UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the Quarterly Period Ended September 30, ~~2019~~2020



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

Commission File Number 1-3610

~~ARCONIC~~HOWMET AEROSPACE INC.

(Exact name of registrant as specified in its charter)

Delaware

25-0317820

(State of incorporation)

(I.R.S. Employer Identification No.)

201 Isabella Street,

Suite 200,

Pittsburgh,

Pennsylvania

15212-5872

(Address of principal executive offices)

(Zip code)

Investor Relations 412-553-1950

Office of the Secretary ~~412~~-~~553-1940~~412-553-1940

(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~~	☐
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 ~~1, 2019,~~5, 2020, there were ~~432,941,063~~433,603,919 shares of common stock, par value $1.00 per share, of the registrant outstanding.

Explanatory Note

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 Arconic Corporation for all periods prior to April 1, 2020, have been retrospectively reflected in the Statement of Consolidated Operations as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods prior to April 1, 2020. Additionally, the related assets and liabilities associated with Arconic Corporation in the December 31, 2019 Consolidated Balance Sheet are classified as assets and liabilities of discontinued operations. The cash flows, comprehensive income, and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows, Statement of Consolidated Comprehensive Income (Loss), and Statement of Changes in Consolidated Equity, respectively, for all periods prior to April 1, 2020.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

~~Arconic~~Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

(U.S. dollars in millions, except per-share amounts)


											Third quarter ended				Nine months ended
	Third quarter ended					Nine months ended					September 30,				September 30,
	September 30,					September 30,					2020		2019		2020		2019
	2019		2018			2019		2018
Sales (C)	$	3,559	$	3,524		$	10,791	$	10,542
Sales (D)										Sales (D)	$	1,134	$	1,794	$	4,021	$	5,364
Cost of goods sold (exclusive of expenses below)	2,800		2,881			8,557		8,552		Cost of goods sold (exclusive of expenses below)	900		1,317		3,006		3,945
Selling, general administrative, and other expenses	167		134			523		464		Selling, general administrative, and other expenses	66		89		219		307
Research and development expenses	16		25			55		77		Research and development expenses	5		6		13		22
Provision for depreciation and amortization	131		141			407		427		Provision for depreciation and amortization	68		70		212		224
Restructuring and other charges (D)	119		(2		)	630		20
Restructuring and other charges (E)										Restructuring and other charges (E)	22		56		166		572
Operating income	326		345			619		1,002		Operating income	73		256		405		294
Interest expense	86		88			256		291
Other expense, net (E)	31		8			92		69
Income before income taxes	209		249			271		642
Provision for income taxes (G)	114		88			110		218
Interest expense, net										Interest expense, net	77		85		305		256
Other expense, net (F)										Other expense, net (F)	8		8		0		26
Income (loss) before income taxes										Income (loss) before income taxes	(12)		163		100		12
Provision (benefit) for income taxes (H)										Provision (benefit) for income taxes (H)	(48)		105		(5)		4
Income from continuing operations after income taxes										Income from continuing operations after income taxes	$	36	$	58	$	105	$	8
Income from discontinued operations after income taxes (B)										Income from discontinued operations after income taxes (B)	$	0	$	37	$	50	153
Net income	$	95	$	161		$	161	$	424	Net income	$	36	$	95	$	155	$	161

Amounts Attributable to Arconic Common Shareholders (I):
Amounts Attributable to Howmet Aerospace Common Shareholders (I):										Amounts Attributable to Howmet Aerospace Common Shareholders (I):
Net income	$	94	$	160		$	159	$	422	Net income	$	35	$	94	$	153	159
Earnings per share - basic	$	0.22	$	0.33		$	0.35	$	0.87	Earnings per share - basic
Continuing operations										Continuing operations	$	0.08	$	0.13	$	0.24	$	0.01
Discontinued operations										Discontinued operations	$	0	$	0.09	$	0.11	$	0.34
Earnings per share - diluted	$	0.21	$	0.32		$	0.35	$	0.86	Earnings per share - diluted
Continuing operations										Continuing operations	$	0.08	$	0.13	$	0.23	$	0.01
Discontinued operations										Discontinued operations	$	0	$	0.08	$	0.11	$	0.34
Average Shares Outstanding (I):										Average Shares Outstanding (I):
Average shares outstanding - basic	436		483			451		483		Average shares outstanding - basic	436		436		436		451
Average shares outstanding - diluted	457		502			455		503		Average shares outstanding - diluted	439		457		440		455

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

~~Arconic~~Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Comprehensive Income (unaudited)

(U.S. dollars in millions)


	Third quarter ended						Nine months ended							Third quarter ended				Nine months ended
	September 30,						September 30,							September 30,				September 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Net income	$	95		$	161		$	161		$	424		Net income	$	36	$	95	$	155	$	161
Other comprehensive (loss) income, net of tax (J):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits	26			37			89			209
Other comprehensive income (loss), net of tax (J):													Other comprehensive income (loss), net of tax (J):
Change in unrecognized net actuarial loss and prior service cost (benefit) related to pension and other postretirement benefits													Change in unrecognized net actuarial loss and prior service cost (benefit) related to pension and other postretirement benefits	8		26		54		89
Foreign currency translation adjustments	(87		)	(16		)	(91		)	(95		)	Foreign currency translation adjustments	48		(87)		(25)		(91)
Net change in unrealized gains on available-for-sale securities	1			1			4			(1		)	Net change in unrealized gains on available-for-sale securities	0		1		0		4
Net change in unrecognized gains/losses on cash flow hedges	1			(10		)	(2		)	(13		)
Total Other comprehensive (loss) income, net of tax	(59		)	12			—			100
Net change in unrecognized gains (losses) on cash flow hedges													Net change in unrecognized gains (losses) on cash flow hedges	5		1		1		(2)
Total Other comprehensive income (loss), net of tax													Total Other comprehensive income (loss), net of tax	61		(59)		30		0
Comprehensive income	$	36		$	173		$	161		$	524		Comprehensive income	$	97	$	36	$	185	$	161

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

~~Arconic~~Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(U.S. dollars in millions)


	September 30, 2019			December 31, 2018				September 30, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	1,321		$	2,277		Cash and cash equivalents	$	1,365	$	1,577
Receivables from customers, less allowances of $4 in 2019 and 2018 (K)	1,116			1,047
Receivables from customers, less allowances of $1 in 2020 and $1 in 2019 (K)							Receivables from customers, less allowances of $1 in 2020 and $1 in 2019 (K)	310		583
Other receivables (K)	657			451			Other receivables (K)	120		349
Inventories (L)	2,555			2,492			Inventories (L)	1,592		1,607
Prepaid expenses and other current assets	259			314			Prepaid expenses and other current assets	213		285
Current assets of discontinued operations (B)							Current assets of discontinued operations (B)	0		1,442
Total current assets	5,908			6,581			Total current assets	3,600		5,843
Properties, plants, and equipment, net (M)	5,377			5,704			Properties, plants, and equipment, net (M)	2,552		2,629
Goodwill (C)	4,460			4,500
Deferred income taxes	466			573
Intangibles, net (D and M)	668			919
Goodwill (D)							Goodwill (D)	4,072		4,067
Deferred income taxes (A)							Deferred income taxes (A)	262		209
Intangibles, net							Intangibles, net	584		599
Other noncurrent assets (N)	605			416			Other noncurrent assets (N)	269		316
Noncurrent assets of discontinued operations (B)							Noncurrent assets of discontinued operations (B)	0		3,899
Total assets	$	17,484		$	18,693		Total assets	$	11,339	$	17,562
Liabilities							Liabilities
Current liabilities:							Current liabilities:
Accounts payable, trade	$	1,988		$	2,129		Accounts payable, trade	$	521	$	976
Accrued compensation and retirement costs	392			370			Accrued compensation and retirement costs	215		285
Taxes, including income taxes	115			118			Taxes, including income taxes	82		65
Accrued interest payable	97			113			Accrued interest payable	99		112
Other current liabilities (N)	434			356			Other current liabilities (N)	276		229
Short-term debt (O)	1,434			434			Short-term debt (O)	384		1,034
Current liabilities of discontinued operations (B)							Current liabilities of discontinued operations (B)	0		1,424
Total current liabilities	4,460			3,520			Total current liabilities	1,577		4,125
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 (O and P)	4,697		4,906
Accrued pension benefits (F)	2,001			2,230
Accrued other postretirement benefits (F)	629			723
Other noncurrent liabilities and deferred credits (B and N)	779			739
Accrued pension benefits (G)							Accrued pension benefits (G)	1,002		1,030
Accrued other postretirement benefits (G)							Accrued other postretirement benefits (G)	191		200
Other noncurrent liabilities and deferred credits (N)							Other noncurrent liabilities and deferred credits (N)	371		438
Noncurrent liabilities of discontinued operations (B)							Noncurrent liabilities of discontinued operations (B)	0		2,258
Total liabilities	12,774			13,108			Total liabilities	7,838		12,957
Contingencies and commitments (R)							Contingencies and commitments (R)
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		)
Common stock							Common stock	434		433
Additional capital							Additional capital	4,683		7,319
Retained earnings (A)							Retained earnings (A)	258		113
Accumulated other comprehensive loss (J)	(2,928		)	(2,926		)	Accumulated other comprehensive loss (J)	(1,929)		(3,329)
Total Arconic shareholders’ equity	4,696			5,573
Total Howmet Aerospace shareholders’ equity							Total Howmet Aerospace shareholders’ equity	3,501		4,591
Noncontrolling interests	14			12			Noncontrolling interests	0		14
Total equity	4,710			5,585			Total equity	3,501		4,605
Total liabilities and equity	$	17,484		$	18,693		Total liabilities and equity	$	11,339	$	17,562

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

~~Arconic~~Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(U.S. dollars in millions)


	Nine months ended							Nine months ended
	September 30,							September 30,
	2019			2018				2020		2019
Operating activities							Operating activities
Net income	$	161		$	424		Net income	$	155	$	161
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	271		407
Deferred income taxes	(36		)	95			Deferred income taxes	25		(36)
Restructuring and other charges	630			20			Restructuring and other charges	148		630
Net loss from investing activities—asset sales	6			7			Net loss from investing activities—asset sales	6		6
Net periodic pension benefit cost (F)	87			100
Net periodic pension benefit cost (G)							Net periodic pension benefit cost (G)	42		87
Stock-based compensation	44			43			Stock-based compensation	35		44
Other	15			61			Other	63		15
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	(117)		(957)
(Increase) in inventories	(92		)	(184		)	(Increase) in inventories	(42)		(92)
Decrease (increase) in prepaid expenses and other current assets	17			(3		)
(Decrease) increase in accounts payable, trade	(119		)	257
Decrease in prepaid expenses and other current assets							Decrease in prepaid expenses and other current assets	1		17
(Decrease) in accounts payable, trade (A)							(Decrease) in accounts payable, trade (A)	(439)		(2)
(Decrease) in accrued expenses	(90		)	(96		)	(Decrease) in accrued expenses	(177)		(90)
Increase in taxes, including income taxes	92			63			Increase in taxes, including income taxes	41		92
Pension contributions	(217		)	(288		)	Pension contributions	(110)		(217)
(Increase) in noncurrent assets	(12		)	(33		)	(Increase) in noncurrent assets	(5)		(12)
(Decrease) in noncurrent liabilities	(36		)	(82		)	(Decrease) in noncurrent liabilities	(39)		(36)
Cash used for operations	(100		)	(209		)
Cash (used for) provided by operations							Cash (used for) provided by operations	(142)		17
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)	(8)		0
Additions to debt (original maturities greater than three months)	300			450
Payments on debt (original maturities greater than three months)	(303		)	(952		)
Premiums paid on early redemption of debt	—			(17		)
Additions to debt (original maturities greater than three months) (B)(O)							Additions to debt (original maturities greater than three months) (B)(O)	2,400		300
Payments on debt (original maturities greater than three months) (O)							Payments on debt (original maturities greater than three months) (O)	(2,041)		(303)
Debt issuance costs (B)(O)							Debt issuance costs (B)(O)	(61)		0
Premiums paid on early redemption of debt (O)							Premiums paid on early redemption of debt (O)	(59)		0
Proceeds from exercise of employee stock options	19			15			Proceeds from exercise of employee stock options	30		19
Dividends paid to shareholders	(48		)	(89		)	Dividends paid to shareholders	(10)		(48)
Repurchase of common stock (H)	(1,100		)	—
Repurchase of common stock							Repurchase of common stock	(51)		(1,100)
Net cash transferred to Arconic Corporation at separation (B)							Net cash transferred to Arconic Corporation at separation (B)	(500)		0
Other	(12		)	(19		)	Other	(39)		(12)
Cash used for financing activities	(1,144		)	(609		)	Cash used for financing activities	(339)		(1,144)
Investing Activities							Investing Activities
Capital expenditures	(415		)	(497		)
Proceeds from the sale of assets and businesses (Q)	27			7
Sales of investments	47			9
Capital expenditures (A )(D)							Capital expenditures (A )(D)	(220)		(532)
Proceeds from the sale of assets and businesses (B)(Q)							Proceeds from the sale of assets and businesses (B)(Q)	114		27
Sale of debt securities							Sale of debt securities	0		47
Cash receipts from sold receivables (K)	630			693			Cash receipts from sold receivables (K)	258		630
Other	(1		)	(1		)	Other	0		(1)
Cash provided from investing activities	288			211			Cash provided from investing activities	152		171
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	(6)		(2)
Net change in cash, cash equivalents and restricted cash	(958		)	(611		)	Net change in cash, cash equivalents and restricted cash	(335)		(958)
Cash, cash equivalents and restricted cash at beginning of year	2,282			2,153
Cash, cash equivalents and restricted cash at beginning of period							Cash, cash equivalents and restricted cash at beginning of period	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	$	1,368	$	1,324

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

~~Arconic~~Howmet Aerospace Inc. and subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(U.S. dollars in millions, except per-share amounts)


	Howmet Aerospace Shareholders
	Preferred stock		Common stock		Additional capital		Accumulated deficit		Accumulated other comprehensive loss		Noncontrolling Interests		Total Equity
Balance at June 30, 2019	$	55	$	440	$	7,484	$	(272)	$	(2,869)	$	12	$	4,850

Net income	—		—		—		95		—		—		95
Other comprehensive loss (J)	—		—		—		—		(59)		—		(59)
Repurchase and retirement of common stock	—		(7)		(193)		—		—		—		(200)
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		—		(1)
Common @ $0.04 per share	—		—		—		(17)		—		—		(17)
Stock-based compensation	—		—		16		—		—		—		16
Common stock issued: compensation plans	—		1		5		—		—		—		6


Other	—		—		2		—		—		2		4
Balance at September 30, 2019	$	55	$	434	$	7,314	$	(195)	$	(2,928)	$	14	$	4,694

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


	Howmet Aerospace Shareholders
	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests		Total Equity
Balance at June 30, 2020	$	55	$	436	$	4,703	$	223	$	(1,968)	$	0	$	3,449

Net income	—		—		—		36		—		—		36
Other comprehensive income (J)	—		—		—		—		61		—		61
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		—		(1)

Repurchase and retirement of common stock	—		(2)		(49)		—		—		—		(51)
Stock-based compensation	—		—		12		—		—		—		12
Common stock issued: compensation plans	—		—		(5)		—		—		—		(5)
Distributions to Arconic Corp (B)	—		—		22		—		(22)		—		0

Balance at September 30, 2020	$	55	$	434	$	4,683	$	258	$	(1,929)	$	0	$	3,501

Arconic Shareholders
Preferred
stock Common
stock Additional
capital Accumulated deficit Accumulated
other
comprehensive
loss Noncontrolling
interests Total
Equity
Balance at June 30, 2019 $ 55
$ 440
$ 7,484
$ (256 ) $ (2,869 ) $ 12
$ 4,866
Net income —
—
—
95
—
—
95
Other comprehensive loss (J)
—
—
—
—
(59 ) —
(59 )
Cash dividends declared:
Preferred-Class A @ $0.9375 per share —
—
—
(1 ) —
—
(1 )
Common @ $0.04 per share —
—
—
(17 ) —
—
(17 )
Repurchase and retirement of common stock (H)
—
(7 ) (193 ) —
—
—
(200 )
Stock-based compensation —
—
16
—
—
—
16
Common stock issued: compensation plans —
1
5
—
—
—
6
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 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
Howmet Aerospace Inc. and subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(U.S. dollars in millions, except per-share amounts)


	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	$	(374)	$	(2,926)	$	12	$	5,569
Adoption of accounting standards (1)	—		—		—		75		(2)		—		73
Net income	—		—		—		161		—		—		161
Other comprehensive income (J)	—		—		—		—		—		—		0
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	—		(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	$	(195)	$	(2,928)	$	14	$	4,694


	Howmet Aerospace Shareholders
	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Noncontrolling interests		Total Equity
Balance at December 31, 2019	$	55	$	433	$	7,319	$	113	$	(3,329)	$	14	$	4,605
Net income	—		—		—		155		—		—		155
Other comprehensive income (J)	—		—		—		—		30		—		30
Cash dividends declared:
Preferred-Class A @ $2.8125 per share	—		—		—		(2)		—		—		(2)
Common @ $0.02 per share	—		—		—		(8)		—		—		(8)
Repurchase and retirement of common stock	—		(2)		(49)		—		—		—		(51)
Stock-based compensation	—		—		35		—		—		—		35
Common stock issued: compensation plans	—		3		(11)		—		—		—		(8)
Distributions to Arconic Corp (B)	—		—		(2,611)		—		1,370		(14)		(1,255)

Balance at September 30, 2020	$	55	$	434	$	4,683	$	258	$	(1,929)	$	0	$	3,501

(1) The Company entered into a sale leaseback arrangement in October 2018 for a cast house that is now part of Arconic Corporation, and due to continuing involvement, the gain on sale was deferred. In connection with the adoption of the new lease accounting standard on January 1, 2019, the arrangement no longer required that the gain be deferred. As such, the associated $73 deferred gain, net of tax was recognized as a cumulative effect of an accounting change within Accumulated deficit. Also, the Company adopted the new hedge accounting guidance on January 1, 2019. As a result, an adjustment of $2 was recognized as a cumulative effect of an accounting change within Accumulated deficit with an offset to Accumulated other comprehensive loss related to the elimination of a separate measurement of ineffectiveness for its cash flow hedges.

