PITTSBURGH--(BUSINESS WIRE)--Arconic Corporation (NYSE: ARNC) today announced second quarter 2020 results, with reported revenue of $1.2 billion, down 38% year over year on weaker volumes across all segments and most end markets primarily due to the impact of the COVID-19 pandemic. The Company reported a net loss of $92 million, or $0.84 per share, in second quarter 2020 compared with net income of $5 million, or $0.04 per share, in second quarter 2019. The second quarter 2020 net loss included $76 million of after-tax special items primarily related to a non-cash charge to annuitize U.K. pension obligations, debt issuance costs, plant closure costs, and the previously announced restructuring. Second quarter 2020 Adjusted EBITDA was $94 million compared with $211 million in second quarter 2019 primarily as a result of lower volumes due to the impact of the COVID-19 pandemic partly mitigated by cost reduction actions.
Tim Myers, Chief Executive Officer, commented, “As we launched a new company in the midst of a global pandemic, we quickly responded to keep our employees safe and continue supply to our customers. Additionally, we implemented strategic and financial actions to conserve cash and maintain our strong position in the markets we serve, which will enable us to benefit from strong secular growth trends.”
Arconic began operating as a standalone company on April 1, when sudden declines in critical end markets due to the COVID-19 pandemic shut down many of its customers’ production facilities around the world. The Company announced $200 million of cash conservation actions in early April to right-size its highly variable cost structure for the swings in demand, which has since been increased to $250 million.
In addition to implementing cash conservation actions, Arconic restructured its balance sheet to be more flexible, increase liquidity, and better mitigate impacts of the global pandemic. Arconic also addressed a legacy pension obligation, reducing its gross liability by approximately $250 million primarily through the annuitization of a portion of the U.K. pension obligation.
Mr. Myers said, “I’m proud of the way the whole Arconic team has continued to take all the right actions to position this Company for growth, and I’d like to thank our employees for their commitment in staying focused on these objectives. Going forward, we will continue to:
- Grow organic volumes in attractive end markets;
- Drive cost savings, increase scrap utilization, and capture network efficiencies across all our facilities; and
- Actively manage our legacy obligations.
These actions position Arconic to benefit from the global megatrends driving growth: automotive light-weighting, demand for alternatives to plastic packaging, and the focus on energy-efficiency in building and construction.”
Arconic ended the second quarter of 2020 with cash on hand of $595 million and total liquidity of approximately $1.3 billion.
Second Quarter Segment Performance
Revenue by Segment ($ in millions)(1)
| Quarter ended | |||||||||
| June 30, 2020 | June 30, 2019 | ||||||||
| Rolled Products | $ | 880 | $ | 1,486 | |||||
| Building and Construction Systems | 230 | 292 | |||||||
| Extrusions | 81 | 145 | |||||||
| (1) | The difference between segment totals and consolidated amounts is in Corporate. |
| Quarter ended | ||||||||||
| June 30, 2020 | June 30, 2019 | |||||||||
| Rolled Products | $ | 78 | $ | 185 | ||||||
| Building and Construction Systems | 38 | 38 | ||||||||
| Extrusions | (13) | – | ||||||||
| Subtotal | 103 | 223 | ||||||||
| Corporate | (9) | (12) | ||||||||
| Adjusted EBITDA | $ | 94 | $ | 211 | ||||||
Updated Response to COVID-19 Pandemic
Arconic increased its previously announced cash conservation actions to $250 million from $200 million in response to the COVID-19 pandemic. Those actions now include $200 million related to temporary salary reductions, 10% salaried headcount reduction, and operational schedule optimization, and a $50 million reduction in capital expenditures for FY2020. Of the $200 million in cost actions, $100 million are structural in nature.
Recapitalization Transaction
On May 13, 2020, Arconic closed on its new capital structure that better positions the Company to weather the swings in cash needs as the end markets move through the cycle. The recapitalization transaction was comprised of a newly issued $700 million first lien note due 2025 with a 6.0% interest rate. The Company used the proceeds to repay the outstanding $600 million of term loan B and added the remaining approximately $100 million in cash to the balance sheet. The Company also replaced its cash flow revolver with an undrawn $800 million asset-backed lending facility.
United Kingdom Pension Annuitization
In second quarter 2020, the Company successfully reduced its gross pension obligation by approximately $250 million primarily through the purchase of a group annuity contract for certain pensioners. This transaction mitigates future mortality, inflation and yield curve risk. This action required approximately $10 million in funding during the quarter and resulted in a $55 million non-cash settlement charge primarily related to the use of surplus for the buyout premium and the acceleration of legacy pension actuarial losses.
Arconic will hold its quarterly conference call at 10:00 AM Eastern Daylight Time on August 4, 2020, to present second quarter 2020 financial results. The call will be webcast on the Arconic website. Call information and related details are available at www.arconic.com under “Investors.”
About Arconic
Arconic Corporation (NYSE: ARNC), headquartered in Pittsburgh, Pennsylvania, is a leading provider of aluminum sheet, plate and extrusions, as well as innovative architectural products, that advance the ground transportation, aerospace, industrial, packaging and building and construction markets.
For more information: www.arconic.com.
