(dollars in millions, except per-share amounts; shipments in thousands of metric tons (kmt))
References to "ParentCo" refer toArconic Inc. , aDelaware corporation, and its consolidated subsidiaries (throughMarch 31, 2020 , at which time it was renamedHowmet Aerospace Inc. ("Howmet")). OnApril 1, 2020 (the "Separation Date"), ParentCo separated into two standalone, publicly-traded companies,Arconic Corporation and Howmet (the "Separation"). In connection with the Separation, as ofMarch 31, 2020 , the Company and Howmet entered into several agreements to effect the Separation, including a Separation and Distribution Agreement and a Tax Matters Agreement. See Overview in the Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II Item 7 ofArconic Corporation's Annual Report on Form 10-K for the year endedDecember 31, 2021 for additional information. Results of Operations Outlook Management has revised certain expectations for sales by major end market, from what had been previously disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in both Part I Item 2 in the Company's Quarterly Report on Form 10-Q for the period endedJune 30, 2022 and in Part II Item 7 in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 . Consistent with the disclosure included in the Form 10-K, the revised expectations do not include the impact of changes in aluminum prices. •Ground Transportation: we lowered our sales outlook at the end of third quarter 2022 to reflect anticipated growth of approximately 0% to 5% (versus prior expectation of 5% to 10%) in 2022 compared with 2021 due to continued supply chain challenges being experienced by original equipment manufacturers. •Industrial Products: we lowered our sales outlook at the end of third quarter 2022 to reflect anticipated growth of approximately (10)% to 0% (versus prior expectation of 5% to 10%) in 2022 compared with 2021 due to operational issues at ourTennessee and Lancaster plants that are impacting shipments in this end market. •Building and Construction: we raised our sales outlook at the end of first quarter 2022 (unchanged at the end of both second quarter and third quarter 2022) to reflect anticipated growth of approximately 15% to 20% (versus prior expectation of 5% to 10%) in 2022 compared with 2021, driven by growth in North American non-residential construction activity and our ability to capture meaningful price increases to address inflationary cost pressures. •Packaging: we lowered our sales outlook at the end of third quarter 2022 to reflect anticipated growth of approximately 20% to 30% (versus prior expectation of 20% to 40%) in 2022 compared with 2021 due to lower export sales fromChina andRussia . •Aerospace: we lowered our sales outlook at the end of third quarter 2022 to reflect anticipated growth of approximately 30% to 40% (versus prior expectation of 35% to 45%) in 2022 compared with 2021 due to production challenges at ourDavenport plant that are impacting shipments in this end market.
Legal Proceedings Involving our Russian Operations
Our subsidiaries that own and operate our facility located inSamara, Russia are, and have been since the Separation, subject to proceedings initiated by Russian regulatory authorities as a result of alleged violations of Russian Federal Law No. 57-FZ. In connection with these proceedings, authorities have imposed preliminary injunctions prohibiting, among other actions, the disposition of shares or assets, the payment of dividends, placement of bonds, amendments to organizational documents, and changes to the subsidiaries' chief executive officer and board of directors. See Note P to the Consolidated Financial Statements in Part I, Item 1. "Financial Statements" under the caption "Contingencies and Commitments-Contingencies-Litigation-Federal Antimonopoly Service Of The Russian Federation Litigation" for additional information regarding the proceedings. The proceedings and underlying claims may not be resolved favorably, are likely to continue to be delayed, may be resolved in a manner that results in permanent injunctions similar to or more restrictive than the preliminary injunctions, and could result in a requirement by the Russian government that we divest some or all of the assets located at theSamara facility, requirements related to or restrictions on the terms of any such divestiture, or the nationalization or other expropriation of our Russian operations by the Russian government. 39
