0001790982-21-000113.txt : 20211102 0001790982-21-000113.hdr.sgml : 20211102 20211102161624 ACCESSION NUMBER: 0001790982-21-000113 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 71 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211102 DATE AS OF CHANGE: 20211102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Arconic Corp CENTRAL INDEX KEY: 0001790982 STANDARD INDUSTRIAL CLASSIFICATION: ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS [3350] IRS NUMBER: 842745636 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39162 FILM NUMBER: 211371514 BUSINESS ADDRESS: STREET 1: 201 ISABELLA STREET CITY: PITTSBURGH STATE: PA ZIP: 15212-5872 BUSINESS PHONE: (412) 992-2500 MAIL ADDRESS: STREET 1: 201 ISABELLA STREET CITY: PITTSBURGH STATE: PA ZIP: 15212-5872 FORMER COMPANY: FORMER CONFORMED NAME: Arconic Rolled Products Corp DATE OF NAME CHANGE: 20191011 10-Q 1 arnc-20210930.htm 10-Q arnc-20210930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-39162
ARCONIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-2745636
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
     
201 Isabella Street,Suite 400,Pittsburgh,Pennsylvania 15212-5872
(Address of principal executive offices) (Zip Code)
(412)-992-2500
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareARNCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
As of November 1, 2021, there were 106,487,406 shares of common stock, par value $0.01 per share, of the registrant outstanding.


TABLE OF CONTENTS

Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that relate to future events and expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. All statements that reflect Arconic’s expectations, assumptions, projections, beliefs or opinions about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements relating to the condition of, or trends or developments in, the ground transportation, aerospace, building and construction, industrial, packaging and other end markets; Arconic’s future financial results, operating performance, working capital, cash flows, liquidity and financial position; cost savings and restructuring programs; Arconic’s strategies, outlook, business and financial prospects; share repurchases; costs associated with pension and other postretirement benefit plans; projected sources of cash flow; potential legal liability; the potential impact of inflationary price pressures; the potential impact of the COVID-19 pandemic; the timing and levels of potential recovery from the COVID-19 pandemic within our end markets; and the impact of actions to mitigate the impact of the COVID-19 pandemic. These statements reflect beliefs and assumptions that are based on Arconic’s perception of historical trends, current conditions and expected future developments, as well as other factors Arconic believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and changes in circumstances, many of which are beyond Arconic’s control. Such risks and uncertainties include, but are not limited to:
continuing uncertainty regarding the duration and impact of the COVID-19 pandemic on our business and the businesses of our customers and suppliers, including labor shortages and increased quarantine rates;
deterioration in global economic and financial market conditions generally;
unfavorable changes in the end markets we serve;
the inability to achieve the level of revenue growth, cash generation, cost savings, benefits of our management of legacy liabilities, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated or targeted;
adverse changes in discount rates or investment returns on pension assets;
competition from new product offerings, disruptive technologies, industry consolidation or other developments;
the loss of significant customers or adverse changes in customers’ business or financial condition;
manufacturing difficulties or other issues that impact product performance, quality or safety;
the impact of pricing volatility in raw materials and inflationary pressures on our costs of production;


a significant downturn in the business or financial condition of a key supplier or other supply chain disruptions;
challenges to or infringements on our intellectual property rights;
the inability to successfully implement our re-entry into the U.S. packaging market or to realize the expected benefits of other strategic initiatives or projects;
the inability to identify or successfully respond to changing trends in our end markets;
the impact of potential cyber attacks and information technology or data security breaches;
geopolitical, economic, and regulatory risks relating to our global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations;
the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation and compliance matters; and
the other risk factors summarized in Arconic’s Form 10-K for the year ended December 31, 2020 and other reports filed with the U.S. Securities and Exchange Commission.
The above list of factors is not exhaustive or necessarily in order of importance. Market projections are subject to the risks discussed above and in this report, and other risks in the market. For additional information concerning factors that could cause actual results to differ materially from the information contained in this report, reference is made to the information in Part I Item 1A, “Risk Factors” in Arconic’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Arconic disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.



PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Arconic Corporation and subsidiaries
Statement of Consolidated Operations (unaudited)
(in millions, except per-share amounts)
Third quarter ended September 30,Nine months ended September 30,
2021202020212020
Sales (C and D)
$1,890 $1,415 $5,366 $4,213 
Cost of goods sold (exclusive of expenses below)
1,676 1,218 4,674 3,614 
Selling, general administrative, and other expenses63 59 183 194 
Research and development expenses8 8 25 27 
Provision for depreciation and amortization61 63 186 191 
Restructuring and other charges (E)
14 3 612 61 
Operating income (loss)68 64 (314)126 
Interest expense (N)
26 22 74 97 
Other expenses, net (F)
15 27 52 69 
Income (Loss) before income taxes27 15 (440)(40)
Provision (Benefit) for income taxes (H)
11 10 (81)5 
Net income (loss)16 5 (359)(45)
Less: Net income attributable to noncontrolling interest    
Net income (loss) attributable to Arconic Corporation$16 $5 $(359)$(45)
Earnings Per Share Attributable to Arconic Corporation Common Stockholders (I):
Basic$0.15 $0.05 $(3.28)$(0.41)
Diluted$0.15 $0.05 $(3.28)$(0.41)
The accompanying notes are an integral part of the consolidated financial statements.
1

Arconic Corporation and subsidiaries
Statement of Consolidated Comprehensive Income (unaudited)
(in millions)
Arconic CorporationNoncontrolling interestTotal
Third quarter ended September 30,202120202021202020212020
Net income$16 $5 $ $ $16 $5 
Other comprehensive income, net of tax (K):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits45 31   45 31 
Foreign currency translation adjustments(11)37   (11)37 
Net change in unrecognized losses on cash flow hedges(13)12   (13)12 
Total Other comprehensive income, net of tax21 80   21 80 
Comprehensive income$37 $85 $ $ $37 $85 
Arconic CorporationNoncontrolling interestTotal
Nine months ended September 30,202120202021202020212020
Net loss$(359)$(45)$ $ $(359)$(45)
Other comprehensive income, net of tax (K):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits637 92   637 92 
Foreign currency translation adjustments(5)42   (5)42 
Net change in unrecognized losses on cash flow hedges(49)5   (49)5 
Total Other comprehensive income, net of tax583 139   583 139 
Comprehensive income$224 $94 $ $ $224 $94 


The accompanying notes are an integral part of the consolidated financial statements.
2

Arconic Corporation and subsidiaries
Consolidated Balance Sheet (unaudited)
(in millions)
September 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$349 $787 
Receivables from customers, less allowances of $1 in both 2021 and 2020
876 631 
Other receivables198 128 
Inventories (L)
1,525 1,043 
Prepaid expenses and other current assets61 53 
Total current assets3,009 2,642 
Properties, plants, and equipment7,452 7,409 
Less: accumulated depreciation and amortization4,836 4,697 
Properties, plants, and equipment, net2,616 2,712 
Goodwill388 390 
Operating lease right-of-use assets (M)
130 144 
Deferred income taxes258 329 
Other noncurrent assets95 97 
Total assets$6,496 $6,314 
Liabilities
Current liabilities:
Accounts payable, trade$1,489 $1,106 
Accrued compensation and retirement costs129 118 
Taxes, including income taxes42 33 
Environmental remediation (P)
56 90 
Operating lease liabilities (M)
35 36 
Other current liabilities163 90 
Total current liabilities1,914 1,473 
Long-term debt (N)
1,593 1,278 
Accrued pension benefits (G)
731 1,343 
Accrued other postretirement benefits424 479 
Environmental remediation (P)
47 66 
Operating lease liabilities (M)
98 111 
Deferred income taxes14 15 
Other noncurrent liabilities and deferred credits97 102 
Total liabilities4,918 4,867 
Contingencies and commitments (P)
Equity
Arconic Corporation stockholders equity:
Common stock1 1 
Additional capital3,361 3,348 
Accumulated deficit (514)(155)
Treasury stock (J)
(106) 
Accumulated other comprehensive loss (K)
(1,178)(1,761)
Total Arconic Corporation stockholders’ equity1,564 1,433 
Noncontrolling interest14 14 
Total equity1,578 1,447 
Total liabilities and equity$6,496 $6,314 
The accompanying notes are an integral part of the consolidated financial statements.
3

