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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2022

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
(State of incorporation)
84-2745636
(I.R.S. Employer Identification No.)
201 Isabella Street, Pittsburgh, Pennsylvania 15212-5872
(Address of principal executive offices) (Zip code)

(412) 992-2500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act;
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareARNCNew York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 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 filer
Accelerated 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates of the registrant, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $2.9 billion. As of February 17, 2023, there were 99,399,365 shares of common stock, par value $0.01 per share, of the registrant outstanding.
Documents incorporated by reference.
Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive Proxy Statement for its 2023 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A (2023 Proxy Statement).


TABLE OF CONTENTS
  Page



Forward-Looking Statements
This Annual Report on Form 10-K 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 Corporation’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 Corporation's future financial results, operating performance, working capital, cash flows, liquidity and financial position; cost savings and restructuring programs; Arconic Corporation’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 impact of inflationary price pressures; and the potential impact of public health epidemics or pandemics, including the COVID-19 pandemic. These statements reflect beliefs and assumptions that are based on Arconic Corporation’s perception of historical trends, current conditions and expected future developments, as well as other factors Arconic Corporation 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 Corporation’s control.
For a discussion of some of the specific factors that could cause actual results to differ materially from the information contained in this report, see the following sections of this report: "Summary of Risks Affecting our Business," Part I. Item 1A. "Risk Factors," Part II. Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations," including the disclosures under "Segment Information" and "Critical Accounting Policies and Estimates," and Note T to the Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data." Market projections are subject to the risks discussed in this report and other risks in the market. Arconic Corporation 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.
Unless otherwise specified or the context otherwise requires, when used in this Annual Report on Form 10-K, the terms “we,” “our,” “us,” “Arconic,” or the “Company” refer to Arconic Corporation and its subsidiaries. The term "ParentCo" refers to Arconic Inc. prior to our separation from Arconic Inc. on April 1, 2020, and “Howmet” refers to “Howmet Aerospace Inc.,” the name of ParentCo following the separation on April 1, 2020.
1

Summary of Risks Affecting our Business

Our business is subject to numerous risks. The following summary highlights some of the risks you should consider with respect to our business, financial condition and results of operations. This summary is not complete and the risks summarized below are not the only risks we face. You should review and consider carefully the risks and uncertainties described in more detail in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K, which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business and an investment in our common stock.

Business Risks – Global Conditions

The markets for our products are cyclical and are influenced by a number of factors, including global economic conditions, that could have a material adverse effect on our business, financial condition or results of operations.
Our business, results of operations, financial condition, liquidity and cash flows have been, and in the future could be, materially adversely affected by the effects of widespread public health epidemics/pandemics.
Climate change, and evolving customer and stakeholder expectations, legal, regulatory and policy requirements, and market dynamics driven by climate change, could adversely affect our business, financial condition or results of operations.
Governments of countries in which we operate could nationalize or expropriate private enterprises, or otherwise change their policies regarding private enterprise, which could adversely impact the value of our operations in those countries.
We are exposed to economic factors, including inflation, fluctuations in aluminum prices, foreign currency exchange rates and interest rates, and currency controls in the countries in which we operate.
Our global operations expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our securities.
An adverse decline in the liability discount rate, lower-than-expected investment return on pension assets and other factors could affect our results of operations or amount of pension funding contributions in future periods.

Business Risks – Competition and Customers

We face significant competition, which may have an adverse effect on profitability.
We could be adversely affected by the loss of key customers, the impact of supply chain disruptions or other economic conditions on our key customers, or significant changes in the business or financial condition of our customers.
Our customers may reduce their demand for aluminum products in favor of alternative materials.
We may face challenges to our intellectual property rights which could adversely affect our reputation, business and competitive position, financial condition and results of operations.

Business Risks – Operations and Product Development

We could encounter manufacturing difficulties or other issues that impact product performance, quality or safety, which could affect our ability to supply customers or meet contractual obligations, reputation, business and financial condition and results of operations.
Our business depends, in part, on our ability to meet increased customer demand successfully and to mitigate the impact of customer program cancellations, reductions and delays.
A material disruption or limitation of our operations, particularly at one or more of our manufacturing facilities, could adversely affect our business.
We may be unable to develop innovative new products or implement technology initiatives successfully.

Business Risks – Supply Chain

Our business could be adversely affected by increases in the cost or volatility in the availability of aluminum or other raw materials.
We are 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.

Business Risks – Strategy

We may not be able to realize the expected benefits of our re-entry into the packaging market in the U.S. and other geographies.
2

We may be unable to realize future targets or goals established for our business segments, or complete capital or other projects, at the levels, projected costs or by the dates targeted.
Our business and growth prospects may be negatively impacted by limits in our capital expenditures.

Business Risks – Information Security and Internal Controls

Information technology system failures, cyber-attacks and security breaches may threaten the integrity of our intellectual property and sensitive information, disrupt our business operations, and result in reputational harm and other negative consequences that could have a material adverse effect on our financial condition and results of operations.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud.

Risks Related to Employee and Labor Matters

Labor disputes and difficulties retaining or hiring skilled employees could adversely affect our business, financial condition or results of operations.
A failure to attract, retain or provide adequate succession plans for key personnel could adversely affect our operations and competitiveness.
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 our business results.

Risks Related to Legal Proceedings and Government Regulations

Product liability, product safety, personal injury, property damage, and recall claims and investigations may materially affect our financial condition and damage our reputation.
We may be exposed to significant legal proceedings, investigations or changes in U.S. federal, state, local or foreign laws, regulations or policies.
We are exposed to environmental and safety risks and are subject to a broad range of health, safety and environmental laws and regulations, which may result in substantial costs and liabilities.
We are subject to privacy and data security/protection laws in the jurisdictions in which we operate and may be exposed to substantial costs and liabilities associated with such laws and regulations.
Unanticipated changes in our tax provisions or exposure to additional tax liabilities could affect our future profitability.

Risks Related to Our Indebtedness

We have significant debt obligations, and may in the future incur, additional debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.
Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our business, financial condition, results of operations or cash flows.

Risks Related to the Separation

We have a limited history of operating as an independent company and our historical financial information may not be a reliable indicator of our future results.
In connection with the separation into two public companies, we and Howmet agreed to indemnify each other for certain liabilities. If we are required to pay under these indemnities to Howmet, our financial results could be negatively impacted. The Howmet indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which Howmet has been allocated responsibility, and Howmet may not be able to satisfy its indemnification obligations in the future.
Howmet may fail to perform under various transaction agreements that were executed as part of the separation.
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 Howmet and Howmet’s stockholders, could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify Howmet for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.



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PART I

Item 1. Business.
Overview
Arconic Corporation ("Arconic" or the "Company") 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 maintain a competitive position in our targeted markets through our global footprint of 20 primary manufacturing facilities, as well as various sales and service facilities, located across North America, Europe, the United Kingdom and China.
On April 1, 2020 (the “Separation Date”), ParentCo separated into two standalone, publicly-traded companies, Arconic and Howmet (the “Separation”). The spin-off company, Arconic, comprised 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”).
Sale of our Samara Facility
On November 15, 2022, we completed the sale of our Russian operations. For a discussion of the sale of our facility in Samara, Russia and the potential impact on our business, see “Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Segment Information—Rolled Products,” and Note S to the Consolidated Financial Statements in Part II, Item 8. “Financial Statements and Supplementary Data.” For a discussion of legal proceedings involving our facility in Samara, Russia prior to the sale, see Note T to the Consolidated Financial Statements in Part II, Item 8. “Financial Statements and Supplementary Data” under the caption “Contingencies and Commitments—Contingencies—Litigation—Federal Antimonopoly Service Of The Russian Federation Litigation."

Description of the Business
We manage our business operations through three reportable segments: Rolled Products, Building and Construction Systems ("BCS") and Extrusions. We strive to make our portfolio of facilities operationally efficient and competitive in the industry. We are well positioned in attractive end markets, and our long-term contracts with customers enhance the strength and stability of our business and our earnings. We believe our extensive manufacturing experience and our commitment to quality and innovation are competitive advantages.
Rolled Products
Rolled products are used in the production of finished goods ranging from automotive body panels and airframes to industrial plate and brazing sheet. Sheet and plate are used extensively in the transportation industries as well as in building and construction and packaging. They are also used for industrial applications such as tooling plate for the production of plastic products.
Our Rolled Products segment produces a range of aluminum sheet and plate products for the following end 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, vehicle components, mold plate for wheels, and sheet for fuel tanks.
Aerospace — supplies a wide range of highly differentiated sheet and plate products that meet strict quality requirements for aerospace applications, including polished fuselage sheet, structural parts, aluminum-lithium stringers, and wing skins.
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 and RVs; tread plate/sheet for toolbox and flooring applications; and circles for cookware.
Building and Construction — supplies a wide range of products serving both the commercial and residential end markets, including roofing, architectural composite panels, curtain walls, ventilated facades and ceiling panels, spacers, culvert pipes and gutters.
Packaging — serves the packaging end market in North America, primarily through our facility in Tennessee, and the markets in Asia and Mexico through our facility located in Bohai, China.

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Competitive Conditions
Our Rolled Products segment is one of the leaders in many of the aluminum flat rolled end markets in which it participates, including the ground transportation, aerospace, industrial, building and construction, and packaging end markets. While Rolled Products participates in end markets where we believe we have a significant competitive advantage due to our extensive knowledge of our customers, advanced manufacturing capability, unique technology and/or differentiated products, in certain cases, our competitors are capable of making products similar to our products. We continuously work to maintain and enhance our competitive position through innovation: new alloys such as high-formability automotive alloys, aluminum lithium aerospace alloys, differentiated products such as our 5-layer brazing products and break-through processes such as A951™ bonding technology.
Some of our Rolled Products markets are global and some are more regionally focused. Participation in these markets by competitors varies. Additionally, there are a number of new 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.
Principal Facilities
The table below sets forth our Rolled Products principal properties as of December 31, 2022.
CountryLocationProducts
ChinaKunshanSheet
Qinhuangdao(1)
Sheet and Plate
HungarySzékesfehérvárSheet, Plate, Slabs and Billets
United KingdomBirminghamPlate
United StatesDavenport, IASheet and Plate
Danville, ILSheet and Plate
Hutchinson, KSSheet and Plate
Lancaster, PASheet and Plate
Alcoa, TNSheet and Plate
___________________
(1)    Leased property or partially leased property.
Building and Construction Systems
Our BCS segment manufactures differentiated products and building envelope solutions, including entrances, curtain walls, windows, composite panel and coil coated sheet. The business is focused on two product lines: architectural systems, which carry the Kawneer® brand, and architectural products, which carry the Reynobond® and Reynolux® brands. The BCS segment has competitive positions with respect to both product lines, attributable to its strong brand recognition, high quality products and strong relationships through the building and construction value chain.
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.
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.
BCS differentiates itself through its footprint in North America and Europe 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 and systems with product lines that can address localized functional and building code requirements. We believe that our products and systems have a reputation for quality and reliability.
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Competitive Conditions
In North America, our BCS segment primarily competes with manufacturers of products used in nonresidential construction. In Europe, it competes with manufacturers of products used in both residential and nonresidential construction. Our competitive advantage is based on strong brands, innovative products, customer intimacy and technical services.
In the architectural systems market we compete with regional competitors. 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 market for our architectural products business is more global and primarily served by subsidiaries of larger multinational companies.
Principal Facilities
The table below sets forth our BCS principal properties as of December 31, 2022.
CountryLocationProducts
CanadaLethbridge, AlbertaArchitectural Systems
France
Merxheim(1)
Architectural Products
United KingdomRuncornArchitectural Systems
United StatesSpringdale, ARArchitectural Systems
Visalia, CAArchitectural Systems
Eastman, GAArchitectural Products
Bloomsburg, PAArchitectural Systems
Cranberry, PAArchitectural Systems
___________________
(1)    Leased property or partially leased property.
Principal facilities are listed, and do not include locations that serve as service centers or administrative offices. The service centers perform light manufacturing, such as assembly and fabrication of certain products.
Extrusions
Our Extrusions segment produces a range of extruded products, including automotive shapes (e.g., driveshafts, anti-lock brake housings, and turbo chargers), aerospace shapes (e.g., wing stringers, floor beams, fuselage, cargo), 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, our Extrusions segment serves a broad range of customers in several of our core end markets, including the following:
Ground Transportation — provides aluminum extrusions for applications that include driveshafts for the automotive market and aluminum frame rails for the commercial transportation market.
Aerospace — supplies a wide range of applications for commercial airframes.
Industrial — supplies a diverse range of industrial solutions for applications that include rods and bars for building supplies and other industrial applications.
Competitive Conditions
The Extrusions segment is a prominent supplier in many of the end markets in which it participates, including automotive (including driveshafts), aerospace, and industrial markets. Extrusions participates in end markets where we believe we have a significant competitive position due to our extensive knowledge of our customers, advanced manufacturing capability, unique technology and/or differentiated products. We continuously work to maintain and enhance our competitive position through innovation: new alloys such as aluminum lithium aerospace alloys and differentiated products.
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Some of our Extrusions end markets are worldwide and some are more regionally focused. Participation in these segments by competitors varies. 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.
Principal Facilities
The table below sets forth our Extrusions principal properties as of December 31, 2022.
CountryLocationProducts
Germany
Hannover(1)
Extrusions
United StatesLafayette, INExtrusions
Massena, NY(2)
Extrusions
___________________
(1)    Leased property.

