PITTSBURGH--(BUSINESS WIRE)--Arconic Inc. (NYSE: ARNC) today reported third quarter 2019 results, for which the Company reported revenues of $3.6 billion, up 1% year over year. Organic revenue1 was up 6% year over year on strong volumes across all key markets and favorable pricing in the Engineered Products and Forgings segment, and volume growth in packaging, industrial, and aerospace markets as well as favorable pricing in the Global Rolled Products segment.

Arconic reported net income of $95 million, or $0.21 per share, in the third quarter 2019 versus net income of $161 million, or $0.32 per share, in the third quarter 2018. Net income excluding special items was $260 million, or $0.58 per share, in the third quarter 2019, versus $160 million, or $0.32 per share, in the third quarter 2018. Special items in the third quarter 2019 were $165 million, principally related to charges associated with non-cash asset impairments of $108 million and separation costs.

Third quarter 2019 operating income was $326 million, versus operating income of $345 million in the third quarter 2018. Operating income excluding special items was $475 million, up 36% year over year, as favorable product pricing, higher volume, favorable aluminum prices, and net cost reductions more than offset operational challenges in the aluminum extrusions business and unfavorable product mix.

Arconic Chairman and Chief Executive Officer John Plant said, “In the third quarter 2019, the Arconic team delivered improved quarterly revenue, adjusted operating income, adjusted operating income margin, adjusted free cash flow and adjusted earnings per share on a year-over-year basis. Arconic’s third quarter 2019 return on net assets improved by 550 basis points year over year. We expect this positive year-over-year trend to continue in the fourth quarter. Based on our performance through the first nine months of 2019 and our outlook for the remainder of 2019, we are increasing our full-year adjusted earnings per share guidance for the third time in 2019.”

Arconic ended the third quarter 2019 with cash on hand of $1.3 billion. Cash provided from operations was $52 million; cash used for financing activities totaled $202 million, reflecting the impact of the accelerated share repurchase program of $200 million; and cash provided from investing activities was $117 million. Adjusted Free Cash Flow for the quarter was $154 million.

Third Quarter 2019 Segment Performance

Engineered Products and Forgings (EP&F)

EP&F reported revenue of $1.8 billion, an increase of 7% year over year. Organic revenue1 was up 8%, driven by aerospace engine, defense and commercial transportation growth. Segment operating profit was $363 million, up $79 million or 28% year over year, driven by volume increases, favorable pricing, lower raw material costs and net cost reductions, partially offset by mix. Segment operating profit margin was 20.2%, up 330 basis points year over year.

Global Rolled Products (GRP)

GRP reported revenue of $1.8 billion, down 4% year over year. Organic revenue1 was up 5%. Segment operating profit was $161 million, up $54 million or 50% year over year, driven by favorable pricing in industrial and commercial transportation; volume growth in packaging, industrial and aerospace; favorable aluminum prices; and net cost reductions. These impacts were partially offset by operational challenges at one plant in the aluminum extrusions business and continued costs associated with the transition of Tennessee’s North American packaging business to more profitable industrial products. Segment operating profit margin was 9.1%, up 330 basis points year over year.

Cost Reduction Commitment Increased

The Company has increased the annualized cost reduction commitment to save approximately $280 million on a run-rate basis, versus its $260 million commitment that was provided during its second quarter 2019 earnings announcement. The Company expects to capture approximately $180 million of savings in 2019, versus its $140 million commitment that was provided during its second quarter 2019 earnings announcement.

Executed Cumulative Share Buybacks Totaling $1.1 Billion; $400 Million Authorization Remains

The share buyback of $200 million of common stock announced on August 6, 2019 was completed on October 3, 2019. In total, Arconic has repurchased approximately 53.2 million shares year-to-date in 2019 at a weighted average price of approximately $20.67 per share. Four hundred million dollars remains authorized for share repurchases. Total shares outstanding as of November 1, 2019 were approximately 433 million.

Realignment of Operations

In the third quarter 2019, the Company realigned its operations by eliminating its Transportation and Construction Solutions segment and transferring the Forged Wheels business to the Engineered Products and Forgings segment (formerly named the Engineered Products and Solutions segment) and the Building and Construction Systems business to the Global Rolled Products segment.

Arconic Corporation to be Spin Co.; Separation Remains on Track

The Company continues to target the completion of the separation in the second quarter 2020. We expect the Form 10 filing to be available in the fourth quarter 2019. The Engineered Products and Forgings businesses (engine products, fastening systems, engineered structures and forged wheels) will remain in the existing company (Remain Co.), which will be renamed Howmet Aerospace Inc. at separation. The Global Rolled Products businesses (global rolled products, aluminum extrusions and building and construction systems) will comprise Spin Co. and will be named Arconic Corporation at separation.

Progress on Divestitures

In the third quarter 2019, the Company reached an agreement to sell its aluminum rolling mill in Itapissuma, Brazil for approximately $50 million in cash. The transaction is expected to close in the first quarter 2020. Also in the third quarter 2019, the Company reached an agreement to sell its forgings business in the U.K. for approximately $62 million in cash. The transaction is expected to close in the fourth quarter 2019. The Company recorded a pre-tax $102 million charge in the third quarter 2019 representing the non-cash impairment of the net book value of these businesses. In the fourth quarter 2019, the Company reached an agreement to sell its hard alloy extrusions plant in South Korea for approximately $61 million in cash. The transaction is expected to close in the first quarter 2020. Arconic expects to recognize a $20 to $25 million pre-tax gain upon the sale. On a year-to-date basis, the Company has signed or closed divestitures expected to generate approximately $180 million in net proceeds.

Convertible Notes Matured on October 15, 2019

The Company repaid in cash the aggregate outstanding principal amount of the 1.63% Convertible Senior Notes of approximately $403 million, together with accrued and unpaid interest, on the maturity date, October 15, 2019. No shares of the Company’s common stock were issued in connection with the maturity or the final conversion of the Notes. As of October 15, 2019, the calculation of average diluted shares outstanding will cease to include the approximately 15 million shares of common stock previously attributable to the Notes.

Arconic will hold its quarterly conference call at 10:00 AM Eastern Time on November 5, 2019, to present third quarter 2019 financial results. The call will be webcast via www.arconic.com. Call information and related details are available at www.arconic.com under “Investors”; presentation materials will be available at approximately 8:00 AM Eastern Time on November 5.

About Arconic

Arconic (NYSE: ARNC) creates breakthrough products that shape industries. Working in close partnership with our customers, we solve complex engineering challenges to transform the way we fly, drive, build and power. Through the ingenuity of our people and cutting-edge advanced manufacturing techniques, we deliver these products at a quality and efficiency that ensure customer success and shareholder value. For more information: www.arconic.com. Follow @arconic: Twitter, Instagram, Facebook, LinkedIn and YouTube.