UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~(Mark One)~~

☒
(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, ~~2017~~

2023

☐
☐			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)


~~PENNSYLVANIA~~

	~~25-0317820~~
~~(State of~~ ~~incorporation)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~

~~390 Park Avenue, New York, New York~~Delaware		~~10022-4608~~25-0317820
(~~Address~~State of ~~principal executive offices)~~incorporation)		(~~Zip code)~~I.R.S. Employer Identification No.)

201 Isabella Street, Suite 200, Pittsburgh, Pennsylvania 15212-5872

(Address of principal executive offices) (Zip code)

Investor Relations ~~212-836-2758~~

412-553-1950

Office of the Secretary ~~212-836-2732~~

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	Name of each exchange on which registered
Common Stock, par value $1.00 per share	HWM	New York Stock Exchange
$3.75 Cumulative Preferred Stock, par value $100.00 per share	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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒✓ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

~~Non-accelerated filer~~

~~☐ (Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

☐

Emerging growth ~~Company~~

company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~20, 2017,~~31, 2023, there were ~~481,324,177~~411,744,354 shares of common stock, par value $1.00 per share, of the registrant outstanding.

TABLE OF CONTENTS


		Page
Part I
Item 1.	Financial Statements and Supplementary Data	3
	Statement of Consolidated Operations for the Third Quarter and Nine Months Ended September 30, 2023 and 2022	3
	Statement of Consolidated Comprehensive Income for the Th ird Quarter and Nine Months Ended September 30, 2023 and 2022	4
	Consolidated Balance Sheet as of September 30, 2023 and December 31, 2022	5
	Statement of Consolidated Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
	Statement of Changes in Consolidated Equity for the Third Quarter Ended September 30, 2023 and 2022	7
	Statement of Changes in Consolidated Equity for the Nine Months Ended September 30, 2023 and 2022	8
	Notes to the Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
Part II
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6.	Exhibits	35
	Signatures	35

PART I – FINANCIAL INFORMATION

Item 1. Financial ~~Statements.~~

~~Arconic~~Statements and Supplementary Data.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)

   Third quarter ended
September 30, Nine months ended
September 30,
   2017 2016 2017 2016
Sales (I)
   $ 3,236 $ 3,138 $ 9,689 $ 9,427
Cost of goods sold (exclusive of expenses below)
   2,626 2,503 7,701 7,436
Selling, general administrative, and other expenses
   155 229 580 673
Research and development expenses
   25 30 83 93
Provision for depreciation and amortization
   140 136 410 402
Restructuring and other charges (D & E)
   19 3 118 33


Operating income
   271 237 797 790
Interest expense (L)
   100 126 398 371
Other income, net (G)
   (1 ) (11 ) (526 ) (40 )


Income from continuing operations before income taxes
   172 122 925 459
Provision for income taxes
   53 56 272 230


Income from continuing operations after income taxes
   119 66 653 229
Income from discontinued operations after income taxes (G)
   —   120 —   146


Net income
   119 186 653 375
Less: Income from discontinued operations attributable to noncontrolling interests (G)
   —   20 —   58


Net income attributable to Arconic
   $ 119 $ 166 $ 653 $ 317


Amounts Attributable to Arconic Common Shareholders (J):

Net income
   $ 101 $ 148 $ 600 $ 265


Earnings per share - basic

Continuing operations
   $ 0.23 $ 0.11 $ 1.36 $ 0.40
Discontinued operations
   —   0.23 —   0.20


Net income per share - basic
   $ 0.23 $ 0.34 $ 1.36 $ 0.60


Earnings per share - diluted

Continuing operations
   $ 0.22 $ 0.11 $ 1.31 $ 0.40
Discontinued operations
   —   0.22 —   0.20


Net income per share - diluted
   $ 0.22 $ 0.33 $ 1.31 $ 0.60


Dividends paid per share
   $ 0.06 $ 0.09 $ 0.18 $ 0.27


Weighted Average Shares Outstanding (J):

Average shares outstanding - basic
   442 438 441 438


Average shares outstanding - diluted
   462 453 501 443


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Sales (C)	$	1,658	$	1,433	$	4,909	$	4,150
Cost of goods sold (exclusive of expenses below)	1,183		1,056		3,543		2,993
Selling, general administrative, and other expenses	87		73		250		225
Research and development expenses	9		7		27		23
Provision for depreciation and amortization	68		65		204		198
Restructuring and other charges (D)	4		4		8		12
Operating income	307		228		877		699
Loss on debt redemption (N)	—		—		1		2
Interest expense, net	54		57		166		172
Other expense, net (F)	11		67		5		67
Income before income taxes	242		104		705		458
Provision for income taxes (G)	54		24		176		100


Net income	$	188	$	80	$	529	$	358

Amounts Attributable to Howmet Aerospace Common Shareholders (H):
Net income	$	187	$	79	$	527	$	356
Earnings per share:
Basic	$	0.45	$	0.19	$	1.28	$	0.86


Diluted	$	0.45	$	0.19	$	1.27	$	0.84

Average Shares Outstanding (H):
Basic	412		415		412		417
Diluted	415		420		417		422

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

~~Arconic~~

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Comprehensive Income ~~(Loss)~~ (unaudited)

(in millions)

   Arconic Noncontrolling
Interests Total
   Third quarter ended
September 30, Third quarter ended
September 30, Third quarter ended
September 30,
   2017 2016 2017    2016 2017 2016
Net income
   $ 119 $ 166 $ —      $ 20 $ 119 $ 186
Other comprehensive income (loss), net of tax (C):

Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits
   31 (462 ) —      (1 ) 31 (463 )
Foreign currency translation adjustments
   85 157 —      45 85 202
Net change in unrealized gains/losses on available-for-sale securities
   1 —   —      —   1 —
Net change in unrecognized gains/losses on cash flow hedges
   10 (338 ) —      (10 ) 10 (348 )




Total Other comprehensive income (loss), net of tax
   127 (643 ) —      34 127 (609 )




Comprehensive income (loss)
   $ 246 $ (477 ) $ —      $ 54 $ 246 $ (423 )




   Arconic Noncontrolling
Interests Total
   Nine months ended
September 30, Nine months ended
September 30, Nine months ended
September 30,
   2017 2016 2017    2016 2017 2016
Net income
   $ 653 $ 317 $ —      $ 58 $ 653 $ 375
Other comprehensive income (loss), net of tax (C):

Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits
   110 (365 ) —      2 110 (363 )
Foreign currency translation adjustments
   251 505 —      184 251 689
Net change in unrealized gains/losses on available-for-sale securities
   (133 ) 4 —      —   (133 ) 4
Net change in unrecognized gains/losses on cash flow hedges
   13 (571 ) —      4 13 (567 )




Total Other comprehensive income (loss), net of tax
   241 (427 ) —      190 241 (237 )




Comprehensive income (loss)
   $ 894 $ (110 ) $ —      $ 248 $ 894 $ 138


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income	$	188	$	80	$	529	$	358
Other comprehensive income (loss), net of tax (I):
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits	10		7		19		39
Foreign currency translation adjustments	(56)		(128)		(18)		(273)

Net change in unrecognized gains (losses) on cash flow hedges	4		2		(10)		(14)
Total Other comprehensive loss, net of tax	(42)		(119)		(9)		(248)
Comprehensive income (loss)	$	146	$	(39)	$	520	$	110

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

~~Arconic~~

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

   September 30,
2017 December 31,
2016
Assets

Current Assets:

Cash and cash equivalents
   $ 1,815 $ 1,863
Receivables from customers, less allowances of $7 in 2017 and $13 in 2016 (K)
   1,150 974
Other receivables (G & K)
   373 477
Inventories (F)
   2,453 2,253
Prepaid expenses and other current assets
   357 325


Total current assets
   6,148 5,892
Properties, plants, and equipment
   11,791 11,572
Less: accumulated depreciation and amortization
   6,265 6,073


Properties, plants, and equipment, net
   5,526 5,499


Goodwill
   5,246 5,148
Deferred income taxes
   1,024 1,234
Investment in common stock of Alcoa Corporation (G & N)
   —   1,020
Other noncurrent assets
   1,293 1,245


Total Assets
   $ 19,237 $ 20,038


Liabilities

Current liabilities:

Short-term borrowings
   $ 54 $ 36
Accounts payable, trade
   1,656 1,744
Accrued compensation and retirement costs
   379 398
Taxes, including income taxes
   74 85
Accrued interest payable
   101 153
Other current liabilities
   412 329
Long-term debt due within one year
   1 4


Total current liabilities
   2,677 2,749
Long-term debt, less amount due within one year (L & N)
   6,802 8,044
Accrued pension benefits
   2,110 2,345
Accrued other postretirement benefits
   811 889
Other noncurrent liabilities and deferred credits
   876 870


Total liabilities
   13,276 14,897


Contingencies and commitments (H)

Equity

Arconic shareholders’ equity:

Preferred stock
   55 55
Mandatory convertible preferred stock
   3 3
Common stock
   442 438
Additional capital
   8,294 8,214
Accumulated deficit
   (519 ) (1,027 )
Accumulated other comprehensive loss (C)
   (2,327 ) (2,568 )


Total Arconic shareholders’ equity
   5,948 5,115


Noncontrolling interests
   13 26


Total equity
   5,961 5,141


Total Liabilities and Equity
   $ 19,237 $ 20,038


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	424	$	791
Receivables from customers, less allowances of $1 in both 2023 and 2022 (J)	714		506
Other receivables	13		31
Inventories (K)	1,748		1,609
Prepaid expenses and other current assets	212		206

Total current assets	3,111		3,143
Properties, plants, and equipment, net (L)	2,296		2,332
Goodwill	4,007		4,013
Deferred income taxes	45		54
Intangibles, net	507		521
Other noncurrent assets (M)	200		192

Total assets	$	10,166	$	10,255
Liabilities
Current liabilities:
Accounts payable, trade (B)	$	894	$	962
Accrued compensation and retirement costs	240		195
Taxes, including income taxes (G)	73		48
Accrued interest payable	58		75
Other current liabilities (M)(P)	189		202


Total current liabilities	1,454		1,482
Long-term debt (N)(O)	3,794		4,162
Accrued pension benefits (E)	618		633
Accrued other postretirement benefits (E)	98		109
Other noncurrent liabilities and deferred credits (M)	330		268

Total liabilities	6,294		6,654
Contingencies and commitments (P)
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock	55		55
Common stock	412		412
Additional capital	3,770		3,947
Retained earnings	1,485		1,028
Accumulated other comprehensive loss (I)	(1,850)		(1,841)


Total equity	3,872		3,601
Total liabilities and equity	$	10,166	$	10,255

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

~~Arconic~~

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)

   Nine months ended
September 30,
   2017 2016
Cash from Operations

Net income
   $ 653 $ 375
Adjustments to reconcile net income to cash from operations:

Depreciation, depletion and amortization
   410 938
Deferred income taxes
   24 (67 )
Equity income, net of dividends
   —   32
Restructuring and other charges
   118 134
Net gain from investing activities - asset sales (G)
   (514 ) (152 )
Net periodic pension benefit cost (M)
   163 246
Stock-based compensation
   59 73
Other
   60 67
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:

(Increase) in receivables
   (278 ) (226 )
(Increase) decrease in inventories
   (168 ) 7
Decrease (increase) in prepaid expenses and other current assets
   6 (10 )
(Decrease) in accounts payable, trade
   (94 ) (196 )
(Decrease) in accrued expenses
   (138 ) (417 )
Increase in taxes, including income taxes
   144 63
Pension contributions
   (257 ) (227 )
(Increase) in noncurrent assets
   (37 ) (284 )
(Decrease) in noncurrent liabilities
   (62 ) (148 )


Cash provided from operations
   89 208


Financing Activities

Net change in short-term borrowings (original maturities of three months or less)
   15 (6 )
Additions to debt (original maturities greater than three months)
   664 1,313
Payments on debt (original maturities greater than three months) (L)
   (1,484 ) (1,324 )
Proceeds from exercise of employee stock options
   48 3
Dividends paid to shareholders
   (132 ) (171 )
Distributions to noncontrolling interests
   (14 ) (176 )
Other
   (15 ) 11


Cash used for financing activities
   (918 ) (350 )


Investing Activities

Capital expenditures
   (360 ) (814 )
Proceeds from the sale of assets and businesses (E)
   (9 ) 683
Additions to investments
   (2 ) (23 )
Sales of investments (G)
   890 280
Net change in restricted cash
   11 (72 )
Other (G)
   246 25


Cash provided from investing activities
   776 79


Effect of exchange rate changes on cash and cash equivalents
   5 7


Net change in cash and cash equivalents
   (48 ) (56 )
Cash and cash equivalents at beginning of year
   1,863 1,919


Cash and cash equivalents at end of period
   $ 1,815 $ 1,863


	Nine months ended
	September 30,
	2023		2022
Operating activities
Net income	$	529	$	358
Adjustments to reconcile net income to cash provided from operations:
Depreciation and amortization	204		198
Deferred income taxes	92		58
Restructuring and other charges	8		12
Net realized and unrealized losses	17		12
Net periodic pension cost (E)	28		17
Stock-based compensation	39		43
Loss on debt redemption (N)	1		2
Other	2		26
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
Increase in receivables (J)	(211)		(246)
Increase in inventories	(148)		(271)
(Increase) decrease in prepaid expenses and other current assets	(12)		5
(Decrease) increase in accounts payable, trade	(57)		130
(Decrease) increase in accrued expenses	(18)		18
Increase (decrease) in taxes, including income taxes	17		(1)
Pension contributions	(19)		(34)
Increase in noncurrent assets	(2)		(5)
Decrease in noncurrent liabilities	(27)		(44)
Cash provided from operations	443		278
Financing Activities
Net change in short-term borrowings	—		(4)

Repurchases and payments on debt (N)	(376)		(60)

Premiums paid on early redemption of debt (N)	(1)		(2)
Repurchases of common stock	(150)		(335)
Proceeds from exercise of employee stock options	10		14
Dividends paid to shareholders	(52)		(27)

Taxes paid for net share settlement of equity awards	(77)		(23)
Cash used for financing activities	(646)		(437)
Investing Activities
Capital expenditures (C)	(164)		(148)
Proceeds from the sale of assets and businesses (L)	1		42



Cash used for investing activities	(163)		(106)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1)		(3)
Net change in cash, cash equivalents and restricted cash	(367)		(268)
Cash, cash equivalents and restricted cash at beginning of period	792		722
Cash, cash equivalents and restricted cash at end of period	$	425	$	454

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)

(in millions, except per-share amounts)

   Arconic Shareholders
   Preferred
stock    Mandatory
convertible
preferred
stock    Common
stock Additional
capital Retained
earnings Treasury
stock Accumulated
other
comprehensive
loss Noncontrolling
interests Total
Equity
Balance at June 30, 2016
   $ 55    $ 3    $ 1,391 $ 9,877 $ 8,871 $ (2,647 ) $ (5,215 ) $ 2,194 $ 14,529
Net income
   —      —      —   —   166 —   —   20 186
Other comprehensive (loss) income (C)
   —      —      —   —   —   —   (643 ) 34 (609 )
Cash dividends declared:

Preferred-Class A @ $1.875 per share
   —      —      —   —   (1 ) —   —   —   (1 )
Preferred-Class B @ $6.71875 per share
   —      —      —   —   (16 ) —   —   —   (16 )
Common @ $0.18 per share
   —      —      —   —   (80 ) —   —   —   (80 )
Stock-based compensation
   —      —      —   18 —   —   —   —   18
Common stock issued:

compensation plans
   —      —      —   (12 ) —   8 —   —   (4 )
Retirement of Treasury stock
   —      —      (76 ) (2,563 ) —   2,639 —   —   —
Reverse stock split
   —      —      (877 ) 877 —   —   —   —   —
Distributions
   —      —      —   —   —   —   —   (92 ) (92 )
Other
   —      —      —   —   —   —   —   14 14






Balance at September 30, 2016
   $ 55    $ 3    $ 438 $ 8,197 $ 8,940 $ —   $ (5,858 ) $ 2,170 $ 13,945

   Arconic Shareholders
   Preferred
stock    Mandatory
convertible
preferred
stock    Common
stock    Additional
capital    Accumulated
deficit Treasury
stock    Accumulated
other
comprehensive
loss Noncontrolling
interests    Total
Equity
Balance at June 30, 2017
   $ 55    $ 3    $ 441    $ 8,262    $ (567 ) $ —      $ (2,454 ) $ 13    $ 5,753
Net income
   —      —      —      —      119 —      —   —      119
Other comprehensive income (C)
   —      —      —      —      —   —      127 —      127
Cash dividends declared:

Preferred-Class A @ $1.875 per share
   —      —      —      —      (1 ) —      —   —      (1 )
Preferred-Class B @ $6.71875 per share
   —      —      —      —      (17 ) —      —   —      (17 )
Common at $0.12 per share
   —      —      —      —      (53 ) —      —   —      (53 )
Stock-based compensation
   —      —      —      11    —   —      —   —      11
Common stock issued:

compensation plans
   —      —      1    21    —   —      —   —      22
Other
   —      —      —      —      —   —      —   —      —














Balance at September 30, 2017
   $ 55    $ 3    $ 442    $ 8,294    $ (519 ) $ —      $ (2,327 ) $ 13    $ 5,961



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at June 30, 2022	$	55	$	416	$	4,079	$	863	$	(1,992)	$	3,421

Net income	—		—		—		80		—		80
Other comprehensive loss (I)	—		—		—		—		(119)		(119)
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		(1)
Common @ $0.06 per share	—		—		—		(25)		—		(25)
Repurchase and retirement of common stock (H)	—		(3)		(97)		—		—		(100)
Stock-based compensation	—		—		14		—		—		14
Common stock issued: compensation plans	—		1		2		—		—		3

Balance at September 30, 2022	$	55	$	414	$	3,998	$	917	$	(2,111)	$	3,273



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at June 30, 2023	$	55	$	412	$	3,782	$	1,334	$	(1,808)	$	3,775

Net income	—		—		—		188		—		188
Other comprehensive loss (I)	—		—		—		—		(42)		(42)
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		(1)
Common @ $0.09 per share	—		—		—		(36)		—		(36)
Repurchase and retirement of common stock (H)	—		—		(25)		—		—		(25)
Stock-based compensation	—		—		13		—		—		13



Balance at September 30, 2023	$	55	$	412	$	3,770	$	1,485	$	(1,850)	$	3,872

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)

   Arconic Shareholders
   Preferred
stock    Mandatory
convertible
preferred
stock    Common
stock Additional
capital Retained
earnings Treasury
stock Accumulated
other
comprehensive
loss Noncontrolling
interests Total
Equity
Balance at December 31, 2015
   $ 55    $ 3    $ 1,391 $ 10,019 $ 8,834 $ (2,825 ) $ (5,431 ) $ 2,085 $ 14,131
Net income
   —      —      —   —   317 —   —   58 375
Other comprehensive (loss) income (C)
   —      —      —   —   —   —   (427 ) 190 (237 )
Cash dividends declared:

Preferred-Class A @ $3.75 per share
   —      —      —   —   (2 ) —   —   —   (2 )
Preferred-Class B @ $20.1563 per share
   —      —      —   —   (50 ) —   —   —   (50 )
Common @ $0.36 per share
   —      —      —   —   (159 ) —   —   —   (159 )
Stock-based compensation
   —      —      —   73 —   —   —   —   73
Common stock issued:

compensation plans
   —      —      —   (209 ) —�� 186 —   —   (23 )
Retirement of Treasury stock
   —      —      (76 ) (2,563 ) —   2,639 —   —   —
Reverse stock split
   —      —      (877 ) 877 —   —   —   —   —
Distributions
   —      —      —   —   —   —   —   (176 ) (176 )
Other
   —      —      —   —   —   —   —   13 13






Balance at September 30, 2016
   $ 55    $ 3    $ 438 $ 8,197 $ 8,940 $ —   $ (5,858 ) $ 2,170 $ 13,945

   Arconic Shareholders
   Preferred
stock    Mandatory
convertible
preferred
stock    Common
stock    Additional
capital    Accumulated
deficit Treasury
stock    Accumulated
other
comprehensive
loss Noncontrolling
interests Total
Equity
Balance at December 31, 2016
   $ 55    $ 3    $ 438    $ 8,214    $ (1,027 ) $ —      $ (2,568 ) $ 26 $ 5,141
Net income
   —      —      —      —      653 —      —   —   653
Other comprehensive income (C)
   —      —      —      —      —   —      241 —   241
Cash dividends declared:

Preferred-Class A @ $3.75 per share
   —      —      —      —      (2 ) —      —   —   (2 )
Preferred-Class B @ $20.1563 per share
   —      —      —      —      (51 ) —      —   —   (51 )
Common @ $0.24 per share
   —      —      —      —      (107 ) —      —   —   (107 )
Stock-based compensation
   —      —      —      59    —   —      —   —   59
Common stock issued:

compensation plans
   —      —      4    21    —   —      —   —   25
Distributions
   —      —      —      —      —   —      —   (14 ) (14 )
Other
   —      —      —      —      15 —      —   1 16












Balance at September 30, 2017
   $ 55    $ 3    $ 442    $ 8,294    $ (519 ) $ —      $ (2,327 ) $ 13 $ 5,961

Preferred
stock Common
stock Additional
capital Retained earnings Accumulated
other
comprehensive
loss Total
Equity
Balance at December 31, 2021 $ 55 $ 422 $ 4,291 $ 603 $ (1,863) $ 3,508
Net income — — — 358 — 358
Other comprehensive loss (I)
— — — — (248) (248)
Cash dividends declared:
Preferred-Class A @ $2.8125 per share — — — (2) — (2)
Common @ $0.10 per share — — — (42) — (42)
Repurchase and retirement of common stock (H)
— (10) (325) — — (335)
Stock-based compensation — — 43 — — 43
Common stock issued: compensation plans — 2 (11) — — (9)
Balance at September 30, 2022 $ 55 $ 414 $ 3,998 $ 917 $ (2,111) $ 3,273



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at December 31, 2022	$	55	$	412	$	3,947	$	1,028	$	(1,841)	$	3,601
Net income	—		—		—		529		—		529
Other comprehensive loss (I)	—		—		—		—		(9)		(9)
Cash dividends declared:
Preferred-Class A @ $2.8125 per share	—		—		—		(2)		—		(2)
Common @ $0.17 per share	—		—		—		(70)		—		(70)
Repurchase and retirement of common stock (H)	—		(3)		(147)		—		—		(150)
Stock-based compensation	—		—		39		—		—		39
Common stock issued: compensation plans	—		3		(69)		—		—		(66)


Balance at September 30, 2023	$	55	$	412	$	3,770	$	1,485	$	(1,850)	$	3,872

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 share and per-share amounts)

A. Basis of Presentation

The interim Consolidated Financial Statements of ~~Arconic~~Howmet Aerospace Inc. and its subsidiaries (“~~Arconic”~~Howmet” or the “Company” or “we” or “our”) 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 ~~2016~~2022 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, ~~2016,~~2022 (the “Form 10-K”), which includes all disclosures required by GAAP. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation.