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

~~Arconic~~Howmet Aerospace Inc. and subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

(U.S. 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 CD).

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. The financial results of Arconic Corporation for all periods prior to the Arconic Inc. Separation Transaction have been retrospectively reflected in the Statement of Consolidated Operations as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. Certain adjustments to equity and reclassifications have been made related to the Arconic Inc. Separation Transaction. In addition, the related assets and liabilities associated with Arconic Corporation in the December 2019 Consolidated Balance Sheet are classified as assets and liabilities of discontinued operations. The cash flows, comprehensive income, and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows, Statement of Consolidated Comprehensive Income (Loss), and Statement of Changes in Consolidated Equity, respectively, for all periods prior to the Arconic Inc. Separation Transaction. See Note B for additional information related to the Arconic Inc. Separation Transaction and discontinued operations.

Year to date, the Company derived approximately 70% of its revenue from products sold to the aerospace end-market. 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. Since the start of the pandemic, certain original equipment manufacturer (“OEM”) customers have reduced production or suspended manufacturing operations in North America and Europe on a temporary basis. While the pandemic has resulted in the temporary closure of a small number of the Company's manufacturing facilities, all of our manufacturing facilities are currently operating. Since the duration of the pandemic is uncertain, 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 level 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 of 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.

During the third quarter ended September 30, 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows. Although management has determined that such misclassification did not materially misstate such prior financial statements, the Company has revised its Statement of Consolidated Cash Flows for the nine months ended September 30, 2019 resulting in a $117 increase to previously reported capital expenditures and decrease to cash provided from investing activities with a corresponding reduction in (decrease) in accounts payable, trade and increase in cash provided by operations. The Company will also prospectively revise, in connection with future filings, its Statement of Consolidated Cash Flows to increase its previously reported capital expenditures with a corresponding offset in accounts payable, trade of $55, $83 and $83 for the twelve months ended December 31, 2019, three months ended March 31, 2020, and six months ended June 30, 2020, respectively.

During the second quarter of 2020, a $16 tax error was identified related to periods prior to 2018. Although management has determined it was not material to any periods, it was corrected as an adjustment to Retained Earnings in the Statement of Changes in Consolidated Equity in the second quarter and six months ended June 30, 2020. During the third quarter, the Company determined that such correction to Retained Earnings should have been accounted for as a revision to its prior year's Retained Earnings (Accumulated Deficit) and has made this correction in the current quarter. The Company will prospectively revise, in connection with future filings, its Statement of Changes in Consolidated Equity for the second quarter and six months ended June 30, 2020 to properly present the correction as a reduction to prior year's Retained Earnings (Accumulated Deficit). The accompanying Consolidated Balance Sheet at December 31, 2019 reflects the revision for such tax item.

B. Arconic Inc. Separation Transaction and Discontinued Operations

On April 1, 2020, the Company completed the previously announced separation of its business into 2 independent, publicly-traded companies. Following the Arconic Inc. Separation Transaction, Arconic Corporation holds the Global Rolled Products businesses (global rolled products, aluminum extrusions, and building and construction systems) previously held by the Company. The Company retained the Engineered Products and Forgings businesses (engine products, fastening systems, engineered structures, and forged wheels).

The Company's Board of Directors approved the completion of the separation on February 5, 2020, which was effected by the distribution (the “Distribution”) by the Company of all of the outstanding common stock of Arconic Corporation on April 1, 2020 to the Company’s stockholders who held shares as of the close of business on March 19, 2020 (the “Record Date”). In the Distribution, each Company stockholder of record as of the Record Date received one share of Arconic Corporation common stock for every four shares of the Company’s common stock held as of the Record Date. The Company did not issue fractional shares of Arconic Corporation common stock in the Distribution. Instead, each stockholder otherwise entitled to a fractional share of Arconic Corporation common stock received cash in lieu of fractional shares.

On March 31, 2020, in connection with the Arconic Inc. Separation Transaction, the Company entered into several agreements with Arconic Corporation that govern the relationship between the Company and Arconic Corporation following the Distribution, including the following:a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and certain Patent, Know-How, Trade Secret License and Trademark License Agreements.

On February 7, 2020 Arconic Corporation completed an offering of $600 aggregate principal amount of 6.125% senior secured second-lien notes due 2028. On March 25, 2020, Arconic Corporation entered into a credit agreement which provided for a $600 aggregate principal amount seven-year senior secured first-lien loan B facility and a revolving credit facility which 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 subsidiary guarantors. Arconic Corporation used the proceeds to make payment to the Company to fund the transfer of certain assets to Arconic Corporation relating to the Arconic Inc. Separation Transaction and for general corporate purposes. The Company incurred debt issuance costs of $45 associated with these issuances for the first quarter of 2020 and nine months ended September 30, 2020.

On February 1, 2020, Arconic Corporation completed the sale of its rolling mill in Itapissuma, Brazil for $50 in cash which resulted in a loss of $59, of which $53 was recognized in discontinued operations in the second half of 2019 and $6 in the first quarter of 2020 and nine months ended September 30, 2020. On March 1, 2020, Arconic Corporation sold its hard alloy extrusions plant in South Korea for $62 in cash, which resulted in a gain that was recognized in discontinued operations in the first quarter of 2020 and nine months ended September 30, 2020.

During the third quarter of 2020, the Company identified and corrected a prior period equity misclassification of $22 million related to the distribution of pension plans and their related financial statement impacts which related to the distributions to Arconic Corporation. Management evaluated the impact of the misclassification within the components of equity on previously issued financial statements and concluded that it was not material.

Discontinued Operations

The results of operations of Arconic Corporation are presented as discontinued operations in the Statement of Consolidated Operations as summarized below:


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Sales	$	0	$	1,765	$	1,576	$	5,427
Cost of goods sold	0		1,483		1,292		4,612
Selling, general administrative, research and development and other expenses	0		88		106		249
Provision for depreciation and amortization	0		61		59		183
Restructuring and other charges	0		63		(18)		58
Interest expense	0		0		7		0
Other expense, net	0		24		42		66
Income from discontinued operations	0		46		88		259
Provision for income taxes	0		9		38		106
Income from discontinued operations after income taxes	$	0	$	37	$	50	$	153

The following table presents purchases of properties, plant and equipment, proceeds from the sale of businesses and the provision for depreciation and amortization of discontinued operations related to Arconic Corporation:


	Third quarter ended				Nine months ended
	September 30,				2020
	2020		2019		2020		2019
Capital expenditures	$	0	$	40	$	72	$	175
Proceeds from the sales of businesses	$	0	$	0	$	112	$	0
Provision for depreciation and amortization	0		61		59		183

On April 1, 2020, management evaluated the net assets of Arconic Corporation for potential impairment and determined that no impairment charge was required.

The cash flows and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows or Statement of Comprehensive Income for all periods presented.

The carrying amount of the major classes of assets and liabilities related to Arconic Corporation classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheet consisted of the following:


	December 31, 2019
Total Assets of Discontinued Operations
Cash and cash equivalents	$	71
Receivables from customers	385
Other receivables	135
Inventories	822
Prepaid expenses and other current assets	29
Current assets of discontinued operations	1,442
Properties, plants, and equipment, net	2,834
Goodwill	426
Intangibles, net	60
Deferred income taxes	383
Other noncurrent assets	196
Noncurrent assets of discontinued operations	3,899
Total assets of discontinued operations	$	5,341

Total Liabilities of Discontinued Operations:
Accounts payable, trade	$	1,067
Accrued compensation and retirement costs	147
Taxes, including income taxes	22
Other current liabilities	188
Current liabilities of discontinued operations	1,424
Accrued pension benefits	1,430
Accrued other postretirement benefits	514
Other noncurrent liabilities and deferred credits	314
Noncurrent liabilities of discontinued operations	2,258
Total liabilities of discontinued operations	$	3,682

C. 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.

The Securities and Exchange Commission issued amendments to modernize the Regulation S-K disclosure requirements about description of business, legal proceedings and risk factors. The amendments permit registrants to take a more principles based approach to tailor business and risk factors disclosures to their circumstances and calls for enhanced human capital disclosures. The amendments, which became effective on November 9, 2020, are designed to improve the readability of these disclosures and discourage the repetition of non-material information. The adoption of this new guidance did not have a material impact on this Form 10-Q.

D. Segment Information

Following the Arconic ~~is a global leader in lightweight metals engineering~~Inc. Separation Transaction, Howmet’s operations consist of 4 worldwide reportable segments as follows:

Engine Products

Engine Products produces investment castings and ~~manufacturing. Arconic’s innovative,~~seamless rolled rings primarily for aircraft engines and industrial gas turbines. Engine Products produces rotating parts as well as structural parts.

Fastening Systems

Fastening Systems produces aerospace fastening systems, as well as commercial transportation fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines. The business’s products ~~which include aluminum,~~are also critical components of automobiles, commercial transportation vehicles, and construction and industrial equipment.

Engineered Structures

Engineered Structures produces titanium and aluminum ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, extrusions forming and machining services for airframe, wing, aero-engine, and landing gear components. Engineered Structures also produces aluminum forgings, nickel ~~are used worldwide in~~forgings, and aluminum machined components and assemblies for aerospace ~~automotive,~~and defense applications.

Forged Wheels

Forged Wheels provides forged aluminum wheels and related products for heavy-duty trucks and the 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.markets.

~~In the third quarter~~Goodwill

The Company had $4,072 of ~~2019,~~Goodwill at September 30, 2020, and the Company ~~realigned its operations by eliminating its Transportation and Construction Solutions (TCS) segment and transferring~~reviews it for impairment annually in the ~~Forged Wheels business~~fourth quarter or more frequently if indicators exist or if a decision is made to its EP&F segment and the Building and Construction Systems (BCS) business to its GRP segment, consistent with how the Chief Executive Officer is assessing operating performance and allocating capital in conjunction with the planned separation of the Company (see Note sell or realign a business.

S~~). 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,~~On January 1, 2020, management transferred ~~its aluminum extrusions operations (Aluminum Extrusions)~~the Savannahbusiness from ~~its Engineered Structures business unit within~~ the ~~EP&F~~Engine Products segment to the ~~GRP~~Engineered Structures segment, based on synergies with ~~GRP including similar customer base,~~forgings technologies and manufacturing capabilities. ~~Prior period financial information has been recast to conform to current year presentation.~~

As a result of the elimination of the TCS segment in the third quarter of 2019 as noted above, 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 for purposes of evaluating goodwill for impairment. In the second quarter of 2019, management transferred its castings operations from the Engineered Structures business unit to the Engine Products business unit within the EP&F 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 unit 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. 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 in the first quarter 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. In the second and third quarters of 2020, there were no indicators of impairment identified for the Engineered Structures reporting unit as the margin between fair value of the reporting unit and carrying value exceeded 20%. 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:~~follows. Differences between total segment and consolidated totals are in Corporate.


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Third quarter ended September 30, 2020
Sales:
Third-party sales	$	485	$	271	$	206	$	172	$	1,134
Inter-segment sales	1		0		1		0		2
Total sales	$	486	$	271	$	207	$	172	$	1,136
Profit and loss:
Segment operating profit	$	39	$	33	$	10	$	35	$	117
Restructuring and other charges	9		0		9		0		18
Provision for depreciation and amortization	31		12		13		10		66
Capital expenditures	15		9		3		6		33

Third quarter ended September 30, 2019
Sales:
Third-party sales	$	844	$	391	$	318	$	241	$	1,794
Inter-segment sales	1		0		4		0		5
Total sales	$	845	$	391	$	322	$	241	$	1,799
Profit and loss:
Segment operating profit	$	161	$	102	$	40	$	60	$	363
Restructuring and other charges	43		0		1		0		44
Provision for depreciation and amortization	31		12		15		8		66
Capital expenditures	39		7		4		11		61

	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Nine months ended September 30, 2020
Sales:
Third-party sales	$	1,851	$	982	$	710	$	476	$	4,019
Inter-segment sales	4		0		6		0		10
Total sales	$	1,855	$	982	$	716	$	476	$	4,029
Profit and loss:
Segment operating profit	$	309	$	199	$	57	$	91	$	656
Restructuring and other charges	44		26		21		3		94
Provision for depreciation and amortization	92		36		40		29		197
Capital expenditures	48		24		11		17		100

Nine months ended September 30, 2019
Sales:
Third-party sales	$	2,492	$	1,185	$	943	$	752	$	5,372
Inter-segment sales	9		0		10		0		19
Total sales	$	2,501	$	1,185	$	953	$	752	$	5,391
Profit and loss:
Segment operating profit	$	465	$	297	$	81	$	193	$	1,036
Restructuring and other charges	296		6		198		5		505
Provision for depreciation and amortization	100		36		46		24		206
Capital expenditures	165		24		22		56		267

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~~Income (loss) from continuing operations 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


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Total segment operating profit	$	117	$	363	$	656	$	1,036
Unallocated amounts:
Restructuring and other charges	(22)		(56)		(166)		(572)
Corporate expense	(22)		(51)		(85)		(170)
Consolidated operating income	$	73	$	256	$	405	$	294
Interest expense, net	(77)		(85)		(305)		(256)
Other expense, net	(8)		(8)		0		(26)
Income (loss) from continuing operations before income taxes	$	(12)	$	163	$	100	$	12

~~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:~~capital expenditures, which are presented on an accrual basis, with Capital expenditures as presented on the statement of cash flows. Differences between segment and consolidated totals are in Corporate and discontinued operations, including the impact of changes in accrued capital expenditures during the period.