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The following table presents selected financial information related to our operations inRussia : September 30, 2022(1) December 31, 2021 Cash and cash equivalents $ 174 $ 79 Receivables from customers 98 120 Inventories 122 102 Properties, plants and equipment, net 186 200 Accounts payable, trade 27 47 For the nine months ended September 30, For the year ended 2022 December 31, 2021 Third-party sales(2) $ 787 $ 968 Segment Adjusted EBITDA 62 87 _____________________
(1)As of
(2)In both periods presented, Third-party sales includes aluminum products
manufactured at
AtSeptember 30, 2022 andDecember 31, 2021 , the Cash and cash equivalents presented above were held inRussia and were not available for dividends. Cash and cash equivalents held inRussia represented 13% ofArconic's liquidity (comprised of Cash and cash equivalents of$312 and undrawn availability of$1,039 under Arconic's ABL Credit Agreement (see Note N to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q)) atSeptember 30, 2022 . Cash and cash equivalents held inRussia increased$95 fromDecember 31, 2021 toSeptember 30, 2022 , primarily due to increased earnings, currency appreciation, and lower aluminum prices. In addition, for the nine months endedSeptember 30, 2022 and year endedDecember 31, 2021 , ourSamara, Russia facility generated 14% and 16% of Third-party sales (mostly packaging and industrial), respectively, and 13% of Segment Adjusted EBITDA for the Rolled Products segment. As a condition of the acquisition of theSamara facility in 2005 by our former parent company, ourSamara facility has an ongoing legal obligation to manufacture semi-finished products for Russian customers for defense applications. The sale of such products represented 1% of the third-party sales generated by ourSamara facility for both the nine months endedSeptember 30, 2022 and year endedDecember 31, 2021 . InMay 2022 , we announced that we would pursue the sale of our operations inRussia .Arconic has engaged with both theU.S. government and Russian government with the objective of executing a lawful sale of its Russian operations. The Company has had several interested parties in the process and is ultimately working towards completion of a sale of its Russian operations to a third party pursuant to a framework agreement, the closing of which is subject to the receipt of governmental approvals and other conditions and contingencies. See
Note O to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
We cannot at this time reasonably estimate the likelihood or timing of any resolution of the regulatory proceedings or underlying claims, whether such resolution would include the removal of the injunctions or the imposition of additional restrictions, or whether we will be able to successfully complete the sale of our Russian operations. The potential impacts of an unfavorable resolution of the proceedings and underlying claims, and our decision to pursue the sale of our Russian operations, include: •continued unavailability of funds for the payment of dividends toArconic ; •a restriction on the disposition of shares or assets; •decreases in or loss of third-party sales and Segment Adjusted EBITDA generated by our Russian operations; •restrictions on capital investments in the facility; •our ability to sell our Russian operations and any losses on, and transaction expenses associated with, any such sale; •our ability to access or repatriate the proceeds of any such sale; and •reactions to or consequences of our announcement regarding the sale of our Russian operations, including the potential for our Russian operations to be nationalized or otherwise expropriated by the Russian government. Any of the foregoing could have a significant indirect impact on the performance of our other locations. In addition, any impact on our ability to fulfill existing contractual obligations could subject us to reputational harm and potential litigation involving customers and suppliers. Increased restrictions on our operations inRussia may have a material adverse effect on our 40 -------------------------------------------------------------------------------- financial condition, results of operations or cash flows. Our operations inRussia , our ability to resolve the proceedings and underlying claims related to our facility inSamara, Russia , and our ability to complete the sale of our Russian operations are likely to be negatively impacted by the disruption and geopolitical instability resulting from the ongoing conflict betweenRussia andUkraine . See Part II, Item 1A "Risk Factors-The ongoing conflict betweenRussia andUkraine has resulted in continued geopolitical instability and disruption, which are likely to adversely affect our business, financial condition, results of operations or cash flows and our ability to complete the sale of our Russian operations." for additional information.