In the third quarter of 2023, the Company derived approximately 49% of its revenue from products sold to the commercial aerospace market which is substantially less than the 2019 annual rate of approximately 60%. During the global COVID-19 pandemic and ~~nine months ended September 30, 2016.~~its impact on the commercial aerospace industry to date, there was a decrease in domestic and international air travel, which in turn adversely affected demand for narrow body and wide body aircraft. Domestic air travel has rebounded and exceeds 2019 levels. International air travel continues to recover and is approximately 90% of 2019 levels. We expect commercial aerospace growth to continue. The ~~cash flows, equity~~commercial wide body aircraft market is emerging but the mix of wide body to narrow body aircraft remains below 2019 levels, which is creating a shift in our product mix compared to 2019 conditions. In addition to the impact from the pandemic, the timing and ~~comprehensive income~~level of future aircraft builds by original equipment manufacturers are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

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 related to ~~Alcoa Corporation have not been segregated~~COVID-19 and ~~are included~~changes in the ~~accompanying Statement~~aerospace industry. The impact of these changes, including the macroeconomic considerations, remains highly uncertain. Management has made its 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 ~~Cash Flows, Statement of Changes~~Financial Statements in ~~Consolidated Equity~~future periods and ~~Statement of Consolidated Comprehensive Income, respectively, for the third quarter and nine months ended September 30, 2016.~~

~~Pursuant~~potentially require adverse adjustments to the ~~authorization provided at a special meeting~~recoverability of ~~Arconic common shareholders held on October 5, 2016, shareholders approved a 1-for-3 reverse stock split~~goodwill, intangible and long-lived assets, the realizability of ~~Arconic’s outstanding~~deferred tax assets and ~~authorized shares of common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every three shares of issued~~other judgments and ~~outstanding common stock were combined into one issued~~estimations and outstanding share of common stock, without any change in the par value per share. The Reverse Stock Split reduced the number of shares of common stock outstanding from approximately 1.3 billion shares to approximately 0.4 billion shares. The Company’s common stock began trading on a reverse stock split-adjusted basis on the New York Stock Exchange on October 6, 2016.

assumptions.

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

In ~~March 2016,~~September 2022, the Financial Accounting Standards Board (“FASB”) issued ~~changes~~guidance to ~~employee share-based payment accounting. Previously, an entity determined for each share-based payment award whether~~enhance the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes resulted in either an excess tax benefit or a tax deficiency. Excess tax benefits were recognized in additional paid-in capital; tax deficiencies were recognized either as an offset to accumulated excess tax benefits, if any, or in the income statement. Excess tax benefits were not recognized until the deduction reduced taxes payable. The changes require all excess tax benefits and tax deficiencies related to share-based payment awards to be recognized as income tax expense or benefit in the income statement. The tax effectstransparency of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. In addition, the presentation of excess tax benefits related to share-based payment awards in the statement of cash flows changed. Previously, excess tax benefits were separated from other income tax cash flows and classified as a financing activity. The changes require excess tax benefits to be classified along with other income tax cash flows as an operating activity. Also, the changes require cash paid by an employer when directly withholding shares for tax-withholding purposes to be classified as a financing activity. Further, for a share-based award to qualify for equity classification it previously could not be partially settled in cash in-excess of the employer’s minimum statutory withholding requirements. The changes permit equity classification of share-based awards for withholdings up to the maximum statutory tax rates in applicable jurisdictions.disclosures regarding supplier finance programs. These changes became effective for ~~Arconic~~fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

On January 1, ~~2017.~~2023, the Company adopted the changes issued by the FASB related to disclosure requirements of supplier finance program obligations. We offer voluntary supplier finance programs to suppliers who may elect to sell their receivables to third parties at the sole discretion of both the suppliers and the third parties. The ~~prospective transition method was utilized for excess tax benefits~~program is at no cost to the Company and provides additional liquidity to our suppliers, if they desire, at their cost. Under these programs, the Company pays the third party bank rather than the supplier, the stated amount of the confirmed invoices on the original maturity date of the invoices. The Company or the third party bank may terminate a program upon at least 30 days’ notice. Supplier invoices under the program require payment in full no more than 120 days of the invoice date. As of September 30, 2023 and December 31, 2022, supplier invoices that are subject to future payment under these programs were $254 and $240, respectively, and are included in Accounts payable, trade in the ~~Statement of~~ Consolidated ~~Cash Flows. Management concluded that the adoption of this guidance did not have a material impact on the Consolidated Financial Statements.~~

Balance Sheet.

Issued

In March ~~2016,~~2020, the FASB issued ~~changes eliminating the requirement~~amendments that provide optional expedients and exceptions for ~~an investor~~applying GAAP to ~~adjust an equity method investment, results of operations,~~contracts, hedging relationships, and ~~retained earnings retroactively on a step-by-step basis as~~other transactions affected by reference rate reform, if ~~the equity method had been in effect during all previous periods~~certain criteria are met. The amendments apply only to contracts and hedging relationships that ~~the investment had been held as a result of an increase in the level of ownership interest~~reference London Inter-bank Offered Rate (“LIBOR”) or degree of influence. In addition, an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting must recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. These changes became effective for Arconic on January 1, 2017. Management determined that the adoption of this guidance did not have a material impact on the Consolidated Financial Statements.

In March 2016, the FASB issued changes to derivative instruments designated as hedging instruments. These changes clarify that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continueanother reference rate expected to be ~~met.~~discontinued due to reference rate reform. These ~~changes became~~amendments are effective ~~for Arconic~~immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on ~~January 1, 2017. Management determined that the adoption of this guidance did not have a material impact on the Consolidated Financial Statements.~~

or before December 31, 2022. In October 2016, the FASB issued changes to the accounting for Intra-Entity transactions, other than inventory. Previously, no immediate tax impact was recognized in the consolidated financial statements as a result of intra-entity transfers of assets. The previous standard precluded an entity from reflecting a tax benefit or expense from an intra-entity transfer between entities that file separate tax returns, whether or not such entities were in different tax jurisdictions, until the asset was sold to a third party or otherwise recovered. The previous standard also prohibited recognition by the buyer of a deferred tax asset for the temporary difference arising from the excess of the buyer’s tax basis over the cost to the seller. The changes require the current and deferred income tax consequences of the intra-entity transfer to be recorded when the transaction occurs. The exception to defer the tax consequences of inventory transactions is maintained. These changes became effective for Arconic on January 1, 2017. Management determined that the adoption of this guidance did not have a material impact on the Consolidated Financial Statements.

In January 2017, the FASB issued changes to the subsequent measurement of goodwill by eliminating step 2 from the goodwill impairment test, which previously required measurement of any goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. An entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value without exceeding the total amount of goodwill allocated to that reporting unit. Arconic has elected to early adopt this guidance as of January 1, 2017, and will apply it on a prospective basis. Management does not anticipate that the adoption of these changes will have a material impact on the Consolidated Financial Statements.

In January 2017, the FASB issued changes which narrow the definition of a business and require an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, which would not constitute the acquisition of a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs. Arconic has elected to early adopt this guidance as of January 1, 2017, and will apply it on a prospective basis. Management does not anticipate that the adoption of these changes will have a material impact on the Consolidated Financial Statements.

~~Issued~~

In May 2014, the FASB issued changes to the recognition of revenue from contracts with customers. These changes created a comprehensive framework for all entities in all industries to apply in the determination of when to recognize revenue and, therefore, supersede virtually all existing revenue recognition requirements and guidance. This framework is expected to result in less complex guidance in application while providing a consistent and comparable methodology for revenue recognition. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract(s), and (v) recognize revenue when, or as, the entity satisfies a performance obligation. In August 2015,December 2022, the FASB deferred the ~~effective~~sunset date ofto December 31, 2024. The Company has amended its agreements in accordance with the new guidance ~~by one year, making these changes effective for Arconic on January 1, 2018.~~

Arconic will adopt the new guidance using the modified retrospective transition approach, reflecting the cumulative effect of initially applying the new standard to revenue recognition in the first quarter of 2018. The Company formed a project assessment(See Note J and adoption team and is currently reviewing contract terms and assessing the impact of adopting the new guidance on the Consolidated Financial Statements. While the Company generally recognizes revenue at a point in time upon delivery and transfer of title and risk of loss for most arrangements, based on the contract assessments to date, it

believes that revenue under certain of those contracts, primarily within the Engineered Products and Solutions segment, may be recognized over time due to the customized nature of certain of its products that have no alternative use combined with an enforceable right of payment from the customer in the event of termination of the contract. The Company is assessing the modification of certain contract terms that may impact point-in-time versus over-time revenue recognition. It is not anticipated that these modifications would result in significant changes to revenue, business practices or controls. The Company is continuing to assess the impact that over-time revenue recognition will have on its Consolidated Financial Statements; therefore an estimate of the impact of adopting this standard is not currently determinable. In addition, the Company is in the process of identifying appropriate changes to its business processes and controls, as well as preparing for revisions to accounting policies and expanded disclosures related to revenue recognition in the notes to the Consolidated Financial Statements.

In January 2016, the FASB issued changes to equity investments. These changes require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Also, the impairment assessment of equity investments without readily determinable fair valuesNote N). Management has been simplified by requiring a qualitative assessment to identify impairment. Also, the new guidance will require changes in fair value of equity securities to be recognized immediately as a component of net income instead of being reported in accumulated other comprehensive loss until the gain (loss) is realized. ~~These changes, which will be applied on a prospective basis, become effective for Arconic on January 1, 2018. Management determined~~concluded that the ~~adoption of these changes will not have a material impact on the Consolidated Financial Statements.~~

In February 2016, the 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 for all leases with terms longer than 12 months. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a right of use asset and lease liability. Additionally, when measuring assets and liabilities arising from a lease, optional payments should be included only if the lessee is reasonably certain to exercise an option to extend the lease, exercise a purchase option, or not exercise an option to terminate the lease. These changes become effective for Arconic on January 1, 2019. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements, which will require right of use assets and lease liabilities be recorded in the consolidated balance sheet for operating leases. An estimate of the impact of this standard is not ~~currently determinable.~~

~~In June 2016, the FASB added a new impairment model (known as the current~~ expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity 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 of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. These changes become effective for Arconic on January 1, 2020. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.

In August 2016, the FASB issued changes to the classification of certain cash receipts and cash payments within the statement of cash flows. The guidance identifies eight specific cash flow items and the sections where they must be presented within the statement of cash flows. These changes become effective for Arconic on January 1, 2018. Management does not expect these changes to have a material impact on the Consolidated Financial Statements.

~~In November 2016, the FASB issued changes to the classification of cash~~

C. Segment Information

Howmet is a global leader in lightweight metals engineering and ~~cash equivalents within the cash flow statement. Restricted cash~~manufacturing. Howmet’s innovative, multi-material products, which include nickel, titanium, aluminum, and restricted cash equivalents will be included within the cash and cash equivalents line on the cash flow statement and a reconciliation must be prepared to the statement of financial position. Transfers between restricted cash and restricted cash equivalents and cash and cash equivalents will no longer be presented as cash flow activitiescobalt, are used worldwide in the ~~statement~~aerospace (commercial and defense), commercial transportation, and industrial and other markets. Segment performance under Howmet’s management reporting system is evaluated based on a number of ~~cash flows~~factors; however, the primary measure of performance is Segment Adjusted EBITDA. Howmet’s definition of Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and ~~material balances of restricted cash~~amortization) is net margin plus an add-back for depreciation and ~~restricted cash equivalents must disclose information regarding~~amortization. Net margin is equivalent to Sales minus the nature of the restrictions. These changes become effective for Arconic on January 1, 2018. Management determined that the adoption of these changes will not have a material impact on the Consolidated Financial Statements.

In March 2017, the FASB issued changes to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. These changes become effective for Arconic on January 1, 2019 and early adoption is permitted. Management determined that the adoption of these changes will not have a material impact on the Consolidated Financial Statements.

In March 2017, the FASB issued changes to the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires registrants to present the service cost component of net periodic benefit cost in the same income statement line item or items as other employee compensation costs arising from services rendered during the period. Also, only the service cost component will be eligible for asset capitalization. Registrants will present the other components of net periodic benefit cost separately from the service cost component; and, the line item or items used in the income statement to present the other components of net periodic benefit cost must be disclosed. These changes become effective for Arconic on January 1, 2018, including interim periods within those fiscal years. The new standard must be adopted retrospectively for the presentation of the service cost component and the other components of net periodic benefit cost in the income statement, and prospectively for the asset capitalization of the service cost component of net periodic benefit cost. The Company currently records non-service related net periodic pension cost and net periodic postretirement benefit cost withinfollowing items: Cost of goods ~~sold,~~sold; Selling, general administrative, and other ~~expenses and~~expenses; Research and development ~~expenses~~expenses; and ~~upon~~Provision for depreciation and amortization. Special items, including Restructuring and other charges, are excluded from net margin and Segment Adjusted EBITDA. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences between the ~~adoption~~total segment and consolidated totals are in Corporate.

Howmet’s operations consist of ~~this standard will be recorded separately from service cost~~four worldwide reportable segments as follows:

Engine Products

Engine Products produces investment castings, including airfoils, and 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, industrial and other fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines. Fastening Systems’ products are also critical components of commercial transportation vehicles, automobiles, construction and industrial equipment, and renewable energy sectors.

Engineered Structures

Engineered Structures produces titanium 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 forgings, and aluminum machined components and assemblies for aerospace and defense applications.

Forged Wheels

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

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


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Third quarter ended September 30, 2023
Sales:
Third-party sales	$	798	$	348	$	227	$	285	$	1,658
Inter-segment sales	5		—		—		—		5
Total sales	$	803	$	348	$	227	$	285	$	1,663
Profit and loss:

Provision for depreciation and amortization	$	33	$	12	$	12	$	10	$	67
Segment Adjusted EBITDA	219		76		30		77		402
Restructuring and other charges	—		1		1		—		2
Capital expenditures	30		9		6		9		54

Third quarter ended September 30, 2022
Sales:
Third-party sales	$	683	$	291	$	193	$	266	$	1,433
Inter-segment sales	1		—		3		—		4
Total sales	$	684	$	291	$	196	$	266	$	1,437
Profit and loss:

Provision for depreciation and amortization	$	31	$	11	$	12	$	10	$	64
Segment Adjusted EBITDA	186		64		28		64		342
Restructuring and other charges	2		—		1		—		3
Capital expenditures	23		7		3		6		39

	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Nine months ended September 30, 2023
Sales:
Third-party sales	$	2,414	$	989	$	634	$	872	$	4,909
Inter-segment sales	12		—		1		—		13
Total sales	$	2,426	$	989	$	635	$	872	$	4,922
Profit and loss:

Provision for depreciation and amortization	$	97	$	35	$	36	$	29	$	197
Segment Adjusted EBITDA	654		198		80		237		1,169
Restructuring and other (credits) charges	(1)		1		7		—		7
Capital expenditures	84		23		21		25		153

Nine months ended September 30, 2022
Sales:
Third-party sales	$	1,966	$	832	$	560	$	792	$	4,150
Inter-segment sales	3		—		5		—		8
Total sales	$	1,969	$	832	$	565	$	792	$	4,158
Profit and loss:

Provision for depreciation and amortization	$	93	$	34	$	36	$	30	$	193
Segment Adjusted EBITDA	538		176		77		206		997
Restructuring and other charges (credits)	9		(3)		4		—		10
Capital expenditures	74		30		12		20		136

The following table reconciles Total Segment Adjusted EBITDA to Income before income taxes. Differences between the total segment and consolidated totals are in ~~the Other income, net line item~~Corporate.


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Total Segment Adjusted EBITDA	$	402	$	342	$	1,169	$	997
Segment provision for depreciation and amortization	(67)		(64)		(197)		(193)
Unallocated amounts:
Restructuring and other charges	(4)		(4)		(8)		(12)
Corporate expense	(24)		(46)		(87)		(93)
Operating income	$	307	$	228	$	877	$	699
Loss on debt redemption	—		—		(1)		(2)
Interest expense, net	(54)		(57)		(166)		(172)
Other expense, net	(11)		(67)		(5)		(67)
Income before income taxes	$	242	$	104	$	705	$	458

The following table reconciles total segment capital expenditures with Capital expenditures as presented in the Statement of Consolidated Operations. The impact of the retrospective adoption of this standard update will be an increase to consolidated operating income of approximately $150 while there will be no impact to consolidated net income for the year ended December 31, 2017. Management is currently evaluating the potential impact of prospectively adopting the asset capitalization of only the service cost component on the Consolidated Financial Statements.

In May 2017, the FASB issued clarification to guidance on the modification accounting criteria for share-based payment awards. The new guidance requires registrants to apply modification accounting unless three specific criteria are met. The three criteria are 1) the fair value of the award is the same before and after the modification, 2) the vesting conditions are the same before and after the modification and 3) the classification as a debt or equity award is the same before and after the modification. These changes become effective for Arconic on January 1, 2018 and are to be applied prospectively to new awards granted after adoption. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.

In August 2017, the FASB issued guidance that will make more financial and nonfinancial hedging strategies eligible for hedge accounting. It also amends the presentation and disclosure requirements and changes 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 become effective for Arconic on January 1, 2019. For cash flow and net investment hedges existing at the date of adoption, Arconic will apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year in which the amendment is adopted. The amended presentation and disclosure guidance is required only prospectively. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.

Cash Flows.


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Total segment capital expenditures	$	54	$	39	$	153	$	136
Corporate	5		3		11		12
Capital expenditures	$	59	$	42	$	164	$	148

~~C. Accumulated Other Comprehensive Loss~~

The following table ~~details~~disaggregates segment revenue by major market served. Differences between the ~~activity~~total segment and consolidated totals are in Corporate.


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Third quarter ended September 30, 2023
Aerospace - Commercial	$	446	$	209	$	165	$	—	$	820
Aerospace - Defense	165		41		45		—		251
Commercial Transportation	—		67		—		285		352
Industrial and Other	187		31		17		—		235
Total end-market revenue	$	798	$	348	$	227	$	285	$	1,658

Third quarter ended September 30, 2022
Aerospace - Commercial	$	388	$	156	$	124	$	—	$	668
Aerospace - Defense	124		43		56		—		223
Commercial Transportation	—		63		—		266		329
Industrial and Other	171		29		13		—		213
Total end-market revenue	$	683	$	291	$	193	$	266	$	1,433

Nine months ended September 30, 2023
Aerospace - Commercial	$	1,324	$	563	$	458	$	—	$	2,345
Aerospace - Defense	502		131		131		—		764
Commercial Transportation	—		192		—		872		1,064
Industrial and Other	588		103		45		—		736
Total end-market revenue	$	2,414	$	989	$	634	$	872	$	4,909

Nine months ended September 30, 2022
Aerospace - Commercial	$	1,079	$	459	$	341	$	—	$	1,879
Aerospace - Defense	384		112		176		—		672
Commercial Transportation	—		169		—		792		961
Industrial and Other	503		92		43		—		638
Total end-market revenue	$	1,966	$	832	$	560	$	792	$	4,150

The Company derived 63% and 61% of its revenue from the aerospace (commercial and defense) markets for the nine months ended September 30, 2023 and 2022, respectively.

General Electric Company and RTX Corporation represented approximately 13% and 10%, respectively, of the ~~four components that comprise Accumulated other comprehensive loss~~Company’s third-party sales for ~~both Arconic’s shareholders~~the nine months ended September 30, 2023. General Electric Company and ~~noncontrolling interests:~~

   Arconic    Noncontrolling Interests
   Third quarter ended    Third quarter ended
   September 30,    September 30,
   2017    2016    2017    2016
Pension and other postretirement benefits (M)

Balance at beginning of period
   $ (1,931 )    $ (3,514 )    $ —      $ (53 )
Other comprehensive income (loss):

Unrecognized net actuarial loss and prior service cost
   (7 )    (819 )    —      (1 )
Tax benefit
   1    286    —      —








Total Other comprehensive loss before reclassifications, net of tax
   (6 )    (533 )    —      (1 )








Amortization of net actuarial loss and prior service cost⁽¹⁾
   56    109    —      1
Tax expense⁽²⁾
   (19 )    (38 )    —      (1 )








Total amount reclassified from Accumulated other comprehensive income, net of tax⁽⁵⁾
   37    71    —      —








Total Other comprehensive income (loss)
   31    (462 )    —      (1 )








Balance at end of period
   $ (1,900 )    $ (3,976 )    $ —      $ (54 )








Foreign currency translation

Balance at beginning of period
   $ (523 )    $ (2,064 )    $ (2 )    $ (641 )
Other comprehensive income⁽³⁾
   85    157    —      45








Balance at end of period
   $ (438 )    $ (1,907 )    $ (2 )    $ (596 )








Available-for-sale securities

Balance at beginning of period
   $ (2 )    $ (1 )    $ —      $ —
Other comprehensive income⁽⁴⁾
   1    —      —      —








Balance at end of period
   $ (1 )    $ (1 )    $ —      $ —








Cash flow hedges

Balance at beginning of period
   $ 2    $ 364    $ —      $ 11
Other comprehensive income (loss):

Net change from periodic revaluations
   15    (430 )    —      20
Tax (expense) benefit
   (5 )    126    —      (6 )








Total Other comprehensive income (loss) before reclassifications, net of tax
   10    (304 )    —      14








Net amount reclassified to earnings
   —      (46 )    —      (34 )
Tax benefit⁽²⁾
   —      12    —      10








Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁵⁾
   —      (34 )    —      (24 )








Total Other comprehensive income (loss)
   10    (338 )    —      (10 )








Balance at end of period
   $ 12    $ 26    $ —      $ 1

⁽¹⁾	~~These amounts were included in the computation of net periodic benefit cost for pension and other postretirement benefits (see Note M).~~

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

⁽³⁾	~~In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings.~~

⁽⁴⁾	~~Realized gains and losses were included in Other income, 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. These amounts were reflected on the accompanying Statement of Consolidated Operations in the line items indicated in footnotes 2 through 4.

   Arconic    Noncontrolling Interests
   Nine months ended    Nine months ended
   September 30,    September 30,
   2017    2016    2017    2016
Pension and other postretirement benefits (M)

Balance at beginning of period
   $ (2,010 )    $ (3,611 )    $ —      $ (56 )
Other comprehensive income (loss):

Unrecognized net actuarial loss and prior service cost
   4    (883 )    —      —
Tax (expense) benefit
   (3 )    312    —      —








Total Other comprehensive income (loss) before reclassifications, net of tax
   1    (571 )    —      —








Amortization of net actuarial loss and prior service cost⁽¹⁾
   167    317    —      3
Tax expense⁽²⁾
   (58 )    (111 )    —      (1 )








Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁵⁾
   109    206    —      2








Total Other comprehensive income (loss)
   110    (365 )    —      2








Balance at end of period
   $ (1,900 )    $ (3,976 )    $ —      $ (54 )








Foreign currency translation

Balance at beginning of period
   $ (689 )    $ (2,412 )    $ (2 )    $ (780 )
Other comprehensive income⁽³⁾
   251    505    —      184








Balance at end of period
   $ (438 )    $ (1,907 )    $ (2 )    $ (596 )








Available-for-sale securities

Balance at beginning of period
   $ 132    $ (5 )    $ —      $ —
Other comprehensive (loss) income⁽⁴⁾
   (133 )    4    —      —








Balance at end of period
   $ (1 )    $ (1 )    $ —      $ —








Cash flow hedges

Balance at beginning of period
   $ (1 )    $ 597    $ —      $ (3 )
Other comprehensive income (loss):

Net change from periodic revaluations
   20    (772 )    —      35
Tax (expense) benefit
   (7 )    229    —      (10 )








Total Other comprehensive income (loss) before reclassifications, net of tax
   13    (543 )    —      25








Net amount reclassified to earnings
   —      (41 )    —      (29 )
Tax benefit²⁾
   —      13    —      8








Total amount reclassified from Accumulated other comprehensive loss, net of tax⁽⁵⁾
   —      (28 )    —      (21 )








Total Other comprehensive income (loss)
   13    (571 )    —      4








Balance at end of period
   $ 12    $ 26    $ —      $ 1

⁽¹⁾	~~These amounts were included in the computation of net periodic benefit cost for pension and other postretirement benefits (see Note M).~~

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

⁽³⁾	~~In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings.~~

⁽⁴⁾	~~Realized gains and losses were included in Other income, 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. These amounts were reflected on the accompanying Statement of Consolidated Operations in the line items indicated in footnotes 2 through 4.

RTX Corporation represented approximately 13% and 9%, respectively, of the Company’s third-party sales for the nine months ended September 30, 2022. These sales were primarily from the Engine Products segment.

