SECURITIES AND EXCHANGE COMMISSION



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Registrant’s telephone number including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	~~ARNC~~HWM	New York Stock Exchange
$3.75 Cumulative Preferred Stock, par value $100 per share	~~ARNC~~HWM PR	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ✓ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ✓ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of ~~November~~May 1, ~~2019,~~2020, there were ~~432,941,063~~436,103,413 shares of common stock, par value $1.00 per share, of the registrant outstanding.

On April 1, 2020, Arconic Inc. completed the separation of its business into two independent, publicly-traded companies: Howmet Aerospace Inc. (the new name for Arconic Inc.) and Arconic Corporation. The financial results of Howmet Aerospace Inc. prior to April 1, 2020 include the Global Rolled Products business (which became Arconic Corporation as of April 1, 2020).

Item 1. Financial Statements.

Restructuring and other charges (D)

Other expense, net (E)

Provision for income taxes (G)

Average Shares Outstanding (H):

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

Receivables from customers, less allowances of $4 in 2019 and 2018 (K)

Other receivables (K)

Receivables from customers, less allowances of $2 in 2020 and $3 in 2019 (J)

Other receivables (J)

Properties, plants, and equipment, net (L)

Other noncurrent assets (M)

Other current liabilities (N)

Other current liabilities (M)

Long-term debt, less amount due within one year (N and O)

Accrued pension benefits (F)

Accrued other postretirement benefits (F)

Contingencies and commitments (Q)

Additional capital (H)

Accumulated other comprehensive loss (J)

Accumulated other comprehensive loss (I)

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

Net periodic pension benefit cost (F)

Additions to debt (original maturities greater than three months) (N)

Proceeds from the sale of assets and businesses (P)

Cash receipts from sold receivables (J)

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

Adoption of accounting standards (I and M)

Other comprehensive income (I)

Other comprehensive income (J)

Other comprehensive loss (J)

Repurchase and retirement of common stock (H)

Other comprehensive loss (I)

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

Arconic Shareholders

Preferred
stock

Common
stock

Additional
capital
Accumulated deficit
Accumulated
other
comprehensive
loss

Noncontrolling
interests

Total
Equity
Balance at December 31, 2017 $ 55
$ 481
$ 8,266
$ (1,248 ) $ (2,644 ) $ 14
$ 4,924
Net income —
—
—
424
—
—
424
Other comprehensive income (J) —
—
—
—
100
—
100
Cash dividends declared:
Preferred-Class A @ $2.8125 per share —
—
—
(2 ) —
—
(2 )
Common @ $0.24 per share —
—
—
(117 ) —
—
(117 )
Stock-based compensation —
—
43
—
—
—
43
Common stock issued: compensation plans —
2
1
—
—
—
3
Balance at September 30, 2018 $ 55

$ 483

$ 8,310

$ (943 )
$ (2,544 )
$ 14

$ 5,375

Arconic Shareholders

Preferred
stock

Common
stock

Additional
capital
Accumulated deficit
Accumulated
other
comprehensive
loss

Noncontrolling
interests

Total
Equity
Balance at December 31, 2018 $ 55
$ 483
$ 8,319
$ (358 ) $ (2,926 ) $ 12
$ 5,585
Adoption of accounting standards(B)
—
—
—
75
(2 ) —
73
Net income —
—
—
161
—
—
161
Other comprehensive income (J)
—
—
—
—
—
—
—
Cash dividends declared:
Preferred-Class A @ $2.8125 per share —
—
—
(2 ) —
—
(2 )
Common @ $0.12 per share —
—
—
(55 ) —
—
(55 )
Repurchase and retirement of common stock (H)
—
(52 ) (1,048 ) —
—
—
(1,100 )
Stock-based compensation —
—
41
—
—
—
41
Common stock issued: compensation plans —
3
—
—
—
—
3
Other —
—
2
—
—
2
4
Balance at September 30, 2019 $ 55
$ 434
$ 7,314
$ (179 ) $ (2,928 ) $ 14

$ 4,710

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

~~Arconic~~Howmet Aerospace and subsidiaries (formerly known as Arconic Inc.)

Notes to the Consolidated Financial Statements (unaudited)

(dollars in millions, except per-share amounts)

A. Basis of Presentation

The interim Consolidated Financial Statements of Howmet Aerospace Inc. (formerly known as Arconic Inc.) and its subsidiaries (“~~Arconic”~~Howmet” or the “Company”) are unaudited. These Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The ~~2018~~2019 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). This Form 10-Q report should be read in conjunction with ~~Arconic’s~~the Company's Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, which includes all disclosures required by GAAP. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation (see Note C).

The separation of Arconic Inc. into 2 standalone, publicly-traded companies, Howmet Aerospace Inc. and Arconic Corporation, (the “Arconic Inc. Separation Transaction”) became effective on April 1, 2020 (see Note R).

The accompanying unaudited, interim Consolidated Financial Statements include the historical results of Arconic Corporation, as the Arconic Inc. Separation Transaction did not take place until April 1, 2020, after the most recent period reported in this Form 10-Q. In future filings, the historical results of the businesses that comprise Arconic Corporation will be presented as discontinued operations in Howmet’s Consolidated Financial Statements. As a result of the Arconic Inc. Separation Transaction, the accompanying unaudited, interim Consolidated Financial Statements are not indicative of the Company’s future financial position, results of operations or cash flows.

The Company derives a significant portion of its revenue from products sold to the aerospace end-market, including 71% of the Engineered Products and Forgings reportable segment. As a result of the global pandemic coronavirus (“COVID-19”) and its impact on the aerospace industry to-date, the possibility exists that there could be a sustained impact to our operations and financial results. Certain original equipment manufacturer (“OEM”) customers have reduced production or suspended manufacturing operations in North America and Europe on a temporary basis. These suspensions, the duration of which is uncertain, are impacting operations at certain of our facilities resulting in the temporary closure of a small number of manufacturing facilities. As a result, the Company is taking a series of actions to address the financial impact, including announcing certain headcount reductions and reducing certain cash outflows by suspending dividends on common stock and reducing the levels of its capital expenditures to preserve cash and maintain liquidity.

The preparation of the Consolidated Financial Statements of the Company in conformity with GAAP requires management to make certain judgments, estimates, and assumptions. These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience, including considerations relating to the impact of COVID-19. The impact of COVID-19 is rapidly changing and of unknown duration and macroeconomic impact and as a result, these considerations remain highly uncertain. We have made our best estimates using all relevant information available at the time, but it is possible that our estimates will differ from our actual results and affect the Consolidated Financial Statements in future periods and potentially require adverse adjustments to the recoverability to goodwill, intangible and long-lived assets, the realizability of deferred tax assets and other judgements and estimations and assumptions that may be impacted by COVID-19.

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

~~In February 2016,~~On January 1, 2020, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) issued changes to the accounting and presentation of leases. These changes require lessees to recognize a right-of-use asset and lease liability on the balance sheet, initially measured at the present value of the future lease payments for all operating leases with a term greater than 12 months.

These changes became effective for Arconic on January 1, 2019 and have been applied using the modified retrospective approach as of the date of adoption, under which leases existing at, or entered into after, January 1, 2019 were required to be recognized and measured. Prior period amounts have not been adjusted and continue to be reflected in accordance with the Company’s historical accounting. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. The Company also elected to separate lease components from non-lease components for all classes of assets.

The adoption of this new standard resulted in the Company recording operating lease right-of-use assets and lease liabilities of approximately $320 on the Consolidated Balance Sheet as of January 1, 2019. Also, the Company reclassified cash proceeds of $119 from Other noncurrent liabilities and deferred credits, assets of $24 from Properties, plants, and equipment, net, and deferred tax assets of $22 from Other noncurrent assets to Accumulated deficit reflecting the cumulative effect of an accounting change("FASB") related to the ~~sale-leaseback of the Texarkana, Texas cast house (see Note~~ Q~~). The adoption of the standard had no impact on the Statement of Consolidated Operations or Statement of Consolidated Cash Flows.~~

~~In August 2017, the FASB issued guidance that made more financial and nonfinancial hedging strategies eligible~~impairment model for hedge accounting. It also amended the presentation and disclosure requirements and changed how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. These changes became effective for Arconic on January 1, 2019. For cash flow hedges, Arconic recorded a cumulative effect adjustment of $2 related to eliminating the separate measurement of ineffectiveness by decreasing Accumulated other comprehensive loss and increasing Accumulated deficit on the accompanying Consolidated Balance Sheet.expected credit losses. The amendments to presentation and disclosure are required prospectively. Arconic has determined that under the new accounting guidance it is able to more broadly use cash flow hedge accounting for its variable priced inventory purchases and customer sales.

In March 2019, the Securities and Exchange Commission (SEC) issued guidance to modernize and simplify certain disclosure requirements in a manner that reduces the costs and burdens on preparers while continuing to provide all material information to investors. This guidance became effective on May 2, 2019 and has been applied to filings thereafter. The adoption of this guidance did not have a material impact on the Notes to Consolidated Financial Statements.

~~Issued~~

~~In June 2016, the FASB added a~~ new impairment model (known as the current expected credit loss ~~(CECL)~~("CECL") model) ~~that~~ is based on expected losses rather than incurred losses. ~~Under the new guidance, an entity~~The Company recognizes as an allowance its estimate of expected credit losses. The CECL model applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan ~~commitments. The CECL model does not have a minimum threshold for recognition~~commitments and requires the measurement of ~~impairment losses and entities will need to measure~~ expected credit losses on assets including those that have a low risk of loss. ~~These changes become effective for Arconic on January 1, 2020. Management has determined that the~~The adoption of this new guidance ~~will~~did not have a material impact on the Consolidated Financial Statements.

Issued

In August 2018, the FASB issued guidance that impacts disclosures for defined benefit pension plans and other postretirement benefit plans. These changes become effective for ~~Arconic's~~the Company's 2020 annual ~~report for the year ending December 31, 2020, with early adoption permitted.~~report. Management has determined that the adoption of this guidance will not have a material impact on the Consolidated Financial Statements and plans to adopt for the 2020 annual report.

In December 2019, the FASB issued guidance that is intended to simplify various aspects related to the accounting for income taxes. These changes become effective on January 1, 2021, with early adoption permitted. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements and plans to adopt on January 1, 2021.

In March 2020, the FASB issued amendments that provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.

C. Segment Information

Arconic is a global leader in lightweight metals engineering and manufacturing. Arconic’s innovative, multi-material products, which include aluminum, titanium, and nickel, are used worldwide in aerospace, automotive, commercial transportation, building and construction, industrial applications, defense, and packaging. Arconic has 2 operating and reportable segments, which are organized by product on a worldwide basis: Engineered Products and Forgings (EP&F) (formerly named the Engineered Products and Solutions segment) and Global Rolled Products (GRP) (see further details below). Segment performance under Arconic’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment operating profit. Arconic’s definition of Segment operating profit is Operating income excluding Special items. Special items include Restructuring and other charges. Segment operating profit includes the impact of LIFO inventory accounting, metal price lag, intersegment profit eliminations, and derivative activities. Segment operating profit may not be comparable to similarly titled measures of other companies. Differences between segment totals and consolidated Arconic are in Corporate.

In the third quarter of 2019, the Company realigned its operations by eliminating its Transportation and Construction Solutions (TCS) segment and transferring the Forged Wheels business to its Engineered Products and Forgings ("EP&F&F") segment and the Building and Construction Systems ~~(BCS)~~("BCS") business to its ~~GRP~~Global Rolled Products ("GRP") segment, consistent with how the Chief Executive Officer iswas assessing operating performance and allocating capital in conjunction with the ~~planned separation of the Company~~Arconic Inc. Separation Transaction (see Note SR). ~~The Latin American extrusions business, which was formerly part of the Company's TCS segment until its sale in April of 2018 (see Note~~ Q), was moved to Corporate. In the first quarter of 2019, management transferred its aluminum extrusions operations (Aluminum Extrusions) from its Engineered Structures business unit within the EP&F segment to the GRP segment, based on synergies with GRP including similar customer base, technologies, and manufacturing capabilities. Prior period financial information has been recast to conform to current year presentation.

AsEngineered Products and Forgings. This segment produces products that are used primarily in the aerospace (commercial and defense), industrial, commercial transportation, and power generation end markets. Such products include fastening systems (titanium, steel, and nickel superalloys) and seamless rolled rings (mostly nickel superalloys); investment castings (nickel superalloys, titanium, and aluminum), including airfoils; forged jet engine components (e.g., jet engine disks); extruded, machined and forged aircraft parts (titanium and aluminum); and forged aluminum commercial vehicle wheels, all of which are sold directly to customers and through distributors.

Global Rolled Products. This segment produces aluminum sheet and plate, aluminum extruded and machined parts, integrated aluminum structural systems, and architectural extrusions used in the automotive, aerospace, building and construction, industrial, packaging, and commercial transportation end markets. Products are sold directly to customers and through distributors. While the customer base for flat-rolled products is large, a ~~result~~significant amount of sales of sheet and plate are to a relatively small number of customers. This segment became part of Arconic Corporation as part of the ~~elimination of the TCS segment in the third quarter of 2019 as noted above, the~~Arconic Inc. Separation Transaction on April 1, 2020.

The Company ~~transferred its existing Forged Wheels goodwill of $7 and its existing BCS goodwill of $68 from the TCS segment to the EP&F segment and GRP segment, respectively. Both Forged Wheels and BCS~~ will continue to ~~be reporting units~~evaluate its organizational structure and portfolio in conjunction with the Arconic Inc. Separation Transaction (see Note R), which may result in further changes to its reportable segments and the need to evaluate goodwill and long-lived assets for ~~purposes~~impairment in future periods.