(2)    Pursuant to certain agreements entered into in connection with the Separation, Arconic leased the Massena property from Howmet until such time as the property could be conveyed to Arconic. The property was conveyed to Arconic in the fourth quarter of 2022.
Principal facilities are listed and do not include locations that have been idled. In the second half of 2021, the Chandler, AZ facility was fully idled and its commercial operations were integrated into the Lafayette facility. The Company may temporarily restart one or more of the presses at Chandler over short periods of time to address customer demand requirements. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Extrusions—Overview.”
End Market and Customer Revenues
We provide products to customers in a number of end markets, and the revenues from any end market may vary from year to year. For more information regarding revenues by major end markets served, see Note C to the Consolidated Financial Statements in Part II. Item 8. "Financial Statements and Supplementary Data." In addition, the demand for products in certain end markets is concentrated in a relatively small number of customers. We have multi-year contracts with many of our key customers, primarily in the aerospace and ground transportation end markets. These contracts indirectly expose us to changes in these customers' end markets, and the loss of sales under these contracts could have a material adverse effect on our business if such sales are not replaced by sales to other customers.
Customer and Distribution Channels
Rolled Products and Extrusions
Our Rolled Products and Extrusions segments have two primary sales channels: direct sales to our customers and sales to distributors.
Direct Sales
Our Rolled Products and Extrusions segments supply various customers 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 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 there has been a high degree of renewal business with these customers. As the manufacture of higher aluminum content vehicles continues to grow, we continue to develop long-term relationships with the automotive original equipment manufacturers (“OEMs”). In some cases, the products we supply 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.

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Distributors
Our Rolled Products and Extrusions segments 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.
Building and Construction Systems
Our BCS segment supplies architectural facade 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 are: primary aluminum for remelting (sows, t-bars, and ingots, including high purity and off-grade), aluminum alloyed and unalloyed casthouse products (including rolling slab and billet), aluminum scrap, alloying materials (including, but not limited to, magnesium, copper, and zinc), aluminum coil, electricity, natural gas, coatings, lube oil, packaging materials, 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 our businesses are and will continue to be available generally, although we experience and anticipate continued cost, availability and other impacts to our supply chain arising from, among other factors, the COVID-19 pandemic, geopolitical instability in areas where we or our suppliers operate, challenges with transportation and logistics, and inflationary price pressures.
Intellectual Property
We believe that our domestic and international intellectual property assets provide us with a significant competitive advantage, as we continue to strive to improve our products and processes. Our rights under our patents, as well as the products made and sold under them, are important to us as a whole, and to varying degrees, important to each business segment. The patents owned by us generally concern metal alloys, particular products, and manufacturing equipment or techniques. Our business as a whole is not, however, materially dependent on any single patent, trademark or other intellectual property. As a result of product development and technological advancement, we continue to pursue patent protection in select jurisdictions throughout the world. As of December 31, 2022, our worldwide patent portfolio consists of approximately 500 granted patents and 225 pending patent applications. Patent terms extend for varying periods based on the filing date or the grant date in the various countries where we have or have applied for patent protection. The actual protection afforded by a patent varies from country to country, with the most significant variations relating to the scope of patent protection and the legal remedies available.
With respect to domestic and foreign 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 December 31, 2022, our worldwide trademark portfolio consists of approximately 1,060 registered trademarks and 60 pending trademark applications. Our rights under our trademarks are important to us as a whole and, to varying degrees, important to each business segment. Trademark protection continues in some countries for as long as the mark is used and in others for as long as it remains registered. Registrations generally are periodically renewable for additional fixed terms.
Research and Development
We engage in research and development programs that include process and product development, and basic and applied research. The Arconic Technology Center, located in New Kensington, Pennsylvania, serves as the headquarters for our research and development efforts, with additional research and development facilities in Norcross, Georgia; Lancaster, Pennsylvania; Runcorn, United Kingdom; 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, products and manufacturing processes as evidenced by our robust intellectual property portfolio.
Government Regulations
As a global company, our business is subject to government regulations in various jurisdictions in which we operate. We believe we are materially compliant with all applicable government laws and regulations, and maintaining compliance, other than as noted below, is not expected to materially affect our capital expenditures, earnings or competitive position. Any new or amended laws or regulations that impose significant operational restrictions and compliance requirements may negatively
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impact our business, capital expenditures, earnings, and competitive position. Additional information is included in Part I. Item 1A. "Risk Factors."
Our operations are subject to national, federal, state and local environmental, health and safety laws and regulations, including those regulating the discharge of materials into the environment, greenhouse gas emissions, hazardous materials in products, chemical usage and workplace safety requirements and protocols. We maintain a global environmental, health and safety program that includes policies and procedures; dedicated environmental, health and safety personnel; procedures for handling of waste materials and hazardous materials; monitoring, reporting and remediating environmental, health, and safety issues; compliance auditing; and training, among other measures.
Approved capital expenditures for new or existing facilities for environmental control are approximately $8 million for 2023. Additional information relating to environmental matters and other matters is included in Note T to the Consolidated Financial Statements included in Part II. Item 8. "Financial Statements and Supplementary Data" under the caption “Contingencies and Commitments — Contingencies - Environmental Matters.”
Other than the foregoing, we do not anticipate any material capital expenditures during fiscal 2023 related to compliance with environmental or other government regulations.
Sustainability and Environmental, Social and Governance (“ESG”)
Arconic is committed to being a good corporate citizen and living our core values by working with our stakeholders to create a better, more sustainable future. Arconic has a cross-functional ESG Council tasked with developing and implementing our sustainability strategy. The ESG Council regularly reports to executive leadership and to the Governance and Nominating Committee of the Board of Directors, which has general oversight responsibility for ESG matters, working in conjunction with other committees of the Board of Directors to which oversight of specific matters have been delegated. Functions responsible for development and implementation of our sustainability commitments, strategies and initiatives directly report to the Chief Executive Officer. In 2022, Arconic engaged a third party to advise in the development of long-term sustainability goals based on findings from the Materiality Assessment conducted in 2021. The Materiality Assessment included stakeholder engagement on a wide range of issues, including managing the impacts of our business on the climate and environment, ensuring supply chain sustainability, and fostering positive human capital dynamics. We expect continued engagement to enhance our understanding of stakeholder views, which help guide our ESG efforts. The use of the terms “material” or “materiality” in this section and in our 2022 ESG disclosures is not related to or intended to convey matters or facts that could be deemed “material” to a reasonable investor within the meaning of U.S. securities laws or similar requirements of other jurisdictions.
Human Capital Resources
At Arconic, we are committed to living our core values by protecting and improving the health and safety of our employees, our communities and the environment. We strive to cultivate an inclusive and diverse culture that advocates for equity, acts with integrity, and upholds high standards for human rights. We strengthen our global workforce by providing learning opportunities, employee engagement programs and talent development efforts that drive innovation, agility, people development and collaboration.
Our worldwide employment at the end of 2022 was approximately 11,550 employees located in 17 countries. The breakdown of our employees by region is as follows:
Region
Percentage of Total Population
Americas
74%
Europe, Middle East and Africa
18%
Asia
8%
Turnover
During 2022, the Company increased hiring initiatives to support the business’s organic growth strategy, including participation in various local and national recruiting events, encouraging and responding to employee feedback through its engagement survey, and leveraging social media campaigns as a vehicle to reach a broader base of existing and potential employees. As a result of these and other targeted efforts, in 2022 the Company’s employee base increased by approximately 590 employees. This net increase was offset by a reduction of approximately 2,900 employees resulting from the sale of our facility in Samara, Russia in November 2022.



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Collective Bargaining Representation
We believe in freedom of association. We respect an individual’s choice to be represented by – or not be represented by – a union or other legally authorized associations or organizations in accordance with the laws of the countries in which we operate. Many of our employees are represented by labor unions. We believe that relations with any applicable union representatives are generally constructive and professional. In the U.S., approximately 4,100 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 3,500 employees at four U.S. locations. The prior master collective bargaining agreement with the USW expired on May 15, 2022, and we entered into a new labor agreement that expires on May 15, 2026. There are seven other collective bargaining agreements in the U.S. with varying expiration dates. On a local basis, there are agreements between Arconic and unions with varying expiration dates that cover employees in Europe, North America, and Asia.
Governance
Oversight responsibility for the Company’s ESG policies and strategies has been delegated by our Board of Directors to our Governance and Nominating Committee, which works in conjunction with other committees of the Board to which oversight of specific matters have been delegated. For example, the responsibilities of our Compensation and Benefits Committee of the Board of Directors include the oversight of talent management strategies, such as the Company’s recruitment, development, employee engagement, promotion and retention programs; policies and practices promoting diversity, equity and inclusion (“DEI”) within the Company; key metrics and objectives related to the Company’s talent; and the succession plan for our executive officers. Our Board of Directors is also committed to our talent management and has oversight responsibility for our safety practices.
Diversity, Equity and Inclusion
We are committed to maintaining an inclusive environment where everyone feels valued, and we celebrate both the differences and similarities among our people. We also believe that diversity in all areas, including cultural background, experience and thought, is essential in making our Company stronger. Consistent with that belief, we conducted focused recruiting and retention initiatives that further demonstrate our ongoing commitment to DEI. The breakdown of our female and U.S. ethnic minority employees globally at the end of 2022, as members of management and as executives, is as follows:

Total %
Management3 %
Executive4 %
Women1
17.7%25.8%30.0%
Minorities2
25.6%13.1%20.0%

(1) Percentages are on a global basis and include locations where Arconic has valid data. Some regions and countries, such as Germany, have privacy laws and regulations that may prevent Arconic from reporting on certain employee demographics and those regions or countries are not included in the global percentages of female employees.

(2) Percentages are on a U.S. basis only.
(3) Represents members of management, other than executives.
(4) Represents our leaders who serve in a Vice President or higher role.
Our Diversity, Equity, and Inclusion Council, chaired by our Chief Executive Officer, continues to advance our mission in partnership with our six employee resource groups (“ERGs”) with senior executives volunteering as sponsors for each group. Our six ERGs – Arconic African Heritage Network, Arconic Hispanic Network, Arconic Next Generation Network, Arconic Veterans Network, Thrive Network (Women) and Spectrum (LGBTQ+) – reflect an inclusive, respectful and values-based company culture. All of our employees are encouraged to participate in these grassroots, employee-led organizations that:
Drive employee engagement through community outreach;
Provide learning and development opportunities for employees;
Help position Arconic as a global employer of choice through strategic recruiting activities;
Inform Company policies around diversity and inclusion; and
Reinforce our brand through key external endorsements such as the Human Rights Campaign and the United Nations Women’s Empowerment Principles.

With the momentum gained from our Grow Together campaigns in 2020 and 2021, we broadened our Grow Together scope in 2022 to integrate equity into our mission, demonstrating our commitment to create a work environment with equal opportunities for all. Grow Together continues to provide momentum to enable our DEI focus and encourages employees to take actions related to inclusion, diversity or social justice through learning activities and volunteering. Employees based in the U.S. also have the opportunity to donate to various non-profit organizations with a social equity mission aligned with and recommended by our ERGs and receive a matching contribution from the Arconic Foundation, an independently endowed
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foundation. As a result, in 2022 the Arconic Foundation granted over $34,000 in matching contributions to organizations that are driving change with DEI initiatives. In addition, the Arconic Foundation granted over $960,000 to non-profits that support inclusivity and social equity in communities where Arconic operates.
Talent Development
We are committed to attracting, retaining, and developing talent that shares our values and demonstrates agility, results focus, and people development capability. All employees have access to a robust, ongoing career planning and performance management process that begins at recruitment and continues throughout their careers. Our twice-yearly succession-planning and calibration processes help us identify successors to business-critical roles while developing our high-potential employees. In addition, we offer management skills training to all supervisory employees, leadership development and coaching programs for mid- and senior-level leaders, and a variety of technical, business, and soft skills training programs to help our business units and resource units meet their strategic objectives.
Compensation and Benefits Programs
Our compensation and benefits programs are designed to provide comprehensive total rewards to attract, motivate, engage and retain a talented workforce. Our programs are competitive with our peers and emphasize performance-based compensation to align employee rewards with company performance. Benefits are a key component of our total rewards package. We offer a holistic benefits package designed to provide greater security for our employees and their families, which depending on country may include healthcare, life insurance, paid parental leave, disability, savings and retirement and various welfare benefit programs through plans we sponsor or through social programs in the countries where we operate.
Health and Safety
We value human life above all else and are committed to operating worldwide in a safe, responsible manner which respects the environment and the health of our employees, our customers and the communities where we operate. Our strong health and safety culture empowers our employees and contractors to take personal responsibility for their actions and the safety of their coworkers. Our focus on safety also includes an ongoing commitment to maintaining a secure work environment that respects the dignity and worth of every employee, which drives our continuous improvement approach in our robust safety programs. Our employees play an important role in actively supporting a workplace that strives to be free of violence, threats, intimidation, and harassment. This culture is supported by internal policies, standards, rules and procedures that clearly articulate our stringent expectations for working safely and maintaining a secure work environment in all of our facilities worldwide.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate. We established strict requirements for onsite work that is continually assessed against the Centers for Disease Control and other expert guidance to assure that we are providing a safe work environment. We continue to adapt our requirements in response to the continuing impacts of the COVID-19 pandemic, including new and developing variants, in the various regions in which we operate.

