PITTSBURGH--(BUSINESS WIRE)--Arconic Corporation (NYSE: ARNC) today announced third quarter 2020 results, with reported revenue of $1.4 billion, up 19% from the prior quarter due to strength in automotive end-market volumes which recovered fully from the second quarter and exceeded third quarter 2019 levels. Year over year, revenues were down 22% reflecting weaker volumes across all end markets other than automotive primarily due to the impact of the pandemic. The Company reported net income of $5 million, or $0.05 per share, in third quarter 2020 compared with a net loss of $24 million, or $0.22 per share, in third quarter 2019.
Third quarter 2020 Adjusted EBITDA was $165 million, which was impacted by the pandemic and partly mitigated by cost reduction actions. Adjusted EBITDA margin was 11.7% primarily due to the proactive cost reduction actions. Cash provided from operations was $240 million resulting in quarter-end cash on hand of $802 million. The Company ended the quarter with total available liquidity of approximately $1.5 billion.
Tim Myers, Chief Executive Officer, commented, “This quarter demonstrated the positive impact our strategic and financial actions made in response to ongoing macro challenges. Our continued execution on cash conservation and productivity measures instituted earlier in the year combined with recovery in North American automotive production resulted in the large sequential increase in Adjusted EBITDA and operating cash flow compared to the prior quarter.”
Mr. Myers continued, “The steps we took to strengthen our financial position combined with the strong recovery of automotive demand and our employees’ hard work enabled us to end the temporary salary reductions and reinstate the 401k match for all impacted employees. While there is uncertainty in the global economy, we demonstrated our agility in responding to challenges quickly and effectively. I appreciate the sacrifices made by our employees and I’m grateful for their continued commitment during these last two quarters to strengthen our company.”
Outlook
The Company expects full-year 2020 revenue to be in a range of $5.6 billion to $5.7 billion (assuming LME aluminum price of $1,660/mt and Midwest Premium of $270/mt for the full year). Adjusted EBITDA for the full-year 2020 is expected to be in a range of $610 million to $630 million. Cumulative free cash flow for Q2 2020 – Q4 2020 is expected to be in a range of $150 million to $200 million.
Changes in Inventory Accounting and Adjusted EBITDA Measures
During the third quarter of 2020, the Company changed its inventory cost method to average cost for all U.S. inventories previously carried at last-in, first-out (“LIFO”) cost. The Company’s heritage on LIFO extends back to 1955 as an aluminum producer and as the Company has changed, the use of LIFO does not fully align with our operations as an aluminum converter. The Company determined that as a result of its recent separation from its former parent that the environment was appropriate for the Company to simplify its inventory cost accounting method. Management believes the average cost method more closely reflects the physical flow of inventories, improves comparability of the Company’s operating results with its industry peers, and provides an increased level of consistency in the measurement of inventories in the Company’s consolidated financial statements. This will result in both alignment with management’s internal evaluation of the business and provide greater visibility into the Company’s operating results. The impact of this change will not have a current cash tax impact considering the Company’s significant tax attributes primarily related to pension, other postretirement benefits, and environmental liabilities. The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to all prior periods presented in the Company’s consolidated financial statements. The effect of this change in accounting principle as reported under average cost in third quarter 2020 compared with the amount had it continued to be reported under LIFO was a decrease of $14 million to cost of goods sold, comprised of a $26 million benefit for the elimination of the incremental LIFO cost associated with inventory sold during the period and a $12 million charge to establish the incremental cost on an average cost basis for inventory sold during the period. Accordingly, effective in the third quarter of 2020, management refined the Company’s Adjusted EBITDA measure and Segment Adjusted EBITDA measure to remove the impact of metal price lag, which was negative $16 million in the third quarter. This change was made to further enhance the transparency and visibility of the underlying operating performance of each segment by removing the volatility associated with metal prices.
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.