Goodwill. The Company had $4,457 of ~~evaluating goodwill~~Goodwill at March 31, 2020 and we review it for ~~impairment. In~~impairment annually in the ~~second~~fourth quarter ~~of 2019,~~or more frequently if indicators exist or if a decision is made to sell or realign a business.

On January 1, 2020, management transferred ~~its castings operations~~the Savannahbusiness from Engine Products to Engineered Structures within the Engineered ~~Structures business unit to the Engine~~ Products ~~business unit within the EP&F~~and Forgings segment, based on process expertise for investment castings that existed within Engine Products. As a result, goodwill of $105 was reallocated from the Engineered Structures reporting unit to the Engine Products reporting unitsynergies with forgings technologies and these reporting units were evaluated for impairment during the second quarter of 2019. The estimated fair value of each of these reporting units substantially exceeded their carrying value; thus, there was no impairment. Also in the second quarter of 2019, as a result of the decline in the forecasted financial performance and related impairment of long-lived assets of the Disks asset group within the Engine Products business unit (see Note M), an additional evaluation of the Engine Products reporting unit goodwill was performed. The estimated fair value of the reporting unit was substantially in excess of its carrying value; thus, there was no impairment of goodwill.manufacturing capabilities. As a result of the reorganization, goodwill of Aluminum Extrusions in the first quarter of 2019 as noted above, management assessed and concluded that the remaining Engineered Structures business unit and the Aluminum Extrusions business unit represent reporting units for purposes of evaluating goodwill for impairment. Goodwill of $110$17 was reallocated from ~~the~~Engine Products to Engineered Structures, ~~reporting unit to the Aluminum Extrusions reporting unit~~ and these reporting units were evaluated for impairment during the first quarter of ~~2019.~~2020. The estimated fair value of each of these reporting units substantially exceeded their carrying value; thus, there was no goodwill ~~impairment.~~impairment at the date the business was transferred.

During the first quarter of 2020, Howmet’s market capitalization declined significantly compared to the fourth quarter of 2019. Over the same period, the equity value of our peer group companies, and the overall U.S. stock market also declined significantly amid market volatility. In addition, as a result of the COVID-19 pandemic and measures designed to contain the spread, sales globally to customers in the aerospace and commercial transportation industries that are impacted by COVID-19 have been and are expected to be negatively impacted as a result of disruption in demand. As a result of these macroeconomic factors, we performed a qualitative impairment test to evaluate whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value. As a result of this assessment, the Company performed a quantitative impairment test for the Engineered Structures reporting unit and concluded that though the margin between the fair value of the reporting unit and carrying value had declined from approximately 60% to approximately 15%, it was not impaired. Consistent with prior practice, a discounted cash flow model was used to estimate the current fair value of the reporting unit. The significant assumptions and estimates utilized to determine fair value were developed utilizing current market and forecast information reflecting the disruption in demand that has and is expected to negatively impact the Company’s sales globally in the aerospace industry. If our actual results or external market factors decline significantly from management’s estimates, future goodwill impairment charges may be necessary and could be material.

The operating results of ~~Arconic’s~~the Company’s reportable segments were as follows:


	Engineered Products and Forgings		Global Rolled Products		Total Segment
First quarter ended March 31, 2020
Sales:
Third-party sales	$	1,631	$	1,578	$	3,209
Intersegment sales	—		35		35
Total sales	$	1,631	$	1,613	$	3,244
Profit and loss:
Segment operating profit	$	339	$	169	$	508
Restructuring and other charges (credits)	34		(18)		16
Provision for depreciation and amortization	65		57		122
Capital expenditures	36		22		58

First quarter ended March 31, 2019
Sales:
Third-party sales	$	1,756	$	1,784	$	3,540
Intersegment sales	—		52		52
Total sales	$	1,756	$	1,836	$	3,592
Profit and loss:
Segment operating profit	$	313	$	135	$	448
Restructuring and other charges	18		11		29
Provision for depreciation and amortization	71		59		130
Capital expenditures	117		39		156

Engineered Products and Forgings Global Rolled Products
Total
Segment
Third quarter ended September 30, 2019
Sales:
Third-party sales $ 1,794
$ 1,763
$ 3,557
Intersegment sales —
41
41
Total sales $ 1,794
$ 1,804
$ 3,598
Profit and loss:
Segment operating profit $ 363
$ 161
$ 524
Restructuring and other charges 45
62
107
Provision for depreciation and amortization 65
57
122

Third quarter ended September 30, 2018
Sales:
Third-party sales $ 1,683

$ 1,839
$ 3,522
Intersegment sales —
44
44
Total sales $ 1,683
$ 1,883
$ 3,566
Profit and loss:
Segment operating profit $ 284
$ 107
$ 391
Restructuring and other charges 15
2
17
Provision for depreciation and amortization 73
61
134

Engineered Products and Forgings Global Rolled Products
Total
Segment
Nine months ended September 30, 2019
Sales:
Third-party sales $ 5,372
$ 5,415
$ 10,787
Intersegment sales —
142
142
Total sales $ 5,372
$ 5,557
$ 10,929
Profit and loss:
Segment operating profit $ 1,036
$ 475
$ 1,511
Restructuring and other charges 506
99
605
Provision for depreciation and amortization 206
175
381

Nine months ended September 30, 2018
Sales:
Third-party sales $ 5,083
$ 5,468
$ 10,551
Intersegment sales —
161
161
Total sales $ 5,083
$ 5,629
$ 10,712
Profit and loss:
Segment operating profit $ 837
$ 388
$ 1,225
Restructuring and other charges 24
3
27
Provision for depreciation and amortization 217
185
402

The following table reconciles Total segment operating profit to Consolidated income before income taxes:

Third quarter ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Total segment operating profit $ 524
$ 391
$ 1,511
$ 1,225
Unallocated amounts:
Restructuring and other charges (119 ) 2
(630 ) (20 )
Corporate expense (79 ) (48 ) (262 ) (203 )
Consolidated operating income $ 326
$ 345
$ 619
$ 1,002
Interest expense (86 ) (88 ) (256 ) (291 )
Other expense, net (31 ) (8 ) (92 ) (69 )
Consolidated income before income taxes $ 209
$ 249
$ 271
$ 642

~~The total assets of Arconic's reportable segment were as follows:~~

September 30, 2019 December 31, 2018
Engineered Products and Forgings $ 10,180
$ 10,384
Global Rolled Products 5,101
4,955
Total segment assets $ 15,281
$ 15,339

~~Segment assets at September 30, 2019 included operating lease right-of-use assets (see Notes~~B ~~and~~ N~~). Segment assets for the EP&F segment at September 30, 2019 were impacted by a long-lived asset impairment charge of $428 recorded in the second quarter of 2019 (see Note~~ M).

~~The following table reconciles Total segment assets to Consolidated assets:~~

September 30, 2019 December 31, 2018
Total segment assets $ 15,281
$ 15,339
Unallocated amounts:
Cash and cash equivalents 1,321
2,277
Deferred income taxes 466
573
Corporate fixed assets, net 320
334
Fair value of derivative contracts 11
37
Other 85
133
Consolidated assets $ 17,484
$ 18,693


	First quarter ended
	March 31,
	2020		2019
Total segment operating profit	$	508	$	448
Unallocated amounts:
Restructuring and other charges	(21)		(12)
Corporate expense	(88)		(62)
Consolidated operating income	$	399	$	374
Interest expense	(91)		(85)
Other expense, net	(17)		(32)
Consolidated income before income taxes	$	291	$	257

The following table disaggregates revenue by major end market served. Differences between segment ~~totals~~ and consolidated ~~Arconic~~totals are in Corporate. ~~For the nine months ended September 30, 2018, Corporate included $38 of costs related to settlements of certain customer claims primarily related to product introductions.~~


	Engineered Products and Forgings		Global Rolled Products		Total Segment
First quarter ended March 31, 2020
Aerospace	$	1,189	$	285	$	1,474
Transportation	256		509		765
Building and construction	—		291		291
Industrial and Other	186		493		679
Total end-market revenue	$	1,631	$	1,578	$	3,209

First quarter ended March 31, 2019
Aerospace	$	1,250	$	302	$	1,552
Transportation	343		649		992
Building and construction	—		330		330
Industrial and Other	163		503		666
Total end-market revenue	$	1,756	$	1,784	$	3,540

Engineered
Products and
Forgings

Global Rolled
Products

Total
Segment
Third quarter ended September 30, 2019
Aerospace $ 1,290
$ 300
$ 1,590
Transportation 319
587
906
Building and construction —
329
329
Industrial and Other 185
547
732
Total end-market revenue $ 1,794
$ 1,763
$ 3,557

Third quarter ended September 30, 2018
Aerospace $ 1,190
$ 274
$ 1,464
Transportation 319
654
973
Building and construction —
352
352
Industrial and Other 174
559
733
Total end-market revenue $ 1,683
$ 1,839
$ 3,522

Nine months ended September 30, 2019
Aerospace $ 3,823
$ 931
$ 4,754
Transportation 1,004
1,868
2,872
Building and construction —
1,004
1,004
Industrial and Other 545
1,612
2,157
Total end-market revenue $ 5,372
$ 5,415
$ 10,787

Nine months ended September 30, 2018
Aerospace $ 3,519
$ 802
$ 4,321
Transportation 981
1,914
2,895
Building and construction —
1,033
1,033
Industrial and Other 583
1,719
2,302
Total end-market revenue $ 5,083
$ 5,468
$ 10,551

D. Restructuring and Other Charges

In the ~~third~~first quarter of ~~2019, Arconic~~2020, the Company recorded Restructuring and other charges of ~~$119~~$21 ($~~114~~23 after-tax), which ~~included: a charge of $102~~included $22 ($~~102 after-tax) for impairment of assets associated with agreements to sell the Company's Brazilian rolling mill operations ($59) and U.K. forgings business ($43) (see Note~~ Q); a charge of $8 ($6 after-tax) for impairment of properties, plants, and equipment related to the Company’s primary research and development facility; a charge of $4 ($3 after-tax) for pension plan settlement accounting; a charge of $4 ($3 after-tax) for accelerated depreciation; a charge of $2 ($1 after-tax) for layoff costs associated with the separation of 56 employees in the GRP segment; and a benefit of $1 ($1 after-tax) for the reversal of layoff reserves related to prior periods.

In the nine months ended September 30, 2019, Arconic recorded Restructuring and other charges of $630 ($521 after-tax), which included: a charge of $428 ($345 after-tax) for impairment of the Disks long-lived asset group (see Note M); a charge of $102 ($102 after-tax) for impairment of assets associated with agreements to sell the Company's Brazilian rolling mill operations ($59) and U.K. forgings business ($43); a charge of $97 ($7417 after-tax) for layoff costs, including the separation of ~~1,183~~approximately 460 employees ~~(463~~(440 in the Engineered Products and Forgings segment and 20 in Corporate); $12 ($12 after-tax) for impairment of assets associated with an agreement to sell an aerospace components business in the U.K.; a $6 ($6 after-tax) post-closing adjustment related to the sale of the Company’s U.K. forgings business; a $6 ($6 after-tax) loss on sale of the Company’s Brazilian rolling mill operations; and a $6 ($6 after-tax) charge for other exit costs related to prior programs; offset by a gain of $27 ($20 after-tax) on the sale of an extrusions business in South Korea; a benefit of $2 ($2 after-tax) related to the reversal of a number of prior period programs; and a gain of $2 ($2 after-tax) on the sale of assets.

In the first quarter of 2019, the Company recorded Restructuring and other charges of $12 ($10 after-tax), which included $65 ($51 after-tax) for layoff costs, including the separation of approximately 800 employees (425 in Corporate, ~~350~~211 in the ~~EP&F~~Engineered Products and Forgings segment, and ~~370~~164 in the ~~GRP~~Global Rolled Products segment); a $2 ($1 after-tax) net charge for executive severance net of the benefit of forfeited executive stock compensation; a pension settlement charge of $2 ($2 after-tax); and $1 ($1 after-tax) for other miscellaneous items; offset by a benefit of $58 ($45 after-tax) related to the elimination of life insurance benefits for U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries.

As of March 31, 2020, NaN of the 460 employees associated with the 2020 restructuring programs were separated. Most of the separations for the 2020 restructuring programs are expected to be completed in 2020. As of March 31, 2020, approximately

1,053 of the 1,310 employees associated with the 2019 restructuring programs were separated. The remaining separations for the 2019 restructuring programs are expected to be completed in 2020. In the first quarter ended March 31, 2020, the Company made cash payments of $7 against layoff reserves related to 2019 restructuring programs.

Activity and reserve balances for restructuring and other charges were as follows:


	Layoff costs		Other exit costs		Total
Reserve balances at December 31, 2018	$	10	$	15	$	25
Cash payments	(74)		(5)		(79)
Restructuring charges	56		574		630
Other⁽¹⁾	39		(581)		(542)
Reserve balances at December 31, 2019	31		3		34
Cash payments	(7)		—		(7)
Restructuring charges	20		1		21
Other⁽²⁾	—		(2)		(2)
Reserve balances at March 31, 2020	$	44	$	2	$	46

⁽¹⁾In 2019, Other for layoff costs included reclassifications of a $58 credit for elimination of life insurance benefits for U.S. salaried and non-bargaining hourly retirees, a charge of ~~$24 ($18 after-tax)~~$9 for pension plan settlement accounting, as the impacts were reflected in the Company's separate liabilities for Accrued pension benefits and Accrued postretirement benefits and reversals of previously recorded restructuring charges of $10.