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Total segment capital expenditures	$	33	$	61	$	100	$	267
Corporate and discontinued operations	3		66		120		265
Capital expenditures	$	36	$	127	$	220	$	532

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

The following table disaggregates segment revenue by major end market served. Differences between total segment ~~totals~~ and consolidated ~~Arconic~~totals are in Corporate. ~~For~~


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Third quarter ended September 30, 2020
Aerospace - Commercial	$	199	$	169	$	104	$	0	$	472
Aerospace - Defense	142		37		82		0		261
Commercial Transportation	0		38		0		172		210
Industrial and Other	144		27		20		0		191
Total end-market revenue	$	485	$	271	$	206	$	172	$	1,134

Third quarter ended September 30, 2019
Aerospace - Commercial	$	571	$	267	$	226	$	0	$	1,064
Aerospace - Defense	120		41		65		0		226
Commercial Transportation	5		59		0		241		305
Industrial and Other	148		24		27		0		199
Total end-market revenue	$	844	$	391	$	318	$	241	$	1,794

Nine months ended September 30, 2020
Aerospace - Commercial	$	1,018	$	650	$	432	$	0	$	2,100
Aerospace - Defense	394		120		216		0		730
Commercial Transportation	0		118		0		476		594
Industrial and Other	439		94		62		0		595
Total end-market revenue	$	1,851	$	982	$	710	$	476	$	4,019

Nine months ended September 30, 2019
Aerospace - Commercial	$	1,689	$	803	$	672	$	0	$	3,164
Aerospace - Defense	350		115		194		0		659
Commercial Transportation	17		179		0		754		950
Industrial and Other	436		88		77		(2)		599
Total end-market revenue	$	2,492	$	1,185	$	943	$	752	$	5,372

In the nine months ended September 30 ~~2018, Corporate included $38~~, 2020, the Company derived 70% of ~~costs~~its revenue from aerospace end markets of which 11% related to ~~settlements of certain customer claims primarily related to product introductions.~~General Electric Company.

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.E. Restructuring and Other Charges


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Layoff costs	$	17	$	0	$	93	$	68
Reversals of previously recorded layoff reserves	0		0		(10)		(2)
Pension, Other post-retirement benefits and Deferred Compensation - net settlements and curtailments	3		4		67		(8)
Non-cash asset impairments	0		8		0		442
Net loss on divestitures of assets and businesses	0		42		9		54
Other	2		2		7		18
Restructuring and other charges	$	22	$	56	$	166	$	572

In the third quarter of 2020, the Company recorded Restructuring and other charges of $22, which included a $17 charge for layoff costs, including the separation of 791 employees (415 in Engine Products and 376 in Engineered Structures); a $8 settlement accounting charge related to United Kingdom (U.K.) and U.S. pension plans, and a $2 charge for accelerated

depreciation. These charges were partially offset by a $3 benefit from the termination of a deferred compensation plan and a $2 curtailment benefit related to a post-retirement plan.

In the nine months ended September 30, 2020 the Company recorded Restructuring and other charges of $166, which included a $93 charge for layoff costs, including the separation of 3,772 employees (1,706 in Engine Products, 1,275 in Fastening Systems, 676 in Engineered Structures, 92 in Forged Wheels and 23 in Corporate); a $72 charge for U.K. and U.S. pension plans' settlement accounting; a $6 post-closing adjustment related to the sale of the Company’s U.K. forgings business; a $5 charge for impairment of assets associated with an agreement to sell an aerospace components business in the U.K that did not occur and the business was returned to held for use; a $2 charge for accelerated depreciation and a $5 charge for various other exit costs. These charges were partially offset by a benefit of $10 related to the reversal of a number of prior period programs; a $3 benefit from the termination of a deferred compensation plan; a $2 curtailment benefit related to a post-retirement plan and a gain of $2 on the sale of assets.

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

In the nine months ended September 30, 2019, ~~Arconic~~the Company recorded Restructuring and other charges of ~~$630 ($521 after-tax),~~$572 which ~~included:~~included a ~~charge of~~ $428 ~~($345 after-tax)~~charge for impairment of the Disks long-lived asset ~~group (see Note~~ M);group; a $68 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 ($74 after-tax) for layoff costs, including the separation of ~~1,183~~901 employees ~~(463~~(103 in ~~Corporate, 350~~Engine Products, 112 in ~~the EP&F segment,~~Engineered Structures, 132 in Fastening Systems, 60 in Forged Wheels and ~~370~~494 in ~~the GRP segment)~~Corporate); a $43 charge for impairment of ~~$24 ($18 after-tax)~~assets associated with an agreement to sell the UK forging business; a $14 charge for impairment of properties, plants, and equipment related to the Company’s primary research and development ~~facility and~~facility; a ~~trade name intangible asset; a~~$12 charge ~~of $12 ($9 after-tax)~~ for other exit costs from lease terminations primarily related to the exit of the corporate aircraft; a ~~charge of~~ $12 ~~($9 after-tax) from the~~ loss on sale of assets primarily related to a small additive business; a $8 settlement accounting charge ~~of $8 ($6 after-tax)~~ for U.S. pension ~~plan settlement accounting; charge of $6 ($5 after-tax) for accelerated~~

~~depreciation;~~plans; a $2 net charge ~~of $2 ($1 after-tax)~~ for executive severance net of the benefit of forfeited executive stock ~~compensation;~~compensation and a $4 charge ~~of $1 ($1 after-tax)~~ for other ~~miscellaneous items;~~exit costs; partially offset by a benefit of ~~$58 ($45 after-tax)~~$16 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)~~$2 for the reversal of a number of small layoff reserves related to prior ~~periods.~~periods and a net gain of $1 on the sales of assets.

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~~recorded an impairment 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)$428 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 completedDisks long-lived asset group in the ~~first half of 2020. For the third~~second quarter ended June 30, 2019 and nine months ended September 30, 2019, ~~Arconic made~~of which $247 and $181 was related to the Engine Products and Engineered Structures segments, respectively, as the carrying value exceeded the forecasted undiscounted cash ~~payments~~flows composed of ~~$21~~a write-down of properties, plants and ~~$61, respectively.~~equipment, intangible assets and certain other noncurrent assets.

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


	Layoff costs		Other exit costs		Total
Reserve balances at December 31, 2019	$	13	$	0	$	13
Cash payments	(38)		0		(38)
Restructuring charges	150		16		166
Other(1)	(67)		(16)		(83)
Reserve balances at September 30, 2020	$	58	$	0	$	58

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

⁽¹⁾

~~In 2018,~~

(1) In 2020, Layoff costs included $72 in settlement accounting charges related to U.K. and U.S. pension plans, a $3 benefit from the termination of a deferred compensation plan and a $2 curtailment benefit related to a post-retirement plan; while 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.

~~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~~$5 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~~$6 post-closing adjustment 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 $2 charge ~~of $12 for lease terminations; and a charge of $6~~ for accelerated depreciation ~~as the impacts~~and a $5 charge for other exit costs, which were ~~primarily reflected in various noncurrent asset accounts; partially~~ offset

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

The remaining Layoff cost reserves are expected to be paid in cash ~~during 2019, with~~by the ~~exception~~end of ~~approximately $15, which is expected to be paid in~~ the ~~first half~~third quarter of ~~2020 related to severance payments.~~2021.

F. Other Expense, Net


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Non-service related net periodic benefit cost	$	8	$	7	$	19	$	15
Interest income	(1)		(5)		(5)		(20)
Foreign currency (gains) losses, net	(5)		7		(12)		8
Net loss from asset sales	2		2		6		9

Deferred compensation	4		1		1		16
Other, net	0		(4)		(9)		(2)
Total	$	8	$	8	$	0	$	26

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

For the third quarter and nine months ended September 30, 2018, Other, net included a benefit from establishing a tax indemnification receivable of $29 reflecting Alcoa Corporation’s 49% share of a Spanish tax reserve (see Note R).

F.G. Pension and Other Postretirement Benefits

The components of net periodic benefit cost were as follows:


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Pension benefits
Service cost	$	1	$	6	$	10	$	19
Interest cost	17		59		81		177
Expected return on plan assets	(21)		(71)		(115)		(214)
Recognized net actuarial loss	12		35		66		104
Amortization of prior service cost (benefit)	0		0		0		1
Settlements	8		4		72		8


Net periodic benefit cost(1)	17		33		114		95
Discontinued operations	0		21		20		69
Net amount recognized in continuing operations in Statement of Consolidated Operations	$	17	$	12	$	94	$	26

Other postretirement benefits
Service cost	$	1	$	1	$	3	$	5
Interest cost	2		7		9		21
Recognized net actuarial loss	0		1		2		3
Amortization of prior service cost (benefit)	(2)		(1)		(5)		(4)
Curtailments	(2)		0		(2)		(58)

Net periodic benefit cost(1)	(1)		8		7		(33)
Discontinued operations	0		7		6		(22)
Net amount recognized in continuing operations in Statement of Consolidated Operations	$	(1)	$	1	$	1	$	(11)

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 for continuing operations 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. The amounts included in Net periodic benefit cost include costs related to both continuing and discontinued operations.


⁽¹⁾ Pension benefits	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~~second quarter ended June 30, 2020 and nine months ended September 30, 2020, the Company undertook a number of actions to reduce pension obligations in the U.K. by offering lump sum payments to certain plan participants and entering into group annuity contracts with a third-party carrier to pay and administer future annuity payments. The Company applied

settlement accounting to these U.K. pension plans which resulted in settlement charges of $62 that were recorded in Restructuring and other charges in the Statement of Consolidated Operations in the second quarter ended June 30, 2020 and nine months ended September 30, 2020.

In the third quarter and nine months ended September 30, 2020, the Company also applied settlement accounting to certain Canadian, U.K., and U.S. pension plans due to lump sum payments to participants which resulted in settlement charges of $8 and $10, respectively, that were recorded in Restructuring and other charges.

In the third quarter and nine months ended September 30, 2019, the Company applied settlement accounting to certain U.S. pension plans due to lump sum payments to participants which resulted in settlement charges of $4 and $8, respectively, that were recorded in Restructuring and other charges.

Other postretirement benefits

In the third quarter of ~~2019,~~2020, the Company applied curtailment accounting due to a workforce reduction resulting in a decrease in expense of $2 which is recorded in Restructuring and other charges in the Statement of Consolidated Operations.

In the second quarter of 2020, 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 certain health care subsidies effective December 31, 2021 and that for certain bargained retirees of the Company, it would eliminate certain health care subsidies effective December 31, 2021 and the life insurance benefit effective August 1, 2020. As a result of ~~this change,~~these changes, in the second quarter ended June 30, 2020 and nine months ended September 30, 2020, the Company recorded a decrease to the Accrued other postretirement benefits liability of $6, which was offset in Accumulated other comprehensive loss.

In the first quarter of 2019, the Company communicated to plan participants that for its U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries, it would eliminate the life insurance benefit effective May 1, 2019, and certain health care subsidies effective December 31, 2019. As a result of 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 in Accumulated other comprehensive loss.~~

Additionally, 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,(of 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 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$16 was recorded in Restructuring and other charges and $42 in discontinued operations in the ~~second quarter~~Statement 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~~Consolidated Operations) 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$17 in Accumulated other comprehensive loss ~~and a curtailment benefit~~in the Statement of ~~$28~~Changes in ~~Restructuring and other charges.~~Consolidated Equity.

~~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.H. 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 estimated annual effective tax rate, before discrete items, applied to ordinary income was ~~43.9%~~34.5% in both the third quarter and nine months ended September 30, ~~2019,~~2020, and ~~26.5%~~75.8% in both the third quarter and nine months ended September 30, ~~2018.~~2019. The ~~estimated annual rates in 2019 and 2018 were~~2020 rate was higher than the U.S. federal statutory rate of ~~21.0%~~21% primarily due to U.S. tax on foreign earnings, incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, and higher nondeductible expenses. The 2019 rate was higher due to U.S. tax on foreign earnings including estimated U.S. tax on Global Intangible Low-Taxed Income ~~the state tax impact of domestic taxable income, and foreign income taxed in higher rate jurisdictions. The 2019 estimated annual rate was also increased by certain~~("GILTI"), nondeductible ~~costs related to the proposed separation transaction and the~~ impairment of certain domestic and foreign ~~assets.~~long-lived assets, and other nondeductible expenses.

For the third quarter of ~~2019~~2020 and ~~2018,~~2019, the tax rate including discrete items was ~~54.5%~~400.0% (benefit on a relatively small loss) and ~~35.3%~~64.4% (provision on income), respectively. For the third quarter of 2020, the Company recorded a discrete tax benefit of $41 related to a $36 benefit for a U.S. tax law change as described below, a net $6 benefit for prior year items, and a net $1 charge for other items. For the third quarter of 2019, the Company recorded a discrete tax charge of ~~$10~~$14 related to ~~the following:~~ a net $12 charge ~~of $9~~ for ~~the adjustment of~~ prior year ~~taxes, a charge of $2 for interest accruals for the potential underpayment of taxes,~~items, 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~~net $2 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.~~other items.

For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the tax rate including discrete items was ~~40.6%~~5.0% (benefit on income) and ~~34.0%~~33.3% (provision on income), respectively. For the nine months ended September 30, 2020, the Company recorded a discrete tax benefit of $39 related to a $36 benefit for a U.S. tax law change as described below, a $6 charge for the remeasurement of deferred tax balances in various jurisdictions as a result of the Arconic Inc. Separation Transaction, a $5 benefit for stock compensation, a net $2 benefit for prior year items, and a net $2 benefit for other items. For the nine months ended September 30, 2019, the Company recorded a discrete tax benefit of ~~$25~~$23 related to ~~the following:~~ a $25 benefit ~~of $25~~ to deduct prior year foreign taxes rather than claim a U.S. foreign tax credit, ~~and~~ a $12 benefit ~~of $13~~ to remeasure certain deferred tax assets as a result of a foreign tax rate change, ~~partially offset by~~ a net $12 charge ~~of $9~~ for ~~the adjustment of~~ prior year ~~taxes, a charge of $2 for interest accruals for the potential underpayment of taxes,~~items, and a net $2 charge $2 for ~~a number~~other items.

The U.S. tax law change, applicable to taxable years beginning in 2018, relates to final regulations issued in July 2020 that provide for an exclusion of ~~small items. For~~certain high-taxed foreign earnings from the ~~nine months ended September 30,~~calculation of tax on GILTI. The Company intends to amend its 2018 and 2019 U.S. income tax returns to elect the ~~Company recorded~~high-tax exclusion, thereby reducing the amount of GILTI in those years and resulting in a discrete ~~charge~~tax benefit during the third quarter 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 a benefit of $38 for the reversal of a foreign tax reserve that is effectively settled.2020.

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


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Pre-tax income (loss) at estimated annual effective income tax rate before discrete items	$	(4)	$	124	$	34	$	9
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income	(2)		(37)		0		0
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	(1)		4		0		18
Other discrete items	(41)		14		(39)		(23)
Provision (benefit) for income taxes	$	(48)	$	105	$	(5)	$	4

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

~~H. Common Stock~~

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


⁽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.~~

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):


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income (loss) attributable to common shareholders:
Income (loss) from continuing operations attributable to common shareholders	$	36	$	58	$	105	$	8
Income (loss) attributable from discontinued operations	0		37		50		153
Net income (loss) attributable to common shareholders	36		95		155		161
Less: preferred stock dividends declared	(1)		(1)		(2)		(2)
Net income available to the Company's common shareholders - basic	35		94		153		159
Add: Interest expense related to convertible notes	0		3		0		0
Net income available to the Company's common shareholders - diluted	$	35	$	97	$	153	$	159

Average shares outstanding - basic	436		436		436		451
Effect of dilutive securities:
Stock options	0		1		0		1
Stock and performance awards	3		5		4		3
Convertible notes(1)	0		15		0		0
Average shares outstanding - diluted	439		457		440		455

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

(1)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 ceased to include the approximately 15 shares of common stock and the corresponding interest expense previously attributable to the convertible notes.

⁽¹⁾

~~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, ~~2019~~2020 and ~~2018~~2019 was 434 and ~~483,~~434, respectively.

The 15 decrease in ~~common stock~~the average shares outstanding atfor the nine months ended September 30, 2020 compared to same period in 2019 was primarily due to the ~~impact~~55 of ~~share repurchases of approximately 52 in the nine months ended September 30, 2019 (see Note~~ H).shares repurchased during 2019. As average shares outstanding are used in the calculation for both basic and diluted EPS, the full impact of 2019 share repurchases was not realized in EPS in the ~~third quarter and~~ nine months ended September 30, 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).


