technology may be misappropriated by its employees, its competitors or other third parties. The pursuit of remedies for any misappropriation of Arconic Corporation intellectual property is expensive and the ultimate remedies may be deemed insufficient. Further, in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of misappropriation of Arconic Corporation intellectual property increases despite efforts Arconic Corporation undertakes to protect it. Developments or assertions by or against Arconic Corporation relating to intellectual property rights, and any inability to protect or enforce Arconic Corporation’s rights sufficiently, could adversely affect Arconic Corporation’s business and competitive position.
A decline in Arconic Corporation’s financial performance or outlook or a deterioration in its credit profile could negatively impact Arconic Corporation’s access to the capital markets and commercial credit, reduce its liquidity, and increase its borrowing costs.
Arconic Corporation has significant capital requirements and may require, in the future, the issuance of debt to fund its operations and contractual commitments or to pursue strategic acquisitions. A decline in Arconic Corporation’s financial performance or outlook due to internal or external factors could affect Arconic Corporation’s access to, and the availability or cost of, financing on acceptable terms and conditions. There can be no assurance that Arconic Corporation will have access to the capital markets on terms Arconic Corporation finds acceptable.
We expect to request that the major credit rating agencies evaluate our creditworthiness and give us specified credit ratings. These ratings would be based on a number of factors, including our financial strength and financial policies as well as our strategies, operations and execution. These credit ratings are limited in scope, and do not address all material risks related to investment in us, but rather reflect only the view of each rating agency at the time the rating is issued. Nonetheless, the credit ratings Arconic
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Corporation receives will impact our borrowing costs as well as the terms upon which we will have access to capital. Failure to obtain sufficiently high credit ratings could adversely affect the interest rate in future financings, our liquidity or our competitive position, and could also restrict our access to capital markets.
There can be no assurance that one or more of the rating agencies will not take negative actions with respect to Arconic Corporation’s ratings in the future. Increased debt levels, macroeconomic conditions, a deterioration in Arconic Corporation’s debt protection metrics, a contraction in Arconic Corporation’s liquidity, or other factors could potentially trigger such actions. A rating agency may lower, suspend or withdraw entirely a rating or place it on negative outlook or watch if, in that rating agency’s judgment, circumstances so warrant. A downgrade of Arconic Corporation’s credit ratings by one or more rating agencies could result in adverse consequences, including: adversely impact the market price of Arconic Corporation’s securities; adversely affect existing financing; limit access to the capital (including commercial paper) or credit markets or otherwise adversely affect the availability of other new financing on favorable terms, if at all; result in more restrictive covenants in agreements governing the terms of any future indebtedness that Arconic Corporation incurs; increase the cost of borrowing or fees on undrawn credit facilities; or result in vendors or counterparties seeking collateral or letters of credit from Arconic Corporation.
Limitations on Arconic Corporation’s ability to access the global capital markets, a reduction in Arconic Corporation’s liquidity or an increase in borrowing costs could materially and adversely affect Arconic Corporation’s ability to maintain or grow its business, which in turn may adversely affect its financial condition, liquidity and results of operations.
Arconic Corporation’s business and growth prospects may be negatively impacted by limits in its capital expenditures.
Arconic Corporation requires substantial capital to invest in growth opportunities and to maintain and prolong the life and capacity of its existing facilities. Insufficient cash generation or capital project overruns may negatively impact Arconic Corporation’s ability to fund as planned its sustaining and return-seeking capital projects. Over the long term, Arconic Corporation’s ability to take advantage of improved market conditions or growth opportunities in its businesses may be constrained by earlier capital expenditure restrictions, which could adversely affect the long-term value of its business and the Company’s position in relation to its competitors.
An adverse decline in the liability discount rate, lower-than-expected investment return on pension assets and other factors could affect Arconic Corporation’s results of operations or amount of pension funding contributions in future periods.
Arconic Corporation’s results of operations may be negatively affected by the amount of expense Arconic Corporation records for its pension and other postretirement benefit plans, reductions in the fair value of plan assets and other factors. Arconic Corporation calculates income or expense for its plans using actuarial valuations in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
These valuations reflect assumptions about financial market and other economic conditions, which may change based on changes in key economic indicators. The most significant year-end assumptions used by Arconic Corporation to estimate pension or other postretirement benefit income or expense for the following year are the discount rate applied to plan liabilities and the expected long-term rate of return on plan assets. In addition, Arconic Corporation is required to make an annual measurement of plan assets and liabilities, which may result in a significant charge to stockholders’ equity. For a discussion regarding how Arconic Corporation’s financial statements can be affected by pension and other postretirement benefits accounting policies, see Note B to the Combined Financial Statements included in the “Index to Financial Statements” section of this information statement. Although GAAP expense and pension funding contributions are impacted by different regulations and requirements, the key economic factors that affect GAAP expense would also likely affect the amount of cash or securities Arconic Corporation would contribute to the pension plans.
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Unanticipated changes in Arconic Corporation’s tax provisions or exposure to additional tax liabilities could affect Arconic Corporation’s future profitability.
Arconic Corporation is subject to income taxes in both the United States and various non-U.S. jurisdictions. Its domestic and international tax liabilities are dependent upon the distribution of income among these different jurisdictions. Changes in applicable domestic or foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect Arconic Corporation’s tax expense and profitability. Arconic Corporation’s tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions. The assumptions include assessments of future earnings of Arconic Corporation that could impact the valuation of its deferred tax assets. Arconic Corporation’s future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of Arconic Corporation, changes in tax legislation and rates, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, the results of tax audits and examinations of previously filed tax returns or related litigation and continuing assessments of its tax exposures.
Corporate tax law changes continue to be analyzed in the United States and in many other jurisdictions. In particular, on December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Act”) was signed into law, significantly reforming the Code. During 2018, the Internal Revenue Service (the “IRS”) began a number of guidance projects which serve to both interpret and implement the 2017 Act. Those guidance projects, which include both Proposed and Final Treasury Regulations, have continued in 2019 and may continue into 2020. Arconic Corporation continues to review the components of the 2017 Act, as well as the ongoing interpretive guidance, and evaluate its consequences. As such, the ultimate impact of the 2017 Act may differ from reported amounts due to, among other things, changes in interpretations and assumptions Arconic Corporation has made to date; and actions Arconic Corporation may take as a result of the 2017 Act and related guidance. These changes to the U.S. corporate tax system could have a substantial impact, positive or negative, on Arconic Corporation’s future effective tax rate, cash tax expenditures, and deferred tax assets and liabilities.
Arconic Corporation may be unable to realize the expected benefits from acquisitions, divestitures, joint ventures and strategic alliances.
Arconic Corporation has made, and may continue to plan and execute, acquisitions and divestitures and take other actions to grow its business or streamline its portfolio. There is no assurance that anticipated benefits will be realized. Acquisitions present significant challenges and risks, including the effective integration of the acquired business into Arconic Corporation, unanticipated costs and liabilities, and the ability to realize anticipated benefits, such as growth in market share, revenue or margins, at the levels or in the timeframe expected. Arconic Corporation may be unable to manage acquisitions successfully. Additionally, adverse factors may prevent Arconic Corporation from realizing the benefits of its growth projects, including unfavorable global economic conditions, currency fluctuations, or unexpected delays in target timelines.
With respect to portfolio optimization actions such as divestitures, curtailments and closures, Arconic Corporation may face barriers to exit from unprofitable businesses or operations, including high exit costs or objections from customers, suppliers, unions, local or national governments, or other stakeholders. In addition, Arconic Corporation may retain unforeseen liabilities for divested entities or businesses, including, but not limited to, if a buyer fails to honor all commitments. Arconic Corporation’s business operations are capital intensive, and curtailment or closure of operations or facilities may include significant charges, including employee separation costs, asset impairment charges and other measures.
In addition, Arconic Corporation has participated in, and may continue to participate in, joint ventures, strategic alliances and other similar arrangements from time to time. Although Arconic Corporation has, in connection with past and existing joint ventures, sought to protect its interests, joint ventures and strategic alliances inherently involve special risks. Whether or not Arconic Corporation holds majority interests or maintains operational control in such arrangements, its partners may:

have economic or business interests or goals that are inconsistent with or opposed to those of Arconic Corporation;
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exercise veto rights to block actions that Arconic Corporation believes to be in our or the joint venture’s or strategic alliance’s best interests;

take action contrary to Arconic Corporation’s policies or objectives with respect to investments; or

as a result of financial or other difficulties, be unable or unwilling to fulfill their obligations under the joint venture, strategic alliance or other agreements, such as contributing capital to expansion or maintenance projects.
There can be no assurance that acquisitions, growth investments, divestitures, closures, joint ventures, strategic alliances or similar arrangements will be undertaken or completed in their entirety as planned or that they will be beneficial to Arconic Corporation, whether due to the above-described risks, unfavorable global economic conditions, increases in construction costs, currency fluctuations, political risks, or other factors.
Arconic Corporation’s business could be adversely affected by increases in the cost of aluminum or volatility in the availability or cost of other raw materials.
Arconic Corporation derives a significant portion of its revenue from aluminum-based products. The price of primary aluminum has historically been subject to significant cyclical price fluctuations, and the timing of changes in the market price of aluminum is largely unpredictable. Although Arconic Corporation’s pricing of products is generally intended to pass substantially all the risk of metal price fluctuations on to Arconic Corporation’s customers or is otherwise hedged, there are situations where Arconic Corporation is unable to pass on the entire cost of increases to its customers and there is a potential time lag on certain products between increases in costs for aluminum and the point when Arconic Corporation can implement a corresponding increase in price to its customers and/or there are other timing factors that may result in Arconic Corporation’s exposure to certain price fluctuations which could have a material adverse effect on Arconic Corporation’s business, financial condition or results of operations. Further, since metal prices fluctuate among the various exchanges, Arconic Corporation competitors may enjoy a metal price advantage from time to time.
Arconic Corporation may be adversely affected by changes in the availability or cost of other raw materials (including, but not limited to, copper, magnesium and zinc), as well as freight costs associated with transportation of raw materials. The availability and costs of certain raw materials necessary for the production of Arconic Corporation’s products may be influenced by private or government entities, including mergers and acquisitions, changes in world politics or regulatory requirements (such as human rights regulations or environmental regulations), labor relations between the producers and their work forces, unstable governments in exporting nations, export quotas, sanctions, new or increased import duties, countervailing or anti-dumping duties, market forces of supply and demand, and inflation. In addition, from time to time, commodity prices may fall rapidly. When this happens, suppliers may withdraw capacity from the market until prices improve, which may cause periodic supply interruptions. Arconic Corporation may be unable to offset fully the effects of raw material shortages or higher costs through customer price increases, productivity improvements or cost reduction programs. Shortages or price fluctuations in raw materials could have a material adverse effect on Arconic Corporation’s operating results.
Arconic Corporation is dependent on a limited number of suppliers for a substantial portion of our primary and scrap aluminum and certain other raw materials essential to our operations.
Arconic Corporation has supply arrangements with a limited number of suppliers for aluminum and other raw materials. We maintain annual or long-term contracts for a majority of our supply requirements, and for the remainder we depend on spot purchases. From time to time, increasing aluminum demand levels have caused regional supply constraints in the industry and further increases in demand levels could exacerbate these issues. Such constraints could impact our production or force us to purchase primary metal and other supplies from alternative sources, which may not be available in sufficient quantities or may only be available on terms that are less favorable to us. Further, there can be no assurance that we will be able to renew, or obtain replacements for, any of our long-term contracts when they expire on terms that are as favorable as our existing agreements or at all. Additionally, Arconic Corporation could have exposure if a key supplier in a particular region is unable to deliver sufficient quantities of a necessary material on a
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timely basis. For example, our plant in Russia depends on a single supplier, UC Rusal PLC, for aluminum: a significant interruption in that supply could jeopardize the plant’s ability to continue as a going concern, which could in turn have a material adverse effect on our financial condition, results of operations and cash flow. In addition, a significant downturn in the business or financial condition of our significant suppliers exposes us to the risk of default by the supplier on our contractual agreements, and this risk is increased by weak and deteriorating economic conditions on a global, regional or industry sector level.
We also depend on scrap aluminum for our operations and acquire our scrap inventory from numerous sources. These suppliers generally are not bound by long-term contracts and have no obligation to sell scrap metal to us. In periods of low inventory prices, suppliers may elect to hold scrap until they are able to charge higher prices. If an adequate supply of scrap metal is not available to us, we would be unable to recycle metals at desired volumes and our results of operation, financial condition and cash flows could be materially adversely affected.
Arconic Corporation is exposed to fluctuations in foreign currency exchange rates and interest rates, as well as inflation, economic factors, and currency controls in the countries in which it operates.
Economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates, competitive factors in the countries in which Arconic Corporation operates, and continued volatility or deterioration in the global economic and financial environment could affect Arconic Corporation’s revenues, expenses and results of operations. Changes in the valuation of the U.S. dollar against other currencies, including the Euro, British pound, Canadian dollar, Chinese yuan (renminbi) and Russian ruble, may affect Arconic Corporation’s profitability as some important inputs are purchased in other currencies, while Arconic Corporation’s products are generally sold in U.S. dollars.
In addition, we expect a portion of Arconic Corporation’s indebtedness to bear interest at rates equal to the London Interbank Offering Rate (“LIBOR”) plus a margin. Accordingly, Arconic Corporation will be subject to risk from changes in interest rates on the variable component of the rate. Further, LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted, but could include changes in the cost of Arconic Corporation’s variable rate indebtedness.
Arconic Corporation also faces risks arising from the imposition of cash repatriation restrictions and exchange controls. Cash repatriation restrictions and exchange controls may limit Arconic Corporation’s ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by Arconic Corporation’s foreign subsidiaries or businesses located in or conducted within a country imposing restrictions or controls. While Arconic Corporation currently has no need, and does not intend, to repatriate or convert cash held in countries that have significant restrictions or controls in place, should Arconic Corporation need to do so to fund its operations, it may be unable to repatriate or convert such cash, or be unable to do so without incurring substantial costs. Arconic Corporation currently has substantial operations in countries that have cash repatriation restrictions or exchange controls in place, including China, and, if Arconic Corporation were to need to repatriate or convert such cash, these controls and restrictions may have an adverse effect on Arconic Corporation’s operating results and financial condition.
Arconic Corporation’s customers may reduce their demand for aluminum products in favor of alternative materials.
Certain applications of Arconic Corporation’s aluminum-based products compete with products made from other materials, such as steel, titanium and composites. The willingness of customers to pursue materials other than aluminum often depends upon the desire to achieve specific attributes. For example, the commercial aerospace industry has used and continues to evaluate the further use of alternative materials to aluminum, such as titanium and composites, in order to reduce the weight and increase the fuel efficiency of aircraft. Additionally, the automotive industry, while motivated to reduce vehicle weight through the use of aluminum, may revert to steel or other materials for certain applications. Further, the decision to use aluminum may be impacted by aluminum prices or compatibility of aluminum with other
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materials used by a customer in a given application. The willingness of customers to accept other materials in lieu of aluminum could adversely affect the demand for certain of Arconic Corporation’s products, and thus adversely affect Arconic Corporation’s business, financial condition or results of operations.
Labor disputes and other employee relations issues could adversely affect Arconic Corporation’s business, financial condition or results of operations.
A significant portion of Arconic Corporation’s employees are represented by labor unions in a number of countries under various collective bargaining agreements with varying durations and expiration dates. While Arconic Corporation previously has been successful in renegotiating its collective bargaining agreements with various unions, Arconic Corporation may not be able to satisfactorily renegotiate all collective bargaining agreements in the United States and other countries when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at Arconic Corporation’s facilities in the future. Arconic Corporation may also be subject to general country strikes or work stoppages unrelated to its business or collective bargaining agreements. Any such work stoppages could have a material adverse effect on Arconic Corporation’s business, financial condition or results of operations.
A failure to attract, retain or provide adequate succession plans for key personnel could adversely affect Arconic Corporation’s operations and competitiveness.
Arconic Corporation’s existing operations and development projects require highly skilled executives and staff with relevant industry and technical experience. The inability of Arconic Corporation to attract and retain such people may adversely impact Arconic Corporation’s ability to meet project demands adequately and fill roles in existing operations. Skills shortages in engineering, manufacturing, technology, construction and maintenance contractors and other labor market inadequacies may also impact activities. These shortages may adversely impact the cost and schedule of development projects and the cost and efficiency of existing operations.
In addition, the continuity of key personnel and the preservation of institutional knowledge are vital to the success of Arconic Corporation’s growth and business strategy. The loss of key members of management and other personnel could significantly harm Arconic Corporation’s business, and any unplanned turnover, or failure to develop adequate succession plans for key positions, could deplete Arconic Corporation’s institutional knowledge base, result in loss of technical expertise, delay or impede the execution of Arconic Corporation’s business plans and erode Arconic Corporation’s competitiveness.
Arconic Corporation may be exposed to significant legal proceedings, investigations or changes in U.S. federal, state or foreign law, regulation or policy.
Arconic Corporation’s results of operations or liquidity in a particular period could be affected by new or increasingly stringent laws, regulatory requirements or interpretations, or outcomes of significant legal proceedings or investigations adverse to Arconic Corporation. Arconic Corporation may experience an unfavorable change in effective tax rates or become subject to unexpected or rising costs associated with business operations or provision of health or welfare benefits to employees due to changes in laws, regulations or policies.
Arconic Corporation is subject to a variety of legal and regulatory compliance risks in the United States and abroad in connection with its business and products. These risks include, among other things, potential claims relating to product liability, product testing, health and safety, environmental matters, employment matters, required record keeping and record retention, compliance with securities laws, intellectual property rights, government contracts and taxes, insurance or commercial matters, as well as compliance with U.S. and foreign laws and regulations governing import and export, anti-bribery, antitrust and competition, sales and trading practices, human rights and modern slavery, sourcing of raw materials, third-party relationships, supply chain operations and the manufacture and sale of products. Arconic Corporation may be a party to litigation in a foreign jurisdiction where geopolitical risks might influence the ultimate outcome of such litigation. Arconic Corporation could be subject to fines, penalties, damages (in certain cases, treble damages), or suspension or debarment from government contracts.
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The global and diverse nature of Arconic Corporation’s operations means that these risks will continue to exist, and additional legal proceedings and contingencies may arise from time to time. While Arconic Corporation believes it has adopted appropriate risk management and compliance programs to address and reduce these risks, including insurance arrangements with respect to these risks, such measures may provide inadequate protection against liabilities that may arise. In addition, various factors or developments can lead Arconic Corporation to change current estimates of liabilities or make such estimates for matters previously unsusceptible to reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. A future adverse ruling or settlement or unfavorable changes in laws, regulations or policies, or other contingencies that Arconic Corporation cannot predict with certainty could have a material adverse effect on Arconic Corporation’s financial condition, results of operations or cash flows in a particular period. Litigation and compliance efforts may require substantial attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on the Company’s financial position, results of operations and cash flows. For additional information regarding the legal proceedings relating to Arconic Corporation, including proceedings and investigations relating to the June 13, 2017 fire at the Grenfell Tower in London, U.K., see the section entitled “Business — Legal Proceedings.”
Arconic Corporation is exposed to environmental and safety risks and is subject to a broad range of health, safety and environmental laws and regulations, which may result in substantial costs and liabilities.
Arconic Corporation’s operations worldwide are subject to numerous complex and increasingly stringent health, safety and environmental laws and regulations. The costs of complying with such laws and regulations, including participation in assessments and cleanups of sites, as well as internal voluntary programs, are significant and will continue to be so for the foreseeable future. Environmental laws may impose cleanup liability on owners and occupiers of contaminated property, including present, past or divested properties, regardless of whether the owners and occupiers caused the contamination or whether the activity that caused the contamination was lawful at the time it was conducted. Environmental matters for which Arconic Corporation may be liable may arise in the future at its present sites, at sites owned or operated by its predecessors or affiliates, at sites that it may acquire in the future, or at third-party sites used by its predecessors or affiliates for material and waste handling and disposal. Compliance with health, safety and environmental laws and regulations, including remediation obligations, may prove to be more challenging and costly than Arconic Corporation anticipates. Arconic Corporation’s results of operations or liquidity in a particular period could be affected by certain health, safety or environmental matters, including remediation costs and damages related to certain sites as well as other health and safety risks relating to its operations and products. Additionally, evolving regulatory standards and expectations can result in increased litigation and/or increased costs, including increased remediation costs, all of which can have a material and adverse effect on Arconic Corporation’s financial condition, results of operations and cash flows.
In addition, the heavy industrial activities conducted at Arconic Corporation’s facilities present a significant risk of injury or death to our employees, customers or third parties that may be on site. We have experienced serious injuries in the past, notwithstanding the safety protocols, practices and precautions we take. Our operations are subject to regulation by various federal, state and local agencies in the United States and regulation by foreign government entities abroad responsible for employee health and safety, including the Occupational Safety and Health Administration. From time to time, we have incurred fines for violations of various health and safety standards. While we maintain insurance and have in place policies to minimize such risks, we may nevertheless be unable to avoid material liabilities for any injury or death that may occur in the future. These types of incidents may not be covered by or may exceed our insurance coverage and could have a material adverse effect on our results of operations and financial condition or result in negative publicity and/or significant reputational harm.
Arconic Corporation is subject to privacy and data security/protection laws in the jurisdictions in which it operates and may be exposed to substantial costs and liabilities associated with such laws and regulations.
The regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements. For example, the European Union’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, imposed significant new
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requirements on how companies process and transfer personal data, as well as significant fines for non-compliance. Compliance with changes in privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes, which could have a material adverse effect on Arconic Corporation’s financial condition and results of operations. In addition, the payment of potentially significant fines or penalties in the event of a breach of the GDPR or other privacy and information security laws, as well as the negative publicity associated with such a breach, could damage Arconic Corporation’s reputation and adversely impact product demand and customer relationships.
Failure to comply with domestic or international employment and related laws could result in penalties or costs that could have a material adverse effect on Arconic Corporation’s business results.
Arconic Corporation is subject to a variety of domestic and foreign employment laws, such as the Fair Labor Standards Act (which governs such matters as minimum wages, overtime and other working conditions), state and local wage laws, the Employee Retirement Income Security Act, and regulations related to safety, discrimination, organizing, whistle-blowing, classification of employees, privacy and severance payments, citizenship requirements, and healthcare insurance mandates. Allegations that Arconic Corporation has violated such laws or regulations could damage Arconic Corporation’s reputation and lead to fines from or settlements with federal, state or foreign regulatory authorities or damages payable to employees, which could have a material adverse impact on Arconic Corporation’s operations and financial condition.
Arconic Corporation may be affected by global climate change or by legal, regulatory, or market responses to such change.
Increased concern over climate change has led to new and proposed legislative and regulatory initiatives, such as cap-and-trade systems, additional limits on emissions of greenhouse gases or Corporate Average Fuel Economy standards in the United States. New or revised laws and regulations in this area could directly and indirectly affect Arconic Corporation and its customers and suppliers, including by increasing the costs of production or impacting demand for certain products, which could result in an adverse effect on our financial condition, results of operations and cash flows. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by Arconic Corporation or its customers or suppliers. Also, Arconic Corporation relies on natural gas, electricity, fuel oil and transport fuel to operate its facilities. Any increased costs of these energy sources because of new laws could be passed along to Arconic Corporation and its customers and suppliers, which could also have a negative impact on Arconic Corporation’s profitability.
Changes in the United Kingdom’s economic and other relationships with the European Union could adversely affect Arconic Corporation.
In March 2017, the United Kingdom formally triggered the process to withdraw from the European Union (also referred to as “Brexit”) following the results of a national referendum that took place in June 2016. The ultimate effects of Brexit on Arconic Corporation are difficult to predict, but because Arconic Corporation currently operates and conducts business in the United Kingdom and in Europe, Brexit could cause disruptions and create uncertainty to Arconic Corporation’s businesses, including affecting the business of and/or our relationships with Arconic Corporation’s customers and suppliers, as well as altering the relationship among tariffs and currencies, including the value of the British pound and the Euro relative to the U.S. dollar. Such disruptions and uncertainties could adversely affect Arconic Corporation’s financial condition, operating results and cash flows. In addition, Brexit could result in legal uncertainty and potentially divergent national laws and regulations as new legal relationships between the United Kingdom and the European Union are established. The ultimate effects of Brexit on Arconic Corporation will also depend on the terms of any agreements the United Kingdom and the European Union make to retain access to each other’s respective markets either during a transitional period or more permanently.
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Risks Related to the Distribution
We have no recent history of operating as an independent company, and our historical and pro forma financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.
The historical information about Arconic Corporation in this information statement refers to the Arconic Corporation Businesses as operated by and integrated with ParentCo. Our historical financial information included in this information statement is derived from ParentCo’s accounting records and is presented on a standalone basis as if the Arconic Corporation Business has been conducted independently from ParentCo. Additionally, the pro forma financial information included in this information statement is derived from our historical financial information and (i) gives effect to the separation and (ii) reflects Arconic Corporation’s anticipated post-separation capital structure, including the assignment of certain assets and assumption of certain liabilities not included in the historical financial statements. Accordingly, the historical and pro forma financial information does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