D. Restructuring and Other Charges

Third quarter ended Nine months ended
September 30, September 30,
2023 2022 2023 2022
Layoff costs $ 1 $ — $ 1 $ —
Reversals of previously recorded layoff reserves — — (1) (1)
Pension and Other post-retirement benefits - net settlements (E)
2 3 5 7
Other 1 1 3 6
Total restructuring and other charges $ 4 $ 4 $ 8 $ 12

In the third quarter of ~~2017, Arconic~~2023, the Company recorded Restructuring and other charges of ~~$19 ($13 after-tax),~~$4, which ~~included $11 ($8 after-tax)~~were primarily due to charges for a Canadian pension plan settlement of $2, layoff charges of $1, and exit related costs, ~~related to cost reduction initiatives~~ including ~~the separation~~accelerated depreciation, of ~~124 employees (111 in the Engineered Products and Solutions segment, 12 in Corporate and 1 in the Global Rolled Products segment); and a net charge of $8 ($5 after-tax) for other miscellaneous items.~~

$1.

In the ~~first~~ nine months ~~of 2017, Arconic~~ended September 30, 2023, the Company recorded Restructuring and other charges of ~~$118 ($99 after-tax),~~$8, which ~~included $59 ($40 after-tax)~~were primarily due to charges for U.S. and Canadian pension plan settlements of $5, exit related costs, including accelerated depreciation, of $3, and layoff ~~costs related to cost reduction initiatives including the separation~~charges of approximately 800 employees (350 in the Engineered Products and Solutions segment, 243 in the Global Rolled Products segment, 133 in the Transportation and Construction Solutions segment and 74 in Corporate); a charge of $60 ($60 after-tax) related to the sale of the Fusina, Italy rolling mill; a net benefit of $6 ($4 after-tax), for the reversal of forfeited executive stock compensation of $13,$1, partially offset by a ~~charge of $7 for the related severance; a net charge of $7 ($5 after-tax) for other miscellaneous items; and a favorable benefit of $2 ($2 after-tax) for the~~ reversal of $1 for a ~~number of small~~ layoff ~~reserves~~reserve related to a prior ~~periods.~~

period.

In the third quarter of ~~2016, Arconic~~2022, the Company recorded Restructuring and other charges of $4, which were primarily due to charges for U.S. and Canadian pension plan settlements of $3 ~~($2 after-tax), which included $4 ($2 after-tax) for layoff~~and exit related costs, ~~related to cost reduction initiatives and the separation~~including accelerated depreciation, of Alcoa Inc. (see Note G), including the separation of approximately 70 employees (60 in the Engineered Products and Solutions segment and 10 in Corporate); a net charge of $7 ($5 after-tax) for other miscellaneous items; and a favorable benefit of $8 ($5 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

$1.

In the ~~first~~ nine months ~~of 2016, Arconic~~ended September 30, 2022, the Company recorded Restructuring and other charges of ~~$33 ($22 after-tax),~~$12, which ~~included $34 ($21 after-tax)~~were primarily due to charges for U.S. pension plan settlements of $7 and exit related costs, including accelerated depreciation, of $6, partially offset by a reversal of $1 for a layoff reserve related to a prior period.


	Layoff costs		Other exit costs		Total
Reserve balances at December 31, 2022	$	6	$	2	$	8
Cash payments	(2)		(2)		(4)
Restructuring charges	5		3		8
Other(1)	(5)		(1)		(6)
Reserve balances at September 30, 2023	$	4	$	2	$	6

(1)In the nine months ended September 30, 2023, other for layoff costs ~~related to cost reduction initiatives~~included $5 of charges for U.S. and ~~the separation of Alcoa Inc. (see Note G), including the separation of approximately 1,140 employees (860 in the Engineered Products~~Canadian pension plan settlements and ~~Solutions segment, 30 in the Global Rolled Products segment, 240 in the Transportation and Construction Solutions segment, and 10 in Corporate); a net charge of $14 ($9 after-tax)~~ for other ~~miscellaneous items; and~~exit costs included a ~~net favorable benefit of $15 ($8 after-tax)~~$1 charge for ~~the reversal of a number of small layoff~~accelerated depreciation.

The remaining reserves ~~related to prior periods.~~

~~Arconic does not include Restructuring and other charges in the results of its reportable segments. The pretax impact of such charges to segment results would have been~~ as ~~follows:~~

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Engineered Products and Solutions
   $ 10    $ (1 )    $ 24    $ 16
Global Rolled Products
   2    (1 )    76    1
Transportation and Construction Solutions
   2    (2 )    11    6








Segment Total
   14    (4 )    111    23
Corporate
   5    7    7    10








Total Restructuring and other charges
   $ 19    $ 3    $ 118    $ 33

As of September 30, 2017, approximately 155 of the 800 employees associated with 2017 restructuring programs, approximately 1,200 of the 1,750 employees (previously 1,800) associated with 2016 restructuring programs (with planned departures in 2017), and approximately 1,120 of the 1,220 employees (previously 1,240) associated with the 2015 restructuring programs were separated. The total number of employees associated with both the 2016 and 2015 restructuring programs was updated to reflect employees who, initially identified for separation, accepted other positions within Arconic, as well as natural attrition. Most of the remaining separations for the 2017 restructuring programs are expected to be completed in 2017 and 2018. All of the remaining separations for the 2016 and 2015 restructuring programs are expected to be completed by the end of 2017.

In the 2017 third quarter and nine-month period, cash payments of $11 and $13, respectively, were made against layoff reserves related to 2017 restructuring programs, cash payments of $3 and $23, respectively, were made against layoff reserves related to 2016 restructuring programs, and cash payments of $1 and $5, respectively, were made against the layoff reserves related to 2015 restructuring programs.

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

   Layoff
costs    Other exit
costs    Total
Reserve balances at December 31, 2015
   $ 84    $ 9    $ 93
2016:

Cash payments
   (73 )    (13 )    (86 )
Restructuring charges
   70    27    97
Other*
   (31 )    (14 )    (45 )






Reserve balances at December 31, 2016
   50    9    59






2017:

Cash payments
   (41 )    (5 )    (46 )
Restructuring charges
   54    —      54
Other*
   10    (1 )    9






Reserve balances at September 30, 2017
   $ 73    $ 3    $ 76

Other includes reversals of previously recorded restructuring charges and the effects of foreign currency translation. In 2017, Other for layoff costs includes the reclassification of a stock awards reversal of $13. In 2016, Other for other exit costs also included reclassifications of $8 in asset retirement, $2 in environmental obligations and $4 in legal obligations as these liabilities were included in Arconic’s separate reserves for asset retirement obligations, environmental remediation and legal costs.

~~The remaining reserves~~2023 are expected to be paid in cash during the remainder of ~~2017, except for approximately $15 to $20, which is expected to be paid~~2023 and 2024.

E. Pension and Other Postretirement Benefits

The components of net periodic cost (benefit) were as follows:


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Pension benefits
Service cost	$	—	$	1	$	2	$	3
Interest cost	20		13		60		38
Expected return on plan assets	(18)		(20)		(55)		(61)
Recognized net actuarial loss	7		12		21		37

Settlements	2		3		5		7


Net periodic cost(1)	$	11	$	9	$	33	$	24



Other postretirement benefits
Service cost	$	1	$	—	$	1	$	1
Interest cost	2		1		5		3
Recognized net actuarial (gain) loss	(1)		—		(2)		1
Amortization of prior service benefit	(3)		(2)		(7)		(7)


Net periodic benefit(1)	$	(1)	$	(1)	$	(3)	$	(2)

(1)Service cost was included within ~~the next year for layoffs.~~

~~As part~~Cost of its ongoing restructuring in Brazil, the Company anticipates recognizing a restructuring-related charge of approximately $30 - $50 in the fourth quarter of 2017 related to its extrusions business which is part of the Transportationgoods sold and ~~Construction Solutions segment. The charge relates to the noncash impairment of the net book value of the business.~~

~~E. Acquisitions~~Selling, general administrative, and ~~Divestitures~~

In April 2016, Arconic completed the sale of the Remmele Medical business to LISI MEDICAL for $102 in cash ($99 net of transaction costs). This business, which was part of the RTI International Metals acquisition, manufactures precision-machined metal products for customers in the minimally invasive surgical device and implantable device markets. While owned by Arconic, the operating results and assets and liabilities of this businessother expenses; settlements were included in ~~the Engineered Products~~Restructuring and ~~Solutions segment. Remmele Medical generated third-party sales of $23 from January 1, 2016 through the divestiture date,~~other charges; and ~~at the time of the divestiture, had approximately 330 employees. This transaction is no longer subject to post-closing adjustments.~~

In March 2017, Arconic completed the sale of its Fusina, Italy rolling mill to Slim Aluminium. While owned by Arconic, the operating results and assets and liabilities of the Fusina, Italy rolling millall other cost components were ~~included~~recorded in Other expense, net in the ~~Global Rolled Products segment. As part~~Statement of Consolidated Operations.

Pension benefits

In the ~~transaction, Arconic injected $10 of cash into~~third quarter and nine months ended September 30, 2023, the ~~business and provided~~Company applied settlement accounting to its Canadian pension plan due to lump sum payments made to participants, reducing gross pension obligations by $12. In June 2023, the Company also undertook additional actions to reduce gross pension obligations by $19 by purchasing group annuity contracts from a third-party ~~guarantee with~~carrier to pay and administer future annuity payments of a ~~fair value~~U.S. pension plan. Settlement charges of ~~$5 related~~$2 and

$5 were recognized in the third quarter and nine months ended September 30, 2023, respectively. In the third quarter and nine months ended September 30, 2022, the Company applied settlement accounting to ~~Slim Aluminium’s environmental remediation. The Company recorded a loss on the sale~~certain small U.S. and Canadian pension plans due to lump sum payments made to participants, which resulted in settlement charges of ~~$60, which was~~$3 and $7, respectively. All settlement charges were recorded in Restructuring and other charges ~~(see~~ in the Statement of Consolidated Operations.

For the third quarter and nine months ended September 30, 2023, Howmet’s combined pension contributions and other postretirement benefit payments were approximately $9 and $28, respectively. For the third quarter and nine months ended September 30, 2022, Howmet’s combined pension contributions and other postretirement benefit payments were approximately $18 and $43, respectively.

F. Other Expense, Net


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Non-service costs - pension and other postretirement benefits (E)	$	7	$	4	$	22	$	11
Interest income	(5)		(2)		(15)		(3)
Foreign currency losses (gains), net	5		(3)		3		(7)
Net realized and unrealized losses	6		5		17		12

Deferred compensation	(1)		(2)		5		(11)
Other, net	(1)		65		(27)		65
Total other expense, net	$	11	$	67	$	5	$	67

In the nine months ended September 30, 2023, Other, net primarily includes the reversal of $25, net of legal fees of $1, of the $65 pre-tax charge taken in the third quarter of 2022 related to the Lehman Brothers International (Europe) legal proceeding (See Note D)P) due to the final settlement of such proceeding in June 2023.

G. Income Taxes

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 23.0% in both the third quarter and nine months ended September 30, 2023 and 24.3% in both the third quarter and nine months ended September 30, 2022. The 2023 and 2022 rates were higher than the U.S. federal statutory rate of 21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, and nondeductible expenses. Foreign earnings subject to tax in higher rate jurisdictions also contributed to the 2023 rate being higher than the U.S. federal statutory rate of 21%.

For the third quarter of 2023 and 2022, the tax rate including discrete items was 22.3% and 23.1%, respectively. In the third quarter of 2023, the Company recorded a discrete net tax benefit of $1 for other small items. In the third quarter of 2022, the Company recorded a discrete tax benefit of $2 for other small items.

For the nine months ended September 30, 2023 and 2022, the tax rate including discrete items was 25.0% and 21.8%, respectively. In the nine months ended September 30, 2023, the Company recorded a discrete net tax charge of $13 attributable to a $20 charge for a tax reserve established in France (See Note P) and a net tax charge of $1 for other small items, reduced by an $8 excess tax benefit for stock compensation. In the nine months ended September 30, 2022, the Company recorded a discrete tax benefit of $11 attributable to a $6 benefit to release a valuation allowance related to an interest carryforward tax attribute in the U.K. and a $5 excess benefit for stock compensation.

The tax provision was comprised of the following:


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Pre-tax income at estimated annual effective income tax rate before discrete items	$	55	$	24	$	162	$	111
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income	—		2		—		—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	—		—		1		—
Tax reserve (P)	—		—		20		—
Other discrete items	(1)		(2)		(7)		(11)
Provision for income taxes	$	54	$	24	$	176	$	100

H. Earnings Per Share and Common Stock

Basic earnings per share (“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 Howmet common shareholders was as follows (shares in millions in the table below):


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022


Net income attributable to common shareholders	$	188	$	80	$	529	$	358
Less: preferred stock dividends declared	1		1		2		2
Net income available to Howmet Aerospace common shareholders - basic and diluted	$	187	$	79	$	527	$	356



Average shares outstanding - basic	412		415		412		417
Effect of dilutive securities:
Stock and performance awards	3		5		5		5


Average shares outstanding - diluted	415		420		417		422

Common stock outstanding as of September 30, 2023 and 2022 was approximately 412 million and 414 million, respectively.

On August 18, 2021, the Company announced that its Board of Directors authorized a share repurchase program of up to $1,500 of the Company's outstanding common stock. After giving effect to the share repurchases made through September 30, 2023, approximately $797 Board authorization remains available.

The following table provides details for share repurchases made for the periods presented:


	Number of shares	Average price per share(1)		Total
Q1 2023 open market repurchase	576,629	$	43.36	$	25

Q2 2023 open market repurchase	2,246,294	$	44.52	$	100

Q3 2023 open market repurchase	506,800	$	49.32	$	25

2023 Share repurchases as of September 30, 2023	3,329,723	$	45.05	$	150

Q1 2022 open market repurchase	5,147,307	$	34.00	$	175

Q2 2022 open market repurchase	1,770,271	$	33.89	$	60

Q3 2022 open market repurchase	2,764,846	$	36.17	$	100

2022 Share repurchases as of September 30, 2022	9,682,424	$	34.60	$	335

(1)Excludes commissions cost.

Under the Company’s share repurchase program (the “Share Repurchase Program”), the Company may repurchase shares 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 is no stated expiration for the Share Repurchase Program. Under its Share Repurchase Program, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations. The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the Share Repurchase Program may be suspended, modified or terminated at any time without prior notice.

The approximately 3 million decrease in average shares outstanding (basic) for the third quarter of 2023 compared to the third quarter of 2022 was primarily due to the approximately 5 million shares repurchased between October 1, 2022 and September 30, 2023. As average shares outstanding are used in the calculation for both basic and diluted EPS, the full impact of share repurchases was not fully realized in EPS in the period of repurchase since share repurchases may occur at varying points during a period.

There were no shares relating to outstanding stock options excluded from the calculation of average shares outstanding - diluted for the third quarter and nine months ended September 30, 2023 and 2022.

Common stock dividends declared were $0.09 per share in the third quarter of 2023 (of which $0.04 per share was paid) and $0.17 per share in the nine months ended September 30, 2023 (of which $0.12 per share was paid). Common stock dividends declared were $0.06 per share in the third quarter of 2022 (of which $0.02 per share was paid) and $0.10 per share in the nine months ended September 30, 2022 (of which $0.06 per share was paid).

I. Accumulated Other Comprehensive Loss

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


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Pension and other postretirement benefits (E)
Balance at beginning of period	$	(644)	$	(767)	$	(653)	$	(799)
Other comprehensive income (loss):
Unrecognized net actuarial gain (loss) and prior service cost/benefit	7		(3)		7		13
Tax expense	(1)		—		(1)		(3)
Total Other comprehensive income (loss) before reclassifications, net of tax	6		(3)		6		10
Amortization of net actuarial loss and prior service cost(1)	5		13		17		38
Tax expense(2)	(1)		(3)		(4)		(9)
Total amount reclassified from Accumulated other comprehensive income, net of tax(3)	4		10		13		29
Total Other comprehensive income	10		7		19		39

Balance at end of period	$	(634)	$	(760)	$	(634)	$	(760)
Foreign currency translation
Balance at beginning of period	$	(1,155)	$	(1,207)	$	(1,193)	$	(1,062)


Other comprehensive loss(4)	(56)		(128)		(18)		(273)

Balance at end of period	$	(1,211)	$	(1,335)	$	(1,211)	$	(1,335)




Cash flow hedges
Balance at beginning of period	$	(9)	$	(18)	$	5	$	(2)

Other comprehensive income (loss):
Net change from periodic revaluations	1		(6)		(13)		(17)
Tax income	—		2		3		4
Total Other comprehensive income (loss) before reclassifications, net of tax	1		(4)		(10)		(13)
Net amount reclassified to earnings	4		9		—		(1)
Tax expense(2)	(1)		(3)		—		—
Total amount reclassified from Accumulated other comprehensive income (loss), net of tax(3)	3		6		—		(1)
Total Other comprehensive income (loss)	4		2		(10)		(14)
Balance at end of period	$	(5)	$	(16)	$	(5)	$	(16)

Accumulated other comprehensive loss	$	(1,850)	$	(2,111)	$	(1,850)	$	(2,111)

(1)These amounts were recorded in Restructuring and other charges (See Note D) and Other expense, net (See Note F) in the Statement of Consolidated Operations.

(2)These amounts were included in Provision for income taxes (See Note G) in the Statement of Consolidated Operations.

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

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

J. Receivables

Sale of Receivables Programs

The Company maintains an accounts receivables securitization arrangement through a wholly-owned special purpose entity (“SPE”). The net cash funding from the sale of accounts receivable through the SPE was neither a use of cash nor a source of cash for the third quarter of 2023 or 2022.

The accounts receivables securitization arrangement is one in which the Company, through an SPE, has a receivables purchase agreement (the “Receivables Purchase Agreement”) pursuant to which the SPE may sell certain receivables to financial institutions until the earlier of August 30, 2024 or a termination event. The Receivables Purchase Agreement 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 Receivables Purchase Agreement was amended on February 17, 2023 to update the reference rate and reduce the facility limit to $250 from $325, with a provision to increase the limit to $325.

The facility limit under the Receivables Purchase Agreement was $250 and $325 as of September 30, 2023 and December 31, 2022, respectively. A total of $250 was drawn as of both September 30, 2023 and December 31, 2022. As collateral against the sold receivables, the SPE maintains a certain level of unsold receivables, which were $164 and $190 as of September 30, 2023 and December 31, 2022, respectively.

The Company sold $439 and $1,158 of its receivables without recourse and received cash funding under this program during thethird quarter and nine months ended September 30, 2023, respectively, resulting in derecognition of the receivables from the Company’s Consolidated Balance Sheet. The Company sold $453 and $1,354 of its receivables without recourse and received cash funding under the program during the third quarter and nine months ended September 30, 2022, respectively, resulting in derecognition of the receivables from the Company’s Consolidated Balance Sheet. Costs associated with the sales of receivables are reflected in the Company’s Statement of Consolidated Operations for the periods in which the sales occur. Cash receipts from sold receivables under the Receivables Purchase Agreement 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, ~~2017. The rolling mill generated third-party sales~~2023, the Company sold $140 and $429, respectively, of ~~approximately $54~~certain customers’ receivables in exchange for cash ($134 was outstanding from customers as of September 30, 2023), the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. In the third quarter and ~~$128 for the nine-month periods~~nine months ended September 30, ~~2017~~2022, the Company sold $127 and ~~2016, respectively. At~~$350 of certain customers’ receivables in exchange for cash, the ~~time~~proceeds from which are presented in changes in receivables within operating activities in the Statement of ~~the divestiture, the rolling mill had approximately 312 employees.~~

F.Consolidated Cash Flows.

K. Inventories

   September 30,
2017    December 31,
2016
Finished goods
   $ 651    $ 625
Work-in-process
   1,332    1,144
Purchased raw materials
   386    408
Operating supplies
   84    76




Total inventories
   $ 2,453    $ 2,253

At
September 30, 2023 December 31, 2022
Finished goods $ 446 $ 490
Work-in-process 857 748
Purchased raw materials 378 317
Operating supplies 67 54
Total inventories $ 1,748 $ 1,609

As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, the portion of inventories valued on a last-in, first-out ~~(LIFO)~~(“LIFO”) basis was ~~$1,148~~$423 and ~~$947,~~$441, respectively. If valued on an average-cost basis, total inventories would have been ~~$449~~$237 and ~~$371~~$220 higher atas of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively.

~~G. Separation Transaction~~

L. Properties, Plants, and ~~Discontinued Operations~~

~~On November 1, 2016, Arconic completed~~Equipment, net
September 30, 2023 December 31, 2022
Land and land rights $ 86 $ 84
Structures 1,000 986
Machinery and equipment 4,002 3,941
5,088 5,011
Less: accumulated depreciation and amortization 2,993 2,858
2,095 2,153
Construction work-in-progress 201 179
Properties, plants, and equipment, net $ 2,296 $ 2,332

The proceeds from the ~~Separation Transaction. Alcoa Inc., which was re-named Arconic Inc., continued to own~~sale of the ~~Engineered Products and Solutions, the Global Rolled Products (except for the Warrick, IN rolling operations~~corporate headquarters in Pittsburgh, PA in June 2022 were $44, excluding $3 of transaction costs, and the ~~equity interest~~carrying value at the time of sale was $41. A loss of less than $1 was recorded in Restructuring and other charges in the ~~rolling mill at~~Statement of Consolidated Operations upon finalization of the joint venture in Saudi Arabia), and the Transportation and Construction Solutions segments. Alcoa Corporation included the Alumina and Primary Metals segments and the Warrick, IN rolling operations and equity interestsale in the ~~rolling mill at~~second quarter of 2022. The Company entered into a 12-year lease with the ~~joint venture~~purchaser for a portion of the property.

The Company incurred capital expenditures which remained unpaid as of September 30, 2023 and September 30, 2022 of $44 and $30, respectively, and will result in ~~Saudi Arabia,~~cash outflows within investing activities in the Statement of Consolidated Cash Flows in subsequent periods.

M. Leases

Operating lease cost includes short-term leases and variable lease payments and approximates cash paid. Operating lease cost was $16 in both ~~of which were formerly part of Arconic’s Global Rolled Products segment. The results of operations of Alcoa Corporation for~~ the third quarter of 2023 and 2022, and $48 and $46 in the nine months ended September 30, ~~2016 are presented as discontinued operations~~2023 and 2022, respectively.

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


	September 30, 2023		December 31, 2022
Right-of-use assets classified in Other noncurrent assets	$	112	$	111

Current portion of lease liabilities classified in Other current liabilities	$	32	$	32
Long-term portion of lease liabilities classified in Other noncurrent liabilities and deferred credits	83		83
Total lease liabilities	$	115	$	115

N. Debt


	September 30, 2023		December 31, 2022



5.125% Notes, due 2024(1)	$	705	$	1,081
6.875% Notes, due 2025(1)	600		600
5.900% Notes, due 2027	625		625
6.750% Bonds, due 2028	300		300
3.000% Notes, due 2029	700		700
5.950% Notes, due 2037	625		625
4.750% Iowa Finance Authority Loan, due 2042	250		250
Other(2)	(11)		(19)


Total long-term debt	$	3,794	$	4,162

(1)The 5.125% Notes, due 2024 (the “5.125% Notes”) are due in October 2024 and the 6.875% Notes, due 2025 are due in May 2025.

(2)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.

Public Debt

In the second quarter of 2022, the Company repurchased in the open market approximately $60 aggregate principal amount of its 5.125% Notes and paid approximately $62, including an early termination premium of approximately $2, which was recorded in Loss on debt redemption in the Statement of Consolidated Operations.

~~Arconic~~

In January 2023, the Company repurchased approximately $26 aggregate principal amount of its5.125% Notes through an open market repurchase (“OMR”). The OMR was settled at slightly less than par.