	Third quarter ended		Nine months ended
	September 30,		September 30,
	2020	2019	2020	2019
Convertible notes	0	0	0	15
Stock options(1)	3	3	3	3

(1)The weighted average exercise price per share of options excluded from diluted EPS was $26.03 and $32.64 as of September 30, 2020 and September 30, 2019, respectively.

On May 20, 2019, the Company announced that its Board of Directors (the "Board") authorized the repurchase of $500 of the Company's outstanding common stock (the "Share Repurchase Program") by means of trading plans established from time to time in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases and/or accelerated share repurchase agreements or other derivative transactions. There was no stated expiration for the Share Repurchase Program under which the Company may repurchase shares from time to time and pursuant to such terms, as and if it deems appropriate. The Share Repurchase Program may be suspended, modified or terminated at any time without prior notice. During August and September 2020, 2.9 shares were repurchased on the open market at an average price of $17.36 for approximately $51 in cash, including commission. All of the shares repurchased have been retired. After giving effect to the share repurchases made through September 30, 2020, approximately $299 remains available under the prior authorizations by the Board for the Share Repurchase Program. The amount of share repurchases by the Company may be limited under the terms of the Five-Year Revolving Credit Agreement. (See Note O.)

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


⁽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.~~

J. Accumulated Other Comprehensive Loss

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


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Pension and other postretirement benefits (G)
Balance at beginning of period	$	(866)	$	(2,281)	$	(2,732)	$	(2,344)
Other comprehensive income:
Unrecognized net actuarial loss and prior service cost/benefit	(7)		(6)		(66)		60
Tax expense	3		2		11		(13)
Total Other comprehensive income (loss) before reclassifications, net of tax	(4)		(4)		(55)		47
Amortization of net actuarial loss and prior service cost(1)	16		39		133		54
Tax (expense) benefit (2)	(4)		(9)		(24)		(12)
Total amount reclassified from Accumulated other comprehensive loss, net of tax(3)	12		30		109		42
Total Other comprehensive income	8		26		54		89
Transfer to Arconic Corporation	$	(22)	0		$	1,798	0
Balance at end of period	$	(880)	$	(2,255)	$	(880)	$	(2,255)
Foreign currency translation
Balance at beginning of period	$	(1,097)	$	(587)	$	(596)	$	(583)
Foreign currency translation	48		(87)		(39)		(91)
Net amount reclassified from Accumulated other comprehensive loss(4)	0		0		14		0
Other comprehensive income (loss)	48		(87)		(25)		(91)
Transfer to Arconic Corporation	0		0		(428)		0
Balance at end of period	$	(1,049)	$	(674)	$	(1,049)	$	(674)
Available-for-sale securities
Balance at beginning of period	$	0	$	0	$	0	$	(3)
Other comprehensive income (loss)(5)	0		1		0		4
Balance at end of period	$	0	$	1	$	0	$	1
Cash flow hedges
Balance at beginning of period	$	(5)	$	(1)	$	(1)	$	4
Adoption of accounting standard	0		0		0		(2)
Other comprehensive income (loss):
Net change from periodic revaluations	2		0		(6)		(5)
Tax expense	2		0		2		2
Total Other comprehensive income (loss) before reclassifications, net of tax	4		0		(4)		(3)
Net amount reclassified to earnings	2		2		6		1
Tax expense(2)	(1)		(1)		(1)		0
Total amount reclassified from Accumulated other comprehensive loss, net of tax(3)	1		1		5		1
Total Other comprehensive income (loss)	5		1		1		(2)
Balance at end of period	$	0	$	0	$	0	$	0

Accumulated other comprehensive loss	$	(1,929)	$	(2,928)	$	(1,929)	$	(2,928)

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


⁽¹⁾ (2)These amounts were included in Provision (benefit) for income taxes on the 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.~~

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

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

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

K. Receivables

~~Arconic~~Sale of Receivables Programs

The Company has 2 accounts receivable securitization arrangements.

The first is an arrangement with 3several 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). ~~On March 30, 2012,~~In the first quarter of 2020, the Company entered into an amendment to remove subsidiaries of Arconic ~~initially sold $304~~Corporation from the sale of ~~customer~~ receivables program in ~~exchange~~preparation for ~~$50~~the Arconic Inc. Separation Transaction and repurchased the remaining $282 unpaid receivables of Arconic Corporation in ~~cash and $254~~a non-cash transaction by reducing the amount of the deferred purchase program ~~under~~receivable. This amendment also reduced the ~~arrangement. Arconic has received additional~~maximum funding for receivables sold to $300. Effective September 30, 2020, the concentration limit of one customer may be reduced at the discretion of the financial institutions or automatically upon the downgrade of its debt rating as defined in the Receivables Sale Program agreement. A reduction in the customer's concentration limit would reduce the eligible receivable funding base thereby reducing the amount of future draws available and may also require repayment of a portion of existing draws.

The Company had net cash ~~funding of $300~~repayments totaling $153 ($~~3,408~~189 in draws and ~~$3,108 in repayments) since the program’s inception, including net cash draws totaling $0 ($450 in draws and $450~~$342 in repayments) for the nine months ended September 30, ~~2019.~~2020.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the deferred purchase program receivable was ~~$461~~$53 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)~~sold) 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 an amendment was executed on May 5, 2020 that cured it. This termination event under the Receivables Sale Program was not an event of default under the Company’s other financing and commercial agreements, including the Credit Agreement.

The second arrangement is one in which the Company, through a wholly-owned special purpose entity (“SPE”), entered into a receivables purchase agreement (the “Receivables Purchase Agreement”) on June 30, 2020 such that the SPE may sell certain receivables to financial institutions until the earlier of June 30, 2021 or a termination event. The Receivables Purchase Agreement also contains customary representations and warranties, as well as affirmative and negative covenants. Pursuant to the Receivables Purchase Agreement, the Company does not maintain effective control over the transferred receivables, and therefore accounts for these transfers as sales of receivables.

The SPE sold $46 and $123, respectively, of its receivables without recourse and received cash funding under this program during the third quarter and nine months ended September 30, 2020, resulting in derecognition of the receivables from the Company’s consolidated balance sheets. Cash received from collections of sold receivables is used by the SPE to fund additional purchases of receivables on a revolving basis, not to exceed $125, which is the aggregate maximum limit. As collateral against the sold receivables, the SPE maintains a certain level of unsold receivables, which was $28 at September 30, 2020. Costs associated with the sales of receivables are reflected in the Company’s Consolidated statements of operations for the periods in which the sales occur. Cash receipts from sold receivables are presented within Operating Activities in the Statement of Consolidated Cash Flows.

Other Customer Receivable Sales

In the third quarter and nine months ended September 30, 2020, the Company sold $8 and $32 of a certain customer’s 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. The sale of these customer receivables partially offset the maximum funding reduction resulting from the Arconic Inc. Separation Transaction as well as customer concentration limits within the first accounts receivable securitization arrangement. In the third quarter and nine months ended September 30, 2020, the Company sold another customer’s receivables of $34 and $99 in exchange for cash, the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. The sale of these customer receivables was undertaken to offset a change in the customer’s payment patterns (customer had been taking a discount for paying early).

L. Inventories


	September 30, 2020		December 31, 2019
Finished goods	$	539	$	524
Work-in-process	683		741
Purchased raw materials	326		299
Operating supplies	44		43
Total inventories	$	1,592	$	1,607

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~~2020 and December 31, ~~2018,~~2019, the portion of inventories valued on a last-in, first-out (LIFO) basis was ~~$1,310~~$488 and ~~$1,292,~~$503, respectively. If valued on an average-cost basis, total inventories would have been ~~$471~~$127 and ~~$530~~$133 higher at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

M. ~~Long-Lived Assets~~Properties, Plants, and Equipment, net


	September 30, 2019		December 31, 2018			September 30, 2020		December 31, 2019
Land and land rights	$	133	$	136	Land and land rights	$	97	$	99
Structures	2,349		2,364		Structures	1,016��		938
Machinery and equipment	9,224		9,234		Machinery and equipment	3,816		3,626
	11,706		11,734			4,929		4,663
Less: accumulated depreciation and amortization	7,070		6,769		Less: accumulated depreciation and amortization	2,560		2,449
	4,636		4,965			2,369		2,214
Construction work-in-progress	741		739		Construction work-in-progress	183		415
	$	5,377	$	5,704
Properties, plants, and equipment, net					Properties, plants, and equipment, net	$	2,552	$	2,629

During the ~~second~~third quarter of ~~2019,~~2020, the Company ~~updated its five-year strategic plan and determined that there was~~identified a ~~decline in the forecasted financial performance for the Disks asset group~~disclosure misclassification related to categories 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;~~equipment at December 31, 2019, and ~~certain other noncurrent assets by $198,~~

~~$197, and $33, respectively. The impairment charge was recorded in Restructuring and other charges~~corrected it in the ~~Statement of Consolidated Operations.~~current period by decreasing Land and land rights, Structures, Machinery and equipment, and Accumulated depreciation and amortization by $2, $120, $116, and $171, respectively, and increasing Construction work-in-progress by $67. Management evaluated the disclosure misclassification on previously issued financial statements and concluded that it was not material.

~~N. Leases~~

The Company ~~determines whether a contract contains a lease~~incurred capital expenditures which remain unpaid at ~~inception. The Company leases land~~September 30, 2020 and ~~buildings, plant equipment, vehicles,~~2019 of $29 and ~~computer equipment~~$71, respectively, 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 periodswill result 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 periodicallycash outflows for ~~inflation. Certain of the Company's lease agreements include variable lease payments. The variable portion of payments is not included~~investing activities 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.subsequent periods.

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.

N. Leases

Operating lease cost, which includes short-term leases and variable lease payments and approximates cash paid, was ~~$36~~$17 and ~~$35~~$21 in the third quarter of 2020 and 2019, respectively. Operating lease cost, which includes short-term leases and ~~2018, respectively,~~variable lease payments and ~~$110~~approximates cash paid, was $53 and ~~$109~~$64 in the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

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


	September 30, 2020		December 31, 2019
Right-of-use assets classified in Other noncurrent assets	$	119	$	125

Current portion of lease liabilities classified in Other current liabilities	36		38
Long-term portion of lease liabilities classified in Other noncurrent liabilities	91		98
Total lease liabilities	$	127	$	136

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

~~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 quarter and nine months ended September 30, 2019 were $7 and $25, respectively. The weighted-average remaining lease term and weighted-average discount rate at September 30, 2019 was 6 years and 6.1%, respectively.

O. Debt


	September 30, 2020		December 31, 2019
6.150% Notes, due 2020	0		1,000
5.400% Notes, due 2021	361		1,250
5.870% Notes, due 2022	476		627
5.125% Notes, due 2024	1,250		1,250
6.875% Notes, due 2025	1,200		0
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
Other (1)	(6)		13
	5,081		5,940
Less: amount due within one year	384		1,034
Total long-term debt	$	4,697	$	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)Includes various financing arrangements related to subsidiaries, unamortized debt discounts and unamortized debt issuance costs related to outstanding notes and bonds listed in the table above.


⁽¹⁾	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.

Public Debt.

On October 15, 2019, the 1.63% Convertible Notes ~~("the Notes")~~ matured in accordance with their terms and the Company repaid in cash ~~on the maturity date~~ the aggregate outstanding principal ~~amount~~ of ~~the Notes of approximately~~ $403 together with accrued and unpaid ~~interest, pursuant to~~interest.

On April 6, 2020, the ~~terms~~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 ~~Notes.~~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 up to, but not including, the redemption date. The Company incurred early termination premium and accrued interest of $35 and $17, respectively, which has been recorded in Interest expense, net during the second quarter ended June 30, 2020 and nine months ended September 30, 2020in the Statement of Consolidated Operations.

On April 16, 2020, the Company 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 24, 2020, the Company completed an offering of $1,200 aggregate principal amount of 6.875% Notes due 2025, the proceeds of which have been 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 $14 associated with the issuance in the second quarter of 2020.

On May 21, 2020, the Company completed a cash tender offer and redeemed $589 and $151 of principal amount of the 5.400% Notes due 2021 and its 5.870% Notes due 2022, respectively. The amount of early tender premium and accrued interest and associated with the notes accepted for early settlement were $24 and $4, respectively, which was recorded in Interest expense, net during the second quarter ended June 30, 2020 and nine months ended September 30, 2020 in the Statement of Consolidated Operations.

Credit Facilities. ~~Arconic maintains a~~

In March 2020, the Company entered into an amendment to its Five-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 to April 1, 2025. The Company was required to maintain a ratio of 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.

On June 26, 2020, the Company entered into another amendment to its Credit Agreement to provide relief from its existing financial covenant through December 31, 2021 and ~~provides~~reduce total commitment available from $1,500 to $1,000. The Company will be required to maintain a ratio of Consolidated Net Debt (as defined in the Credit Agreement) to Consolidated EBITDA (as defined in the Credit Agreement) as of the end of each fiscal quarter for ~~a senior unsecured revolving credit facility~~the period of ~~$3,000.~~ the four fiscal quarters of the Company most recently ended, to be no greater than (i)5.00 to 1.00 for any quarter ending on or prior to December 31, 2020, (ii) 5.25 to 1.00 for the quarter ending March 31, 2021, (iii) 5.00 to 1.00 for the quarter ending June 30, 2021, (iv) 4.50 to 1.00 for the quarter ending September 30, 2021, and (v) 4.00 to 1.00 for the quarter ending December 31, 2021. The ratio returns to 3.50 to 1.00 for all periods thereafter. Under the amendment to the Credit Agreement, during the covenant relief period from June 30, 2020 through December 31, 2021 (unless the Company ends the covenant relief period earlier in accordance with the amendment), common stock dividends and share repurchases are permitted only if no borrowings are outstanding under the Credit Agreement and are limited to an aggregate amount of $100 through June 30, 2021, with such limit increasing by $150 to an aggregate amount of $250 after June 30, 2021 if the Consolidated Net Debt to Consolidated EBITDA ratio is no greater than 3.75 to 1.00.There were 0 amounts outstanding at September 30, ~~2019~~2020 or December 31, ~~2018,~~2019, and 0 amounts were borrowed during ~~2019~~2020 or ~~2018~~2019 under the Credit Agreement. At September 30, 2020, the Company was in compliance with all covenants under the Credit Agreement. Availability under the Credit Agreement could be reduced in future periods if the Company fails to maintain the required ratios referenced above.

In addition to the Credit Agreement, ~~Arconic~~the Company has ~~a number of other~~another credit ~~agreements~~agreement that ~~provide~~provided a ~~combined~~ borrowing capacity of ~~$715 as of~~$100 at September 30, ~~2019, of~~2020 which ~~$175 is due to expire in 2019 and $540 is due to expire in~~expired on October 31, 2020. The purpose of any borrowings under ~~these~~this credit ~~arrangements~~arrangement is to provide for working capital requirements and for other general corporate purposes. The covenants contained in ~~all these arrangements~~this arrangement are the same as the Credit Agreement. During the nine months ended September 30, ~~2019, Arconic borrowed and repaid $300 and $300, respectively,~~2020, there were no borrowings or repayments under ~~these~~this 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.facility.

P. 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


	September 30, 2020				December 31, 2019
	Carrying value		Fair value		Carrying value		Fair value
Long-term debt, less amount due within one year	$	4,697	$	5,079	$	4,906	$	5,337

Restricted cash, which was included in Prepaid assets and other current liabilities in the Consolidated Balance Sheet, was $3 and $6$55 at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Q. Acquisitions and Divestitures

~~2019 Divestitures.~~ On May 31, 2019, Arconic sold a small additive manufacturing facility within the EP&F segment for $1 in cash, which resulted in a loss of $13 in the second quarter of 2019 recorded in Restructuring and other charges in the Statement of Consolidated Operations. The sale is subject to certain post-closing adjustments.2020 Divestitures

On ~~August 15, 2019, Arconic sold inventories and properties, plants, and equipment related to a small energy business within~~January 31, 2020, the EP&F segment for $13 in cash. As 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~~Company reached an agreement to sell its aluminum rolling mill in Itapissuma, Brazil for $50 in cash, subject to working capital and other adjustments. The rolling mill produces specialty foil and sheet products and its operating results and assets and liabilities are includeda small manufacturing plant 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 recognized a charge of $59 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 recorded the charge in Restructuring and other charges in the Statement of Consolidated Operations.

