Arconic Reports Fourth Quarter and Full Year 2017 Results

February 5, 2018

Fourth Quarter 2017 Highlights

Revenue of $3.3 billion, up 10% year over year; organic revenue1
up 6% year over year
Net loss attributable to Arconic of $727 million, or $1.51 per share,
versus net loss of $1.3 billion, or $2.91 per share, in the fourth
quarter of 2016
Excluding special items, adjusted income of $152 million, or $0.31 per
share, versus $71 million, or $0.12 per share, in the fourth quarter
of 2016
Consolidated adjusted EBITDA2 of $436 million, up 54% year
over year
Excluding special items, consolidated adjusted EBITDA of $446 million,
up 24% year over year
Net cost savings of 2.1% of revenues

Full Year 2017 Highlights

Revenue of $13.0 billion, up 5% year over year; organic revenue up 5%
year over year
Net loss attributable to Arconic of $74 million, or $0.28 per share,
versus net loss of $941 million, or $2.31 per share, in the full year
2016
Excluding special items, adjusted income of $618 million, or $1.22 per
share, versus $505 million, or $0.98 per share, in 2016
Consolidated adjusted EBITDA of $1.8 billion, up 17% year over year
Excluding special items, consolidated adjusted EBITDA of $1.9 billion,
up 9% year over year
Net cost savings of 1.8% of revenues; reduced SG&A excluding special
items by $111 million
Strengthened balance sheet:
- $1.25 billion debt redemption in 2017
- Year-end cash balance of $2.15 billion

Guidance

Issued Full Year 2018 Guidance*: Revenue $13.4-$13.7 billion, Adjusted
Earnings Per Share $1.45-$1.55, Free Cash Flow ~$500 million

Key Announcements

Announced share repurchase program of up to $500 million and $500
million early debt reduction
Initiated strategy and portfolio review, expected to be complete by
end of 2018
Announced plans to relocate global headquarters out of New York City
in 2018

___________________________________

* Reconciliations of the forward-looking non-GAAP measures to
the most directly comparable GAAP measures are not available without
unreasonable efforts due to the variability and complexity of the
charges and other components excluded from the non-GAAP measures – for
further detail, see “Full Year 2018 Guidance.”

NEW YORK–(BUSINESS WIRE)–Arconic Inc. (NYSE: ARNC) today reported fourth quarter and full-year
2017 results.

The Company recorded fourth quarter 2017 revenue of $3.3 billion, up 10%
year over year, driven by higher volumes across all segments and higher
aluminum prices. Fourth quarter 2017 organic revenue was up 6% year over
year. For full year 2017, revenue was $13.0 billion, up 5% year over
year, driven by higher volumes across all segments and higher aluminum
prices, partially offset by the impact of the planned ramp-down of the
Company’s Tennessee Packaging operations and unfavorable product pricing
and mix. Full year 2017 organic revenue was up 5% year over year.

Net loss attributable to Arconic in the fourth quarter was $727 million,
or $1.51 per share. These results include $879 million in special items,
principally due to impairments of goodwill in the forgings and
extrusions business and assets in the Latin America extrusions business,
the impact of U.S. tax reform, and reduction of liabilities for a
contingent earn-out and a separation-related guarantee. For the full
year 2017, the Company reported 2017 net loss attributable to Arconic of
$74 million, or $0.28 per share.

Excluding special items, fourth quarter 2017 adjusted income was $152
million, or $0.31 per share, driven by net cost savings and higher
volumes, which were partially offset by unfavorable product pricing and
mix. Excluding the impact of special items, full year 2017 adjusted
income was $618 million, or $1.22 per share.

Fourth quarter 2017 Consolidated adjusted EBITDA was $436 million, up
54% year over year. Consolidated adjusted EBITDA excluding special items
was $446 million, up 24% year over year. Consolidated adjusted EBITDA
margin excluding special items was 13.6%, up 150 basis points year over
year, including a 190 basis point negative impact of higher aluminum
prices, last-in-first-out (LIFO) and metal lag.