We are committed to achieving zero fatalities and keeping a major focus on fatality prevention. Each location maintained an active fatality prevention team and had zero employee and contractor fatalities in 2022. We have prioritized our risk management processes toward fatality and serious injury potential to focus on the most impactful hazards that have the potential for life-altering outcomes. In addition, during 2022, all of our key safety rates remained significantly below the most recent U.S. industry averages. At 0.48, our 2022 days away, restricted and transfer (“DART”) was less than 1 percent lower than our adjusted 2021 DART of 0.482. Our 2022 total recordable incident rate (“TRR”) of 1.39 (recorded in accordance with U.S. Occupational Safety and Health Administration (“OSHA”) record keeping requirements) was 35% higher than our adjusted 2021 TRR of 1.03. Our previously reported 2021 DART was 0.42 and 2021 TRR was 0.88. Both rates for 2021 were adjusted above to exclude safety rates for our facility in Samara, Russia that was sold in November 2022. At the time of the sale of our Samara facility in November 2022, our 2022 DART (including our Samara facility) was 0.41 versus our unadjusted 2021 DART of 0.42 and our 2022 TRR (including our Samara facility) was 1.11 versus our unadjusted 2021 TRR of 0.88.






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Information about our Executive Officers
The following table sets forth information, as of February 17, 2023, regarding the individuals who are executive officers of Arconic.
Name
Age
Position
Timothy D. Myers
57
Chief Executive Officer
Erick R. Asmussen
56
Executive Vice President and Chief Financial Officer
Daniel G. Fayock48Executive Vice President, Chief Legal Officer and Secretary
Melissa M. Miller
51
Executive Vice President and Chief Human Resources Officer
Diana B. Perreiah58Executive Vice President, Rolled Products North America
Mark J. Vrablec
62
Executive Vice President and Chief Commercial Officer
Robert L. Woodall56Executive Vice President, Rolled Products International and Extrusions
Timothy D. Myers has served as President of Arconic Corporation since February 2020 and as Chief Executive Officer since April 2020. From October 2017 to April 2020, Mr. Myers served as Executive Vice President and Group President, Global Rolled Products, which was restructured in contemplation of the Separation to include the Extrusions and Building and Construction Systems businesses of ParentCo. From May 2016 to June 2019, he served as Executive Vice President and Group President of ParentCo’s Transportation and Construction Solutions segment, which then comprised Arconic Wheel and Transportation Products and Building and Construction Systems and which segment was eliminated in the third quarter of 2019, with the Building and Construction Systems business then moved to the Global Rolled Products segment. Prior to that assignment, he was President of Alcoa Wheel and Transportation Products, from June 2009 to May 2016. Mr. Myers was Vice President and General Manager, Commercial Vehicle Wheels for the Alcoa Wheel Products business from January 2006 to June 2009. Mr. Myers joined Alcoa Inc. in 1991 as an automotive applications engineer in the Commercial Rolled Products Division, and held a series of engineering, marketing, sales and management positions with Alcoa Inc. and ParentCo since that time.
Erick R. Asmussen has served as Executive Vice President and Chief Financial Officer of Arconic Corporation since February 2020. Mr. Asmussen previously served as Senior Vice President and Chief Financial Officer of Momentive Performance Materials Inc. from May 2015 to July 2019. Prior to joining Momentive, Mr. Asmussen served as Vice President and Chief Financial Officer of GrafTech International, Ltd. from September 2013 to May 2015. Mr. Asmussen joined GrafTech in 1999 and served in multiple leadership roles, including Vice President of Strategy, Planning and Corporate Development, Worldwide Controller, Tax Director, and Treasurer. Prior to GrafTech, Mr. Asmussen worked in various financial positions with Corning Incorporated, AT&T Corporation, and Arthur Andersen LLP.
Daniel G. Fayock has served as Executive Vice President, Chief Legal Officer and Corporate Secretary of Arconic Corporation since April 2022. Mr. Fayock previously served as Assistant General Counsel and Secretary of PPG Industries, Inc. from September 2018 to March 2022, where he was responsible for advising the board of directors and executive team and serving as counsel to various businesses on legal and strategic issues. Prior to this position, Mr. Fayock served as Corporate Counsel from January 2015 to September 2018 and previously in a number of senior legal positions over his 15 years with PPG Industries with a broad spectrum of progressive legal responsibilities. Prior to joining PPG Industries, Mr. Fayock was a senior attorney with Allegheny Energy after starting his legal career as a corporate associate with K&L Gates.

Melissa M. Miller has served as Executive Vice President and Chief Human Resources Officer of Arconic Corporation since April 2020. From October 2017 until April 2020, Ms. Miller served as Vice President of Human Resources for ParentCo’s Global Rolled Products business, which was restructured in contemplation of the Separation to include the Extrusions and Building and Construction Systems (BCS) businesses of ParentCo. From May 2016 until October 2017, Ms. Miller served as Vice President of Human Resources for the business segment that comprised the BCS business and Arconic Wheel & Transportation Products. From June 2011 until February 2016, Ms. Miller served as Global Human Resources Director of the BCS business. Ms. Miller joined Alcoa Inc. in 2005 and held multiple leadership roles at Alcoa Inc. and ParentCo with a broad spectrum of progressive HR responsibilities, including HR strategy and delivery, talent management, workforce planning, succession planning, employee engagement, campus partnerships, HR technology, growth in emerging markets, merger integrations, turnarounds and employee/labor relations. Prior to joining Alcoa Inc., Ms. Miller served in several HR-related roles at Marconi Communications (formerly known as FORE Systems) for more than seven years.
Diana B. Perreiah has served as Executive Vice President, Rolled Products North America of Arconic Corporation since August 2022. Ms. Perreiah served as President, Building and Construction Systems at ParentCo from May 2015 to March 2020
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and continued in that role at Arconic Corporation from the Separation Date to August 2022. Ms. Perreiah joined Alcoa Inc. in 1986 as a systems analyst and subsequently held a variety of positions with Alcoa Inc. and ParentCo, including Operations Manager, North American Extrusions, and several positions in corporate, including Global Information Services, and in the internal manufacturing excellence group. She joined the Building and Construction Systems group in 2009 as Vice President, Business Operations, Kawneer North America. Since then, she has held a series of leadership positions within Building and Construction Systems, including Vice President & General Manager, Kawneer North America.

Mark J. Vrablec has served as Executive Vice President and Chief Commercial Officer of Arconic Corporation since April 2020. From February 2019 to April 2020, Mr. Vrablec served as Vice President for ParentCo’s Global Rolled Products business, which was restructured in contemplation of the Separation to include the Extrusions and Building and Construction Systems businesses. From July 2017 to February 2019, Mr. Vrablec served as Vice President, Global Rolled Products Commercial and Business Development. From November 2016 to July 2017, Mr. Vrablec served as President of the Aerospace and Automotive Products business, holding the same role for Alcoa Inc. from October 2015 until November 2016. From September 2011 until October 2015, Mr. Vrablec served as President of Alcoa Inc.’s Aerospace, Transportation and Industrial Rolled Products business. Mr. Vrablec joined Alcoa Inc. in 1982 as a metallurgist, and has held a series of quality assurance, operations, and management positions with Alcoa Inc. and ParentCo since that time.
Robert L. Woodall has served as Executive Vice President, Rolled Products International and Extrusions of Arconic since August 2022. Mr. Woodall served as President, Global Rolled Products Europe and Asia from April 2020 to August 2022, and assumed responsibility for Extrusions in June 2022. From July 2018 to April 2020, he served as Director of Global Plant Operations for Global Rolled Products at ParentCo, and prior to July 2018, he served as Vice President of Operations at ParentCo. Mr. Woodall joined Alcoa in 1989 as a mechanical engineer and subsequently held a variety of engineering, maintenance, production, and management positions with Alcoa Inc. and ParentCo, including Plant Manager, Pt. Henry, Australia; Director of Australian Rolled Products; and Manufacturing Director for Arconic Davenport Works and Satellite locations.
Available Information
The Company’s Internet address is www.arconic.com. Arconic makes available free of charge on or through its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“SEC”). The information on the Company’s website is not a part of, or incorporated by reference in, this Annual Report on Form 10-K.
Item 1A. Risk Factors.
Our business, financial condition and results of operations may be impacted by a number of factors. In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially harm our business, financial condition, or results of operations, including causing our actual results to differ materially from those projected in any forward-looking statements. The following list of significant risk factors is not all-inclusive or necessarily in order of importance. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may materially adversely affect us in future periods

Business Risks – Global Conditions

The markets for our products are cyclical and are influenced by a number of factors, including global economic conditions, that could have a material adverse effect on our business, financial condition or results of operations.

We are subject to cyclical fluctuations in global economic conditions and lightweight metals end-use markets. Many of our products are sold to industries that are cyclical, such as the aerospace, automotive, commercial transportation and building and construction industries, and the demand for our products are sensitive to, and quickly impacted by, demand for the finished goods manufactured by our 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 our control.

In particular, we derive a significant portion of our revenue from products sold to the aerospace industry, which can be 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,
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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 our 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 supply chain disruptions, the age of the vehicle fleet and related scrap rates, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements, interest rates, health and safety concerns and levels of competition both within and outside of the aluminum industry.

Our 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. Common alloy sheet, which is a significant portion of the total industrial products market, is particularly sensitive to the volume of imports of common alloys into the U.S. 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. That decrease was followed by a significant increase in imports of common alloy into the U.S. from other countries, which led to softening prices. In 2021, the U.S. government imposed new anti-dumping and countervailing duties on imports of common alloy aluminum sheet from 16 additional countries. The anti-dumping and countervailing duties have led to improved pricing in the U.S. for common alloy sheet, though the long-term impact of the tariffs on import levels and pricing, as well as the likelihood of extension of such duties, remains difficult to predict.

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 our business, financial condition or results of operations.

Our business, results of operations, financial condition, liquidity and cash flows have been, and in the future could be, materially adversely affected by the effects of widespread public health epidemics/pandemics.

Outbreaks of contagious diseases, public health epidemics or pandemics (including the COVID-19 pandemic, which resulted in travel restrictions, governmental restrictions on certain activities, and shutdown of certain businesses globally, Sudden Acute Respiratory Syndrome, Avian Influenza, H1N1 virus, or the Ebola virus) or other adverse public health developments in countries where we, our employees, customers and suppliers operate could have a material and adverse effect on our business, results of operations, financial condition, liquidity and/or cash flows. Any such epidemics or pandemics could experience resurgences in cases, communicability or severity as a result of the development of different variants, as with the COVID-19 pandemic, which could extend the magnitude or duration of the adverse impact on our operations. The extent to which any such outbreak affects our operations over time is highly uncertain and beyond our control, and is dependent on a variety of factors, including the duration and severity of the initial outbreak or subsequent variants, the imposition of governmental quarantine or other public health measures, the availability of vaccines or other medical remedies and preventive measures, and determinations regarding, among other things, health and safety, demand for specific products, and broader economic conditions. Many of the actions that may be taken to mitigate the impact of an epidemic or pandemic, including declarations of states of emergency, governmental quarantines, shelter-in-place and stay-at-home orders, social distancing requirements, business closures and staged procedures for reopening, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations, are highly likely to impact our business and the business of many of our customers, and therefore are likely to magnify the risks of a material adverse impact on our business, results of operations, financial condition, liquidity and/or cash flows, as well as on our business strategies and initiatives. In addition, the impact of any epidemic or pandemic, and the related restrictions, may differ in the areas in which our products are manufactured, distributed or sold, or may change on short notice in response to new variants or other circumstances and, accordingly, any such impact on our operations or the operations of our customers and suppliers is difficult to predict. Because we rely on supply chain continuity, restrictions in one location may materially impact operations in multiple locations, and the impact of an epidemic or pandemic in one location may have a disproportionate effect on our operations in the future.

An epidemic or pandemic subjects our operations, financial performance and financial condition to a number of risks, including, but not limited to modification of business practices, including idling or production decreases at our facilities and workforce reductions; actions we may take associated with the safety and welfare of our employees, including increased costs associated with recruiting, hiring, training and supervising new employees or employees required to perform new roles, maintaining high levels of employee awareness of and compliance with our internal procedures and regulatory requirements, and implementing employee health and safety initiatives; lower demand for our products should our customers experience labor shortages, supply chain issues or other operational impacts; concessions or contract modifications that we may grant to our
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customers; supply chain disruption, including labor shortages, unavailability of or price volatility for raw materials or energy, and transportation and logistics challenges; volatility in financial and commodities markets adversely impacting asset valuations, including pension assets; and the impact on our customers’ businesses related to the financial condition of or other restrictions on the end users of their products or services, including air travel, construction and the trends in the purchases of automobiles, industrial products and other manufactured goods. In addition, we may experience decreased availability of liquidity under our asset-based lending credit facility (the "ABL Credit Facility" and the credit agreement forming a part of the ABL Credit Facility, the "ABL Credit Agreement"), which is based on a borrowing base calculation based on our financial results and cash from operations, or credit rating downgrades that could adversely affect our cost of funding and related margins, liquidity, competitive position, access to capital markets, and ability to refinance indebtedness on favorable terms. The magnitude of the adverse effects of these and other risks on our business, results of operations, financial condition, liquidity and cash flows will vary depending on the duration and severity of an epidemic or pandemic and the responses of governmental authorities, suppliers, customers and Arconic. A sustained impact to our operations and financial results may require material impairments of our assets including, but not limited to, inventory, goodwill, intangible assets, long-lived assets, right-of-use assets, and deferred income tax assets.