In March 2023, the Company completed the ~~Separation Transaction by distribution on November 1, 2016~~early partial redemption of ~~80.1%~~an additional $150 aggregate principal amount of its 5.125% Notes in accordance with the terms of the ~~outstanding common stock~~notes, and paid an aggregate of ~~Alcoa Corporation to the Company’s shareholders~~$155, including accrued interest and an early termination premium of ~~record as of the close of business on October 20, 2016. Arconic retained 19.9% of the Alcoa Corporation common stock (36,311,767 shares).~~

~~In February 2017, the Company sold 23,353,000 shares of Alcoa Corporation common stock at $38.03 per share, which resulted in cash proceeds of $888~~approximately $4 and $1, respectively, which were recorded in ~~Sale of investments within Investing Activities~~Interest expense, net, and Loss on debt redemption, respectively, in the ~~accompanying~~ Statement of Consolidated ~~Cash Flows and a gain of $351, which was recorded in Other income, net in the accompanying Statement of Consolidated~~ Operations.

~~In April and May 2017,~~

On September 28, 2023, the Company ~~acquired a portion~~completed an early partial redemption of its outstanding ~~notes held~~5.125% Notes in the aggregate principal amount of $200. Such 5.125% Notes were redeemed at par with cash on hand at an aggregate redemption price of approximately $205, including accrued interest of approximately $5.

Credit Facility

On July 27, 2023, the Company entered into the Second Amended and Restated Five-Year Revolving Credit Agreement (the “Credit Agreement”) by and among the Company, a syndicate of lenders and issuers named therein, Citibank, N.A., as administrative agent for the lenders and issuers, and JPMorgan Chase Bank, N.A., as syndication agent. The Credit Agreement amended and restated the Company’s Amended and Restated Five-Year Revolving Credit Agreement, dated as of September 28, 2021, as amended by Amendment No. 1 to Credit Agreement, dated as of February 13, 2023.

The Credit Agreement provides a $1,000 senior unsecured revolving credit facility (the “Credit Facility”) that matures on July 27, 2028, unless extended or earlier terminated in accordance with the provisions of the Credit Agreement. The Company may make two ~~investment banks (the “Investment Banks”~~one-year extension requests during the term of the Credit Facility, with any extension being subject to the lender consent requirements set forth in the Credit Agreement. Subject to the terms and conditions of the Credit Agreement, the Company may from time to time request increases in commitments under the Credit Facility, not to exceed $500 in aggregate principal amount, and may also request the issuance of letters of credit, subject to a letter of credit sublimit of $500 of the Credit Facility. Under the provisions of the Credit Agreement, based on Howmet’s current long-term debt ratings, Howmet pays an annual fee of 0.175% of the total commitment to maintain the Credit Facility.

The Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured, unsubordinated indebtedness of the Company. Borrowings under the Credit Facility may be denominated in U.S. dollars or Euros. Loans will bear interest at a base rate or, in the case of U.S. dollar-denominated loans, a rate equal to the Term Secured Overnight Financing Rate (“SOFR”) plus adjustment or, in ~~exchange for cash~~the case of euro-denominated loans, the Euro inter-bank offered rate (“EURIBOR”), plus, in each case, an applicable margin based on the credit ratings of the Company’s outstanding senior unsecured long-term debt. Based on the Company’s current long-term debt ratings, the applicable margin on base rate loans would be 0.325% per annum and the ~~Company’s remaining 12,958,767 Alcoa Corporation shares (valued at $35.91~~applicable margin on Term SOFR loans and EURIBOR loans would be 1.325% per ~~share) (the “Debt-for-Equity Exchange”) (See Note L). A gain of $167~~annum. The applicable margin is subject to change based on the ~~Debt-for-Equity Exchange~~Company’s long-term debt ratings. Loans may be prepaid without premium or penalty, subject to customary breakage costs.

The obligation of the Company to pay amounts outstanding under the Credit Facility may be accelerated upon the occurrence of an “Event of Default” as defined in the Credit Agreement. Such Events of Default include, among others, (a) non-payment of obligations; (b) breach of any representation or warranty in any material respect; (c) non-performance of covenants and obligations; (d) with respect to other indebtedness in a principal amount in excess of $100, a default thereunder that causes such indebtedness to become due prior to its stated maturity or a default in the payment at maturity of any principal of such indebtedness; (e) the bankruptcy or insolvency of the Company; and (f) a change in control of the Company.

The Credit Agreement contains covenants, including, among others, (a) limitations on the Company’s ability to incur liens securing indebtedness for borrowed money; (b) limitations on the Company’s ability to consummate a consolidation, merger or sale of all or substantially all of its assets; (c) limitations on the Company’s ability to change the nature of its business; and (d) a limitation requiring the ratio of Consolidated Net Debt to Consolidated EBITDA (each as defined in the Credit Agreement) as of the end of each fiscal quarter for the period of the four fiscal quarters most recently ended, to be less than or equal to 3.75 to 1.00.

There were no amounts outstanding under the Credit Agreement as of September 30, 2023 or December 31, 2022, and no amounts were borrowed during 2023 or 2022 under the Credit Agreement. As of September 30, 2023, the Company was ~~recorded~~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 ratio referenced above.

O. Fair Value of Financial Instruments

The carrying values of Cash and cash equivalents, restricted cash, derivatives, noncurrent receivables, and Short-term debt included in the Consolidated Balance Sheet approximate their fair value. The Company holds exchange-traded fixed income securities which are considered available-for-sale securities and are carried at fair value based on quoted market prices. The aforementioned securities are classified in Level 1 of the fair value hierarchy and are included in Other ~~income, net~~noncurrent assets in the ~~accompanying Statement of Consolidated Operations. The share exchange had no impact on the accompanying Statement of Consolidated Cash Flows.~~

~~The Company had recorded the retained interest as a cost method investment in Investment in common stock of Alcoa Corporation in the accompanying~~ Consolidated Balance Sheet. The fair value of ~~Arconic’s retained~~Long-term debt was based on quoted market prices for public debt and on interest rates that are currently available to Howmet 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 ~~Alcoa Corporation~~Level 2 of the fair value hierarchy.
September 30, 2023 December 31, 2022
Carrying
value Fair
value Carrying
value Fair
value
Long-term debt $ 3,794 $ 3,630 $ 4,162 $ 4,059

Restricted cash, which is included in Prepaid expenses and other current assets in the Consolidated Balance Sheet, was ~~$0 and $1,020 at~~$1 as of both September 30, ~~2017~~2023 and December 31, ~~2016, respectively.~~ 2022.

P. Contingencies and Commitments

Contingencies

The ~~fair value was based on~~following information supplements and, as applicable, updates the ~~closing stock price~~discussion of ~~Alcoa Corporation as of September 30, 2017,~~the contingencies and ~~December 31, 2016 multiplied by~~commitments in Note V to the ~~number of shares of Alcoa Corporation common stock owned by the Company at those respective dates. As of May 4, 2017, the Company no longer maintained a retained interest~~Consolidated Financial Statements in ~~Alcoa Corporation common stock.~~

~~In connection~~our Form 10-K, and should be read in conjunction with the Separation Transaction, on October 31, 2016, Arconic and Alcoa Corporation entered into a Toll Processing and Services Agreement (the “Toll Processing Agreement”) pursuant to which Arconic provides can body stock from its Tennessee operations to Alcoa Corporation’s Warrick, Indiana rolling mill. Aluminum for the can body stock is supplied by Alcoa Corporation. The Toll Processing Agreement expires on December 31, 2018, unless sooner terminated by the parties. Tolling revenues for the third quarter and nine months ended September 30, 2017, and accounts receivable at September 30, 2017, were not material to the consolidated results of operations and financial position, respectively.

~~As part of the Separation Transaction, Arconic had recorded a receivable~~complete descriptions provided in the accompanying Consolidated Balance Sheet as of December 31, 2016 for the net after-tax proceeds from Alcoa Corporation’s sale of the Yadkin Hydroelectric Project. The transaction closed in the first quarter of 2017 and the Company received proceeds of $238 in the first quarter of 2017 and the remaining $5 in the second quarter of 2017. The $243 proceeds were included in Other within Investing Activities in the Statement of Consolidated Cash Flows.

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

   Third quarter ended
September 30,
2016    Nine months ended
September 30,
2016
Sales
   $ 2,075    $ 6,028
Cost of goods sold (exclusive of expenses below)
   1,714    5,038
Selling, general administrative, and other expenses
   46    148
Research and development expenses
   8    26
Provision for depreciation, depletion and amortization
   180    532
Restructuring and other charges
   15    101
Interest expense
   7    18
Other income, net
   (106 )    (80 )




Income from discontinued operations before income taxes
   211    245
Provision for income taxes
   91    99




Income from discontinued operations after income taxes
   120    146
Less: Net income from discontinued operations attributable to noncontrolling interests
   20    58




Net income from discontinued operations
   $ 100    $ 88

The cash flows related to Alcoa Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows for all periods presented. The following table presents depreciation, depletion and amortization, restructuring and other charges, and purchases of property, plant and equipment of the discontinued operations related to Alcoa Corporation:

   Nine months ended
September 30,
   2016
Depreciation, depletion and amortization
   $ 532
Restructuring and other charges
   $ 101
Capital expenditures
   $ 258

~~H. Contingencies and Commitments~~

~~Contingencies~~

Form 10-K.

Environmental ~~Matters~~

~~Arconic~~Matters. Howmet 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~~operated 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 ~~$292 at~~$17 and $16 as of September 30, ~~2017~~2023 and ~~$308 at~~ December 31, ~~2016~~2022, respectively, and was recorded in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet (of which ~~$39 and $48, respectively,~~$6 was classified as a current ~~liability)~~liability for both periods), 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 ~~$10~~$2 and ~~$17~~less than $1 in the third quarter of 2023 and 2022, respectively, and $4 and $1 in the nine months ended September 30, ~~2017, respectively. This amount includes~~2023 and 2022, respectively, and included 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~~less than 1% ~~or less~~ of ~~cost~~Cost of goods sold.

~~The following discussion provides details regarding~~

Tax. In December 2013 and 2014, the ~~current status~~Company received audit assessment notices from the French Tax Authority (“FTA”) for the 2010 through 2012 tax years. In 2016, the Company appealed to the Committee of the ~~most significant reserve related to~~Abuse of Tax Law, where it received a ~~current Arconic site.~~

~~Massena West, NY—~~~~Arconic has an ongoing remediation project related~~favorable nonbinding decision. The FTA disagreed with the Committee of the Abuse of Tax Law’s opinion, and the Company appealed to the ~~Grasse River, which is adjacent~~Montreuil Administrative Court, where in 2020 the Company prevailed on the merits. The FTA appealed this decision to ~~Arconic’s Massena plant site. Many years ago, it was determined that sediments~~the Paris Administrative Court of Appeal in 2021. On March 31, 2023, the Company received an adverse decision from the Paris Administrative Court of Appeal. The Company estimates the assessment amount to be $19 (€18), including interest and ~~fish in~~penalties. In the ~~river contain varying levels~~second quarter of ~~polychlorinated biphenyls (PCBs). The project, which was selected by~~2023, the ~~U.S. Environmental Protection Agency (USEPA) in~~Company filed an appeal to the French Administrative Supreme Court.

As 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~~result of the ~~river and dredging PCB contaminated sediments in~~adverse decision from the ~~near-shore areas where total PCBs exceed one part per million. At September 30, 2017 and December 31, 2016,~~Paris Administrative Court of Appeal, the ~~reserve balance associated with this matter was $221 and $228, respectively. Arconic~~Company has concluded that it is ~~in the planning and design phase, which is expected~~no longer more likely than not to ~~be completed in 2018. In~~sustain its position. Through the third quarter of ~~2017,~~2023, the ~~New York State Department~~Company recorded an income tax reserve in Provision for income taxes in the Statement of ~~Environmental Conservation (NYSDEC) sent~~Consolidated Operations of $20 (€19), which includes estimated interest and penalties, for the 2010 through 2012 tax years, as well as the remaining tax years open for reassessment. In accordance with FTA dispute resolution practices, the Company is expecting that a ~~letter to USEPA requesting a revision~~payment to the ~~draft design. The USEPA has not responded~~FTA will be necessary in 2023. If an appeal to the ~~NYSDEC letter but~~French Administrative Supreme Court is successful, any payment would be refunded with interest.

Indemnified Matters. The Separation and Distribution Agreement, dated October 31, 2016, that the request has put on hold Arconic’s preparation of a final design and extended the expected submittal into 2018. Following submittal and USEPA approval of the final design, the actual remediation fieldwork is expected to commence and take approximately four years. The majority of the project funding is expected to be incurred between 2018 and 2022.

~~Tax~~

~~Pursuant to the Tax Matters Agreement~~Company entered into ~~between Arconic and~~with Alcoa Corporation in connection with ~~the Separation Transaction, Arconic shares responsibility with~~its separation from Alcoa Corporation, provides for cross-indemnities between the Company and Alcoa Corporation ~~has agreed~~for claims subject to ~~partially indemnify Arconic, with respect to the following matter.~~

As previously reported, in September 2010, following a corporate income tax audit covering the 2003 through 2005 tax years, an assessment was received as a result of Spain’s tax authorities disallowing certain interest deductions claimed by a Spanish consolidated tax group owned by the Company. An appeal of this assessment in Spain’s Central Tax Administrative Court by the Company was denied in October 2013. In December 2013, the Company filed an appeal of the assessment in Spain’s National Court. On January 16, 2017, Spain’s National Court issued a decision in favor of the Company.indemnification. The ~~Spanish Tax Administration did not file an appeal within the applicable period. Based on this decision~~Separation and ~~recent confirming correspondence from the Spanish Tax Administration, the matter is now closed. The Company will not be responsible for any assessment related to the 2003 through 2005 tax years.~~

In addition, following a corporate income tax audit of the same Spanish consolidated tax group for the 2006 through 2009 tax years, Spain’s tax authorities issued an assessment in July 2013 similarly disallowing certain interest deductions. In August 2013, Arconic filed an appeal of this second assessment in Spain’s Central Tax Administrative Court, which was denied in January 2015. Arconic filed another appeal of this second assessment in Spain’s National Court inDistribution Agreement, dated March ~~2015. Spain’s National Court has not yet rendered a decision related to the assessment received in July 2013. The assessment for the 2006 through 2009 tax years is $152 (€129), including interest.~~

Finally, the Spanish consolidated tax group had been under audit (beginning in September 2015) for the 2010 through 2013 tax years. In August 2017, the Company reached a settlement of this audit. The settlement amount is not material to the Company’s Consolidated Financial Statements. While the 2010 through 2013 tax years are closed to audit, it is possible31, 2020, that the Company ~~may receive similar assessments~~entered into with Arconic Corporation in connection with its separation from ~~Spain’s tax authorities~~Arconic Corporation, provides for ~~years subsequent~~cross-indemnities between the Company and Arconic Corporation for claims subject to ~~2013. The~~indemnification. Among other claims that are covered by these indemnities, Arconic Corporation indemnifies the Company ~~believes it has meritorious arguments to support its tax position~~(f/k/a Arconic Inc. and f/k/a Alcoa Inc.) for all ~~years and intends to vigorously litigate assessments through Spain’s court system. However, in~~potential liabilities associated with the event the Company is unsuccessful, a portion of the assessments may be offset with existing net operating losses available to the Spanish consolidated tax group, which would be shared between Arconic and Alcoa Corporation as provided for in the Tax Matters Agreement related to the Separation Transaction. At this time, the Company is unable to reasonably predict an outcome for this matter.

~~Reynobond PE~~

~~As previously reported, on June 13, 2017,~~fire that occurred at the Grenfell Tower in London, UK caught fire resulting in fatalities, injuries and damage. A French subsidiary of Arconic, Arconic Architectural Products SAS (AAP SAS), supplied a product, Reynobond PE, to its customer, a cladding system fabricator, which usedU.K. on June 14, 2017, including the ~~product~~following legal proceedings, as ~~one component of~~updated from the overall cladding system on Grenfell Tower. The fabricator supplied its portion of the cladding system to the façade installer, who then completed and installed the system under the direction of the general contractor. Neither Arconic nor AAP SAS was involved in the design or installation of the system used at the Grenfell Tower, nor did it have a role in any other aspect of the building’s refurbishment or original design. Regulatory investigations into the overall Grenfell Tower matter are being conducted, including a criminal investigation by the London Metro Police, a Public Inquiry by the British government and a consumer protection inquiry by a French public authority. AAP SAS has filed an application seeking core participant status in the Public Inquiry.

In August and September 2017, two purported class action complaints were filed against Arconic and certain officers, directors and/or other parties, alleging that, in light of the Grenfell Tower fire, certain Company filings with the Securities and Exchange Commission contained false and misleading disclosures and omissions in violation of the federal securities laws.

While the Company believes that these cases are without merit and intends to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters. Given the preliminary nature of these matters 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. The Board of Directors has also received letters, purportedly sentForm 10-K:

United Kingdom Litigation (various claims on behalf of ~~shareholders, reciting allegations similar~~survivors and estates of decedents). The substantial majority of these suits were settled pursuant to ~~those made~~the terms of a confidential settlement agreement and are now discontinued and closed. Those suits that have not been settled are stayed until the next case management conference, which will be heard on November 15, 2023.

Behrens et al. v. Arconic Inc. et al. (various claims on behalf of survivors and estates of decedents). On September 16, 2020, the court dismissed the U.S. case, determining that the U.K. is the appropriate jurisdiction for the case. On July 8, 2022, the Third Circuit Court of Appeals affirmed the dismissal, and, on October 7, 2022, the Third Circuit Court denied a petition for a rehearing. On January 5, 2023, the plaintiffs filed a petition for a writ of certiorari in the ~~federal~~U.S. Supreme Court, which the Supreme Court denied on February 21, 2023. This case is dismissed and closed.

Howard v. Arconic Inc. et al. (securities law related claims). On February 3, 2023, the court ~~lawsuits~~issued an order referring the case to mediation. In March 2023, following successive mediation sessions, the parties reached a settlement in principle that was subject to court approval and, ~~demanding~~among other things, is in the amount of $74 and is to be covered by insurance proceeds, in exchange for the dismissal of the action and a release of all claims against the defendants. The settlement is without admission of fault or wrongdoing by the defendants. Plaintiffs filed the Stipulation of Settlement, a motion to preliminarily approve the settlement, and related papers with the court on April 21, 2023. On May 2, 2023, the court issued an order granting plaintiffs’ motion to preliminarily approve the settlement. On August 9, 2023, the court granted final approval of the settlement. This case is dismissed and closed.

Raul v. Albaugh, et al.(derivative related claim). The Raul case had been stayed until the final resolution of the Howard case and the regulatory investigations in the U.K. Following the final approval of the settlement and closure of the Howard case on August 9, 2023, the court in the Raul case ordered the parties to file joint status reports on September 12, 2023 and September 20, 2023. On September 19, 2023 and October 19, 2023, the parties filed joint status reports stating that they are exploring whether a resolution of the action may be possible and that if a resolution is not reached, defendants are prepared to move the court for an order lifting the stay so that they may move to dismiss the action.

With respect to the regulatory investigations and the stockholder demands specified in the Form 10-K, there are no updates.

Lehman Brothers International (Europe) (“LBIE”) Legal Proceeding. On June 26, 2020, Lehman Brothers International (Europe) (“LBIE”) filed proceedings in the High Court of Justice, Business and Property Courts of England and Wales (the “Court”) against two subsidiaries of the Company, FR Acquisitions Corporation (Europe) Ltd and JFB Firth Rixson Inc. (collectively, the “Firth Rixson Entities”). The proceedings concerned two interest rate swap transactions that the ~~Board authorize~~Firth Rixson Entities entered into with LBIE in 2007 and 2008. As a result of the ruling issued by the Court in October 2022, the Company recorded $65 in Other current liabilities in the Consolidated Balance Sheet and took a pre-tax charge of this amount in Other expense, net in the Statement of Consolidated Operations in the third quarter of 2022. The Firth Rixson Entities appealed the Court’s ruling, and the appeal was to ~~initiate litigation against members~~be addressed at a hearing before the English Court of ~~management, the Board and others. The Board of Directors is reviewing these shareholder demand letters and considering the appropriate course of action. In addition, lawsuits are pending~~Appeal in ~~state court in New York and federal court in Pennsylvania, initiated, respectively, by another purported shareholder and by~~June 2023 (the “Litigation”). On June 15, 2023, the Company, ~~concerning~~ the ~~shareholder’s claimed right, which~~Firth Rixson Entities, and LBIE reached a full and final settlement of all claims arising out of the ~~Company contests,~~Litigation (the “Settlement”). The Settlement provides for a payment of $40 to ~~inspect~~be paid to LBIE in two installments: $15 paid in July 2023 and $25 payable in July 2024. As a result of the Settlement, $25 of the amount previously recorded for the Litigation as a pre-tax charge in Other expense, net was reversed as a credit to Other expense, net in the Company’s ~~books and records related to~~second quarter 2023 results. The hearing before the ~~Grenfell Tower fire and Reynobond PE.~~

~~Other~~

English Court of Appeal was accordingly vacated.

Other.In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against ~~Arconic,~~theCompany, including those pertaining to environmental, product liability, safety and health, employment, tax and ~~tax~~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

As of September 30, ~~2017, Arconic~~2023, Howmet had outstanding bank guarantees related to a European energy supply contract, 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 ~~2017~~2023 and ~~2026,~~2040, was ~~$25 at~~$20 as of September 30, ~~2017.~~

2023.

Pursuant to the Separation and Distribution Agreement, dated as of October 31, 2016, between ~~Arconic~~Howmet and Alcoa Corporation, ~~Arconic~~Howmet was required to provide ~~maximum potential future payment~~certain guarantees for Alcoa Corporation, ~~issued on behalf~~which had a fair value of ~~a third party~~$6 as of ~~$270 and $354 at~~both September 30, ~~2017~~2023 and December 31, ~~2016. These guarantees expire~~2022, and were included in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet. The remaining guarantee, for which the Company and Arconic Corporation are secondarily liable in the event of a payment default by Alcoa Corporation, relates to a long-term energy supply agreement that expires in 2047 at ~~various times between 2017~~an Alcoa Corporation facility. The Company currently views the risk of an Alcoa Corporation payment default on its obligations under the contract to be remote. The Company and ~~2024, and relate to project financing for Alcoa Corporation’s aluminum complex in Saudi Arabia. Furthermore,~~ Arconic ~~was~~Corporation are required to provide ~~guarantees~~a guarantee up to an estimated present value amount of approximately ~~$1,660 related to two long-term supply agreements for energy for Alcoa Corporation facilities. In accordance with the Separation~~$1,040 as of both September 30, 2023 and ~~Distribution Agreement, Arconic is only liable for these guaranteed amounts~~December 31, 2022 in the event of an Alcoa Corporation ~~payment~~ default. In December ~~2016, Arconic entered into~~2022, a ~~one-year claims purchase agreement~~surety bond with a ~~bank covering claims up to $245 related to the Saudi Arabian aluminum complex and two long-term energy supply agreements. Most~~limit of ~~the premium related~~$80 relating to this ~~claims purchase agreement is being paid~~guarantee was obtained by Alcoa Corporation. At September 30, 2017 and December 31, 2016, the combined fair value of the three required guarantees was $35 in both periods and was included in Other noncurrent liabilities and deferred creditsCorporation to protect Howmet’s obligation. This surety bond will be renewed on ~~the accompanying Consolidated Balance Sheet. See Note O for further information on the guarantee related to one of the long-term supply agreements for energy for~~ an annual basis by Alcoa ~~Corporation facility.~~

Arconic was also required to provide guarantees of $50 related to two Alcoa Corporation energy supply contracts. These guarantees expired in March 2017. Additionally, Arconic was required to provide guarantees of $53 related to certain Alcoa Corporation environmental liabilities. Notification of a change in guarantor to Alcoa Corporation was made to the appropriate environmental agencies and as such, Arconic no longer provides these guarantees.