Generally, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, have historically been satisfied as part of the corporate-wide cash management policies of ParentCo. Following the completion of the distribution, our results of operations and cash flows are likely to be more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly.

Prior to the distribution, our business has been operated by ParentCo as part of its broader corporate organization, rather than as an independent company. ParentCo or one of its affiliates performed various corporate functions for us, such as legal, treasury, accounting, auditing, human resources, investor relations, and finance. Our historical and pro forma financial results reflect allocations of corporate expenses from ParentCo for such functions, which may be less than the expenses we would have incurred had we operated as a separate, publicly traded company.

Currently, our business is integrated with the other businesses of ParentCo. Historically, we have shared economies of scope and scale in costs, employees, vendor relationships and customer relationships. While we have sought to minimize the impact on Arconic Corporation when separating these arrangements, there is no guarantee these arrangements will continue to capture these benefits in the future.

As a current part of ParentCo, we take advantage of ParentCo’s overall size and scope to obtain more advantageous procurement terms. After the distribution, as a standalone company, we may be unable to obtain similar arrangements to the same extent as ParentCo did, or on terms as favorable as those ParentCo obtained, prior to completion of the distribution.

After the completion of the distribution, the cost of capital for our business may be higher than ParentCo’s cost of capital prior to the distribution.

Our historical financial information does not reflect the debt that we will incur as part of the distribution.

As an independent public company, we will separately become subject to, among other things, the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the regulations of the NYSE and will be required to prepare our standalone financial statements according to the rules and regulations required by the SEC. These reporting and other obligations will place significant demands on our management and administrative and operational resources. Moreover, to comply with these requirements, we anticipate that we will need to migrate our systems, including information technology systems, implement additional financial and
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management controls, reporting systems and procedures and hire additional accounting and finance staff. We expect to incur additional annual expenses related to these steps, and those expenses may be significant. If we are unable to implement our financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired.
Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from ParentCo. For additional information about the past financial performance of our business and the basis of presentation of the historical combined financial statements and the unaudited pro forma condensed combined financial statements of our business, see “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Combined Financial Data of Arconic Corporation,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and accompanying notes included elsewhere in this information statement.
Following the separation, our financial profile will change, and we will be a smaller, less diversified company than ParentCo prior to the separation.
The separation will result in each of Howmet Aerospace and Arconic Corporation being smaller, less diversified companies with more limited businesses concentrated in their respective industries. As a result, our Company may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the diversification of our revenues, costs, and cash flows will diminish as a standalone company, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and our ability to fund capital expenditures and investments, pay dividends and service debt may be diminished. Following the separation we may also lose capital allocation efficiency and flexibility, as we will no longer be able to use cash flow from Howmet Aerospace to fund our investments into one of our other businesses.
We may not achieve some or all of the expected benefits of the distribution, and the distribution may materially adversely affect our business.
We may not be able to achieve the full strategic and financial benefits expected to result from the distribution, or such benefits may be delayed or not occur at all. The distribution is expected to provide the following benefits, among others: (1) enabling our management to more effectively pursue its own distinct operating priorities and strategies and to focus on strengthening our core business and unique needs, and pursue distinct and targeted opportunities for long-term growth and profitability; (2) permitting us to allocate our financial resources to meet the unique needs of our business, which will allow us to intensify our focus on distinct strategic priorities and to more effectively pursue our own distinct capital structures and capital allocation strategies; (3) allowing us to more effectively articulate a clear investment thesis to attract a long-term investor base suited to our business and providing investors with a distinct and targeted investment opportunity; (4) creating an independent equity security tracking our underlying business, affording us direct access to the capital markets and facilitating our ability to consummate future acquisitions or other transactions using our common stock; and (5) permitting us to more effectively recruit, retain and motivate employees through the use of stock-based compensation that more closely aligns management and employee incentives with specific business goals and objectives related to our business.
We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (1) the separation will demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business; (2) following the separation, we may be more susceptible to market fluctuations and other adverse events than if we were still a part of ParentCo because our business will be less diversified than ParentCo’s business prior to the completion of the separation; (3) after the separation, as a standalone company, we may be unable to obtain certain goods, services and technologies at prices or on terms as favorable as those ParentCo obtained prior to completion of the separation; (4) the separation may require us to pay costs that could be substantial and material to our financial resources, including accounting, tax, legal and other
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professional services costs, recruiting and relocation costs associated with hiring key senior management and personnel new to Arconic Corporation, tax costs and costs to separate information systems; (5) under the terms of the tax matters agreement that we will enter into with ParentCo, we will be restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free and these restrictions may limit us for a period of time from pursuing certain strategic transactions and equity issuances or engaging in other transactions that might increase the value of our business; and (6) after the separation, we cannot predict the trading prices of Arconic Corporation common stock or know whether the combined value of  [    ] shares of our common stock and one share of Howmet Aerospace common stock will be less than, equal to or greater than the market value of one share of ParentCo common stock prior to the distribution. If we fail to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.
ParentCo’s plan to separate into two independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.
In February 2019, ParentCo announced its plan to separate into two independent, publicly traded companies. The separation is subject to the satisfaction of certain conditions (or waiver by ParentCo in its sole and absolute discretion), including final approval by ParentCo’s Board of Directors of the final terms of the separation and market and certain other conditions. Furthermore, the separation is complex in nature, and unanticipated developments or changes, including changes in the law, the macroeconomic environment, competitive conditions of ParentCo’s markets, regulatory approvals or clearances, the uncertainty of the financial markets and challenges in executing the separation, could delay or prevent the completion of the proposed separation, or cause the separation to occur on terms or conditions that are different or less favorable than expected. Additionally, the ParentCo Board of Directors, in its sole and absolute discretion, may decide not to proceed with the distribution at any time prior to the distribution date.
The process of completing the proposed separation has been and is expected to continue to be time- consuming and involves significant costs and expenses. The separation costs may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the separation is not completed or is not well executed, or the expected benefits of the separation are not realized. Executing the proposed separation will also require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business. Other challenges associated with effectively executing the separation include attracting, retaining and motivating employees during the pendency of the separation and following its completion; addressing disruptions to our supply chain, manufacturing, sales and distribution, and other operations resulting from separating ParentCo into two independent companies; and separating ParentCo’s information systems.
Challenges in the commercial and credit environment may adversely affect the expected benefits of the separation, the expected plans or anticipated timeline to complete the separation and our future access to capital on favorable terms.
Volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. These conditions may adversely affect our anticipated timeline to complete the separation and the expected benefits of the separation, including by increasing the time and expense involved in the separation.
We have incurred, and may in the future incur additional, debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.
We expect to complete one or more financing transactions on or prior to the completion of the distribution, with approximately $[    ] of the proceeds of such financings expected to be used to distribute cash to ParentCo. As a result of such transactions, we anticipate having approximately $[    ] million of indebtedness upon completion of the distribution. See “Description of Material Indebtedness.” We may also incur additional indebtedness in the future.
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This significant amount of debt could potentially have important consequences to us and our debt and equity investors, including:

requiring a substantial portion of our cash flow from operations to make interest payments;

making it more difficult to satisfy debt service and other obligations;

increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;

increasing our vulnerability to general adverse economic and industry conditions;

reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;

limiting our flexibility in planning for, or reacting to, changes in our business and the industry;

placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and

limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase ordinary shares.
To the extent that we incur additional indebtedness, the foregoing risks could increase. In addition, our actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt.
We could experience temporary interruptions in business operations and incur additional costs as we build our information technology infrastructure and transition our data to our own systems.
We are in the process of creating our own, or engaging third parties to provide, information technology infrastructure and systems to support our critical business functions, including accounting and reporting, in order to replace many of the systems ParentCo currently provides to us. We may incur temporary interruptions in business operations if we cannot transition effectively from ParentCo’s existing operating systems, databases and programming languages that support these functions to our own systems. Our failure to implement the new systems and transition our data successfully and cost-effectively could disrupt our business operations and have a material adverse effect on our profitability. In addition, our costs for the operation of these systems may be higher than the amounts reflected in our historical combined financial statements.
Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject as a standalone, publicly traded company following the distribution.
Our financial results previously were included within the consolidated results of ParentCo, and we believe that our reporting and control systems were appropriate for those of subsidiaries of a public company. However, we were not directly subject to the reporting and other requirements of the Exchange Act. As a result of the distribution, we will be directly subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These reporting and other obligations will place significant demands on our management and administrative and operational resources, including accounting resources. We may not have sufficient time following the separation to meet these obligations by the applicable deadlines.
Moreover, to comply with these requirements, we anticipate that we will need to migrate our systems, including information technology systems, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. We expect to incur additional annual expenses related to these steps, and those expenses may be significant. If we are unable to implement our financial and management controls, reporting systems, information technology and
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procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. Any failure to achieve and maintain effective internal controls could result in adverse regulatory consequences and/or loss of investor confidence, which could limit Arconic Corporation’s ability to access the global capital markets and could have a material adverse effect on our business, financial condition, results of operations, cash flows or the market price of Arconic Corporation securities.
In connection with the separation into two public companies, each of Howmet Aerospace and Arconic Corporation will indemnify each other for certain liabilities. If we are required to pay under these indemnities to Howmet Aerospace, our financial results could be negatively impacted. The Howmet Aerospace indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which Howmet Aerospace will be allocated responsibility, and Howmet Aerospace may not be able to satisfy its indemnification obligations in the future.
Pursuant to the separation agreement and certain other agreements between ParentCo and Arconic Corporation, each party will agree to indemnify the other for certain liabilities, in each case for uncapped amounts, as discussed further in the section entitled “Certain Relationships and Related Party Transactions — Separation Agreement” of this information statement. Indemnities that we may be required to provide Howmet Aerospace are not subject to any cap, may be significant and could negatively impact our business. Third parties could also seek to hold us responsible for any of the liabilities that Howmet Aerospace has agreed to retain. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. Further, the indemnities from Howmet Aerospace for our benefit may not be sufficient to protect us against the full amount of such liabilities, and Howmet Aerospace may not be able to fully satisfy its indemnification obligations.
Moreover, even if we ultimately succeed in recovering from Howmet Aerospace any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.
Howmet Aerospace may fail to perform under various transaction agreements that will be executed as part of the separation, or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
In connection with the separation and prior to the distribution, Arconic Corporation and ParentCo will enter into the separation agreement and will also enter into various other agreements, including a tax matters agreement, an employee matters agreement, intellectual property license agreements, an agreement relating to the Davenport plant, metal supply agreements and real estate and office leases. The separation agreement, the tax matters agreement and the employee matters agreement, together with the documents and agreements by which the internal reorganization will be effected, will determine the allocation of assets and liabilities between the companies following the separation for those respective areas and will include any necessary indemnifications related to liabilities and obligations. Arconic Corporation will rely on Howmet Aerospace to satisfy its performance and payment obligations under these agreements. If Howmet Aerospace is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our business effectively, and our profitability may decline. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that ParentCo currently provides to us. However, we may not be successful in implementing these systems and services in a timely manner or at all, we may incur additional costs in connection with, or following, the implementation of these systems and services, and we may not be successful in transitioning data from ParentCo’s systems to ours.
The terms we will receive in our agreements with ParentCo could be less beneficial than the terms we may have otherwise received from unaffiliated third parties.
The agreements we will enter into with ParentCo in connection with the separation, including the separation agreement, a tax matters agreement, an employee matters agreement, intellectual property license agreements, an agreement relating to the Davenport plant, metal supply agreements and real estate
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and office leases, were prepared in the context of the separation while we were still a wholly owned subsidiary of ParentCo. Accordingly, during the period in which the terms of those agreements were prepared, we did not have an independent Board of Directors or a management team that was independent of ParentCo. As a result, the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. See “Certain Relationships and Related Party Transactions.”
If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we, as well as ParentCo and ParentCo’s stockholders, could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify ParentCo for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
It is a condition to the distribution that ParentCo receive an opinion of its outside counsel, satisfactory to the ParentCo Board of Directors, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Code. The opinion of counsel will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of ParentCo and Arconic Corporation, including those relating to the past and future conduct of ParentCo and Arconic Corporation. If any of these facts, assumptions, representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if ParentCo or Arconic Corporation breaches any of its representations or covenants contained in the separation agreement and certain other agreements and documents or in any documents relating to the opinion of counsel, the opinion of counsel may be invalid and the conclusions reached therein could be jeopardized.
Notwithstanding receipt of the opinion of counsel, the IRS could determine that the distribution and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings upon which the opinion of counsel was based are false or have been violated. In addition, the opinion of counsel will represent the judgment of such counsel and will not be binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion of counsel. Accordingly, notwithstanding receipt of the opinion of counsel, there can be no assurance that the IRS will not assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail with such challenge, we, as well as ParentCo and ParentCo’s stockholders, could be subject to significant U.S. federal income tax liability.
If the distribution were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, ParentCo would recognize taxable gain as if it had sold the Arconic Corporation common stock in a taxable sale for its fair market value, and ParentCo stockholders who receive such Arconic Corporation shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. For more information, see “Material U.S. Federal Income Tax Consequences.”
Under the tax matters agreement to be entered into between ParentCo and Arconic Corporation in connection with the separation, we generally would be required to indemnify ParentCo for any taxes resulting from the separation (and any related costs and other damages) to the extent such amounts resulted from (1) an acquisition of all or a portion of the equity securities or assets of Arconic Corporation, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) other actions or failures to act by Arconic Corporation, or (3) any of Arconic Corporation’s representations, covenants or undertakings contained in the separation agreement and certain other agreements and documents or in any documents relating to the opinion of counsel being incorrect or violated. Any such indemnity obligations could be material. For a more detailed discussion, see “Certain Relationships and Related Party Transactions — Tax Matters Agreement.” In addition, ParentCo, Arconic Corporation and their respective subsidiaries may incur certain tax costs in connection with the separation, including non-U.S. tax costs resulting from transactions (including the internal reorganization) in non-U.S. jurisdictions, which may be material.
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We may not be able to engage in desirable capital-raising or strategic transactions following the separation.
Under current U.S. federal income tax law, a spin-off that otherwise qualifies for tax-free treatment can be rendered taxable to the parent corporation and its stockholders as a result of certain post-spin-off transactions, including certain acquisitions of shares or assets of the spun-off corporation. To preserve the tax-free treatment of the separation and the distribution, and in addition to our indemnity obligations described above, the tax matters agreement will restrict us, for the two-year period following the distribution, except in specific circumstances, from, among other things: (1) entering into any transaction pursuant to which all or a portion of the shares of Arconic Corporation stock would be acquired, whether by merger or otherwise; (2) issuing equity securities beyond certain thresholds; (3) repurchasing shares of Arconic Corporation stock other than in certain open-market transactions; and (4) ceasing to actively conduct certain of its businesses. The tax matters agreement will also prohibit Arconic Corporation from taking or failing to take any other action that would prevent the distribution and certain related transactions from qualifying as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code. These restrictions may limit our ability to pursue certain equity issuances, strategic transactions, repurchases or other transactions that we may believe to be in the best interests of our stockholders or that might increase the value of our business. For more information, see the sections entitled “Certain Relationships and Related Party Transactions — Tax Matters Agreement” and “Material U.S. Federal Income Tax Consequences.”
The transfer to us of certain contracts, permits and other assets and rights may require the consents or approvals of, or provide other rights to, third parties and governmental authorities. If such consents or approvals are not obtained, we may not be entitled to the benefit of such contracts, permits and other assets and rights, which could increase our expenses or otherwise harm our business and financial performance.
The separation agreement will provide that certain contracts, permits and other assets and rights are to be transferred from ParentCo or its subsidiaries to Arconic Corporation or its subsidiaries in connection with the separation. The transfer of certain of these contracts, permits and other assets and rights may require consents or approvals of third parties or governmental authorities or provide other rights to third parties. In addition, in some circumstances, we and ParentCo are joint beneficiaries of contracts, and we and ParentCo may need the consents of third parties in order to split or separate the existing contracts or the relevant portion of the existing contracts to us or ParentCo.
Some parties may use consent requirements or other rights to seek to terminate contracts or obtain more favorable contractual terms from us, which, for example, could take the form of adverse price changes, require us to expend additional resources in order to obtain the services or assets previously provided under the contract, or require us to seek arrangements with new third parties or obtain letters of credit or other forms of credit support. If we are unable to obtain required consents or approvals, we may be unable to obtain the benefits, permits, assets and contractual commitments that are intended to be allocated to us as part of our separation from ParentCo, and we may be required to seek alternative arrangements to obtain services and assets which may be more costly and/or of lower quality. The termination or modification of these contracts or permits or the failure to timely complete the transfer or separation of these contracts or permits could negatively impact our business, financial condition, results of operations and cash flows.
Until the distribution occurs, the ParentCo Board of Directors has sole and absolute discretion to change the terms of the separation in ways which may be unfavorable to us.
Until the distribution occurs, Arconic Corporation will be a wholly-owned subsidiary of ParentCo. Accordingly, ParentCo will have the sole and absolute discretion to determine and change the terms of the separation, including the establishment of the record date for the distribution and the distribution date. These changes could be unfavorable to us. In addition, the ParentCo Board of Directors, in its sole and absolute discretion, may decide not to proceed with the distribution at any time prior to the distribution date.
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No vote of ParentCo stockholders is required in connection with the distribution. As a result, if the distribution occurs and you do not want to receive our common stock in the distribution, your sole recourse will be to divest yourself of your ParentCo common stock prior to the record date.
No vote of ParentCo stockholders is required in connection with the distribution. Accordingly, if the distribution occurs and you do not want to receive our common stock in the distribution, your only recourse will be to divest yourself of your ParentCo common stock prior to the record date for the distribution.
Risks Related to Our Common Stock
We cannot be certain that an active trading market for our common stock will develop or be sustained after the distribution and, following the distribution, our stock price may fluctuate significantly.
A public market for our common stock does not currently exist. We anticipate that on or prior to the record date for the distribution, trading of shares of our common stock will begin on a “when-issued” basis and will continue through the distribution date. However, we cannot guarantee that an active trading market will develop or be sustained for our common stock after the distribution, nor can we predict the prices at which shares of our common stock may trade after the distribution. Similarly, we cannot predict the effect of the distribution on the trading prices of our common stock or whether the combined market value of  [    ] shares of our common stock and one share of Howmet Aerospace common stock will be less than, equal to or greater than the market value of one share of ParentCo common stock prior to the distribution.
Until the market has fully evaluated Howmet Aerospace’s businesses without Arconic Corporation, the price at which each share of Howmet Aerospace common stock trades may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. Similarly, until the market has fully evaluated our business as a standalone entity, the prices at which shares of our common stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. The increased volatility of our stock price following the distribution may have a material adverse effect on our business, financial condition and results of operations. The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