In 2019, Other for other exit costs included a charge of $428 for impairment of the Disks long-lived asset group; a charge of $112 for impairment of assets associated with agreement to sell the Company’s Brazilian rolling mill operations, the U.K. forgings business, and a small additive business; a charge of $25 for impairment of properties, plants, and equipment related to the Company’s primary research and development facility and a trade name intangible asset; a charge of $12 ~~($9 after-tax)~~ for ~~other exit costs from~~ lease ~~terminations, primarily related to the exit of the corporate aircraft;~~terminations; a charge of $12 ($9 after-tax) from the loss on sale of assets primarily related to a small additive business; a charge of $8 ($6 after-tax) for pension plan settlement accounting; charge of $6 ($5 after-tax) for accelerated

depreciation; a net charge of $2 ($1 after-tax) for executive severance net of the benefit of forfeited executive stock compensation; and a charge of $1 ($1 after-tax) for other miscellaneous items; partially offset by a benefit of $58 ($45 after-tax) related to the elimination of the life insurance benefit for the U.S. salaried and non-bargaining hourly retirees of the Company and its subsidiaries; and a benefit of $4 ($4 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

On October 18, 2019, the Company announced that it would curtail operations at its GRP plant in San Antonio, Texas before the end of 2019. The plant generates approximately $50 of annual revenue. The business will be transferred into other mills, which will improve the overall effectiveness of the Company’s GRP operations. The Company expects to record a restructuring charge of approximately $4 in the fourth quarter of 2019 associated with this curtailment.

~~In the third quarter of 2018, Restructuring and other charges was a net benefit of $2 ($3 after-tax), which included a postretirement curtailment benefit of $28 ($22 after-tax) (see Note~~ F); a charge of $12 ($9 after-tax) for contract termination costs and asset impairments associated with the shutdown of a facility in Acuna, Mexico; a charge of $8 ($6 after-tax) for layoff costs, including the separation of approximately 85 employees (65 in the EP&F segment and 20 in Corporate); a charge of $4 ($3 after-tax) for pension plan settlement accounting; a charge of $3 ($2 after-tax) for other miscellaneous items; and a benefit of $1 ($1 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

In the nine months ended September 30, 2018, Arconic recorded Restructuring and other charges of $20 ($14 after-tax), which included a postretirement curtailment benefit of $28 ($22 after-tax) (see Note F); a charge of $14 ($11 after-tax) for pension curtailments; a charge of $16 ($12 after-tax) for layoff costs, including the separation of approximately 125 employees (89 in the EP&F segment and 36 in Corporate); a charge of $12 ($9 after-tax) related to the shutdown of a facility in Acuna, Mexico as noted above; a charge of $7 ($5 after-tax) for other miscellaneous items; a charge of $5 ($4 after-tax) for exit costs primarily related to the New York office; a charge of $4 ($3 after-tax) for pension plan settlement accounting; and a benefit of $10 ($8 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

As of September 30, 2019, approximately 745 of the 1,183 employees associated with the 2019 restructuring programs were separated. The 2018 and 2017 restructuring programs are essentially completed. Most of the remaining separations for the 2019 restructuring programs are expected to be completed in the first half of 2020. For the third quarter and nine months ended September 30, 2019, Arconic made cash payments of $21 and $61, respectively.

~~Activity and reserve balances for restructuring and other charges were as follows:~~

Layoff
costs

Other exit
costs
Total
Reserve balances at December 31, 2017 $ 56
$ 2
$ 58
Cash payments (47 ) (2 ) (49 )
Restructuring charges 111
13
124
Other⁽¹⁾
(110 ) 2
(108 )
Reserve balances at December 31, 2018 10
15
25
Cash payments (61 ) (4 ) (65 )
Restructuring charges 45
585
630
Other⁽²⁾
50
(591 ) (541 )
Reserve balances at September 30, 2019 $ 44
$ 5
$ 49

In 2019, Other for other exit costs included a charge of $428 for impairment of the Disks long-lived asset group; a charge of $102 for impairment of assets associated with agreements to sell the Company's Brazilian rolling mill operations and UK forgings business; a charge of $24 for impairment of properties, plants, and equipment related to the Company’s primary research and development facility and a trade name intangible asset; a charge of $12 from the loss on sale of assets primarily related to a small additive business; a charge of $12 for lease terminations; and a charge of $6$9 for accelerated depreciation as the impacts were primarily reflected in various noncurrent asset accounts; a charge of $5 related to the impairment of a cost method investment of the GRP segment, and a charge of $1 related to other miscellaneous items; partially offset

by a ~~credit~~gain of ~~$2.~~$20 related to contingent consideration from the Texarkana sale. Additionally, Other included the reclassification of $9 in lease exit costs to reduce right-of-use assets within Other noncurrent assets in accordance with the new lease accounting standard.

⁽²⁾In 2020, Other for other exit costs included a gain of $27 on sale of the Company’s extrusions business in South Korea; a gain of $2 on the sale of assets; a charge of $12 for impairment of assets associated with an agreement to sell an aerospace component business in the U.K., a $6 post-closing adjustment related to the sale of the Company’s U.K. forgings business; a $6 loss on the sale of the Company’s Brazilian rolling mill operations; and a $3 charge for other exit costs.

The remaining reserves are expected to be paid in cash during ~~2019, with the exception of approximately $15, which is expected to be paid in the first half of 2020 related to severance payments.~~2020.

E. Other Expense, Net

Third quarter ended
Nine months ended
September 30,
September 30,

2019
2018
2019 2018
Non-service related net periodic benefit cost $ 30
$ 27
$ 88
$ 83
Interest income (5 ) (6 ) (21 ) (16 )
Foreign currency losses, net 7
6
3
20
Net loss from asset sales 2
2
6
7
Other, net (3 ) (21 ) 16
(25 )
$ 31
$ 8
$ 92
$ 69


	First quarter ended
	March 31,
	2020		2019
Non-service related net periodic benefit cost	$	25	$	29
Interest income	(4)		(10)
Foreign currency losses, net	11		—
Net loss from asset sales	2		2

Other, net	(17)		11
	$	17	$	32

~~For the third quarter and nine months ended September 30, 2018,~~ Other, net included ~~a benefit from establishing a tax indemnification receivable~~the impacts of ~~$29 reflecting Alcoa Corporation’s 49% share~~deferred compensation arrangements of ~~a Spanish tax reserve (see Note~~ $16 related to investment performance which were favorable in the first quarter of 2020, but unfavorable of $10 in the first quarter of 2019.

R).

F. Pension and Other Postretirement Benefits

The components of net periodic benefit cost were as follows:


	First quarter ended
	March 31,
	2020		2019
Pension benefits
Service cost	$	7	$	7
Interest cost	47		59
Expected return on plan assets	(70)		(72)
Recognized net actuarial loss	42		35

Settlements	—		2


Net periodic benefit cost⁽¹⁾	$	26	$	31

Other postretirement benefits
Service cost	$	1	$	2
Interest cost	6		7
Recognized net actuarial loss	2		1
Amortization of prior service cost (benefit)	(2)		(1)
Curtailments	—		(58)

Net periodic benefit cost⁽¹⁾	$	7	$	(49)

Third quarter ended Nine months ended
September 30,
September 30,
2019 2018
2019 2018
Pension benefits
Service cost $ 6
$ 9
$ 19
$ 37
Interest cost 59
54
177
164
Expected return on plan assets (71 ) (76 ) (214 ) (230 )
Recognized net actuarial loss 35
42
104
126
Amortization of prior service cost (benefit) —
1
1
3
Settlements 4
4
8
4
Curtailments —
—
—
14
Net periodic benefit cost⁽¹⁾
$ 33
$ 34
$ 95
$ 118

Other postretirement benefits
Service cost $ 1
$ 2
$ 5
$ 6
Interest cost 7
7
21
21
Recognized net actuarial loss 1
1
3
5
Amortization of prior service cost (benefit) (1 ) (2 ) (4 ) (6 )
Curtailments —
(28 ) (58 ) (28 )
Net periodic benefit cost⁽¹⁾
$ 8
$ (20 ) $ (33 ) $ (2 )

⁽¹⁾Service cost was included within Cost of goods sold, Selling, general administrative, and other expenses, and Research and development expenses; settlements and curtailments were included in Restructuring and other charges; and all other cost components were recorded in Other expense, net in the Statement of Consolidated Operations.


⁽¹⁾	Service cost was included within Cost of goods sold, Selling, general administrative, and other expenses, and Research and development expenses; settlements and curtailments were included in Restructuring and other charges; and all other cost components were recorded in Other expense, net in the Statement of Consolidated Operations.

In the first quarter of 2019, the Company communicated to plan participants that ~~effective May 1, 2019, the life insurance benefit~~ for its U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries, it would ~~be eliminated.~~eliminate the life insurance benefit effective May 1, 2019, and certain health care subsidies effective December 31, 2019. As a result of ~~this change,~~these changes, in the first quarter of 2019, the Company recorded a decrease to the Accrued other postretirement benefits liability of ~~$63,~~$75, which was offset by a curtailment benefit of $58 in Restructuring and other charges and $5$17 in Accumulated other comprehensive loss.

~~Additionally, in~~In the first quarter of 2019, the Company communicated to plan participants that, effective December 31, 2019, it will eliminate certain health care subsidies for its U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries. As a result of this change, in the first quarter of 2019, the Company recorded a decrease to the Accrued other postretirement benefits liability of $12, which was offset in Accumulated other comprehensive loss.

During the third quarter of 2016, the Pension Benefit Guaranty Corporation approved management’s plan to separate the Alcoa Inc. pension plans between Arconic Inc. and Alcoa Corporation. The plan stipulated that Arconic make cash contributions of $150 over a period of 30 months (from November 1, 2016) to its two largest pension plans. The Company satisfied the requirements of the plan by making payments of $34, $66, and $50 in April 2019, March 2018, and April 2017, respectively.

~~In the nine months ended September 30,~~ 2019, the Company applied settlement accounting to U.S. pension plans due to lump sum payments to participants which resulted in settlement charges of $8$2 that were recorded in Restructuring and other charges.

In June of 2019, the Company and the United Steelworkers (USW) reached a tentative three-year labor agreement covering approximately 3,400 employees at 4 U.S. locations; the previous labor agreement expired on May 15, 2019. The tentative agreement was ratified on July 11, 2019. In the second quarter of 2019, Arconic recognized $9 in Cost of goods sold on the accompanying Statement of Consolidated Operations primarily for a one-time signing bonus for employees.

~~On July 25, 2019, the USW ratified a new four-year labor agreement covering approximately 560 employees at the Company’s Niles, Ohio facility. The prior labor agreement expired on June 30, 2018.~~

On April 1, 2018, benefit accruals for future service and compensation under all of the Company's qualified and non-qualified defined benefit pension plans for U.S. salaried and non-bargaining hourly employees ceased. As a result of this change, in the first quarter of 2018, the Company recorded a decrease to the Accrued pension benefit liability of $136 related to the reduction of future benefits ($141 offset in Accumulated other comprehensive loss) and curtailment charges of $5 in Restructuring and other charges.

On April 13, 2018, the United Auto Workers ratified a new five-year labor agreement, covering approximately 1,300 U.S. employees of Arconic, which expires on March 31, 2023. A provision within the agreement includes a retirement benefit increase for future retirees that participate in a defined benefit pension plan, which impacts approximately 300 of those employees. In addition, effective January 1, 2019, benefit accruals for future service ceased. As result of these changes, a curtailment charge of $9 was recorded in Restructuring and other charges in the second quarter of 2018.

In the third quarter of 2018, the Company announced that effective December 31, 2018, it would end all pre-Medicare medical, prescription drug and vision coverage for current and future salaried and non-bargained hourly employees and retirees of the Company and its subsidiaries. As a result of this change, in the third quarter of 2018, the Company recorded a decrease to the Accrued other postretirement benefits liability of $32 related to the reduction of future benefits, $4 offset in Accumulated other comprehensive loss, and a curtailment benefit of $28 in Restructuring and other charges.

~~In the third quarter of 2018, settlement accounting applied to a U.S. pension plan due to the payment of lump sums, resulting in a charge of $4 that was recorded in Restructuring and other charges.~~

G. Income Taxes

~~Arconic’s~~The Company’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pre-tax ordinary income. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur. In addition, the tax provision is adjusted for the interim period impact of non-benefited pre-tax losses.

~~The~~For the first quarter of 2020 and 2019, the estimated annual effective tax rate, before discrete items, applied to ordinary income was ~~43.9%~~27.9% and 25.9%, respectively. The rate in ~~both the third quarter and nine months ended September 30, 2019, and 26.5% in both the third quarter and nine months ended September 30, 2018. The estimated annual rates in 2019 and 2018 were~~each period was higher than the U.S. federal statutory rate of ~~21.0%~~21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income, ~~the~~ state ~~tax impact of domestic taxable~~ income taxes, and foreign income taxed in higher rate jurisdictions. The ~~2019~~2020 estimated annual effective tax rate was also ~~increased by certain nondeductible~~higher due to tax expense resulting from non-deductible transaction costs and restructuring related tocapital gains associated with the ~~proposed separation transaction and the impairment of certain domestic and foreign assets.~~Arconic Inc. Separation Transaction.

