PITTSBURGH--(BUSINESS WIRE)--Arconic Inc. (NYSE: ARNC) today reported fourth quarter 2019 and full year 2019 results. The Company reported fourth quarter revenues of $3.4 billion, down 2% year over year. Organic revenue1 was up 1% year over year on growth in the aerospace, packaging and industrial markets and favorable product pricing, largely offset by weakness in the automotive, commercial transportation, and building and construction markets.

Arconic reported net income of $309 million, or $0.70 per share, in the fourth quarter 2019 versus net income of $218 million, or $0.44 per share, in the fourth quarter 2018. Net income excluding special items was $234 million, or $0.53 per share, in the fourth quarter 2019, versus $162 million, or $0.33 per share, in the fourth quarter 2018. Net income in the fourth quarter 2019 included $75 million of income from Special items, including discrete and special tax items principally related to U.S. tax basis adjustments to foreign subsidiaries, partially offset by separation costs. Full year 2019 net income was $470 million, or $1.03 per share, versus net income of $642 million, or $1.30 per share, in the full year 2018. Full year 2019 net income excluding special items was $971 million, or $2.11 per share, versus $676 million, or $1.36 per share, in the full year 2018. Net income in the full year 2019 included $501 million of expenses from Special items, principally related to charges associated with non-cash asset impairments and separation costs, partially offset by discrete and special tax items principally related to U.S. tax basis adjustments to foreign subsidiaries.

Fourth quarter 2019 operating income was $416 million, versus operating income of $323 million in the fourth quarter 2018. Operating income excluding special items was $444 million, up 37% year over year, driven by net cost reductions, favorable product pricing, and favorable aluminum and raw material costs, partially offset by lower volumes in automotive and commercial transportation. Full year 2019 operating income was $1.0 billion versus $1.3 billion in the full year 2018. Operating income excluding special items for full year 2019 was $1.8 billion versus $1.4 billion in the full year 2018, driven by favorable product pricing; net cost reductions; volume growth in aerospace, packaging and commercial transportation markets; and favorable aluminum and raw material costs. These impacts were partially offset by unfavorable product mix.

Arconic Chairman and Chief Executive Officer John Plant said, “In 2019, the Arconic team delivered improved revenue, adjusted operating income, adjusted operating income margin, adjusted free cash flow and adjusted earnings per share. Arconic’s 2019 return on net assets improved by 450 basis points year over year to 13.7%.”

Arconic ended the year with a cash balance2 of $1.7 billion. For the full year 2019 and 2018: Cash provided from operations was $406 million and $217 million, respectively; cash used for financing activities totaled $1.6 billion and $649 million, respectively, as full year 2019 reflected the impact of the share repurchase programs totaling $1.15 billion; and cash provided from investing activities was $583 million and $565 million, respectively. Adjusted Free Cash Flow for the full year 2019 was $815 million, up 75% from full year 2018. Adjusted Free Cash Flow excluding separation costs for the full year 2019 was $870 million, up 87% from full year 2018.

Fourth Quarter 2019 Segment Performance

Engineered Products and Forgings (EP&F)

EP&F reported revenue of $1.7 billion, an increase of 1% year over year. Organic revenue1 was up 2%, driven by aerospace growth, partially offset by weakness in commercial transportation. Segment operating profit was $354 million, up $86 million or 32% year over year, driven by net cost reductions, favorable product pricing, lower raw material costs and volume increases, partially offset by mix. Segment operating profit margin was 20.4%, up 480 basis points year over year.

Global Rolled Products (GRP)

GRP reported revenue of $1.7 billion, down 5% year over year. Organic revenue1 was flat year over year. Segment operating profit was $150 million, up $57 million or 61% year over year, driven by net cost reductions, favorable aluminum prices, favorable pricing in industrial and commercial transportation, and the transition of Tennessee’s North American packaging business to more profitable industrial products. These impacts were partially offset by weakness in automotive, commercial transportation and building and construction markets. Segment operating profit margin was 9.0%, up 370 basis points year over year.

Full Year 2019 Segment Performance

Segment performance in 2019 included the following:

• EP&F revenue of $7.1 billion, up 5% year over year; organic revenue1 up 6% year over year; segment operating profit was $1.4 billion, up $285 million year over year; segment operating profit margin was 19.6%, up 330 basis points year over year.
• GRP revenue of $7.1 billion, down 2% year over year; organic revenue1 up 6% year over year; segment operating profit was $625 million, up $144 million year over year; segment operating profit margin was 8.8%, up 210 basis points year over year.

2020 Guidance*

Arconic is providing the following 2020 guidance:

Arconic expects first quarter 2020 Earnings Per Share Excluding Special Items to be in a range of $0.47-$0.53.

* All guidance excludes separation impacts. Arconic has not provided reconciliations of the forward-looking non-GAAP financial measures, such as earnings per share excluding special items and adjusted free cash flow, to the most directly comparable GAAP financial measures. Such reconciliations are not available without unreasonable efforts due to the variability and complexity with respect to the charges and other components excluded from the non-GAAP measures, such as the effects of foreign currency movements, equity income, gains or losses on sales of assets, taxes and any future restructuring or impairment charges. These reconciling items are in addition to the inherent variability already included in the GAAP measures, which includes, but is not limited to, price/mix and volume. Arconic believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Cost Reduction Commitment Update

The Company expects annual run rate operating costs to be reduced by approximately $300 million on a run-rate basis. The Company captured approximately $213 million of savings in full year 2019.

Executed Cumulative Share Buybacks Totaling $1.15 Billion; $350 Million Authorization Remains

During the fourth quarter 2019, the Company repurchased approximately 1.6 million shares of its common stock for $50 million. In total, Arconic repurchased approximately 54.9 million shares in full year 2019 at a weighted average price of approximately $20.97 per share. Three hundred fifty million dollars remains authorized for share repurchases. Total diluted shares as of the end of 2019 were approximately 440 million.

Targeting Separation Completion April 1, 2020

The Company expects the separation to be complete before the opening of the market on April 1, 2020. The separation remains subject to the satisfaction of certain conditions and may change if certain conditions are not satisfied by that date, as described in Arconic Corporation’s preliminary information statement filed with the Form 10.

Howmet Aerospace Inc. (Remain Co.) and Arconic Corporation (Spin Co.) will hold Investor Days on February 25, 2020, both of which will be available via webcast. 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 and change its stock ticker from “ARNC” to “HWM.” 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 and apply for authorization to list its common stock on the New York Stock Exchange under the symbol “ARNC.”

On January 13, 2020, the Company entered into an employment letter agreement with Timothy D. Myers providing for his appointment as the Chief Executive Officer of Arconic Corporation effective upon its legal separation from the Company. Until separation, Mr. Myers will continue to serve as Executive Vice President and Group President, Global Rolled Products, which includes Extrusions and Building and Construction Systems.

The separation does not trigger incremental pension cash contributions.

Progress on Divestitures

In the fourth quarter 2019, the Company completed the previously announced sale of its forgings business in the U.K. for net proceeds of $59 million in cash. The Company continues to expect to close the previously announced sale of its aluminum rolling mill in Itapissuma, Brazil in the first quarter 2020 for approximately $50 million in cash. The Company also expects to close the previously announced sale of its hard alloy extrusions plant in South Korea in the first quarter 2020 for approximately $61 million in cash. In 2019, the Company signed or closed divestitures expected to generate approximately $190 million in net proceeds.

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.