An epidemic or pandemic may also exacerbate other risks disclosed in this Annual Report on Form 10-K, including, but not limited to, risks related to global economic conditions and inflation, competition, loss of customers, costs of supplies, manufacturing difficulties and disruptions, our credit profile, our credit ratings and interest rates. In addition, a future epidemic or pandemic may also affect our operating and financial results in a manner that is not presently known to us, or present significant risks to our business, results of operations, financial condition, liquidity and/or cash flows that are different from the risks presented by prior epidemics or pandemics.

Climate change, and evolving customer and stakeholder expectations, legal, regulatory and policy requirements, and market dynamics driven by climate change, could adversely affect our business, financial condition or results of operations.
There are inherent climate-related risks in various regions where we conduct business. Global climate change is resulting, and is expected to continue to result, in certain natural disasters and adverse weather conditions, such as drought, wildfires, storms, tornados, hurricanes, blizzards, changes in sea-levels, flooding, and extreme temperatures, occurring more frequently or with greater intensity and unpredictability. Such conditions could result in disruptions to any facility or surrounding community directly impacted by a climate-related event, including physical damage resulting in shutdowns and requiring repair or our employees’ unavailability to work, and could also adversely impact our suppliers, customers, and shipping and transportation networks. These disruptions could make it more difficult and costly for us to produce and deliver our products, obtain raw materials or other supplies, maintain our critical corporate functions, and could reduce customer demand for our products.

In addition, customers, communities, investors and other stakeholders are increasingly focusing on environmental issues, including climate change and the carbon footprint of businesses throughout our supply chain. Changing customer preferences may result in increased demands regarding, among other matters, the source of aluminum, alloying metals and other materials used in our products, demand for increased use of recycled materials in our products, the manner in which power we consume is generated, our use and treatment of water and other natural resources, and the packing materials and shipping methods we use to deliver our products. In order to respond to these demands, we may need to make changes to our facilities, operations or production methods, or increase research and development efforts, any of which are likely to result in significant additional costs. Additional costs, or diminished customer demand for our products, loss of market share, or reputational damage resulting from our failure to satisfy customer preferences or to meet evolving investor, stakeholder or industry expectations, could have a material adverse effect on our business, operating results and financial condition.

Additionally, concerns over climate change have resulted in ongoing public pressure to address, and to adopt legal and regulatory requirements designed to address, climate change, including regulating greenhouse gas emissions (and the establishment of enhanced internal processes or systems to track emissions), policies mandating or promoting the use of renewable or zero-carbon energy and sustainability initiatives, and additional taxes on or other costs related to fuel and energy. For example, in January 2021, the U.S. recommitted to the Paris Agreement and in April 2021, President Biden announced targets to reduce U.S. greenhouse gas emissions. If newly enacted laws or regulations, or newly adopted policies or initiatives, are more stringent than current requirements, we, our suppliers and our customers may be subject to increased compliance burdens, incur significant additional costs, or experience disruption in the sourcing of materials and the manufacturing and distribution of products, any of which could have a material adverse effect on our business, financial condition or results of operations.

Governments of countries in which we operate could nationalize or expropriate private enterprises, or otherwise change their policies regarding private enterprise, which could adversely impact the value of our operations in those countries.

Certain countries in which we operate are subject to political, social, diplomatic and economic uncertainty. The governments of these countries may develop or implement political, social or economic policies contrary to, or reversing current policies encouraging, private enterprise, economic decentralization and/or outside investment in such countries. Changes in policies, the enactment of new laws or regulations, or changes in the interpretation of current policies, laws or
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regulations could result in, among other impacts, the imposition of confiscatory taxation, trade sanctions or embargoes, our inability to protect our intellectual property rights, renegotiation or nullification of existing agreements or property rights, restrictions on currency conversion, restrictions or prohibitions on the payment of dividends or distributions, or the nationalization or expropriation of private enterprises, including our operations. Any of these occurrences could have a material adverse effect on our business, financial condition or results of operations, and nationalization or expropriation could result in the loss of all revenues generated in, and the entire value or our investment in, such countries.

We are exposed to economic factors, including inflation, fluctuations in aluminum prices, foreign currency exchange rates and interest rates, and currency controls in the countries in which we operate.

We have experienced, and continue to experience, inflationary pressures on the prices of aluminum, materials, transportation, energy and labor. In an inflationary environment, such as the current economic environment, our ability to implement customer pricing adjustments or surcharges to pass-through or offset the impacts of inflation may be limited. Continued inflationary pressures could reduce our profit margins and profitability.

Other economic factors, including fluctuations in foreign currency exchange rates and interest rates, competitive factors in the countries in which we operate, and continued volatility or deterioration in the global economic and financial environment could affect our 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, and Chinese yuan (renminbi), may affect our profitability as some important inputs are purchased in other currencies, while our products are generally sold in U.S. dollars.

Our ABL Credit Facility bears interest at rates equal to the Secured Overnight Financing Rate (“SOFR”) plus a credit spread adjustment, plus a margin. Accordingly, we will be subject to risk from changes in interest rates on the variable component of the rate.

We also face risks arising from the imposition of cash repatriation restrictions and exchange controls. Cash repatriation restrictions and exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing restrictions or controls. While we currently have no need, and do not intend, to repatriate or convert cash held in countries that have significant restrictions or controls in place, should we need to do so to fund our operations, we may be unable to repatriate or convert such cash, or be unable to do so without incurring substantial costs. We currently have substantial operations in countries that have, or that may in the future impose, cash repatriation restrictions or exchange controls in place, including China, and, if we were to need to repatriate or convert such cash, these controls and restrictions may have an adverse effect on our operating results and financial condition.

Our global operations expose us to risks that could adversely affect our business, financial condition, results of operations, cash flows or the market price of our securities.

We have operations or activities in numerous countries and regions outside the U.S., including Europe, the United Kingdom, Canada, and China. As a result, our global operations are affected by economic, political and other conditions in the foreign countries in which we do 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 U.S. as well as retaliatory tariffs imposed by the European Union or other foreign entities), import or export restrictions, taxation, environmental regulations, production curtailments, exchange controls, employment regulations and repatriation of assets or earnings;
the ongoing uncertainty regarding the United Kingdom’s withdrawal from the European Union (known as “Brexit”) and its impact and long-term effects on trade, imports and exports, tariffs and currencies, and our relationships with customers and suppliers;
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;
the potential for increased tensions between the U.S. and countries in which we operate, including China and European Union nations;
the global impact of the ongoing conflict between Russia and Ukraine, including tariffs, economic sanctions and import-export restrictions imposed by either nation, and retaliatory actions by the other nation;
war or terrorist activities;
kidnapping of personnel;
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major public health issues such as an outbreak of a pandemic or epidemic, such as the COVID-19 pandemic, which could cause disruptions in our operations, workforce, supply chain and/or customer demand;
shipping, freight and supply chain disruptions;
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 impact our operations and financial condition and/or 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 products we supply to them;
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;
compliance with data privacy regulations; and
adverse tax laws and audit rulings.

Although the effect of any of the foregoing factors is difficult to predict, any one or more of them could adversely affect our business, financial condition, or results of operations. Our international operations subject us 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 we believe we have adopted appropriate risk management, compliance programs and insurance arrangements to mitigate 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.

An adverse decline in the liability discount rate, lower-than-expected investment return on pension assets and other factors could affect our results of operations or amount of pension funding contributions in future periods.

We provide defined benefit pension and retiree healthcare benefits to eligible employees and retirees. Our results of operations may be negatively affected by the amount of expense we record for our pension and other postretirement benefit plans, reductions in the fair value of plan assets, significant changes in market interest rates, investment losses or lower than expected returns on plan assets, and other factors. We calculate income or expense for our 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 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, we are 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 our financial statements can be affected by pension and other post-retirement benefits accounting policies, see Note B to the Consolidated Financial Statements in Part II. Item 8, and Part II. Item 7. “Management's Discussion and Analysis of Financial Conditions and Results of Operations--Critical Accounting Policies and Estimates.” 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 we would contribute to the pension plans. The defined benefit pension plans were underfunded as of December 31, 2022 by $578 million based on actuarial methods and assumptions in accordance with GAAP. In the event that actual results differ from the actuarial assumptions, the funded status of our defined benefit plans and future cash contributions may increase or decrease. See Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations--Contractual Obligations and Off-Balance Sheet Arrangements--Contractual Obligations" and "--Obligations for Operating Activities" for additional information regarding expected contributions and benefit payments in 2023.





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Business Risks – Competition and Customers

We face significant competition, which may have an adverse effect on profitability.

The markets for our products are highly competitive. Our competitors include a variety of both U.S. and non-U.S. companies in all major markets. We may also face competition from emerging competitors, particularly in China and other developing economies, as customers seek to globalize their supply bases in order to reduce costs. New product offerings, new technologies in the marketplace or new facilities may compete with or replace our products. The willingness of customers to accept substitutes for our products, the ability of large customers to exert leverage in the marketplace to affect the pricing for our products, and technological advancements or other developments by or affecting our competitors or customers could adversely affect our business, financial condition or results of operations. See Part I. Item 1. Business “Description of the Business—Rolled Products—Competitive Conditions,” “—Extrusions—Competitive Conditions,” and “—Building and Construction Systems—Competitive Conditions” for additional information about competition in the markets for our products.

In addition, we may face increased competition due to industry consolidation. As companies attempt to strengthen or maintain their market positions in an evolving industry, they could be acquired or merged. Companies that are strategic alliance partners in some areas of our business may acquire or form alliances with our competitors, thereby reducing their business with us. 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 our 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 our profitability. Moreover, if, as a result of increased leverage, customers require us to reduce our pricing such that our gross margins are diminished, we 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 our customer base may also lead to reduced demand for our products, a combined entity replacing our products with those of our competitors, and cancellations of orders. The result of these developments could have a material adverse effect on our business, operating results and financial condition.

We could be adversely affected by the loss of key customers, the impact of supply chain disruptions or other economic conditions on our key customers, or significant changes in the business or financial condition of our customers.

We have long-term contracts with a significant number of our customers, some of which are subject to renewal, renegotiation or re-pricing at periodic intervals or upon changes in competitive supply conditions. Our 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 could affect our financial results. Our customers may experience unavailability or price volatility of raw materials, key components or other supply chain disruptions, weak demand for their products, delays in the certification or launch of new products, inability to achieve expected future orders in China or other markets, labor strikes, diminished liquidity or credit unavailability that negatively impact the customer's ability to make full or timely payment or that require us to restructure payment terms, or other difficulties in their businesses, any of which could significantly reduce demand for our products. These impacts may be unique to one customer or a small number of customers. For example, Boeing has experienced negative impacts in recent periods, including the temporary reduction in the production rate and subsequent temporary suspension of production of the 737 MAX aircraft, and delays in certification of the 737 MAX aircraft in China; and reduced passenger travel during the COVID-19 pandemic and the resulting elevated inventory of airframes and fuselages. These events have negatively impacted sales of aluminum sheet and plate products that we produce for Boeing airplanes and may continue to negatively impact sales for future periods. The impacts may also be experienced by a broader group of customers within an end market that we serve. For example, in 2020, the impact of the COVID-19 pandemic and other global factors contributed to a severe shortage in semiconductors used in automotive manufacturing. As a result, automotive customers were forced to curtail production at various intervals and across many different product lines resulting in reductions in the volume of vehicles manufactured. For 2020, 2021 and 2022, global vehicle production was reduced by more than 10 million vehicles, resulting in a significant reduction in sales of aluminum sheet and extrusions products that we produce for a number of key automotive customers. Customer initiatives to recover lost volume as business and economic conditions improve may not be successfully implemented, or may be implemented over extended time periods. Depending on the nature, extent and duration of negative business or economic conditions impacting our customers, our financial condition and results of operations may be adversely affected acutely or over a longer period of time.

Our customers may also change their business strategies or modify their business relationships with us, including to reduce the amount of our products they purchase or to switch to alternative suppliers. If our customers reduce, terminate or delay
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purchases from us due to the foregoing factors or otherwise and we are unsuccessful in replacing such business in whole or in part or replace it with less profitable business, our financial condition and results of operations may be adversely affected.

Our customers may reduce their demand for aluminum products in favor of alternative materials.

Certain applications of our aluminum-based products compete with products made from other materials, such as steel, titanium, plastics, glass and composites. The willingness of customers to pursue materials other than aluminum often depends upon the desire to achieve specific performance 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 further reduce the weight and increase the fuel efficiency of aircraft. The automotive industry, while motivated to reduce vehicle weight through the use of aluminum, may substitute with steel or other materials for certain applications. The packaging industry continues to experience advances in alternative materials, such as plastics, glass and organic or compostable materials, which may compare favorably to aluminum with respect to preservation of food and beverage quality and recyclability. Further, the decision to use aluminum may be impacted by aluminum prices or compatibility of aluminum with other 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 our products, and thus adversely affect our business, financial condition or results of operations.