Earnings Summary
Sales. Sales were$2,280 in the 2022 third quarter compared to$1,890 in the 2021 third quarter and$7,019 in the 2022 nine-month period compared with$5,366 in the 2021 nine-month period. The increase of$390 , or 21%, in the third quarter comparison was primarily due to favorable impacts from aluminum hedging activities, favorable product pricing, and favorable product mix, somewhat offset by lower aluminum prices. In the nine-month period comparison, the improvement of$1,653 , or 31%, was principally due to higher aluminum prices, favorable impacts from aluminum hedging activities, favorable product pricing, and favorable product mix, all of which were slightly offset by unfavorable foreign currency movements driven by a weaker euro. InMarch 2021 , the Company entered into a settlement agreement with a customer related to the terms of an existing long-term contract. As a result, the customer agreed to payArconic $18 , which will be recognized over the applicable three-year period. Accordingly, the Company's sales for each of the 2022 and 2021 third quarter included$2 and the 2022 and 2021 nine-month period included$5 and$11 , respectively, associated with this settlement. Cost of goods sold. COGS was$2,074 , or 91.0% of Sales, in the 2022 third quarter compared to$1,676 , or 88.7% of Sales, in the 2021 third quarter and$6,288 , or 89.6% of Sales, in the 2022 nine-month period compared with$4,674 , or 87.1% of Sales, in the 2021 nine-month period. In the third quarter and nine-month period comparisons the percentage was negatively impacted by higher costs for direct materials, including alloying materials, energy, and transportation, operational issues and production outages affecting the Rolled Products segment, and higher aluminum prices (underlying metal price is contractually passed-through to most customers at cost). These negative impacts were partially offset by favorable product pricing driven by pricing pressures primarily inNorth America as a result of inflation. Additionally, onMay 14, 2022 , the Company and theUnited Steelworkers reached a tentative four-year labor agreement covering approximately 3,300 employees at fourU.S. locations; the previous labor agreement expired onMay 15, 2022 . The tentative agreement was ratified by the union employees onJune 1, 2022 . In the 2022 nine-month period,Arconic recognized$19 in Cost of goods sold primarily for a one-time signing bonus for the covered employees. Selling, general administrative, and other expenses. SG&A was$62 in the 2022 third quarter compared to$63 in the 2021 third quarter and$200 in the 2022 nine-month period compared to$183 in the 2021 nine-month period. The decrease of$1 , or 2%, in the third quarter comparison was due to lower incentive compensation expense mostly offset by an increase in labor costs and legal fees. The increase of$17 , or 9%, in the 2022 nine-month period comparison was largely attributable to higher labor costs, stock-based employee compensation expense, and legal fees. SG&A as a percentage of Sales was 2.7% in the 2022 third quarter compared to 3.3% in the 2021 third quarter and 2.8% in the 2022 nine-month period compared to 3.4% in the 2021 nine-month period. Provision for depreciation and amortization. D&A was$59 in the 2022 third quarter compared to$61 in the 2021 third quarter and$181 in the 2022 nine-month period compared to$186 in the 2021 nine-month period. The decrease of$2 , or 3%, in the third quarter comparison, and$5 , or 3%, in the nine-month period was mainly caused by the absence of depreciation resulting from asset retirements and a decrease in amortization related to intangible assets. Restructuring and other charges. Restructuring and other charges were$112 and$119 in the 2022 third quarter and nine-month period, respectively, and$14 and$612 in the 2021 third quarter and nine-month period, respectively. See Note E to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional information. Interest expense. Interest expense was$27 in the 2022 third quarter compared to$26 in the 2021 third quarter and$78 in the 2022 nine-month period compared to$74 in the 2021 nine-month period. The increase of$1 , or 4%, in the third quarter comparison was principally related to$150 borrowed, of which$50 was repaid, under the ABL Credit Facility. The increase of$4 , or 5%, in the nine-month period comparison was principally related to$250 borrowed, of which$100 was repaid, under the ABL Credit Facility, and additional interest associated with a$300 debt offering completed inMarch 2021 . See Financing Activities under Liquidity and Capital Resources below for additional information related to these financing transactions. 41
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Other expenses, net. Other expenses, net was
Provision (Benefit) for income taxes. The Company's effective tax rate, including discrete items, was 27.8% and 21.4% in the 2022 third quarter and nine-month period, respectively, and 40.7% and 18.4% in the 2021 third quarter and nine-month period, respectively. See Note H to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional information.