actual or anticipated fluctuations in our operating results;

changes in earnings estimated by securities analysts or our ability to meet those estimates;

the operating and stock price performance of comparable companies;

changes to the regulatory and legal environment under which we operate;

actual or anticipated fluctuations in commodities prices; and

domestic and worldwide economic conditions.
A significant number of shares of our common stock may be sold following the distribution, which may cause our stock price to decline.
Any sales of substantial amounts of our common stock in the public market or the perception that such sales might occur, in connection with the distribution or otherwise, may cause the market price of our common stock to decline. Upon completion of the distribution, we expect that we will have an aggregate of approximately [    ] shares of our common stock issued and outstanding. Shares distributed to ParentCo stockholders in the separation will generally be freely tradeable without restriction or further registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”), except for shares owned by one of our “affiliates,” as that term is defined in Rule 405 under the Securities Act.
We are unable to predict whether large amounts of our common stock will be sold in the open market following the distribution. We are also unable to predict whether a sufficient number of buyers of our common stock to meet the demand to sell shares of our common stock at attractive prices would exist at that time.
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Your percentage of ownership in Arconic Corporation may be diluted in the future.
In the future, your percentage ownership in Arconic Corporation may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we will grant to our directors, officers and employees. Our employees will have stock-based awards that correspond to shares of our common stock after the distribution as a result of conversion of their ParentCo stock-based awards. We anticipate that the compensation committee of our Board of Directors will grant additional stock-based awards to our employees after the distribution. Such awards will have a dilutive effect on the number of Arconic Corporation shares outstanding, and therefore on our earnings per share, which could adversely affect the market price of our common stock. From time to time, we will issue additional stock-based awards to our employees under our employee benefits plans.
We cannot guarantee the timing, amount or payment of dividends on our common stock.
The timing, declaration, amount and payment of future dividends to our stockholders will fall within the discretion of our Board of Directors. The Board of Directors’ decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, covenants associated with certain of our debt service obligations, industry practice, legal requirements, regulatory constraints and other factors that our Board of Directors deems relevant. For more information, see the section entitled “Dividend Policy.”
Anti-takeover provisions could enable Arconic Corporation to resist a takeover attempt by a third party and limit the power of our stockholders.
Our amended and restated certificate of incorporation and amended and restated bylaws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover. These provisions are expected to include, among others:

the ability of our remaining directors to fill vacancies on our Board of Directors that do not arise as a result of removal by stockholders;

limitations on stockholders’ ability to call a special stockholder meeting;

rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; and

the right of our Board of Directors to issue preferred stock without stockholder approval.
In addition, we expect to be subject to Section 203 of the Delaware General Corporate Law (the “DGCL”), which could have the effect of delaying or preventing a change of control that you may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make Arconic Corporation immune from takeovers; however, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of Arconic Corporation and our stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. See “Description of Arconic Corporation Common Stock — Other Matters.”
In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code, causing the distribution to be taxable to ParentCo. For a discussion of Section 355(e) of the Code, see “Material U.S. Federal Income Tax Consequences.” Under the tax matters agreement, we would be required to indemnify ParentCo for the resulting tax, and this indemnity obligation might discourage, delay or prevent a change of control that our stockholders may consider favorable.
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Our amended and restated certificate of incorporation will designate the state courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against Arconic Corporation and our directors and officers.
Our amended and restated certificate of incorporation will provide that unless the Board of Directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Arconic Corporation, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer of Arconic Corporation to Arconic Corporation or to Arconic Corporation stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against Arconic Corporation or any current or former director or officer of Arconic Corporation arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving Arconic Corporation governed by the internal affairs doctrine, or any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
To the fullest extent permitted by law, this exclusive forum provision will apply to state and federal law claims, including claims under the federal securities laws, including the Securities Act and the Exchange Act, although Arconic Corporation stockholders will not be deemed to have waived Arconic Corporation’s compliance with the federal securities laws and the rules and regulations thereunder. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with claims arising under federal securities laws or otherwise, a court could find the exclusive forum provision contained in the amended and restated certificate of incorporation to be inapplicable or unenforceable.
This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Arconic Corporation or our directors or officers, which may discourage such lawsuits against Arconic Corporation and our directors and officers. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition.
The combined post-separation value of one share of Howmet Aerospace common stock and [    ] shares of Arconic Corporation common stock may not equal or exceed the pre-distribution value of one share of ParentCo common stock.
As a result of the separation, Arconic expects the trading price of shares of Howmet Aerospace common stock immediately following the separation to be different from the “regular-way” trading price of ParentCo common shares immediately prior to the separation because the trading price will no longer reflect the value of the Arconic Corporation Businesses. There can be no assurance that the aggregate market value of a share of Howmet Aerospace common stock and [     ] shares of Arconic Corporation common stock following the separation will be higher than, lower than or the same as the market value of a share of ParentCo common stock if the separation did not occur.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This information statement and other materials ParentCo and Arconic Corporation have filed or will file with the SEC (and oral communications that ParentCo or Arconic Corporation may make) contain or incorporate by reference statements that relate to future events and expectations and, as such, constitute forward-looking statements under the securities laws. 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 ParentCo’s or Arconic Corporation’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts 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 ParentCo’s or Arconic Corporation’s strategies, outlook, business and financial prospects; and statements regarding potential share gains. 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 each of ParentCo and Arconic Corporation believes that the expectations reflected in any forward-looking statements it makes 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:

deterioration in global economic and financial market conditions generally;

unfavorable changes in the markets served by ParentCo and Arconic Corporation;

competition from new product offerings, disruptive technologies, industry consolidation or other developments;

the loss of key customers or significant changes in the business or financial condition of customers;

manufacturing difficulties or other issues that impact product performance, quality or safety;

the inability to meet increased program demand successfully or to mitigate the impact of program cancellations, reductions or delays;

the outcome of product liability, product safety, personal injury, property damage, and recall claims and investigations, which can expose ParentCo and Arconic Corporation to substantial costs, liabilities and reputational harm;

political, economic, and regulatory risks relating to ParentCo’s and Arconic Corporation’s global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations;

a material disruption of Arconic Corporation’s operations, particularly at one or more of Arconic Corporations’ manufacturing facilities;

the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated or targeted;

the impact of potential cyber-attacks and information technology or data security breaches;

the inability to develop innovative new products or implement technology initiatives successfully;

challenges to Arconic Corporation’s intellectual property rights;

adverse changes in discount rates or investment returns on pension assets;

ParentCo’s and Arconic Corporation’s inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, expansions, or joint ventures;

increases in the cost of aluminum or volatility in the availability or costs of other raw materials;
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a significant downturn in the business or financial condition of a significant supplier;

the impact of changes in foreign currency exchange rates on costs and results;

the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental compliance and remediation, which can expose ParentCo and Arconic Corporation to substantial costs and liabilities;

the expected benefits and timing of the separation, and uncertainties regarding the planned separation, including the risk that conditions to the separation will not be satisfied and that it will not be completed pursuant to the targeted timing, asset perimeters, and other anticipated terms, if at all;

the impact of the separation on the businesses of ParentCo;

a determination by the IRS that the distribution or certain related transactions should be treated as taxable transactions;

the possibility that any consents or approvals required in connection with the separation will not be received or obtained within the expected time frame, on the expected terms or at all;

expected financing transactions undertaken in connection with the separation and risks associated with additional indebtedness;

the risk that dissynergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed our estimates; and

the impact of the separation on our businesses and the risk that the businesses will not be separated successfully or such separation may be more difficult, time-consuming or costly than expected, which could result in additional demands on ParentCo’s resources, systems, procedures and controls, disruption of our ongoing business, and diversion of management’s attention from other business concerns and impact our relationships with customers, suppliers, employees and other business counterparties.
There can be no assurance that the separation, distribution or any other transaction described above will in fact be consummated in the manner described or at all. The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see the discussions under “Risk Factors” in this information statement. Any forward-looking statement speaks only as of the date on which it is made, and each of ParentCo and Arconic Corporation assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
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THE SEPARATION AND DISTRIBUTION
Overview
In February 2019, we announced our plan to separate into two independent, publicly traded companies. The separation will occur through a pro rata distribution to the ParentCo stockholders of 100% of the outstanding shares of common stock of Arconic Corporation, which was formed to hold the Arconic Corporation Businesses.
In connection with the distribution, we expect that:

ParentCo will complete the internal reorganization as a result of which Arconic Corporation will become the parent company of the ParentCo operations comprising, and the entities that will conduct, the Arconic Corporation Businesses;

ParentCo will change its name to “Howmet Aerospace Inc.”;

“Arconic Rolled Products Corporation” will change its name to “Arconic Corporation”;

Arconic Corporation will incur approximately $[    ] of indebtedness, as described under “Description of Material Indebtedness”; and

using a portion of the proceeds from one or more financing transactions on or prior to the completion of the distribution, Arconic Corporation will distribute approximately $[    ] of cash to ParentCo.
On [           ], 2020, the ParentCo Board of Directors approved the distribution of all of Arconic Corporation’s issued and outstanding shares of common stock on the basis of  [      ] shares of Arconic Corporation common stock for every share of ParentCo common stock held as of the close of business on [           ], 2020, the record date for the distribution.
At [        ], Eastern Time, on [           ], 2020, the distribution date, each ParentCo stockholder will receive [      ] shares of Arconic Corporation common stock for every share of ParentCo common stock held at the close of business on the record date for the distribution, as described below. ParentCo stockholders will receive cash in lieu of any fractional shares of Arconic Corporation common stock that they would have received after application of this ratio. Upon completion of the separation, each Arconic stockholder as of the record date will continue to own shares of ParentCo (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace shares) and will receive a proportionate share of the outstanding common stock of Arconic Corporation to be distributed. You will not be required to make any payment, surrender or exchange your ParentCo common stock or take any other action to receive your shares of Arconic Corporation common stock in the distribution. The distribution of Arconic Corporation common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “ — Conditions to the Distribution.”
Reasons for the Separation
The ParentCo Board of Directors believes that the separation of ParentCo into two independent, publicly traded companies through the separation of the Arconic Corporation Businesses from the Howmet Aerospace Businesses is in the best interests of ParentCo and its stockholders for a number of reasons, including:

Management Focus on Core Business and Distinct Opportunities.   The separation will permit each company to more effectively pursue its own distinct business, operating priorities and strategies, with Howmet Aerospace focusing primarily on aerospace and Arconic Corporation focusing on rolled products, extrusions, and building and construction systems. The separation will enable the management teams of each of the two companies to focus on strengthening its core business and operations, more effectively address unique operating and other needs, and pursue distinct and targeted opportunities for long-term growth and profitability.
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Allocation of Financial Resources and Separate Capital Structures.   The separation will permit each company to allocate its financial resources to meet the unique needs of its own business, which will allow each company to intensify its focus on its distinct strategic priorities. The separation will also allow each business to more effectively pursue its own distinct capital structures and capital allocation strategies. In addition, after the separation, the respective businesses within each company will no longer compete internally with the businesses of the other company for capital and other corporate resources.

Simplified Business Structure.   The separation will separate and simplify the structures currently required to manage a number of distinct and differing underlying businesses. These differences include exposure to industry cycles, manufacturing and procurement methods, customer base, research and development activities, and overhead structures.

Targeted Investment Opportunity.   The separation will create two companies with more focused, aligned businesses, which will allow each company to more effectively articulate a clear investment thesis to attract a long-term investor base suited to its businesses and the industries in which it operates and serves, and will facilitate each company’s access to capital by providing investors with two distinct and targeted investment opportunities.

Employee Incentives, Recruitment and Retention.   The separation will allow each company to more effectively recruit, retain and motivate employees through the use of stock-based compensation that more closely reflects and aligns management and employee incentives with specific growth objectives, financial goals and business performance. In addition, the separation will allow incentive structures and targets at each company to be better aligned with each underlying business. Similarly, recruitment and retention will be enhanced by more consistent talent requirements across the businesses, allowing both recruiters and applicants greater clarity and understanding of talent needs and opportunities associated with the core business activities, principles and risks of each company.

Creation of Independent Equity Currencies.   The separation will create independent equity securities, affording Arconic Corporation direct access to the capital markets, enabling it to use its own industry-focused stock to consummate future acquisitions or other transactions. As a result, Arconic Corporation will have more flexibility to capitalize on its unique strategic opportunities.
The ParentCo Board of Directors also considered a number of potentially negative factors in evaluating the separation, including:

Risk of Failure to Achieve Anticipated Benefits of the Separation.   We may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will demand significant management resources and require significant amounts of management’s time and effort, which may divert management’s attention from operating our business; and following the separation, we may be more susceptible to market fluctuations, and other adverse events than if we were still a part of ParentCo because our business will be less diversified than ParentCo’s business prior to the completion of the separation.

Disruptions and Costs Related to the Separation.   The actions required to separate the Arconic Corporation Businesses and the Howmet Aerospace Businesses could disrupt our operations. In addition, we will incur substantial costs in connection with the separation and the transition to being a standalone, public company, which may include accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel who are new to Arconic Corporation, tax costs and costs to separate information systems.

Loss of Scale and Increased Administrative Costs.   As a current part of ParentCo, Arconic Corporation takes advantage of ParentCo’s size and purchasing power in procuring certain goods and services. After the separation, as a standalone company, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those ParentCo obtained prior to completion of the separation. In addition, as part of ParentCo, Arconic Corporation benefits from certain functions performed by ParentCo, such as accounting, tax, legal, human
48

resources and other general and administrative functions. After the separation, Howmet Aerospace will not perform these functions for us and, because of our smaller scale as a standalone company, our cost of performing such functions could be higher than the amounts reflected in our historical financial statements, which would cause our profitability to decrease.

Limitations on Strategic Transactions.   Under the terms of the tax matters agreement that we will enter into with the ParentCo, we will be restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free under applicable law. These restrictions may limit for a period of time our ability to pursue certain strategic transactions and equity issuances or engage in other transactions that might increase the value of our business.

Uncertainty Regarding Stock Prices.   We cannot predict the effect of the separation on the trading prices of Arconic Corporation or Howmet Aerospace common stock or know with certainty whether the combined market value of  [    ] shares of our common stock and one share of Howmet Aerospace common stock will be less than, equal to or greater than the market value of one share of ParentCo common stock prior to the distribution.
In determining to pursue the separation, the ParentCo Board of Directors concluded the potential benefits of the separation outweighed the foregoing factors. See the section entitled “Risk Factors” included elsewhere in this information statement.
Formation of Arconic Corporation
Arconic Corporation was formed in Delaware on August 14, 2019 for the purpose of holding the Arconic Corporation Businesses. As part of the plan to separate the Arconic Corporation Businesses from the remainder of its businesses, in connection with the internal reorganization, ParentCo plans to transfer the equity interests of certain entities that are expected to operate the Arconic Corporation Businesses and the assets and liabilities of the Arconic Corporation Businesses to Arconic Corporation prior to the distribution.
When and How You Will Receive the Distribution
With the assistance of Computershare, ParentCo expects to distribute Arconic Corporation common stock at [    ], Eastern Time, on [    ], 2020, the distribution date, to all holders of outstanding ParentCo common stock as of the close of business on [    ], 2020, the record date for the distribution. Computershare will serve as the settlement and distribution agent in connection with the distribution and the transfer agent and registrar for Arconic Corporation common stock.
If you own ParentCo common stock as of the close of business on the record date for the distribution, Arconic Corporation common stock that you are entitled to receive in the distribution will be issued electronically, as of the distribution date, to you in direct registration form or to your bank or brokerage firm on your behalf. If you are a registered holder, Computershare will then mail you a direct registration account statement that reflects your shares of Arconic Corporation common stock. If you hold your ParentCo shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the Arconic Corporation shares. Direct registration form refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this distribution. If you sell ParentCo common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive shares of Arconic Corporation common stock in the distribution.
Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your ParentCo common stock and you are the registered holder of the shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of shares of Arconic Corporation common stock that have been registered in book-entry form in your name.
Most ParentCo stockholders hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm is said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your ParentCo common stock through a bank
49