We may face challenges to our intellectual property rights which could adversely affect our reputation, business and competitive position, financial condition and results of operations.
We own important intellectual property, including patents, trademarks and copyrights. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design around the patents we own or license. Despite our controls and safeguards, our technology may be misappropriated by our employees, our competitors or other third parties. The pursuit of remedies for any misappropriation of our 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 our intellectual property increases despite efforts we undertake to protect it. Developments or assertions by or against us relating to intellectual property rights, and any inability to protect or enforce our rights sufficiently, could adversely affect our business and competitive position, financial condition and results of operations.

Business Risks – Operations and Product Development

We could encounter manufacturing difficulties or other issues that impact product performance, quality or safety, which could affect our ability to supply customers or meet contractual obligations, reputation, business and financial condition and results of operations.

The manufacture of many of our products is a highly exacting and complex process. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction or unforeseen maintenance outages, failure to follow specific protocols, specifications and procedures, including those related to quality or safety, unavailability of raw materials, supply chain interruptions, natural disasters, health pandemics (including the COVID-19 pandemic), labor shortages or unrest, and environmental factors. Such problems could have an adverse impact on our ability to fulfill customer orders or meet contractual obligations, including with respect to quantity, delivery times, or product quality, specifications or performance, which 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 related to remediation and other liabilities that could have a material adverse effect on our business, 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.

Our business depends, in part, on our ability to meet increased customer demand successfully and to mitigate the impact of customer program cancellations, reductions and delays.

We are 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. In addition, we expect customer demand for packaging materials to continue to increase. If we fail to meet production levels or encounter difficulty or unexpected costs in meeting such levels, it could have a material adverse effect on our business, financial condition
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or results of operations. Similarly, program cancellations, reductions or delays could also have a material adverse effect on our business.

A material disruption or limitation of our operations, particularly at one or more of our manufacturing facilities, could adversely affect our business.

If our operations, particularly one of our manufacturing facilities, were to be disrupted as a result of significant equipment failures, natural disasters, adverse weather conditions, power outages, fires, floods, explosions, terrorism, theft, sabotage, public health crises, labor shortages or disputes or other reasons, we may be unable to effectively meet our obligations to or demand from our customers, which could adversely affect our financial performance.

Our operations depend on the continued and efficient functioning of our facilities, including critical equipment. Despite our routine maintenance programs for our facilities and equipment, we may experience periods of reduced production or production delays due to planned and unplanned equipment outages at our facilities. Our facilities also require significant capital improvements, including upgrades to or replacements of equipment, from time to time. Repairs, equipment replacement or other facility improvement projects may also result in periods of reduced or delayed production. Supply chain issues and labor shortages may impact our ability to obtain parts, materials or replacement equipment necessary to make repairs or improvements, and may increase the time required to complete such repairs or improvements. Unforeseen delays or unavailability of parts or materials could significantly increase the costs associated with repairs or improvements.

Interruptions in production could result in significant increases in our costs and reductions in our sales. Any interruption in production capability could require us 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 our 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. While we maintain property damage insurance that we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate certain of our losses resulting from significant production interruption or shutdown caused by an insured loss, not all events leading to a disruption of operations are covered events. Additionally, any recovery under our insurance policies may not fully offset the lost profits or increased costs that may be experienced during the disruption of operations, which could adversely affect our business, results of operations, financial condition and cash flow.

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

Our competitive position and future performance depend, in part, on our ability to:
identify and evolve with emerging technological and broader industry trends in our target end-markets;
identify and successfully execute on a strategy to remain an essential and sustainable element of our customers’ supply chains;
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.

We continuously work on new developments for 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 our research and development programs, see Part I, Item 1. Business “Research and Development.”

In spite of our expenditure of financial resources and dedicated effort to develop innovative new products and services, we may not be able to successfully differentiate our products or services from those of our competitors or match the level of research and development spending of our competitors, including those developing technology to displace our current products. In addition, we 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 our new products or services, development programs or technologies will be commercially adopted or beneficial to us.





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Business Risks – Supply Chain

Our business could be adversely affected by increases in the cost or volatility in the availability of aluminum or other raw materials.

We derive a significant portion of our 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 the pricing of most of our products is generally intended to pass substantially all the risk of metal price fluctuations on to our customers or is otherwise hedged, there are situations where we are unable to pass on the entire cost of increases to our customers and there is a potential time lag on certain products between increases in costs for aluminum and the point when we can implement a corresponding increase in price to our customers and/or there are other timing factors that may result in our exposure to certain price fluctuations which could have a material adverse effect on our business, financial condition or results of operations. Further, since metal prices fluctuate among the various exchanges, our competitors may enjoy a metal price advantage from time to time.

We may be adversely affected by changes in the availability or cost of other raw materials (including, but not limited to, copper, magnesium, silicon and zinc), as well as labor costs, energy costs and freight costs associated with transportation of materials. Prices for and the availability of materials necessary for production may fluctuate due to a number of factors, including inflationary pressure, supply shortages and disruptions caused by geopolitical or global health events, such as the COVID-19 pandemic. The availability and costs of certain raw materials necessary for the production of our products may also be influenced by private or government entities, including mergers and acquisitions, changes in world politics or regulatory requirements (such as human rights regulations, environmental regulations or production curtailments), labor relations between the producers and their work forces, labor shortages, political instability in exporting nations, export quotas, sanctions, new or increased import duties, countervailing or anti-dumping duties, infrastructure and transportation issues, 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. We may be unable to offset fully the effects of 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 our operating results.

We are 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.

We have 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, we could have exposure if a key supplier in a particular region is unable to deliver sufficient quantities of a necessary material on a timely basis. A significant interruption in the operations of a key supplier could jeopardize the ability of plants in that region to operate at capacity, 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. Additionally, the purity and attributes of scrap material can vary significantly, which could result in a shortage of useable scrap metal. 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 operations, financial condition and cash flows could be materially adversely affected.






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Business Risks – Strategy

We may not be able to realize the expected benefits of our re-entry into the packaging market in the U.S. and other geographies.

We have made a significant investment of management time and financial resources in our re-entry into the U.S. packaging market, including capital investments in machinery, application of research and development resources to developing innovations in packaging materials, re-tooling portions of our rolled products capacity to produce materials designed to suit the needs of customers in the packaging market, supplementing our workforce to fulfill capacity, and engaging with a new customer base that has different needs than our aerospace, automotive, and industrial customers. In addition, the competitive landscape in the packaging market involves not only some of our current key competitors, with whom we compete for customers, labor and materials including scrap, but also new competitors offering alternative packaging materials, particularly plastics and glass products, many of whom are larger and more established in the packaging market than we are. Our ability to realize the benefits of our strategic decision to re-enter the packaging market could be impacted by availability of labor, raw materials or scrap necessary to produce sufficient volume to satisfy customer demands, unforeseen outages at our facilities that serve the packaging market, or unexpected costs. If we are unable to realize the projected benefits of our re-entry into the packaging market in the U.S. or other geographies, our financial condition and results of operations may be materially adversely affected.

We may be unable to realize future targets or goals established for our business segments, or complete capital or other projects at the levels, projected costs or by the dates targeted.

From time to time, we may announce future targets or goals for our business, which are based on our then current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which we operate. Future targets and goals reflect our beliefs and assumptions and our 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 therein. The actual outcome may be materially different from projected or target outcomes, and there can be no assurance that any targets or goals established by us will be accomplished at the levels or by the dates targeted, if at all. Failure to achieve our targets or goals may have a material adverse effect on our business, financial condition, results of operations or the market price of our securities.

In addition, the implementation of our business strategy may involve the entry into and the execution of complex capital or other projects, which place significant demands on our management and personnel, and the completion and ultimate impact of such projects on our operations may depend on numerous factors beyond our 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 herein, or other factors. The failure to complete a material project as planned, a significant delay in a material project, increased or unforeseen costs associated with a project, or the failure of a project to have the projected impact on our business or operations, whatever the cause, could have an adverse effect on our business, financial condition, or results of operations.

Our business and growth prospects may be negatively impacted by limits in our capital expenditures.

We require substantial capital to invest in growth opportunities and to maintain and prolong the life and capacity of our existing facilities. Insufficient cash generation or capital project overruns or delays may negatively impact our ability to fund as planned our sustaining and return-seeking capital projects. Over the long term, our ability to take advantage of improved market conditions or growth opportunities in our businesses may be constrained by earlier capital expenditure restrictions, which could adversely affect the long-term value of our business and our position in relation to our competitors.

We may be unable to realize the expected benefits from acquisitions, divestitures, joint ventures and strategic alliances.

We have made, and may continue to plan and execute, acquisitions and divestitures and take other actions to grow our business or streamline our portfolio. There is no assurance that anticipated benefits will be realized. Acquisitions present significant challenges and risks, including our effective integration of the acquired business, 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. We may be unable to manage acquisitions successfully. Additionally, adverse factors may prevent us from realizing the benefits of our 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, we may face barriers to exit from unprofitable businesses or operations, including high exit costs or objections from customers, suppliers, unions, local or
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national governments, or other stakeholders. In addition, we may retain unforeseen liabilities for divested entities or businesses, including, but not limited to, if a buyer fails to honor all commitments. Our 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, we have participated in, and may continue to participate in, joint ventures, strategic alliances and other similar arrangements from time to time. Although we have, in connection with past and existing joint ventures, sought to protect our interests, joint ventures and strategic alliances inherently involve special risks. Whether or not we hold majority interests or maintains operational control in such arrangements, our partners may:

have economic or business interests or goals that are inconsistent with or opposed to ours;
exercise veto rights to block actions that we believe to be in our or the joint venture’s or strategic alliance’s best interests;
take action contrary to our 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 us, whether due to the above-described risks, unfavorable global economic conditions, increases in construction costs, currency fluctuations, political risks, or other factors.

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

We have significant capital requirements and may require, in the future, the issuance of debt to fund our operations and contractual commitments or to pursue strategic acquisitions. A decline in our financial performance or outlook due to internal or external factors could affect our access to, and the availability or cost of, financing on acceptable terms and conditions. There can be no assurance that we will have access to the capital markets on terms we find acceptable.

Major credit rating agencies evaluate our creditworthiness and give us specified credit ratings. These credit ratings are 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 we receive 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 credit rating agencies will not take negative actions with respect to our ratings in the future. Increased debt levels, macroeconomic conditions, a deterioration in our debt protection metrics, a contraction in our liquidity, or other factors could potentially trigger such actions. A credit 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 our credit ratings by one or more credit rating agencies could result in adverse consequences, including: adversely impact the market price of our 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 we incur; increase the cost of borrowing or fees on undrawn credit facilities; or result in vendors or counterparties seeking collateral or letters of credit from us.

Limitations on our ability to access the global capital markets, a reduction in our liquidity or an increase in borrowing costs could materially and adversely affect our ability to maintain or grow our business, which in turn may adversely affect our financial condition, liquidity and results of operations.







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Business Risks – Information Security and Internal Controls

Information technology system failures, cyber-attacks and security breaches may threaten the integrity of our intellectual property and sensitive information, disrupt our business operations, and result in reputational harm and other negative consequences that could have a material adverse effect on our financial condition and results of operations.

We rely on our information technology systems to manage and operate our business, process transactions, and summarize our operating results. Our information technology systems are subject to damage or interruption from power outages, computer, network and 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 our information technology systems are damaged or cease to function properly, we may have to make a significant investment to fix or replace them, and we may suffer loss of critical data and interruptions or delays in our operations. Any material disruption in our information technology systems, or delays or difficulties in implementing or integrating new systems or enhancing current systems, could have an adverse effect on our business, financial condition or results of operations.

We believe that we face the threat of cyber-attacks due to the industries we serve, the locations of our operations and our technological innovations. These cyber-attacks may range from uncoordinated individual attempts to sophisticated and targeted measures, known as advanced persistent threats, directed at us and our customers, suppliers and vendors. 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, any of which could manipulate or improperly use our systems or networks, compromise confidential information, destroy or corrupt data, or otherwise disrupt our operations. We have experienced cybersecurity attacks in the past, including breaches of our 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 our 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.

We continually work to safeguard our systems and mitigate potential risks, and our enterprise risk management program and disclosure controls and procedures include elements intended to ensure that we analyze potential disclosure obligations arising from cyber-attacks and security breaches. However, there is no assurance that these safeguards and controls will be sufficient to detect, prevent, engage in timely response to, or report cyber-attacks or security breaches. The occurrence of cyber-attacks or security breaches could negatively impact our reputation and competitive position and could result in litigation with third parties, regulatory action, loss of business, diminution of the value of investments in research and development, potential liability and increased remediation costs, any of which could have a material adverse effect on our financial condition and results of operations.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud.

We are subject to reporting and other obligations under the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the regulations of the New York Stock Exchange, and to the requirements of Section 404 of Sarbanes-Oxley which requires management to establish and maintain internal control over financial reporting and disclosure controls and procedures. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Internal controls are also important in the prevention and detection of fraudulent activity. Disclosure controls and procedures are processes designed to ensure that information required to be disclosed is communicated to management and reported in a timely fashion. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance with respect to the reliability of reporting, including financial reporting and financial statement preparation. If we are not able to maintain effective internal control over financial reporting or disclosure controls and procedures, or other accounting, financial management or reporting systems or procedures, or experience difficulties or delays in the implementation of systems or controls, we may not be able to accurately report our financial results or prevent fraud, and in some cases may be required to restate financial results. As a result, stockholders could lose confidence in our financial and other public reporting, could result in adverse regulatory consequences and/or loss of investor confidence, which could limit our 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 our securities. In addition, the remediation of any ineffective internal controls could result in unforeseen expenses.