~~On September 13, 2019, Arconic reached an agreement to sell its forgings business in the United Kingdom~~U.K. for $62 in cash, subject to working capital and other adjustments. 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 included in the EP&F segment. The sale transaction is expected to close in the fourth quarter of 2019, subject to regulatory approvals and customary closing conditions. As a result 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~~$12 in cash, subject to working capital and other adjustments. The operating results and assets and liabilities of this plant are included in the ~~GRP~~Engineered Structures segment. ~~The sale transaction is expected~~As a result of entering into the agreement to ~~close~~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 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~~ended March 31, 2020. As the sale ~~whichwill be~~is not expected to occur, the Company changed the classification of the assets from held for sale to held for use in the second quarter ended June 30, 2020 and recorded these assets at their lower of carrying value (assuming no initial reclassification for held for sale was made) or fair value. The result was a reversal of $7 related to a non-cash impairment in the second quarter of 2020. These charges were recorded in Restructuring and other charges in the Statement of Consolidated Operations.

~~2018 Divestitures.~~ 2019 Divestitures

On ~~April 2, 2018, Arconic~~December 1, 2019, the Company 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 extrusionsforgings business in ~~December 2017,~~the U.K. for $64 in cash, which resulted in a ~~charge~~loss on sale of ~~$41~~$46 that was recognized in 2019 (of which $43 and $3 was recognized in the third quarter and fourth quarter of ~~2017~~2019, respectively) and an incremental charge of $6 related to certain post-closing adjustments in the first quarter ended March 31, 2020 and nine months ended September 30, 2020. These charges were recorded in Restructuring and other charges in the Statement of Consolidated ~~Operations~~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 as its use is subject to restriction by the U.K. pension authority until certain U.K. pension plan changes were made and approved. In the second quarter of 2020, the restriction was removed, and the proceeds were reclassified to Cash and cash equivalents. The forgings business primarily produced steel, titanium, and nickel based forged components for aerospace, mining, and off-highway markets and its operating results and assets and liabilities were included in the Engine Products segment. The sale remains subject to certain remaining post-closing adjustments. This business generated third-party sales of $30 and $95 in the third quarter and nine months ended September 30, 2019, respectively, and had 540 employees at the time of divestiture.

On May 31, 2019, the Company sold a small additive manufacturing facility within the Engineered Structures segment for $1 in cash, which resulted in a loss of $13 in the second quarter ended June 30, 2019 and nine months ended September 30, 2019 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 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~~Operations.

On August 15, 2019, the Company sold inventories and properties, plants and equipment related to a small energy business within the Engineered Structures segment for $13 in cash. As the sale was substantially complete as of June 30, 2019, and the sale price was estimated to be less than the carrying value, the Company recognized a charge of $9 in the ~~fourth~~second quarter ended June 30, 2019 and nine months ended September 30, 2019 related to inventory impairment and recorded the charge in Cost 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~~goods sold 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. Contingencies and Commitments

Contingencies

Environmental Matters

~~Arconic~~The Company participates in environmental assessments and cleanups at more than ~~100~~30 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~~$9 at September 30, ~~2019~~2020 and ~~$266~~$8 at December 31, ~~2018~~2019, recorded in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet (of which ~~$88~~$4 and ~~$81,~~$3, 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~~less than $1 in the third quarter and nine months ended September 30, ~~2019, respectively,~~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, NY—~~Arconic has an ongoing remediation project related to the Grasse River, which is adjacent to Arconic’s Massena plant site. Many years ago, it was determined that sediments and fish in the river contain varying levels of polychlorinated biphenyls (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 and December 31, 2018, the reserve balance associated with this matter was $191 and $198, respectively. In the first quarter of 2019, Arconic 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.

Tax

Pursuant to the October 31, 2016 Tax Matters Agreement ~~entered into~~ between ~~Arconic~~the Company and Alcoa Corporation, ~~in connection with the separation transaction with~~ Alcoa Corporation ~~Arconic~~ shares responsibility with ~~Alcoa Corporation,~~ and ~~Alcoa Corporation~~ has agreed to partially indemnify ~~Arconic~~the Company for ~~49%~~the following matter. Additionally, as part of the ~~ultimate~~March 31, 2020 Tax Matters Agreement between the Company and Arconic Corporation, Arconic Corporation also shares partial responsibility with and has agreed to partially indemnify the Company for its own share of the same matter. In connection with these indemnities, Alcoa Corporation and Arconic Corporation retain 49% and 34% of the total liability, ~~with respect to~~respectively, for the following ~~matter.~~matter, and the Company retains the remaining 17% of the total liability.

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~~$181 (€~~152)~~155), 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~~On October 13, 2020, the Supreme Court ~~of Spain is reviewing~~reviewed the assessment on its merits, and ~~will render~~ a final ~~decision.~~decision is expected to be rendered before the end of the year. 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~~in existence during the audit period.

In the third quarter of 2018, the Company ~~and Alcoa Corporation as provided for in the Tax Matters Agreement.~~

~~Arconic has~~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 reserve and indemnification receivable were established in~~Pursuant to the ~~third~~Tax Matters Agreement with Arconic Corporation, as of the second quarter of ~~2018.~~2020 the Company established an additional income tax receivable representing Arconic Corporation's 34% share of the total liability. As of September 30, 2020, the balances of the Company's reserve, including interest, and the receivables are $63 (€54) and $52 (€45), respectively.

~~Additionally, while the~~The tax years 2010 through 2013 are closed to audit. In July 2020, a Spanish corporate income tax audit ~~it is possible that~~covering the ~~Company may receive assessments for~~ tax years ~~subsequent to 2013.~~2014 through 2018 commenced. Any potential assessment for ~~an individual~~the tax ~~year~~period open to audit is not expected to be material to the Company’s consolidated operations.

Reynobond PE

~~As previously reported,~~Prior to the Arconic Inc. Separation Transaction on April 1, 2020, the Company was known as Arconic Inc.References to “Arconic Inc.” in this “Reynobond PE” section refer to Arconic Inc. only and do not include its subsidiaries, except as otherwise stated.

On June 13, 2017, the Grenfell Tower in London, U.K. caught fire resulting in fatalities, injuries and damage. A French subsidiary of Arconic Inc., Arconic Architectural Products SAS (AAP SAS) (now a subsidiary of Arconic Corporation), 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 Inc. 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.

Pursuant to the Separation and Distribution Agreement, Arconic Corporation agreed to indemnify the Company for certain liabilities and the Company agreed to indemnify Arconic Corporation for certain liabilities. As a result of the Arconic Inc. Separation Transaction, Arconic Corporation holds the building and construction systems businesses previously held by the Company and AAP SAS is a subsidiary of Arconic Corporation; accordingly, Arconic Corporation has agreed to assume and indemnify the Company against potential liabilities associated with the June 13, 2017 fire at the Grenfell Tower in London, U.K., including the following legal proceedings in which Arconic Inc. and/or its then directors were named as parties:

Behrens et al. v. Arconic Inc. et al. ~~As previously reported, on~~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~~alleging 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~~case was 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~~Pennsylvania. Defendants moved to dismiss the ~~complaint~~case on numerous grounds, including forum non conveniens. Defendant Saint-Gobain Corporation was subsequently voluntarily dismissed from the ~~bases, among other things, that: (i)~~case. On September 16, 2020, the ~~case should be heard in~~court issued an order granting the ~~United Kingdom, not~~remaining Defendants’ motion to dismiss on forum non conveniens grounds. Plaintiffs subsequently filed a motion for reconsideration of the ~~United States; (ii) there is no jurisdiction over necessary parties;~~judgment and (iii) Pennsylvania products liability law does not apply to manufacture and sale of product overseas. 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.Defendants are preparing a response.

Howard v. Arconic Inc. et al. ~~As previously reported, a~~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 Inc. 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~~banks. Howard and Sullivan~~, closed~~ ~~Sullivan~~,were subsequently consolidated 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 risksalleging violations of the ~~Reynobond PE product, including in Arconic’s Form 10-Ks for the fiscal years ended December 31, 2013, 2014, 2015~~federal securities laws 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,seeking, 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~~After the ~~consolidated amended complaint for failure to state a claim. On June 21, 2019, the Court~~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 have moved to dismiss the second amended complaint. Plaintiffs’ opposition to that motion is due by November 1, 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~~On June 22, 2018, a derivative complaint was filed nominally on behalf of Arconic Inc. by a purported Arconic Inc. stockholder against the then members of ~~Arconic’s~~Arconic Inc.’s Board of Directors and Klaus Kleinfeld and Ken Giacobbe, naming Arconic Inc. 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~~federal securities laws and Delaware state law. ~~On July 13, 2018, the parties filed a stipulation agreeing to stay this~~The case has been stayed 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.Police.

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

Stockholder Demands. ~~The~~Prior to the Arconic Inc. Separation Transaction, 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.

Other

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.

Commitments

Guarantees

At September 30, ~~2019, Arconic~~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~~$26 at September 30, ~~2019.~~2020.

~~Pursuant~~In addition, pursuant to the Separation and Distribution Agreement between ~~Arconic~~the Company and Alcoa Corporation, ~~Arconic~~the Company was required to provide ~~certain guarantees~~a guarantee for an energy supply agreement at an Alcoa Corporation ~~which~~facility that expires in 2047. This guarantee had a ~~combined~~ fair value of $8$17 and $6$9 at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and ~~were~~was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet. ~~Arconic~~The Company was required to provide a guarantee up to an estimated present value ~~amount~~ of approximately ~~$1,265~~$1,183 and ~~$1,087~~$1,353 at September 30, ~~2019~~2020 and December 31, ~~2018, respectively, related to a long-term supply agreement for energy for an Alcoa Corporation facility in the event of an Alcoa Corporation payment default. This guarantee expires in 2047.~~2019, respectively. For this guarantee, subject to its provisions, ~~Arconic~~the Company is secondarily liable in the event of a payment default by Alcoa Corporation. ~~Arconic~~The Company currently views the risk of an Alcoa Corporation payment default on its obligations under the contract to be remote.

Letters of Credit

~~Arconic~~The Company has outstanding letters of credit, primarily related to workers’ compensation, environmental obligations, and leasing obligations. The total amount committed under these annual letters of credit, which expire and automatically renew ~~or expire~~ at various dates ~~mostly~~ in ~~2019,~~2020 and 2021, was ~~$146~~$105 at September 30, ~~2019.~~2020.

workers’ compensation claims which occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016. Arconic Corporation and Alcoa Corporation workers’ compensation ~~claims~~ and letter of credit fees paid by ~~Arconic~~the Company are being proportionally billed to and are being ~~fully~~ reimbursed by Arconic Corporation and Alcoa Corporation. Also, the Company was required to provide letters of credit for certain Arconic Corporation environmental obligations and, as a result, the Company has $29 of outstanding letters of credit relating to liabilities (which are included in the $105 in the above paragraph). $13 of these outstanding letters of credit are pending cancellation and will be deemed cancelled once returned by the beneficiary. Arconic Corporation has issued surety bonds to cover these environmental obligations. Arconic Corporation is being billed for these letter of credit fees paid by the Company, and will reimburse the Company for any payments made under these letters of credit.

Surety Bonds

~~Arconic~~The Company has outstanding surety bonds, primarily related to tax matters, contract performance, workers’ compensation, environmental-related matters, and customs duties. The total amount committed under these annual surety bonds, which expire and automatically renew at various dates, primarily in ~~2019,~~2020, was ~~$49~~$43 at September 30, ~~2019.~~2020.

Pursuant to the Separation and Distribution ~~Agreement,~~Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company was required to provide surety bonds of $26 (which are included in the $43 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims which occurred prior to the respective separation transactions of April 1, 2020 and November 1, ~~2016~~2016. Arconic Corporation and ~~as a result, Arconic has $24 in outstanding surety bonds relating to these liabilities.~~ Alcoa Corporation workers’ compensation claims paid and surety bond fees paid by ~~Arconic~~the Company are being proportionately billed to and are being ~~fully~~ reimbursed by Arconic Corporation and Alcoa Corporation.

S. ~~Proposed Separation Transaction~~

On February 8, 2019, Arconic announced, as part of its strategy and portfolio review, a separation of its portfolio into 2 independent, publicly-traded companies. The EP&F businesses will remain in the existing company (Remain Co.) which will be renamed Howmet Aerospace Inc. at separation. The GRP businesses will comprise Spin Co. and will be named Arconic Corporation at separation. The Company will also consider the sale of businesses that do not best fit into EP&F and GRP. The Company is targeting to complete the separation in the second quarter of 2020. The separation transaction is subject to a number of conditions, including, but not limited to, final approval by Arconic’s Board of Directors, receipt of a favorable opinion of legal counsel with respect to the tax-free nature of the transaction for U.S. federal income tax purposes, completion of financing, and the effectiveness of a Form 10 registration statement to be filed with the U.S. Securities and Exchange Commission. The Company expects the Form 10 filing to be available in the fourth quarter of 2019. Arconic may, at any time and for any reason until the proposed transaction is complete, abandon the separation plan or modify or change its terms.In the third quarter and nine months ended September 30, 2019, Arconic recognized $25 and $44, respectively, in Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations for costs related to the proposed separation transaction.

T. Subsequent Events

Management evaluated all activity of ~~Arconic~~the Company and concluded that no subsequent events have occurred that would require recognition in the Consolidated Financial Statements or disclosure in the Notes to the Consolidated Financial ~~Statements, except as noted below:~~Statements.

~~See Note~~ D ~~for details of a curtailment of operations at a plant in the GRP segment.~~

~~See Note~~ H ~~for details of the August 2019 ASR that was settled in October.~~

~~See Note~~ O ~~for details on the maturity of Convertible Notes.~~

~~See Note~~ Q ~~for details on an agreement reached to sell a hard alloy extrusions plant.~~

Report of Independent Registered Public Accounting Firm*

~~To theShareholders and Board of Directors of Arconic Inc.~~

~~Results of Review of Interim Financial Statements~~

We have reviewed the accompanying consolidated balance sheet of Arconic Inc. and its subsidiaries (the “Company”) as of September 30, 2019, and the related statements of consolidated operations, of consolidated comprehensive income (loss), and of changes in consolidated equity for the three-month and nine-month periods ended September 30, 2019 and 2018 and the statements of consolidated cash flows for the nine-month periods ended September 30, 2019 and 2018, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2018, and the related consolidated statements of operations, comprehensive (loss) income, changes in equity, and cash flows for the year then ended (not presented herein), and in our report dated February 21, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~Basis for Review Results~~

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

~~/s/ PricewaterhouseCoopers LLP~~

~~PricewaterhouseCoopers LLP~~

~~Pittsburgh, Pennsylvania~~

~~November 5, 2019~~

* The Company notes that PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for its report on the unaudited interim financial statements because that report is not a "report" or a "part" of a registration statement within the meaning of Sections 7 and 11 of the Act.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(dollars in millions, except per share ~~amounts; shipments in thousands of metric tons [kmt])~~amounts)

Overview

~~Our Business~~

On April 1, 2020, Howmet Aerospace Inc. (formerly known as Arconic Inc.) (“~~Arconic”~~Howmet” or the “Company”) ~~is a global leader in lightweight metals engineering~~completed the previously announced separation of its business into two independent, publicly-traded companies (the “Arconic Inc. Separation Transaction”). Following the Arconic Inc. Separation Transaction, Arconic Corporation holds the Global Rolled Products businesses (global rolled products, aluminum extrusions, 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,~~systems) previously held by the Company. The Company retained the Engineered Products and ~~packaging.~~Forgings businesses (Engine Products, Engineered Structures, Fastening Systems, and Forged Wheels).

The Company's Board of Directors approved the completion of the Arconic Inc. Separation Transaction on February 5, 2020, which was effected by the distribution (the “Distribution”) by the Company of all of the outstanding common stock of Arconic Corporation on April 1, 2020 to the Company’s stockholders who held shares as of the close of business on March 19, 2020 (the “Record Date”). In the Distribution, each Company stockholder of record as of the Record Date received one share of Arconic Corporation common stock for every four shares of the Company’s common stock held as of the Record Date. The Company did not issue fractional shares of Arconic Corporation common stock in the Distribution. Instead, each stockholder otherwise entitled to a fractional share of Arconic Corporation common stock received cash in lieu of fractional shares.