or brokerage firm, your bank or brokerage firm will credit your account for the Arconic Corporation common stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.
Transferability of Shares You Receive
Shares of Arconic Corporation common stock distributed to holders in connection with the distribution will be transferable without registration under the Securities Act, except for shares received by persons who may be deemed to be our affiliates. Persons who may be deemed to be our affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with us, which may include certain of our executive officers or directors. Securities held by our affiliates will be subject to resale restrictions under the Securities Act. Our affiliates will be permitted to sell shares of our common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.
Number of Shares of Arconic Corporation Common Stock You Will Receive
For every share of ParentCo common stock that you own at the close of business on [    ], 2020, the record date for the distribution, you will receive [    ] shares of Arconic Corporation common stock on the distribution date. ParentCo will not distribute any fractional shares of Arconic Corporation common stock to its stockholders. Instead, if you are a registered holder, Computershare will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. The distribution agent, in its sole discretion, without any influence by ParentCo or Arconic Corporation, will determine when, how, and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either ParentCo or Arconic Corporation and the distribution agent is not an affiliate of either ParentCo or Arconic Corporation. Neither Arconic Corporation nor ParentCo will be able to guarantee any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts paid in lieu of fractional shares.
The net cash proceeds of these sales of fractional shares will be taxable for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences” for an explanation of certain material U.S. federal income tax consequences of the distribution. If you hold physical certificates for shares of ParentCo common stock and are the registered holder, you will receive a check from the distribution agent in an amount equal to your pro rata share of the net cash proceeds of the sales. We estimate that it will take approximately two weeks from the distribution date for the distribution agent to complete the distribution of the net cash proceeds. If you hold your shares of ParentCo common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the net cash proceeds of the sales and will electronically credit your account for your share of such proceeds.
Treatment of Equity-Based Compensation
[    ]
Internal Reorganization
As part of the separation, and prior to the distribution, ParentCo and its subsidiaries expect to complete an internal reorganization in order to transfer to Arconic Corporation the Arconic Corporation Businesses that it will hold following the separation. Among other things and subject to limited exceptions, the internal reorganization is expected to result in Arconic Corporation owning, directly or indirectly, the operations comprising, and the entities that conduct, the Arconic Corporation Businesses.
The internal reorganization is expected to include various restructuring transactions pursuant to which (1) the operations, assets and liabilities of ParentCo and its subsidiaries used to conduct the Arconic Corporation Businesses will be separated from the operations, assets and liabilities of ParentCo and its
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subsidiaries used to conduct the Howmet Aerospace Businesses and (2) such Arconic Corporation Businesses operations, assets and liabilities will be contributed, transferred or otherwise allocated to Arconic Corporation or one of its direct or indirect subsidiaries. These restructuring transactions may take the form of asset transfers, mergers, demergers, dividends, contributions and similar transactions, and may involve the formation of new subsidiaries in U.S. and non-U.S. jurisdictions to own and operate the Arconic Corporation Businesses or Howmet Aerospace Businesses in such jurisdictions.
As part of this internal reorganization, ParentCo will contribute to Arconic Corporation certain liabilities and certain assets, including equity interests in entities that are expected to conduct the Arconic Corporation Businesses.
Following the completion of the internal reorganization and immediately prior to the distribution, Arconic Corporation will be the parent company of the entities that are expected to conduct the Arconic Corporation Businesses and ParentCo will remain the parent company of the entities that are expected to conduct the Howmet Aerospace Businesses.
Results of the Distribution
After the distribution, Arconic Corporation will be an independent, publicly traded company. The actual number of shares to be distributed will be determined at the close of business on [    ], 2020, the record date for the distribution, and will reflect any exercise of ParentCo options between the date the ParentCo Board of Directors declares the distribution and the record date for the distribution. The distribution will not affect the number of outstanding shares of ParentCo common stock or any rights of ParentCo stockholders. ParentCo will not distribute any fractional shares of Arconic Corporation common stock.
We will enter into a separation agreement and other related agreements with ParentCo to effect the separation and to provide a framework for our relationship with Howmet Aerospace after the separation, and will enter into certain other agreements, including a tax matters agreement, an employee matters agreement, intellectual property license agreements, an agreement relating to the Davenport plant, metal supply agreements and real estate and office leases. These agreements will provide for the allocation between Arconic Corporation and Howmet Aerospace of the assets, employees, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of ParentCo and its subsidiaries attributable to periods prior to, at and after Arconic Corporation’s separation from ParentCo and will govern the relationship between Arconic Corporation and Howmet Aerospace subsequent to the completion of the separation. For additional information regarding the separation agreement and other transaction agreements, see the sections entitled “Risk Factors — Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.”
Market for Arconic Corporation Common Stock
There is currently no public trading market for Arconic Corporation common stock. Arconic Corporation intends to apply to list its common stock on the NYSE under the symbol “ARNC.” Arconic Corporation has not and will not set the initial price of its common stock. The initial price will be established by the public markets.
We cannot predict the price at which Arconic Corporation common stock will trade after the distribution. In fact, the combined trading prices, after the distribution, of the shares of Arconic Corporation common stock that each ParentCo stockholder will receive in the distribution, together with the ParentCo common stock (which, as a result of ParentCo’s name change to Howmet Aerospace, will be Howmet Aerospace common stock) held at the record date for the distribution, may not equal the “regular-way” trading price of the ParentCo common stock immediately prior to the distribution. The price at which Arconic Corporation common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for Arconic Corporation common stock will be determined in the public markets and may be influenced by many factors. See “Risk Factors — Risks Related to Our Common Stock.”
Incurrence of Debt
Arconic Corporation expects to complete one or more financing transactions on or prior to the completion of the distribution, with approximately $[    ] of the proceeds of such financings expected to
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be used to distribute cash to ParentCo. As a result of such transactions, Arconic Corporation anticipates having approximately $[    ] of indebtedness upon completion of the distribution. For more information, see “Description of Material Indebtedness.”
Trading Between the Record Date and the Distribution Date
Beginning on or shortly before the record date for the distribution and continuing up to and including through the distribution date, ParentCo expects that there will be two markets in ParentCo common stock: a “regular-way” market and an “ex-distribution” market. ParentCo common stock that trades on the “regular-way” market will trade with an entitlement to Arconic Corporation common stock distributed in the distribution. ParentCo common stock that trades on the “ex-distribution” market will trade without an entitlement to Arconic Corporation common stock distributed in the distribution. Therefore, if you sell shares of ParentCo common stock in the “regular-way” market up to and including through the distribution date, you will be selling your right to receive shares of Arconic Corporation common stock in the distribution. If you own ParentCo common stock at the close of business on the record date and sell those shares on the “ex-distribution” market up to and including through the distribution date, you will receive the shares of Arconic Corporation common stock that you are entitled to receive pursuant to your ownership of shares of ParentCo common stock as of the record date.
Furthermore, beginning on or shortly before the record date for the distribution and continuing up to and including the distribution date, Arconic Corporation expects that there will be a “when-issued” market in its common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for Arconic Corporation common stock that will be distributed to holders of ParentCo common stock on the distribution date. If you owned ParentCo common stock at the close of business on the record date for the distribution, you would be entitled to Arconic Corporation common stock distributed pursuant to the distribution. You may trade this entitlement to shares of Arconic Corporation common stock, without trading the ParentCo common stock you own, on the “when-issued” market. On the first trading day following the distribution date, “when-issued” trading with respect to Arconic Corporation common stock will end, and “regular-way” trading with respect to Arconic Corporation common stock will begin.
Conditions to the Distribution
The distribution will be effective at [    ], Eastern Time, on [    ], 2020, which is the distribution date, provided that the conditions set forth in the separation agreement have been satisfied (or waived by ParentCo in its sole and absolute discretion), including, among others:

the SEC declaring effective the registration statement of which this information statement forms a part; there being no order suspending the effectiveness of the registration statement in effect; and no proceedings for such purposes having been instituted or threatened by the SEC;

this information statement having been made available to ParentCo stockholders;

the receipt by ParentCo and continuing validity of an opinion of its outside counsel, satisfactory to the ParentCo Board of Directors, regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Code;

the internal reorganization having been completed and the transfer of assets and liabilities of the Arconic Corporation Businesses from ParentCo to Arconic Corporation, and the transfer of assets and liabilities of the Howmet Aerospace Businesses from Arconic Corporation to ParentCo, having been completed in accordance with the separation agreement;

the receipt of one or more opinions from an independent appraisal firm to the ParentCo Board of Directors as to the solvency of Howmet Aerospace and Arconic Corporation after the completion of the distribution, in each case in a form and substance acceptable to the ParentCo Board of Directors in its sole and absolute discretion;
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all actions necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder having been taken or made and, where applicable, having become effective or been accepted;

the execution of certain agreements contemplated by the separation agreement;

no order, injunction or decree issued by any government authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, the distribution or any of the related transactions being in effect;

the shares of Arconic Corporation common stock to be distributed having been accepted for listing on the NYSE, subject to official notice of distribution;

ParentCo having received certain proceeds from the financing arrangements described under “Description of Material Indebtedness” and being satisfied in its sole and absolute discretion that, as of the effective time of the distribution, it will have no further liability under such arrangements; and

no other event or development existing or having occurred that, in the judgment of ParentCo’s Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and the other related transactions.
ParentCo will have the sole and absolute discretion to determine (and change) the terms of, and whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the record date for the distribution, the distribution date and the distribution ratio. ParentCo will also have sole and absolute discretion to waive any of the conditions to the distribution. ParentCo does not intend to notify its stockholders of any modifications to the terms of the separation or distribution that, in the judgment of its Board of Directors, are not material. For example, the ParentCo Board of Directors might consider material such matters as significant changes to the distribution ratio, significant changes to the assets to be contributed or the liabilities to be assumed in the separation. To the extent that the ParentCo Board of Directors determines that any modifications by ParentCo, including any waivers of any conditions to the distribution, materially change the terms of the distribution, ParentCo will notify ParentCo stockholders in a manner reasonably calculated to inform them about the modification as may be required by law, by publishing a press release, filing a current report on Form 8-K and/​or circulating a supplement to this information statement.
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DIVIDEND POLICY
The timing, declaration, amount of, and payment of any dividends following the separation will be within the discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by our Board of Directors. Moreover, if we determine to pay any dividend in the future, there can be no assurance that we will continue to pay such dividends or the amount of such dividends.
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CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2019, on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in our Unaudited Pro Forma Condensed Combined Financial Information. The information below is not necessarily indicative of what our capitalization would have been had the separation, distribution, and related financing transactions been completed as of September 30, 2019. In addition, it is not indicative of our future capitalization. This table should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Combined Financial Data of Arconic Corporation,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Combined Financial Statements and notes included in the “Index to Financial Statements” section of this information statement.
September 30, 2019
(amounts in millions)
Actual
Pro Forma
(Unaudited)
Cash
Cash and cash equivalents
$ 47 $ [   ]
Capitalization:
Debt Outstanding
Long-term debt
$ 250 $ [   ]
Equity
Common stock, par value $0.01
$ $ [   ]
Additional paid-in capital
[   ]
Parent Company net investment
2,416 [   ]
Accumulated other comprehensive income
310 [   ]
Sub-total equity
2,726 [   ]
Noncontrolling interest
14 [   ]
Total equity
2,740 [   ]
Total capitalization
$ 2,990 $ [   ]
Arconic Corporation has not yet finalized its post-distribution capitalization. Pro forma financial information reflecting Arconic Corporation’s post-distribution capitalization will be included in an amendment to this information statement.
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SELECTED HISTORICAL COMBINED FINANCIAL DATA OF ARCONIC CORPORATION
The following table presents the selected historical combined financial data for Arconic Corporation. We derived the selected statement of combined operations data for the nine months ended September 30, 2019 and 2018 and the selected combined balance sheet data as of September 30, 2019 from our unaudited Combined Financial Statements, which are included in the “Index to Financial Statements” section of this information statement. We derived the selected statement of combined operations data for the years ended December 31, 2018, 2017, and 2016, and the selected combined balance sheet data as of December 31, 2018 and 2017, as set forth below, from our audited Combined Financial Statements, which are included in the “Index to Financial Statements” section of this information statement. We derived the selected statement of combined operations data for the years ended December 31, 2015 and 2014 and the selected combined balance sheet data as of December 31, 2016, 2015, and 2014 from Arconic Corporation’s unaudited underlying financial records, which were derived from the financial records of ParentCo and are not included in this information statement.
The historical results do not necessarily indicate the results expected for any future period. You should read the selected historical combined financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Combined Financial Statements and accompanying notes included elsewhere in this information statement. Per share data has not been presented since Arconic Corporation was wholly-owned by ParentCo during the periods presented.
As of and for the nine months
ended September  30,
As of and for the year ended December 31,
(in millions)
2019
2018
2018
2017
2016
2015
2014
Sales
$ 5,569 $ 5,633 $ 7,442 $ 6,824 $ 6,661 $ 7,046 $ 8,321
Net income (loss)
39 71 170 209 155 (60) (124)
Total assets
4,790 4,968 4,795 4,902 4,705 4,627 4,886
Total debt
250 260 250 255 256 253 251
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Information presented below has been derived from Arconic Corporation’s historical Combined Financial Statements included in this information statement. While the historical Combined Financial Statements reflect the past financial results of the Arconic Corporation Businesses, this pro forma information gives effect to the separation of that business into an independent, publicly traded company. The pro forma adjustments to reflect the distribution include:

the separation of the assets (including the equity interests of certain subsidiaries) and liabilities related to the Arconic Corporation Businesses from ParentCo and the transfer of those assets (including the equity interests of certain subsidiaries) and liabilities to Arconic Corporation;

the distribution of 100% of our issued and outstanding common stock by ParentCo in connection with the separation;

the effect of our anticipated post-separation capital structure, including the incurrence of indebtedness of approximately $[    ] million and the distribution of approximately $[    ] million of cash to ParentCo; and