For the ~~third~~first quarter of ~~2019~~2020 and ~~2018,~~2019, the tax rate including discrete items was ~~54.5%~~26.1% and ~~35.3%~~27.2%, ~~respectively. For the third quarter of 2019, the Company recorded~~respectively, and included a discrete charge of $10 related to the following: a charge of $9 for the adjustment of prior year taxes, a charge of $2 for interest accruals for the potential underpayment of taxes, and a benefit of $1 to remeasure certain deferred tax assets as a result of a foreign tax rate change. For the third quarter of 2018, the Company recorded a discrete charge of $26 related to the following: a charge of $59 to establish a tax reserve in Spain (see Note R~~), a charge of $13 related to prior year adjustments to various jurisdictions, a benefit of $38 for the reversal of a foreign tax reserve that is effectively settled, and a~~ benefit of $8 ~~for the reduction to the estimate of the then provisional impact of the Tax Cut and Jobs Act of 2017.~~

For the nine months ended September 30, 2019 and 2018, the tax rate including discrete items was 40.6% and 34.0%, respectively. For the nine months ended September 30, 2019, the Company recorded a discrete benefit of $25 related to the following: a benefit of $25 to deduct prior year foreign taxes rather than claim a U.S. foreign tax credit and a benefit of $13 to remeasure certain deferred tax assets as a result of a foreign tax rate change, partially offset by a charge of $9 for the adjustment of prior year taxes, a charge of $2 for interest accruals for the potential underpayment of taxes, and a net charge $2 for a number of small items. For the nine months ended September 30, 2018 the Company recorded a discrete charge of $49 related to the following: a charge of $59 to establish a tax reserve in Spain (see Note R~~), a charge of $13~~ primarily related to revised estimates of the then provisional impact for the Tax Cuts and Jobs Act of 2017, a charge of $13 related to prior year adjustments to various jurisdictions, and a charge of $2 related to stock compensation ~~partially offset by~~in the first quarter of 2020 and a ~~benefit~~discrete tax charge of ~~$38 for~~$1 related to other items in the ~~reversal~~first quarter of ~~a foreign tax reserve that is effectively settled.~~2019.

The tax provisions for the ~~third~~first quarter ended March 31, 2020 and ~~nine months ended September 30,~~ 2019 ~~and 2018~~ were comprised of the following:


	First quarter ended
	March 31,
	2020		2019
Pre-tax income at estimated annual effective income tax rate before discrete items	$	81	$	67

Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	3		2
Other discrete items	(8)		1
Provision for income taxes	$	76	$	70

Third quarter ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Pre-tax income at estimated annual effective income tax rate before discrete items $ 92
$ 66
$ 119
$ 170
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income 5
(2 ) —
—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized 7
(2 ) 16
(1 )
Other discrete items 10
26
(25 ) 49
Provision for income taxes $ 114
$ 88
$ 110
$ 218

On February 19, 2019, the Company entered into an accelerated share repurchase (ASR) agreement with JPMorgan Chase Bank to repurchase $700 of its common stock (the “February 2019 ASR”), pursuant to the share repurchase programs previously authorized by its Board of Directors (the Board). Under the February 2019 ASR, Arconic received an initial delivery of shares on February 21, 2019 and additional shares on April 29, 2019. On May 2, 2019, the Company entered into an ASR agreement with JPMorgan Chase Bank to repurchase $200 of its common stock (the “May 2019 ASR”), pursuant to the share repurchase programs previously authorized by its Board. Under the May 2019 ASR, Arconic received an initial delivery of shares on May 6, 2019 and additional shares on June 12, 2019. On May 14, 2019, the Board authorized an additional share repurchase program of up to $500 of its outstanding common stock. On August 6, 2019, the Company entered into an ASR agreement with Goldman Sachs & Co. LLC (GS) to repurchase $200 of its common stock (the “August 2019 ASR”), pursuant to the share repurchase programs previously authorized by its Board. Under the August 2019 ASR, Arconic received an initial delivery of shares on August 8, 2019 and additional shares on October 3, 2019. All of the shares repurchased during 2019 were immediately retired. After giving effect to the February 2019 ASR, May 2019 ASR, and August 2019 ASR, $400 remains available under the prior authorizations by the Board for share repurchases through the end of 2020.

~~The following table provides details for the share repurchases during 2019.~~

Share delivery date Number of shares Average price Total
February 21, 2019 31,908,831
April 29, 2019 4,525,592
February 2019 ASR total 36,434,423 $19.21 $700

May 6, 2019 7,455,732
June 12, 2019 1,561,249
May 2019 ASR total 9,016,981 $22.18 $200

August 8, 2019 6,791,172
October 3, 2019⁽¹⁾
983,107
August 2019 ASR total 7,774,279 $25.73 $200

2019 ASR total 53,225,683 $20.67 $1,100

I. Earnings Per Share

Basic earnings per share ~~(EPS)~~("EPS") amounts are computed by dividing earnings, after the deduction of preferred stock dividends declared, by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.

The information used to compute basic and diluted EPS attributable to ~~Arconic~~the Company's common shareholders was as follows (shares in millions):


	First quarter ended
	March 31,
	2020		2019
Net income	$	215	$	187
Less: preferred stock dividends declared	(1)		(1)
Net income available to the Company's common shareholders - basic	214		186
Add: Interest expense related to convertible notes	—		4
Net income available to the Company's common shareholders - diluted	$	214	$	190

Average shares outstanding - basic	435		471
Effect of dilutive securities:
Stock options	1		—
Stock and performance awards	4		4
Convertible notes⁽¹⁾	—		14
Average shares outstanding - diluted	440		489

Third quarter ended
Nine months ended
September 30,
September 30,
2019 2018
2019 2018
Net income $ 95
$ 161
$ 161
$ 424
Less: preferred stock dividends declared (1 ) (1 ) (2 ) (2 )
Net income available to Arconic common shareholders - basic 94
160

159
422
Add: Interest expense related to convertible notes 3
3
—
8
Net income available to Arconic common shareholders - diluted $ 97
$ 163
$ 159
$ 430

Average shares outstanding - basic 436
483
451
483
Effect of dilutive securities:
Stock options 1
—
1
1
Stock and performance awards 5
5
3
5
Convertible notes⁽¹⁾
15
14
—
14
Average shares outstanding - diluted 457
502
455
503

~~The convertible notes matured on October 15, 2019 (see Note~~ O). No shares of the Company’s common stock were issued in connection with the maturity or the final conversion of the convertible notes. As of October 15, 2019, the calculation of average diluted shares outstanding will cease to include the approximately 15 million shares of common stock and the corresponding interest expense previously attributable to the convertible notes.

Common stock outstanding at ~~September 30,~~March 31, 2020 and 2019 was 436 and ~~2018 was 434 and 483,~~453, respectively. The decrease in common stock outstanding at ~~September 30, 2019~~March 31, 2020 was primarily due to the impact of share repurchases of ~~approximately 52~~55 in ~~the nine months ended September 30, 2019 (see Note~~ H).2019. As average shares outstanding are used in the calculation for both basic and diluted EPS, the full impact of share repurchases was not realized in EPS in the ~~third~~first quarter ~~and nine months~~ ended ~~September 30,~~March 31, 2019, as the share repurchases occurred at varying points during 2019.

The following shares were excluded from the calculation of average shares outstanding – diluted as their effect was anti-dilutive (shares in millions).


	First quarter ended
	March 31,
	2020	2019

Stock options⁽¹⁾	4	8

⁽¹⁾The average exercise price per share of options was $27.65 for the first quarter ended March 31, 2020 and $26.67 for the first quarter ended March 31, 2019.

Third quarter ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Convertible notes —
—
15
—
Stock options⁽¹⁾
3
6
3
6

J.I. Accumulated Other Comprehensive Loss

The following table details the activity of the four components that comprise Accumulated other comprehensive loss:

Pension and other postretirement benefits (F)

Amortization of net actuarial loss and prior service cost⁽¹⁾

Tax (expense) benefit ⁽²⁾

Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽³⁾

Net amount reclassified from Accumulated other comprehensive loss⁽⁴⁾

Other comprehensive income⁽⁵⁾

Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽³⁾

Third quarter ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Pension and other postretirement benefits (F)

Balance at beginning of period $ (2,281 ) $ (2,058 )
$ (2,344 ) $ (2,230 )
Other comprehensive income:
Unrecognized net actuarial loss and prior service cost/benefit (6 ) 30

60
152
Tax benefit (expense) 2
(7 )
(13 ) (35 )
Total Other comprehensive (loss) income before reclassifications, net of tax (4 ) 23
47
117
Amortization of net actuarial loss and prior service cost⁽¹⁾
39
18

54
118
Tax expense⁽²⁾
(9 ) (4 )
(12 ) (26 )
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁵⁾
30
14
42
92
Total Other comprehensive income 26
37
89
209
Balance at end of period $ (2,255 ) $ (2,021 )
$ (2,255 ) $ (2,021 )
Foreign currency translation
Balance at beginning of period $ (587 ) $ (516 )
$ (583 ) $ (437 )
Other comprehensive loss⁽³⁾
(87 ) (16 )
(91 ) (95 )
Balance at end of period $ (674 ) $ (532 ) $ (674 ) $ (532 )
Available-for-sale securities
Balance at beginning of period $ —
$ (4 )
$ (3 ) $ (2 )
Other comprehensive income (loss) ⁽⁴⁾
1
1

4
(1 )
Balance at end of period $ 1
$ (3 ) $ 1
$ (3 )
Cash flow hedges
Balance at beginning of period $ (1 ) $ 22
$ 4
$ 25
Adoption of accounting standards (B)
—
—
(2 ) —
Other comprehensive loss:
Net change from periodic revaluations —
(7 ) (5 ) (4 )
Tax benefit —
1
2
1
Total Other comprehensive loss before reclassifications, net of tax —
(6 ) (3 ) (3 )
Net amount reclassified to earnings 2
(5 ) 1
(12 )
Tax (expense) benefit⁽²⁾
(1 ) 1
—
2
Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁵⁾
1
(4 ) 1
(10 )
Total Other comprehensive income (loss) 1
(10 ) (2 ) (13 )
Balance at end of period $ —
$ 12
$ —
$ 12

Accumulated other comprehensive loss $ (2,928 ) $ (2,544 ) $ (2,928 ) $ (2,544 )

⁽¹⁾

⁽²⁾These amounts were included in Provision for income taxes on the accompanying Statement of Consolidated Operations.

~~These amounts were recorded in Other expense, net (see Note~~ E).

⁽³⁾A positive amount indicates a corresponding charge to earnings and a negative amount indicates a corresponding benefit to earnings.

⁽⁴⁾Foreign currency translation charges were included in Restructuring and other charges on the accompanying Statement of Consolidated Operations due to the sale of foreign entities.

⁽⁵⁾Realized gains and losses were included in Other expense, net on the accompanying Statement of Consolidated Operations.

~~Arconic~~The Company has an arrangement with 3 financial institutions to sell certain customer receivables without recourse on a revolving ~~basis.~~basis ("Receivables Sale Program"). The sale of such receivables is completed using a bankruptcy remote special purpose entity, which is a consolidated subsidiary of ~~Arconic.~~the Company. This arrangement ~~provides~~historically provided up to a maximum funding of $400 for receivables sold. ~~Arconic~~The Company maintains a beneficial interest, or a right to collect cash, on the sold receivables that have not been funded (deferred purchase ~~program)~~program receivable). In the first quarter of 2020, the Company entered into an amendment to remove subsidiaries of the GRP business from the sale of receivables program in preparation for the Arconic Inc. Separation Transaction and repurchased the remaining $282 unpaid receivables of GRP customers in a non-cash transaction by reducing the amount of the deferred purchase program receivable. This amendment also reduced the maximum funding for receivables sold to $300.

On March 30, 2012, ~~Arconic~~the Company initially sold $304 of customer receivables in exchange for $50 in cash and $254 of deferred purchase program receivable under the arrangement. ~~Arconic~~The Company has received additional net cash funding of ~~$300~~$248 ($~~3,408~~3,656 in draws and ~~$3,108~~$3,408 in repayments) since the program’s inception, including net cash ~~draws~~repayments totaling $0$52 ($~~450~~98 in draws and ~~$450~~$150 in repayments) for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the deferred purchase program receivable was ~~$461~~$65 and ~~$234,~~$246, respectively, which was included in Other receivables on the accompanying Consolidated Balance Sheet. The deferred purchase program receivable is reduced as collections of the underlying receivables occur; however, as this is a revolving program, the sale of new receivables will result in an increase in the deferred purchase program receivable. The ~~gross amount of receivables sold and total cash collected under this program since its inception was $46,843 and $46,032, respectively. Arconic~~Company services the customer receivables for the financial institutions at market rates; therefore, no servicing asset or liability was recorded.

Cash receipts from customer payments on sold receivables (which are cash receipts on the underlying trade receivables that have been previously sold in this program) as well as cash receipts and cash disbursements from draws and repayments under the program are presented as cash receipts from sold receivables within investing activities in the Statement of Consolidated Cash Flows.

On April 14, 2020, the Company’s credit rating was downgraded by Moody’s Investors Service, Inc., which resulted in a termination event under the provisions of the Receivables Sale Program agreement for which a waiver was obtained. This termination event under the Receivables Sale Program is not an event of default under the Company’s other financing and commercial agreements, including the Credit Agreement. On May 5, 2020, an amendment to the Receivables Sale Program was executed that cured the termination event.

L.Other Customer Receivable Sales

In the first quarter of 2020, the Company also sold $31 of customer receivables in exchange for cash, the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows.