Corporation.

Letters of Credit

~~Arconic~~

The Company has outstanding letters of credit primarily related to workers’ compensation, environmental obligations, and ~~environmental obligations.~~insurance obligations, among others. The total amount committed under these letters of credit, which automatically renew or expire at various dates, primarily in ~~2017,~~2023 and 2024, was ~~$127 at~~$116 as of September 30, ~~2017.~~

2023.

Pursuant to the Separation and Distribution ~~Agreement,~~Agreements between the Company and Arconic ~~was~~Corporation and between the Company and Alcoa Corporation, the Company is required to retain letters of credit of ~~$61~~$52 (which are included in the $116 in the above paragraph) that had previously been provided related to ~~both~~the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims ~~which~~that occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016. Arconic Corporation and Alcoa ~~Corporation’s~~Corporation workers’ compensation ~~claims~~ and ~~letter~~letters of credit fees paid by ~~Arconic~~the Company are ~~being~~proportionally billed to, and are ~~being fully~~ reimbursed by, Arconic Corporation and Alcoa ~~Corporation. Additionally, Arconic~~Corporation, respectively. Also, the Company was required to provide letters of credit ~~totaling $103~~ for certain ~~Alcoa~~Arconic Corporation ~~equipment leases~~environmental obligations and, ~~energy contracts. The entire $103~~as a result, the Company has $17 of outstanding letters of credit ~~were cancelled~~relating to such liabilities (which are also included in ~~2017 when Alcoa Corporation issued its own letters of credit to cover these obligations.~~

the $116 in the above paragraph).

Surety Bonds

~~Arconic~~

The Company has outstanding surety bonds primarily related to tax matters, contract performance, workers’ compensation, environmental-related matters, energy contracts, and customs duties. The total amount committed under these annual surety bonds, which automatically renew or expire at various dates, primarily in ~~2017,~~2023 and 2024, was ~~$128 at~~$42 as of September 30, ~~2017.~~

2023.

~~I. Segment Information~~

~~Arconic~~

Q. Subsequent Events

Management evaluated all activity of Howmet 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.

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

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto included in Part I, Item 1 (Financial Statements and Supplementary Data) of this Form 10-Q.

Overview

Howmet is a ~~producer of~~global leader in lightweight metals engineering and manufacturing. Howmet’s innovative, multi-material products, ~~including sheet, plate, precision castings, forgings, rolled rings, extrusions, wheels~~which include nickel, titanium, aluminum, and ~~fasteners. Arconic’s products~~cobalt, are used worldwide in ~~transportation (including~~the aerospace ~~automotive, truck, trailer, rail,~~(commercial and ~~shipping)~~defense), ~~packaging, building and construction, oil and gas, defense,~~commercial transportation, and industrial ~~applications. Arconic’s segments are organized by product on a worldwide basis.~~ and other markets.

In the ~~first~~third quarter of ~~2017,~~2023, the Company ~~changed~~derived approximately 49% of its ~~primary measure~~revenue from products sold to the commercial aerospace market which is substantially less than the 2019 annual rate of ~~segment performance~~approximately 60%. During the global COVID-19 pandemic and its impact on the commercial aerospace industry to date, there was a decrease in domestic and international air travel, which in turn adversely affected demand for narrow body and wide body aircraft. Domestic air travel has rebounded and exceeds 2019 levels. International air travel continues to recover and is approximately 90% of 2019 levels. We expect commercial aerospace growth to continue. The commercial wide body aircraft market is emerging but the mix of wide body to narrow body aircraft remains below 2019 levels, which is creating a shift in our product mix compared to 2019 conditions. In addition to the impact from ~~After-tax~~the pandemic, the timing and level of future aircraft builds by original equipment manufacturers are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

For additional information regarding the ongoing risks related to our business, see section Part I, Item 1A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Results of Operations

Earnings Summary:

Sales. Sales were $1,658 in the third quarter of 2023 compared to $1,433 in the third quarter of 2022 and $4,909 in the nine months ended September 30, 2023 compared to $4,150 in the nine months ended September 30, 2022. The increase of $225, or 16%, in the third quarter of 2023 was primarily due to higher sales from the commercial aerospace, defense aerospace, commercial transportation, and industrial and other markets, an increase in inflationary cost pass through of approximately $15, and favorable product pricing of $28. The increase of $759, or 18%, in the nine months ended September 30, 2023 was primarily due to higher sales from the commercial aerospace, defense aerospace, commercial transportation, and industrial and other markets, an increase in inflationary cost pass through of approximately $75, and favorable product pricing of $65. Product price increases are in excess of inflationary cost pass through to our customers.

Cost of goods sold (“COGS”). COGS as a percentage of Sales was 71.4% in the third quarter of 2023 compared to 73.7% in the third quarter of 2022 and 72.2% in the nine months ended September 30, 2023 compared to 72.1% in the nine months ended September 30, 2022. The decrease in the third quarter of 2023 was primarily due to total COGS charges of $1 in the third quarter of 2023 related to fires that occurred at a Fastening Systems plant in France in 2019 (the “France Plant Fire”) and a mechanical failure resulting in substantial heat and fire-related damage to equipment at the Forged Wheel’s cast house in Barberton, Ohio in the third quarter of 2022 (the “Barberton Cast House Incident”), compared to total COGS charges of $25 in the third quarter of 2022, related to the France Plant Fire, Barberton Cast House Incident, and a fire that occurred at a Forged Wheels plant in Barberton, Ohio in mid-February 2020 (the “Barberton Plant Fire”), as well as higher volumes and favorable product pricing, partially offset by increased net headcount in the Engine Products and Engineered Structures segments, in support of expected revenue increases. The increase in COGS in the nine months ended September 30, 2023 was attributable to inflationary costs and increased net headcount, primarily in the Engine Products, Fastening Systems, and Engineered Structures segments, in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs, as well as an increase of $9 of inventory impairment costs related to facilities closures, a supply chain disruption, and other items, costs primarily related to new collective bargaining agreements at two of our Engine Products and one of our Engineered Structures locations, and additional operating costs from production rate increases not realized due to production bottlenecks at a plant in the Engineered Structures segment. The increase in the nine months ended September 30, 2023 was partially offset by higher volumes and favorable product pricing, as well as total COGS net charges of $1 in the nine months ended September 30, 2023 related to the France Plant Fire and Barberton Cast House Incident compared to total COGS charges of $32 in the nine months ended September 30, 2022 related to the France Plant Fire, Barberton Cast House Incident, and the Barberton Plant Fire. The Company has submitted insurance claims related to these plant fires. During the fourth quarter of 2022, the Company settled the insurance claim related to the Barberton Plant Fire. The Company anticipates additional charges of up to $2 in the fourth quarter of 2023 for the France Plant Fire and Barberton Cast House Incident.

Selling, general administrative, and other expenses (“SG&A”). SG&A expenses were $87 in the third quarter of 2023 compared to $73 in the third quarter of 2022 and $250 in the nine months ended September 30, 2023 compared to $225 in the nine months ended September 30, 2022. The increase of $14, or 19%, in the third quarter of 2023 was primarily due to higher employment costs. The increase of $25, or 11%, in the nine months ended September 30, 2023 was primarily due to higher employment costs and legal fees related to the Lehman Brothers International (Europe) (“LBIE”) legal proceeding (See Note P to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference).

Research and development expenses (“R&D”). R&D expenses were $9 in the third quarter of 2023 compared to $7 in the third quarter of 2022, an increase of $2, or 29%. R&D expenses were $27 in the nine months ended September 30, 2023 compared to $23 in the nine months ended September 30, 2022, an increase of $4, or 17%. The increase in the third quarter and nine months ended September 30, 2023 was primarily due to higher spending on technology projects intended to support the aerospace business.

Restructuring and other charges. Restructuring and other charges were $4 in both the third quarter of 2023 and 2022. Restructuring and other charges were $8 in the nine months ended September 30, 2023 compared to $12 in the nine months ended September 30, 2022 or a decrease of $4. Restructuring and other charges for the third quarter of 2023 were primarily due to charges for a Canadian pension plan settlement of $2. Restructuring and other charges for the nine months ended September 30, 2023 were primarily due to charges for U.S. and Canadian pension plan settlements of $5 and exit related costs, including accelerated depreciation, of $3. Restructuring and other charges for the third quarter of 2022 were primarily due to charges for U.S. and Canadian pension plan settlements of $3. Restructuring and other charges for the nine months ended September 30, 2022 were primarily due to charges for U.S. pension plan settlements of $7 and exit related costs, including accelerated depreciation, of $6.

See Note D to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for additional detail.

Interest expense, net. Interest expense, net was $54 in the third quarter of 2023 compared to $57 in the third quarter of 2022 and $166 in the nine months ended September 30, 2023 compared to $172 in the nine months ended September 30, 2022. The decrease of $3, or 5%, in the third quarter of 2023 and $6, or 3%, in the nine months ended September 30, 2023 was primarily due to a reduced average level of long-term debt. As a result of the January 2023, March 2023, and September 2023 debt actions that collectively reduced the outstanding aggregate principal amount of the 5.125% Notes due October 2024 (the “5.125% Notes”) by $376 during the nine months ended September 30, 2023, Interest expense, net is expected to be reduced annually by $19.

See Note N to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for additional detail related to the Company’s debt.

Loss on debt redemption. Debt redemption or tender premiums include the cost to redeem or repurchase certain of the Company’s notes at a price which may be equal to the greater of the principal amount or the sum of the present values of the remaining scheduled payments, discounted using a defined treasury rate plus a spread, or a price based on the market price of its notes. Loss on debt redemption was less than $1 in both the third quarter of 2023 and 2022 and $1 in the nine months ended September 30, 2023 compared to $2 in the nine months ended September 30, 2022. The decrease of $1 in the nine months ended September 30, 2023 was due to the higher debt premiums paid on the early partial redemption of the 5.125% Notes in the second quarter of 2022.

See Note N to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for additional detail related to the Company’s debt.

Other expense, net. Other expense, net was $11 in the third quarter of 2023 compared to Other expense, net of $67 in the third quarter of 2022 and Other expense, net was $5 in the nine months ended September 30, 2023 compared to Other expense, net of $67 in the nine months ended September 30, 2022. The decrease of $56 in the third quarter of 2023 was primarily due to the $65 pre-tax charge taken in the third quarter of 2022 related to the LBIE legal proceeding (See Note P to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), and higher interest income ~~(ATOI)~~of $3, partially offset by an increase in foreign currency losses of $8 and higher non-service related net periodic benefit costs related to ~~Adjusted~~pension and other postretirement benefit plans of $3. The decrease of $62 in the nine months ended September 30, 2023 was primarily due to the LBIE legal proceeding settled in the second quarter of 2023 (See Note P to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), and higher interest income of $12, partially offset by the impacts of deferred compensation arrangements of $16, higher non-service related net periodic benefit costs related to pension and other postretirement benefit plans of $11, an increase in foreign currency losses of $10, and an increase from net realized and unrealized losses of $5, primarily due to losses on sales of receivables. Non-service related net periodic benefit costs related to defined benefit plans is expected to increase by approximately $15 for the full year 2023 versus 2022.

Provision for income taxes. The estimated annual effective tax rate, before discrete items, applied to ordinary income was 23.0% in both the third quarter and nine months ended September 30, 2023 compared to 24.3% in both the third quarter and nine months ended September 30, 2022. The tax rate including discrete items was 22.3% in the third quarter of 2023 compared to 23.1% in the third quarter of 2022. A discrete net tax benefit of $1 was recorded in the third quarter of 2023 compared to a discrete tax benefit of $2 in the third quarter of 2022. The tax rate including discrete items was 25.0% in the nine months ended September 30, 2023 compared to 21.8% in the nine months ended September 30, 2022. A discrete net tax charge of $13, which included the income tax reserve recorded as a result of the French tax litigation (See Note P to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), was recorded in the nine months ended September 30, 2023 compared to a discrete tax benefit of $11 in the nine months ended September 30, 2022. The estimated annual effective tax rate has decreased primarily due to increased domestic deductions, lower non-deductible expenses, and a decrease in apportioned state tax rates, partially offset by increased earnings ~~before interest,~~in high tax ~~depreciation~~rate jurisdictions.

See Note G to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for additional detail.

Net income. Net income was $188, or $0.45 per diluted share, in the third quarter of 2023 compared to $80, or $0.19 per diluted share, in the third quarter of 2022 and ~~amortization (“Adjusted EBITDA”).~~$529, or $1.27 per diluted share, in the nine months ended September 30, 2023 compared to $358, or $0.84 per diluted share, in the nine months ended September 30, 2022. The increase of $108 in the third quarter of 2023 was primarily due to higher volumes in the commercial aerospace, defense aerospace, commercial transportation, and industrial and other markets, as well as the $65 pre-tax charge taken in the third quarter of 2022 related to the LBIE legal proceeding (See Note P to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference) that did not recur in 2023, and favorable product pricing, partially offset by an increase in Provision for income taxes. The increase of $171 in the nine months ended September 30, 2023 was primarily due to higher volumes in the commercial aerospace, defense aerospace, commercial transportation, and industrial and other markets, as well as favorable product pricing, and the settlement of the LBIE legal proceeding (See Note P to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), partially offset by an increase in Provision for income taxes.

Segment Information

The Company’s operations consist of four worldwide reportable segments: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. Segment performance under ~~Arconic’s~~Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment Adjusted EBITDA. ~~Arconic’s~~Howmet’s definition of Segment Adjusted EBITDA ~~is net margin plus an add-back for~~(Earnings before interest, taxes, depreciation, and amortization and special items. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.

Items required to reconcile Combined segment adjusted EBITDA to Net income attributable to Arconic include: the Provision for depreciation and amortization; Restructuring and other charges; the impact of LIFO inventory accounting; metal price lag (the timing difference created when the average price of metal sold differs from the average cost of the metal when purchased by the respective segment — generally, when the price of metal increases, metal price lag is favorable, and when the price of metal decreases, metal price lag is unfavorable); corporate expense (general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities and corporate research and development expenses); other items, including intersegment profit eliminations; Other income, net; Interest expense; Income tax expense; and the results of discontinued operations. Prior period information has been recast to conform to current year presentation.

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

   Engineered       Transportation
   Products and    Global Rolled    and Construction    Combined
   Solutions    Products    Solutions    Segment
Third quarter ended

September 30, 2017

Sales:

Third-party sales
   $ 1,476    $ 1,234    $ 517    $ 3,227
Intersegment sales
   —      36    —      36








Total sales
   $ 1,476    $ 1,270    $ 517    $ 3,263








Profit and loss:

Depreciation and amortization
   68    52    13    133
Adjusted EBITDA
   312    140    83    535








Third quarter ended

September 30, 2016

Sales:

Third-party sales
   $ 1,406    $ 1,285    $ 450    $ 3,141
Intersegment sales
   —      30    —      30








Total sales
   $ 1,406    $ 1,315    $ 450    $ 3,171








Profit and loss:

Depreciation and amortization
   63    52    12    127
Adjusted EBITDA
   296    143    76    515

   Engineered       Transportation
   Products and    Global Rolled    and Construction    Combined
   Solutions    Products    Solutions    Segment
Nine months ended

September 30, 2017

Sales:

Third-party sales
   $ 4,445    $ 3,751    $ 1,467    $ 9,663
Intersegment sales
   —      107    —      107








Total sales
   $ 4,445    $ 3,858    $ 1,467    $ 9,770








Profit and loss:

Depreciation and amortization
   198    153    37    388
Adjusted EBITDA
   928    475    237    1,640








Nine months ended

September 30, 2016

Sales:

Third-party sales
   $ 4,320    $ 3,785    $ 1,346    $ 9,451
Intersegment sales
   —      88    —      88








Total sales
   $ 4,320    $ 3,873    $ 1,346    $ 9,539








Profit and loss:

Depreciation and amortization
   190    152    35    377
Adjusted EBITDA
   930    461    216    1,607

~~The following table reconciles Combined segment adjusted EBITDA to Net income attributable to Arconic:~~

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Combined segment adjusted EBITDA
   $ 535    $ 515    $ 1,640    $ 1,607
Unallocated amounts:

Depreciation and amortization
   (140 )    (136 )    (410 )    (402 )
Restructuring and other charges
   (19 )    (3 )    (118 )    (33 )
Impact of LIFO
   (48 )    (1 )    (78 )    (26 )
Metal price lag
   2    4    43    10
Corporate expense
   (42 )    (113 )    (224 )    (304 )
Other
   (17 )    (29 )    (56 )    (62 )








Operating income
   $ 271    $ 237    $ 797    $ 790
Other income, net
   1    11    526    40
Interest expense
   (100 )    (126 )    (398 )    (371 )








Income from continuing operations before income taxes
   $ 172    $ 122    $ 925    $ 459
Provision for income taxes
   (53 )    (56 )    (272 )    (230 )
Discontinued operations
   —      100    —      88








Net income attributable to Arconic
   $ 119    $ 166    $ 653    $ 317

~~J. Earnings Per Share~~

Basic earnings per share (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 number of shares and per share amounts for all periods presented below have been updated to reflect the Reverse Stock Split (see Note A).~~

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

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Income from continuing operations after income taxes
   $ 119    $ 66    $ 653    $ 229
Less: Preferred stock dividends declared
   (18 )    (18 )    (53 )    (52 )








Income from continuing operations available to Arconic common shareholders
   101    48    600    177
Income from discontinued operations after income taxes and noncontrolling interests
   —      100    —      88








Net income available to Arconic common shareholders - basic
   101    148    600    265
Add: Interest expense related to convertible notes
   2    2    7    —
Add: Dividends related to mandatory convertible preferred stock
   —      —      50    —








Net income available to Arconic common shareholders - diluted
   $ 103    $ 150    $ 657    $ 265








Weighted average shares outstanding - basic
   442    438    441    438
Effect of dilutive securities:

Stock options
   1    1    2    1
Stock and performance awards
   5    5    5    4
Mandatory convertible preferred stock
   —      —      39    —
Convertible notes
   14    9    14    —








Weighted average shares outstanding - diluted
   462    453    501    443

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

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Mandatory convertible preferred stock
   39    26    —      26
Convertible notes
   —      —      —      9

Also, options to purchase 3 million shares of common stock at a weighted average exercise price of $33.33 and options to purchase 8 million shares of common stock at a weighted average exercise price of $38.16 were outstanding as of September 30, 2017 and 2016, respectively, but were not included in the computation of diluted EPS because their effect was anti-dilutive as the exercise price of the options was greater than the average market price of Arconic’s common stock.

~~K. Receivables~~

Arconic has an arrangement with three financial institutions to sell certain customer receivables without recourse on a revolving basis. The sale of such receivables is completed using a bankruptcy remote special purpose entity, which is a consolidated subsidiary of Arconic. This arrangement provides for minimum funding of $200 up to a maximum of $400 for receivables sold. On March 30, 2012, Arconic initially sold $304 of customer receivables in exchange for $50 cash and $254 of deferred purchase program under the arrangement. Arconic has received additional net cash funding of $300 ($2,208 in draws and $1,908 in repayments) since the program’s inception, including net cash draws totaling $0 ($450 in draws and $450 in repayments) in the nine months ended September 30, 2017.

As of September 30, 2017, and December 31, 2016, the deferred purchase program receivable was $238 and $83, 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 net change in the deferred purchase program receivable was reflected in the (Increase) in receivables line item on the accompanying Statement of Consolidated Cash Flows. This activity is reflected as an operating cash flow because the related customer receivables are the result of an operating activity with an insignificant, short-term interest rate risk.

The gross amount of receivables sold and total cash collected under this program since its inception was $34,004 and $33,416, respectively. Arconic services the customer receivables for the financial institutions at market rates; therefore, no servicing asset or liability was recorded.

~~L. Debt~~

   September 30,
2017    December 31,
2016
6.50% Bonds, due 2018
   $ —      $ 250
6.75% Notes, due 2018
   —      750
5.72% Notes, due 2019
   500    750
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**
   (27 )    (32 )




Total debt
   6,803    8,048
Less: amount due within one year
   1    4




Total long-term debt
   $ 6,802    $ 8,044

*	~~Amount was assumed in conjunction with the July 2015 acquisition of RTI International Metals, Inc.~~

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, adjustments to the carrying value of long-term debt related to an interest rate swap contract accounted for as a fair value hedge, and unamortized debt issuance costs.

~~Public Debt~~ – In April 2017, the Company announced three separate cash tender offers by the Investment Banks for the purchase of the Company’s 6.50% Bonds due 2018 (the “6.50% Bonds”), 6.75% Notes due 2018 (the “6.75% Notes”), and 5.72% Notes due 2019 (the “5.72% Notes”), up to a maximum purchase amount of $1,000 aggregate principal amount of notes, subject to certain conditions.

The Investment Banks purchased notes totaling $805 aggregate principal amount, including $150 aggregate principal amount of 6.50% Bonds, $405 aggregate principal amount of 6.75% Notes, and $250 aggregate principal amount of $5.72% Notes.

During the second quarter of 2017, the Company agreed to acquire the notes from the Investment Banks for $409 in cash plus its remaining investment in Alcoa Corporation common stock (12,958,767 shares valued at $35.91 per share) for total consideration of $874 including accrued and unpaid interest. The Company recorded a charge of $58 ($27 in cash) primarily for the premium for the early redemption of the notes, a benefit of $8 for the proceeds of a related interest rate swap agreement, and a charge of $2 for legal fees associated with the transaction in Interest expense, and recorded a gain of $167 in Other income, net in the accompanying Statement of Consolidated Operations for the nine months ended September 30, 2017 for the Debt-for-Equity Exchange.

On June 19, 2017, the Company completed the early redemption of its remaining outstanding 6.50% Bonds, with aggregate principal amount of $100, and its remaining outstanding 6.75% Notes, with aggregate principal amount of $345, for $479 in cash including accrued and unpaid interest. As a result of the early redemption of the 6.50% Bonds and 6.75% Notes, the Company recorded a charge of $24 in Interest expense in the accompanying Statement of Consolidated Operations for the nine months ended September 30, 2017 for the premium paid for the early redemption of these notes in excess of their carrying value.

~~M. Pension and Other Postretirement Benefits~~

~~The components of net periodic benefit cost were as follows:~~

   Third quarter ended
September 30,    Nine months ended
September 30,
Pension benefits
   2017    2016    2017    2016
Service cost
   $ 22    $ 43    $ 67    $ 124
Interest cost
   59    114    175    358
Expected return on plan assets
   (82 )    (187 )    (248 )    (558 )
Recognized net actuarial loss
   55    104    165    308
Amortization of prior service cost (benefits)
   1    4    4    12
Settlements
   —      13    —      15
Special termination benefits
   —      —      —      1








Net periodic benefit cost*
   $ 55    $ 91    $ 163    $ 260
Discontinued operations
   —      41    —      114








Net amount recognized in Statement of Consolidated Operations
   $ 55    $ 50    $ 163    $ 146








Other postretirement benefits

Service cost
   $ 2    $ 3    $ 6    $ 10
Interest cost
   7    16    22    53
Recognized net actuarial loss
   2    8    4    19
Amortization of prior service cost (benefits)
   (2 )    (6 )    (6 )    (19 )
Special termination benefits
   —      —      —      —








Net periodic benefit cost*
   $ 9    $ 21    $ 26    $ 63
Discontinued operations
   —      12    —      37








Net amount recognized in Statement of Consolidated Operations
   $ 9    $ 9    $ 26    $ 26

Components of Net periodic benefit cost were included within Cost of goods sold, Selling, general administrative, and other expenses, Research and development expenses as well as Restructuring and other charges in the Statement of Consolidated Operations.