the impact of, and transactions contemplated by, the separation agreement, the tax matters agreement, the employee matters agreement, intellectual property license agreements, an agreement relating to the Davenport plant, metal supply agreements and real estate and office leases between us and ParentCo and the provisions contained therein.
The pro forma adjustments are based on available information and assumptions our management believes are reasonable; however, such adjustments are subject to change as the costs of operating as a standalone company are determined. In addition, such adjustments are estimates and may not prove to be accurate. The Unaudited Pro Forma Condensed Combined Financial Information has been derived from our historical Combined Financial Statements included in this information statement and includes certain adjustments to give effect to events that are (1) directly attributable to the distribution and related transaction agreements, (2) factually supportable, and (3) with respect to the statement of combined operations, expected to have a continuing impact on Arconic Corporation. Any change in costs or expenses associated with operating as a standalone company would constitute projected amounts based on estimates and, therefore, are not factually supportable; as such, the Unaudited Pro Forma Condensed Combined Financial Information has not been adjusted for any such estimated changes. Only costs that management has determined to be factually supportable and recurring are included as pro forma adjustments, including the items described above. Incremental costs and expenses associated with operating as a standalone company, which are not reflected in the Unaudited Pro Forma Condensed Combined Financial Information, are not practical to estimate as of the date of this filing.
The Unaudited Pro Forma Condensed Combined Statement of Operations for the fiscal year ended December 31, 2018 and the nine months ended September 30, 2019 has been prepared as though the distribution occurred on January 1, 2018. The Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 2019 has been prepared as though the distribution occurred on September 30, 2019. The Unaudited Pro Forma Condensed Combined Financial Information is for illustrative purposes only, and does not reflect what our financial position and results of operations would have been had the distribution occurred on the dates indicated and is not necessarily indicative of our future financial position and future results of operations.
The Unaudited Pro Forma Condensed Combined Financial Information should be read in conjunction with our historical combined financial information, “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement. The Unaudited Pro Forma Condensed Combined Financial Information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this information statement.
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Arconic Rolled Products Corporation
Unaudited Pro Forma Statement of Combined Operations
(in millions, except per-share amounts)
For the nine months ended September 30, 2019
As Reported
Pro Forma
Adjustments
Pro Forma
Sales
$ 5,569 [   ] [   ]
Cost of goods sold (exclusive of expenses below)
4,810 [   ] [   ]
Selling, general administrative, and other expenses
255 [   ] [   ]
Research and development expenses
34 [   ] [   ]
Provision for depreciation and amortization
190 [   ] [   ]
Restructuring and other charges
104 [   ] [   ]
Operating income
176 [   ] [   ]
Interest expense
86 [   ] [   ]
Other income, net
(4) [   ] [   ]
Income before income taxes
94 [   ] [   ]
Provision for income taxes
55 [   ] [   ]
Net income
39 [   ] [   ]
Less: Net income attributable to noncontrolling interest
[   ] [   ]
Net income attributable to Arconic Rolled Products Corporation
$ 39 [   ] [   ]
Unaudited pro forma earnings per share:
      ​
      ​
Basic
[   ]
Diluted
      [   ]
Weighted-average shares outstanding:
Basic
      ​
      ​
[   ]
Diluted
      ​
      ​
[   ]
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Arconic Rolled Products Corporation
Unaudited Pro Forma Statement of Combined Operations
(in millions, except per-share amounts)
For the year ended December 31, 2018
As Reported
Pro Forma
Adjustments
Pro Forma
Sales
$ 7,442 [   ] [   ]
Cost of goods sold (exclusive of expenses below)
6,549 [   ] [   ]
Selling, general administrative, and other expenses
288 [   ] [   ]
Research and development expenses
63 [   ] [   ]
Provision for depreciation and amortization
272 [   ] [   ]
Restructuring and other charges
(104) [   ] [   ]
Operating income
374 [   ] [   ]
Interest expense
129 [   ] [   ]
Other expenses, net
4 [   ] [   ]
Income before income taxes
241 [   ] [   ]
Provision for income taxes
71 [   ] [   ]
Net income
170 [   ] [   ]
Less: Net income attributable to noncontrolling interest
[   ] [   ]
Net income attributable to Arconic Rolled Products Corporation
$ 170       [   ]       [   ]
Unaudited pro forma earnings per share:
Basic
[   ]
Diluted
[   ]
Weighted-average shares outstanding:
Basic
[   ]
Diluted
[   ]
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Arconic Rolled Products Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
(in millions)
September 30, 2019
As Reported
Pro Forma
Adjustments
Pro Forma
Assets
Current assets:
Cash and cash equivalents
$ 47 [   ] [   ]
Receivables from customers
436 [   ] [   ]
Inventories
877 [   ] [   ]
Other current assets
175 [   ] [   ]
Total current assets
1,535 [   ] [   ]
Properties, plants, and equipment, net
2,711 [   ] [   ]
Other noncurrent assets
544 [   ] [   ]
Total assets
$ 4,790 [   ] [   ]
Liabilities
Current liabilities:
Accounts payable, trade
$ 1,056 [   ] [   ]
Environmental remediation
77 [   ] [   ]
Other current liabilities
206 [   ] [   ]
Total current liabilities
1,339 [   ] [   ]
Long-term debt
250 [   ] [   ]
Accrued pension and other postretirement benefits
51 [   ] [   ]
Environmental remediation
152 [   ] [   ]
Other noncurrent liabilities
258 [   ] [   ]
Total liabilities
2,050 [   ] [   ]
Equity
Common stock
[   ] [   ]
Additional paid-in capital
[   ] [   ]
Parent Company net investment
2,416 [   ] [   ]
Accumulated other comprehensive income
310 [   ] [   ]
Sub-total equity
2,726 [   ] [   ]
Noncontrolling interest
14 [   ] [   ]
Total equity
2,740 [   ] [   ]
Total liabilities and equity
$ 4,790       [   ]       [   ]
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BUSINESS
All amounts discussed in this section are in millions of U.S. dollars, unless otherwise indicated. This section discusses Arconic Corporation’s business assuming the completion of all of the transactions described in this information statement, including the separation.
Our Company
Overview
Arconic Corporation is a global leader in manufacturing aluminum sheet, plate, extrusions and architectural products, serving primarily the ground transportation, aerospace, building and construction, industrial, and packaging end-markets. We were previously part of Alcoa Inc. (which was renamed Arconic Inc. in 2016), which created the modern aluminum industry more than 125 years ago. Our technical expertise, long-standing, collaborative customer relationships and history in the lightweight metals industry as an innovator positions us as a supplier of choice to “blue-chip” customers in high-growth markets that require value-added products with performance-critical applications. Our product portfolio is diverse and most of our products command premium pricing as compared to more commoditized fabricated aluminum products. We maintain a leadership position in our targeted markets through our global footprint of 46 manufacturing, sales and service facilities located across North America, Europe, the United Kingdom, Russia and Asia.
We operate through three reportable segments: Rolled Products, Extrusions, and BCS. We strive to make our portfolio of integrated facilities among the most operationally efficient in the industry. We are well positioned in attractive markets that exhibit trends favorable to our industry, and our long-term contracts with customers enhance the strength and stability of our business and our earnings. We will strive to generate strong returns through growth in operating profit, disciplined capital deployment, increasing cash flow and continued optimization of working capital levels. We believe our more than 125 years of manufacturing experience and our commitment to quality and innovation have put us in a leadership position among our primary competitors.
Our business focuses on producing rolled and extruded products used principally for the following five market segments: (i) ground transportation, (ii) aerospace, (iii) building and construction, (iv) industrial and (v) packaging. Our primary market segments present attractive characteristics, including (i) demand for products that command premium pricing due to technical requirements; (ii) stability through economic cycles due to portfolio diversity; (iii) favorable secular growth trends, such as the substitution of heavier materials with aluminum in the automotive market (“aluminum lightweighting”), strong passenger growth in the commercial aerospace market and population growth driving urbanization for increased demand in the building and construction industry; and (iv) favorable trade conditions in the United States resulting from the Department of Commerce’s ruling on anti-dumping and countervailing duties imposed on imported Chinese common alloy products. We have a leading position in the growing North American automotive aluminum sheet market, and we are a leading supplier of aluminum sheet and plate to the aerospace market. We supply industrial and commercial transportation products to customers around the world. Our BCS products carry recognized brand names and hold strong market positions in North America and Europe.
Our customer base includes market leading companies. A sampling of our top customers includes Ford, General Motors, FCA, Airbus, Boeing, Daimler, Paccar, Ball and CANPACK. We predominantly focus on high-value-added products that we believe we are particularly well-suited to developing and manufacturing for our customers due to our technical and R&D capabilities, our ability to supply materials in the volume customers need, our unique manufacturing capabilities and the complex qualification processes that we have passed and are required for many of our products. Our core products require ongoing close collaboration and, in many instances, joint development with our customers.
Prices for rolled products and extrusions are generally based on the price of metal plus a premium for adding value to the aluminum to produce a semi-finished product, resulting in a business model in which the underlying price of metal is contractually passed-through to customers, or hedged. The financial
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performance of producers of rolled and extruded aluminum products, such as Arconic Corporation, is driven by the dynamics in the end markets that they serve, the degree of technical specification required for the products sold, the companies’ relative positioning in those markets and the efficiency of their industrial operations.
For the year ended December 31, 2018, we shipped approximately 1,308 thousand metric tons of finished products and generated revenues of  $7.4 billion and operating income of  $365 million.
The following charts present our revenues by market segment and by geography for the year ended December 31, 2018:
[MISSING IMAGE: tv531264-pc_ourcompany4clr.jpg]
Our Strengths
We believe several key attributes add to the strength of our business: growing demand for high-strength, lightweight aluminum in our targeted markets; our leading positions in the markets we serve; our track record developing differentiated products backed by advanced expertise and technological capabilities; our collaborative and long-standing customer relationships; our global network of efficient facilities with a broad range of advanced manufacturing capabilities operated by a highly skilled workforce; and our healthy financial position, which positions us for future growth. Each of these attributes are described in more detail below.
Growing demand for high-strength, lightweight aluminum in our target markets.
Demand for aluminum and other lightweight products continues to grow at a steady pace. With unique properties that increase performance, improve efficiency and provide a lower carbon footprint throughout its life cycle, aluminum continues to draw demand from industries that require lightweight yet strong material. According to CRU International Limited, the projected annual growth rate from 2019 to 2023 of flat rolled aluminum products is 3.6%, and projected growth in the air and ground transportation market segment is 5.3%.
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Projected Demand for Flat Rolled Products from 2019-2023 (in thousand metric tons)
[MISSING IMAGE: tv531264-bc_projected4clr.jpg]
Transportation consumption 2019: 4,761 and 2023: 6,161 CAGR 5.3%
Source: CRU International Limited
Asia Pacific includes: Japan, China, South East Asia and Middle East
Other includes: Africa, Australia, Central and South America
In the ground transportation market, even as vehicle production remains flat, we continue to benefit from growth in automotive aluminum applications, with automotive body sheet forecasted to grow at a 9% annual growth rate from 2019 through 2026 in North America. Acceleration of aluminum adoption and product penetration, noted by third-party research firm Ducker Worldwide in July 2017, continue to advance as automakers are increasingly selecting aluminum as the material of choice for vehicle design solutions that aid in meeting fuel consumption and greenhouse gas emissions regulations while delivering better performance, higher safety ratings and a lower carbon footprint than steel.
We continue to see interest in aluminum lightweighting from a growing customer base, and we currently have material on more than 60 programs with eight automotive original equipment manufacturers (“OEMs”), as well as many of their tier-one suppliers. We have significant forward revenue under contract across multiple OEMs. Our A951™ coating and bonding technology underpinned Ford’s design decision to go aluminum-intensive on the F-150 truck, which has since been expanded to Ford’s Super Duty, Navigator and Expedition vehicle platforms. In fact, all vehicles that have converted to aluminum-intensive structures have received 5-star safety ratings, better performance ratings, and increased fuel efficiency as a result of aluminum lightweighting. Additionally, in North America, demand for larger vehicles (small trucks and SUVs) — where the volume of aluminum use is greater — is increasing while demand for smaller vehicles is decreasing.
In the aerospace market, large commercial aircraft have an approximate seven-year backlog in their order book, driven by global population growth, increasing per capita incomes and higher penetration of air-travel. We have significant forward revenue under contract with major commercial aircraft OEMs or framers, such as Boeing, Airbus, Spirit AeroSystems and Embraer. In defense, spending under the current U.S. administration has been increasing and we have secured new contracts on multiple applications.
In the building and construction market, several secular trends — global warming, urbanization, and increased needs for personal security — are increasing demand for the products and solutions we provide, both in North America and in Europe. Population is expected to grow from 7.2 to 8 billion people by 2025, with more than 50% of population growth in urban areas that drive construction demand. With global energy demand expected to increase by more than 25% by 2040, energy efficiency is another strong market driver for our building and construction products and systems.
The industrial market in North America is closely tied to the U.S. GDP level, which indicates that the overall industrial flat rolled products segment is poised to grow 2% to 3% in 2019. The common alloy sheet market, which is a significant portion of the total industrial products market, continues to be significantly influenced by imports of common alloys into the United States. With the implementation of anti-dumping and countervailing duties imposed on Chinese common alloy sheet during 2018, the volume of imports
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from China has significantly decreased. Although there has been an increase of imports of common alloy into the United States from other countries as a result of the duties imposed on China, prices for common alloy sheet have significantly improved in North America during the first half of 2019. We expect these duties to remain in place for at least the next five years.
In the packaging market, we are continuing to see positive trends in both demand and supply dynamics. As it relates to demand, trends are positive as a result of consumer preferences for more sustainable packaging options, driving a broad-based shift from plastic to aluminum. On the other hand, supply for aluminum packaging has tightened as more aluminum rolled products manufacturers redirect rolling mill capacity to supply the automotive end-market. As a result, manufacturers that continued to supply aluminum packaging are able to achieve more favorable pricing for packaging products relative to historical norms. Additionally, the packaging market can be expected to provide relatively steady demand, with resiliency evidenced by trends throughout past economic cycles.
Leading positions in our key markets.
In our core market segments — ground transportation, aerospace, building and construction, industrial and packaging — we have strong market positions and long-standing, collaborative relationships with customers. Within these attractive and diverse segments, we are particularly focused on product lines that require our expertise and advanced technical capabilities to produce efficiently.
In the ground transportation market, we captured a leading position in the North American automotive aluminum market when we invested a combined $600 million in 2014 to expand our automotive rolling capacity in Davenport, Iowa and Alcoa, Tennessee, and we continue to maintain that position by expanding capabilities to meet demand. In February 2019, we announced a $100 million investment in Tennessee to provide additional capacity to support automotive and industrial growth, and that capacity is expected to come online in late 2020. We have already secured customer commitments in support of this additional capacity in North America. Our position in this market segment also benefits from the natural characteristics of automotive aluminum sheet, which make importing of aluminum sheet more difficult as it hardens and strengthens with age and as a result is not as easily formed or stamped into parts as time progresses.
In the aerospace market, we have a growing position secured by long-term contracts, totaling more than $4 billion over the next several years, with some of the biggest players in the industry, including Boeing, Airbus, Embraer, Mitsubishi Heavy Industries and Spirit AeroSystems. In July 2018, we announced that we signed our largest multi-year supply contract with Boeing to supply aluminum sheet and plate for all models produced by Boeing Commercial Airplanes. The agreement expanded on our collaboration with Boeing for wing skins on all of its metallic structure airplanes and included polished fuselage skins and wing ribs. In addition, Boeing awarded us new business for the supply of structural plate used in a variety of other applications, including wing ribs for carbon fiber platforms such as the 787 and 777X.
In the building and construction market, we are differentiated through scale, expertise and a broad range of building envelope products. We have strong market positions in North America and Europe as a supplier of well-known, leading brands with differentiated products and service offerings that we believe enable us to deliver industry-leading service and performance. In total, BCS has more than 270 active patent matters. These are spread across multiple technology areas including: doors, windows, fixed fenestrations and material interfaces/coatings. Our products, which are offered as systems and are localized to address functional and building code requirements, span the range of building end-use and building complexities, making us a go-to provider for architects, general contractors and fabricators.
In the industrial market, we have a strong position, particularly in North America. Our recent $100 million investment in our Tennessee facility to expand our industrial and automotive capacity is aimed to capture favorable pricing in the North American market for industrial products as well as the anticipated resulting growth. With our diverse industrial portfolio, providing high quality mill finish product, we are positioned to capture opportunities in the industrial market segment.
In the packaging market, we have strong positions in the regions we serve. Our rolling mill in Samara, Russia, serves various markets with its wide range of capabilities, including production of a full range of canstock products, from coated end and tab stock to body stock. Packaging volumes have increased year
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over year in Samara for the past five years, where demand for canstock is steadily increasing. To further differentiate among packaging suppliers in the region, Arconic Samara’s flagship coil coating line product portfolio was recently expanded with the start of commercial production of black-lacquered end stock, along with coil coated with gold and clear lacquers. Arconic Corporation also supplies canstock to the packaging market in China from its plant in Qinhuangdao.
Track record developing differentiated products backed by advanced expertise and technological capabilities.
Built on a heritage of innovation and operational excellence, Arconic Corporation develops and produces quality materials and technologies efficiently for customers of lightweight metals. In each of the markets we serve, we collaborate with our customers to deliver solutions that meet performance-critical specifications and give our customers a competitive advantage in terms of meeting fuel efficiency, strength and safety requirements. We believe that our ability to produce tailored, high-value-added products fosters longer-term and synergistic relationships with a customer base that includes well-established, blue-chip companies. We regard our relationships with our customers as partnerships in which we work together to utilize our unique technological capabilities to develop customized solutions to meet evolving requirements. This includes developing products together through long-term partnerships.
We have made substantial investments to develop unique technological capabilities, which we believe provide us with a competitive advantage as a supplier of the high-value-added, specialty products that make up the majority of our product portfolio. The Arconic Technology Center, located in New Kensington, Pennsylvania, serves as the headquarters for our Research and Development efforts, and we also have R&D facilities in Norcross, Georgia; Merxheim, France; Vendargues, France; and Harderwijk, Netherlands. These facilities focus on innovation and have given us a leading position in the development of proprietary next-generation specialty alloys and manufacturing processes as evidenced by our robust intellectual property portfolio, which includes over 900 granted or pending patents. We also have a significant number of trade secrets, mostly regarding manufacturing processes and material compositions that give us important advantages in our markets. We continue to strive to improve those processes and generate new material compositions that provide additional benefits.
Recent examples of collaborative and industry redefining innovations include:

Arconic Corporation’s Very Thick Plate Stretcher (VTPS). No supplier in the industry can currently produce plate as wide or as thick as we can. With our 220” mill and the VTPS, we are able to supply the exterior of large metallic planes as well as the most challenging structural plate applications on both metallic and carbon fiber aircrafts. Combined with a new horizontal heat treat furnace in Davenport, Iowa, scheduled to come online in late 2019, Arconic Corporation will be able to offer expanded capabilities and capacity in thick plate products.

Arconic 951 adhesive bonding technology. One of our most notable hallmark R&D achievements was the development of the breakthrough Arconic 951 adhesive bonding technology that is enabling the automotive industry’s historic shift to aluminum-intensive vehicles. One of the first customers to utilize this technology was Ford, for its flagship vehicle, the F-150, which — since going aluminum-intensive in 2015 — has increased its lead as America’s #1 best-selling vehicle, a position it has held for more than 40 years in a row.

High strength aerospace and automotive alloys. We continue to work with automotive and aerospace customers to develop solutions with innovative aluminum and aluminum lithium alloys. Working with automotive customer FCA US LLC, for example, our engineers developed a new, highly formable aluminum to enable FCA to shed weight and boost performance of its 2018 Jeep Wrangler, one of the automaker’s top selling vehicles.
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Diverse, entrenched and collaborative customer relationships.
We have a diverse customer base that includes hundreds of companies that span our key market segments. A sampling of our top customers includes:
Key Markets
Key Customers
Ground Transportation Ford, FCA, General Motors, Daimler, Paccar, Entrans/Heil
Aerospace Boeing, Airbus, Spirit AeroSystems, Embraer
Building and Construction Fabricators, installers, architects and developers around the world
Industrial Ryerson, Thyssenkrupp MA, Reliance, Kloeckner, Champagne Metals
Packaging Ball, CANPACK
The average length of our relationships with our top 20 customers exceeds 25 years, and in some cases goes back as far as the beginning of their existence, particularly with our aerospace, automotive and building and construction customers. We have long-term contracts with many of our major customers, and we have partnered with some of them for substantial investments that support new product launches, increased capacity or unique capabilities that solve key challenges. 56% of 2019 Global Rolled Products revenue is under a long-term agreement, and only 6% of the Global Rolled Products long-term agreements are expected to be up for renewal in 2020 and 2021. In addition, we frequently collaborate with our customers to complete a rigorous process for qualifying our products, which requires substantial time and investment and imposes high costs for customers to switch suppliers.
Global network of efficient facilities with a broad range of capabilities operated by a highly skilled workforce.
We operate a network of strategically located facilities within close proximity to our customers and/or raw materials, which we believe allows us to compete effectively in our selected end-markets across numerous geographies. Our facilities, which in many cases have been in operation for decades and are continuously assessed for optimal efficiency, enable us to reliably produce a broad range of high-quality products. Our production lines are operated by a highly skilled workforce with decades of accumulated operational experience. We believe this collective knowledge base would be very difficult to replicate and is a key contributing factor in our ability to produce consistently high-quality products.
Our production sites feature industry-leading manufacturing capabilities with required industry qualifications that are, in our view, difficult for market outsiders to accomplish. We believe our portfolio of facilities provides us with a strong platform to retain and grow our global customer base.
Our capabilities include the development, alloying, and casting of standard and patented Arconic aluminum and aluminum-lithium alloys that provide superior mechanical properties using continuous heat treat and batch heat treat processes. We also have continuous cast capability, as well as hot and cold rolling of aluminum coil, sheet and plate products of different thicknesses and widths. We have the world’s largest thick plate stretcher, which can stretch the thickest plate in the world, and we have state-of-the-art metallurgical laboratories.
Our processes include coil and sheet leveling, straightening, and trimming capabilities, indirect aluminum extrusion piercing press capabilities and non-destructive inspection and testing capabilities.
Healthy financial position.
We believe the following factors will contribute to our long-term financial stability and future growth:

Our revenue diversification in terms of geography, customers and end-markets gives Arconic Corporation a healthy financial position.

Approximately 50% of our revenue is under long-term agreements, which provides earnings visibility.
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Our contracts are typically structured to contractually pass-through movements in underlying metal price, which, combined with our hedging program, helps to insulate us from commodity price volatility and generate earnings stability.

Profitability has improved due to targeted mix shift to more specialized, more engineered, higher margin products, as well as cost optimization initiatives.

We manage our business through a disciplined capital allocation framework.

Over the last two years, we have undertaken several cost cutting initiatives in a relentless pursuit of cost reduction, while consistently delivering productivity improvements through smart manufacturing (physical and digital automation), cast house optimization, lower procurement costs, and labor and equipment efficiency.

Our improved capital efficiency is delivering higher returns on our existing asset base. Our disciplined capital allocation with priority on high-return uses driving return on net assets (RONA) expansion has built an attractive margin profile and we believe we are positioned for future profitable growth upside. Examples include the automotive and industrial expansions in Alcoa, Tennessee to seek to capture future market growth, as well as expanding capabilities in Davenport, Iowa to capture demand in aerospace.
Our Business Strategies
Our objective is to expand our leading position as the industry’s supplier of choice for high-value-added, technologically advanced products for which we believe that we have a competitive advantage. Our strategy to achieve this objective has two primary pillars: (i) selective participation in attractive markets and (ii) continuing focus on capital efficiency and operational performance.
Selective Participation in Attractive Markets
Continue to target investment in high-return opportunities in our core market segments
We are focused on five strategic market segments (ground transportation, aerospace, building and construction, industrial and packaging) that we believe have attractive growth prospects for aluminum and a solid long-term outlook. These are also markets where we believe that we can differentiate ourselves through high-value-added products, strong customer relationships and R&D and advanced technical capabilities. We selectively pursue capital projects in response to specific volume requirements from long-term customer contracts, aiming for relatively short payback periods and good visibility into return on investment.
For example, in February 2019, in order to seek to capture the growing industrial and automotive aluminum demand in North America, we announced an investment of approximately $100 million to expand our hot mill capability and add downstream equipment capabilities to manufacture industrial and automotive aluminum products in our Tennessee Operations facility near Knoxville, Tennessee. The project is already underway and is expected to be completed by the fourth quarter of 2020.
Focus on technologically advanced products that facilitate long-term relationships as a key supplier to our customers
Our product portfolio is predominantly focused on high-value-added products that we believe we are particularly well-suited to developing and manufacturing for our customers. These products tend to require close collaboration with our customers to develop tailored solutions, as well as significant effort and investment to adhere to rigorous qualification procedures, which enables us to foster long-term relationships with our customers. Our products typically command premium prices and are supplied to end-markets that we believe have highly attractive characteristics and long-term growth trends.
Focus on Capital Efficiency and Operational Performance
Pursuit of highly efficient operations through smart manufacturing
We believe that there are significant opportunities to improve our quality and to reduce our manufacturing costs by implementing smart manufacturing initiatives, which involve physical and digital
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automation. We continually evaluate the processes and flowpaths of our operations in order to work to improve our production efficiency. Sharing best practices throughout our network enables us to apply advanced manufacturing techniques globally to improve existing equipment and processes. We aim to establish highly efficient operations and achieve cost reductions by standardizing manufacturing processes and the associated production elements where possible, while still allowing the flexibility to respond to local market demands and volatility.
To focus our efforts, we have launched a smart manufacturing program, sponsored at the executive level that is designed to optimize productivity of our plants with the goal of delivering value to customers through quality and efficiency.
To advance manufacturing improvements and optimize capital efficiency, Arconic Corporation has developed teams made up of cross-functional experts working on projects that provide an impact across the network. These teams each have a primary focus, seeking to improve efficiencies for optimal operational performance, as follows:

Driving Operational Equipment Efficiency (OEE) on bottlenecked equipment, including cold mills, hot mills, annealing furnaces and finishing equipment.

Maximizing internal ingot production, minimizing third party ingot purchase, and managing outside scrap sales to deliver the best solution for our North American network.

Managing scrap charge solutions and driving scrap utilization in order to offset the need to purchase high cost primary alloy.

Driving down transportation costs by combining routes, eliminating surcharges, and finding lower cost transportation solutions.

Leveraging the excess internal process capabilities within the North American network to offset the need for expensive outside providers to perform key operations.

Managing energy contracts, leveraging volume purchases, and implementing energy conservation activities.
Along with these initiatives, Arconic Corporation has standing teams working on overall equipment effectiveness, cast house capacity improvements, and reduction improvements in planned and un-planned scrap.
Our Portfolio
We manage our business operations through three segments: Rolled Products, Extrusions, and BCS. These segments contributed approximately 77%, 7% and 15%, respectively, of the 2018 revenues for the businesses that comprise Arconic Corporation.
Rolled Products
Rolled products are used in the production of finished goods ranging from airframes and automotive body panels to industrial plate and brazing sheet. Sheet and plate are used extensively in the transportation industries as well as in building and construction. They are also used for industrial applications such as tooling plate for the production of plastic products.
Arconic Corporation’s Rolled Products segment produces a range of aluminum sheet and plate products for the following markets:
Ground Transportation — provides specialty aluminum sheet and plate products, including auto body sheet, structural reinforcement, proprietary heat exchanger products like multilayer brazing sheet, trailer and cab structures and sheet for fuel tanks.
Aerospace — supplies a wide range of highly differentiated sheet and plate products that meet strict quality requirements for aerospace and defense applications, including polished fuselage sheet, structural parts, aluminum-lithium stringers, wing skins and armored plate.
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Industrial — supplies a diverse range of industrial solutions for applications that include mold and tooling plate for semiconductors; general engineering/machinery and injection molding applications; specialty finishes for appliances, cosmetic packaging, RVs and vehicle components; tread plate/sheet for tool box and flooring applications; and circles for cookware.
Packaging — serves the packaging market in Europe and Asia through regional facilities located in Russia and China. The packaging market includes a full range of can stock products, from coated end and tab stock to body stock.
Rolled Products — Competitive Conditions
Arconic Corporation’s Rolled Products segment is one of the leaders in many of the aluminum flat rolled markets in which it participates, including ground transportation (including brazing sheet), aerospace, industrial and packaging markets. While Rolled Products participates in markets where Arconic Corporation believes it has a significant competitive advantage due to customer intimacy, advanced manufacturing capability, unique technology and/or differentiated products, in certain cases, our competitors are capable of making products similar to Arconic Corporation’s products. We continuously work to maintain and enhance our competitive position through innovation: new alloys such as aluminum lithium aerospace alloys, differentiated products such as our 5-layer brazing products and break-through processes such as A951™ bonding technology.
Some of Arconic Corporation’s Rolled Products markets are global and some are more regionally focused. Participation in these segments by competitors varies. For example, Novelis is the largest flat rolled products producer competing in automotive, but it does not participate in the aerospace market. On the other hand, Kaiser participates in aerospace, but does not participate in the automotive sheet market. Other competitors include Aleris, AMAG, Constellium, Hydro, Kobe, Nanshan, and UACJ.
Additionally, there are a number of new competitors emerging, particularly in China and other developing economies. Arconic Corporation expects that this competitive pressure will continue and increase in the future as customers seek to globalize their supply bases in order to reduce costs.
List of Major Competitors for Rolled Products:

Aleris

AMAG (Austria)

Constellium (Netherlands)

Granges (Sweden)

Hydro (Norway)

Kaiser Aluminum

Kobe (Japan)

Nanshan (China)