On March 31, 2020, in connection with the Arconic Inc. Separation Transaction, the Company entered into several agreements with Arconic Corporation that govern the relationship between the Company and Arconic Corporation following the Distribution, including the following: a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and certain Patent, Know-How, Trade Secret License and Trademark License Agreements.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes the historical results of Arconic Corporation, as the Arconic Inc. Separation Transaction took place on April 1, 2020. The financial results of Arconic Corporation for all periods prior to the Arconic Inc. Separation Transaction have been retrospectively reflected in the Statement of Consolidated Operations as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. In addition, the related assets and liabilities associated with Arconic Corporation in the December 2019 Consolidated Balance Sheet are classified as assets and liabilities of discontinued operations. The cash flows, comprehensive income, and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows, Statement of Consolidated Comprehensive Income and Statement of Changes in Consolidated Equity, respectively, for all periods prior to the Arconic Inc. Separation Transaction.

COVID-19

Year to date, the Company derived approximately 70% of its revenue from products sold to the aerospace end-market. As a result of 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 our financial results. Since the start of the pandemic, certain original equipment manufacturer (“OEM”) customers have suspended manufacturing operations in North America and Europe on a temporary basis. While the pandemic has resulted in temporary closure of a small number of the Company's manufacturing facilities, all of our manufacturing facilities are currently operating. Since the duration of the pandemic is uncertain, 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 our dividends and reducing the levels of our capital expenditures to preserve cash and maintain liquidity. For additional information regarding the risks of COVID-19 on our business, see the section entitled “Item 1A. Risk Factors — Our business, results of operations, financial condition and/or cash flows have been and could continue to be materially adversely affected by the effects of widespread public health epidemics/pandemics, including COVID-19, that are beyond our control.”

Results of Operations

Earnings Summary:

Sales. Sales were ~~$3,559~~$1,134 in the third quarter of 2020 compared to $1,794 in the third quarter of 2019 ~~compared to $3,524 in the third quarter of 2018~~ and ~~$10,791~~$4,021 in the nine months ended September 30, ~~2019~~2020 compared to ~~$10,542~~$5,364 in the nine months ended September 30, ~~2018.~~2019. The ~~increase~~decrease of ~~$35,~~$660, or 1%37%, in the third quarter of ~~2019~~2020 and ~~$249,~~$1,343, or 2%25%, in the nine months ended September 30, ~~2019,~~2020, was primarily due to ~~volume growth~~lower volumes in the commercial aerospace and commercial transportation ~~packaging,~~markets driven by the impacts of COVID-19 and ~~industrial end markets; favorable product pricing and mix~~737 MAX production declines along with a decrease in the Global Rolled Products (GRP) segment; and favorable product pricing in the Engineered Products and Forgings (EP&F) segment (formerly named the Engineered Products and Solutions segment) when fulfilling volume above contractual share, renewing contracts, and selling non-contractual spot business; partially offset by lower aluminum prices; lower sales of ~~$44 and $177 in~~$30 for the third quarter of 2020 and $95 for the nine months ~~ended~~ending September 30, ~~2019, respectively, related to~~2020 from the ~~completed ramp down~~divestiture of ~~Arconic's North American packaging operations (in December 2018) and the divestitures of the extrusions business in Latin America (divested in April 2018) and~~ the forgings business in ~~Eger, Hungary (divested~~the U.K. in December ~~2018);~~2019, all partially offset by growth in the defense aerospace and ~~unfavorable foreign currency movements. The nine months ended September 30, 2018 was also impacted by costs incurred of $38 related to settlements of certain customer claims primarily related to~~industrial gas turbine markets as well as favorable product ~~introductions.~~pricing.

Cost of goods sold (COGS). COGS as a percentage of Sales was ~~78.7%~~79.4% in the third quarter of ~~2019~~2020 compared to ~~81.8%~~73.4% in the

third quarter of ~~2018~~2019 and ~~79.3%~~was 74.8% in the nine months ended September 30, ~~2019~~2020 compared to ~~81.1%~~73.5% in the nine months ended September 30, ~~2018.~~2019. The ~~decrease~~increase in the third quarter of 2020 was primarily due to lower volumes and the impacts of COVID-19. In the third quarter of 2020, the Company incurred costs related to fires at two plants of $7. The increase in the nine months ended September 30, ~~2019~~2020 was primarily due to the impacts of COVID-19 and lower ~~raw material costs including aluminum prices, favorable product pricing,~~volumes in the second and ~~net cost savings,~~third quarter, partially offset by unfavorable product mix, and costs related to a fire at a fasteners plant of $4 and $8 in the third quarter and nine months ended September 30, 2019, respectively. The nine months ended September 30, 2019 also included the following costs: a charge for environmental remediation at Grasse River of $25; the impairment of energy business assets of ~~$9; and a charge of~~ $9 ~~primarily for a one-time signing bonus for employees associated with~~in the ~~collective bargaining agreement negotiation. In June~~second quarter of 2019, and favorable pricing. In the ~~Company~~second quarter ended June 30, 2020 and the United Steelworkers reached a tentative three-year labor agreement covering approximately 3,400 employees at four U.S. locations; the previous labor agreement expired on May 15, 2019. The tentative agreement was ratified on July 11, 2019. The nine months ended September 30, ~~2018 included~~2020, the ~~following costs that did not recur in 2019: costs of $38 related to settlements of certain customer claims noted above and a charge of $23~~Company submitted an insurance claim related to a ~~physical inventory adjustment at one~~ plant fire and received a partial settlement of $10, which was in ~~the GRP segment (this plant was previously included in the EP&F segment prior to the transfer~~excess of the aluminum extrusions operations from EP&F to GRP in the first quarter of 2019). In the second quarter of 2019, the Company sustained a fire at a fasteners plant in France and recorded a charge of $4 for equipment and inventory damage, as well as higher operating costs. The Company recorded a charge of $4 in the third quarter of 2019 for repairs, cleanup, and higher operating costs related to the fire.its $10 insurance deductible which has already been met. The Company anticipates ~~a charge~~charges of approximately ~~$10~~$5 to ~~$15~~$10 in the fourth quarter of ~~2019,~~2020, with additional impacts in subsequent quarters as the ~~business continues~~businesses continue to recover from the ~~fire. The Company has insurance with a deductible of $10.~~fires.

Selling, general administrative, and other expenses (SG&A).. SG&A expenses were ~~$167~~$66 in the third quarter of 2020 compared to $89 in the third quarter of 2019 ~~compared to $134 in the third quarter of 2018~~ and ~~$523~~$219 in the nine months ended September 30, ~~2019~~2020 compared to ~~$464~~$307 in the nine months ended September 30, ~~2018.~~2019. The ~~increase~~decrease of ~~$33,~~$23, or ~~25%~~26%, in the third quarter of ~~2019~~2020 and $59, or 13%, in the nine months ended September 30, 2019, was primarily due to costs associated with the planned separation of Arconic of $25 and $44 in the third quarter and nine months ended September 30, 2019, respectively, and higher annual incentive compensation accruals and executive compensation costs, partially offset by lower costs driven by overhead cost reductions. The nine months ended September 30, 2019 was also impacted by $6 in strategy and portfolio review costs.

~~Research and development expenses (R&D).~~R&D expenses were $16 in the third quarter of 2019 compared to $25 in the third quarter of 2018 and $55 in the nine months ended September 30, 2019 compared to $77 in the nine months ended September 30, 2018. The decrease of $9, or 36%, in the third quarter of 2019 and $22,$88, or 29%, in the nine months ended September 30, 2020, was primarily due to lower costs driven by overhead cost reductions and lower net legal and other advisory costs related to Grenfell Tower primarily due to insurance reimbursements, partially offset by higher costs associated with the Arconic Inc. Separation Transaction through June 30, 2020.

Research and development expenses (R&D). R&D expenses were $5 in the third quarter of 2020 compared to $6 in the third quarter of 2019 and $13 in the nine months ended September 30, 2020 compared to $22 in the nine months ended September 30, 2019. The decrease of $1, or 17%, in the third quarter of 2020 and $9, or 41%, in the nine months ended September 30, 2020, was primarily due to the consolidation of the Company's primary R&D facility in conjunction with ongoing cost reduction efforts.

Restructuring and other ~~charges.~~charges. Restructuring and other charges was ~~$119~~$22 in the third quarter of 2020 compared to $56 in the third quarter of 2019 or a decrease of $34; and was $166 in the nine months ended September 30, 2020 compared to ~~a net benefit of $2 in the third quarter of 2018 and $630~~$572 in the nine months ended September 30, 2019 ~~compared to $20 in~~or a decrease of $406. The decrease for the nine months ended September 30, ~~2018. The increase of $121 in the third quarter of 2019 and $610 in the nine months ended September 30, 2019,~~2020 was primarily due to charges of $59 and $43 primarily related to non-cash impairments of the net book value of the Company’s aluminum rolling mill in Brazil and its forgings business in the U.K., respectively, associated with agreements reached during the quarter to sell these businesses. The nine months ended September 30, 2019 was also impacted by a charge for impairment of a long-lived asset group of $428 ~~(see Note~~ Mand a loss on sale of an additives business of $12 both of which occurred in the second quarter of 2019, as well as a decrease in severance cost reversals of $8 and a decrease in lease termination costs of $12; which were partially offset by a net increase related to ~~the Consolidated Financial Statements);~~pension and other postretirement benefit settlement accounting of $74, an increase in layoff charges of ~~$81,~~$25 and ~~a charge for~~charges related to an impairment of ~~a trade name intangible asset and properties, plants, and equipment~~assets associated with agreements to sell two businesses in the United Kingdom of ~~$24; partially offset by a credit of $58 related to~~$11 in the ~~elimination of life insurance benefits for U.S. salaried and non-bargaining hourly retirees of the Company and its subsidiaries. The~~ nine months ended September 30, ~~2018 was also impacted by a postretirement curtailment benefit of $28.~~2020. See Note DE to the Consolidated Financial ~~Statements.~~Statements for additional detail.

Interest ~~expense.~~expense, net. Interest expense, net was ~~$86~~$77 in the third quarter of 2020 compared to $85 in the third quarter of 2019 ~~compared to $88~~and $305 in the ~~third quarter of 2018 and~~nine months ended September 30, 2020 compared to $256 in the nine months ended September 30, ~~2019 compared to $291 in the nine months ended September 30, 2018.~~2019. The decrease of ~~$2,~~$8, or 2%9%, in the third quarter of ~~2019 and $35,~~2020 was the result of a reduced level of debt during the quarter, while the increase of $49, or ~~12%~~19%, in the nine months ended September 30, ~~2019, was~~2020, were primarily due to ~~lower debt outstanding. The nine months ended September 30, 2018 was also impacted by~~ a ~~charge of $19 related to the~~$59 premium paid on the early redemption of debt, partially offset by a reduced average level of debt for the ~~Company’s then outstanding 5.72% Senior Notes due 2019.~~nine months ended September 30, 2020.

Other expense, net. Other expense, net was ~~$31~~$8 in the third quarter of ~~2019~~2020 compared to $8 in the third quarter of ~~2018 and $92~~2019. Changes in other expense, net in the third quarter of 2020 were primarily due to a $13 favorable change in foreign currency, completely offset by a reduction in interest income of $5, higher deferred compensation of $3 along with an increase of $5 related to various smaller items. Other expense, net was less than $1 for the nine months ended September 30, ~~2019~~2020 compared to ~~$69~~in$26 expense for the nine months ended September 30, ~~2018.~~2019. The ~~increase~~lower expense of ~~$23,~~$26, or ~~288%, in the third quarter of 2019 and $23, or 33%, in the nine months ended September 30, 2019,~~100% was ~~primarily~~ due to ~~a benefit of $29 from establishing a tax indemnification receivable reflecting Alcoa Corporation’s 49% share of a Spanish tax reserve in 2018 that did not recur in 2019 and an increase in~~lower deferred compensation ~~arrangements related to investment performance. The nine months ended September 30, 2019 was also impacted by~~of $15, favorable foreign currency ~~movements.~~movements of $21 and various small items of $6, partially offset by lower interest income of $16.

Provision for income taxes. The tax rate including discrete items was ~~54.5%~~400.0% (benefit on a small loss) in the third quarter of ~~2019~~2020 compared to ~~35.3%~~64.4% (provision on income) in the third quarter of ~~2018.~~2019. A discrete tax ~~charge~~benefit of ~~$10~~$41 was recorded in the third quarter of ~~2019~~2020 compared to a discrete tax charge of ~~$26~~$14 in the third quarter of ~~2018.~~2019. The estimated annual effective tax rate, before discrete items, applied to ordinary income was ~~43.9%~~34.5% in the third quarter of ~~2019~~2020 compared to ~~26.5%~~75.8% in the third quarter of ~~2018.~~2019. See Note GH to the Consolidated Financial Statements.

~~Net income~~Income from Continuing and Discontinued Operations ~~. Net income~~Income (loss) from continuing operations was ~~$95~~$36, or $0.08 per diluted share, in the third quarter of 2020 compared to $58, or $0.13 per diluted share, in the third quarter of 2019, and $105, or ~~$0.21~~$0.23 per diluted share, ~~compared $161 in the third quarter of 2018, or $0.32 per diluted share, and $161~~ in the nine months ended September 30, ~~2019,~~2020, compared to $8, or ~~$0.35~~$0.01 per diluted share, ~~compared to $424~~ in the nine months ended September 30, ~~2018, or $0.86 per diluted share.~~2019. The decrease of ~~$66~~$22 in the third quarter of ~~2019~~2020 is primarily related to the reduction of operating income of $183 due to lower volumes and ~~$263~~the impact of COVID-19 along with a decrease in interest of $8, partially offset by a decrease in the Provision for income taxes of $153 (decreased from a charge of $105 to a benefit of $48). The increase of $97 in the nine months ended September 30, ~~2019,~~2020 was primarily due to ~~higher~~lower Restructuring and other charges ~~higher Income taxes, higher SG&A~~of $406, reflecting the $428 impairment of a long-lived asset group taken in the second quarter of 2019, along with lower Selling, general,

administrative and other expenses ~~and higher Other expense, net,~~of $88 related to primarily overhead cost reductions, partially offset by ~~volume growth, favorable product pricing, net cost savings,~~ lower ~~Interest expense,~~volumes and ~~lower R&D expenses.~~the impacts of COVID-19.

There was no Income from discontinued operations for the third quarter of 2020 compared to $37 or $0.08 per diluted share for the third quarter of 2019. Income from discontinued operations was $50 or $0.11 per diluted share for the nine months ended September 30, 2020 compared to $153 or $0.34 per diluted share for the nine months ended September 30, 2019. See details of discontinued operations in Note B to the Consolidated Financial Statements.

Segment Information

Segment performance under ~~Arconic’s~~the Company's management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment operating profit. ~~Arconic’s~~The Company'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~~charges and Impairment of ~~LIFO inventory accounting, metal price lag, intersegment profit eliminations, and derivative activities.~~goodwill. Segment operating profit may not be comparable to similarly titled measures of other companies. Differences between segment ~~totals~~ and consolidated ~~Arconic~~totals are in Corporate. The Company has four segments - Engine Products, Fastening Systems, Engineered Structures and Forged Wheels. (See Note D to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for a description of each segment).

In the ~~third~~second quarter of ~~2019,~~2020, the Company realigned its operations by eliminating its Transportation and Construction Solutions (TCS) segment and transferring the Forged Wheels business to its EP&F segment and the Building and Construction Systems business to its GRP segment, consistent with how the ~~Chief~~Co-Chief Executive ~~Officer is~~Officers are assessing operating performance and allocating capital in conjunction with the ~~planned separation of the Company~~Arconic Inc. Separation Transaction (see Note SB~~to the Consolidated Financial Statements). 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 to the Consolidated Financial ~~Statements), was moved to Corporate. In the first quarter~~Statements in Part I Item 1 of 2019, management transferred its aluminum extrusions operations 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.this Form 10-Q). Prior period financial information has been recast to conform to current year presentation.