Full year 2017 Consolidated adjusted EBITDA was $1.8 billion, up 17%
year over year. Consolidated adjusted EBITDA excluding special items was
$1.9 billion, up 9% year over year. Consolidated adjusted EBITDA margin
excluding special items was 14.3%, up 60 basis points year over year,
including a 110 basis point year-over-year negative impact of higher
aluminum prices, LIFO and metal lag.

Arconic continued its progress on cost reduction; in the fourth quarter,
the Company delivered net cost savings of $68 million or 2.1% of
revenue, and for the full year 2017, net cost savings of $232 million or
1.8% of revenue. Arconic delivered an improvement of $111 million year
over year in selling, general and administrative expenses (SG&A)
excluding special items.

Arconic Chief Executive Officer Chip Blankenship said, “In 2017, Arconic
made progress on growing revenue and profits and taking out cost.
However, a significant opportunity for improvement remains. Our
challenge is to reinforce strengths, close gaps and identify new
opportunities. My goal is to ensure that all of our businesses execute
consistently and deliver outstanding returns for our shareholders.”

Blankenship continued, “Arconic has foundational strengths and
incredible potential. I am convinced that if we stay focused on four
priorities – customers, people, operational excellence and technology –
we will deliver on Arconic’s potential.”

In the fourth quarter 2017, cash from operations was $612 million; cash
used for financing activities totaled $45 million; and cash used for
investing activities was $236 million. Free Cash Flow for the quarter
was $376 million. In 2017, Arconic redeemed $1.25 billion of debt,
ending the year with debt of $6.8 billion and cash on hand of $2.15
billion. Cash from operations in 2017 was $701 million. Free Cash Flow
for the year was $105 million.

Fourth Quarter 2017 Segment Performance

Engineered Products and Solutions (EP&S)

EP&S reported revenue of $1.5 billion, an increase of 6% year over year,
and Adjusted EBITDA of $296 million, up $31 million year over year.
Increased aerospace volume in both engines and airframes coupled with
strong net cost savings more than offset unfavorable price and mix.
Adjusted EBITDA margin was 19.9%, up 110 basis points year over year.

Continuing Arconic’s efforts to lower its cost profile, EP&S
consolidated its organizational structure, collapsing four business
units into three and reducing layers. These changes are expected to save
approximately $15 million in 2018 and create a streamlined organization
to accelerate progress and deliver for customers and shareholders.

Global Rolled Products (GRP)

GRP reported revenue of $1.2 billion, an increase of 15% year over year.
Organic revenue was up 7%. Adjusted EBITDA was $124 million, up $8
million year over year, driven by strong automotive volume and net cost
savings, partially offset by reduced aerospace wide-body build rates,
airframe destocking, pricing pressure in regional specialties, and the
planned Tennessee Packaging ramp down. Adjusted EBITDA margin was 10.0%,
down 80 basis points year over year, driven by a 160 basis point
negative impact of higher aluminum prices.

Transportation and Construction Solutions (TCS)

TCS delivered revenue of $518 million, an increase of 14% year over
year. Organic revenue was up 8%. Adjusted EBITDA was $84 million, up $9
million year over year, as higher volume and cost reductions more than
offset headwinds, including unfavorable price and mix and higher
aluminum prices. Adjusted EBITDA margin was 16.2%, down 20 basis points
year over year, including a 170 basis point negative impact of higher
aluminum prices.

Full Year 2017 Segment Performance

Segment performance in 2017 included the following:

EP&S revenue of $5.9 billion, up 4% year over year, Adjusted EBITDA of
$1.2 billion, up 2% year over year, and an Adjusted EBITDA margin of
20.6%, down 30 basis points year over year
GRP revenue of $5.0 billion, up 3% year over year, organic revenue up
5% year over year, Adjusted EBITDA of $599 million, up 4% year over
year, and an Adjusted EBITDA margin of 12.0%, up 10 basis points year
over year, including a 140 basis point negative impact of higher
aluminum prices
TCS revenue of $2.0 billion, up 10% year over year, organic revenue up
7% year over year, Adjusted EBITDA of $321 million, up 10% year over
year, and an Adjusted EBITDA margin of 16.2%, up 10 basis points year
over year, including a 120 basis point negative impact of higher
aluminum prices