Novelis

UACJ (Japan)
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Rolled Products Principal Facilities
Country
Location
Products
Brazil Itapissuma(1) Specialty Foil
China Kunshan Sheet and Plate
Qinhuangdao(2) Sheet and Plate
Hungary Székesfehérvár Sheet and Plate/Slabs and Billets
Russia Samara
Sheet and Plate/Extrusions and Forgings
United Kingdom
Birmingham Plate
United States Davenport, IA Sheet and Plate
Danville, IL Sheet and Plate
Hutchinson, KS Sheet and Plate
Lancaster, PA Sheet and Plate
Alcoa, TN Sheet
San Antonio, TX(3)
Sheet
(1)
On August 23, 2019, we reached an agreement to sell the aluminum rolling mill in Itapissuma, Brazil to Companhia Brasileira de Aluminio for approximately $50 million in cash, subject to working capital and other adjustments. The transaction is expected to close by the first quarter of 2020, subject to regulatory approvals and customary closing conditions.
(2)
Leased property or partially leased property.
(3)
On October 18, 2019, we announced plans to curtail operations in San Antonio by year end 2019.
Extrusions
Arconic Corporation’s Extrusions segment produces a range of extruded products, including aerospace shapes (wing stringer, floor beams, fuselage, cargo), automotive shapes (driveshafts, anti-lock brake housings, turbo charger), seamless tube, hollows, mortar fins and high strength rod and bar. With process and product technologies that include large and small extrusion presses, integrated cast houses, horizontal heat treat furnaces, vertical heat treat furnaces, annealing furnaces, induction billet heating and ultrasonic inspection capabilities, Arconic Corporation’s Extrusions operating segment serves a broad range of customers in several of our core market segments, including the following:
Ground Transportation — provides aluminum extrusions for applications that include drive shafts for the automotive market and aluminum frame rails for the commercial transportation market.
Aerospace — supplies a wide range of applications for commercial and military airframes.
Industrial — supplies a diverse range of industrial solutions for applications that include rods and bars for building supplies and other industrial applications.
Arconic Corporation’s Extrusions plants are strategically located in close proximity to key customers, which offers a competitive advantage for markets that require products within short lead times. It also fosters close collaboration with customers who work with us to develop solutions that drive performance, safety and efficiency in their end products.
Extrusions — Competitive Conditions
The Extrusions segment is a leader in many of the markets in which it participates, including aerospace, automotive (including driveshafts) and industrial markets. While Extrusions participates in markets where Arconic Corporation believes we have a significant competitive position due to customer intimacy, advanced manufacturing capability, unique technology and/or differentiated products, in certain
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cases, our competitors are capable of making products similar to Arconic Corporation’s products. We continuously work to maintain and enhance our competitive position through innovation: new alloys such as aluminum lithium aerospace alloys and differentiated products.
Some of Arconic Corporation’s Extrusions markets are worldwide and some are more regionally focused. Participation in these segments by competitors varies. For example, UAC is the largest competitor in aerospace extrusions, but it does not participate in the drawn tubing market. On the other hand, Unna participates in drawn tubing, but they do not compete in extrusions. Other competitors include Kaiser, Constellium, Otto Fuchs, Taber, Ye Fong, and Impol.
Additionally, there are a number of other competitors emerging, particularly in China and other developing economies. We expect that this competitive pressure will continue and increase in the future as customers seek to globalize their supply bases in order to reduce costs.
List of Major Competitors for Extrusions:

Constellium (France)

Impol (Poland)

Kaiser (USA)

Otto Fuchs (Germany)

Taber (USA)

UAC (USA/Romania)

Unna (Germany)

Ye Fong (Taiwan)
Extrusions Principal Facilities
Country
Location
Products
Germany Hannover(1) Extrusions
United States
Massena, NY Extrusions
Lafayette, IN Extrusions
Halethorpe, MD(1)
Extrusions
Chandler, AZ(1) Extrusions
(1)
Leased property or partially leased property.
Building and Construction Systems
Our BCS business manufactures differentiated products and building envelope solutions, including entrances, curtain walls, windows, composite panel and coil coated sheet. The business operates in two market segments: architectural systems, which carry the Kawneer® brand, and architectural products, which carry the Reynobond® and Reynolux® brands. The BCS business has competitive positions in both market segments, attributable to its strong brand recognition, high quality products and strong relationships through the building and construction value chain.
Architectural systems make up 70% of the business segment’s revenue in 2018. As the inventor of the modern storefront more than 100 years ago, our Kawneer® branded architectural systems products include windows, doors and curtain walling. Kawneer is a premium brand, known for the breadth, depth and performance of its product portfolio and is a leading manufacturer of architectural systems in North America, with an established presence in Europe. Key customers of this market segment include fabricators and glazing subcontractors.
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Architectural products make up 30% of the business segment’s revenue. The Reynobond and Reynolux brands deliver innovative exterior and interior cladding and coil coated sheet solutions with end uses that include building façades, retail, sign and display, interior applications and various industrial applications. Reynobond is composite material that consists of an extruded core that is fused between two sheets of coil-coated aluminum and Reynolux is coil-coated aluminum sheet that can be sold in coil or flat-sheet form. Key customers include metal fabricators and installers.
With 28 total facilities, including 18 service centers and more than 3,300 employees, BCS differentiates itself through its global footprint and by offering a broad portfolio of building envelope products that span the range of building end-use and building complexities. Architects, general contractors and fabricators consider BCS a go-to provider of products that are offered as systems and are localized to address functional and building code requirements. We believe that our products and systems have a reputation for quality and reliability, with customer returns comprising less than 0.4% of revenue in 2018.
BCS — Competitive Conditions
In North America, Arconic Corporation’s BCS segment primarily competes in the nonresidential building segment. In Europe, it competes in both the residential and the nonresidential building segments. Arconic Corporation’s competitive advantage is based on strong brands, innovative products, customer intimacy and technical services.
In the architectural systems market, Arconic Corporation competes with regional competitors like Apogee, YKK, and Oldcastle in North America and Schüco, Hydro/SAPA and Reynaers in Europe. The competitive landscape in the architectural systems market has been relatively stable since the mid-2000s, with the major competitors in North America and Europe remaining constant, despite some industry consolidation in North America during the late 2000s.
The primary product categories in architectural products are aluminum composite material and coil coated sheet. The architectural products business is a more global market and is primarily served by subsidiaries of larger companies like Alpolic (Mitsubishi Corporation), Alucobond (Schweiter Technologies) and Novelis (Aditya Birla Group).
List of Major Competitors for Architectural Systems:

North America — Apogee, Oldcastle and YKK

Europe — Schüco (Germany), Hydro/SAPA (Norway), Reynaers (Belgium) and Corialis (Belgium)
List of Major Competitors for Architectural Products:

Composite Material — Alucobond, Alucoil and Alpolic

Coil Coated Sheet — Euramax, Novelis and Hydro
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Building and Construction Systems Principal Facilities
Country
Location
Products
Canada
Lethbridge, Alberta
Architectural Products and Systems
France Merxheim(1) Architectural Products
United Kingdom
Runcorn
Architectural Products and Systems
United States Springdale, AR
Architectural Products and Systems
Visalia, CA
Architectural Products and Systems
Eastman, GA Architectural Products
Bloomsburg, PA
Architectural Products and Systems
Cranberry, PA
Architectural Products and Systems
(1)
Leased property or partially leased property.
Principal facilities are listed, and do not include two locations that serve as sales and administrative offices. In addition to the facilities listed above, BCS has 18 service centers. These centers perform light manufacturing, such as assembly and fabrication of certain products.
Our Market Segments
Ground Transportation
In our ground transportation market segment, we produce and develop customized aluminum sheet and extruded products for all major automakers in North America as well as commercial trucks, tankers, rail cars and buses around the world. Approximately 36% of the Company’s revenue for the year ended December 31, 2018 was for automotive and commercial transportation applications, which include aluminum sheet and extruded products, as well as brazing sheet.
We are a leading North American supplier of automotive aluminum sheet, which is one of the fastest growing markets for aluminum, with a 9% growth rate from 2019-2026, according to independent research firm Ducker Worldwide. We currently have material on more than 60 programs with the majority of global OEMs, as well as many of their tier-one suppliers. Our investment in technology has had a significant influence on the recent growth in this space for the aluminum industry overall. In fact, our A951™ coating and bonding technology underpinned Ford’s design decision to go aluminum-intensive on its flagship vehicle, the F-150, which has been America’s best-selling truck for more than 40 consecutive years. That decision was replicated on the Super Duty, Navigator and Expedition platforms, which are all now aluminum-intensive.
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Participation in the Automotive Market Segment
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Our automotive sheet revenue has grown by a factor of over six times in the past five years, from $229 million in 2013 to $1.4 billion in 2018. We have already captured over $7 billion of long-term contracts with multiple automotive OEMS for vehicle production in 2020 through the life of those vehicle programs, some of which extend through 2026. Our recent investment of  $100 million in Tennessee will provide additional capacity in 2020 to support this growth. Our automotive sheet is currently supplied by plants located in Davenport, Iowa; Lancaster, Pennsylvania; Danville, Illinois; and Alcoa, Tennessee. We also supply aluminum extrusions to the automotive market, from our plants in Lafayette, Indiana; Massena, New York; and Hannover, Germany; and we supply brazing sheet from our plants in Lancaster, Pennsylvania; Kofem, Hungary; and Qinhuangdao, China.
In the commercial transportation industry, we are a leading supplier of aluminum sheet and extrusions in North America and have been pursuing growth opportunities in Europe and Russia. Our major commercial transportation customers include Daimler, Paccar, Entrans/Heil, MAC Trailer and Wabash.
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Participation in Commercial Transportation Applications
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Aerospace
Our aerospace market segment has been a leader in the aerospace industry for decades. The Aerospace market segment accounted for 16% of our revenues for the year ended December 31, 2018. With its 220” rolling mill and a plate stretcher that can manufacture the thickest plate in the world, no other supplier in the industry can produce aluminum plate as wide or as thick as Arconic Corporation. This allows Arconic Corporation to provide the majority of the exterior of the plane, as well as the most challenging structural plate applications on the aircraft. In addition, no other supplier in the industry can offer the breadth of material offerings or material development as Arconic Corporation.
Participation Across Airframe Platforms
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Recent long-term agreements are expanding our share with the leaders in aerospace frames, including our largest-ever long-term contract with Boeing announced in July 2018, which includes 100% of Boeing’s fuselage and wing skins. We also have long-term contracts with Airbus, Spirit AeroSystems and Embraer, along with Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Subaru Heavy Industries.
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Recent investments allow us to provide more content on aircraft applications. Key differentiators for our aerospace market segment are alloy material development (7085 replacement — high strength 7xxx alloy, aluminum-lithium), the ability to manufacture a broad range of sheet with unique tempers and thermal capabilities, and both wide and heat treated, as well as the ability to produce the thickest and widest plate.
Our new horizontal heat treat line in Davenport, Iowa supports share gain in the same products with Airbus and retention of the Boeing wing share. We have similar capabilities in Kitts Green, United Kingdom, to support Airbus in Europe.
Ten of our manufacturing facilities serve our aerospace market segment. Our aerospace sheet and plate manufacturing facilities in Davenport, Iowa; Hutchinson, Kansas; Kitts Green, United Kingdom; and Samara, Russia, together offer the full spectrum of sheet and plate required by the aerospace industries (alloys, temper, dimensions, pre-machined) and have unique capabilities such as producing the widest plates required for some aerospace programs (civil and commercial). Our extrusions facilities in Lafayette, Indiana; Massena, New York; Chandler, Arizona; Halethorpe, Maryland and Hannover, Germany, produce components for aerospace customers. Downstream aluminum products for the aerospace market require relatively high levels of R&D investment and advanced technological capabilities, and therefore tend to command premium prices compared to more commoditized products. We work in close collaboration with our customers to develop highly engineered solutions to fulfill their specific requirements.
Aerospace products are typically subject to long qualification, development and supply lead times, and our contracts with our largest aerospace customers generally have a term of five years or longer, which provides us with volume and profitability visibility. In addition, demand for our aerospace products typically correlates directly with aircraft backlogs and build rates. As of July 2019, the passenger aircraft market continues to have a firm backlog estimated at seven years.
Building and Construction
Arconic Corporation operates in the building and construction markets in North America and Europe. In North America, Arconic Corporation sells architectural systems, composite material to the nonresidential building segment. In Europe, Arconic Corporation sells architectural systems in both the residential and the nonresidential building segments and sells sheet in the building and industrial segments. The BCS segment accounted for roughly 18% of our revenues for the year ended December 31, 2018.
With leading positions in North America and a strong foundation in Europe, Arconic Corporation is well positioned to take advantage of strong fundamentals in its target markets. Overall, the global building and construction market is expected to continue to grow as population growth and urbanization drive underlying demand for structures. At the same time, demand for higher performing building facades is driving the value of the building envelope to increase over time. Key performance drivers include energy efficiency, enhanced building security and improved acoustics.
Participation in the BCS Market Segment
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Arconic Corporation invests in product innovation to deliver solutions offering increased thermal performance to meet evolving energy codes, hurricane impact products for buildings in extreme weather zones, and blast-resistant products to meet the needs of buildings with enhanced security requirements. The innovation in this segment is supported by more than 270 active patent matters, of which 230 are granted patents and the balance are pending applications.
Industrial
Our industrial market segment produces mold and tooling plate for semiconductors, general engineering/machinery and injection molding applications, specialty finishes for applications in appliances, cosmetic packaging, recreational vehicles and vehicle components, tread plate and sheet for tool box and flooring applications, plate circles for cookware and extrusions to distributors. Our industrial market segment accounted for 16% of revenue for the year ended December 31, 2018.
With a diverse industrial product portfolio in North America, we provide high quality mill finish product and have been expanding into the North American industrial market, displacing less profitable products. Our recently announced $100 million Tennessee investment, which aims to capture automotive growth, is also targeting to capture growth opportunities in the industrial market in 2020. We are continuing to optimize our portfolio to replace Chinese imports impacted by the common alloy trade case in the United States, which placed duties ranging from 96% – 176% on approximately $1.5 billion of Chinese common alloy imports. We expect these duties to remain in place for at least the next five years.
In North America, we supply industrial sheet and plate from our facilities in Alcoa, Tennessee; Lancaster, Pennsylvania; and Davenport, Iowa. For customers in Europe and Asia, we supply industrial sheet and plate from our plants in Székesfehérvár, Hungary; Qinhuangdao, China; Kitts Green, United Kingdom; and Samara, Russia.
Our major customers in the industrial market include key Service Centers partners (Ryerson, Thyssenkrupp MA, Reliance, Kloeckner, Champagne Metals) as well as end users (Airstream, Air Products, Applied Materials).
Packaging
Our packaging market segment is currently regionally focused, with operations in Bohai, China and Samara, Russia. We announced in August 2019 that our facility in Itapissuma, Brazil is under agreement to be sold to CBA. Including our Brazil operations, our packaging market segment accounted for 14% of revenues for the year ended December 31, 2018.
With highly efficient rolling mills operating in Russia and Asia, our packaging market segment has long-standing customer commitments for the supply of large volumes of can sheet and specialty packaging sheet. As with our other market segments, we collaborate with customers for innovations that meet the needs of consumers by developing new characteristics such as alternative coatings, distinctive sizes and variable thicknesses. Our major customers in the packaging space include Ball and CANPACK.
Major Product and Customer Revenues
Products that contributed 10% or more to combined revenues were as follows:
For the Years Ended December 31,
2018
2017
2016
Flat-rolled aluminum
77% 75% 75%
Architectural aluminum systems
15% 16% 16%
Sales to Arconic Corporation’s largest customer, Ford, accounted for 13% of our total revenue for 2018. These sales were made under various contracts relating to Ford vehicle programs, such as the F-150, F-250/350, Explorer and Navigator vehicles. The loss of sales to Ford under all of these contracts could have a material adverse effect on our business if such sales are not replaced by sales to other customers. No other customer accounted for 10% or more of our total revenue in 2018.
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Sales and Marketing
Rolled Products and Extrusions
Arconic Corporation’s Rolled Products group and Extrusions group have two primary sales channels for the segments in which we operate: direct sales to our customers and sales to distributors.
Direct Sales
Arconic Corporation’s Rolled Products group and Extrusions group supply various segments all over the world through a direct sales force operating from individual facilities or sales offices. The direct sales channel typically serves very large, sophisticated customers and OEMs, but can also service medium and small size customers as well. Long-standing relationships are maintained with leading companies in industries using aluminum rolled and extruded products. Supply contracts for large global customers generally range from one to five years in length and historically, in segments such as aerospace, there has been a high degree of renewal business with these customers. As the manufacture of aluminum-intensive and higher content aluminum vehicles continues to grow, we continue to develop long-term relationships with the automotive OEMs. In some cases, the products Arconic Corporation supplies are proprietary in nature. Further, certain industries, such as automotive and aerospace, and their related customers require suppliers to complete a rigorous qualification process; the ability to obtain and maintain these qualifications is an important part of doing business in these segments. A customer’s cost to switch and either find a new product or qualify a new supplier can be significant, so it is in both the customer’s and the supplier’s best interest to maintain these relationships.
Distributors
Arconic Corporation’s Rolled Products group and Extrusions group also sell their products through third-party distributors. Customers of distributors are typically widely dispersed, and sales through this channel are usually highly fragmented. Distributors sell mostly commodity or less specialized products into many end-use segments in smaller quantities.
BCS
Arconic Corporation’s BCS business supplies architectural façade systems and products principally in North America and Europe but also globally through both direct sales and distributors. Its typical customers are installers or fabricators who purchase product on a project-by-project basis. Long-standing relationships are maintained with its leading customers. BCS also maintains an e-commerce platform for numerous standard architectural products for use by its North American customers and offers standard architectural products for purchase in its service centers.
Sources and Availability of Raw Materials
Important raw materials used by Arconic Corporation are: alloying materials (including, but not limited to, copper, magnesium and zinc), aluminum scrap, coatings, electricity, lube oil, natural gas, packaging materials, primary aluminum (ingot, slab, billet, P1020, high purity), aluminum coil and resin. Generally, other materials are purchased from third-party suppliers under competitively priced supply contracts or bidding arrangements. We believe that the raw materials necessary to the Arconic Corporation Businesses are and will continue to be available.
Patents, Trade Secrets and Trademarks
We believe that our domestic and international patent, trade secret and trademark assets provide us with a significant competitive advantage. Our rights under our patents, as well as the products made and sold under them, are important to us as a whole. The patents owned by us generally concern metal alloys, particular products, manufacturing equipment or techniques. The Arconic Corporation business as a whole is not, however, materially dependent on any single patent, trade secret or trademark. As a result of product development and technological advancement, we continue to pursue patent protection in jurisdictions throughout the world. As of September 30, 2019, our worldwide patent portfolio consists of approximately 620 granted patents and 299 pending patent applications.
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We also have a significant number of trade secrets, mostly regarding manufacturing processes and material compositions that give us important advantages in our markets. We continue to strive to improve those processes and generate new material compositions that provide additional benefits.
With respect to domestic and international registered trademarks, we have many that have significant recognition within the markets that are served. Examples include the name “Arconic” and the Arconic symbol for aluminum products, Kawneer for building panels, and Reynobond and Reynolux for architectural products. As of September 30, 2019, our worldwide trademark portfolio consists of approximately 889 registered trademarks and 274 pending trademark applications. Our rights under our trademarks are important to us as a whole and, to varying degrees, important to each business segment.
Research and Development
We engage in research and development programs that include process and product development, and basic and applied research. Throughout 2019, we continued working on new developments and leveraging new technologies. The Arconic Technology Center (ATC), located in New Kensington, Pennsylvania, serves as the headquarters for our Research and Development efforts, and we also have R&D facilities in Norcross, Georgia, Merxheim, France, Vendargues, France, and Harderwijk, Netherlands. These facilities focus on innovation and have given us a leading position in the development of proprietary next-generation specialty alloys and manufacturing processes as evidenced by our robust intellectual property portfolio. See “Our Company — Our Strengths — Track record developing differentiated products backed by advanced expertise and technological capabilities.”
Environmental Matters
Approved capital expenditures for new or expanded facilities for environmental control are $8 million for 2019 and estimated expenditures for such purposes are $17 million for 2020. Information relating to environmental matters is included in Note S to the Combined Financial Statements under the caption “Contingencies and Commitments — Environmental Matters.”
Employees
Total worldwide employment at the end of 2018 was approximately 15,300 employees in 18 countries. Many of these employees are represented by labor unions. We believe that relations with our employees and any applicable union representatives generally are good.
In the United States, approximately 4,200 employees are represented by various labor unions. The largest collective bargaining agreement is the master collective bargaining agreement between us and the United Steelworkers (“USW”). The USW master agreement covers approximately 3,400 employees at four U.S. locations. The current labor agreement expires on May 15, 2022. There are eight other collective bargaining agreements in the United States with varying expiration dates.
On a regional basis, there are agreements between Arconic Corporation and unions with varying expiration dates that cover employees in Europe, Russia, North America, South America, and Asia.
Legal Proceedings
In connection with the separation, Arconic Corporation will agree to assume and indemnify ParentCo against certain liabilities relating to Arconic Corporation’s businesses, including potential liabilities associated with the following legal proceedings, as discussed further in the section entitled “Certain Relationships and Related Party Transactions — Separation Agreement.”
Environmental
Information relating to legal proceedings involving environmental matters is included in Note S to the Combined Financial Statements under the caption “Contingencies and Commitments — Environmental Matters.”
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Reynobond PE
All references to ParentCo in the matters described under this section Reynobond PE refer to Arconic Inc. only and do not include its subsidiaries, except as otherwise stated.
On June 13, 2017, the Grenfell Tower in London, U.K. caught fire resulting in fatalities, injuries and damage. A French subsidiary of ParentCo, Arconic Architectural Products SAS (AAP SAS), supplied a product, Reynobond PE, to its customer, a cladding system fabricator, which used the product as one component of the overall cladding system on Grenfell Tower. The fabricator supplied its portion of the cladding system to the façade installer, who then completed and installed the system under the direction of the general contractor. Neither ParentCo nor AAP SAS was involved in the design or installation of the system used at the Grenfell Tower, nor did it have a role in any other aspect of the building’s refurbishment or original design. Regulatory investigations into the overall Grenfell Tower matter are being conducted, including a criminal investigation by the London Metropolitan Police Service (the “Police”), a Public Inquiry by the British government and a consumer protection inquiry by a French public authority. The Public Inquiry was announced by the U.K. Prime Minister on June 15, 2017 and subsequently was authorized to examine the circumstances leading up to and surrounding the Grenfell Tower fire in order to make findings of fact and recommendations to the U.K. Government on matters such as the design, construction, and modification of the building, the role of relevant public authorities and contractors, the implications of the fire for the adequacy and enforcement of relevant regulations, arrangements in place for handling emergencies, and the handling of concerns from residents, among other things. Hearings for Phase 1 of the Public Inquiry began on May 21, 2018 and concluded on December 12, 2018. Phase 2 hearings of the Public Inquiry are expected to begin in early 2020, following which a final report will be written and subsequently published. AAP SAS is participating as a Core Participant in the Public Inquiry and is also cooperating with the ongoing parallel investigation by the Police. ParentCo no longer sells the PE product for architectural use on buildings. Given the preliminary nature of these investigations and the uncertainty of potential future litigation, ParentCo cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.
Behrens et al. v. Arconic Inc. et al.   On June 6, 2019, 247 plaintiffs comprised of survivors and estates of decedents of the Grenfell Tower fire filed a complaint against “Arconic Inc., Alcoa Inc., and Arconic Architectural Products, LLC” (collectively, for purposes of the description of such proceeding, the “ParentCo Defendants”), as well as Saint-Gobain Corporation, d/b/a Celotex and Whirlpool Corporation, in the Court of Common Pleas of Philadelphia County. The complaint alleges claims under Pennsylvania state law for products liability and wrongful death related to the fire. In particular, the plaintiffs allege that the ParentCo Defendants knowingly supplied a dangerous product (Reynobond PE) for installation on the Grenfell Tower despite knowing that Reynobond PE was unfit for use above a certain height. The ParentCo Defendants removed the case to the United States District Court for the Eastern District of Pennsylvania on June 19, 2019. On August 29, 2019, the ParentCo Defendants moved to dismiss the complaint on the bases, among other things, that: (i) the case should be heard in the United Kingdom, not the United States; (ii) there is no jurisdiction over necessary parties; and (iii) Pennsylvania products liability law does not apply to manufacture and sale of product overseas. A hearing was held before the Court on November 25, 2019 on a motion to dismiss the complaint on bases (ii) and (iii), followed by a scheduling order on December 3, 2019 in which the judge did not issue a ruling on the bases for dismissal but instead, among other things, suggested a procedure for limited discovery followed by a briefing on those bases. Discovery is ongoing on defendants’ motion to have the case dismissed in favor of a UK forum. Given the preliminary nature of this matter and the uncertainty of litigation, the ParentCo Defendants cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.
Howard v. Arconic Inc. et al.   A purported class action complaint related to the Grenfell Tower fire was filed on August 11, 2017 in the United States District Court for the Western District of Pennsylvania against ParentCo and Klaus Kleinfeld. A related purported class action complaint was filed in the United States District Court for the Western District of Pennsylvania on August 25, 2017, under the caption Sullivan v. Arconic Inc. et al., against ParentCo, two former ParentCo executives, several current and former ParentCo directors, and banks that acted as underwriters for ParentCo’s September 18, 2014 preferred stock offering (the “Preferred Offering”). The plaintiff in Sullivan had previously filed a purported class
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action against the same defendants on July 18, 2017 in the Southern District of New York and, on August 25, 2017, voluntarily dismissed that action without prejudice. On February 7, 2018, on motion from certain putative class members, the court consolidated Howard and Sullivan, closed Sullivan, and appointed lead plaintiffs in the consolidated case. On April 9, 2018, the lead plaintiffs in the consolidated purported class action filed a consolidated amended complaint. The consolidated amended complaint alleged that the registration statement for the Preferred Offering contained false and misleading statements and omitted to state material information, including by allegedly failing to disclose material uncertainties and trends resulting from sales of Reynobond PE for unsafe uses and by allegedly expressing a belief that appropriate risk management and compliance programs had been adopted while concealing the risks posed by Reynobond PE sales. The consolidated amended complaint also alleged that between November 4, 2013 and June 23, 2017 ParentCo and Kleinfeld made false and misleading statements and failed to disclose material information about ParentCo’s commitment to safety, business and financial prospects, and the risks of the Reynobond PE product, including in ParentCo’s Form 10-Ks for the fiscal years ended December 31, 2013, 2014, 2015, and 2016, its Form 10-Qs and quarterly financial press releases from the fourth quarter of 2013 through the first quarter of 2017, its 2013, 2014, 2015, and 2016 Annual Reports, its 2016 Annual Highlights Report, and on its official website. The consolidated amended complaint sought, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses. On June 8, 2018, all defendants moved to dismiss the consolidated amended complaint for failure to state a claim. On June 21, 2019, the Court granted the defendants’ motion to dismiss in full, dismissing the consolidated amended complaint in its entirety without prejudice. On July 23, 2019, the lead plaintiffs filed a second amended complaint. The second amended complaint alleges generally the same claims as the consolidated amended complaint with certain additional allegations, as well as claims that the risk factors set forth in the registration statement for the Preferred Offering were inadequate and that certain additional statements in the sources identified above were misleading. The second amended complaint seeks, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses. On September 11, 2019, all defendants moved to dismiss the second amended complaint. Plaintiffs’ opposition to that motion was filed on November 1, 2019 and all defendants filed a reply brief on November 26, 2019. Given the preliminary nature of this matter and the uncertainty of litigation, ParentCo cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.
Raul v. Albaugh, et al.   On June 22, 2018, a derivative complaint was filed nominally on behalf of ParentCo by a purported ParentCo stockholder against the then members of ParentCo’s Board of Directors and Klaus Kleinfeld and Ken Giacobbe, naming ParentCo as a nominal defendant, in the United States District Court for the District of Delaware. The complaint raises similar allegations as the consolidated amended complaint and second amended complaint in Howard, as well as allegations that the defendants improperly authorized the sale of Reynobond PE for unsafe uses, and asserts claims under Section 14(a) of the Exchange Act and Delaware state law. On July 13, 2018, the parties filed a stipulation agreeing to stay this case until the final resolution of the Howard case, the Grenfell Tower Public Inquiry in London, and the investigation by the Police and on July 23, 2018, the Court approved the stay. Given the preliminary nature of this matter and the uncertainty of litigation, ParentCo cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.
While ParentCo believes that these cases are without merit and intends to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters.
Stockholder Demands.   The ParentCo Board of Directors also received letters, purportedly sent on behalf of stockholders, reciting allegations similar to those made in the federal court lawsuits and demanding that the ParentCo Board authorize ParentCo to initiate litigation against members of management, the ParentCo Board, and others. The ParentCo Board of Directors appointed a Special Litigation Committee of the ParentCo Board to review, investigate, and make recommendations to the ParentCo Board regarding the appropriate course of action with respect to these stockholder demand letters. On May 22, 2019, the Special Litigation Committee, following completion of its investigation into the claims demanded in the demand letters, recommended to the ParentCo Board that it reject the demands
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to authorize commencement of litigation. On May 28, 2019, the ParentCo Board adopted the Special Litigation Committee’s findings and recommendations and rejected the demands that it authorize commencement of actions to assert the claims set forth in the demand letters.
Other
In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against Arconic Corporation, including those pertaining to environmental, product liability, safety and health, employment, tax and antitrust matters. While the amounts claimed in these other matters may be substantial, the ultimate liability cannot currently be determined because of the considerable uncertainties that exist. Therefore, it is possible that the Company’s liquidity or results of operations in a period could be materially affected by one or more of these other matters. However, based on facts currently available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the results of operations, financial position or cash flows of the Company.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in conjunction with the audited Combined Financial Statements and corresponding notes and the Unaudited Pro Forma Condensed Combined Financial Information and corresponding notes included elsewhere in this information statement. This MD&A contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties, and other factors that could cause actual results to differ materially from those projected or implied in the forward-looking statements. Please see “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with these statements.
All amounts are in millions of U.S. dollars, unless otherwise indicated.
Overview
The Separation
The Proposed Separation.   On February 8, 2019, ParentCo announced that its Board of Directors approved a plan to separate into two standalone, publicly-traded companies. The spin-off company, Arconic Rolled Products Corporation (“Arconic Corporation” or the “Company”), will include the rolled aluminum products, aluminum extrusions, and architectural products operations of ParentCo, as well as the Latin America extrusions operations sold in April 2018 (collectively, the “Arconic Corporation Businesses”). The existing publicly traded company, ParentCo, will continue to own the engines, engineered structures, fastening systems, and forged wheels operations (collectively, the “Howmet Aerospace Businesses”).
The separation will occur by means of a pro rata distribution by ParentCo of all the outstanding shares of common stock of Arconic Corporation. In conjunction with the consummation of the separation, ParentCo will change its name to Howmet Aerospace Inc. (“Howmet Aerospace”) and Arconic Rolled Products Corporation will change its name to Arconic Corporation.
The separation, which is expected to be completed in the second quarter of 2020, is subject to a number of conditions, including, but not limited to: final approval by ParentCo’s Board of Directors; receipt of an opinion of legal counsel regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Code (i.e., a transaction that is generally tax-free for U.S. federal income tax purposes); and the U.S. Securities and Exchange Commission (the “SEC”) declaring effective the registration statement of which this information statement forms a part.
Arconic Corporation and Howmet Aerospace will enter into several agreements to implement the legal and structural separation between the two companies; govern the relationship between Arconic Corporation and Howmet Aerospace after the completion of the separation; and allocate between Arconic Corporation and Howmet Aerospace various assets, liabilities, and obligations, including, among other things, employee benefits, environmental liabilities, intellectual property, and tax-related assets and liabilities. One agreement in particular, the separation agreement, will identify the assets to be transferred, the liabilities to be assumed, and the contracts to be transferred to each of Arconic Corporation and Howmet Aerospace as part of the separation, and will provide for when and how these transfers and assumptions will occur.
ParentCo may, at any time and for any reason until the separation is complete, abandon the separation plan or modify its terms.
ParentCo will incur costs to evaluate, plan, and execute the separation, and Arconic Corporation will be allocated a pro rata portion of these costs based on segment revenue (see “— Overview — The Separation — Cost Allocations”). The allocated amounts will be included in Selling, general administrative, and other expenses on Arconic Corporation’s Statement of Combined Operations.
Basis of Presentation.   The Combined Financial Statements of Arconic Corporation are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In accordance with GAAP, certain situations require management to make estimates based on judgments and
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assumptions, which may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They also may affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates upon subsequent resolution of identified matters.
The Combined Financial Statements of Arconic Corporation are prepared from ParentCo’s historical accounting records and are presented on a standalone basis as if the Arconic Corporation Businesses have been conducted independently from ParentCo. Such Combined Financial Statements include the historical operations that are considered to comprise the Arconic Corporation Businesses, as well as certain assets and liabilities that have been historically held at ParentCo’s corporate level but are specifically identifiable or otherwise attributable to Arconic Corporation.