September 30, 2019 December 31, 2018
Finished goods $ 696
$ 668
Work-in-process 1,410
1,371
Purchased raw materials 350
366
Operating supplies 99
87
Total inventories $ 2,555
$ 2,492

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the portion of inventories valued on a last-in, first-out (LIFO) basis was ~~$1,310~~$1,295 and ~~$1,292,~~$1,257, respectively. If valued on an average-cost basis, total inventories would have been ~~$471~~$423 and ~~$530~~$445 higher at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

~~M. Long-Lived Assets~~

September 30, 2019 December 31, 2018
Land and land rights $ 133
$ 136
Structures 2,349
2,364
Machinery and equipment 9,224
9,234
11,706
11,734
Less: accumulated depreciation and amortization 7,070
6,769
4,636
4,965
Construction work-in-progress 741
739
$ 5,377
$ 5,704
L. Properties, Plants, and Equipment, net


	March 31, 2020		December 31, 2019
Land and land rights	$	118	$	128
Structures	2,468		2,385
Machinery and equipment	9,364		9,293
	11,950		11,806
Less: accumulated depreciation and amortization	6,966		7,074
	4,984		4,732
Construction work-in-progress	374		731
Properties, plants, and equipment, net	$	5,358	$	5,463

During the second quarter of 2019, the Company updated its five-year strategic plan and determined that there was a decline in the forecasted financial performance for the Disks asset group within the EP&F segment. As such, the Company evaluated the recoverability of the Disks long-lived assets by comparing the carrying value to the undiscounted cash flows of the Disks asset group. The carrying value exceeded the undiscounted cash flows and therefore the Disks long-lived assets were deemed to be impaired. The impairment charge was measured as the amount of carrying value in excess of fair value of the long-lived assets, with fair value determined using a discounted cash flow model and a combination of sales comparison and cost approach valuation methods including an estimate for economic obsolescence. The impairment charge of $428 recorded in the second quarter of 2019 impacted properties, plants, and equipment; intangible assets; and certain other noncurrent assets by $198,

~~$197, and $33, respectively. The impairment charge was recorded in Restructuring and other charges in the Statement of Consolidated Operations.~~

The Company determines whether a contract contains a lease at inception. The Company leases land and buildings, plant equipment, vehicles, and computer equipment which have been classified as operating leases. Certain real estate leases include one or more options to renew; the exercise of lease renewal options is at the Company’s discretion. The Company includes renewal option periods in the lease term when it is determined that the options are reasonably certain to be exercised. Certain of Arconic's real estate lease agreements include rental payments that either have fixed contractual increases over time or adjust periodically for inflation. Certain of the Company's lease agreements include variable lease payments. The variable portion of payments is not included in the initial measurement of the right-of-use asset or lease liability due to the uncertainty of the payment amount and is recorded as lease cost in the period incurred. The Company also rents or subleases certain real estate to third parties, which is not material to the consolidated financial statements.

Operating lease right-of-use assets and lease liabilities with an initial term greater than 12 months are recorded on the balance sheet at the present value of the future minimum lease payments over the lease term at the lease commencement date and are recognized as lease expense on a straight-line basis over the lease term. The Company uses an incremental collateralized borrowing rate based on the information available at the lease commencement date in determining the present value of future payments, as most of its leases do not provide an implicit rate. The operating lease right-of-use assets also include any lease prepayments made and were reduced by lease incentives and accrued exit costs as of the adoption date.

Operating lease cost, which includes short-term leases and variable lease payments and approximates cash paid, was ~~$36~~$34 and ~~$35~~$37 in the ~~third~~first quarter of ~~2019~~2020 and ~~2018, respectively, and $110 and $109 in the nine months ended September 30,~~ 2019, ~~and 2018,~~ respectively.

Operating lease right-of-use assets and lease liabilities in the Consolidated Balance Sheet were as follows:

September 30, 2019
Right-of-use assets classified in Other noncurrent assets $ 256

Current portion of lease liabilitiesclassified in Other current liabilities
74
Long-term portion of lease liabilities classified in Other noncurrent liabilities and deferred credits 194
Total lease liabilities $ 268


	March 31, 2020		December 31, 2019
Right-of-use assets classified in Other noncurrent assets	$	242	$	252

Current portion of lease liabilitiesclassified in Other current liabilities	70		71
Long-term portion of lease liabilities classified in Other noncurrent liabilities and deferred credits	188		194
Total lease liabilities	$	258	$	265

Future minimum contractual operating lease obligations were as follows:

September 30, 2019 December 31, 2018
2019 $ 24
$ 94
2020 79
74
2021 59
54
2022 43
40
2023 32
30
Thereafter 90
87
Total lease payments $ 327
$ 379
Less: Imputed interest (59 )
Present value of lease liabilities $ 268

Right-of-use assets obtained in exchange for operating lease obligations in the ~~third~~first quarter ~~and nine months~~ ended ~~September 30,~~March 31, 2020 and 2019 were $7$14 and ~~$25,~~$6, respectively. The weighted-average remaining lease term at March 31, 2020 and 2019 was 6 years. The weighted-average discount rate at ~~September 30,~~March 31, 2020 and 2019 was ~~6 years~~5.8% and ~~6.1%~~6.2%, respectively.

On October 31, 2018, the Company sold its Texarkana, Texas rolling mill and cast house which were accounted for separately. The Company had continuing involvement related to the lease back of the cast house. As a result, in 2018, the Company continued to treat the cast house assets that it sold to Ta Chen as owned at December 31, 2018. In conjunction with the adoption of the new lease accounting standard on January 1, 2019, the Company's continuing involvement no longer required deferral of the recognition of the cast house sale. As such, the associated $73 deferred gain related to the cast house was recorded in Retained earnings as a cumulative effect of an accounting change in the first quarter of 2019.


	March 31, 2020		December 31, 2019
6.150% Notes, due 2020	1,000		1,000
5.400% Notes due 2021	1,250		1,250
5.870% Notes, due 2022	627		627
5.125% Notes, due 2024	1,250		1,250
5.900% Notes, due 2027	625		625
6.750% Bonds, due 2028	300		300
5.950% Notes, due 2037	625		625
4.750% Iowa Finance Authority Loan, due 2042	250		250
Term Loan, due 2027⁽¹⁾	600		—
6.125% Notes, due 2028⁽¹⁾	600		—
Other⁽²⁾	(41)		(18)
	7,086		5,909
Less: amount due within one year	1,309		1,003
Total long-term debt	$	5,777	$	4,906

September 30, 2019 December 31, 2018
1.63% Convertible Notes, due 2019 403
403
6.150% Notes, due 2020 1,000
1,000
5.40% Notes due 2021 1,250
1,250
5.87% Notes, due 2022 627
627
5.125% Notes, due 2024 1,250
1,250
5.90% Notes, due 2027 625
625
6.75% Bonds, due 2028 300
300
5.95% Notes, due 2037 625
625
Iowa Finance Authority Loan, due 2042 250
250
Other⁽¹⁾
(21 ) (29 )
6,309
6,301
Less: amount due within one year 1,404
405
Total long-term debt $ 4,905
$ 5,896

⁽¹⁾This debt was issued by Arconic Corporation as part of the Arconic Inc. Separation Transaction.

⁽¹⁾

⁽²⁾Includes various financing arrangements related to subsidiaries, unamortized debt discounts related to outstanding notes and bonds listed in the table above and unamortized debt issuance costs.

On ~~October 15, 2019, the 1.63% Convertible Notes ("the Notes") matured in accordance with their terms and~~February 7, 2020, Arconic Corporation, which was a wholly-owned subsidiary of the Company, ~~repaid in cash on the maturity date the~~completed an offering of $600 aggregate ~~outstanding~~ principal amount of 6.125% senior secured second-lien notes due 2028 (the "6.125% Notes").

On March 25, 2020, Arconic Corporation entered into a credit agreement (the "Arconic Corporation Credit Agreement"), which provided for a $600 aggregate principal amount seven-year, senior secured first-lien term loan B facility (the "Term Loan") and the Revolving Credit Facility (as defined below). Arconic Corporation borrowed the full amount of the Term Loan on the closing date. The Term Loan has a variable interest rate currently based on LIBOR for the relevant interest period plus an applicable margin of 2.75%. The provisions of the Term Loan require a mandatory 1% repayment of $6 each annual period during the seven-year term. The Arconic Corporation Credit Facility is guaranteed by certain of Arconic Corporation’s wholly-owned domestic subsidiaries and secured on a first-priority basis by liens on substantially all assets of Arconic Corporation and the guarantors.

Arconic Corporation used the proceeds from the 6.125% Notes and Term Loan to make a payment to the Company to fund the transfer of ~~approximately $403 together with~~certain assets to Arconic Corporation relating to the Arconic Inc. Separation Transaction and for general corporate purposes. Following the Arconic Inc. Separation Transaction, the Company has no obligations under either the 6.125% Notes or the Arconic Corporation Credit Agreement. See Note R.

On April 6, 2020, the Company completed the early redemption of all $1,000 of its 6.150% Notes due 2020 (the "6.150% Notes") and the early partial redemption of $300 of its 5.400% Notes due 2021 (the 5.400% Notes"). Holders of the 6.150% Notes were paid an aggregate of $1,020 and holders of the 5.400% Notes were paid an aggregate of $315, plus accrued and unpaid interest ~~pursuant~~up to, but not including, the redemption date. The Company incurred early termination premium and interest of $35 and $17, respectively, which will be recorded during the second quarter of 2020 in Interest expense, net.

On April 16, 2020, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission, which became effective automatically (the “Shelf Registration Statement”). The Shelf Registration Statement allows for offerings of debt securities from time to time.

On April 22, 2020, the Company priced, and on April 24, 2020, the Company completed, an offering of $1,200 aggregate principal amount of 6.875% Notes due 2025, the proceeds of which are to be used to fund the cash tender offers noted below and to pay related transaction fees, including applicable premiums and expenses, with the remaining amount to be used for general corporate purposes. The Company incurred deferred financing costs of $15, which will be recorded during the second quarter of 2020. The offering satisfies the financing condition for the cash tender offers noted below. On April 22, 2020, the Company announced (1) a cash tender offer and consent solicitation for its 5.400% Notes with a maximum aggregate purchase price of up to $785 and (2) a cash tender offer for its 5.870% Notes due 2022 (the “5.870% Notes”) with a maximum aggregate

purchase price of up to $210. As of 5:00 pm on May 5, 2020, which was the early tender deadline for the tender offers, $561 aggregate principal amount of 5.400% Notes and $147 aggregate principal amount of 5.870% Notes had been tendered. The Company has announced that it expects to purchase the notes tendered on the early settlement date on May 7, 2020. On May 6, 2020, the Company increased the amount of maximum aggregate purchase price for its 5.870% Notes from $210 to $300.

The tender cap related to the ~~terms~~5.400% Notes remains unchanged. The Company also announced that it is extending the deadline for receiving the early tender premium in respect of each tender offer through the expiration date of the ~~Notes.~~tender offers, May 20, 2020. The amount of accrued interest and early tender premium associated with the notes accepted for early settlement was $4 and $35, respectively, which will be recorded during the second quarter of 2020 in Interest expense, net.

~~Credit Facilities.~~In March 2020, the Company entered into an amendment to its Five ~~Arconic maintains a Five-Year~~-Year Revolving Credit Agreement (the “Credit Agreement”) ~~with~~. The amendment was entered into to permit the Arconic Inc. Separation Transaction and to amend certain terms of the Credit Agreement, including a ~~syndicate~~change to the existing financial covenant and reduction of ~~lenders~~total commitments available from $3,000 to $1,500, effective April 1, 2020 and ~~issuers named therein that matures on~~extended the maturity date from June 29, 2023 ~~and provides for~~to April 1, 2025. The Company will be required to maintain a ~~senior unsecured revolving credit facility~~ratio of ~~$3,000.~~Consolidated Net Debt (as defined in the Credit Agreement) to Consolidated EBITDA (as defined in the Credit Agreement) to be no greater than 3.50 to 1.00. There were 0 amounts outstanding at ~~September 30, 2019~~March 31, 2020 or December 31, ~~2018,~~2019, and 0 amounts were borrowed during ~~2019~~2020 or ~~2018~~2019 under the Credit Agreement. At March 31, 2020, Howmet was in compliance with all covenants under the Credit Agreement.

On March 25, 2020, Arconic Corporation entered into the Arconic Corporation Credit Agreement, which provided for the Term Loan and a $1,000 aggregate principal amount five-year, senior secured first-lien revolving credit facility (the “Revolving Credit Facility”), in connection with the Arconic Inc. Separation Transaction. During the three months ended March 31, 2020, there were no borrowings or repayments under this Revolving Credit Facility.

In addition to the Credit Agreement, ~~Arconic~~the Company has a number of other credit agreements that provide a combined borrowing capacity of ~~$715~~$250 as of ~~September 30, 2019, of~~March 31, 2020 which ~~$175 is due to expire in 2019 and $540~~ is due to expire in 2020. The purpose of any borrowings under these credit arrangements is to provide for working capital requirements and for other general corporate purposes. The covenants contained in all these arrangements are the same as the Credit Agreement. During the ~~nine~~three months ended ~~September 30, 2019, Arconic borrowed and repaid $300 and $300, respectively,~~March 31, 2020, there were no borrowings or repayments under these other credit facilities. ~~The weighted-average interest rate and weighted-average days outstanding during the third quarter and nine months ended September 30, 2019 were 3.7% and 70 days and 3.8% and 46 days, respectively.~~

P.O. Fair Value of Financial Instruments

The carrying values of Cash and cash equivalents, Restricted cash, Derivatives, Noncurrent receivables, and Short-term debt included in the Consolidated Balance Sheet approximate their fair value. The Company holds exchange-traded fixed income securities which are considered available-for-sale securities that are carried at fair value which is based on quoted market prices which are classified in Level 1 of the fair value hierarchy. The fair value of Long-term debt, less amount due within one year was based on quoted market prices for public debt and on interest rates that are currently available to ~~Arconic~~the Company for issuance of debt with similar terms and maturities for non-public debt. The fair value amounts for all Long-term debt were classified in Level 2 of the fair value hierarchy.

September 30, 2019 December 31, 2018

Carrying
value

Fair
value

Carrying
value

Fair
value
Long-term debt, less amount due within one year $ 4,905
$ 5,288
$ 5,896
$ 5,873

Restricted cash was $3$52 and $6$55 at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively.