Share Repurchase Program and Early Debt Reduction

To further enhance the Company’s financial position and return capital
to shareholders, Arconic’s Board of Directors has authorized a share
repurchase program of up to $500 million of its outstanding common stock
and a $500 million early debt reduction. Under the share repurchase
program, the Company may repurchase shares from time to time, in
amounts, at prices, and at such times as the Company deems appropriate.
Repurchases will be subject to market conditions, legal requirements and
other considerations. The Company is not obligated to repurchase any
specific number of shares or to do so at any particular time, and the
share repurchase program may be suspended, modified or terminated at any
time without prior notice. The Company currently has approximately 483
million shares of common stock outstanding.

In addition, Arconic intends to redeem in March 2018 all of its
outstanding 5.72% Notes due in 2019 in accordance with the terms of the
notes and the Indenture, dated as of September 30, 1993, between Arconic
and The Bank of New York Mellon Trust Company, N.A. as trustee. As of
February 5, 2018, the aggregate outstanding principal amount of the
Notes is $500 million.

Strategy and Portfolio Review

Chip Blankenship, who officially joined the Company on January 15, has
initiated a review of Arconic’s strategy and portfolio. The Company
expects to complete this review by the end of the year.

Global Headquarters Relocation

As part of the Company’s continued drive to reduce corporate overhead,
Arconic announced that it will relocate its global headquarters in 2018
out of New York City to a more cost-effective location. The Company
expects to complete the move by the end of 2018.

Full Year 2018 Guidance*

Arconic is providing the following 2018 guidance:

Full Year 2018
Revenue	$13.4-$13.7 billion
Adjusted Earnings Per Share	$1.45-$1.55
Free Cash Flow	~$500 million

___________________________________

* Arconic has not provided a reconciliation of the forward-looking
financial measures of adjusted earnings per share and free cash flow to
the most directly comparable financial measures prepared in accordance
with accounting principles generally accepted in the United States of
America (GAAP) because Arconic is unable to quantify certain amounts
that would be required to be included in the GAAP measures without
unreasonable efforts, and Arconic believes such reconciliations would
imply a degree of precision that would be confusing or misleading to
investors. In particular, reconciliations of the forward-looking
non-GAAP financial measures to the most directly comparable GAAP
measures 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 will hold its quarterly conference call at 10:00 AM Eastern
Time on February 5, 2018 to present quarterly and full year results. The
meeting 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 February 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.

Dissemination of Company Information

Arconic intends to make future announcements regarding Company
developments and financial performance through its website at www.arconic.com.

