01—Abstract
Summary
Summary of the 10-K filed February 28, 2017. Cited figures are marked; the original filing is the authoritative source.
Howmet Aerospace Inc. (HWM), formerly known as Arconic Inc., filed its 2016 10-K on February 27, 2017, detailing its performance following a significant separation transaction.
On November 1, 2016, the company spun off its Alumina and Primary Metals segments into a new entity, Alcoa Corporation. Arconic retained its Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions segments, focusing on lightweight metals engineering and manufacturing. For the fiscal year ended December 30, 2016, Arconic reported stable sales of $12.39 billiona, but incurred a net loss of $941 million, or $2.31 per diluted share.
This loss was significantly impacted by costs associated with the separation, including substantial tax valuation allowance charges and restructuring expenses. Despite the net loss, the company highlighted operational improvements, with segment after-tax operating income increasing by 10%b year-over-year. Management expressed a focus on liquidity, balance sheet strengthening, and cost efficiency for future periods.
02—Key points
Key Highlights
- **Alcoa Corporation Separation:** Completed the separation of its upstream Alumina and Primary Metals businesses into a new independent public company, Alcoa Corporation, on November 1, 2016.
- **Stable Revenue, Net Loss:** Reported total sales of $12.39 billion, a slight decrease from the prior year, but incurred a significant net loss of $941 million due to separation costs and tax valuation allowances.
- **Operational Improvement:** Segment after-tax operating income (ATOI) increased by 10% to $1.09 billion, driven by productivity gains across all segments.
- **Key Segment Performance:** Global Rolled Products saw a 7% decline in third-party sales due to specific market factors, while Engineered Products and Solutions grew sales by 7% driven by acquisitions and aerospace demand.
- **Balance Sheet Strengthening:** Total debt decreased by $743 million to $8.08 billion, and cash on hand increased to $1.86 billion.
- **Capital Expenditure Focus:** Capital expenditures were $1.13 billion, with a significant portion allocated to growth projects in aerospace and automotive sectors.
- **Innovation:** Highlighted the development of Arconic Micromill™ technology, recognized with an R&D 100 Award, and secured major contracts with Airbus and Nissan.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 28, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $12.39B$12.41B | −0.2% |
| R&D Expenses | $130.00M$169.00M | −23.1% |
| SG&A Expenses | $924.00M$765.00M | +20.8% |
| Operating Expenses | $11.98B$12.23B | −2.0% |
| Operating Income | $954.00M$628.00M | +51.9% |
| Interest Expense | $499.00M$473.00M | +5.5% |
| Net Income | -$941.00M-$322.00M | −192.2% |
| EPS (Basic) | $-2.31$-0.93 | −148.4% |
| EPS (Diluted) | $-2.31$-0.93 | −148.4% |
| Shares Outstanding (Basic) | 438.00M420.00M | +4.3% |
| Shares Outstanding (Diluted) | 438.00M420.00M | +4.3% |
05—Questions
Frequently Asked Questions
What was the most significant event impacting Arconic in 2016?
The most significant event was the completion of the separation of its upstream Alumina and Primary Metals businesses into Alcoa Corporation on November 1, 2016. This strategic move allowed Arconic to focus on its lightweight metals engineering and manufacturing businesses.
How did the company perform financially in 2016?
Arconic reported stable revenues of $12.39 billion but experienced a net loss of $941 million, primarily due to significant costs related to the separation transaction, including tax valuation allowances and restructuring charges. Despite the net loss, segment operating income showed improvement.
What are Arconic's main business segments?
Arconic operates through three main segments: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions, serving diverse end markets including aerospace, automotive, and building and construction.
What is the company's outlook for 2017?
Management projected stable to slightly down sales for 2017, anticipating continued growth in aerospace and automotive, but facing challenges in commercial transportation and a ramp-down in North American packaging. The focus remains on improving operating performance through cost reductions and margin enhancement.
06—Continue