Arconic Corporation and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(in millions)
Nine months ended September 30,
20212020
Operating Activities
Net loss$(359)$(45)
Adjustments to reconcile net loss to cash (used for) provided from operations:
Depreciation and amortization186 191 
Deferred income taxes(111)28 
Restructuring and other charges (E)
612 61 
Net periodic pension benefit cost (G)
55 61 
Stock-based compensation15 18 
Amortization of debt issuance costs (N)
 23 
Other21 (2)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
(Increase) in receivables(307)(250)
(Increase) Decrease in inventories(488)197 
(Increase) in prepaid expenses and other current assets(7)(24)
Increase (Decrease) in accounts payable, trade
388 (165)
(Decrease) in accrued expenses(55)(153)
Increase in taxes, including income taxes15 75 
Pension contributions (G)
(456)(44)
(Increase) Decrease in noncurrent assets(5)28 
(Decrease) Increase in noncurrent liabilities(7)19 
Cash (used for) provided from operations(503)18 
Financing Activities
Net transfers from former parent company 216 
Separation payment to former parent company (A)
— (728)
Additions to debt (original maturities greater than three months) (N)
319 2,400 
Debt issuance costs (N)
(5)(57)
Payments on debt (original maturities greater than three months) (N)
 (1,100)
Repurchases of common stock (J)
(106) 
Other(18)4 
Cash provided from financing activities190 735 
Investing Activities
Capital expenditures
(123)(126)
Proceeds from the sale of assets and businesses (O)
(2)102 
Cash used for investing activities(125)(24)
Effect of exchange rate changes on cash and cash equivalents and restricted cash 1 
Net change in cash and cash equivalents and restricted cash(438)730 
Cash and cash equivalents and restricted cash at beginning of year787 72 
Cash and cash equivalents and restricted cash at end of period$349 $802 

The accompanying notes are an integral part of the consolidated financial statements.
4

Arconic Corporation and subsidiaries
Statement of Changes in Consolidated Equity (unaudited)
(in millions)
Parent
Company net
investment
Common stockAdditional capitalAccumulated deficitTreasury stockAccumulated
other
comprehensive (loss) income
Noncontrolling
interest
Total
equity
Balance at June 30, 2020$ $1 $3,318 $(96)$ $(1,848)$14 $1,389 
Net income— — — 5 — — — 5 
Other comprehensive income (K)
— — — — — 80 — 80 
Separation-related adjustments— — 8 — — — — 8 
Stock-based compensation— — 6 — — — — 6 
Balance at September 30, 2020$ $1 $3,332 $(91)$ $(1,768)$14 $1,488 
Balance at June 30, 2021$ $1 $3,351 $(530)$(9)$(1,199)$14 $1,628 
Net income— — — 16 — — — 16 
Other comprehensive income (K)
— — — — — 21 — 21 
Repurchases of common stock (J)
— — — — (97)— — (97)
Stock-based compensation— — 8 — — — — 8 
Other— — 2 — — — — 2 
Balance at September 30, 2021$ $1 $3,361 $(514)$(106)$(1,178)$14 $1,578 
Balance at December 31, 2019$2,664 $ $ $ $ $295 $14 $2,973 
Net income (loss)46 — — (91)— — — (45)
Other comprehensive income (K)
— — — — — 139 — 139 
Establishment of additional defined benefit plans349 — — — — (1,752)— (1,403)
Change in ParentCo contribution217 — — — — — — 217 
Separation payment to former parent company (A)
(728)— — — — — — (728)
Separation-related adjustments(2,548)— 3,322 — — (450)— 324 
Issuance of common stock— 1 (1)— — — —  
Stock-based compensation— — 11 — — — — 11 
Balance at September 30, 2020$ $1 $3,332 $(91)$ $(1,768)$14 $1,488 
Balance at December 31, 2020$ $1 $3,348 $(155)$ $(1,761)$14 $1,447 
Net loss— — — (359)— — — (359)
Other comprehensive income (K)
— — — — — 583 — 583 
Repurchases of common stock (J)
— — — — (106)— — (106)
Stock-based compensation— — 15 — — — — 15 
Other— — (2)— — — — (2)
Balance at September 30, 2021$ $1 $3,361 $(514)$(106)$(1,178)$14 $1,578 
The accompanying notes are an integral part of the consolidated financial statements.
5