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Risks Related to Employee and Labor Matters

Labor disputes and difficulties retaining or hiring skilled employees could adversely affect our business, financial condition or results of operations.

The continuity of our operations depends on maintaining a skilled workforce. We have previously experienced shortages of qualified labor due in part to the COVID-19 pandemic and other economic factors, and may see similar labor shortages in the future. Any labor shortage could decrease our ability to effectively produce and deliver product and to achieve our strategic objectives. In addition, any potential labor shortage may result in increased expenses related to hiring and retention of qualified employees.

Furthermore, a significant portion of our employees are represented by labor unions in a number of countries under various collective bargaining agreements with varying durations and expiration dates. While we previously have been successful in renegotiating our collective bargaining agreements with various unions, we may not be able to satisfactorily renegotiate all collective bargaining agreements in the U.S. and other countries when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at our facilities in the future. We may also be subject to general country strikes or work stoppages unrelated to our business or collective bargaining agreements. Any such work stoppages could have a material adverse effect on our business, financial condition or results of operations.

A failure to attract, retain or provide adequate succession plans for key personnel could adversely affect our operations and competitiveness.

Our existing operations and development projects require highly skilled executives and staff with relevant industry and technical experience. Our inability to attract and retain such people may adversely impact our 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 our growth and business strategy. The loss of key members of management and other personnel could significantly harm our business, and any unplanned turnover, or failure to develop adequate succession plans for key positions, could deplete our institutional knowledge base, result in loss of technical expertise, delay or impede the execution of our business plans and erode our competitiveness.

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 our business results.

We are 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 health and safety, discrimination, organizing, whistleblowing, classification of employees, privacy, severance payments, citizenship requirements, and healthcare insurance mandates. Allegations that we have violated such laws or regulations could damage our 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 our operations and financial condition.

Risks Related to Legal Proceedings and Government Regulations

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

The manufacture and sale of our products exposes us to potential product liability, personal injury, property damage and related claims. These claims may arise from our alleged 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 our products are used, may lead regulatory authorities, government agencies or other entities or organizations to publish guidelines or recommendations, or impose restrictions, related to the manufacturing or use of our products.

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In the event that a product of ours 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, we may be subject to product liability lawsuits and other claims, or may be required or requested by our customers to participate in a recall or other corrective action involving such product. In addition, if a product of ours is perceived to be defective or unsafe, sales of our products could be diminished, our reputation could be adversely impacted, and we could be subject to further liability claims. Moreover, events that give rise to actual, potential or perceived product safety concerns could expose us to government investigations or regulatory enforcement action.

There can be no assurance that we will be successful in defending any such proceedings or that insurance available to us 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 our business, financial condition or profitability; impose substantial monetary damages and/or non-monetary penalties; result in additional litigation, regulatory investigations or other proceedings involving us; result in loss of customers; require changes to our products or business operations; damage our reputation and/or negatively impact the market price of our common stock. Even if we successfully defend against these types of claims, we could still be required to spend a substantial amount of money in connection with legal proceedings or investigations with respect to such claims; our 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 our 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 our 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 Note T to the Consolidated Financial Statements in Part II. Item 8. "Financial Statements and Supplementary Data" under the caption "Contingencies and Commitments - Contingencies."

We may be exposed to significant legal proceedings, investigations or changes in U.S. federal, state, local or foreign laws, regulations or policies.

Our 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 us. We 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.

We are subject to a variety of legal and regulatory compliance risks in the U.S. and abroad in connection with our 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. We may be a party to litigation in a foreign jurisdiction where geopolitical risks might influence the ultimate outcome of such litigation. We could be subject to fines, penalties, damages (in certain cases, treble damages), or suspension or debarment from government contracts.

The global and diverse nature of our operations means that these risks will continue to exist, and additional legal proceedings and contingencies may arise from time to time. While we believe we have 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 us to change current estimates of liabilities or make such estimates for matters previously insusceptible 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 we cannot predict with certainty could have a material adverse effect on our 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 our financial position, results of operations and cash flows. For additional information regarding our legal proceedings, including proceedings and investigations relating to the June 13, 2017 fire at the Grenfell Tower in London, U.K., see Note T to the Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data" under the Caption "Contingencies and Commitments - Contingencies."

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We are exposed to environmental and safety risks and are subject to a broad range of health, safety and environmental laws and regulations, which may result in substantial costs and liabilities.

Our 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. Failure to comply with such laws and regulations could result in significant penalties or criminal liability. 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 we may be liable may arise in the future at our present sites, at sites owned or operated by our predecessors or affiliates, at sites that we may acquire in the future, or at third-party sites used by our 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 we anticipate. Our 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 our 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 our financial condition, results of operations and cash flows.

In addition, the heavy industrial activities conducted at our 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 U.S. and regulation by foreign government entities abroad responsible for employee health and safety, including OSHA. 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.

We are subject to privacy and data security/protection laws in the jurisdictions in which we operate 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 as well as significant fines for non-compliance. While Arconic has appropriate processes and procedures in place regarding compliance with existing data protection regulations in other countries, such as the European Union’s General Data Protection Regulation, the California Privacy Rights Act, and China’s Personal Information Protection Law, further changes may be necessary to ensure those processes and procedures will be adequate to implement additional state and country specific requirements. 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 our financial condition and results of operations. In addition, the payment of potentially significant fines or penalties in the event of a breach of privacy and information security laws, as well as the negative publicity associated with such a breach, could damage our reputation and adversely impact product demand and customer relationships.

Unanticipated changes in our tax provisions or exposure to additional tax liabilities could affect our future profitability.

We are subject to income taxes in both the U.S. and various non-U.S. jurisdictions. Our 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 our tax expense and profitability. Our 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 our future earnings that could impact the valuation of our deferred tax assets. Our 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 our overall profitability, 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 our tax exposures. Any failure to comply with all such tax laws or regulations could subject us to liability.

Corporate tax law changes continue to be analyzed in the U.S. and in many other jurisdictions. The Organisation for Economic Co-operation and Development and current U.S. presidential administration have proposed changes that could
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adversely impact the taxation of corporations in the U.S. and abroad. Any change to the U.S. corporate tax system could have a substantial impact, positive or negative, on our future effective tax rate, cash tax expenditures, and deferred tax assets and liabilities.

Risks Related to Our Indebtedness

We have significant debt obligations, and may in the future incur, additional debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.

On February 7, 2020, we completed an offering for $600 million of 6.125% (fixed rate) Senior Secured Second-Lien Notes due 2028 (the “2028 Notes”). On May 13, 2020, we completed an offering of $700 million principal amount of 6.0% Senior Secured First-Lien Notes due 2025 (the "2025 Notes"). Also on May 13, 2020, we entered into the ABL Credit Agreement, which provides for a senior secured asset-based revolving credit facility in an aggregate principal amount of $800 million, including a letter of credit sub-facility, a swingline loan sub-facility and an accordion feature allowing the Company to request one or more increases to the revolving commitments in an aggregate principal amount up to $350 million. On March 3, 2021, we completed an offering for an additional $300 million principal amount of the 2028 Notes, which were issued under the indenture governing the existing 2028 Notes. We increased the aggregate principal amount of the ABL Credit Agreement in February 2022 to $1.2 billion. We may also incur additional indebtedness in the future, including by drawing under the ABL Credit Facility.

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 securities.

Subject to the restrictions in the indenture governing the 2025 Notes, the indenture governing the 2028 Notes and the ABL Credit Agreement, we, including our subsidiaries, have the ability to incur significant additional indebtedness. Although the terms of the 2025 Notes indenture, the 2028 Notes indenture and the ABL Credit Facility include restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of important exceptions, and indebtedness incurred in compliance with these restrictions could be substantial. Adding new debt to our current debt levels could intensify the related risks that we and our subsidiaries face now or may face in the future. 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.

Our indebtedness restricts our current and future operations, which could adversely affect our ability to respond to changes in our business and manage our operations.

The terms of the 2025 Notes indenture, the 2028 Notes indenture and the ABL Credit Agreement include a number of restrictive covenants that impose significant operating and financial restrictions on us, including restrictions on our ability to, among other things:
make investments, loans, advances, guarantees and acquisitions;
dispose of assets;
incur or guarantee additional debt and issue certain disqualified equity interests and preferred stock;
make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness;
engage in transactions with affiliates;
enter into certain restrictive agreements;
create liens on assets to secure debt; and
consolidate, merge, sell or otherwise dispose of all or substantially all of our or a subsidiary guarantor’s assets.
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These covenants limit our operational flexibility and could prevent us from taking advantage of business opportunities as they arise, growing our business or competing effectively. In addition, the ABL Credit Facility contains a financial maintenance covenant applicable when the excess availability is less than the greater of (a) 10% of the lesser of (x) the aggregate amount of the commitments under the ABL Credit Facility and (y) the borrowing base and (b) $50.0 million. In such circumstances, we would be required to maintain a fixed charge coverage ratio of not less than 1.00 to 1.00. Our ability to draw under the ABL Credit Facility could be impacted by a number of factors, including but not limited to any impact by disruptions to our operations and financial performance.

The ABL Credit Facility also provides for “springing control” over the cash in our deposit accounts constituting ABL priority collateral for the ABL Credit Facility, and such cash management arrangement includes a cash sweep at any time that excess availability under the ABL Credit Facility is less than the greater of (x) 12.5% of the lesser of the borrowing base and the aggregate amount of the commitments under the ABL Credit Facility at such time and (y) $62.5 million for five consecutive business days. Such cash sweep, if in effect, will cause all our available cash in deposit accounts subject to such “springing control” to be applied to outstanding borrowings under our ABL Credit Facility. If we satisfy the conditions to borrowings under the ABL Credit Facility while any such cash sweep is in effect, we may be able to make additional borrowings under the ABL Credit Facility to satisfy our working capital and other operational needs. If we do not satisfy the conditions to borrowing, we will not be permitted to make additional borrowings under our ABL Credit Facility, and we may not have sufficient cash to satisfy our working capital and other operational needs.

Our ability to comply with these agreements may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other opportunities. The breach of any of these covenants or restrictions could result in a default under the 2025 Notes indenture, the 2028 Notes indenture or the ABL Credit Agreement.

Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our business, financial condition, results of operations or cash flows.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, including the 2025 Notes indenture, the 2028 Notes indenture and the ABL Credit Agreement, we may not be able to incur additional indebtedness and the holders of the defaulted indebtedness could cause all amounts outstanding with respect to that indebtedness to be immediately due and payable. We cannot assure you that our assets or cash flow would be sufficient to fully repay our outstanding indebtedness if accelerated upon an event of default, which could have a material adverse effect on our ability to continue to operate as a going concern. Further, if we are unable to repay, refinance or restructure our secured indebtedness, the holders of such indebtedness could proceed against the collateral securing that indebtedness. In addition, any event of default under or declaration of acceleration under one debt instrument also could result in an event of default under one or more of the agreements governing our other indebtedness.

Risks Related to the Separation

We have a limited history of operating as an independent company and our historical financial information may not be a reliable indicator of our future results.

The historical information included in this Annual Report on Form 10-K for periods prior to the Separation refers to Arconic as operated by and integrated with ParentCo for those periods. Our historical financial information is derived from ParentCo’s accounting records and is presented on a standalone basis as if Arconic was independent of ParentCo. Accordingly, the historical 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 significant changes 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, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II, Item 8. “Financial Statements and Supplementary Data.”





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In connection with the Separation, we and Howmet have agreed to indemnify each other for certain liabilities. If we are required to pay under these indemnities to Howmet, our financial results could be negatively impacted. The Howmet indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which Howmet has been allocated responsibility, and Howmet may not be able to satisfy its indemnification obligations in the future.

Pursuant to the separation agreement and certain other agreements between ParentCo and us, each party has agreed to indemnify the other for certain liabilities, in each case for uncapped amounts. Indemnities that we may be required to provide Howmet 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 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 for our benefit may not be sufficient to protect us against the full amount of such liabilities, and Howmet may not be able to fully satisfy its indemnification obligations.

Moreover, even if we ultimately succeed in recovering from Howmet 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 may fail to perform under various transaction agreements that were executed as part of the Separation.

In connection with the Separation, we and ParentCo have entered into the separation agreement and various other agreements, including a tax matters agreement, an employee matters agreement, intellectual property license agreements, an agreement relating to the Davenport, Iowa plant, metal supply agreements and real estate and office leases. We will rely on Howmet to satisfy its performance and payment obligations under these agreements. If Howmet is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses.

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 Howmet and Howmet's stockholders, could be subject to significant tax liabilities, and, in certain circumstances, we could be required to indemnify Howmet for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.