Q.P. Acquisitions and Divestitures

~~2019~~2020 Divestitures. On ~~May~~January 31, ~~2019, Arconic sold~~2020, the Company reached an agreement to sell a small ~~additive~~ manufacturing ~~facility within~~plant in the United Kingdom for $12 in cash, subject to working capital and other adjustments. The operating results and assets and liabilities of this plant are included in the EP&F ~~segment for $1 in cash, which resulted in a loss of $13~~segment. Subject to regulatory approvals and provided the parties reach agreement regarding customary closing conditions, the Company currently plans to close the sale in the second quarter of ~~2019~~2020. As a result of entering into the agreement to sell, the Company recognized a charge of $12 related to a non-cash impairment of the net book value of the business, primarily properties, plants, and equipment. This charge was recorded in Restructuring and other charges in the Statement of Consolidated Operations. ~~The sale is subject to certain post-closing adjustments.~~

On ~~August 15, 2019, Arconic sold inventories and properties, plants, and equipment related to a small energy business within~~February 1, 2020, the ~~EP&F segment for $13 in cash. As~~Company completed the sale ~~agreement was substantially complete as~~ of June 30, 2019, and the sale price was estimated to be less than the carrying value, Arconic recognized a charge of $9 in the second quarter of 2019 related to inventory impairment and recorded the charge in Cost of goods sold in the Statement of Consolidated Operations.

~~On August 23, 2019, Arconic reached an agreement to sell~~ its aluminum rolling mill in Itapissuma, Brazil for $50 which resulted in ~~cash, subject to working capital and other adjustments.~~a loss of $59. The rolling mill produces specialty foil and sheet products and its operating results and assets and liabilities ~~are~~were included in the GRP segment. ~~The sale transaction is expected to close in the first quarter of 2020, subject to regulatory approvals and customary closing conditions.~~ As a result of entering into the agreement ~~Arconic~~to sell in August 2019, the Company recognized a charge of ~~$59~~$53 in ~~the third quarter of~~ 2019 related to a non-cash impairment of the net book value of the business, primarily properties, plants, and ~~equipment, and~~

equipment. The Company recognized an incremental charge of $6 in the first quarter of 2020 due to certain adjustments related to unfavorable changes in foreign currency. These charges were recorded ~~the charge~~ in Restructuring and other charges in the Statement of Consolidated Operations. The sale remains subject to certain post-closing adjustments. This business generated sales of $11 and $40 in the first quarter of 2020 and 2019, respectively, and had 525 employees at the time of divestiture.

2019 Divestiture. On December 1, 2019, the Company completed the sale of its forgings business in the United Kingdom for ~~$62~~$64 in cash, which resulted in a loss on sale of $46 that was recognized in 2019 and an incremental charge of $6 related to certain post-closing adjustments that was recorded in the first quarter of 2020. These charges were recorded in Restructuring and other charges in the Statement of Consolidated Operations. Of the cash proceeds received, $53 was recorded as Restricted cash within Prepaid expenses and other current assets on the Consolidated Balance Sheet at December 31, 2019 and March 31, 2020, as its use is subject to ~~working capital~~restriction by the U.K. pension authority until certain U.K. pension plan changes have been made and ~~other adjustments.~~approved. The forgings business primarily produces steel, titanium, and nickel based forged components for aerospace, mining, and off-highway markets and its operating results and assets and liabilities ~~are~~were included in the EP&F segment. The sale ~~transaction is expected to close in the fourth quarter of 2019,~~remains subject to ~~regulatory approvals and customary closing conditions. As a result~~certain remaining post-closing adjustments. This business generated sales of entering into the agreement, Arconic recognized a charge of $43 in the third quarter of 2019 related to a non-cash impairment of the net book value of the business, primarily properties, plants, and equipment, goodwill, and deferred taxes, and recorded the charge in Restructuring and other charges in the Statement of Consolidated Operations.

On October 30, 2019, Arconic reached an agreement to sell its hard alloy extrusions plant in South Korea for $61 in cash, subject to working capital and other adjustments. The operating results and assets and liabilities of this plant are included in the GRP segment. The sale transaction is expected to close$32 in the first quarter of ~~2020, subject to regulatory approvals and customary closing conditions. Arconic expects to recognize a gain of $20 to $25 upon the sale, whichwill be recorded in Restructuring and other charges in the Statement of Consolidated Operations.~~

~~2018 Divestitures.~~ On April 2, 2018, Arconic completed the sale of its Latin America extrusions business to a subsidiary of Hydro Extruded Solutions AS for $2, following the settlement of post-closing and other adjustments in December 2018. As a result of entering into the agreement to sell the Latin America extrusions business in December 2017, a charge of $41 was recognized in the fourth quarter of 2017 in Restructuring and other charges in the Statement of Consolidated Operations related to the non-cash impairment of the net book value of the business, and an additional charge of $2 related to a post-closing adjustment was recognized in the fourth quarter of 2018. The operating results and assets and liabilities of the business were included in the TCS segment at the time of divestiture, but were transferred to Corporate in connection with a segment change in the third quarter of 2019 ~~(see Note~~ C~~). This business generated sales of $25 in the first quarter of 2018~~ and had ~~612~~540 employees at the time of divestiture.

On July 31, 2018, the Company announced that it had initiated a sale process of its BCS business, as part of the Company’s ongoing strategy and portfolio review. In the first quarter of 2019, the Company decided to no longer pursue the sale of BCS and the business continued to be reported in the TCS segment until it was transferred to the GRP segment in connection with a segment change in the third quarter of 2019 (see Note C).

On October 31, 2018, the Company sold its Texarkana, Texas rolling mill and cast house, which had a combined net book value of $63, to Ta Chen International, Inc. for $302 in cash, including the settlement of post-closing adjustments, plus additional contingent consideration of up to $50. The contingent consideration relates to the achievement of various milestones within 36 months of the transaction closing date associated with operationalizing the rolling mill equipment. The operating results and assets and liabilities of the business were included in the GRP segment. The Texarkana rolling mill facility had previously been idle since late 2009. In early 2016, the Company restarted the Texarkana cast house to meet demand for aluminum slab. As part of the agreement, the Company will continue to produce aluminum slab at the facility for a period of 18 months through a lease back of the cast house building and equipment, after which time, Ta Chen will perform toll processing of metal for the Company for a period of six months. The Company will supply Ta Chen with cold-rolled aluminum coil during this 24-month period.

The sale of the rolling mill and cast house had been accounted for separately. The gain on the sale of the rolling mill of $154, including the fair value of contingent consideration of $5, was recorded in Restructuring and other charges in the Statement of Consolidated Operations in the fourth quarter of 2018. The Company continues to reevaluate its estimate of the remaining $45

~~of contingent consideration to which it will be entitled at the end of each reporting period and recognize any changes thereto in the Statement of Consolidated Operations.~~

The Company had continuing involvement related to the lease back of the cast house. As a result, in 2018, the Company continued to treat the cast house building and equipment that it sold to Ta Chen as owned and therefore reflected the following balances in its Consolidated Balance Sheet at December 31, 2018: assets of $24 in Properties, plants, and equipment, net; cash proceeds of $119 in Other noncurrent liabilities and deferred credits (which included a deferred gain of $95); and a deferred tax asset of $22 in Other noncurrent assets. In the first quarter of 2019, in conjunction with the adoption of the new lease accounting standard (see Note B), the Company's continuing involvement no longer requires deferral of the recognition of the cast house sale. As such, the cash proceeds, fixed assets, and deferred tax asset related to the cast house were reclassified to Accumulated deficit as a cumulative effect of an accounting change.

R.Q. Contingencies and Commitments

Environmental Matters

~~Arconic~~The Company participates in environmental assessments and cleanups at more than 100 locations. These include owned or operating facilities and adjoining properties, previously owned or operating facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and Liability Act ~~(CERCLA)~~("CERCLA")) sites.

A liability is recorded for environmental remediation when a cleanup program becomes probable and the costs can be reasonably estimated. As assessments and cleanups proceed, the liability is adjusted based on progress made in determining the extent of remedial actions and related costs. The liability can change substantially due to factors such as the nature and extent of contamination, changes in remedial requirements, and technological changes, among others.

~~Arconic’s~~The Company’s remediation reserve balance was ~~$253~~$229 at ~~September 30, 2019~~March 31, 2020 and ~~$266~~$230 at December 31, ~~2018~~2019, recorded in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet (of which ~~$88~~$93 and ~~$81,~~$94, respectively, were classified as a current liability), and reflects the most probable costs to remediate identified environmental conditions for which costs can be reasonably estimated. Payments related to remediation expenses applied against the reserve were ~~$22 and $38~~$2 in the ~~third~~first quarter ~~and nine months~~ ended ~~September 30, 2019, respectively,~~March 31, 2020, which includes expenditures currently mandated, as well as those not required by any regulatory authority or third party.

Included in annual operating expenses are the recurring costs of managing hazardous substances and environmental programs. These costs are estimated to be approximately 1% or less of Cost of goods sold.

The following discussion provides details regarding the current status of the most significant remediation reserves related to a current ~~Arconic~~ site.

Massena West, NY—~~Arconic~~The Company has an ongoing remediation project related to the Grasse River, which is adjacent to ~~Arconic’s~~the Company's Massena plant ~~site.~~site and is included in the GRP segment. Many years ago, it was determined that sediments and fish in the river contain varying levels of polychlorinated biphenyls ~~(PCBs)~~("PCBs"). The project, which was selected by the U.S. Environmental Protection Agency (EPA) in a Record of Decision issued in April 2013, is aimed at capping PCB contaminated sediments with concentration in excess of one part per million in the main channel of the river and dredging PCB contaminated sediments in the near-shore areas where total PCBs exceed one part per million. At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the reserve ~~balance~~balances associated with this matter ~~was $191~~were $169 and ~~$198,~~$171, respectively. In the first quarter of 2019, ~~Arconic~~the Company received approval from the EPA of its final remedial design which is now under construction and is expected to be completed in 2022. ~~During the second quarter of 2019, Arconic recorded a charge of $25 due to changes required in the remedial design and post-construction monitoring.~~ As the project proceeds, the liability may be updated due to factors such as changes in remedial requirements, site restoration costs, and ongoing operation and maintenance costs, among others.

In connection with the Arconic Inc. Separation Transaction, Arconic Corporation agreed to assume and indemnify the Company against certain liabilities relating to Arconic Corporation’s businesses, including potential liabilities associated with the remediation project related to the Grasse River.

Pursuant to the Tax Matters Agreement, dated as of October 31, 2016, entered into between ~~Arconic~~the Company and Alcoa Corporation in connection with the separation ~~transaction with~~of Alcoa Corporation, ~~Arconic~~the Company shares responsibility with Alcoa Corporation for, and Alcoa Corporation has agreed to partially indemnify ~~Arconic for 49% of~~ the ~~ultimate liability,~~Company with respect to the following matter.

As previously reported, in July 2013, following a Spanish corporate income tax audit covering the 2006 through 2009 tax years, an assessment was received mainly disallowing certain interest deductions claimed by a Spanish consolidated tax group owned by the Company. In August 2013, the Company filed an appeal of this assessment in Spain’s Central Tax Administrative Court, which was denied in January 2015. ~~Arconic~~The Company filed another appeal in Spain’s National Court in March 2015 which was denied in July 2018. The National Court’s decision requires the assessment for the 2006 through 2009 tax years to be reissued

to take into account the outcome of the 2003 to 2005 audit which was closed in 2017. The Company estimates the revised assessment to be ~~$166~~$170 (€~~152)~~154), including interest.

In March 2019, the Supreme Court of Spain accepted the Company's petition to review the National Court’s decision, and the Company has filed a formal appeal of the assessment. The Supreme Court ~~of Spain~~ is reviewing the assessment on its merits and will render a final decision. In the event the Company receives an unfavorable ruling from the Supreme Court of Spain, a portion of the assessment may be offset with existing net operating losses and tax credits available to the Spanish consolidated tax group, which would be shared between the Company and Alcoa Corporation as provided for in the Tax Matters Agreement.

~~Arconic has~~In the third quarter of 2018, the Company established an income tax reserve ~~including interest, of $58 (€53)~~ and an indemnification receivable ~~of $28 (€26),~~ representing Alcoa Corporation’s 49% share of the liability. ~~The~~As of March 31, 2020, the balances of the reserve, including interest, and ~~indemnification~~the receivable ~~were established in the third quarter of 2018.~~are $59 (€53) and $29 (€26), respectively.

Additionally, while the tax years 2010 through 2013 are closed to audit, it is possible that the Company may receive assessments for tax years subsequent to 2013. Any potential assessment for an individual tax year is not expected to be material to the Company’s consolidated operations.

As previously reported, on June 13, 2017, the Grenfell Tower in London, U.K. caught fire resulting in fatalities, injuries and damage. A French subsidiary of Arconic, Arconic Architectural Products SAS (AAP SAS), supplied a product, Reynobond PE, to its customer, a cladding system fabricator, which used the product as one component of the overall cladding system on Grenfell Tower. The fabricator supplied its portion of the cladding system to the façade installer, who then completed and installed the system under the direction of the general contractor. Neither Arconic nor AAP SAS was involved in the design or installation of the system used at the Grenfell Tower, nor did it have a role in any other aspect of the building’s refurbishment or original design. Regulatory investigations into the overall Grenfell Tower matter are being conducted, including a criminal investigation by the London Metropolitan Police Service (the “Police”), a Public Inquiry by the British government and a consumer protection inquiry by a French public authority. The Public Inquiry was announced by the U.K. Prime Minister on June 15, 2017 and subsequently was authorized to examine the circumstances leading up to and surrounding the Grenfell Tower fire in order to make findings of fact and recommendations to the U.K. Government on matters such as the design, construction and modification of the building, the role of relevant public authorities and contractors, the implications of the fire for the adequacy and enforcement of relevant regulations, arrangements in place for handling emergencies and the handling of concerns from residents, among other things. Hearings for Phase 1 of the Public Inquiry began on May 21, 2018 and concluded on December 12, 2018. Phase 2 hearings of the Public Inquiry ~~are expected to begin~~began in early 2020, following which a final report will be written and subsequently published. AAP SAS is participating as a Core Participant in the Public Inquiry and is also cooperating with the ongoing parallel investigation by the Police. The Company no longer sells the PE product for architectural use on buildings. Given the preliminary nature of these investigations and the uncertainty of potential future litigation, the Company cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.

