01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
This 10-K filing for Arconic Inc. (now Howmet Aerospace Inc.) for the fiscal year ending December 31, 2019, details significant corporate restructuring, including the planned separation of the company into two independent entities: Howmet Aerospace Inc. (focused on Engineered Products and Forgings) and Arconic Corporation (focused on Global Rolled Products).
This separation was targeted for April 1, 2020. The company reported a 1% increase in sales to $14.2 billiona, driven by growth in aerospace, packaging, commercial transportation, and industrial sectors. Segment operating profit saw a significant increase of 27% due to favorable pricing, cost savings, and higher volumes.
Key financial highlights include cash from operations of $406 millionb and a reduction in total debt by $390 million to $5.94 billion. The company also engaged in substantial share repurchases totaling $1.15 billion during the year.
Significant restructuring and other charges of $620 millionc were incurred, primarily related to asset impairments and layoff costs, impacting profitability for the period. The company faces ongoing litigation related to the Grenfell Tower fire, with an uncertain financial outcome.
02—Key points
Key Highlights
- Planned separation into two independent companies: Howmet Aerospace Inc. (EP&F) and Arconic Corporation (GRP), targeting completion April 1, 2020.
- Reported sales of $14.2 billion, a 1% increase year-over-year, driven by growth in aerospace, packaging, commercial transportation, and industrial markets.
- Segment operating profit increased by 27% to $2.015 billion, benefiting from improved pricing, cost savings, and higher volumes.
- Generated $406 million in cash from operations.
- Reduced total debt by $390 million to $5.94 billion.
- Executed significant share repurchases totaling $1.15 billion during 2019.
- Incurred $620 million in restructuring and other charges, primarily for asset impairments and layoffs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $7.10B$6.78B | +4.7% |
| R&D Expenses | $28.00M$41.00M | −31.7% |
| SG&A Expenses | $400.00M$371.00M | +7.8% |
| Operating Income | $579.00M$775.00M | −25.3% |
| Interest Expense | $338.00M$377.00M | −10.3% |
| Net Income | $470.00M$642.00M | −26.8% |
| EPS (Basic) | $1.05$1.33 | −21.1% |
| EPS (Diluted) | $1.03$1.30 | −20.8% |
| Shares Outstanding (Basic) | 446.00M483.00M | −7.7% |
| Shares Outstanding (Diluted) | 463.00M503.00M | −8.0% |
05—Questions
Frequently Asked Questions
What is the most significant event discussed in this filing?
The most significant event discussed is the planned separation of Arconic Inc. into two independent publicly-traded companies: Howmet Aerospace Inc. (comprising Engineered Products and Forgings businesses) and Arconic Corporation (comprising Global Rolled Products businesses). This separation was targeted for completion on April 1, 2020.
How did the company perform financially in 2019?
In 2019, Arconic reported sales of $14.2 billion, a 1% increase from 2018. Net income was $470 million, or $1.03 per diluted share. Segment operating profit significantly improved by 27% to $2.015 billion due to favorable pricing, cost savings, and higher volumes. The company also managed its debt effectively, reducing it by $390 million to $5.94 billion.
What are the key risks identified in the filing?
The company faces several risks, including cyclicality in its end markets (aerospace, automotive, etc.), significant competition, potential manufacturing difficulties, product liability claims (notably related to the Grenfell Tower fire), global economic and geopolitical uncertainties, cybersecurity threats, and the successful execution of the planned separation. The company also notes potential impacts from raw material cost fluctuations and environmental matters.
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