In conjunction with the Separation Transaction, the Pension Benefit Guaranty Corporation approved management’s plan to separate the Alcoa Inc. pension plans between Arconic Inc. and Alcoa Corporation. The plan stipulates that Arconic will make cash contributions over a period of 30 months to its two largest pension plans. Payments are expected to be made in three increments of no less than $50 each ($150 total) over this 30-month period. The first payment of $50 was made on April 18, 2017.

~~N. Financial Instruments~~

~~Fair Value~~

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

~~Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.~~

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

~~Level 3 - Inputs that are both significant to the fair value measurement and unobservable.~~

~~The carrying values and fair values of Arconic’s financial instruments were as follows:~~

   September 30, 2017    December 31, 2016
   Carrying
value    Fair
value    Carrying
value    Fair
value
Cash and cash equivalents
   $ 1,815    1,815    $ 1,863    $ 1,863
Restricted cash
   5    5    15    15
Derivatives - current asset
   41    41    14    14
Noncurrent receivables
   18    18    21    21
Derivatives - noncurrent asset
   24    24    10    10
Available-for-sale securities
   106    106    102    102
Investment in common stock of Alcoa Corporation
   —      —      1,020    1,020
Short-term borrowings
   54    54    36    36
Derivatives - current liability
   31    31    5    5
Long-term debt due within one year
   1    1    4    4
Derivatives - noncurrent liability
   11    11    3    3
Contingent payment related to an acquisition
   81    81    78    78
Long-term debt, less amount due within one year
   6,802    7,440    8,044    8,519

~~The following methods were used to estimate the fair values of financial instruments:~~

~~Cash and cash equivalents, Restricted cash, and Short-term borrowings.~~The carrying amounts approximate fair value because of the short maturity of the instruments. The fair value amounts for Cash and cash equivalents and Restricted cash were classified in Level 1, and Short-term borrowings were classified in Level 2.

~~Derivatives.~~The fair value of derivative contracts classified as Level 1 was based on identical unrestricted assets and liabilities. The fair value of derivative contracts classified as Level 2 was based on inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates).

~~Noncurrent receivables.~~~~The fair value of noncurrent receivables was based on anticipated cash flows, which approximates carrying value, and was classified in Level 2 of the fair value hierarchy.~~

~~Available-for-sale securities.~~The fair value of such securities was based on quoted market prices. These financial instruments consist of exchange-traded fixed income and equity securities, which are carried at fair value and were classified in Level 1 of the fair value hierarchy.

~~Investment in common stock of Alcoa Corporation.~~The fair value was based on the closing stock price of Alcoa Corporation on the New York Stock Exchange at December 31, 2016 multiplied by the number of shares of Alcoa Corporation common stock owned by Arconic at that date. This investment was classified in Level 1 of the fair value hierarchy. The Company disposed of its remaining investment in Alcoa Corporation common stock in the second quarter of 2017.

~~Contingent payment related to an acquisition.~~ ~~The fair value was based on the net present value of expected future cash flows and was classified in Level 3 of the fair value hierarchy.~~

~~Long-term debt due within one year and Long-term debt, less amount due within one year.~~ The fair value was based on quoted market prices for public debt and on interest rates that are currently available to Arconic 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.

~~O. Subsequent Events~~

On October 2, 2017, all outstanding 24,975,978 depositary shares (each depositary share representing a 1/10th interest in a share of the mandatory convertible preferred stock) were converted at a rate of 1.56996 into 39,211,286 common shares; 24,022 depositary shares were previously tendered for early conversion into 31,428 shares of Arconic common stock. No gain or loss was recognized associated with this equity transaction.

On October 13, 2017, Alcoa Corporation announced that it had terminated an electricity contract with Luminant Generation Company LLC, effective as of October 1, 2017, that was tied to its Rockdale Operations in Texas. Pursuant to the Separation and Distribution Agreement between Arconic and Alcoa Corporation, Arconic was required to provide a guarantee up to an estimated present value amount of approximately $485 related to this electricity contract for Alcoa Corporation’s facility in the event of an Alcoa Corporation payment default. As a result of the termination of the electricity contract by Alcoa Corporation, Arconic expects to record noncash non-operating income in the fourth quarter of 2017 of approximately $25 ($16 after-tax) associated with the reversal of the fair value of the guarantee which was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet.

Report of Independent Registered Public Accounting Firm*

~~To the Shareholders and Board of Directors of Arconic Inc.~~

We have reviewed the accompanying consolidated balance sheet of Arconic Inc. and its subsidiaries (Arconic) as of September 30, 2017, and the related statements of consolidated operations, consolidated comprehensive income (loss), and changes in consolidated equity for the three-month and nine-month periods ended September 30, 2017 and 2016 and the statement of consolidated cash flows for the nine-month periods ended September 30, 2017 and 2016. These consolidated interim financial statements are the responsibility of Arconic’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 Public Company Accounting Oversight Board (United States), 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.

Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related statements of consolidated operations, consolidated comprehensive loss, changes in consolidated equity, and consolidated cash flows for the year then ended (not presented herein), and in our report dated February 28, 2017 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

~~/s/ PricewaterhouseCoopers LLP~~

~~PricewaterhouseCoopers LLP~~

~~Pittsburgh, Pennsylvania~~

~~November 6, 2017~~

*	This report should not be considered a “report” within the meanings of Sections 7 and 11 of the Securities Act of 1933, and the independent registered public accounting firm’s liability under Section 11 does not extend to it.

~~Item~~

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

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

~~Overview~~

~~Our Business~~

Arconic (“Arconic” or the “Company”) is a global leader in lightweight metals engineering and manufacturing. Arconic’s innovative, multi-material products, which include aluminum, titanium, and nickel alloys, are used worldwide in aerospace, automotive, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications.

The separation of Alcoa Inc. into two standalone, publicly-traded companies, Arconic Inc. (the new name for Alcoa Inc.) and Alcoa Corporation, became effective on November 1, 2016 (the “Separation Transaction”). The financial results of Alcoa Corporation for all periods prior to the 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 the third quarter and nine months ended September 30, 2016. The cash flows, equity and comprehensive income related to Alcoa Corporation have not been segregated and are included in the accompanying Statement of Consolidated Cash Flows, Statement of Changes in Consolidated Equity and Statement of Consolidated Comprehensive Income, respectively, for the third quarter and nine months ended September 30, 2016.

~~Results of Operations~~

~~Earnings Summary:~~

~~Sales.~~Sales increased $98, or 3%, and $262, or 3%, in the third quarter and nine months ended September 30, 2017, respectively, compared to the corresponding periods in 2016. The increase in both periods was the result of strong volume growth in our Engineered Products and Solutions and Transportation and Construction Solutions segments and higher aluminum pricing, partially offset by the planned ramp down and Toll Processing and Services Agreement (the “Toll Processing Agreement”) relating to the Company’s North America packaging business in Tennessee in the Global Rolled Products segment, as well as unfavorable product pricing in both the Engineered Products and Solutions and Global Rolled Products segments. Pursuant to the Toll Processing Agreement that Arconic entered into with Alcoa Corporation on October 31, 2016 in connection with the Separation Transaction. Arconic provides can body stock to Alcoa Corporation using aluminum supplied by Alcoa Corporation, resulting in the absence of metal sales in the 2017 periods compared to the corresponding periods in 2016.

~~Cost of goods sold (COGS).~~ COGS as a percentage of Sales was 81.1% and 79.5% in the third quarter and nine months ended September 30, 2017, respectively, compared to 79.8% and 78.9% in the third quarter and nine months ended September 30, 2016, respectively. The increase in both periods was primarily attributable to cost increases, including higher aluminum prices and ramp-up costs related to new commercial aerospace engines, and a lower margin product mix, partially offset by net cost savings.

~~Selling, general administrative, and other expenses (SG&A).~~ SG&A expenses decreased $74 in the third quarter of 2017 compared to the third quarter of 2016 as a result of expenses related to the Separation Transaction of $54 in the prior year period and ongoing overhead cost reduction efforts (see Note D), partially offset by external legal and other advisory costs related to Grenfell Tower of $7 in the current year period

SG&A expenses decreased $93 in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 as a result of expenses related to the Separation Transaction of $117 in the prior year period compared to $18 in the current year period, as well as ongoing overhead cost reduction efforts (see Note D), partially offset by proxy, advisory and governance-related costs of $58 and external legal and other advisory costs related to Grenfell Tower of $7 in the current year period.

~~Restructuring and other charges.~~ Restructuring and other charges were $19 ($13 after-tax) in the third quarter of 2017 compared to $3 ($2 after-tax) in the third quarter of 2016. Restructuring and other charges were $118 ($99 after-tax) in the nine months ended September 30, 2017 compared to $33 ($22 after-tax) in the nine months ended September 30, 2016.

In the third quarter of 2017, Arconic recorded Restructuring and other charges of $19 ($13 after-tax), which included $11 ($8 after-tax) for layoff costs related to cost reduction initiatives including the separation of 124 employees (111 in the Engineered Products and Solutions segment, 12 in Corporate and 1 in the Global Rolled Products segment); and a net charge of $8 ($5 after-tax) for other miscellaneous items.

In the first nine months of 2017, Arconic recorded Restructuring and other charges of $118 ($99 after-tax), which included $59 ($40 after-tax) for layoff costs related to cost reduction initiatives including the separation of approximately 800 employees (350 in the Engineered Products and Solutions segment, 243 in the Global Rolled Products segment, 133 in the Transportation and Construction Solutions segment and 74 in Corporate); a charge of $60 ($60 after-tax) related to the sale of the Fusina, Italy rolling mill; a net benefit of $6 ($4 after-tax), for the reversal of forfeited executive stock compensation of $13, partially offset by a charge of $7 for the related severance; a net charge of $7 ($5 after-tax) for other miscellaneous items; and a favorable benefit of $2 ($2 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

In the third quarter of 2016, Arconic recorded Restructuring and other charges of $3 ($2 after-tax), which included $4 ($2 after-tax) for layoff costs related to cost reduction initiatives and the separation of Alcoa Inc. (see Note G), including the separation of approximately 70 employees (60 in the Engineered Products and Solutions segment and 10 in Corporate); a net charge of $7 ($5 after-tax) for other miscellaneous items; and a favorable benefit of $8 ($5 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

In the first nine months of 2016, Arconic recorded Restructuring and other charges of $33 ($22 after-tax), which included $34 ($21 after-tax) for layoff costs related to cost reduction initiatives and the separation of Alcoa Inc. (see Note G), including the separation of approximately 1,140 employees (860 in the Engineered Products and Solutions segment, 30 in the Global Rolled Products segment, 240 in the Transportation and Construction Solutions segment, and 10 in Corporate); a net charge of $14 ($9 after-tax) for other miscellaneous items; and a net favorable benefit of $15 ($8 after-tax) for the reversal of a number of small layoff reserves related to prior periods.

~~Arconic does not include Restructuring and other charges in the results of its reportable segments. The pretax impact of such charges to segment results would have been as follows:~~

As part of its ongoing restructuring in Brazil, the Company anticipates recognizing a restructuring-related charge of approximately $30 - $50 in the fourth quarter of 2017 related to its extrusions business which is part of the Transportation and Construction Solutions segment. The charge relates to the noncash impairment of the net book value of the business.

~~Interest expense.~~ Interest expense decreased $26, or 21%, in the third quarter of 2017 compared to the third quarter of 2016 due to lower outstanding debt. During the second quarter of 2017, Arconic redeemed all of the Company’s 6.50% Bonds due 2018 and 6.75% Notes due 2018, and a portion of the Company’s 5.72% Notes due 2019 (see Note L) in advance of the expiration date. Interest expense increased $27, or 7%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 due to $76 of premiums paid for the early redemption noted above, partially offset by lower interest expense due to lower outstanding debt.

~~Other income, net.~~ Other income, net decreased $10 in the third quarter of 2017 compared to the third quarter of 2016, primarily due to the favorable post-closing adjustment related to the November 2014 acquisition of Firth Rixson that was recorded in the third quarter of 2016.

Other income, net increased $486 in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to the gain on the sale of a portion of Arconic’s investment in Alcoa Corporation common stock of $351 and the gain of $167 on the debt-for-equity exchange with two investment banks (the “Investment Banks”) of the remaining portion of Arconic’s retained interest in Alcoa Corporation common stock for a portion of the Company’s outstanding notes held by the Investment Banks (the “Debt-for-Equity Exchange”) (See Note G).

~~Provision for income taxes.~~ For the nine months ended September 30, 2017, Arconic’s estimated annual effective tax rate, before discrete items, was 28.5%. This rate is lower than the federal statutory rate of 35% due to foreign income taxed in lower rate jurisdictions, a tax basis in excess of book basis in Alcoa Corporation common stock sold (see Note G), and a nontaxable gain on the Debt-for-Equity Exchange (see Note L). These beneficial items were partially offset by a loss on the sale of a rolling mill in Fusina, Italy for which no net tax benefit was recognized (see Note E) and valuation allowances recorded against U.S. foreign tax credits.

For the nine months ended September 30, 2016, Arconic’s estimated annual effective tax rate, before discrete items, was 56.0%. This rate is higher than the federal statutory rate of 35% primarily due to book basis in excess of tax basis of company-owned life insurance contracts that were sold during 2016, and separation expenses for which no tax benefit was recognized, partially offset by foreign income taxed in lower rate jurisdictions.

For the third quarter ended September 30, 2017 and September 30, 2016, the tax rate including discrete items was 30.8% and 45.9% respectively. Discrete items of $2 were recorded in the quarter ended September 30, 2017 and primarily relate to the tax effects of expired stock compensation partially offset by other insignificant adjustments. Discrete items of $7 were recorded in the quarter ended September 30, 2016 and primarily relate to Arconic’s share of a valuation allowance recorded by one of our joint ventures and as-filed adjustments related to the Company’s 2015 U.S. tax return, partially offset by other discrete benefits.

~~The tax provisions for the third quarter and nine months ended September 30, 2017 and September 30, 2016 were comprised of the following:~~

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Pretax income at estimated annual effective income tax rate before discrete items
   $ 49    $ 69    $ 264    $ 257
Catch-up adjustment to revalue previous quarter pre-tax income at current estimated annual effective tax rate
   1    10    —
—

Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized
   1    (30 )    5    (37 )
Other discrete items
   2    7    3    10








Provision for income taxes
   $ 53    $ 56    $ 272    $ 230

~~Income from continuing operations after income taxes.~~ Income from continuing operations after income taxes was $119 for the third quarter of 2017, or $0.22 per diluted share, compared to income from continuing operations after income taxes of $66 for the third quarter of 2016, or $0.11 per diluted share. The increase of $53 was primarily attributable to higher volumes and net cost savings across the businesses and the absence of expenses associated with the Separation Transaction, partially offset by higher LIFO inventory expense associated with higher aluminum prices, unfavorable product pricing, primarily in aerospace, and lower-margin product mix.

Income from continuing operations after income taxes was $653 for the nine months ended September 30, 2017, or $1.31 per diluted share, compared to income from continuing operations after income taxes of $229 for the nine months ended September 30, 2016, or $0.40 per diluted share. The increase of $424 was primarily attributable to a gain of $351 on the sale of a portion of Arconic’s investment in Alcoa Corporation common stock and a gain of $167 on the Debt-for-Equity Exchange; net cost savings; and higher volumes across all segments; partially offset by higher LIFO inventory expense associated with higher aluminum prices; the loss on sale of the Fusina, Italy rolling mill of $60; unfavorable product pricing, primarily in aerospace; and lower-margin product mix.

~~Discontinued operations.~~In the third quarter of 2016, net income attributable to Arconic included income of $120 from discontinued operations after income taxes and $20 from discontinued operations attributable to noncontrolling interests. In the nine months ended September 30, 2016, net income attributable to Arconic included income of $146 from discontinued operations after income taxes and $58 from discontinued operations attributable to noncontrolling interests.

~~Segment Information~~

In the first quarter of 2017, the Company changed its primary measure of segment performance from After-tax operating income (ATOI) to Adjusted earnings before interest, tax, depreciation, and amortization (“Adjusted EBITDA”). Segment performance under Arconic’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Adjusted EBITDA. Arconic’s definition of Adjusted EBITDAamortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. ~~The~~Special items, including Restructuring and other charges, are excluded from net margin and Segment Adjusted EBITDA. Segment Adjusted EBITDA ~~presented~~ may not be comparable to similarly titled measures of other companies.

~~Engineered~~ Differences between the total segment and consolidated totals are in Corporate (See Note C to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a description of each segment).

The Company has aligned its operations consistent with how the Chief Executive Officer assesses operating performance and allocates capital.

Engine Products ~~and Solutions~~

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Third-party sales
   $ 1,476    $ 1,406    $ 4,445    $ 4,320
Adjusted EBITDA
   $ 312    $ 296    $ 928    $ 930

Third quarter ended Nine months ended
September 30, September 30,
2023 2022 2023 2022
Third-party sales $ 798 $ 683 $ 2,414 $ 1,966
Segment Adjusted EBITDA 219 186 654 538
Segment Adjusted EBITDA Margin 27.4 % 27.2 % 27.1 % 27.4 %

Third-party sales for the ~~Engineered~~Engine Products ~~and Solutions~~ segment increased 5%$115, or 17%, in the third quarter of ~~2017~~2023 compared to the third quarter of ~~2016. The increase was the result of volume growth partially offset by lower product pricing,~~2022, primarily due to higher volumes in the commercial aerospace, ~~end market.~~ defense aerospace, oil and gas, and industrial gas turbine markets.

Third-party sales for the Engine Products segment increased 3%$448, or 23%, in the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, ~~2016. The increase was the result of volume growth, partially offset by lower product pricing,~~2022, primarily due to higher volumes in the commercial aerospace, ~~end market, the effects of foreign currency fluctuations,~~defense aerospace, oil and ~~the absence of sales of $23 related to the Remmele Medical business, which was sold in April 2016.~~

gas, and industrial gas turbine markets.

Segment Adjusted EBITDA for the ~~Engineered~~Engine Products ~~and Solutions~~ segment increased ~~$16~~$33, or 18%, in the third quarter of ~~2017~~2023 compared to the third quarter of ~~2016. The increase was the result of~~2022, primarily due to higher volumes in the commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets. The segment absorbed approximately 500 net ~~cost savings partially offset by lower product pricing~~headcount in the third quarter of 2023, in support

of expected revenue increases, resulting in unfavorable near-term recruiting, training and ~~ramp up costs associated with increasing production volumes of new aerospace engine parts, such as higher scrap rates, production inefficiencies, new process development and employee training.~~operational costs.

Segment Adjusted EBITDA ~~decreased by $2~~for the Engine Products segment increased $116, or 22%, in the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, ~~2016. The decrease was the result of unfavorable product pricing, ramp up costs associated with increasing production~~2022, primarily due to higher volumes ~~of new aerospace engine parts, and a lower margin product mix, largely offset by net cost savings and higher volumes.~~

~~In the fourth quarter of 2017, growth~~ in ~~demand from~~ the commercial aerospace, ~~end market relative to the fourth quarter of 2016 is expected along with continued~~defense aerospace, oil and gas, and industrial gas turbine markets. The segment absorbed approximately 850 net ~~cost savings. These benefits will be partially offset by continued ramp up costs associated with the introduction of new commercial aerospace engines and unfavorable product pricing.~~

~~Global Rolled Products~~⁽¹⁾

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Third-party sales
   $ 1,234    $ 1,285    $ 3,751    $ 3,785
Intersegment sales
   36    30    107    88








Total sales
   $ 1,270    $ 1,315    $ 3,858    $ 3,873
Adjusted EBITDA
   $ 140    $ 143    $ 475    $ 461
Third-party aluminum shipments (kmt)
   297    356    914    1,063
Average realized price per metric ton of aluminum⁽²⁾⁽³⁾
   $ 4,155    $ 3,610    $ 4,104    $ 3,561

⁽¹⁾	Excludes the Warrick, IN rolling operations and the equity interest in the rolling mill at the joint venture in Saudi Arabia, both of which were previously part of the Global Rolled Products segment but became part of Alcoa Corporation effective November 1, 2016.

⁽²⁾

Generally, average realized price per metric ton of aluminum includes two elements: a) the price of metal (the underlying base metal component based on quoted prices from the London Metal Exchange (“LME”), plus a regional premium which represents the incremental price over the base LME component that is associated with physical delivery of metal to a particular region), and b) the conversion price, which represents the incremental price over the metal price component that is associated with converting primary aluminum into sheet and plate.

⁽³⁾	~~The metal price component is a pass-through to this segment’s customers with limited exceptions (e.g., fixed-priced contracts, certain regional premiums).~~

Third-party sales for the Global Rolled Products segment decreased 4% in the third quarter of 2017 compared to the third quarter of 2016. The decrease was primarily related to the impact of $131 associated with the ramp-down and Toll Processing Agreement with Alcoa Corporation at the Company’s North America packaging business in Tennessee, the absence of sales of $39 from the rolling mill in Fusina, Italy, which was sold in March 2017, and unfavorable product pricing, partially offset by higher aluminum pricing. Third-party sales decreased 1%headcount in the nine months ended September 30, ~~2017~~2023, in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs.

Segment Adjusted EBITDA Margin for the Engine Products segment increased approximately 20 basis points in the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher volumes in the commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets, partially offset by an increase in headcount and inflationary costs.

Segment Adjusted EBITDA Margin for the Engine Products segment decreased approximately 30 basis points in the nine months ended September 30, 2023 compared to the nine months ended September 30, ~~2016. The decrease was~~2022, primarily ~~related~~due to ~~the impact of $365 associated with the ramp-down~~an increase in headcount and Toll Processing Agreement with Alcoa Corporation at the Company’s North America packaging business in Tennessee, the absence of sales of $74 from the rolling mill in Fusina, Italy, and unfavorable product pricing, largelyinflationary costs, partially offset by ~~volume growth~~higher volumes in the ~~automotive end~~commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets.

On May 15, 2023, Howmet and the United Autoworkers at our Whitehall, Michigan location approved a new five-year collective bargaining agreement, covering approximately 1,300 employees, effective April 1, 2023. The previous agreement expired on March 31, 2023. The agreement positions our Whitehall location to offer market competitive wages and ~~higher aluminum pricing.~~

~~Adjusted EBITDA~~benefits and provide additional operational flexibility in support of expected revenue increases.

For the full year 2023 compared to 2022, demand in the commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets is expected to increase.

Fastening Systems


	Third quarter ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Third-party sales	$	348		$	291		$	989		$	832


Segment Adjusted EBITDA	76			64			198			176
Segment Adjusted EBITDA Margin	21.8		%	22.0		%	20.0		%	21.2		%

Third-party sales for the ~~Global Rolled Products~~Fastening Systems segment ~~decreased $3~~increased $57, or 20%, in the third quarter of ~~2017~~2023 compared to the third quarter of 2016. The decrease is the result of the planned ramp-down of the Company’s North America packaging business in Tennessee, lower aerospace volume from customer inventory destocking and reduced build rates as well as continued pricing pressure on regional specialty products, and2022, primarily due to higher ~~aluminum prices of $7, partially offset by net cost savings. The higher aluminum prices negatively impacted the Global Rolled Products Adjusted EBITDA margin by 170 basis points~~volumes in the ~~third quarter of 2017 compared to~~commercial aerospace market, including the ~~third quarter of 2016.~~

~~Adjusted EBITDA~~emerging wide body recovery, and commercial transportation market.