Segment Information
Arconic's profit or loss measure for its reportable segments is Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization). The Company calculates Segment Adjusted EBITDA as Total sales (third-party and intersegment) minus each of (i) Cost of goods sold, (ii) Selling, general administrative, and other expenses, and (iii) Research and development expenses, plus each of (i) Stock-based compensation expense, (ii) Metal price lag, and (iii) Unrealized (gains) losses on mark-to-market hedging instruments and derivatives (see below).Arconic's Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies' reportable segments. Effective in the first quarter of 2022, management modified the Company's definition of Segment Adjusted EBITDA to exclude the impact of unrealized gains and losses on mark-to-market hedging instruments and derivatives. This modification was deemed appropriate asArconic is considering entering into additional hedging instruments in future reporting periods if favorable conditions exist to mitigate cost inflation. Certain of these instruments may not qualify for hedge accounting resulting in unrealized gains and losses being recorded directly to Sales or Cost of goods sold, as appropriate (i.e., mark-to-market). Additionally, this change was also applied to derivatives that do not qualify for hedge accounting for consistency purposes. The Company does not have a regular practice of entering into contracts that are treated as derivatives for accounting purposes. Ultimately, this change was made to maintain the transparency and visibility of the underlying operating performance ofArconic's reportable segments. Prior to this change, the Company had a limited number of hedging instruments and derivatives that did not qualify for hedge accounting, the unrealized impact of which was not material toArconic's Segment Adjusted EBITDA performance measure. Accordingly, prior period information presented was not recast to reflect this change. Rolled Products Third quarter ended September Nine months ended September 30, 30, 2022 2021 2022 2021 Third-party sales$ 1,861 $ 1,559 $ 5,778 $ 4,397 Intersegment sales 10 9 33 26 Total sales$ 1,871 $ 1,568 $ 5,811 $ 4,423 Segment Adjusted EBITDA$ 111 $ 155 $ 461 $ 493 Third-party aluminum shipments (kmt) 345 345 1,067 1,043 Third-party sales for the Rolled Products segment increased$302 , or 19%, in the 2022 third quarter and$1,381 , or 31%, in the 2022 nine-month period compared to the same periods in 2021. In the third quarter comparison, the increase was primarily due to favorable impacts from aluminum hedging activities, price increases for the pass-through of certain inflation impacts, and favorable product mix, somewhat offset by lower aluminum prices (see below). The improvement in the nine-month period comparison was largely the result of higher aluminum prices (see below), favorable impacts from aluminum hedging activities, price increases for the pass-through of certain inflation impacts, favorable product mix, and a net increase in volumes (see below). In the third quarter comparison, the lower aluminum prices were mostly driven by an 11% decrease in the average LME aluminum price and a decline in regional premiums, including a 21% decrease in the average Midwest premium (United States ). The higher aluminum prices in the nine-month period comparison were largely driven by a 19% rise in the average LME aluminum price and increases in regional premiums, including a 31% increase in the average Midwest premium (United States ). The net increase in volumes in the nine-month period comparison was mostly due to improvements in the packaging, aerospace, and automotive component of ground transportation end markets. Volume related to the packaging end market increased significantly as the can sheet operation at theTennessee rolling mill essentially reached full capacity by the end of the 42 -------------------------------------------------------------------------------- 2022 second quarter. Higher volume associated with the aerospace end market was driven by continued recovery from the COVID-19 pandemic. An improvement in volume for the automotive component of ground transportation was due to slow recovery from the global semiconductor chip shortage. These higher volumes were partially offset by a decline in both industrial products and the commercial transportation component of ground transportation end markets, both of which were impacted by supply chain disruptions. Additionally, the Rolled Products segment experienced operational challenges and production outages associated with electrical and mechanical issues at theTennessee rolling mill and disruptions in both theTennessee andDavenport casting operations. InMarch 2021 , the Company entered into a settlement agreement with a customer related to the terms of an existing long-term contract. As a result, the customer agreed to payArconic $18 , which will be recognized over the applicable three-year period. Accordingly, the Company's sales for each of the 2022 and 2021 third quarter included$2 and the 2022 and 2021 nine-month period included$5 and$11 , respectively, associated with this settlement. Segment Adjusted EBITDA for this segment decreased$44 , or 28%, and$32 , or 6%, in the 2022 third quarter and nine-month period, respectively, compared with the corresponding periods in 2021. The decline in both comparisons was principally related to higher costs for alloying materials, energy, maintenance, and transportation all due to inflation, the impact of the previously mentioned operational challenges and production outages, and increased expenses for labor as this segment increases its workforce to address current and future volume growth. These higher costs were partially offset by customer price increases due to adjustments for inflation impacts and, in the nine-month period comparison, a benefit derived from the absence of below normal absorption of fixed costs that occurred in the 2021 first quarter. The Company is working towards completion of a sale of its operations inRussia . See "-Legal Proceedings Involving our Russian Operations" and Note O to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional information.