~~Arconic~~The Company produces aerospace engine parts and components and aerospace fastening systems ~~and aluminum sheet and plate products~~ for Boeing 737 MAX ("737 MAX") airplanes. The temporary reduction in the production rate of the 737 MAX airplanes that was announced by Boeing in April 2019 did not have a significant impact on the Company's ~~revenues~~sales or segment operating profit in 2019. In late December 2019, Boeing announced a temporary suspension of production of the ~~third quarter. A significant reduction~~737 MAX airplanes. This decline in ~~the~~ production ~~rate could have~~had a negative impact on ~~revenues~~sales and segment operating profit in the ~~fourth quarter of 2019 in the EP&F~~Engine Products, Fastening Systems and ~~GRP segments.~~

Engineered ~~Products and Forgings~~

Third quarter ended Nine months ended
September 30, September 30,
2019 2018
2019 2018
Third-party sales $ 1,794
$ 1,683
$ 5,372
$ 5,083
Segment operating profit 363
284
1,036
837

Third-party sales for the Engineered Products and Forgings segment increased $111, or 7%, in the third quarter of 2019 compared to the third quarter of 2018 and $289, or 6%, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, primarily as a result of higher aerospace and commercial transportation volumes and favorable product pricing, partially offset by unfavorable foreign currency movements and the absence of sales of $7 and $26Structures segments in the third quarter and nine months ended September 30, ~~2019, respectively, from~~2020. The Company expects the ~~forgings business~~reduction in ~~Eger, Hungary (divested in December 2018).~~

~~Segment operating profit~~737 MAX production rates to continue to have a negative impact on its financial performance for the ~~Engineered~~remainder of 2020.

Engine Products ~~and Forgings~~


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Third-party sales	$	485	$	844	$	1,851	$	2,492
Intersegment sales	1		1		4		9
Total sales	$	486	$	845	$	1,855	$	2,501
Segment operating profit	39		161		309		465

Third-party sales for the Engine Products segment ~~increased $79,~~decreased $359, or ~~28%~~43%, in the third quarter of ~~2019~~2020 compared to the third quarter of ~~2018~~2019, primarily due to lower volumes in the commercial aerospace end market driven by COVID-19 and ~~$199,~~737 MAX production declines and a decrease in sales of $30 from the divestiture of the forgings business in the U.K. (December 2019) (see Note Q to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q), partially offset by higher volumes in the defense aerospace and industrial gas turbines end markets, as well as price increases.

Third-party sales for the Engine Products segment decreased $641, or ~~24%, in~~26% for the nine months ended September 30, ~~2019~~2020 compared to the nine months ended September 30, ~~2018,~~2019, primarily due to ~~higher~~lower volumes as noted previously, favorable product pricing, net cost savings, and lower raw material costs, partially offset by the unfavorable impact of new product introductions in aerospace engines and unfavorable product mix.

~~On December 31, 2018, as part of the Company’s ongoing strategy and portfolio review, Arconic completed the sale of its Eger, Hungary forgings business to Angstrom Automotive Group LLC.~~

~~In the fourth quarter of 2019 compared to the fourth quarter of 2018, demand~~ in the commercial aerospace end market ~~is expected to remain strong,~~ driven by COVID-19 and 737 MAX production declines and a decrease in sales of $95 from the ~~ramp-up~~divestiture of ~~new aerospace engine platforms. Demand~~the forgings business in the ~~defense end market is expected to continue to grow due~~U.K. (December 2019) (see Note Q to the ~~ramp-up~~Consolidated Financial Statements in Part I Item 1 of ~~certain~~this Form 10-Q), partially offset by higher volumes in the industrial gas turbines and defense aerospace ~~programs, while the commercial transportation~~ end ~~market is expected to be down. Net cost savings and favorable pricing are expected to continue.~~

~~Global Rolled Products~~markets as well as price increases.

Third quarter ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
Third-party sales $ 1,763
$ 1,839
$ 5,415
$ 5,468
Intersegment sales 41
44
142
161
Total sales $ 1,804
$ 1,883
$ 5,557
$ 5,629
Segment operating profit 161
107
475
388
Third-party aluminum shipments (kmt) 351
330
1,049
982

~~Third-party sales~~Segment operating profit for the ~~Global Rolled~~Engine Products segment decreased ~~$76,~~$122, or 4%76%, in the third quarter of ~~2019~~2020 compared to the third quarter of ~~2018~~2019, primarily due to lower commercial aerospace volumes and ~~$53,~~COVID-19 productivity impacts, partially offset by cost reductions, price increases, and favorable volumes in the industrial gas turbines and defense aerospace end markets.

Segment operating profit for the Engine Products segment decreased $156, or 1%34%, infor the nine months ended September 30, ~~2019~~2020 compared to the nine months ended September 30, ~~2018,~~2019, primarily ~~as a result of~~due to lower ~~aluminum prices; the absence of sales of $37~~commercial aerospace volumes and $126 in the third quarter and nine months ended September 30, 2019, respectively, from the completed ramp down of Arconic's North American packaging operations (completed in December 2018); and unfavorable foreign currency movements;

COVID-19 productivity impacts, partially offset by ~~higher~~cost reductions, price increases and favorable volumes in the ~~packaging,~~industrial gas turbines and defense aerospace ~~and industrial~~ end ~~markets; and favorable product pricing and mix.~~markets.

~~Segment operating profit~~Fastening Systems


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Third-party sales	$	271	$	391	$	982	$	1,185


Segment operating profit	33		102		199		297

Third-party sales for the ~~Global Rolled Products~~Fastening Systems segment ~~increased $54,~~decreased $120, or ~~50%~~31%, in the third quarter of ~~2019~~2020 compared to the third quarter of ~~2018~~2019, primarily due to lower volumes in the commercial transportation and ~~$87,~~commercial aerospace end markets driven by COVID-19 and 737 MAX production declines.

Third-party sales for the Fastening Systemssegment decreased $203, or ~~22%~~17%, infor the nine months ended September 30, ~~2019~~2020 compared to the nine months ended September 30, ~~2018,~~2019, primarily due to ~~favorable pricing adjustments on industrial~~lower volumes in the commercial transportation and commercial ~~transportation products, higher~~aerospace end markets driven by COVID-19 and 737 MAX production declines.

Segment operating profit for the Fastening Systems segment decreased $69, or 68%, in the third quarter of 2020 compared to the third quarter of 2019, primarily due to lower volumes ~~as noted previously, favorable aluminum price~~and COVID-19 productivity impacts, ~~and net cost savings,~~ partially offset by ~~operational challenges at one plant in~~cost reductions and favorable product pricing.

Segment operating profit for the ~~Aluminum Extrusions business and~~Fastening Systems segment decreased $98 or 33%, for the ~~Tennessee plant transition to industrial production. The~~ nine months ended September 30, ~~2018 was also impacted~~2020 compared to the nine months ended September 30, 2019, primarily due to lower volumes and COVID-19 productivity impacts, partially offset by ~~a charge related~~cost reductions.

Engineered Structures


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Third-party sales	$	206	$	318	$	710	$	943
Intersegment sales	1		4		6		10
Total sales	$	207	$	322	$	716	$	953
Segment operating profit	10		40		57		81

Third-party sales for the Engineered Structures segment decreased $112, or 35%, in the third quarter of 2020 compared to ~~a physical inventory adjustment at one plant incurred in 2018 that did not recur in 2019.~~

In the ~~fourth~~third quarter of 2019, primarily due to lower volumes in the commercial aerospace end market driven by COVID-19 and Boeing 787 and 737 MAX production declines, partially offset by price increases.

Third-party sales for the Engineered Structuressegment decreased $233, or 25%, for the nine months ended September 30, 2020 compared to the ~~fourth~~nine months ended September 30, 2019, primarily due to lower volumes in the commercial aerospace end market driven by COVID-19 and Boeing 787 and 737 MAX production declines, partially offset by price increases.

Segment operating profit for the Engineered Structuressegment decreased $30, or 75%, in the third quarter of ~~2018, demand from~~2020 compared to the third quarter of 2019, primarily due to lower volumes and COVID-19 productivity impacts, partially offset by cost reductions and price increases.

Segment operating profit for the Engineered Structuressegment decreased $24 or 30%, for the nine months ended September 30, 2020 compared to nine months ended September 30, 2019, primarily due to lower volumes and COVID-19 productivity impacts, partially offset by cost reductions, price increases and intentional product exits.

Forged Wheels


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Third-party sales	$	172	$	241	$	476	$	752


Segment operating profit	35		60		91		193

Third-party sales for the Forged Wheels segment decreased $69, or 29%, in the third quarter of 2020 compared to the third quarter of 2019, primarily due to lower volumes in the commercial ~~airframe end~~transportation market ~~is expected~~driven by market softness and COVID-19.

Third-party sales for the Forged Wheels segment decreased $276, or 37%, for the nine months ended September 30, 2020 compared to ~~be up, while~~ the ~~automotive end market is expected~~nine months ended September 30, 2019, primarily due to ~~be down. Demand~~lower volumes in the ~~North American~~ commercial transportation market driven by market softness and COVID-19 .

~~transportation end market is expected to be down, while growth is anticipated~~Segment operating profit for the Forged Wheels segment decreased $25, or 42%, in the ~~industrial market with~~third quarter of 2020 compared to the ~~Tennessee transition from packaging. Favorable pricing~~third quarter of 2019, primarily due to lower volumes and ~~net~~COVID-19 productivity ~~improvements are also anticipated~~impacts, partially offset by cost reductions.

Segment operating profit for the Forged Wheels segment decreased $102, or 53%, for the nine months ended September 30, 2020 compared to ~~continue.~~the nine months ended September 30, 2019, primarily due to lower volumes and COVID-19 productivity impacts, partially offset by cost reductions.

Reconciliation of Total segment operating profit to ~~Consolidated income~~Income (loss) from continuing operations before income taxes


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Total segment operating profit	$	117	$	363	$	656	$	1,036
Unallocated amounts:
Restructuring and other charges	(22)		(56)		(166)		(572)
Corporate expense	(22)		(51)		(85)		(170)
Consolidated operating income	$	73	$	256	$	405	$	294
Interest expense, net	(77)		(85)		(305)		(256)
Other expense, net	(8)		(8)		—		(26)
Income (loss) from continuing operations before income taxes	$	(12)	$	163	$	100	$	12

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

See Restructuring and other charges, Interest expense, and Other expense, net discussions above under Results of Operations for reference.

Corporate expense increased $31, or 65%, in the third quarter of 2019 compared to the third quarter of 2018 and $59, or 29%, in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, due to costs associated with the planned separation of Arconic of $25 and $44 in the third quarter and nine months ended September 30, 2019, respectively, higher annual incentive compensation accruals and executive compensation costs, and costs related to a fire at a fasteners plant of $4 and $8 in the third quarter and nine months ended September 30, 2019, respectively, partially offset by lower costs driven by overhead cost reductions, lower research and development expenses, and a decrease in legal and other advisory costs related to Grenfell Tower. The nine months ended September 30, 2019 also included the following costs: environmental remediation costs for Grasse River of $25; collective bargaining agreement negotiation costs of $9; impairment of energy business assets of $9; and costs associated with the strategy and portfolio review of $6. The nine months ended September 30, 2018 included costs of $38 incurred in the second quarter of 2018 related to settlements of certain customer claims primarily related to product introductions.

Environmental Matters

See the Environmental Matters section of Note R to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.

Subsequent Events

See Note TS to the Consolidated Financial Statements in Part I Item 1 of this Form ~~10-Q.~~10-Q for subsequent events.

Liquidity and Capital Resources

During the third quarter ended September 30, 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows, and has revised its Statement of Consolidated Cash Flows for the nine months ended September 30, 2019. See Note A to the Consolidated Financial Statements for additional detail.

Operating Activities

Cash ~~used for~~(used for) provided by operations was ~~$100~~($142) in the nine months ended September 30, ~~2019~~2020, compared to ~~$209~~$17 in the nine months ended September 30, ~~2018.~~2019. The ~~decrease~~increase in cash used for operations of ~~$109,~~$159, or ~~52%~~935%, was primarily due to ~~higher~~lower operating results of $569, partially offset by lower working capital of $299 and lower pension contributions of ~~$71, and a favorable change in noncurrent liabilities of $46, partially offset by higher working capital of $166.~~$107. The components of the change in working capital included ~~an unfavorable change~~favorable changes in receivables of ~~$376 in~~$840, and inventories of $50, offset by accounts payable ~~partially offset by favorable changes~~ of ~~$92 in inventories, $63 in receivables, and $29 in~~$437, accrued expenses of $87, taxes, including income ~~taxes.~~taxes of $51, and prepaid expenses and other current assets of $16.

Financing Activities

Cash used for financing activities was $339 in the nine months ended September 30, 2020 compared to $1,144 in the nine months ended September 30, ~~2019 compared to $609 in the nine months ended September 30, 2018.~~2019. The ~~increase~~decrease in cash used for financing activities of ~~$535,~~$805, or ~~88%~~70%, was primarily ~~related~~due to a decrease in the repurchase of ~~$1,100 of~~ common stock ~~(see Note~~ H ~~to the Consolidated Financial Statements);~~of $1,049 and an increase in debt issued of $2,100, which were partially offset by ~~a decrease~~

an increase in ~~payments on~~long-term debt ~~due~~redemptions of $1,738, cash distributed to Arconic Corporation at the ~~redemption in the first quarter~~Arconic Inc. Separation Transaction of ~~2018~~$500, debt issuance costs of ~~the then outstanding 5.72% Notes due in 2019 with aggregate principal amount of $500; a decrease in dividends paid to shareholders of $41;~~$61 and premiums paid on ~~early~~the redemption of debt of ~~$17 in 2018.~~

On October 15, 2019, the 1.63% Convertible Notes (“the Notes”) matured in accordance with their terms and the Company repaid in cash on the maturity date the aggregate outstanding principal amount of the Notes of approximately $403 together with accrued and unpaid interest, pursuant to the terms of the Notes.$59.

~~Arconic~~The Company maintains a Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and issuers named therein. In addition to the Credit Agreement, ~~Arconic~~the Company has a number of other credit agreements. On June 26, 2020, the Company entered into an amendment to its Credit Agreement to modify certain terms which provided relief from its existing financial covenant through December 31, 2021 and reduced total commitment available from $1,500 to $1,000. See Note O to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for reference.

~~Arconic’s~~The Company’s costs of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short- and long-term debt ratings assigned to ~~Arconic~~the Company by the major credit rating agencies.

~~Arconic’s~~The Company's credit ratings from the three major credit rating agencies are as follows:

Long-Term Debt

Short-Term Debt

Outlook

Date of Last Update

Standard and Poor’s

~~BBB-~~BB+

~~A-3~~B

Negative

~~April 26, 2019~~September 9, 2020

Moody’s

~~Ba2~~Ba3

Speculative Grade Liquidity-2

~~Stable~~Negative

~~October 9, 2019~~April 23, 2020

Fitch

~~BB+~~BBB-

~~Positive~~Stable

~~October 8, 2019~~April 22, 2020

Investing Activities

Cash provided from investing activities was ~~$288~~$152 in the nine months ended September 30, ~~2019~~2020 compared to ~~$211~~$171 in the nine months ended September 30, ~~2018.~~2019. The ~~increase in~~decrease of cash provided from investing activities of ~~$77,~~$19, or ~~36%~~11%, was primarily due to ~~the sale~~a decrease in Cash receipts from sold receivables of $372, and lower sales of fixed-income securities of $47, ~~in the first quarter of 2019 and lower capital expenditures of $82,~~ partially offset by a decrease in capital expenditures of $312 and the sale of assets and business of $87 primarily related to the sale of a hard extrusions plant in South Korea and an aluminum rolling mill in Brazil in the first quarter of 2020 (both of which related to Arconic Corporation) compared to the sale of a small additives business and inventory and properties, plants and equipment of a small energy business within the Engineered Structures segment in the second and third quarters of 2019, respectively.

Goodwill. Goodwill is not amortized; instead, it is reviewed for impairment annually (in the fourth quarter) or more frequently if indicators of impairment exist or if a decision is made to sell or realign a business. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash ~~receipts~~flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from ~~sold receivables~~that used to evaluate the impairment of ~~$63.~~goodwill.