Third-party sales for the Fastening Systems segment increased ~~$14~~$157, or 19%, in the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, ~~2016. The increase is the result of net cost savings and increased automotive~~2022, primarily due to higher volumes ~~partially offset by lower aerospace volume from customer destocking and reduced build rates as well as continued pricing pressure on regional specialty products.~~

~~In the fourth quarter of 2017, demand~~ in the ~~automotive end market is expected to continue to grow relative to~~commercial aerospace, including the ~~fourth quarter of 2016 due to the increasing demand for innovative products~~emerging wide body recovery, defense aerospace, commercial transportation, and aluminum-intensive vehicles. While new programs continue to ramp-up, demand from the commercial airframe end market is expected to decline due to customer destocking and lower build rates for aluminum intensive wide-body programs. Sales to the packaging market are expected to decline due to continuing pricing pressure within this market and the impact of the ramp-down relating to the Company’s North America packaging business in Tennessee. Net cost savings are expected to continue.

~~Transportation and Construction Solutions~~

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Third-party sales
   $ 517    $ 450    $ 1,467    $ 1,346
Adjusted EBITDA
   $ 83    $ 76    $ 237    $ 216

~~Third-party sales~~industrial markets.

Segment Adjusted EBITDA for the ~~Transportation and Construction Solutions~~Fastening Systems segment increased ~~15%~~$12, or 19%, in the third quarter of ~~2017~~2023 compared to the third quarter of ~~2016~~2022, primarily due to ~~increased~~higher volumes in the commercial aerospace and commercial transportation ~~and building and construction end markets, higher aluminum pricing, and~~markets.

Segment Adjusted EBITDA for the ~~effects of foreign currency, partially offset by lower product pricing. Third-party sales~~Fastening Systems segment increased 9%$22, or 13%, in the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, ~~2016~~2022, primarily due to ~~increased~~higher volumes in the commercial aerospace, defense aerospace, commercial transportation, and ~~building and construction end markets and higher aluminum pricing, partially offset by lower product pricing.~~

~~Adjusted EBITDA for the Transportation and Construction Solutions~~industrial markets. The segment ~~increased $7 and $21~~absorbed approximately 385 net headcount in the ~~third quarter and~~ nine months ended September 30, ~~2017, respectively, compared to the corresponding periods~~2023, in ~~2016. The change was principally the result~~support of ~~net cost savings~~expected revenue increases, resulting in unfavorable near-term recruiting, training and higher volumes, partially offset by lower product pricing in the heavy-duty truck market, unfavorable product mix, and higher aluminum prices. The higher aluminum prices negatively impacted the Transportation and Construction Solutionsoperational costs.

Segment Adjusted EBITDA ~~margin by $4 or 120~~Margin for the Fastening Systems segment decreased approximately 20 basis points in the third quarter of ~~2017~~2023 compared to the third quarter of ~~2016.~~

~~In the fourth quarter of 2017, increased volumes are expected to continue relative to the fourth quarter of 2016~~2022, primarily due to ~~growth~~an increase in ~~the Commercial Transportation~~headcount and ~~Building and Construction markets,~~inflationary costs as well as ~~growth in demand for innovative and new products. Additionally, net cost savings and pricing headwinds are anticipated to continue~~unfavorable foreign currency movements, partially offset by higher volumes in the ~~fourth quarter.~~

~~Reconciliation of Combined segment adjusted~~commercial aerospace and commercial transportation markets.

Segment Adjusted EBITDA ~~to Net income attributable to Arconic~~

~~The following table reconciles Combined segment adjusted EBITDA to Net income attributable to Arconic:~~

~~The changes in the reconciling items between Combined segment adjusted EBITDA and Net income attributable to Arconic~~Margin for the ~~third quarter and nine months ended September 30, 2017 compared to corresponding periods in 2016 consisted of:~~

an increase in Restructuring and other charges primarily due to ongoing overhead cost reductions; the nine month period was also impacted by the loss on sale of the Fusina, Italy rolling mill in the first quarter of 2017;

a change in the Impact of LIFO, mostly due to a greater increase in the price of aluminum, driven by higher base metal prices (LME) and regional premiums at September 30, 2017 indexed to December 31, 2016 for the 2017 third quarter and nine month period compared to higher base metal prices (LME) at September 30, 2016 indexed to December 31, 2015 for the 2016 third quarter and nine month period;

~~a change in Metal price lag~~Fastening Systems segment decreased approximately 120 basis points in the nine months ended September 30, ~~2017 compared to nine months ended September 30, 2016 due to higher prices for aluminum;~~

a decrease in Corporate expense in the third quarter of 2017 compared to the third quarter of 2016 primarily attributable to costs incurred in 2016 related to the separation of Alcoa Inc. and a decrease in Corporate expense in the nine months ended September 30, 20172023 compared to the nine months ended September 30, ~~2016~~2022, primarily ~~attributable~~due to ~~costs incurred~~an increase in ~~2016 related to the separation of Alcoa Inc.,~~headcount and inflationary costs, partially offset by ~~proxy, advisory~~higher volumes in the commercial aerospace, defense aerospace, commercial transportation, and ~~governance-related costs incurred~~industrial markets.

For the full year 2023 compared to 2022, demand in ~~2017;~~the commercial aerospace, defense aerospace, commercial transportation, and industrial markets is expected to increase.

~~an increase~~

Engineered Structures


	Third quarter ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Third-party sales	$	227		$	193		$	634		$	560


Segment Adjusted EBITDA	30			28			80			77
Segment Adjusted EBITDA Margin	13.2		%	14.5		%	12.6		%	13.8		%

Third-party sales for the Engineered Structures segment increased $34, or 18%, in ~~Other income, net,~~the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher volumes in the commercial aerospace market, including Russian titanium share gains and the emerging wide body recovery, partially offset by lower volumes in the defense aerospace market associated with legacy fighter programs.

Third-party sales for the Engineered Structures segment increased $74, or 13%, in the nine months ended September 30, 2017, largely the result of the $351 gain on the sale of a portion of Arconic’s investment in Alcoa Corporation common stock in the first quarter of 2017 and a $167 gain on the Debt-for-Equity Exchange in the second quarter of 2017;

a decrease in Interest expense in the third quarter of 2017 compared to the third quarter of 2016 due to lower outstanding debt and an increase in Interest expense in the nine months ended September 30, 20172023 compared to the nine months ended September 30, ~~2016~~2022, primarily due to ~~premiums paid for~~higher volumes in the ~~early redemption of $1,250 of~~commercial aerospace market, including Russian titanium share gains and the ~~Company’s long-term debt during the second quarter of 2017~~emerging wide body recovery, partially offset by lower ~~expense~~volumes in the defense aerospace market associated with legacy fighter programs.

Segment Adjusted EBITDA for the Engineered Structuressegment increased $2, or 7%, in the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher volumes in the commercial aerospace market, partially offset by lower ~~outstanding debt;~~volumes in the defense aerospace market. The segment absorbed approximately 145 net headcount in the third quarter of 2023, in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs.

~~an increase in Provision~~Segment Adjusted EBITDA for ~~income taxes~~the Engineered Structuressegment increased $3, or 4%, in the nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, ~~2016 attributable~~2022, primarily due to higher ~~pretax income, exclusive of the previously noted gain on the Debt-for-Equity Exchange.~~

~~Reconciliation of Net income attributable to Arconic to Consolidated adjusted EBITDA~~

Items required to reconcile Net income attributable to Arconic to Consolidated adjusted EBITDA include: Depreciation and amortization; Restructuring and other charges; Other income, net; Interest expense; Income tax expense; and Discontinued operations.

~~The following table reconciles Net income attributable to Arconic to Consolidated adjusted EBITDA:~~

   Third quarter ended
September 30,    Nine months ended
September 30,
   2017    2016    2017    2016
Net income attributable to Arconic
   $ 119    $ 166    $ 653    $ 317
Depreciation and amortization
   140    136    410    402
Restructuring and other charges
   19    3    118    33
Other income, net
   (1 )    (11 )    (526 )    (40 )
Interest expense
   100    126    398    371
Income taxes
   53    56    272    230
Discontinued operations
   —      (100 )    —      (88 )








Consolidated adjusted EBITDA⁽¹⁾
   $ 430    $ 376    $ 1,325    $ 1,225

⁽¹⁾

Consolidated adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because Consolidated adjusted EBITDA provides additional information with respect to Arconic’s operating performance. Additionally, presenting Consolidated adjusted EBITDA pursuant to our debt agreements is appropriate to provide additional information to investors to demonstrate Arconic’s ability to comply with its financial debt covenants. The Consolidated adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.

~~Environmental Matters~~

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

~~Subsequent Events~~

On October 13, 2017, Alcoa Corporation announced that it had terminated an electricity contract with Luminant Generation Company LLC, effective as of October 1, 2017, that was tied to its Rockdale Operations in Texas. Pursuant to the Separation and Distribution Agreement between Arconic and Alcoa Corporation, Arconic was required to provide a guarantee up to an estimated present value amount of approximately $485 related to this electricity contract for Alcoa Corporation’s facilityvolumes in the ~~event of an Alcoa Corporation payment default. As a result of the termination of the electricity contract~~commercial aerospace market, partially offset by ~~Alcoa Corporation, Arconic expects to record noncash non-operating income~~lower volumes in the ~~fourth quarter of 2017 of~~defense aerospace market. The segment absorbed approximately $25 ($16 after-tax) associated with the reversal of the fair value of the guarantee which was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet.

~~Liquidity and Capital Resources~~

The cash flows related to Alcoa Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows for the nine months ended September 30, 2016. As a result, the cash flow amounts reported for the nine months ended September 30, 2017 are not comparable to the amounts reported for the nine months ended September 30, 2016.

~~Cash from Operations~~

~~Cash provided from operations was $89~~195 net headcount in the nine months ended September 30, ~~2017~~2023, in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs.

Segment Adjusted EBITDA Margin for the Engineered Structuressegment decreased approximately 130 basis points in the third quarter of 2023 compared to ~~$208~~the third quarter of 2022, primarily due to lower volumes in the defense aerospace market, material and inflationary cost pass through, and an increase in headcount, partially offset by higher volumes in the commercial aerospace market.

Segment Adjusted EBITDA Margin for the Engineered Structuressegment decreased approximately 120 basis points in the nine months ended September 30, ~~2016. The decrease in cash provided from operations of $119, or 57%, was~~2023 compared to the nine months ended September 30, 2022, primarily due to lower ~~operating results (net income plus net add-back for noncash transactions~~volumes in ~~earnings) of $673,~~the defense aerospace market, material and inflationary cost pass through, and an increase in headcount, partially offset by ~~lower cash used~~higher volumes in the commercial aerospace market.

On July 10, 2023, Howmet and the United Steel Workers at our Niles, Ohio location entered into a new four-year collective bargaining agreement, covering approximately 370 employees, effective July 1, 2023. The previous agreement was to expire on April 20, 2024. The agreement positions our Niles location to offer market competitive wages and benefits, promote cost competitiveness, and provide additional operational flexibility in support of expected revenue increases.

For the full year 2023 compared to 2022, demand in the commercial aerospace market is expected to increase. However, demand in the defense aerospace market is expected to decrease.

Forged Wheels


	Third quarter ended						Nine months ended
	September 30,						September 30,
	2023			2022			2023			2022
Third-party sales	$	285		$	266		$	872		$	792


Segment Adjusted EBITDA	77			64			237			206
Segment Adjusted EBITDA Margin	27.0		%	24.1		%	27.2		%	26.0		%

Third-party sales for ~~working capital~~the Forged Wheels segment increased $19, or 7%, in the third quarter of ~~$251 and a positive change associated with noncurrent assets~~2023 compared to the third quarter of ~~$247~~2022, primarily due to higher volumes in the ~~prepayment of $200 made~~commercial transportation market, partially offset by a decrease in ~~April 2016 related to a gas supply agreement~~aluminum price pass through.

Third-party sales for the ~~Australia alumina refineries.~~

~~Financing Activities~~

~~Cash used for financing activities was $918~~Forged Wheels segment increased $80, or 10%, in the nine months ended September 30, ~~2017~~2023 compared to ~~$350~~the nine months ended September 30, 2022, primarily due to higher volumes in the commercial transportation market.

Segment Adjusted EBITDA for the Forged Wheels segment increased $13, or 20%, in the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher volumes in the commercial transportation market.

Segment Adjusted EBITDA for the Forged Wheels segment increased $31, or 15%, in the nine months ended September 30, ~~2016.~~2023 compared to the nine months ended September 30, 2022, primarily due to higher volumes in the commercial transportation market, partially offset by a supply chain disruption and unfavorable foreign currency movements.

Segment Adjusted EBITDA Margin for the Forged Wheels segment increased approximately 290 basis points in the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher volumes. The favorable impact of lower aluminum prices was partially offset by other inflationary cost pass through.

Segment Adjusted EBITDA Margin for the Forged Wheels segment increased approximately 120 basis points in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to higher volumes, partially offset by a supply chain disruption and unfavorable foreign currency movements. The favorable impact of lower aluminum prices was partially offset by other inflationary cost pass through.

For the full year 2023 compared to 2022, demand in the commercial transportation markets served by Forged Wheels is expected to increase.

Reconciliation of Total Segment Adjusted EBITDA to Income before income taxes


	Third quarter ended				Nine months ended
	September 30,				September 30,
	2023		2022		2023		2022
Income before income taxes	$	242	$	104	$	705	$	458
Loss on debt redemption	—		—		1		2
Interest expense, net	54		57		166		172
Other expense, net	11		67		5		67
Operating income	$	307	$	228	$	877	$	699
Segment provision for depreciation and amortization	67		64		197		193
Unallocated amounts:
Restructuring and other charges	4		4		8		12
Corporate expense	24		46		87		93
Total Segment Adjusted EBITDA	$	402	$	342	$	1,169	$	997

Total Segment Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because it provides additional information with respect to the Company’s operating performance and the Company’s ability to meet its financial obligations. Differences between the total segment and consolidated totals are in Corporate.

See Restructuring and other charges, Interest expense, net, Loss on debt redemption, and Other expense, net discussions above, under “Results of Operations” for reference.

Corporate expense decreased $22, or 48%, in the third quarter of 2023 compared to the third quarter of 2022, primarily due to lower net costs related to the France Plant Fire, the Barberton Plant Fire, and the Barberton Cast House Incident of $24, partially offset by higher employment costs in 2023.

Corporate expense decreased $6, or 6%, in the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, primarily due to lower net costs related to the France Plant Fire, the Barberton Plant Fire, and the Barberton Cast House Incident of $31, partially offset by higher inventory impairment costs related to facilities closures, a supply chain disruption, and other items of $10, costs related to collective bargaining agreement negotiations in 2023 of $8, higher nonrecurring legal and other advisory reimbursements received in 2022 compared to 2023 of $3, and higher employment costs in 2023.

Environmental Matters

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

Subsequent Events

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

Liquidity and Capital Resources

Operating Activities

Cash provided from operations was $443 in the nine months ended September 30, 2023 compared to $278 in the nine months ended September 30, 2022. The increase of $165, or 59%, was primarily due to higher operating results of $194, lower payments on noncurrent liabilities of $17, and lower pension contributions of $15, partially offset by higher working capital of $64. The components of the change in ~~cash~~working capital primarily included unfavorable changes in accounts payable of $187, accrued expenses of $36, and prepaid expenses and other current assets of $17, partially offset by inventories of $123, receivables of $35, and taxes, including income taxes, of $18.

Management expects Howmet’s estimated pension contributions and other postretirement benefit payments in 2023 to be approximately $56.

Financing Activities

Cash used for financing activities was $646 in the nine months ended September 30, 2023 compared to $437 in the nine months ended September 30, 2022. The increase of $209, or 48%, was primarily ~~related~~due to higher payments made in connection with the reduction of long-term debt of $316 (See Note N to the ~~early redemption~~Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference), higher taxes of $54 paid for the net share settlement of equity awards due to a significant amount of equity awards that vested and the impact of the Company’s ~~6.50% Bonds due 2018, 6.75% Notes due 2018,~~stock price on the vesting date, and increased dividends paid to common stock shareholders of $25, partially offset by a ~~portion~~reduction in common stock repurchases of $185. As a result of the ~~5.72%~~January 2023, March 2023, and September 2023 debt actions that collectively reduced the outstanding aggregate principal amount of the 5.125% Notes ~~due 2019 (see Note L).~~

~~Arconic~~by $376 during the nine months ended September 30, 2023, Interest expense, net is expected to be reduced annually by $19.

The Company maintains a credit facility pursuant to its Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and issuers named therein ~~which provides~~(See Note N to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a $3,000 senior unsecured revolving credit facility (the “Credit Facility”) which matures on July 25, 2020 unless extended or earlier terminated in accordance with the provisions of the Credit Agreement. The purpose of any borrowingsreference). There were no amounts outstanding under the Credit ~~Facility is to provide for working capital requirements and for other general corporate purposes.~~

~~In addition to the Credit~~ Agreement ~~above, Arconic has a number of other credit agreements that provide a combined borrowing capacity of $715~~ as of September 30, ~~2017, of which $175 is due to expire in 2017~~2023 or December 31, 2022, and ~~$540 is due to expire in 2018. The purpose of any borrowings~~no amounts were borrowed during 2023 or 2022 under ~~these credit arrangements is to provide for working capital requirements and for other general corporate purposes. The covenants contained in all these arrangements are the same as~~ the Credit Agreement. ~~During~~On July 27, 2023, the ~~third quarter~~Company entered into the Second Amended and ~~nine months ended September 30, 2017, Arconic borrowed~~Restated Five-Year Revolving Credit Agreement (See Note N to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference).

The Company may opportunistically issue new debt securities in accordance with securities laws, in order to, but not limited to, refinance existing indebtedness. The Company continues to evaluate whether, when and ~~repaid $150~~to what extent it may access capital markets, including any plans to refinance, the 5.125% Notes due October 2024. Our ability to refinance our indebtedness or enter into alternative financings in adequate amounts on commercially reasonable terms, or terms acceptable to us, may be affected by circumstances and ~~$660, respectively,~~economic events outside of our control. In the event that a refinancing does not occur before the October 2024 maturity date of the Company’s 5.125% Notes, the Company believes that its projected cash on hand and/or availability under ~~these~~its Credit Facility will enable the Company to repay the 5.125% Notes.

The Company may, in the future from time to time, redeem portions of its debt securities or repurchase portions of its debt or equity securities in either the open market or through privately negotiated transactions, in accordance with applicable SEC and other ~~credit facilities.~~legal requirements. The ~~weighted-average interest rate~~timing, prices, and ~~weighted-average days outstanding during~~sizes of purchases depend upon prevailing trading prices, general economic and market conditions, and other factors, including applicable securities laws. Such purchases may be completed by means of trading plans established from time to time in accordance with Rule 10b5-1 under the ~~third quarter and nine months ended September 30, 2017 were 2.73% and 73 days and 2.48% and 43 days, respectively.~~

~~Arconic’s~~Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases, tender offers, and/or accelerated share repurchase agreements or other derivative transactions.

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-~~short-term and long-term debt ratings assigned to ~~Arconic~~the Company by the major credit rating agencies.

~~Arconic’s~~ The Company believes that its cash on hand, cash provided from operations and availability of its Credit Facility and its accounts receivables securitization program will continue to be sufficient to fund our operating and capital allocation activities, including repayments of indebtedness.

The Company’s most recent credit ratings from the three major credit rating agencies are as follows:

Issuer Rating

~~Long-Term Debt~~

~~Short-Term Debt~~Outlook

~~Outlook~~

Date of Last Update

Standard and Poor’s

Ratings Service (“S&P”)

BB+

~~BBB-~~

~~A-3~~Positive

~~Stable~~

~~May 1, 2017~~April 25, 2023

Moody’s

Investors Service (“Moody’s”)

Ba1

~~Ba2~~

~~Speculative Grade~~
~~Liquidity-2~~Positive

~~Stable~~

~~November 2, 2017~~September 18, 2023

Fitch

Investors Service (“Fitch”)

BBB

~~BB+~~

BStable

~~Stable~~

~~July 3, 2017~~August 23, 2023

On September 18, 2023, Moody’s affirmed Howmet’s long-term debt rating at Ba1 and upgraded the current outlook from stable to positive, citing the Company’s revenue and strong market position.

On August 23, 2023, Fitch upgraded Howmet’s long-term debt rating from BBB- to BBB, citing the Company’s improved financial leverage, and affirmed the current outlook at stable.

On April 25, 2023, S&P affirmed Howmet’s long-term debt rating at BB+ and upgraded the current outlook from stable to positive, citing strong demand in the commercial aerospace market and the Company’s improved financial leverage.

Investing Activities

Cash ~~provided from~~used for investing activities was ~~$776~~$163 in the nine months ended September 30, ~~2017~~2023 compared to ~~$79~~$106 in the nine months ended September 30, ~~2016.~~

~~Cash provided from investing activities for~~2022. The increase of $57, or 54%, was primarily due to the ~~nine months ended September 30, 2017 included proceeds of $888 from the sale of a portion of Arconic’s investment in Alcoa Corporation common stock and the receipt of~~net proceeds from the sale of the ~~Yadkin Hydroelectric Project of $243, somewhat offset by cash used for capital expenditures of $360 and the injection of $10 into the Fusina rolling business prior to its sale.~~

~~Cash provided from investing activities for the nine months ended September 30, 2016 included proceeds of $683 from the sale of assets and businesses, primarily related to $457~~corporate center in proceeds from the redemption of Company-owned life insurance policies, proceeds of $120 related to the sale of the Intalco smelter wharf property, and proceeds of $102 from the sale of the Remmele Medical business, and $280 in proceeds received from the sale of investments, including $145 for the sale of an equity interest in a natural gas pipeline in Australia and $130 for fixed income and equity securities held by Arconic’s captive insurance company. These cash flows were partially offset by $814 in capital expenditures, including the aerospace expansion (thick plate stretcher) at the Davenport, Iowa plant.

~~Noncash Financing and Investing Activities~~

In the second quarter of ~~2017, the Company completed a Debt-for-Equity Exchange with the Investment Banks~~2022 of ~~the remaining portion~~$41 that did not recur in 2023 and an increase in capital expenditures of ~~Arconic’s retained interest in Alcoa Corporation common stock for a portion of the Company’s outstanding notes held by the Investment Banks for $465 including accrued and unpaid interest.~~

$16 primarily related to sustaining capital projects across all segments.

Recently Adopted and Recently Issued Accounting Guidance

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

Forward-Looking Statements

This report contains (and oral communications made by Howmet Aerospace may contain) 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 Aerospace’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements, forecasts and ~~expectations~~outlook relating to the ~~aerospace, automotive, commercial transportation and other~~condition of end markets; ~~statements and guidance regarding~~ future financial results or operating performance; ~~statements about Arconic’s~~future strategic actions; Howmet Aerospace’s strategies, outlook, and business and financial prospects; and ~~statements regarding potential share gains.~~any future debt redemptions or repurchases of its debt or equity securities. These statements reflect beliefs and assumptions that are based on ~~Arconic’s~~Howmet Aerospace’s perception of historical trends, current conditions and expected future developments, as well as other factors ~~management~~Howmet Aerospace 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. Although Arconic believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible thatpredict, which could cause actual results ~~may~~to differ materially from those indicated by these ~~forward-looking statements due to a variety of risks and uncertainties.~~statements. Such risks and uncertainties include, but are not limited to: (a) deterioration in global economic and financial market conditions generally; (b) unfavorable changes in the markets served by ~~Arconic;~~Howmet Aerospace; (c) 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; (d) changes in discount rates or investment returns on pension assets; (e) Arconic’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; (f) the impact of potential cyber attacks and ~~potential~~ information technology or data security breaches; ~~(g) any~~(d) the loss of significant customers or adverse changes in customers’ business or financial conditions; (e) manufacturing difficulties or other issues that impact product performance, quality or safety; (f) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (g) failure to attract and retain a qualified workforce and key personnel; (h) ~~political,~~uncertainty of the residual impact of the COVID-19 pandemic on Howmet Aerospace’s business, results of operations, and financial condition; (i) the inability to achieve revenue growth, cash generation, restructuring plans, cost reductions, improvement in profitability, or strengthening of competitiveness and operations anticipated or targeted; (j) inability to meet increased demand, production targets or commitments; (k) competition from new product offerings, disruptive technologies or other developments; (l) geopolitical, economic, and regulatory risks ~~in the countries in which Arconic operates or sells products; (i) material adverse changes in aluminum industry conditions,~~relating to Howmet Aerospace’s global operations, including ~~fluctuations in London Metal Exchange-based aluminum prices; (j) the impact of changes in~~geopolitical and diplomatic tensions, instabilities, conflicts and wars, as well as compliance with U.S. and foreign ~~currency exchange rates on costs~~trade and ~~results; (k)~~tax laws, sanctions, embargoes and other regulations; (m) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation, which can expose ~~Arconic~~Howmet Aerospace to substantial costs and liabilities; (n) failure to comply with government contracting regulations; (o) adverse changes in discount rates or investment returns on pension assets; and ~~(l)~~(p) the other risk factors summarized in ~~Arconic’s~~Howmet Aerospace’s Form 10-K for the year ended December 31, ~~2016, including under Part I, Item 1A thereof, in Arconic’s Form 10-Q for~~2022 and other reports filed with the ~~quarter ended June 30, 2017,~~U.S. Securities and Exchange Commission. Market projections are subject to the risks discussed above and other risks in the ~~following sections~~market. The statements in this report are made as of the date of the filing of this ~~report: Note H to the financial statements, and the discussion included above under Segment Information. Arconic~~report. Howmet Aerospace 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. ~~Market projections are subject to the risks discussed above and other risks in the market.~~

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 Interim~~

The Company's Chief Executive Officer 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 ~~2017,~~2023 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.