Upon the completion of the Arconic Inc. Separation Transaction, Arconic Corporation holds the building and construction systems businesses previously held by the Company and AAP SAS has become a subsidiary of Arconic Corporation. In connection with the Arconic Inc. Separation Transaction, Arconic Corporation agreed to assume and indemnify the Company against certain liabilities relating to Arconic Corporation’s businesses, including potential liabilities associated with the following legal proceedings. In connection with the Separation, Arconic Corporation has agreed to indemnify the Company for certain liabilities and Howmet has agreed to indemnify Arconic Corporation for certain liabilities.

Behrens et al. v. Arconic Inc. et al. As previously reported, on June 6, 2019, 247 plaintiffs comprised of survivors and estates of decedents of the Grenfell Tower fire filed a complaint against “Arconic Inc., Alcoa Inc. and Arconic Architectural Products, ~~LLC,”~~LLC” (collectively, for purposes of the description of such proceeding, the “Arconic Defendants”), as well as Saint-Gobain Corporation, d/b/a Celotex and Whirlpool Corporation, in the Court of Common Pleas of Philadelphia County. The complaint alleges claims under Pennsylvania state law for products liability and wrongful death related to the fire. In particular, the

plaintiffs allege that the Arconic Defendants knowingly supplied a dangerous product ~~(Reynobond PE)~~("Reynobond PE") for installation on the Grenfell Tower despite knowing that Reynobond PE was unfit for use above a certain height. The Arconic Defendants removed the case to the United States District Court for the Eastern District of Pennsylvania on June 19, 2019. On August 29, 2019, the Arconic Defendants moved to dismiss the complaint on the bases, among other things, that: (i) the case should be heard in the United Kingdom, not the United States; (ii) there is no jurisdiction over necessary parties; and (iii) Pennsylvania products liability law does not apply to manufacture and sale of product overseas. On December 23, 2019, the Court issued an order denying the motion to dismiss the complaint on bases (ii) and (iii) and suggesting a procedure for limited discovery followed by further briefing on those subjects. Discovery is ongoing on defendants’ motion to have the case dismissed in favor of a UK forum (forum non conveniens). Given the preliminary nature of this matter and the uncertainty of litigation, the Company cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.

Howard v. Arconic Inc. et al. As previously reported, a purported class action complaint related to the Grenfell Tower fire was filed on August 11, 2017 in the United States District Court for the Western District of Pennsylvania against Arconic Inc. and Klaus Kleinfeld. A related purported class action complaint was filed in the United States District Court for the Western District of Pennsylvania on ~~August 25,~~September 15, 2017, under the caption Sullivan v. Arconic Inc. et al., against Arconic Inc., ~~two~~three former Arconic executives, several current and former Arconic directors, and banks that acted as underwriters for Arconic’s September 18, 2014 preferred stock offering (the “Preferred Offering”). The plaintiff in Sullivan had previously filed a purported class action against the same defendants on July 18, 2017 in the Southern District of New York and, on August 25, 2017, voluntarily dismissed that action without prejudice. On February 7, 2018, on motion from certain putative class members, the court

consolidated Howard and Sullivan, closed Sullivan, and appointed lead plaintiffs in the consolidated case. On April 9, 2018, the lead plaintiffs in the consolidated purported class action filed a consolidated amended complaint. The consolidated amended complaint alleged that the registration statement for the Preferred Offering contained false and misleading statements and omitted to state material information, including by allegedly failing to disclose material uncertainties and trends resulting from sales of Reynobond PE for unsafe uses and by allegedly expressing a belief that appropriate risk management and compliance programs had been adopted while concealing the risks posed by Reynobond PE sales. The consolidated amended complaint also alleged that between November 4, 2013 and June 23, 2017 Arconic and Kleinfeld made false and misleading statements and failed to disclose material information about the Company’s commitment to safety, business and financial prospects, and the risks of the Reynobond PE product, including in Arconic’s Form 10-Ks for the fiscal years ended December 31, 2013, 2014, 2015, and 2016, its Form 10-Qs and quarterly financial press releases from the fourth quarter of 2013 through the first quarter of 2017, its 2013, 2014, 2015, and 2016 Annual Reports, its 2016 Annual Highlights Report, and on its official website. The consolidated amended complaint sought, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses. On June 8, 2018, all defendants moved to dismiss the consolidated amended complaint for failure to state a claim. On June 21, 2019, the Court granted the defendants’ motion to dismiss in full, dismissing the consolidated amended complaint in its entirety without prejudice. On July 23, 2019, the lead plaintiffs filed a second amended complaint. The second amended complaint alleges generally the same claims as the consolidated amended complaint with certain additional allegations, as well as claims that the risk factors set forth in the registration statement for the Preferred Offering were inadequate and that certain additional statements in the sources identified above were misleading. The second amended complaint seeks, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses. On September 11, 2019, all defendants moved to dismiss the second amended complaint. Plaintiffs’ opposition to that motion ~~is due~~was filed by November 1, 2019 and all defendants filed a reply brief on November 26, 2019. Given the preliminary nature of this matter and the uncertainty of litigation, the Company cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.

Raul v. Albaugh, et al. As previously reported, on June 22, 2018, a derivative complaint was filed nominally on behalf of Arconic by a purported Arconic stockholder against the then members of Arconic’s Board of Directors and Klaus Kleinfeld and Ken Giacobbe, naming Arconic as a nominal defendant, in the United States District Court for the District of Delaware. The complaint raises similar allegations as the consolidated amended complaint and second amended complaint in Howard, as well as allegations that the defendants improperly authorized the sale of Reynobond PE for unsafe uses, and asserts claims under Section 14(a) of the Securities Exchange Act of 1934 and Delaware state law. On July 13, 2018, the parties filed a stipulation agreeing to stay this case until the final resolution of the Howard case, the Grenfell Tower Public Inquiry in London, and the investigation by the Police and on July 23, 2018, the Court approved the stay. Given the preliminary nature of this matter and the uncertainty of litigation, the Company cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.

While the Company believes that these cases are without merit and intends to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters.

Stockholder Demands. ~~The~~As previously noted, the Board of Directors also received letters, purportedly sent on behalf of stockholders, reciting allegations similar to those made in the federal court lawsuits and demanding that the Board authorize the Company to initiate litigation against members of management, the Board and others. The Board of Directors appointed a

Special Litigation Committee of the Board to review, investigate, and make recommendations to the Board regarding the appropriate course of action with respect to these stockholder demand letters. On May 22, 2019, the Special Litigation Committee, following completion of its investigation into the claims demanded in the demand letters, recommended to the Board that it reject the demands to authorize commencement of litigation. On May 28, 2019, the Board adopted the Special Litigation Committee’s findings and recommendations and rejected the demands that it authorize commencement of actions to assert the claims set forth in the demand letters.

In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against ~~Arconic,~~the Company, including those pertaining to environmental, product liability, safety and health, employment, tax and antitrust matters. While the amounts claimed in these other matters may be substantial, the ultimate liability cannot currently be determined because of the considerable uncertainties that exist. Therefore, it is possible that the Company’s liquidity or results of operations in a period could be materially affected by one or more of these other matters. However, based on facts currently available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the results of operations, financial position or cash flows of the Company.

At ~~September 30, 2019, Arconic~~March 31, 2020, the Company had outstanding bank guarantees related to tax matters, outstanding debt, workers’ compensation, environmental obligations, energy contracts, and customs duties, among others. The total amount committed under these guarantees, which expire at various dates between ~~2019~~2020 and ~~2026,~~2040, was ~~$31~~$27 at ~~September 30, 2019.~~March 31, 2020.


	September 30, 2019			December 31, 2018				March 31, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	1,321		$	2,277		Cash and cash equivalents	$	2,591	$	1,648
Receivables from customers, less allowances of $4 in 2019 and 2018 (K)	1,116			1,047
Other receivables (K)	657			451
Inventories (L)	2,555			2,492
Receivables from customers, less allowances of $2 in 2020 and $3 in 2019 (J)							Receivables from customers, less allowances of $2 in 2020 and $3 in 2019 (J)	1,290		967
Other receivables (J)							Other receivables (J)	244		484
Inventories (K)							Inventories (K)	2,512		2,429
Prepaid expenses and other current assets	259			314			Prepaid expenses and other current assets	311		314
Total current assets	5,908			6,581			Total current assets	6,948		5,842
Properties, plants, and equipment, net (M)	5,377			5,704
Properties, plants, and equipment, net (L)							Properties, plants, and equipment, net (L)	5,358		5,463
Goodwill (C)	4,460			4,500			Goodwill (C)	4,457		4,493
Deferred income taxes	466			573			Deferred income taxes	553		608
Intangibles, net (D and M)	668			919
Other noncurrent assets (N)	605			416
Intangibles, net							Intangibles, net	647		658
Other noncurrent assets (M)							Other noncurrent assets (M)	502		514
Total assets	$	17,484		$	18,693		Total assets	$	18,465	$	17,578
Liabilities							Liabilities
Current liabilities:							Current liabilities:
Accounts payable, trade	$	1,988		$	2,129		Accounts payable, trade	$	1,799	$	2,043
Accrued compensation and retirement costs	392			370			Accrued compensation and retirement costs	323		432
Taxes, including income taxes	115			118			Taxes, including income taxes	88		87
Accrued interest payable	97			113			Accrued interest payable	102		112
Other current liabilities (N)	434			356
Short-term debt (O)	1,434			434
Other current liabilities (M)							Other current liabilities (M)	453		418
Short-term debt (N)							Short-term debt (N)	1,342		1,034
Total current liabilities	4,460			3,520			Total current liabilities	4,107		4,126
Long-term debt, less amount due within one year (O and P)	4,905			5,896
Long-term debt, less amount due within one year (N and O)							Long-term debt, less amount due within one year (N and O)	5,777		4,906
Accrued pension benefits (F)	2,001			2,230			Accrued pension benefits (F)	2,389		2,460
Accrued other postretirement benefits (F)	629			723			Accrued other postretirement benefits (F)	700		714
Other noncurrent liabilities and deferred credits (B and N)	779			739
Other noncurrent liabilities and deferred credits (M)							Other noncurrent liabilities and deferred credits (M)	695		751
Total liabilities	12,774			13,108			Total liabilities	13,668		12,957
Contingencies and commitments (R)
Contingencies and commitments (Q)							Contingencies and commitments (Q)
Equity							Equity
Arconic shareholders’ equity:
Howmet Aerospace shareholders’ equity:							Howmet Aerospace shareholders’ equity:
Preferred stock	55			55			Preferred stock	55		55
Common stock (H)	434			483
Additional capital (H)	7,314			8,319
Accumulated deficit	(179		)	(358		)
Accumulated other comprehensive loss (J)	(2,928		)	(2,926		)
Total Arconic shareholders’ equity	4,696			5,573
Common stock							Common stock	436		433
Additional capital							Additional capital	7,326		7,319
Retained earnings							Retained earnings	335		129
Accumulated other comprehensive loss (I)							Accumulated other comprehensive loss (I)	(3,369)		(3,329)
Total Howmet Aerospace shareholders’ equity							Total Howmet Aerospace shareholders’ equity	4,783		4,607
Noncontrolling interests	14			12			Noncontrolling interests	14		14
Total equity	4,710			5,585			Total equity	4,797		4,621
Total liabilities and equity	$	17,484		$	18,693		Total liabilities and equity	$	18,465	$	17,578


	Nine months ended							Three months ended
	September 30,							March 31,
	2019			2018				2020		2019
Operating activities							Operating activities
Net income	$	161		$	424		Net income	$	215	$	187
Adjustments to reconcile net income to cash used for operations:							Adjustments to reconcile net income to cash used for operations:
Depreciation and amortization	407			427			Depreciation and amortization	129		137
Deferred income taxes	(36		)	95			Deferred income taxes	19		8
Restructuring and other charges	630			20			Restructuring and other charges	21		12
Net loss from investing activities—asset sales	6			7			Net loss from investing activities—asset sales	2		2
Net periodic pension benefit cost (F)	87			100			Net periodic pension benefit cost (F)	26		29
Stock-based compensation	44			43			Stock-based compensation	13		10
Other	15			61			Other	25		11
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:							Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
(Increase) in receivables	(957		)	(1,020		)	(Increase) in receivables	(210)		(489)
(Increase) in inventories	(92		)	(184		)	(Increase) in inventories	(136)		(118)
Decrease (increase) in prepaid expenses and other current assets	17			(3		)
(Increase) in prepaid expenses and other current assets							(Increase) in prepaid expenses and other current assets	(2)		(14)
(Decrease) increase in accounts payable, trade	(119		)	257			(Decrease) increase in accounts payable, trade	(215)		65
(Decrease) in accrued expenses	(90		)	(96		)	(Decrease) in accrued expenses	(173)		(69)
Increase in taxes, including income taxes	92			63			Increase in taxes, including income taxes	90		47
Pension contributions	(217		)	(288		)	Pension contributions	(56)		(55)
(Increase) in noncurrent assets	(12		)	(33		)	(Increase) in noncurrent assets	—		(1)
(Decrease) in noncurrent liabilities	(36		)	(82		)	(Decrease) in noncurrent liabilities	(39)		(20)
Cash used for operations	(100		)	(209		)	Cash used for operations	(291)		(258)
Financing Activities							Financing Activities
Net change in short-term borrowings (original maturities of three months or less)	—			3			Net change in short-term borrowings (original maturities of three months or less)	2		1
Additions to debt (original maturities greater than three months)	300			450
Additions to debt (original maturities greater than three months) (N)							Additions to debt (original maturities greater than three months) (N)	1,200		150
Payments on debt (original maturities greater than three months)	(303		)	(952		)	Payments on debt (original maturities greater than three months)	—		(151)
Premiums paid on early redemption of debt	—			(17		)
Debt issuance costs							Debt issuance costs	(45)		—