Forward-Looking Statements

This release contains statements that relate to future events and
expectations and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
"anticipates," "believes," "could," "estimates," "expects," "forecasts,"
"goal," "guidance," "intends," "may," "outlook," "plans," "projects,"
"seeks," "sees," "should," "targets," "will," "would," or other words of
similar meaning. All statements that reflect Arconic’s expectations,
assumptions or projections about the future, other than statements of
historical fact, are forward-looking statements, including, without
limitation, forecasts and expectations relating to the growth of the
aerospace, automotive, commercial transportation and other end markets;
statements and guidance regarding future financial results or operating
performance; statements about Arconic's strategies, outlook, business
and financial prospects; and statements regarding potential share gains.
These statements reflect beliefs and assumptions that are based on
Arconic’s perception of historical trends, current conditions and
expected future developments, as well as other factors management
believes are appropriate in the circumstances. Forward-looking
statements are not guarantees of future performance and are subject to
risks, uncertainties, and changes in circumstances that are difficult to
predict. Although Arconic believes that the expectations reflected in
any forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and it is
possible that actual results may differ materially from those indicated
by these forward-looking statements due to a variety of risks and
uncertainties. Such risks and uncertainties include, but are not limited
to: (a) deterioration in global economic and financial market conditions
generally; (b) unfavorable changes in the markets served by Arconic; (c)
the inability to achieve the level of revenue growth, cash generation,
cost savings, improvement in profitability and margins, fiscal
discipline, or strengthening of competitiveness and operations
anticipated or targeted; (d) changes in discount rates or investment
returns on pension assets; (e) Arconic’s inability to realize expected
benefits, in each case as planned and by targeted completion dates, from
acquisitions, divestitures, facility closures, curtailments, expansions,
or joint ventures; (f) the impact of cyber attacks and potential
information technology or data security breaches; (g) any manufacturing
difficulties or other issues that impact product performance, quality or
safety; (h) political, economic, and regulatory risks in the countries
in which Arconic operates or sells products; (i) material adverse
changes in aluminum industry conditions, including fluctuations in
London Metal Exchange-based aluminum prices; (j) the impact of changes
in foreign currency exchange rates on costs and results; (k) the outcome
of contingencies, including legal proceedings, government or regulatory
investigations, and environmental remediation, which can expose Arconic
to substantial costs and liabilities; and (l) the other risk factors
summarized in Arconic’s Form 10-K for the year ended December 31, 2016,
Arconic’s Form 10-Q for the quarter ended June 30, 2017 and other
reports filed with the U.S. Securities and Exchange Commission (SEC).
Arconic disclaims any intention or obligation to update publicly any
forward-looking statements, whether in response to new information,
future events, or otherwise, except as required by applicable law.
Market projections are subject to the risks discussed above and other
risks in the market.

Non-GAAP Financial Measures

Some of the information included in this release is derived from
Arconic’s consolidated financial information but is not presented in
Arconic’s financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP).
Certain of these data are considered “non-GAAP financial measures” under
SEC rules. These non-GAAP financial measures supplement our GAAP
disclosures and should not be considered an alternative to the GAAP
measure. Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this release and on
our website at www.arconic.com under
the “Investors” section.

___________________________________

1 Organic revenue is U.S. GAAP revenue adjusted for
Tennessee Packaging (due to its planned phase-down), divestitures, and
changes in aluminum prices and foreign currency exchange rates relative
to prior year period.

2 Arconic’s definition of Adjusted EBITDA (earnings
before interest, taxes, depreciation, and amortization) is net margin
plus an add-back for depreciation and amortization. Net margin is
equivalent to sales minus the following items: cost of goods sold;
selling, general administrative and other expenses; research and
development expenses; and provision for depreciation and amortization.
The Adjusted EBITDA presented may not be comparable to similarly titled
measures of other companies.

Arconic and subsidiaries
Statement of Consolidated Operations (unaudited)
(in millions, except per-share and share amounts)
Quarter ended
December 31,	September 30,	December 31,
2017	2017	2016 (1)
Sales	$	3,271	$	3,236	$	2,967
Cost of goods sold (exclusive of expenses below)	2,656	2,626	2,375
Selling, general administrative, and other expenses	151	155	269
Research and development expenses	28	25	39
Provision for depreciation and amortization	141	140	133
Impairment of goodwill	719	–	–
Restructuring and other charges	47	19	122
Operating (loss) income	(471	)	271	29
Interest expense	98	100	128
Other income, net (2)	(114	)	(1	)	(54	)
(Loss) income from continuing operations before income taxes	(455	)	172	(45	)
Provision for income taxes	272	53	1,246
(Loss) income from continuing operations after income taxes	(727	)	119	(1,291	)
Income from discontinued operations after income taxes(1)	–	–	38
Net (loss) income	(727	)	119	(1,253	)
Less: Net income from discontinued operations attributable to noncontrolling interests(1)	–	–	5
NET (LOSS) INCOME ATTRIBUTABLE TO ARCONIC	$	(727	)	$	119	$	(1,258	)
(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO ARCONIC COMMON SHAREHOLDERS:
Basic(4)(5):
Continuing operations	$	(1.51	)	$	0.23	$	(2.98	)
Discontinued operations	–	–	0.07
Net (loss) income	$	(1.51	)	$	0.23	$	(2.91	)
Average number of shares(3)(5)	481,339,090	441,512,709	438,486,935
Diluted(4)(5):
Continuing operations	$	(1.51	)	$	0.22	$	(2.98	)
Discontinued operations	–	–	0.07
Net (loss) income	$	(1.51	)	$	0.22	$	(2.91	)
Average number of shares(3)(5)	481,339,090	462,055,864	438,486,935