It was a condition to the distribution of our common stock to ParentCo stockholders in connect with the Separation 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 U.S. Internal Revenue Code. The opinion of counsel was based upon and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of ParentCo and us, including those relating to the past and future conduct of ParentCo and us. If any of these facts, assumptions, representations, statements or undertakings was, or becomes, inaccurate or incomplete, or if ParentCo breaches its or we breach any of our respective 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 U.S. Internal Revenue Service (“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 represented the judgment of such counsel and is not 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 is 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 U.S. Internal Revenue Code, in general, for U.S. federal income tax purposes, ParentCo would recognize taxable gain as if it had sold the our common stock in a taxable sale for its fair market value, and ParentCo stockholders who received our 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.

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Under the tax matters agreement entered into between ParentCo and us in connection with the separation, we generally are required to indemnify Howmet 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 our equity securities or assets, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) certain of our other actions or failures to act, or (3) any of our 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. In addition, we, Howmet, and the respective subsidiaries may continue to 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.

Risks Related to Our Common Stock

We cannot be certain that an active trading market for our common stock will be sustained and our stock price may fluctuate significantly.

For many reasons, including the risks identified in this Annual Report on Form 10-K, the market price of our common stock may be volatile. These factors may result in short-term or long-term negative pressure on the value of our common stock. 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:
sales of a significant number of our shares or other shifts in our investor base;
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.

Actions of activist shareholders could have an adverse effect on our business.

Companies across a variety of industries are experiencing an increase in shareholder activism, particularly shareholder proposals regarding ESG and DEI matters. If we are required to respond to shareholder proposals (including the implementation of any proposals), proxy contests or other actions by activist shareholders, we could incur significant expense, disruptions to our operations and diversion of the attention of management and our employees. In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist shareholder initiatives may result in reputational damage, which could negatively impact relationships with customers, suppliers and strategic partners, impair our ability to attract and retain employees, and cause volatility in our stock price.

Individual stockholders' percentage of ownership of our common stock may be diluted in the future.

In the future, individual stockholders' percentage of ownership in our common stock may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise. In addition, from time to time, we grant stock-based awards to our directors, officers and employees. Such awards will have a dilutive effect on the number of our shares outstanding, and therefore on our earnings per share, which could adversely affect the market price of our common stock.

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

The initiation, timing, declaration, amount and payment of future dividends to our stockholders falls within the discretion of our Board of Directors. The Board of Directors’ decisions regarding the payment of dividends depends 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 Part II, Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

Anti-takeover provisions could enable us 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 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 include, among others:
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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 are 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 stockholders 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 us 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 our best interests and our stockholders’ best interests. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

Our amended and restated certificate of incorporation designates 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 us and our directors and officers.

Our amended and restated certificate of incorporation provides 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 us, any action asserting a claim for or based on a breach of a fiduciary duty owed by any of our current or former directors or officers to us or our stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against us or any of our current or former directors or officers arising under 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 us 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 applies to state and federal law claims, including claims under the federal securities laws, including the Securities Act of 1933, as amended (“Securities Act”), and the Exchange Act, although our stockholders will not be deemed to have waived our 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 our stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us 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.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of December 31, 2022, we maintain 20 primary manufacturing facilities, as well as various sales and service facilities, located across North America, Europe, the United Kingdom, and China. Our principal office and corporate center is located at 201 Isabella Street, Suite 400, Pittsburgh, Pennsylvania 15212-5858. The Arconic Technology Center which serves as the
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headquarters for our research and development efforts is located at 100 Technical Drive, New Kensington, Pennsylvania 15069-0001.

Arconic believes that its facilities are suitable and adequate for its operations. Although no title examination of properties owned by Arconic has been made for the purpose of this Annual Report on Form 10-K, the Company knows of no material defects in title to any such properties. Arconic leases some of its facilities as provided in Part 1. Item 1. "Business—Description of the Business—Rolled Products—Principal Facilities," "—Building and Construction Systems—Principal Facilities" and "—Extrusions—Principal Facilities." See Note B and Note P to the Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data."

Arconic has active plants and holdings in each of its segments. See Part I. Item 1. "Business—Description of the Business—Rolled Products—Principal Facilities," "—Building and Construction Systems—Principal Facilities" and "—Extrusions—Principal Facilities."
Item 3. Legal Proceedings.
The information set forth in Note T to the Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data" under the caption “Contingencies and Commitments - Contingencies” is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Company’s common stock is listed on the New York Stock Exchange under the trading symbol “ARNC.”
As of February 17, 2023, there were approximately 8,700 holders of record of shares of the Company's common stock. Because many of Arconic’s shares are held by brokers and other institutions on behalf of stockholders, the Company is unable to estimate the total number of stockholders represented by these recordholders.
Arconic did not declare or pay any dividends from April 1, 2020 through December 31, 2022. The timing, declaration, amount of, and payment of any dividends is within the discretion of the Company’s Board of Directors and depends upon many factors, including Arconic’s financial condition, earnings, capital requirements of Arconic’s operating subsidiaries, covenants associated with certain of Arconic’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by the Company’s Board of Directors. Moreover, if Arconic determines to pay any dividends in the future, there can be no assurance that Arconic will continue to pay such dividends or the amount of such dividends.











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Stock Performance Graph
The following graph compares the performance of the Company’s common stock from market close on April 1, 2020 (beginning of “regular way” trading) to December 31, 2022 with (1) the Standard & Poor’s (S&P) 500® Index, and (2) the S&P 1000® Materials Index, a group of 59 companies categorized by S&P as active in the “materials” market sector. The graph assumes, in each case, an initial investment of $100 on April 1, 2020, and the reinvestment of dividends, as applicable. The graph, table and related information shall not be deemed to be “filed” with the SEC, nor shall such information be incorporated by reference into future filings under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

CUMULATIVE TOTAL RETURN
Based on an initial investment of $100 on
April 1, 2020 with dividends reinvested, as applicable

arnc-20221231_g1.jpg

Source: S&P Capital IQ
April 1, 2020December 31, 2020December 31, 2021December 31, 2022
Arconic Corporation
$100.00 $430.64 $477.02 $305.78 
S&P 500® Index
100.00
152.04
192.92155.41
S&P 1000® Materials Index
100.00
175.00
222.10210.92