Building and Construction Systems
Third quarter ended September Nine months ended September 30, 30, 2022 2021 2022 2021 Third-party sales$ 321 $ 257 $ 941 $ 750 Segment Adjusted EBITDA$ 49 $ 34 $ 146 $ 97 Third-party sales for the Building and Construction Systems segment increased$64 , or 25%, in the 2022 third quarter and$191 , or 25%, in the 2022 nine-month period, compared to the same periods in 2021. In both comparisons, the improvement was mostly attributable to multiple product price increases implemented sinceMarch 2021 across the entire portfolio to address inflationary cost pressures. Segment Adjusted EBITDA for this segment increased$15 , or 44%, and$49 , or 51%, in the 2022 third quarter and nine-month period, respectively, compared with the corresponding periods in 2021. In both comparisons, the improvement was primarily related to favorable product pricing, partially offset by higher costs for aluminum, alloying materials, maintenance, and transportation, all due to inflation. The Company is evaluating strategic options for the businesses that comprise the Building and Construction Systems segment. See Note O to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q for additional information. Extrusions Third quarter ended September Nine months ended September 30, 30, 2022 2021 2022 2021 Third-party sales$ 98 $ 74 $ 300 $ 219 Segment Adjusted EBITDA$ (13) $ (7) $ (30) $ (19) Third-party aluminum shipments (kmt) 9 9 28 26 Third-party sales for the Extrusions segment increased$24 , or 32%, in the 2022 third quarter and$81 , or 37%, in the 2022 nine-month period compared to the same periods in 2021. In both comparisons, the improvement was principally the result of favorable product mix, primarily due to higher volumes for aerospace and automotive; price increases, due to adjustments for 43
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inflation impacts and higher aluminum prices; and a net increase in volumes, mostly driven by aerospace due to the lessened impact of the COVID-19 pandemic.
Segment Adjusted EBITDA for this segment decreased$6 , or 86%, and$11 , or 58%, in the 2022 third quarter and nine-month period, respectively, compared with the corresponding periods in 2021. The decrease in both comparisons was mainly attributable to higher costs for aluminum, transportation, outside services, and energy. The higher costs were the result of both increased pricing due to inflation and usage due to operational issues. These negative impacts were mostly offset by customer price increases due to adjustments for inflation impacts. Overall, operational issues are driving underperformance in this segment. In the 2022 third quarter, management initiated a business review of the Extrusions segment aimed at identifying alternatives to improve the financial performance of this segment in future periods. Management continues to assess alternatives and no decisions or commitments were made as ofSeptember 30, 2022 . In connection with this review, the Company updated its five-year strategic plan, the results of which indicated that there is an expected decline in the forecasted financial performance for the Extrusions segment (and asset group), including continued forecasted losses. As such, management evaluated the recoverability of the long-lived assets of the Extrusions asset group by comparing the aggregate carrying value to the undiscounted future cash flows. The result of this evaluation was that the long-lived assets were deemed to be impaired as the aggregate carrying value exceeded the undiscounted future cash flows. The impairment charge was measured as the difference between the aggregate carrying value and aggregate fair value of the long-lived assets. Fair value was determined using an orderly liquidation methodology for the machinery and equipment and a sales comparison approach for the land and structures. As a result, the Company recorded an impairment charge of$92 , composed of$90 for Properties, plants, and equipment and$2 for intangible assets (included within Other noncurrent assets), in Restructuring and other charges on the Company's Statement of Consolidation Operations (see Note E to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q). This charge was not included in Extrusion's Segment Adjusted EBITDA.
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net (Loss)
Income Attributable to
Third quarter ended September Nine months ended September 30, 30, 2022 2021 2022 2021 Total Segment Adjusted EBITDA$ 147 $ 182 $ 577 $ 571 Unallocated amounts: Corporate expenses(1) (4) (7) (23) (26) Stock-based compensation expense (6) (8) (19) (15) Metal price lag(2) 15 (21) 9 (27) Unrealized (losses) gains on mark-to-market hedging instruments and derivatives (7) - 16 - Provision for depreciation and amortization (59) (61) (181) (186) Restructuring and other charges(3) (112) (14) (119) (612) Other(4) (10) (3) (56) (19) Operating (loss) income (36) 68 204 (314) Interest expense (27) (26) (78) (74) Other expenses, net (27) (15) (9) (52) Benefit (Provision) for income taxes 25 (11) (25) 81 Net income attributable to noncontrolling interest - - (1) - Consolidated net (loss) income attributable to Arconic Corporation$ (65) $ 16 $ 91 $ (359) __________________
(1)Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities.