~~Environmental Matters~~

As previously reported, by an amended complaint filed April 21, 2005, Alcoa Global Fasteners, Inc. (now known as Arconic Global Fasteners & Rings, Inc.) was added as a defendant in Orange County Water District (OCWD) v. Northrop Corporation, et al., civil action 04cc00715 (Superior Court of California, County of Orange). OCWD alleges contamination or threatened contamination of a drinking water aquifer by Arconic, certain of the entities that preceded Arconic at the same locations as property owners and/or operators, and other current and former industrial and manufacturing businesses that operated in Orange County in past decades. OCWD seeks to recover the cost of aquifer remediation and attorney’s fees. Trial on statutory, non-jury claims commenced on February 10, 2012. On October 29, 2013, the court issued its final Statement of Decision in favor of Arconic and the other Phase I trial defendants dismissing the statutory law liability claims. On June 20, 2014, following the full briefing by the parties, the trial court entered final judgment in favor of Arconic and the other trial defendants on the remaining tort claims. On August 18, 2014, the OCWD appealed the dismissal of the statutory law claims and common law claims (except for negligence). On March 29, 2017, oral argument on the appeal took place before a panel of three California Court of Appeal justices. On June 1, 2017, the Court of Appeal upheld the trial court’s decision in favor of Arconic on all claims. The OCWD did not file a petition for review

See Note P to the ~~California Supreme Court. On July 12, 2017, Northrop filed a petition for review by the Supreme Court~~Consolidated Financial Statements in Part I, Item 1 of ~~the State of California. On September 13, 2017, the California Supreme Court denied Northrop’s petition for review. The remaining claims against Northrop~~this Form 10-Q.

Item 1A. Risk Factors.

There have been ~~remanded to~~no material changes from the ~~trial court. No claims against Arconic are pending~~risk factors previously disclosed in Part I, Item 1A, “Risk Factors” in the ~~remanded case. No further reports will be made~~Company’s Annual Report on ~~this matter unless there is a material development.~~

As previously reported, on June 21, 2017, the UK Environment Agency (the “Agency”) confirmed that it will prosecute Firth Rixson Metals Limited in Chesterfield (UK) Magistrates Court in relation to an environmental incident that took place on April 22, 2015 at the Company’s Glossop UK site. It is alleged that an acid scrubber unit at the site caused a leak into the local river resulting in environmental damage, including the death of approximately 200 fish. Arconic was not successful in persuading the Agency to drop the prosecution in lieu of an enforcement undertaking (a civil remedy) despite the fact that cyanide, a compound not used on the site, had been identified in the samples of water taken at the time. A hearing before the Court was held on September 13, 2017 at which Firth Rixson pled guilty to the underlying offense of allowing a release to occur to the nearby stream. The Agency was not ready to proceed to a full hearing on the culpability and harm elements of the allegations, and requested more time. The Court granted the Agency’s request and set a follow-up hearing for December 6, 2017. The Company expects that to be the final dispositive hearing, at or after which it expects the Court to render final decisions on culpability and harm, and impose a fine on the Company. The Company has recorded an amount to cover the estimated fine and this amount is not material to the Company’s Consolidated Financial Statements.

~~Reynobond PE~~

As previously reported, on June 13, 2017, the Grenfell Tower in London, UK caught fire resulting in fatalities, injuries and damage. A French subsidiary of Arconic, Arconic Architectural Products SAS (AAP SAS), supplied a product, Reynobond PE, to its customer, a cladding system fabricator, which used the product as one component of the overall cladding system on Grenfell Tower. The fabricator supplied its portion of the cladding system to the façade installer, who then completed and installed the system under the direction of the general contractor. Neither Arconic nor AAP SAS was involved in the design or installation of the system used at the Grenfell Tower, nor did it have a role in any other aspect of the building’s refurbishment or original design. Regulatory investigations into the overall Grenfell Tower matter are being conducted, including a criminal investigation by the London Metro Police, a Public Inquiry by the British government and a consumer protection inquiry by a French public authority. AAP SAS has filed an application seeking core participant status in the Public Inquiry.

~~Brave v. Arconic Inc., Kenneth J. Giacobbe and Klaus Kleinfeld~~. A purported class action complaint was filed on July 13, 2017 in the United States District Court for the Southern District of New York against Arconic Inc., Kenneth J. Giacobbe and Klaus Kleinfeld. The complaint alleged that the statements in Arconic’s 2016 10-K about management’s recognition of its responsibility to conduct the Company’s affairs according to the highest standards of personal and corporate conduct and within the laws of the host countries in which it operates, and its failure to disclose that Arconic knowingly supplied highly flammable Reynobond PE cladding panels for use in construction that significantly increased the risk of property damage, injury and death, were false and misleading in violation of the federal securities laws and artificially inflated the prices of Arconic’s securities. The plaintiffs sought, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses. On August 14, 2017, this case was dismissed by the plaintiff without prejudice.

~~Tripson v. Arconic Inc. and Klaus Kleinfeld~~. A purported class action complaint was filed on July 14, 2017 in the United States District Court for the Southern District of New York against Arconic Inc. and Klaus Kleinfeld. The complaint alleged that statements in Arconic’s 2012-2016 10-Ks, 2012-15 Annual Reports and the 2016 Annual Highlights Report about management’s recognition of its responsibility to conduct the Company’s affairs according to the highest standards of personal and corporate conduct and within the laws of the host countries in which it operates, and its failure to disclose that Arconic knowingly supplied highly flammable Reynobond PE cladding panels for use in construction that significantly increased the risk of property damage, injury and death, were false and misleading in violation of the federal securities laws and artificially inflated the prices of Arconic’s securities. The complaint also alleged that Arconic was motivated to conceal its potential liability to improve its credit ratings and enhance its ability to raise capital. The plaintiffs sought, among other things, unspecified compensatory damages and equitable relief and an award of attorney and expert fees and expenses. On August 25, 2017, this case was dismissed by the plaintiff without prejudice.

~~Sullivan v. Arconic Inc. et al.~~ A purported class action complaint was filed on July 18, 2017 in the United States District Court for the Southern District of New York against Arconic Inc., as well as two former Arconic executives and several current and former Arconic directors, and banks that acted as underwriters for Arconic’s September 18, 2014 preferred stock offering. The complaint alleges that statements in the registration statement for Arconic’s September 18, 2014 preferred stock offering were false and misleading in light of the subsequent Grenfell Tower fire. The complaint also alleges that Arconic’s failure to disclose at the time of the offering that it was obtaining significant profits through sales that exposed it to substantial liability violated the federal securities laws. The plaintiffs seek, among other things, unspecified compensatory and recissory damages and an award of attorney and expert fees and expenses. On August 25, 2017, this case was dismissed by the plaintiff without prejudice and re-filed on September 15, 2017 in the United States District Court for the Western District of Pennsylvania.

~~Howard v. Arconic Inc. et al.~~ A purported class action complaint was filed on August 11, 2017 in the United States District Court for Western District of Pennsylvania against Arconic Inc., and Klaus Kleinfeld. The complaint alleges that Arconic and Mr. Kleinfeld made various false and misleading statements, and omitted to disclose material information, about the company’s business and financial prospects and, specifically, the risks of the Reynobond PE product. The complaint alleges that the statements in Arconic’s Form 10-K for the ~~fiscal years~~year ended December 31, ~~2012, 2013, 2014, 2015~~2022.

Item 2. Unregistered Sales of Equity Securities and ~~2016, its 2012, 2013, 2014, 2015 and 2016 Annual Reports, and its 2016 Annual Highlights Report about management’s recognition~~Use of Proceeds.

The following table presents information with respect to the Company’s repurchases of its ~~responsibility to conduct~~common stock during the Company’s affairs according to the highest standards of personal and corporate conduct and within the laws of the host countries in which it operates, and its failure to disclose that Arconic knowingly supplied highly flammable Reynobond PE cladding panels for use in construction that significantly increased the risk of property damage, injury and death, were false and misleading in violation of the federal securities laws and artificially inflated the prices of Arconic’s securities. The plaintiffs seek, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses.

~~While~~quarter ended September 30, 2023:
Period Total Number of Shares Purchased
Average Price Paid Per Share(1)
Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(1)(2)
July 1 - July 31, 2023 — $ — — $ 822
August 1 - August 31, 2023 — $ — — $ 822
September 1 - September 30, 2023 506,800 $ 49.32 506,800 $ 797
Total for quarter ended September 30, 2023 506,800 $ 49.32 506,800

(1)Excludes commissions cost.

(2)On August 18, 2021, the Company ~~believes~~announced that these cases are without merit and intends to challenge them vigorously, there can be no assurances regarding the ultimate resolution of these matters. Given the preliminary nature of these matters 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. Theits Board of Directors ~~has also received letters, purportedly sent on behalf~~authorized a share repurchase program of ~~shareholders, reciting allegations similar~~up to ~~those~~$1,500 million of the Company's outstanding common stock. After giving effect to the share repurchases made inthrough September 30, 2023, approximately $797 million Board authorization remains available. Under the ~~federal court lawsuits and demanding that the Board authorize~~Company’s share repurchase program (the “Share Repurchase Program”), the Company may repurchase shares by means of trading plans established from time to ~~initiate litigation against members~~time in accordance with Rule 10b5-1 under the Securities Exchange Act of ~~management,~~1934, as amended, block trades, private transactions, open market repurchases and/or accelerated share repurchase agreements or other derivative transactions. There is no stated expiration for the Board and others. The Board of Directors is reviewing these shareholder demand letters and considering the appropriate course of action. In addition, lawsuits are pending in state court in New York and federal court in Pennsylvania, initiated, respectively, by another purported shareholder and byShare Repurchase Program. Under its Share Repurchase Program, the Company ~~concerning the shareholder’s claimed right, which~~may repurchase shares from time to time, in amounts, at prices, and at such times as the Company ~~contests,~~deems appropriate, subject to ~~inspect~~market conditions, legal requirements and other considerations. The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the ~~Company’s books and records related to the Grenfell Tower fire and Reynobond PE.~~

Share Repurchase Program may be suspended, modified or terminated at any time without prior notice.

Item 6. Exhibits.


31
~~10(a)~~	Letter Agreement, by and between Arconic Inc. and Charles P. Blankenship, dated as of October 19, 2017, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated October 23, 2017

~~12.~~	~~Computations of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends~~

~~15.~~	~~Letter regarding unaudited interim financial information~~

~~31.~~	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
32
~~32.~~	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
101.INS
~~101.INS~~	Inline 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
~~101.SCH~~	Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL
~~101.CAL~~	Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF
~~101.DEF~~	Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
101.LAB
~~101.LAB~~	Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
101.PRE
~~101.PRE~~	Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104.		Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, 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.


			~~Arconic~~Howmet Aerospace Inc.

November ~~6, 2017~~ 2, 2023			/s/ Ken Giacobbe
Date			Ken Giacobbe
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial Officer)

November 2, 2023	/s/ Barbara L. Shultz
~~November 6, 2017~~ Date			~~/s/ Paul Myron~~
~~Date~~		~~Paul Myron~~Barbara L. Shultz
			Vice President and Controller
			(Principal Accounting Officer)


	Third quarter ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Sales (I)	$	3,236		$	3,138		$	9,689		$	9,427
Cost of goods sold (exclusive of expenses below)		2,626			2,503			7,701			7,436
Selling, general administrative, and other expenses		155			229			580			673
Research and development expenses		25			30			83			93
Provision for depreciation and amortization		140			136			410			402
Restructuring and other charges (D & E)		19			3			118			33

Operating income		271			237			797			790
Interest expense (L)		100			126			398			371
Other income, net (G)		(1	)		(11	)		(526	)		(40	)

Income from continuing operations before income taxes		172			122			925			459
Provision for income taxes		53			56			272			230

Income from continuing operations after income taxes		119			66			653			229
Income from discontinued operations after income taxes (G)		—			120			—			146

Net income		119			186			653			375
Less: Income from discontinued operations attributable to noncontrolling interests (G)		—			20			—			58

Net income attributable to Arconic	$	119		$	166		$	653		$	317

Amounts Attributable to Arconic Common Shareholders (J):
Net income	$	101		$	148		$	600		$	265

Earnings per share - basic
Continuing operations	$	0.23		$	0.11		$	1.36		$	0.40
Discontinued operations		—			0.23			—			0.20

Net income per share - basic	$	0.23		$	0.34		$	1.36		$	0.60

Earnings per share - diluted
Continuing operations	$	0.22		$	0.11		$	1.31		$	0.40
Discontinued operations		—			0.22			—			0.20

Net income per share - diluted	$	0.22		$	0.33		$	1.31		$	0.60

Dividends paid per share	$	0.06		$	0.09		$	0.18		$	0.27

Weighted Average Shares Outstanding (J):
Average shares outstanding - basic		442			438			441			438

Average shares outstanding - diluted		462			453			501			443


	Arconic						Noncontrolling Interests					Total
	Third quarter ended September 30,						Third quarter ended September 30,					Third quarter ended September 30,
	2017			2016			2017		2016			2017			2016
Net income	$	119		$	166		$	—	$	20		$	119		$	186
Other comprehensive income (loss), net of tax (C):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits		31			(462	)		—		(1	)		31			(463	)
Foreign currency translation adjustments		85			157			—		45			85			202
Net change in unrealized gains/losses on available-for-sale securities		1			—			—		—			1			—
Net change in unrecognized gains/losses on cash flow hedges		10			(338	)		—		(10	)		10			(348	)

Total Other comprehensive income (loss), net of tax		127			(643	)		—		34			127			(609	)

Comprehensive income (loss)	$	246		$	(477	)	$	—	$	54		$	246		$	(423	)


	Arconic						Noncontrolling Interests					Total
	Nine months ended September 30,						Nine months ended September 30,					Nine months ended September 30,
	2017			2016			2017		2016			2017			2016
Net income	$	653		$	317		$	—	$	58		$	653		$	375
Other comprehensive income (loss), net of tax (C):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits		110			(365	)		—		2			110			(363	)
Foreign currency translation adjustments		251			505			—		184			251			689
Net change in unrealized gains/losses on available-for-sale securities		(133	)		4			—		—			(133	)		4
Net change in unrecognized gains/losses on cash flow hedges		13			(571	)		—		4			13			(567	)

Total Other comprehensive income (loss), net of tax		241			(427	)		—		190			241			(237	)

Comprehensive income (loss)	$	894		$	(110	)	$	—	$	248		$	894		$	138


	September 30, 2017			December 31, 2016
Assets
Current Assets:
Cash and cash equivalents	$	1,815		$	1,863
Receivables from customers, less allowances of $7 in 2017 and $13 in 2016 (K)		1,150			974
Other receivables (G & K)		373			477
Inventories (F)		2,453			2,253
Prepaid expenses and other current assets		357			325

Total current assets		6,148			5,892
Properties, plants, and equipment		11,791			11,572
Less: accumulated depreciation and amortization		6,265			6,073

Properties, plants, and equipment, net		5,526			5,499

Goodwill		5,246			5,148
Deferred income taxes		1,024			1,234
Investment in common stock of Alcoa Corporation (G & N)		—			1,020
Other noncurrent assets		1,293			1,245

Total Assets	$	19,237		$	20,038

Liabilities
Current liabilities:
Short-term borrowings	$	54		$	36
Accounts payable, trade		1,656			1,744
Accrued compensation and retirement costs		379			398
Taxes, including income taxes		74			85
Accrued interest payable		101			153
Other current liabilities		412			329
Long-term debt due within one year		1			4

Total current liabilities		2,677			2,749
Long-term debt, less amount due within one year (L & N)		6,802			8,044
Accrued pension benefits		2,110			2,345
Accrued other postretirement benefits		811			889
Other noncurrent liabilities and deferred credits		876			870

Total liabilities		13,276			14,897

Contingencies and commitments (H)
Equity
Arconic shareholders’ equity:
Preferred stock		55			55
Mandatory convertible preferred stock		3			3
Common stock		442			438
Additional capital		8,294			8,214
Accumulated deficit		(519	)		(1,027	)
Accumulated other comprehensive loss (C)		(2,327	)		(2,568	)

Total Arconic shareholders’ equity		5,948			5,115

Noncontrolling interests		13			26

Total equity		5,961			5,141

Total Liabilities and Equity	$	19,237		$	20,038


	Arconic Shareholders
	Preferred stock		Mandatory convertible preferred stock		Common stock			Additional capital			Retained earnings			Treasury stock			Accumulated other comprehensive loss			Noncontrolling interests			Total Equity
Balance at June 30, 2016	$	55	$	3	$	1,391		$	9,877		$	8,871		$	(2,647	)	$	(5,215	)	$	2,194		$	14,529
Net income		—		—		—			—			166			—			—			20			186
Other comprehensive (loss) income (C)		—		—		—			—			—			—			(643	)		34			(609	)
Cash dividends declared:
Preferred-Class A @ $1.875 per share		—		—		—			—			(1	)		—			—			—			(1	)
Preferred-Class B @ $6.71875 per share		—		—		—			—			(16	)		—			—			—			(16	)
Common @ $0.18 per share		—		—		—			—			(80	)		—			—			—			(80	)
Stock-based compensation		—		—		—			18			—			—			—			—			18
Common stock issued:
compensation plans		—		—		—			(12	)		—			8			—			—			(4	)
Retirement of Treasury stock		—		—		(76	)		(2,563	)		—			2,639			—			—			—
Reverse stock split		—		—		(877	)		877			—			—			—			—			—
Distributions		—		—		—			—			—			—			—			(92	)		(92	)
Other		—		—		—			—			—			—			—			14			14

Balance at September 30, 2016	$	55	$	3	$	438		$	8,197		$	8,940		$	—		$	(5,858	)	$	2,170		$	13,945


	Third quarter ended September 30,					Nine months ended September 30,
	2017		2016			2017		2016
Engineered Products and Solutions	$	10	$	(1	)	$	24	$	16
Global Rolled Products		2		(1	)		76		1
Transportation and Construction Solutions		2		(2	)		11		6

Segment Total		14		(4	)		111		23
Corporate		5		7			7		10

Total Restructuring and other charges	$	19	$	3		$	118	$	33


	Layoff costs			Other exit costs			Total
Reserve balances at December 31, 2015	$	84		$	9		$	93
2016:
Cash payments		(73	)		(13	)		(86	)
Restructuring charges		70			27			97
Other*		(31	)		(14	)		(45	)

Reserve balances at December 31, 2016		50			9			59

2017:
Cash payments		(41	)		(5	)		(46	)
Restructuring charges		54			—			54
Other*		10			(1	)		9

Reserve balances at September 30, 2017	$	73		$	3		$	76


	September 30, 2017		December 31, 2016
Finished goods	$	651	$	625
Work-in-process		1,332		1,144
Purchased raw materials		386		408
Operating supplies		84		76

Total inventories	$	2,453	$	2,253


	September 30, 2023		December 31, 2022
Land and land rights	$	86	$	84
Structures	1,000		986
Machinery and equipment	4,002		3,941
	5,088		5,011
Less: accumulated depreciation and amortization	2,993		2,858
	2,095		2,153
Construction work-in-progress	201		179
Properties, plants, and equipment, net	$	2,296	$	2,332


	September 30, 2023				December 31, 2022
	Carrying value		Fair value		Carrying value		Fair value
Long-term debt	$	3,794	$	3,630	$	4,162	$	4,059


	Third quarter ended September 30, 2016			Nine months ended September 30, 2016
Sales	$	2,075		$	6,028
Cost of goods sold (exclusive of expenses below)		1,714			5,038
Selling, general administrative, and other expenses		46			148
Research and development expenses		8			26
Provision for depreciation, depletion and amortization		180			532
Restructuring and other charges		15			101
Interest expense		7			18
Other income, net		(106	)		(80	)

Income from discontinued operations before income taxes		211			245
Provision for income taxes		91			99

Income from discontinued operations after income taxes		120			146
Less: Net income from discontinued operations attributable to noncontrolling interests		20			58

Net income from discontinued operations	$	100		$	88


	Nine months ended September 30,
	2016
Depreciation, depletion and amortization	$	532
Restructuring and other charges	$	101
Capital expenditures	$	258


	Engineered				Transportation
	Products and		Global Rolled		and Construction		Combined
	Solutions		Products		Solutions		Segment
Third quarter ended
September 30, 2017
Sales:
Third-party sales	$	1,476	$	1,234	$	517	$	3,227
Intersegment sales		—		36		—		36

Total sales	$	1,476	$	1,270	$	517	$	3,263

Profit and loss:
Depreciation and amortization		68		52		13		133
Adjusted EBITDA		312		140		83		535

Third quarter ended
September 30, 2016
Sales:
Third-party sales	$	1,406	$	1,285	$	450	$	3,141
Intersegment sales		—		30		—		30

Total sales	$	1,406	$	1,315	$	450	$	3,171

Profit and loss:
Depreciation and amortization		63		52		12		127
Adjusted EBITDA		296		143		76		515


	September 30, 2017			December 31, 2016
6.50% Bonds, due 2018	$	—		$	250
6.75% Notes, due 2018		—			750
5.72% Notes, due 2019		500			750
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**		(27	)		(32	)

Total debt		6,803			8,048
Less: amount due within one year		1			4

Total long-term debt	$	6,802		$	8,044


	September 30, 2017				December 31, 2016
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,815		1,815	$	1,863	$	1,863
Restricted cash		5		5		15		15
Derivatives - current asset		41		41		14		14
Noncurrent receivables		18		18		21		21
Derivatives - noncurrent asset		24		24		10		10
Available-for-sale securities		106		106		102		102
Investment in common stock of Alcoa Corporation		—		—		1,020		1,020
Short-term borrowings		54		54		36		36
Derivatives - current liability		31		31		5		5
Long-term debt due within one year		1		1		4		4
Derivatives - noncurrent liability		11		11		3		3
Contingent payment related to an acquisition		81		81		78		78
Long-term debt, less amount due within one year		6,802		7,440		8,044		8,519



Period	Total Number of Shares Purchased	Average Price Paid Per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(1)(2)
July 1 - July 31, 2023	—	$	—	—	$	822
August 1 - August 31, 2023	—	$	—	—	$	822
September 1 - September 30, 2023	506,800	$	49.32	506,800	$	797
Total for quarter ended September 30, 2023	506,800	$	49.32	506,800