Arconic Corporation and subsidiaries
Notes to the Consolidated Financial Statements (unaudited)
(dollars in millions, except per-share amounts)
A.    The Separation and Basis of Presentation
The interim Consolidated Financial Statements of Arconic Corporation and its subsidiaries (“Arconic” or the “Company”) are unaudited. These Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The 2020 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP). This Form 10-Q report should be read in conjunction with Arconic’s Annual Report on Form 10-K for the year ended December 31, 2020, which includes all disclosures required by GAAP. In accordance with GAAP, certain situations require management to make estimates based on judgments and 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.
References to “ParentCo” refer to Arconic Inc., a Delaware corporation, and its consolidated subsidiaries (through March 31, 2020, at which time it was renamed Howmet Aerospace Inc. (“Howmet”)).
Coronavirus. Our operations and financial results have been, and may continue to be, adversely affected by the coronavirus (COVID-19) pandemic. As a result of the COVID-19 pandemic, several of our automotive and aerospace customers temporarily suspended operations at different points throughout 2020. While many of our customers have resumed operations as it relates to the COVID-19 pandemic, we are unable to estimate with certainty at this time the status, frequency, or duration of any potential reoccurrences of customer shutdowns, or the duration or extent of resumed operations. Due to the impacts of the COVID-19 pandemic on our customers, we are experiencing, and expect to continue experiencing, lower demand and volume for certain of our products. These trends may lead to charges, impairments, and other adverse financial impacts over time, including but not limited to the recoverability of goodwill and long-lived assets and the realizability of deferred tax assets. The impact on our business, results of operations, financial condition, liquidity, and/or cash flows will be magnified if the disruption from the COVID-19 pandemic continues for an extended period.
The Separation.  On February 8, 2019, ParentCo announced that its Board of Directors approved a plan to separate into two standalone, publicly-traded companies (the “Separation”). The spin-off company, later named Arconic Corporation, was to 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, was to continue to own the engine products, engineered structures, fastening systems, and forged wheels operations (collectively, the “Howmet Aerospace Businesses”).
The Separation was subject to a number of conditions, including, but not limited to: final approval by ParentCo’s Board of Directors (see below); receipt of an opinion of legal counsel (received on March 31, 2020) regarding the qualification of the distribution, together with certain related transactions, as a “reorganization” within the meaning of Sections 335 and 368(a)(1)(D) of the U.S. Internal Revenue 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 a Registration Statement on Form 10, as amended, filed with the SEC on February 13, 2020 (effectiveness was declared by the SEC on February 13, 2020).
On February 5, 2020, ParentCo’s Board of Directors approved the completion of the Separation by means of a pro rata distribution by ParentCo of all of the outstanding shares of Arconic common stock to ParentCo common stockholders of record as of the close of business on March 19, 2020 (the “Record Date”). At the time of the Separation, ParentCo common stockholders were to receive one share of Arconic common stock for every four shares of ParentCo common stock (the “Separation Ratio”) held as of the Record Date (ParentCo common stockholders were to receive cash in lieu of fractional shares).
In connection with the Separation, as of March 31, 2020, Arconic and Howmet entered into several agreements to implement the legal and structural separation between the two companies; govern the relationship between Arconic and Howmet after the completion of the Separation; and allocate between Arconic and Howmet various assets, liabilities, and obligations, including, among other things, employee benefits, environmental liabilities, intellectual property, and tax-related assets and liabilities. These agreements included a Separation and Distribution Agreement, Tax Matters Agreement, Employee