Cost Allocations.   The Combined Financial Statements of Arconic Corporation include general corporate expenses of ParentCo that were not historically charged to the Arconic Corporation Businesses for certain support functions that are provided on a centralized basis, such as expenses related to finance, audit, legal, information technology, human resources, communications, compliance, facilities, employee benefits and compensation, and research and development activities. These general corporate expenses are included on Arconic Corporation’s Statement of Combined Operations within Cost of goods sold, Selling, general administrative and other expenses, and Research and development expenses. These expenses have been allocated to Arconic Corporation on the basis of direct usage when identifiable, with the remainder allocated based on the Arconic Corporation Businesses’ segment revenue as a percentage of ParentCo’s total segment revenue, as reported in the respective periods.
All external debt not directly attributable to Arconic Corporation has been excluded from the Company’s Combined Balance Sheet. Financing costs related to these debt obligations have been allocated to Arconic Corporation and are included on the Company’s Statement of Combined Operations within Interest expense. In general, the allocation was calculated as the capital invested by ParentCo in the Arconic Corporation Businesses to the total capital invested by ParentCo in all its businesses. For 2018, 2017, and the last two months of 2016, ParentCo’s businesses were composed of the Arconic Corporation Businesses and the Howmet Aerospace Businesses. For the first ten months of 2016, ParentCo’s businesses also included the Alcoa Corporation business, which was spun-off from ParentCo in the 2016 Separation Transaction; however, Alcoa Corporation did not assume any of ParentCo’s corporate debt upon consummation of the 2016 Separation Transaction. Accordingly, for the periods subsequent to the 2016 Separation Transaction, Arconic Corporation was allocated a higher amount of interest expense due to the absence of the Alcoa Corporation business from the ratio.
The following table reflects the allocations described above:
2018
2017
2016
Cost of goods sold(1)
$ 11 $ 35 $ 30
Selling, general administrative, and other expenses(2)
56 120 141
Research and development expenses
24 28 33
Provision for depreciation and amortization
10 10 8
Restructuring and other charges(3)
50 6 9
Interest expense
125 162 94
Other expenses (income), net(4)
(12) (285) (11)
(1)
For all periods presented, amount principally relates to an allocation of expenses for ParentCo’s retained pension and other postretirement benefit obligations associated with closed and sold operations.
(2)
In 2017, amount includes an allocation of  $30 in costs related to ParentCo’s proxy, advisory, and governance-related matters. Also, in 2016, amount includes an allocation of  $68 in separation costs associated with the 2016 Separation Transaction.
(3)
In 2018, amount includes an allocation of settlement and curtailment charges and benefits related to several actions taken (lump sum payments and benefit reductions) by ParentCo associated with pension and other postretirement benefit plans.
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(4)
In 2017, amount includes an allocation of two gains related to ParentCo’s investing and financing activities. Specifically, an allocation of  $182 associated with the sale of a portion of ParentCo’s investment in Alcoa Corporation common stock and an allocation of  $87 related to an exchange of cash and the remaining portion of ParentCo’s investment in Alcoa Corporation common stock to acquire a portion of ParentCo’s outstanding debt. These amounts were allocated to Alcoa Corporation in preparing the accompanying Combined Financial Statements as the Company participates in ParentCo’s centralized treasury function, which includes cash and debt management. As a result, Arconic Corporation benefitted from the cash received by ParentCo and/or the reduction of ParentCo debt, including the reduction in related interest cost, in the respective transactions.
Management believes the assumptions regarding the allocation of ParentCo’s general corporate expenses and financing costs are reasonable.
Nevertheless, the Combined Financial Statements of Arconic Corporation may not include all of the actual expenses that would have been incurred and may not reflect the Company’s combined results of operations, financial position, and cash flows had it been a standalone company during the periods presented. Actual costs that would have been incurred if Arconic Corporation had been a standalone company would depend on multiple factors, including organizational structure, capital structure, and strategic decisions made in various areas, including information technology and infrastructure. Transactions between Arconic Corporation and ParentCo, including sales to the Howmet Aerospace Businesses, have been presented as related party transactions on Arconic Corporation’s Combined Financial Statements and are considered to be effectively settled for cash at the time the transaction is recorded. The total net effect of the settlement of these transactions is reflected on Arconic Corporation’s Statement of Combined Cash Flows as a financing activity and on the Company’s Combined Balance Sheet as Parent Company net investment.
Results of Operations
Earnings Summary
Net Income.   Net income was $170 in 2018 compared to $209 in 2017. The decrease in results of  $39 was principally caused by the non-recurring nature of an allocation of two gains related to ParentCo’s 2017 investing and financing activities, an allocation of a net charge associated with several actions taken by ParentCo related to employee retirement benefit plans, and unfavorable pricing and product mix. These negative impacts were mostly offset by a gain on the sale of the Texarkana (Texas) rolling mill, lower allocations of ParentCo’s corporate overhead and financing costs, the absence of charges related to the divestiture of the Fusina (Italy) rolling mill and Latin America extrusions business, and higher volumes in the Rolled Products and Building and Construction Systems segments.
Net income was $209 in 2017 compared with $155 in 2016. The increase in results of  $54 was primarily due to an allocation of two gains related to ParentCo’s 2017 investing and financing activities, higher volumes in the Rolled Products and Building and Construction Systems segments, a lower allocation of ParentCo’s corporate overhead costs, and the absence of a charge related to a decision to permanently close the Tennessee can sheet facility. These positive impacts were mostly offset by charges related to the divestiture of the Fusina (Italy) rolling mill and Latin America extrusions business, a higher allocation of ParentCo’s financing costs, and unfavorable pricing and product mix.
Sales.   Sales in 2018 were $7,442 compared with $6,824 in 2017, an increase of  $618, or 9%. The improvement was largely attributable to volume growth in the Rolled Products and Building and Construction Systems segments and both higher aluminum prices and favorable product mix in the Rolled Products segment. These positive impacts were somewhat offset by lower sales of  $190 as a result of each of the following: the divestitures of both the Latin America Extrusions business (April 2018) and the rolling mill in Fusina, Italy (March 2017) and the ramp down of the North American packaging operations (completed in December 2018).
Sales in 2017 were $6,824 compared with $6,661 in 2016, an increase of  $163, or 2%. The increase was mainly the result of volume growth in the Rolled Products and Building and Construction Systems segments, partially offset by the ramp down and toll processing agreement relating to the North America
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packaging business in Tennessee (Rolled Products segment), as well as the absence of sales of  $111 as a result of the divestiture of the rolling mill in Fusina, Italy (March 2017). Pursuant to the toll processing agreement that ParentCo entered into with Alcoa Corporation on October 31, 2016 in connection with the 2016 Separation Transaction, Arconic Corporation provides can body stock to Alcoa Corporation using aluminum supplied by Alcoa Corporation, resulting in the absence of metal sales in 2017 compared to 2016.
Cost of Goods Sold.   COGS as a percentage of Sales was 88.0% in 2018 compared with 86.0% in 2017. The percentage was negatively impacted by higher aluminum prices, unfavorable aerospace product mix, and higher transportation costs. These negative impacts were partially offset by higher volumes in the Rolled Products and Building and Construction Systems segments and a favorable last in, first out (LIFO) inventory adjustment (difference of  $59).
COGS as a percentage of Sales was 86.0% in 2017 compared with 84.1% in 2016. The percentage was negatively impacted by net higher aluminum prices, a lower margin product mix, and an unfavorable LIFO inventory adjustment (difference of  $64). These negative impacts were mostly offset by higher volumes in the Rolled Products and Building and Construction Systems segments and net cost savings.
Selling, General Administrative, and Other Expenses.   SG&A expenses were $288, or 3.9% of Sales, in 2018 compared with $361, or 5.3% of Sales, in 2017. The decline of  $73 was primarily the result of a lower allocation (decrease of  $64) of ParentCo’s corporate overhead, which was mostly driven by overall cost reductions and the non-recurring nature of certain ParentCo costs in 2017 for proxy, advisory, and governance-related matters.
SG&A expenses were $361, or 5.3% of Sales, in 2017 compared with $396, or 5.9% of Sales, in 2016. The decrease of  $35 was primarily the result of a lower allocation (decrease of  $21) of ParentCo’s corporate overhead. The lower allocation was mainly driven by a substantial decrease in the non-recurring nature of costs incurred by ParentCo in 2016 related to the 2016 Separation Transaction, as well as overall cost reductions, partially offset by certain costs incurred by ParentCo in 2017 for proxy, advisory, and governance-related matters and a higher ratio used to make the overall allocation (see “— Overview — The Separation — Cost Allocations”).
Research and Development Expenses.   R&D expenses were $63 in 2018 compared with $66 in 2017 and $83 in 2016. The decrease in both periods was principally related to a lower allocation of ParentCo’s expenses, which was driven by decreased spending.
Provision for Depreciation and Amortization.   The provision for D&A was $272 in 2018 compared with $266 in 2017 and $257 in 2016. The increase in both periods was primarily due to capital projects placed into service related to Arconic Corporation’s Davenport (Iowa) (very thick plate stretcher related to aerospace expansion) and Tennessee (equipment upgrades and conversions to transition to automotive sheet and industrial applications from can sheet) rolling mills.
Restructuring and Other Charges.   In 2018, Restructuring and other charges were a net benefit of $104, which were comprised of the following components: a $154 gain on the sale of the Texarkana (Texas) rolling mill and cast house; a $50 charge for an allocation of ParentCo’s corporate restructuring charges (see “— Overview — The Separation — Cost Allocations”); a $2 charge for a post-closing adjustment related to the divestiture of the Latin America extrusions business; an $8 net charge for other items; and a $10 benefit for the reversal of several layoff reserves related to prior periods.
In 2017, Restructuring and other charges were $133, which were comprised of the following components: a $60 loss related to the divestiture of the Fusina (Italy) rolling mill; a $41 impairment charge for the assets associated with the Latin America extrusions business as a result of signing a definitive sale agreement (completed sale in April 2018); a $31 charge for layoff costs related to cost reduction initiatives, including the separation of approximately 400 employees (the majority of which related to the Rolled Products and Building and Construction Systems segments); a $6 charge for an allocation of ParentCo’s corporate restructuring charges (see “— Overview — The Separation — Cost Allocations”); a $2 net benefit for other items; and a $3 benefit for the reversal of several layoff reserves related to prior periods.
In 2016, Restructuring and other charges were $67, which were comprised of the following components: a $37 charge for exit costs related to a decision to permanently shut down the Tennessee can sheet facility; an $11 charge for layoff costs, including the separation of approximately 300 employees (the
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majority of which related to the Latin America extrusions business); a $9 charge for an allocation of ParentCo’s corporate restructuring charges (see “— Overview — The Separation — Cost Allocations”); a $17 net charge for other items; and a $7 benefit for the reversal of several layoff reserves related to prior periods.
See Note E to the Combined Financial Statements in the Index within this information statement for additional information.
Interest Expense.   Interest expense was $129 in 2018 compared with $168 in 2017. The decrease of $39, or 23%, was mostly the result of a lower allocation (decrease of  $37) of ParentCo’s financing costs due to a lower average amount of ParentCo’s outstanding debt in 2018 compared to 2017.
Interest expense was $168 in 2017 compared with $97 in 2016. The increase of  $71, or 73%, was mostly due to a higher allocation (increase of  $68) of ParentCo’s financing costs, which was the result of a higher ratio used to make such allocation (see “— Overview — The Separation — Cost Allocations”).
Other Expenses (Income), Net.   Other expenses, net was $4 in 2018 compared with Other income, net of  $287 in 2017. The change of  $291 was largely attributable to the non-recurring nature of an allocation ($269) of two gains related to ParentCo’s 2017 investing and financing activities (see below).
Other income, net was $287 in 2017 compared with $9 in 2016. The change of  $278 was largely attributable to an allocation of two gains related to ParentCo’s investing and financing activities. Specifically, an allocation of  $182 associated with the sale of a portion of ParentCo’s investment in Alcoa Corporation common stock and an allocation of  $87 related to an exchange of cash and the remaining portion of ParentCo’s investment in Alcoa Corporation common stock to acquire a portion of ParentCo’s outstanding debt. See “— Overview — The Separation — Cost Allocations” for an explanation of the allocation methodology of ParentCo activities for purposes of Arconic Corporation’s Combined Financial Statements.
Income Taxes.   Arconic Corporation’s effective tax rate was 29.5% in 2018 compared with the U.S. federal statutory rate of 21%. The effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $15 charge related to an increase in valuation allowance attributable to non-U.S. jurisdictions, primarily in Brazil and China, and a $6 charge for U.S. state taxes.
Arconic Corporation’s effective tax rate was 16.7% in 2017 compared with the U.S. federal statutory rate of 35%. The effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $50 benefit related to the remeasurement of U.S. net deferred tax assets as a result of the federal tax rate reduction from 35% to 21% pursuant to the provision of the U.S. Tax Cuts and Jobs Act of 2017 (the “2017 Act”). In addition, the effective tax rate differs from the U.S. federal statutory rate as a result of a $37 tax benefit related to the tax impact of corporate allocations, a $37 charge related to an increase in valuation allowance attributable to non-U.S. jurisdictions, primarily in Brazil and China, an $18 charge for an increase in unrecognized tax benefits recorded in Germany, a $16 benefit for foreign income taxed in lower rate jurisdictions, a $7 charge for U.S. state taxes, and a $7 benefit related to intercompany transactions within Arconic Corporation and between Arconic Corporation and ParentCo.
Arconic Corporation’s effective tax rate was 7.7% in 2016 compared with the U.S. federal statutory rate of 35%. The effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $17 tax benefit related to statutory tax rate and law changes, primarily attributable to a write-off of a deferred tax liability associated with foreign branch earnings in the United States. In addition, the effective tax rate differs from the U.S. federal statutory rate as a result of an $11 charge related to an increase in valuation allowance attributable to non-U.S. jurisdictions, primarily in Brazil and China, a $20 discrete tax benefit for the release of valuation allowances in Russia, a $10 benefit for foreign income taxed in lower rate jurisdictions, and a $9 benefit related to intercompany transactions within Arconic Corporation and between Arconic Corporation and ParentCo.
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Segment Information
Arconic Corporation’s operations consist of three reportable segments: Rolled Products, Extrusions, and Building and Construction Systems. Segment performance under Arconic Corporation’s management reporting system is evaluated based on several factors; however, the primary measure of performance is Segment operating profit. Arconic Corporation calculates Segment operating profit as Total sales (third-party and intersegment) minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. Segment operating profit may not be comparable to similarly titled measures of other companies.
Segment operating profit for all reportable segments totaled $420 in 2018, $500 in 2017, and $534 in 2016. The following information provides Sales and Segment operating profit for each reportable segment for each of the three years in the period ended December 31, 2018. See Note D to the Combined Financial Statements in the Index within this information statement for additional information.
Rolled Products
2018
2017
2016
Third-party sales*
$ 5,731 $ 5,125 $ 4,996
Intersegment sales
15 15 9
Total sales
$ 5,746 $ 5,140 $ 5,005
Segment operating profit
$ 328 $ 384 $ 374
Third-party aluminum shipments (kmt)*
1,309 1,257 1,400
*
In 2018, 2017, and 2016, third-party sales included $145, $133, and $132, respectively, and third-party aluminum shipments included 60 kmt, 60 kmt, and 61 kmt, respectively, related to sales to ParentCo’s Howmet Aerospace Businesses. These sales are deemed to be related-party sales and are presented as such on Arconic Corporation’s Statement of Combined Operations.
Overview.   The Rolled Products segment produces aluminum sheet and plate for a variety of end markets. Sheet and plate are sold directly to customers and through distributors related to the aerospace, automotive, commercial transportation, packaging, building and construction, and industrial products (mainly used in the production of machinery and equipment and consumer durables) end markets. A small portion of this segment also produces aseptic foil for the packaging end market. While the customer base for flat-rolled products is large, a significant amount of sales of sheet and plate is to a relatively small number of customers. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are the U.S. dollar and, to a lesser extent, each of the following: the Russian ruble, Chinese yuan, the euro, the British pound, and the Brazilian real.
On April 6, 2018, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced new sanctions against Russian “oligarchs” and extended those sanctions to companies that are majority-owned or substantively controlled by those oligarchs. These sanctions block U.S. persons — both individuals and companies — from engaging in transactions with listed oligarchs and their companies. These sanctions originally extended to UC Rusal PLC (“Rusal”), which supplies primary aluminum to Arconic Corporation in Europe, the United States, and to the Company’s Samara plant in Russia. The Company operated under a series of temporary licenses issued by OFAC until January 27, 2019 when OFAC removed Rusal from the list of sanctioned parties. The Company complies with and expects to continue to comply with all other aspects of these sanctions and does not anticipate any interruption in Samara’s ability to operate normally.
In March 2017, Arconic Corporation completed the divestiture of its Fusina, Italy rolling mill. The rolling mill generated third-party sales of  $54 and $165 in 2017 (through the date of divestiture) and 2016, respectively, and had 312 employees at the time of the divestiture. See “Results of Operations — Earnings Summary — Restructuring and Other charges.”
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On November 1, 2016, Arconic Corporation entered into a toll processing agreement with Alcoa Corporation for the tolling of metal for the Warrick, IN rolling mill which became a part of Alcoa Corporation upon the completion of the 2016 Separation Transaction. As part of this arrangement, Arconic Corporation provided a toll processing service to Alcoa Corporation to produce can sheet products at its facility in Tennessee through the end date of the contract, December 31, 2018. Alcoa Corporation supplied all required raw materials to Arconic Corporation, which processed the raw materials into finished can sheet coils ready for shipment to the end customer. Tolling revenue for 2018, 2017, and the two months ended December 31, 2016 was $144, $190, and $37, respectively.
Sales.   Third-party sales for the Rolled Products segment increased $606, or 12%, in 2018 compared with 2017, primarily attributable to higher aluminum prices; higher volumes in the automotive, commercial transportation, and industrial end markets; and favorable product mix; partially offset by the absence of sales of  $54 from the rolling mill in Fusina, Italy (see above) and the ramp down of the North American packaging operations (completed in December 2018).
Third-party sales for this segment increased $129, or 3%, in 2017 compared with 2016, primarily attributable to volume growth in the automotive end market and higher aluminum pricing, partially offset by the impact of  $362 associated with the ramp-down and toll processing agreement with Alcoa Corporation at the Company’s North America packaging business in Tennessee, the absence of sales of $111 from the rolling mill in Fusina, Italy (see above), aerospace customer inventory destocking and reduced build rates, and pricing pressures in the global packaging market.
Segment Operating Profit.   Segment operating profit for the Rolled Products segment decreased $56, or 15%, in 2018 compared with 2017, primarily driven by unfavorable aerospace wide-body production mix, higher aluminum prices, and higher transportation costs and scrap spreads, partially offset by higher automotive, commercial transportation, and industrial volumes.
Segment operating profit for this segment increased $10, or 3%, in 2017 compared with 2016, primarily driven by net cost savings and increased automotive volumes, partially offset by lower aerospace volume from customer destocking and reduced build rates, continued pricing pressure on global packaging products, and higher aluminum prices.
Extrusions
2018
2017
2016
Third-party sales*
$ 546 $ 518 $ 551
Segment operating profit
$ 1 $ 34 $ 74
Third-party aluminum shipments (kmt)*
59 59 57
*
In 2018, 2017, and 2016, third-party sales included $61, $49, and $47, respectively, and third-party aluminum shipments included 7 kmt, 6 kmt, and 6 kmt, respectively, related to sales to ParentCo’s Howmet Aerospace Businesses. These sales are deemed to be related-party sales and are presented as such on Arconic Corporation’s Statement of Combined Operations.
Overview.   The Extrusions segment produces a range of extruded and machined parts for the aerospace, automotive, commercial transportation, and industrial products end markets. These products are sold directly to customers and through distributors. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are the U.S. dollar and, to a lesser extent, the euro.
Sales.   Third-party sales for the Extrusions segment increased $28, or 5%, in 2018 compared with 2017, primarily driven by higher aluminum prices and higher volumes in the automotive end market, partially offset by lower volumes in the aerospace and industrial end markets.
Third-party sales for this segment decreased $33, or 6%, in 2017 compared with 2016, primarily driven by lower volumes in the aerospace and industrial end markets, partially offset by higher aluminum prices and higher volumes in the automotive end market.
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Segment Operating Profit.   Segment operating profit for the Extrusions segment declined $33, or 97%, in 2018 compared with 2017, principally driven by operational challenges at one plant, higher aluminum prices, and lower volumes for aerospace and industrial products, partially offset by higher volumes for automotive products.
Segment operating profit for this segment decreased $40, or 54%, in 2017 compared with 2016, principally driven by lower volumes for aerospace and industrial products and higher aluminum prices, partially offset by higher volumes for automotive products.
Building and Construction Systems
2018
2017
2016
Third-party sales
$ 1,140 $ 1,067 $ 1,011
Segment operating profit
$ 91 $ 82 $ 86
Overview.   The Building and Construction Systems segment manufactures products that are used in the non-residential building and construction end market. These products include integrated aluminum architectural systems and architectural extrusions, which are sold directly to customers and through distributors. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are the U.S. dollar and, to a lesser extent, each of the following: the euro, the British pound, and Canadian dollar.
Sales.   Third-party sales for the Building and Construction Systems segment increased $73, or 7%, in 2018 compared with 2017, primarily driven by higher volume related to the building and construction end market, increased product pricing, and favorable foreign currency movements due to a stronger euro and British pound.
Third-party sales for this segment increased $56, or 6%, in 2017 compared with 2016, primarily driven by increased volume related to the building and construction end market and favorable pricing, mostly due to an increase in the LME aluminum price.
Segment Operating Profit.   Segment operating profit for the Building and Construction Systems segment increased $9, or 11%, in 2018 compared with 2017, principally driven by favorable product pricing and higher volume related to the building and construction end market, mostly offset by higher costs. The improved pricing was mainly the result of price increases partially offset by absorption of a portion of a higher LME aluminum price.
Segment operating profit for this segment decreased $4, or 5%, in 2017 compared with 2016, principally driven by lower product pricing and unfavorable product mix, mostly offset by net cost savings. The lower pricing was mainly the result of the absorption of a portion of a higher LME aluminum price, somewhat offset by price increases.
Reconciliation of Total Segment Operating Profit to Combined Income before Income Taxes
2018
2017
2016
Total segment operating profit
$ 420 $ 500 $ 534
Unallocated amounts:
Cost allocations(1)
(101) (193) (212)
Restructuring and other charges(2)
104 (133) (67)
Other
(49) (42) 1
Combined operating income
$ 374 $ 132 $ 256
Interest expense(2)
(129) (168) (97)
Other (expenses) income, net(2)
(4) 287 9
Combined income before income taxes
$ 241 $ 251 $ 168
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(1)
Cost allocations are composed of an allocation of ParentCo’s general administrative and other expenses related to operating its corporate headquarters and other global administrative facilities, as well as an allocation of ParentCo’s research and development expenses associated with its corporate technical center. See “— Overview — The Separation — Cost Allocations.”
(2)
See same titled sections under “— Results of Operations — Earnings Summary” for a description of notable changes.
Environmental Matters
See the Environmental Matters section of Note S to the Combined Financial Statements in the Index within this information statement.
Liquidity and Capital Resources
Historically, ParentCo has provided capital, cash management, and other treasury services to Arconic Corporation. ParentCo will continue to provide these services to Arconic Corporation until the separation is consummated. Only cash amounts specifically attributable to Arconic Corporation were reflected in the Company’s Combined Financial Statements. Transfers of cash, both to and from ParentCo’s centralized cash management system, were reflected as a component of Parent Company net investment in the Combined Financial Statements of Arconic Corporation.
Arconic Corporation’s primary future cash needs will be centered on operating activities, including working capital, as well as recurring and strategic capital expenditures. Following the separation, Arconic Corporation’s capital structure and sources of liquidity will change significantly from its historical capital structure. Arconic Corporation will no longer participate in capital management with ParentCo; rather Arconic Corporation’s ability to fund its cash needs will depend on its ongoing ability to generate and raise cash in the future. Although Arconic Corporation believes that its future cash from operations, together with its access to capital markets, will provide adequate resources to fund its operating and investing needs, our access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including: (i) Arconic Corporation’s credit rating; (ii) the liquidity of the overall capital markets; and (iii) the current state of the economy. There can be no assurances that Arconic Corporation will continue to have access to capital markets on terms acceptable to it. See “Risk Factors” elsewhere in this information statement for further information.
ParentCo has an arrangement with several financial institutions to sell certain customer receivables without recourse on a revolving basis. The sale of such receivables is completed through the use of a bankruptcy-remote special-purpose entity, which is a consolidated subsidiary of ParentCo. In connection with this arrangement, certain of Arconic Corporation’s customer receivables are sold on a revolving basis to this bankruptcy-remote subsidiary of ParentCo; these sales were reflected as a component of Parent Company net investment in Arconic Corporation’s Combined Financial Statements.
In addition, ParentCo participates in several account payable settlement arrangements with certain vendors and third-party intermediaries. These arrangements provide that, at the vendor’s request, the third-party intermediary advances the amount of the scheduled payment to the vendor, less an appropriate discount, before the scheduled payment date and ParentCo makes payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its vendors. In connection with these arrangements, certain of Arconic Corporation’s accounts payable are settled, at the vendor’s request, before the scheduled payment date; these settlements were reflected as a component of Parent Company net investment in Arconic Corporation’s Combined Financial Statements.
Arconic Corporation may seek similar standalone arrangements regarding the potential sale of certain customer receivables and settlement of accounts payable upon the separation. However, there can be no assurance that Arconic Corporation will be able to establish such arrangements on terms acceptable to it.
Operating Activities
Cash provided from operations was $503 in 2018 compared with $182 in 2017 and $618 in 2016.
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In 2018, cash provided from operations was comprised primarily of a positive add-back for non-cash transactions in earnings of  $196, net income of  $170, and a favorable change in working capital of  $159.
In 2017, cash provided from operations was comprised principally of net income of  $209 and a positive add-back for non-cash transactions in earnings of  $194, partially offset by an unfavorable change in working capital of  $185.
In 2016, cash provided from operations was comprised mainly of a positive add-back for non-cash transactions in earnings of  $334, net income of  $155, and a favorable change in working capital of  $141.
Financing Activities
Cash used for financing activities was $536 in 2018 compared with cash provided from financing activities of  $136 in 2017 and cash used for financing activities of  $278 in 2016. The amount in each period primarily reflects net cash activity between Arconic Corporation and ParentCo.
Investing Activities
Cash used for investing activities was $10 in 2018 compared with $250 in 2017 and $350 in 2016.
The use of cash in 2018 reflects capital expenditures of  $317, including for a horizontal heat treat furnace at the Davenport, Iowa plant, mostly offset by proceeds of  $302 from the sale of the Texarkana, Texas rolling mill and cast house.
The use of cash in both 2017 and 2016 reflects capital expenditures in the amount of  $241 and $350, respectively, including for the aerospace expansion (very thick plate stretcher and/or horizontal heat treat furnace) at the Davenport, Iowa plant.
Contractual Obligations and Off-Balance Sheet Arrangements
Following the separation, Arconic Corporation’s capital structure and sources of liquidity will differ from its historical capital structure. Please refer to the “The Separation and Distribution,” “Capitalization,” and “Unaudited Pro Forma Condensed Combined Financial Statements” sections included elsewhere in this information statement for additional information regarding the capital structure of Arconic Corporation following the distribution.
Also, following the separation, Arconic Corporation will no longer participate in cash management and intercompany funding arrangements with ParentCo. Arconic Corporation’s ability to fund its operating and capital needs will depend on the Company’s ability to generate cash from operations and access capital markets. The following table and discussion summarize Arconic Corporation’s contractual obligations as of December 31, 2018 that may have an impact on liquidity and cash flows in future periods.
Contractual Obligations.   Arconic Corporation is required to make future payments under various contracts, including long-term purchase obligations, lease agreements, and financing arrangements. Arconic Corporation also has commitments to fund its pension plans, provide payments for other postretirement benefit plans, and fund capital projects. As of December 31, 2018, a summary of Arconic Corporation’s
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outstanding contractual obligations is as follows (these contractual obligations are grouped in the same manner as they are classified in the Statement of Combined Cash Flows in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information):
Total
2019
2020 – 2021
2022 – 2023
Thereafter
Operating activities:
Raw material purchase obligations
$ 324 $ 316 $ 8 $ $
Energy-related purchase obligations
67 33 28 6
Other purchase obligations
19 4 7 6 2
Operating leases
158 34 50 31 43
Interest related to debt
285 12 24 24 225
Estimated minimum required pension funding
12 3 6 3
Other postretirement benefit payments
1 1
Layoff and other restructuring payments
4 4
Deferred revenue arrangements
18