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Issuer Purchases of Equity Securities
PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced plans or programs*Approximate dollar value of shares that may yet be purchased under the plans or programs*
October 1 - October 31, 2022— $— — $— 
November 1 - November 30, 2022468,979 $21.59 468,979 $190,000,000 
December 1 - December 31, 20221,602,856 $22.56 1,602,856 $154,000,000 
Total for quarter ended
December 31, 2022
2,071,835 2,071,835 
________________
*     On November 16, 2022, Arconic announced that its Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $200 million of common stock for a two-year period expiring November 17, 2024. Repurchases under the program may be made from time to time, as the Company deems appropriate, based on a variety of factors such as price, capital position, liquidity, financial performance, alternative uses of capital, and overall market conditions. There can be no assurance as to the number of shares the Company will purchase, if any. The share repurchase program may be increased or otherwise modified, renewed, suspended or terminated by the Company at any time, without prior notice. In connection with the establishment of this share repurchase program, the prior $300 million repurchase program, which the Company completed in August 2022, was terminated. This program is intended to comply with Rule 10b5-1 and all purchases shall be made in compliance with Rule 10b-18, including without limitation the timing, price, and volume restrictions thereof.
Item 6. Reserved.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(dollars in millions, except per-share amounts and per-metric ton amounts; shipments in thousands of metric tons (kmt))
Overview
Our Business
Arconic Corporation (“Arconic” or the “Company”) is a manufacturer of fabricated aluminum products, including sheet and plate, extrusions, and architectural products and systems, with a primary focus on the ground transportation, aerospace, building and construction, industrial products, and packaging end markets. The Company has 20 primary operating locations in 7 countries around the world, situated in the United States, Canada, China, France, Germany, Hungary, and the United Kingdom. Arconic’s previous operations in Russia were divested in November 2022 (see Rolled Products within Segment Information under Results of Operations below).
Management Review of 2022 and Outlook for the Future
Arconic had strong sales growth in 2022 resulting primarily from completion of our re-entry into the North American packaging end market and continued recovery in the aerospace end market, while we navigated challenges associated with our facility in Russia that was ultimately divested in November 2022 and the operational challenges and production outages experienced at the North American rolling mills in the second half of the year. We implemented actions to help offset inflation in alloying materials, energy prices and freight costs through increased pricing. We returned capital to shareholders as we repurchased $185 of shares of the Company’s common stock and continued to progress high-return, low-risk organic capital projects in the Rolled Products segment that are expected to drive future EBITDA growth starting in 2023.
In 2022, Sales of $8,961 rose 19% from 2021, reflecting higher aluminum prices and favorable product pricing and mix that drove double digit increases in all of our end markets. The Company recorded a net loss of $182, or $1.75 per share, compared to a net loss of $397, or $3.65 per share, in 2021. The 2022 results included a pre-tax charge of $306 ($304 after-tax) for the loss on sale of the Russian operations and a pre-tax charge of $92 ($70 after-tax) for the impairment of long-lived assets in the Extrusions segment.
We ended the year with a cash balance of $261, and total liquidity of $1,450 (comprised of Cash and cash equivalents of $261 and undrawn availability of $1,189 under the Company’s ABL Credit Agreement).
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As we look forward to 2023, we anticipate continued growth in packaging volumes and ongoing recovery in the aerospace end-market. Growth in North America is also expected to continue in the ground transportation and building and construction end markets and is anticipated to occur in the industrial products end market, while these end markets in Europe are anticipated to improve later in the year. Based on current internal and external projections of build rates and leading indicators in the markets we serve, our expectations for sales by major end market, excluding the impact of changes in aluminum prices, in 2023 follow. For the ground transportation end market, we expect sales to be relatively flat to an increase of approximately 5% in 2023 compared with 2022, driven by continued strength in North American automotive, offset partly by weakness in European commercial transportation and automotive. For the industrial products end market, we anticipate sales to be relatively flat to an increase of approximately 10% in 2023 compared with 2022, driven by improved operations in North America, as production outages that reduced output in 2022 have been addressed and the Company’s rolling mills work through backlog, while European recovery is anticipated in the second half of the year. For the building and construction end market, we anticipate sales to be relatively flat to an increase of approximately 5% in 2023 compared with 2022, as North American non-residential spend is expected to continue driving growth while the current European weakness is expected to improve later in the year. For the packaging end market, we expect sales to increase by approximately 5% to 10% in 2023 compared with 2022, as incremental North American can sheet production is expected to drive growth. For the aerospace end market, we expect sales to grow by approximately 25% to 30% in 2023 compared with 2022, as the market continues to recover, driven by increased aircraft build rates and consumer air travel.
Results of Operations
The discussion and analysis that follows includes a comparison of Arconic’s results of operations between the 2022 and 2021 annual periods for both the total company and each reportable segment. Please refer to the Results of Operations section included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (filed on February 22, 2022) for a discussion and analysis of Arconic’s results of operations between the 2021 and 2020 annual periods for both the total company and each reportable segment.
Earnings Summary
Sales.   Sales were $8,961 in 2022 compared to $7,504 in 2021, an increase of $1,457, or 19%. The increase was principally due to favorable impacts from higher aluminum prices, aluminum hedging activities, product pricing, and product mix, all of which were partially offset by the sale of the Company’s Russian operations and unfavorable foreign currency movements driven by a weaker euro.
In March 2021, the Company entered into a settlement agreement with a customer related to the terms of an existing long-term contract. As a result, the customer agreed to pay Arconic $18, which was recognized over the applicable three-year period. Accordingly, the Company’s sales in 2022 and 2021 included $6 and $12, respectively, associated with this settlement.
Cost of Goods Sold.   COGS was $8,032 in 2022 compared to $6,573 in 2021, an increase of $1,459, or 22%. COGS as a percentage of Sales was 89.6% in 2022 compared to 87.6% in 2021. This percentage was negatively impacted by higher costs for direct materials, including alloying materials, energy, and transportation; operational issues and production outages affecting the Rolled Products segment; higher aluminum prices (underlying metal price is contractually passed-through to most customers at cost); an unfavorable impact related to environmental remediation matters (change of $39); and the sale of the Company’s Russian operations. These negative impacts were partially offset by favorable product pricing driven by pricing pressures as a result of inflation.
Additionally, on May 14, 2022, the Company and the United Steelworkers reached a tentative four-year labor agreement covering approximately 3,300 employees at four U.S. locations; the previous labor agreement expired on May 15, 2022. The tentative agreement was ratified by the union employees on June 1, 2022. In 2022, Arconic recognized $19 in Cost of goods sold primarily for a one-time signing bonus for the covered employees.
In the 2022 fourth quarter, Arconic recorded both a $61 charge and a $53 benefit in Cost of goods sold to establish a liability for a potential settlement and a receivable for anticipated insurance reimbursement, respectively, related to a litigation matter. See the Reynobond PE matter in the Litigation section of Note T to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K.
Selling, General Administrative, and Other Expenses.   SG&A expenses were $246, or 2.7% of Sales, in 2022 compared to $247, or 3.3% of Sales, in 2021. The decrease of $1 was largely attributable to a benefit for an expected insurance reimbursement for legal fees related to a litigation matter and a reduction in stock-based compensation expense including the reversal of expense previously recognized in 2021 related to the performance condition portion of the 2021 performance stock units ($4), partially offset by higher labor costs, selling commission expense, and consulting fees.
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Research and Development Expenses.   R&D expenses were $37 in 2022 compared to $34 in 2021. The increase was primarily driven by increased costs for contracted services and utilities as a result of inflation.
Provision for Depreciation and Amortization.   The provision for depreciation and amortization was $237 in 2022 compared to $253 in 2021. The decrease of $16 was mainly caused by the absence of depreciation resulting from an impairment charge on Properties, plants and equipment in the Extrusions segment taken in the 2022 third quarter (See Extrusions in Segment Information below), the sale of the Company’s operations in Russia on November 15, 2022 (See Rolled Products in Segment Information below), and asset retirements.
Impairment of Goodwill. In 2022, after completing its annual review of goodwill for impairment, management determined there was no goodwill impairment for any of the Company's reporting units. In 2021, the Company recognized a charge of $65 in connection with its annual review of goodwill for impairment related to the Extrusions reporting unit. In accordance with Arconic’s accounting policy, this review is performed in the fourth quarter each calendar year. Accordingly, this charge was recognized in the fourth quarter of 2021. See Goodwill in Critical Accounting Policies and Estimates below for additional information.
Restructuring and Other Charges.   In 2022 and 2021, Restructuring and other charges were comprised of a net charge of $456 and $624, respectively. See Note E to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
Interest Expense.   Interest expense was $104 in 2022 compared to $100 in 2021. The increase of $4, or 4%, was primarily due to $87 in weighted-average borrowings under the ABL Credit Facility in 2022 (no borrowings occurred in 2021) and a $300 debt offering completed in March 2021, somewhat offset by higher capitalized interest. See Financing Activities under Liquidity and Capital Resources below for additional information related to these financing transactions.
Other Expenses, Net.   Other expenses, net was $41 in 2022 compared to $67 in 2021. See Note G to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
(Benefit) Provision for Income Taxes.   The Company’s effective tax rate, including discrete items, was 5.7% (benefit on a loss) in 2022 and 13.5% (benefit on a loss) in 2021. See Note I to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for a reconciliation of the effective tax rate for each of these years to the U.S. federal statutory rate of 21%.
Segment Information
Arconic’s operations consist of three reportable segments: Rolled Products, Building and Construction Systems, and Extrusions. Segment performance under the Company’s management reporting system is evaluated based on several factors; however, the primary measure of performance is Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization).
The Company calculates Segment Adjusted EBITDA as Total sales (third-party and intersegment) minus each of (i) Cost of goods sold, (ii) Selling, general administrative, and other expenses, and (iii) and Research and development expenses, plus each of (i) Stock-based compensation expense, (ii) Metal price lag, and (iii) Unrealized (gains) losses on mark-to-market hedging instruments and derivatives (see below). Arconic’s Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies’ reportable segments.
Effective in the first quarter of 2022, management modified the Company's definition of Segment Adjusted EBITDA to exclude the impact of unrealized gains and losses on mark-to-market hedging instruments and derivatives. This modification was deemed appropriate as Arconic is considering entering into additional hedging instruments in future reporting periods if favorable conditions exist to mitigate cost inflation. Certain of these instruments may not qualify for hedge accounting resulting in unrealized gains and losses being recorded directly to Sales or Cost of goods sold, as appropriate (i.e., mark-to-market). Additionally, this change was also applied to derivatives that do not qualify for hedge accounting for consistency purposes. The Company does not have a regular practice of entering into contracts that are treated as derivatives for accounting purposes. Ultimately, this change was made to maintain the transparency and visibility of the underlying operating performance of Arconic's reportable segments. Prior to this change, the Company had a limited number of hedging instruments and derivatives that did not qualify for hedge accounting, the unrealized impact of which was not material to Arconic's Segment Adjusted EBITDA performance measure. Accordingly, prior period information presented was not recast to reflect this change.
Segment Adjusted EBITDA for all reportable segments totaled $729 in 2022, $757 in 2021, and $648 in 2020. The following information provides Sales and Segment Adjusted EBITDA for each reportable segment for each of the three years in the period ended December 31, 2022. See Note D to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
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Rolled Products
202220212020
Third-party sales$7,313 $6,187 $4,335 
Intersegment sales44 33 19 
  Total sales$7,357 $6,220 $4,354 
Segment Adjusted EBITDA$581 $655 $527 
Third-party aluminum shipments (kmt)1,372 1,404 1,179 
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, ground transportation, packaging, building and construction, and industrial products (mainly used in the production of machinery and equipment and consumer durables) end markets. 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. Prices for these products 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. 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 (see below), the Chinese yuan, the euro, and the British pound.
On November 15, 2022, the Company completed the sale of all of its operations in Russia to Promishlennie Investitsii LLC, the majority owner of VSMPO-AVISMA Corporation. Arconic’s former operations in Russia were comprised of one principal location in Samara, which manufactured sheet, plate, extrusions, and forgings across all of the Company’s end markets. The Samara facility generated third-party sales of $903, $968, and $705, in 2022, 2021, and 2020, respectively, and, at the time of divestiture, had approximately 2,900 employees. See Note S to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
Sales.   Third-party sales for the Rolled Products segment increased $1,126, or 18%, in 2022 compared to 2021. The improvement was largely attributable to higher aluminum prices (see below), price increases for the pass-through of certain inflation impacts, favorable product mix, and favorable impacts from aluminum hedging activities partially offset by the divestiture of the Company’s Russian operations, unfavorable foreign currency movements due to a weaker euro, and a net decrease in volumes (see below).
The higher aluminum prices were mostly driven by a 9% rise in the average LME aluminum price and increases in regional premiums, including a 13% improvement in the average Midwest premium (United States).
The net decrease in volumes was negatively impacted by the absence of shipments from November 15, 2022 through December 31, 2022 due to the sale of this segment’s former operations in Russia (see Overview above). Otherwise, the overall net volume for this segment slightly increased in 2022 compared to 2021, largely driven by improvements in the packaging, aerospace, and automotive component of ground transportation end markets. Volume related to the packaging end market increased significantly as the can sheet operation at the Tennessee rolling mill essentially reached full capacity by the end of the 2022 second quarter. Higher volume associated with the aerospace end market was driven by continued recovery from the COVID-19 pandemic. An improvement in volume for the automotive component of ground transportation was due to slow recovery from the global semiconductor chip shortage. These higher volumes were mostly offset by declines in the industrial products, building and construction, and the commercial transportation component of ground transportation end markets, which were impacted by supply chain disruptions. Additionally, the Rolled Products segment experienced operational challenges and production outages associated with electrical and mechanical issues at the Tennessee and Lancaster rolling mills and disruptions in both the Tennessee and Davenport casting operations.
In March 2021, the Company entered into a settlement agreement with a customer related to the terms of an existing long-term contract. As a result, the customer agreed to pay Arconic $18, which was recognized over the applicable three-year period. Accordingly, in 2022 and 2021, Rolled Products’ sales included $6 and $12, respectively, associated with this settlement.
Segment Adjusted EBITDA.  Segment Adjusted EBITDA for the Rolled Products segment decreased $74, or 11%, in 2022 compared to 2021. The decline was primarily due to higher costs for alloying materials, energy, transportation, and maintenance all due to inflation, increased expenses for labor as this segment increases its workforce to address current and future volume growth, the impact of the previously mentioned operational challenges and production outages, and the divestiture of the Company’s Russian operations. These higher costs were partially offset by customer price increases due to adjustments for inflation impacts and a benefit derived from the absence of below normal absorption of fixed costs that occurred in the 2021 first quarter.
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Building and Construction Systems
202220212020
Third-party sales$1,245 $1,011 $963 
Segment Adjusted EBITDA$195 $130 $137 
Overview.   The Building and Construction Systems segment manufactures products that are used primarily 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. A limited amount of this segment’s product sales is directly impacted by metal pricing, which is a pass-through to the related 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 euro, the British pound, and Canadian dollar.
The Company is evaluating strategic options for the businesses that comprise the Building and Construction Systems segment. See Note S to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
Sales.   Third-party sales for the Building and Construction Systems segment increased $234, or 23%, in 2022 compared to 2021. The improvement was mostly due to multiple product price increases implemented since March 2021 across the entire portfolio to address inflationary cost pressures. Additionally, a positive impact from higher aluminum prices was virtually offset by a negative impact from unfavorable foreign currency movements due to a weaker euro.
Segment Adjusted EBITDA.   Segment Adjusted EBITDA for the Building and Construction Systems segment increased $65, or 50%, in 2022 compared to 2021. The improvement was principally driven by favorable product pricing, partially offset by higher costs for aluminum, alloying materials, maintenance, and transportation, all due to inflation.
Extrusions
202220212020
Third-party sales$409 $306 $381 
Segment Adjusted EBITDA$(47)$(28)$(16)
Third-party aluminum shipments (kmt)38 35 40 
Overview.   The Extrusions segment produces a range of extruded and machined parts for the aerospace, ground transportation, and industrial products end markets. These products are sold directly to customers and through distributors. Prices for these products 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. 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.
In the 2022 third quarter, management initiated a business review of the Extrusions segment aimed at identifying alternatives to improve the financial performance of this segment in future periods. Management continues to assess alternatives and no decisions or commitments were made as of December 31, 2022. In connection with this review, the Company updated its five-year strategic plan, the results of which indicated that there is an expected decline in the forecasted financial performance for the Extrusions segment (and asset group), including continued forecasted losses. As such, management evaluated the recoverability of the long-lived assets of the Extrusions asset group by comparing the aggregate carrying value to the undiscounted future cash flows. The result of this evaluation was that the long-lived assets were deemed to be impaired as the aggregate carrying value exceeded the undiscounted future cash flows. The impairment charge was measured as the difference between the aggregate carrying value and aggregate fair value of the long-lived assets. Fair value was determined using an orderly liquidation methodology for the machinery and equipment and a sales comparison approach for the land and structures. Significant judgments and assumptions were applied in estimating the fair value of the long-lived assets, including the use of market-based information specific to the machinery and equipment and information from recent sales or current listings of comparable properties for the land and structures. As a result, the Company recorded an impairment charge of $92, composed of $90 for Properties, plants, and equipment and $2 for intangible assets (included within Other noncurrent assets), in Restructuring and other charges on the Company's Statement of Consolidated Operations. See Note E to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K for additional information.
In the 2021 first quarter, management approved the idling of the casthouse at the Lafayette (Indiana) plant. Additionally, in the 2021 second quarter, management approved the idling of the remaining operations (primarily small presses) at the Chandler
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(Arizona) plant. These actions were deemed necessary to address the then-depressed demand related to the aerospace end market and identified operational inefficiencies in the Extrusions portfolio. The Lafayette casthouse action is near completion. Ultimately, the casthouse function will be fully outsourced to third-party vendors. The Chandler action was completed in the 2021 third quarter. The commercial operations related to Chandler were integrated into Lafayette for the foreseeable future. In 2021, the Company incurred certain charges related to these decisions such as inventory write-downs, severance costs, and customer qualification costs. These items were not material, individually or in the aggregate, and were reported in Corporate (i.e., not included in Extrusion’s Segment Adjusted EBITDA). The Company may temporarily restart one or more of the presses at Chandler over short periods of time to address customer demand requirements.
Sales.   Third-party sales for the Extrusions segment increased $103, or 34%, in 2022 compared to 2021. The improvement was largely attributable to favorable product mix, primarily due to higher volumes for aerospace; price increases due to adjustments for inflation impacts and higher aluminum prices; and a net increase in volumes, mostly driven by aerospace due to the lessened impact of the COVID-19 pandemic.
Segment Adjusted EBITDA.   Segment Adjusted EBITDA for the Extrusions segment decreased $19, or 68%, in 2022 compared to 2021. The decline was mostly related to higher costs for aluminum, maintenance, energy, transportation, and outside services. The higher costs were the result of both increased pricing due to inflation and usage due to operational issues. These negative impacts were mostly offset by customer price increases due to adjustments for inflation impacts. Overall, operational issues are driving underperformance in this segment.
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net Loss Attributable to Arconic Corporation
For the year ended December 31,202220212020
Total Segment Adjusted EBITDA
$729 $757 $648 
Unallocated amounts:
Corporate expenses(1)
(29)(33)(24)
Stock-based compensation expense(15)(22)(23)
 Metal price lag(2)
17 (16)(27)
Unrealized gains on mark-to-market hedging instruments and derivatives
— — 
Provision for depreciation and amortization(237)(253)(251)
Impairment of goodwill
— (65)— 
Restructuring and other charges(3),(4)
(456)(624)(188)
 Other(5)
(62)(36)(55)
Operating (loss) income
(47)(292)80 
Interest expense(104)(100)(118)
Other expenses, net
(41)(67)(70)
Benefit (Provision) for income taxes
11 62 (1)
Net income attributable to noncontrolling interest(1)— — 
Consolidated net loss attributable to Arconic(1)
$(182)$(397)$(109)
_____________________
(1)Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities. The amounts presented for all periods prior to second quarter 2020 include an allocation of ParentCo’s corporate expenses, including research and development expenses, for the portion of the period prior to the Separation Date.
(2)Metal price lag represents the financial impact of the timing difference between when aluminum prices included in Sales are recognized and when aluminum purchase prices included in Cost of goods sold are realized. This adjustment aims to remove the effect of the volatility in metal prices and the calculation of this impact considers applicable metal hedging transactions.
(3)