6

Matters Agreement, and certain Patent, Know-How, Trade Secret License and Trademark License Agreements. The Separation and Distribution Agreement identified the assets to be transferred, the liabilities to be assumed, and the contracts to be transferred to each of Arconic and Howmet as part of the Separation, and provided for when and how these transfers and assumptions were to occur.
On April 1, 2020 (the “Separation Date”), the Separation was completed and became effective at 12:01 a.m. Eastern Daylight Time. To effect the Separation, ParentCo undertook a series of transactions to separate the net assets and certain legal entities of ParentCo, resulting in a cash payment of $728 to ParentCo by Arconic from a portion of the aggregate net proceeds of previously executed financing arrangements (see 2020 Activity in Note N). In connection with the Separation, 109,021,376 shares of Arconic common stock were distributed to ParentCo stockholders. This was determined by applying the Separation Ratio to the 436,085,504 shares of ParentCo’s outstanding common stock as of the Record Date. “Regular-way” trading of Arconic’s common stock began with the opening of the New York Stock Exchange on April 1, 2020 under the ticker symbol “ARNC.” Arconic’s common stock has a par value of $0.01 per share.
ParentCo incurred costs to evaluate, plan, and execute the Separation, and Arconic was allocated a pro rata portion of these costs based on segment revenue (see Cost Allocations below). ParentCo recognized $38 in the 2020 nine-month period for such costs, of which $18 was allocated to Arconic. The allocated amount was included in Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations.
Principles of Consolidation.   The Company’s Consolidated Financial Statements include the accounts of Arconic and companies in which Arconic has a controlling interest. Intercompany transactions have been eliminated.
Management evaluates whether an Arconic entity or interest is a variable interest entity and whether the Company is the primary beneficiary. Consolidation is required if both of these criteria are met. Arconic does not have any variable interest entities requiring consolidation.
Prior to the Separation Date, Arconic did not operate as a separate, standalone entity. Arconic’s operations were included in ParentCo’s financial results. Accordingly, for all periods prior to the Separation Date, the accompanying Consolidated Financial Statements were prepared from ParentCo’s historical accounting records and were presented on a standalone basis as if the Arconic Corporation Businesses had been conducted independently from ParentCo. Such Consolidated Financial Statements include the historical operations that were considered to comprise the Arconic Corporation Businesses, as well as certain assets and liabilities that were historically held at ParentCo’s corporate level but were specifically identifiable or otherwise attributable to Arconic. ParentCo’s net investment in these operations was reflected as Parent Company net investment on the Company’s Consolidated Financial Statements. All significant transactions and accounts within Arconic were eliminated. All significant intercompany transactions between ParentCo and Arconic were included within Parent Company net investment on Arconic’s Consolidated Financial Statements.
Cost Allocations.   The description and information on cost allocations is applicable for all periods included in the Company’s Consolidated Financial Statements prior to the Separation Date.
Arconic’s Consolidated Financial Statements include general corporate expenses of ParentCo that were not historically charged to the Arconic Corporation Businesses for certain support functions that were 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 were included on the accompanying Statement of Consolidated Operations within Cost of goods sold, Selling, general administrative and other expenses, and Research and development expenses. These expenses were allocated to Arconic 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 the Arconic Corporation Businesses was excluded from the Company’s Consolidated Balance Sheet. Financing costs related to these debt obligations were allocated to Arconic based on the ratio of capital invested by ParentCo in the Arconic Corporation Businesses to the total capital invested by ParentCo in both the Arconic Corporation Businesses and the Howmet Aerospace Businesses, and were included on the accompanying Statement of Consolidated Operations within Interest expense.




7

The following table reflects the allocations described above:
Nine months ended September 30,2020
Cost of goods sold
$ 
Selling, general administrative, and other expenses*
25 
Research and development expenses 
Provision for depreciation and amortization1 
Restructuring and other charges (E)
2 
Interest expense28 
Other (income), net (F)
(5)
_____________________
*    In the 2020 nine-month period, amount includes an allocation of $18 for costs incurred by ParentCo associated with the Separation (see above).
Management believes the assumptions regarding the allocation of ParentCo’s general corporate expenses and financing costs were reasonable.
Nevertheless, the Company’s Consolidated Financial Statements may not include all of the actual expenses that would have been incurred and may not reflect Arconic’s consolidated results of operations, financial position, and cash flows had it been a standalone company during the periods prior to the Separation Date. Actual costs that would have been incurred if Arconic 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 and ParentCo, including sales to the Howmet Aerospace Businesses, were considered to be effectively settled for cash at the time the transaction was recorded. The total net effect of the settlement of these transactions was reflected on the accompanying Statement of Consolidated Cash Flows as a financing activity and on Arconic’s Consolidated Balance Sheet as Parent Company net investment.
Cash Management.   The description and information on cash management is applicable for all periods included in the Company’s Consolidated Financial Statements prior to the Separation Date.
Cash was managed centrally with certain net earnings reinvested locally and working capital requirements met from existing liquid funds. Accordingly, the cash and cash equivalents held by ParentCo at the corporate level were not attributed to Arconic for any of the periods presented prior to the Separation Date. Only cash amounts specifically attributable to Arconic were reflected in the Company’s Consolidated Balance Sheet. Transfers of cash, both to and from ParentCo’s centralized cash management system, were reflected as a component of Parent Company net investment on Arconic’s Consolidated Balance Sheet and as a financing activity on the accompanying Statement of Consolidated Cash Flows.
ParentCo had an arrangement with several financial institutions to sell certain customer receivables without recourse on a revolving basis. The sale of such receivables was completed through the use of a bankruptcy-remote special-purpose entity, which was a consolidated subsidiary of ParentCo. In connection with this arrangement, in all periods prior to January 1, 2020, certain of Arconic’s customer receivables were sold on a revolving basis to this bankruptcy-remote subsidiary of ParentCo; these sales were reflected as a component of Parent Company net investment on Arconic’s Consolidated Balance Sheet. As of December 31, 2019, the amount of Arconic’s outstanding customer receivables sold to ParentCo’s subsidiary was $281. Effective January 2, 2020, in preparation for the Separation, ParentCo’s arrangement was amended to no longer include customer receivables associated with the Arconic Corporation Businesses, as well as to remove previously included customer receivables related to the Arconic Corporation Businesses not yet collected as of January 2, 2020. Accordingly, uncollected customer receivables of $281 related to the Arconic Corporation Businesses were removed from the program and the right to collect and receive the cash from the customer was returned to Arconic.
ParentCo participated in several accounts payable settlement arrangements with certain vendors and third-party intermediaries. These arrangements provided that, at the vendor’s request, the third-party intermediary advance the amount of the scheduled payment to the vendor, less an appropriate discount, before the scheduled payment date and ParentCo make 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’s accounts payable were settled, at the vendor’s request, before the scheduled payment date; these settlements were reflected as a component of Parent Company net investment on