Proceeds from exercise of employee stock options	19			15			Proceeds from exercise of employee stock options	30		1
Dividends paid to shareholders	(48		)	(89		)	Dividends paid to shareholders	(9)		(29)
Repurchase of common stock (H)	(1,100		)	—
Repurchase of common stock							Repurchase of common stock	—		(700)
Other	(12		)	(19		)	Other	(33)		(13)
Cash used for financing activities	(1,144		)	(609		)
Cash provided from (used for) financing activities							Cash provided from (used for) financing activities	1,145		(741)
Investing Activities							Investing Activities
Capital expenditures	(415		)	(497		)	Capital expenditures	(69)		(168)
Proceeds from the sale of assets and businesses (Q)	27			7
Proceeds from the sale of assets and businesses (P)							Proceeds from the sale of assets and businesses (P)	114		4
Sales of investments	47			9			Sales of investments	—		47
Cash receipts from sold receivables (K)	630			693
Cash receipts from sold receivables (J)							Cash receipts from sold receivables (J)	48		160
Other	(1		)	(1		)	Other	1		(1)
Cash provided from investing activities	288			211			Cash provided from investing activities	94		42
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2		)	(4		)	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(8)		1
Net change in cash, cash equivalents and restricted cash	(958		)	(611		)	Net change in cash, cash equivalents and restricted cash	940		(956)
Cash, cash equivalents and restricted cash at beginning of year	2,282			2,153			Cash, cash equivalents and restricted cash at beginning of year	1,703		2,282
Cash, cash equivalents and restricted cash at end of period	$	1,324		$	1,542		Cash, cash equivalents and restricted cash at end of period	$	2,643	$	1,326



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Third quarter ended					Nine months ended					First quarter ended
	September 30,					September 30,					March 31,
	2019		2018			2019		2018			2020		2019
Sales (C)	$	3,559	$	3,524		$	10,791	$	10,542	Sales (C)	$	3,209	$	3,541
Cost of goods sold (exclusive of expenses below)	2,800		2,881			8,557		8,552		Cost of goods sold (exclusive of expenses below)	2,476		2,818
Selling, general administrative, and other expenses	167		134			523		464		Selling, general administrative, and other expenses	169		178
Research and development expenses	16		25			55		77		Research and development expenses	15		22
Provision for depreciation and amortization	131		141			407		427		Provision for depreciation and amortization	129		137
Restructuring and other charges (D)	119		(2		)	630		20		Restructuring and other charges (D)	21		12
Operating income	326		345			619		1,002		Operating income	399		374
Interest expense	86		88			256		291		Interest expense	91		85
Other expense, net (E)	31		8			92		69		Other expense, net (E)	17		32
Income before income taxes	209		249			271		642		Income before income taxes	291		257
Provision for income taxes (G)	114		88			110		218		Provision for income taxes (G)	76		70
Net income	$	95	$	161		$	161	$	424	Net income	$	215	$	187

Amounts Attributable to Arconic Common Shareholders (I):
Amounts Attributable to Howmet Aerospace Common Shareholders (H):										Amounts Attributable to Howmet Aerospace Common Shareholders (H):
Net income	$	94	$	160		$	159	$	422	Net income	$	214	$	186
Earnings per share - basic	$	0.22	$	0.33		$	0.35	$	0.87	Earnings per share - basic	$	0.49	$	0.40
Earnings per share - diluted	$	0.21	$	0.32		$	0.35	$	0.86	Earnings per share - diluted	$	0.49	$	0.39
Average Shares Outstanding (I):
Average Shares Outstanding (H):										Average Shares Outstanding (H):
Average shares outstanding - basic	436		483			451		483		Average shares outstanding - basic	435		471
Average shares outstanding - diluted	457		502			455		503		Average shares outstanding - diluted	440		489


	Howmet Aerospace Shareholders
	Preferred stock		Common stock		Additional capital		Accumulated deficit		Accumulated other comprehensive loss		Noncontrolling interests		Total Equity
Balance at December 31, 2018	$	55	$	483	$	8,319	$	(358)	$	(2,926)	$	12	$	5,585
Adoption of accounting standards (I and M)	—		—		—		75		(2)		—		73
Net income	—		—		—		187		—		—		187
Other comprehensive income (I)	—		—		—		—		76		—		76
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		—		(1)
Common @ $0.08 per share	—		—		—		(38)		—		—		(38)
Stock-based compensation	—		—		8		—		—		—		8
Common stock issued: compensation plans	—		2		(15)		—		—		—		(13)
Repurchase and retirement of common stock	—		(32)		(668)		—		—		—		(700)


Other	—		—		—		1		—		—		1
Balance at March 31, 2019	$	55	$	453	$	7,644	$	(134)	$	(2,852)	$	12	$	5,178



	Arconic Shareholders
	Preferred stock		Common stock		Additional capital		Accumulated deficit			Accumulated other comprehensive loss			Noncontrolling interests		Total Equity
Balance at June 30, 2018	$	55	$	483	$	8,295	$	(1,073	)	$	(2,556	)	$	14	$	5,218
Net income	—		—		—		161			—			—		161
Other comprehensive income (J)	—		—		—		—			12			—		12
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1		)	—			—		(1		)
Common @ $0.06 per share	—		—		—		(30		)	—			—		(30		)
Stock-based compensation	—		—		14		—			—			—		14
Common stock issued: compensation plans	—		—		1		—			—			—		1
Balance at September 30, 2018	$	55	$	483	$	8,310	$	(943	)	$	(2,544	)	$	14	$	5,375



	September 30, 2019		December 31, 2018
Total segment assets	$	15,281	$	15,339
Unallocated amounts:
Cash and cash equivalents	1,321		2,277
Deferred income taxes	466		573
Corporate fixed assets, net	320		334
Fair value of derivative contracts	11		37
Other	85		133
Consolidated assets	$	17,484	$	18,693


⁽¹⁾	In 2018, Other for layoff costs included reclassifications of $119 in pension costs and a $28 credit in postretirement benefits, as the impacts were reflected in Arconic's separate liabilities for Accrued pension benefits and Accrued postretirement benefits, and the reversal of previously recorded restructuring charges of $19.


⁽²⁾	In 2019, Other for layoff costs included reclassifications of a $58 credit for elimination of life insurance benefits for U.S. salaried and non-bargaining hourly retirees and a charge of $8 for pension plan settlement accounting, as the impacts were reflected in Arconic's separate liabilities for Accrued pension benefits and Accrued postretirement benefits.



Share delivery date	Number of shares	Average price	Total
February 21, 2019	31,908,831
April 29, 2019	4,525,592
February 2019 ASR total	36,434,423	$19.21	$700

May 6, 2019	7,455,732
June 12, 2019	1,561,249
May 2019 ASR total	9,016,981	$22.18	$200

August 8, 2019	6,791,172
October 3, 2019⁽¹⁾	983,107
August 2019 ASR total	7,774,279	$25.73	$200

2019 ASR total	53,225,683	$20.67	$1,100


⁽¹⁾	~~The term of the August 2019 ASR concluded on September 30, 2019, with GS delivering 983,107 additional shares to Arconic on October 3, 2019.~~


⁽¹⁾	~~The average exercise price per share of options was $32.64 for the third quarter and nine months ended September 30, 2019 and $29.14 for the third quarter and nine months ended September 30, 2018.~~


⁽¹⁾ ⁽²⁾These amounts were included in Provision for income taxes on the accompanying Statement of Consolidated Operations.	~~These amounts were recorded in Other expense, net (see Note~~ E).


⁽²⁾	~~These amounts were included in Provision for income taxes on the accompanying Statement of Consolidated Operations.~~


⁽³⁾	~~In all periods presented, no amounts were reclassified to earnings.~~


⁽⁴⁾	~~Realized gains and losses were included in Other expense, net on the accompanying Statement of Consolidated Operations.~~


⁽⁵⁾	~~A positive amount indicates a corresponding charge to earnings and a negative amount indicates a corresponding benefit to earnings.~~



	September 30, 2019		December 31, 2018
Finished goods	$	696	$	668
Work-in-process	1,410		1,371
Purchased raw materials	350		366
Operating supplies	99		87
Total inventories	$	2,555	$	2,492



	September 30, 2019			December 31, 2018
1.63% Convertible Notes, due 2019	403			403
6.150% Notes, due 2020	1,000			1,000
5.40% Notes due 2021	1,250			1,250
5.87% Notes, due 2022	627			627
5.125% Notes, due 2024	1,250			1,250
5.90% Notes, due 2027	625			625
6.75% Bonds, due 2028	300			300
5.95% Notes, due 2037	625			625
Iowa Finance Authority Loan, due 2042	250			250
Other⁽¹⁾	(21		)	(29		)
	6,309			6,301
Less: amount due within one year	1,404			405
Total long-term debt	$	4,905		$	5,896


⁽¹⁾ ⁽²⁾Includes various financing arrangements related to subsidiaries, unamortized debt discounts related to outstanding notes and bonds listed in the table above and unamortized debt issuance costs.	Includes various financing arrangements related to subsidiaries, unamortized debt discounts related to outstanding notes and bonds listed in the table above, an equity option related to the convertible notes due in 2019, and unamortized debt issuance costs.



	September 30, 2019				December 31, 2018
	Carrying value		Fair value		Carrying value		Fair value
Long-term debt, less amount due within one year	$	4,905	$	5,288	$	5,896	$	5,873



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1 - July 31, 2019	—	$	—	—	$	600,000,000
August 1 - August 31, 2019⁽²⁾	6,791,172	$	25.73	6,791,172	$	400,000,000
September 1 - September 30, 2019⁽²⁾	—	$	—	—	$	400,000,000
Total for quarter ended September 30, 2019	6,791,172			6,791,172



~~15.~~2.1			~~Letter regarding unaudited interim financial information.~~Separation and Distribution Agreement, dated as of March 31, 2020, by and between Arconic Inc. and Arconic Rolled Products Corporation, incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on April 6, 2020.
~~31.~~2.2			Tax Matters Agreement, dated as of March 31, 2020, by and between Arconic Inc. and Arconic Rolled Products Corporation, incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.3			Employee Matters Agreement, dated as of March 31, 2020, by and between Arconic Inc. and Arconic Rolled Products Corporation, incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.4			First Amendment to Employee Matters Agreement, dated as of April 10, 2020, by and between Howmet Aerospace Inc. and Arconic Corporation, incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on April 13, 2020.
2.5			Patent, Know-How, and Trade Secret License Agreement, dated as of March 31, 2020, by and between Arconic Inc. and Arconic Rolled Products Corporation, incorporated by reference to Exhibit 2.4 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.6			Patent, Know-How, and Trade Secret License Agreement, dated as of March 31, 2020, by and between Arconic Rolled Products Corporation and Arconic Inc. , incorporated by reference to Exhibit 2.5 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.7			Trademark License Agreement, dated as of March 31, 2020, by and between Arconic Rolled Products Corporation and Arconic Inc. , incorporated by reference to Exhibit 2.6 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.8			Trademark License Agreement, dated as of March 31, 2020, by and between Arconic Inc. and Arconic Rolled Products Corporation, incorporated by reference to Exhibit 2.7 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.9			Master Agreement for Product Supply, dated as of March 31, 2020, by and between Arconic Massena LLC, Arconic Lafayette LLC, Arconic Davenport LLC and Arconic Inc., incorporated by reference to Exhibit 2.8 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.10			Second Supplemental Tax and Project Certificate and Agreement, dated as of March 31, 2020, by and among Arconic Inc., Arconic Davenport LLC and Arconic Rolled Products Corporation, incorporated by reference to Exhibit 2.9 to the Company's Current Report on Form 8-K filed on April 6, 2020.
2.11			Lease and Property Management Agreement, dated as of March 31, 2020, by and between Arconic Inc. and Arconic Massena LLC, incorporated by reference to Exhibit 2.10 to the Company's Current Report on Form 8-K filed on April 6, 2020.
4.1			Fifth Supplemental Indenture, dated as of April 16, 2020, between Howmet Aerospace Inc., a Delaware corporation, and The Bank of New York Mellon Trust Company, N.A., as trustee, incorporated by reference to exhibit 4(e) to the Howmet Aerospace’s Registration Statement on Form S-3 (Registration Statement No. 333-237705) dated April 16, 2020.
4.2			Form of 6.875% Notes due 2025, incorporated by reference to Exhibit 4.6 to the Company's Current Report on Form 8-K filed on April 24, 2020.
4.3			Sixth Supplemental Indenture, dated as of May 6, 2020, between Howmet Aerospace Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee., incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 6, 2020.
10.1			Employment Letter Agreement between Arconic Inc. and Tolga Oal, dated as of February 24, 2020, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 25, 2020.
10.2			Amendment No. 3, dated March 4, 2020, to the Five-Year Revolving Credit Agreement dated as of July 25, 2014, among Arconic Inc., the lenders and issuers named therein, Citibank, N.A., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, and Goldman Sachs Bank USA, as documentation agent, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A filed on March 5, 2020.
10.3			Non-Employee Director Compensation Policy, effective April 1, 2020.
10.4			Amended and Restated Deferred Fee Plan for Directors, effective April 1, 2020.
31.			Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.			Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document.


101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104.			Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2019,~~March 31, 2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).


		Howmet Aerospace Inc.

May 7, 2020		~~Arconic Inc.~~

~~November 5, 2019~~	/s/ Ken Giacobbe
Date		Ken Giacobbe
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

~~November 5, 2019~~May 7, 2020		/s/ Paul Myron
Date		Paul Myron
		Vice President and Controller
		(Principal Accounting Officer)