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. For the third quarter of 2020, Howmet had four reporting units (Engine Products, Fastening Systems, Engineered Structures and Forged Wheels).

In reviewing goodwill for impairment, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the quantitative impairment test (described below); otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether an entity chooses to perform the qualitative assessment or proceeds directly to the quantitative impairment test.

Howmet determines annually, based on facts and circumstances, which of its reporting units will be subject to the qualitative assessment. For those reporting units where a qualitative assessment is either not performed or for which the conclusion is that an impairment is more likely than not, a quantitative impairment test will be performed. Howmet’s policy is that a quantitative impairment test be performed for each reporting unit at least once during every three-year period.

Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value of a reporting unit are identified (similar to impairment indicators above). These factors are then classified by the type of impact they would have on the estimated fair value using positive, neutral, and adverse categories based on current business conditions. Additionally, an assessment of the level of impact that a particular factor would have on the estimated fair value is determined using high, medium, and low weighting. Furthermore, management considers the results of the most recent quantitative impairment test completed for a reporting unit and compares the weighted average cost of capital (WACC) between the current and prior years for each reporting unit.

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 in the first quarter 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 in the first quarter 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.

In the second and third quarters of 2020, there were no indicators of impairment identified for the Engineered Structures reporting unit as the margin between fair value of the reporting unit and carrying value exceeded 20%. As such, the fair values of all of our reporting units substantially exceeded their carrying values at September 30, 2020. 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.

Recently Adopted and Recently Issued Accounting Guidance

See Note BC to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.

Forward-Looking Statements

This report contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. All statements that reflect ~~Arconic’s~~Howmet’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, forecasts and expectations relating to the growth of the aerospace, ~~defense, automotive, industrial,~~ commercial transportation and other end markets; statements and guidance regarding future financial results or operating performance; statements regarding future strategic actions; and statements about ~~Arconic’s~~Howmet’s strategies, outlook, business and financial ~~prospects.~~prospects, including share repurchases, which may be subject to market conditions, legal requirements and other considerations. These statements reflect beliefs and assumptions that are based on ~~Arconic’s~~Howmet’s perception of historical trends, current conditions and expected future developments, as well as other factors ~~Arconic~~Howmet believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict, which could cause actual results to differ materially from those indicated by these statements. Such risks and uncertainties include, but are not limited to: (a) ~~uncertainties regarding the planned separation, including whether it will be completed pursuant to the targeted timing, asset perimeters, and other anticipated terms, if at all; (b)~~ the impact of the separation of Arconic Corporation from Howmet on the businesses of Arconic; (c) the risk that the businesses will not be separated successfully or such separation may be more difficult, time-consuming or costly than expected, which could result in additional demands on Arconic’s resources, systems, procedures and controls, disruption of its ongoing business, and diversion of management’s attention from other business concerns; (d)Howmet; (b) deterioration in global economic and financial market conditions ~~generally; (e)~~generally including as a result of pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the COVID-19 outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations); (c) unfavorable changes in the markets served by ~~Arconic; (f)~~Howmet; (d) the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated or targeted; ~~(g)~~(e) competition from new product offerings, disruptive technologies or other developments; ~~(h)~~(f) political, economic, and regulatory risks relating to ~~Arconic’s~~Howmet’s global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; ~~(i)~~(g) manufacturing difficulties or other issues that impact product performance, quality or safety; ~~(j) Arconic’s~~(h) Howmet’s inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, expansions, or joint ventures; ~~(k)~~(i) the impact of potential cyber attacks and information technology or data security breaches; ~~(l)~~(j) the loss of significant customers or adverse changes in customers’ business or financial conditions; ~~(m)~~(k) adverse changes in discount rates or investment returns on pension assets; ~~(n)~~(l) the impact of changes in raw material prices (including but not limited to aluminum ~~prices~~and nickel prices) and foreign currency exchange rates on costs and results; ~~(o)~~(m) the outcome of contingencies, including legal proceedings, government or

regulatory investigations, and environmental remediation, which can expose ~~Arconic~~Howmet to substantial costs and liabilities; (n) the possible impacts and ~~(p)~~our preparedness to respond to implications of COVID-19; and (o) the other risk factors summarized in ~~Arconic’s~~Howmet’s Form 10-K for the year ended December 31, ~~2018~~2019, Form 10-Q for the quarter ended March 31, 2020, Form 10-Q for the quarter ended June 30, 2020 and other reports filed with the U.S. Securities and Exchange Commission. Market projections are subject to the risks discussed above and other risks in the market. ~~Arconic~~Howmet disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not material.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

~~Arconic’s Chief~~The Company's Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the third quarter of ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

See Note R to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

Howmet’s business, financial condition and results of operations may be impacted by a number of factors. In addition to the factors discussed elsewhere in this report, in Part I, Item 1A of Howmet’s Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A. of Howmet’s Quarterly Reports on Form 10-Q for the quarters ended June 30, 2020 and March 31, 2020, and in other reports filed by Howmet with the Securities and Exchange Commission, the following risks and uncertainties, updated from and in addition to those in the Form 10-K and Forms 10-Q, could materially harm its business, financial condition or results of operations, including causing Howmet’s actual results to differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to Howmet or that Howmet currently deems immaterial also may materially adversely affect the Company in future periods.

Our business, results of operations, financial condition and/or cash flows have been and could continue to be materially adversely affected by the effects of widespread public health epidemics/pandemics, including COVID-19, that are beyond our control.

Any outbreaks of contagious diseases, public health epidemics or pandemics and other adverse public health developments in countries where we, our employees, customers and suppliers operate could have a material and adverse effect on our business, results of operations, financial condition and/or cash flows. Specifically, the novel strain of COVID-19, affecting the global community on a pandemic basis, including the United States, Europe and South America, is adversely impacting our operations, and the nature and extent of the impact over time is highly uncertain and beyond our control. The extent to which COVID-19 further affects our operations over time will depend on future developments, which are highly uncertain, including the duration of the outbreak, the continued severity of the virus, resurgences of the virus, and the efficacy and the extent of actions that have been or may be taken to contain or treat its impact. These actions include, but are not limited to, declarations of states of emergency, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations, many of which have been implemented across much of the globe and all of which have negatively affected our business. The longer the period of duration, the greater impact on our businesses and the heightened risk of a continuing material adverse impact on our business, results of operations, financial conditions and/or cash flows, as well as on our business strategies and initiatives. While some of the restrictions and limitations noted above have been and may continue to be relaxed or rolled back, certain actions have been and may continue to be reinstated as the pandemic continues to evolve including as a result of resurgences. The scope and timing of such reinstatements are difficult to predict and may materially affect our operations in the future. We continue to monitor guidelines proposed by federal, state and local governments with respect to the “reopening” measures and measures for continued operation, which may change over time depending on public health, safety and other considerations. We are continuing to focus on the safety and protection of our workforce by continuing to implement additional safety protocols in light of COVID-19.

As a result of COVID-19 and the measures designed to contain its spread, our sales globally, including 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, which has had and over time could continue to have a material adverse effect on our business, results of operations, financial condition and/or cash flows. The COVID-19 pandemic has already subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below:

•Business and operations risks: We continue to monitor the evolving situation relating to COVID-19 to determine whether we will need to significantly modify our business practices or take actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and shareholders. We have had a number of smaller manufacturing locations that have experienced periods of shutdowns. Future shutdowns will be dependent on facts and circumstances as they unfold, including based on the restrictions and limitations noted above. Additional shutdowns, while not required by governmental authorities, may be necessary to match our production of materials to the reduced demand of our customers. In addition, given these factors and potential further disruptions, we may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. We may also face challenges in restoring our production levels if and when COVID-19 abates, including as a result of government-imposed or other limitations that prevent the return of all or a portion of our workforce and/or continue to disrupt demand and limit the capabilities of our suppliers. We continue to monitor the situation, to assess further possible implications to our business, employees, customers and supply chain, and to take actions in an effort to mitigate adverse consequences. As a result of COVID-19 and its potential impact on the aerospace industry, the possibility exists that a sustained impact to our operations, financial results and market capitalization may require material impairments of our assets including, but not limited to, goodwill, intangible assets, long-lived assets, and right-of-use assets. While we have already commenced plans to reduce costs, including certain headcount reductions, reductions in certain cash outflows, suspension of our common stock dividend and reductions in the levels of our capital expenditures, we cannot at this time predict the longer term impact of the COVID-19 pandemic, but it could continue to have a material adverse effect on our business, results of operations, financial condition and/or cash flows.

•Customer and supplier risks: We have limited visibility into future demand given the disruptions resulting from COVID-19. The sharp decrease in air travel resulting from the COVID-19 outbreak and the measures governments and private organizations worldwide have implemented in an attempt to contain its spread is adversely affecting, and will likely continue to adversely affect, airlines and airframers and their respective demand for our customers’ products and services. Aircraft manufacturers are reducing production rates due to fewer expected aircraft deliveries and, as a result, demand for products in the original equipment manufacturer market has significantly decreased. Several of our aerospace and commercial transportation customers have temporarily suspended operations at certain production sites, reduced operations and production rates and/or taken cost-cutting actions, the duration and extent of which we cannot predict, including, but not limited to, General Electric Company, Raytheon Technologies Corporation and The Boeing Company, which represented approximately 11%, 9% and 8%, respectively, of our third-party sales for the nine months ended September 30, 2020. Due to these cost-cutting measures and others, we are experiencing, and expect to continue experiencing, lower demand and volume for products and services, customer requests for potential payment deferrals, pricing concessions or other contract modifications, delays of deliveries and the achievement of other billing milestones. COVID-19 may also limit the ability of our counterparties generally to perform their obligations to us, including, but not limited to, our customers’ ability to make timely payments to us. These trends may lead to charges, impairments and other adverse financial impacts over time, as noted above, as we have historically depended upon the strength of these industries, particularly the aerospace industry. In addition, the ongoing COVID-19 pandemic may negatively impact customer contract negotiations, including the ability to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers. Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. To date, we have not experienced significant disruption to our supply chain. If our suppliers’ operations were to be impacted, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows. The duration of the current disruptions to our customers and to our supply chain, and related financial impact to us, cannot be estimated at this time. Should such disruption continue for an extended period of time, the impact will have a material adverse effect on our business, results of operations, financial condition and/or cash flows. Ultimately, the demand for our products is, in turn, driven by demand for transportation and for people to travel within and between various countries around the world. Should the COVID-19 outbreak cause a long term deterioration in demand for transportation or travel due to fear or anxiety related to health concerns, governmental restriction, economic hardships, or increased use of electronic communication technologies embraced during the COVID-19 related shutdowns, the effects of the COVID-19 virus on our business may extend well beyond the COVID-19 current health crisis and immediate related governmental actions.

•Market risks: The current financial market dynamics and volatility pose heightened risks to our liquidity. For example, dramatically lowered interest rates and lower expected asset valuations and returns can materially impact the calculation of long-term liabilities such as our pension. In addition, extreme volatility in financial and commodities markets has had and may continue to have adverse impacts on other asset valuations such as the value of the investment portfolios supporting our pension. Our long-term liabilities are sensitive to numerous factors and assumptions that can move in offsetting directions and should be considered as of the time of a relevant measurement event.

•Liquidity and credit risks: We currently have the ability to borrow up to $1.0 billion under our revolving credit agreement, which was amended in June 2020. A prolonged period of generating lower financial results and cash from operations could adversely affect our ability to draw under such amended revolving credit agreement, could also adversely affect our financial condition, including in respect of satisfying both required and voluntary pension funding requirements, and could otherwise negatively affect our ability to achieve our strategic objectives. These factors could also adversely affect our ability to maintain compliance with the debt covenants under our amended revolving credit agreement, including as a result of potential increases in net debt or future reductions in EBITDA. There can also be no assurance that we will not face credit rating downgrades as a result of weaker than anticipated performance of our businesses or other factors including overall market conditions. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse commercial impact on our businesses. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding (including for receivables securitization or supply chain finance programs used to finance working capital) or our ability to refinance certain of our indebtedness, which could adversely affect our business, financial position, results of operations and/or cash flows. Although the U.S. federal and other governments have announced a number of funding programs to support businesses, our ability or willingness to access funding under such programs may be limited by regulations or other guidance, including eligibility criteria, or by further change or uncertainty related to the terms of these programs.

The COVID-19 pandemic may also exacerbate other risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, including, but not limited to, risks related to global economic conditions, competition, loss of customers, costs of supplies, manufacturing difficulties and disruptions, investment returns, our credit profile, our credit ratings and interest rates. We expect that the longer the period of disruption from COVID-19 continues, the more material the adverse impacts will be on our business operations, financial performance, results of operations and/or cash flows. In addition, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our business, results of operations, financial conditions and/or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents information with respect to ~~Arconic~~the Company’s open-market repurchases of its common stock ~~purchases made by the Company~~ during the quarter ended September 30, ~~2019.~~2020:


	(in millions except share and per share amounts)
Period	Total Number of Shares Purchased	Average Price Paid Per Share (1)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)(2)
July 1 - July 31, 2020	—	----	—	$350.0
August 1 - August 31, 2020	31,755	$18.59	31,755	$349.4
September 1 - September 30, 2020	2,875,339	$17.34	2,875,339	$299.5
Total for quarter ended September 30, 2020	2,907,094	$17.36	2,907,094

(1) Excludes commissions cost

(2) On May 20, 2019, the Company announced that its Board of Directors authorized the repurchase of $500 million of the Company's outstanding common stock (the "Share Repurchase Program") by means of trading plans established from time to time in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases and/or accelerated share repurchase agreements or other derivative transactions. There was no stated expiration for the Share Repurchase Program under which the Company may repurchase shares from time to time and pursuant to such terms, as and if it deems appropriate. The Share Repurchase Program may be suspended, modified or terminated at any time without prior notice. After giving effect to the share repurchases made through September 30, 2020, approximately $299.5 million remains available under the prior authorization by the Board for the Share Repurchase Program. The amount of share repurchases by the Company may be limited under the terms of the Five-Year Revolving Credit Agreement (See Note O to the Consolidated Financial Statements for additional detail).

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

⁽¹⁾

On February 5, 2018, the Company announced that its Board of Directors (the Board) had authorized the repurchase of up to $500 million of the Company's outstanding common stock (the "February 2018 Share Repurchase Program"). There was no stated expiration for the February 2018 Share Repurchase Program, and no shares were repurchased during 2018. On February 8, 2019, the Company announced that the Board had authorized the repurchase of an additional $500 million of the Company's outstanding common stock, effective through the end of 2020. On May 20, 2019, the Company announced that the Board had authorized the repurchase of a further $500 million of the Company's outstanding common stock (the "May 2019 Share Repurchase Program"). There was no stated expiration for the May 2019 Share Repurchase Program.

⁽²⁾

On August 6, 2019, the Company entered into an accelerated share repurchase (ASR) agreement with Goldman Sachs & Co. LLC (“GS”) to repurchase $200 million of its common stock, and received an initial delivery of 6,791,172 shares. The term of the ASR concluded on September 30, 2019, with GS delivering 983,107 additional shares to Arconic on October 3, 2019. A total of 7,774,279 shares, at an average price of $25.73 per share, were repurchased under the agreement.

Item 6. Exhibits.



~~15.~~10.1			~~Letter regarding unaudited interim financial information.~~2013 Howmet Aerospace Stock Incentive Plan, as Amended and Restated, effective September 30, 2020.
~~31.~~10.2			Howmet Aerospace Inc. Change in Control Severance Plan, as Amended and Restated, effective September 30, 2020.
10.3			Howmet Aerospace Inc. Executive Severance Plan, as Amended and Restated, effective September 30, 2020.
10.4			Global Restricted Share Unit Award Agreement, effective September 30, 2020.
10.5			Global Stock Option Award Agreement, effective September 30, 2020.
10.6			Global Special Retention Award Agreement, effective September 30, 2020.
10.7			Terms and Conditions for Restricted Share Units, effective September 30, 2020.
31			Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~32.~~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,~~2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Howmet Aerospace Inc.

November 9, 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~~9, 2020		/s/ Paul Myron
Date		Paul Myron
		Vice President and Controller
		(Principal Accounting Officer)



	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



	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



	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



	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



	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



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



	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



	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



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