8

Arconic’s Consolidated Balance Sheet. As of December 31, 2019, the amount of Arconic’s accounts payables settled under such arrangements that had yet to be extinguished between ParentCo and third-party intermediaries was $1.

9

B.    Recently Adopted and Recently Issued Accounting Guidance
Adopted
On January 1, 2021, Arconic adopted changes issued by the Financial Accounting Standards Board (FASB) to accounting for income taxes. The FASB issued this guidance to simplify various aspects related to the accounting for income taxes as part of the overall initiative to reduce complexity in accounting standards. These changes include the removal of certain exceptions and the simplification of several provisions, including: requiring an entity to recognize tax that is partially based on income, such as franchise tax, as income-based tax and account for additional amounts incurred as non-income based tax; requiring an entity to evaluate when a step up in tax basis of goodwill should be considered part of the original business combination or a separate transaction; and requiring an entity to reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements. The Company will need to continue to consider this guidance in future periods.
Issued
In March 2020, the FASB issued guidance that provides optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. These expedients and exceptions may be used when applying GAAP, if certain criteria are met, to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of such reform. The purpose of this guidance is to provide relief to entities from experiencing unintended accounting and/or financial reporting outcomes or consequences due to reference rate reform. This guidance became effective immediately on March 12, 2020 and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022, after which time the expedients and exceptions expire. In January 2021, the FASB issued clarifying guidance to specify that certain of the optional expedients and exceptions apply to derivatives that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. This additional guidance may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively in the manner previously described for the guidance issued on March 12, 2020. As of September 30, 2021, Arconic has not experienced any unintended outcomes or consequences of reference rate reform that would necessitate the adoption of this guidance. Additionally, the Company will not need to consider the application of this guidance related to its credit agreement, which is scheduled to mature on May 13, 2025 and provides a credit facility that is referenced to LIBOR in certain borrowing situations, as the terms of such agreement currently provide for a replacement rate if LIBOR is discontinued by the end of 2021 as expected. That said, management will continue to closely monitor all potential instances of reference rate reform to determine if adoption of this guidance becomes necessary in the future.




10

C.    Revenue from Contracts with Customers
The following table disaggregates revenue by major end market served. Differences between segment totals and consolidated Arconic are in Corporate.
Third quarter ended September 30,Rolled
Products
Building and
Construction
Systems
ExtrusionsTotal
2021
Ground Transportation$681 $ $25 $706 
Building and Construction70 257  327 
Packaging325   325 
Aerospace134  28 162 
Industrial Products and Other349  21 370 
Total end-market revenue$1,559 $257 $74 $1,890 
2020
Ground Transportation$493 $ $25 $518 
Building and Construction42 241  283 
Packaging198   198 
Aerospace107  44 151 
Industrial Products and Other252  13 265 
Total end-market revenue$1,092 $241 $82 $1,415 
Nine months ended September 30,Rolled
Products
Building and
Construction
Systems
ExtrusionsTotal
2021
Ground Transportation$1,928 $ $74 $2,002 
Building and Construction172 750  922 
Packaging820   820 
Aerospace367  84 451 
Industrial Products and Other1,110  61 1,171 
Total end-market revenue$4,397 $750 $219 $5,366 
2020
Ground Transportation$1,242 $ $62 $1,304 
Building and Construction110 727  837 
Packaging571   571 
Aerospace505  183 688 
Industrial Products and Other766  51 817 
Total end-market revenue$3,194 $