(1)	On November 1, 2016, the former Alcoa Inc. was separated into two standalone, publicly-traded companies, Arconic and Alcoa Corporation, by means of a pro rata distribution of 80.1 percent of the outstanding common stock of Alcoa Corporation to Alcoa Inc. shareholders. Accordingly, the results of operations of Alcoa Corporation have been reflected as discontinued operations for the quarter ended December 31, 2016.
(2)	Other income, net for the quarter ended December 31, 2017 included an adjustment of $81 to the contingent earn-out liability related to the 2014 acquisition of Firth Rixson (Firth Rixson earn-out) and an adjustment of $25 to a separation-related guarantee liability. Other income, net for the quarter ended December 31, 2016 included an adjustment of $56 to the Firth Rixson earn-out.
(3)	In the fourth quarter of 2017, all outstanding depositary shares (each depositary share representing a 1/10 interest in a share of the mandatory convertible preferred stock) were converted into 39 million common shares. As a result, the basic and diluted average number of shares for the quarter ended December 31, 2017 includes the 39 million common shares.
(4)	In order to calculate both basic and diluted (loss) earnings per share, preferred stock dividends of $18 and $17 for the quarters ended September 30, 2017 and December 31, 2016, respectively, need to be subtracted from Net (loss) income attributable to Arconic.
(5)	In the quarters ended December 31, 2017 and December 31, 2016, the diluted average number of shares does not include any share equivalents (21 million and 18 million, respectively) related to outstanding employee stock options and awards and shares underlying outstanding convertible debt (acquired through the acquisition of RTI International Metals, Inc (“RTI”)) as their effect was anti-dilutive. In the quarter ended September 30, 2017, the difference between the respective diluted average number of shares and the respective basic average number of shares relates to share equivalents (20 million) on outstanding employee stock options and awards and shares underlying outstanding convertible debt (acquired through the acquisition of RTI).

Arconic and subsidiaries
Statement of Consolidated Operations (unaudited)
(in millions, except per-share and share amounts)
Year ended
December 31,	December 31,
2017	2016 (1)
Sales	$	12,960	$	12,394
Cost of goods sold (exclusive of expenses below)	10,357	9,811
Selling, general administrative, and other expenses	731	942
Research and development expenses	111	132
Provision for depreciation and amortization	551	535
Impairment of goodwill	719	–
Restructuring and other charges	165	155
Operating income	326	819
Interest expense(2)	496	499
Other income, net(3)	(640	)	(94	)
Income from continuing operations before income taxes	470	414
Provision for income taxes	544	1,476
Loss from continuing operations after income taxes	(74	)	(1,062	)
Income from discontinued operations after income taxes(1)	–	184
Net loss	(74	)	(878	)
Less: Net income from discontinued operations attributable to noncontrolling interests(1)	–	63
NET LOSS ATTRIBUTABLE TO ARCONIC	$	(74	)	$	(941	)
LOSS PER SHARE ATTRIBUTABLE TO ARCONIC COMMON SHAREHOLDERS:
Basic(5):
Continuing operations	$	(0.28	)	$	(2.58	)
Discontinued operations	–	0.27
Net loss	$	(0.28	)	$	(2.31	)
Average number of shares(4)(6)	450,875,943	438,275,079
Diluted(5):
Continuing operations	$	(0.28	)	$	(2.58	)
Discontinued operations	–	0.27
Net loss	$	(0.28	)	$	(2.31	)
Average number of shares(4)(6)	450,875,943	438,275,079
Common stock outstanding at the end of the period(4)	481,416,537	438,519,780