(2)Metal price lag represents the financial impact of the timing difference between when aluminum prices included in Sales are recognized and when aluminum purchase prices included in Cost of goods sold are realized. This adjustment aims to remove the effect of the volatility in metal prices and the calculation of this impact considers applicable metal hedging transactions. 44
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(3)In the 2022 third quarter and nine-month period, Restructuring and other
charges includes a
(4)Other includes certain items that impact Cost of goods sold and Selling, general administrative, and other expenses on the Company's Statement of Consolidated Operations that are not included in Segment Adjusted EBITDA. In the 2022 third quarter and nine-month period, the respective amounts include costs related to environmental remediation charges of$9 and$18 , respectively. Additionally in the 2022 nine-month period, Other includes costs related to the new union labor agreement of$19 . These charges were recorded in Cost of goods sold on Arconic's Statement of Consolidated Operations. See Note G and Environmental Matters in Note P , respectively, to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
Environmental Matters
See Environmental Matters in Note P to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q.
Liquidity and Capital Resources
AtSeptember 30, 2022 , the Company's Cash and cash equivalents were$312 , of which$174 , or 56%, was held inRussia . Cash and cash equivalents held inRussia represented 13% ofArconic's total liquidity atSeptember 30, 2022 . Cash and cash equivalents held inRussia increased$95 fromDecember 31, 2021 toSeptember 30, 2022 , primarily due to increased earnings, currency appreciation, and lower aluminum prices. Cash and cash equivalents held inRussia are currently subject to preliminary injunctions imposed by regulatory authorities that, among other things, prohibit the distribution of dividends. We cannot at this time reasonably estimate the likelihood or timeline of a resolution involving the removal of these injunctions, and accordingly cannot reasonably estimate when, if at all, the funds will be available for the payment of dividends toArconic . We maintain a renewable intercompany loan facility that could be utilized but we have as yet not utilized this facility. In addition,Arconic has a number of commitments and obligations related to the Company's operations in various foreign jurisdictions, resulting in the need for cash outsidethe United States . Management continuously evaluates the Company's local and global cash needs for future business operations, which may influence future repatriation decisions. Operating Activities
Cash provided from operations was
In the 2022 nine-month period, cash provided from operations was mostly comprised of a positive add-back for non-cash transactions in earnings of$351 and net income of$92 , partially offset by an unfavorable change in working capital of$284 . The change in working capital was largely driven by higher aluminum prices due to an increase in both the average LME price and regional premiums. Additionally, the unfavorable change in working capital includes a benefit of$158 related to customer receivables sold to a financial institution where the underlying trade receivables were uncollected as ofSeptember 30, 2022 (see Note R to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q). In the 2021 nine-month period, cash used for operations was mostly comprised of pension contributions of$456 (see below), an unfavorable change in working capital of$454 , and a net loss of$359 , partially offset by a positive add-back for non-cash transactions in earnings of$778 . The impact in working capital was partially driven by higher aluminum prices due to an increase in both the average LME price and regional premiums. InJanuary 2021 , the Company contributed a total of$200 to its two fundedU.S. defined benefit pension plans, comprised of the estimated minimum required funding for 2021 of$183 and an additional$17 . Additionally, inApril 2021 ,Arconic contributed a total of$250 to its two fundedU.S. defined benefit pension plans to maintain the funding level of the remaining plan obligations not transferred under a group annuity contract. This contribution was funded with the net proceeds from aMarch 2021 debt offering (see 2021 Debt Activity in Financing Activities below). The Company had no minimum required funding due in the 2022 first quarter and contributed$7 in both the 2022 second quarter and third quarter to these two plans.Arconic expects to contribute a total of$8 to these two plans in the remainder of 2022.
The Company received
Financing Activities
Cash provided from financing activities was$1 in the 2022 nine-month period compared with$190 in the 2021 nine-month period. The source of cash in the 2022 nine-month period was principally due to$150 in net borrowings under the ABL Credit 45
-------------------------------------------------------------------------------- Facility (see 2022 Debt Activity below) mostly offset by the repurchase of 4,863,672 shares of the Company's common stock for$139 (see Share Repurchase Program below). In the 2021 nine-month period, the source of cash reflects$314 in net proceeds from the issuance of new indebtedness (see 2021 Debt Activity below), somewhat offset by$106 for the repurchase of 3,108,705 shares of the Company's common stock (see Share Repurchase Program below). 2022 Debt Activity-Arconic maintains a five-year credit agreement, datedMay 13, 2020 , with a syndicate of lenders named therein and Deutsche Bank AG New York Branch as administrative agent (the "ABL Credit Agreement"). The ABL Credit Agreement provides for a senior secured asset-based revolving credit facility (the "ABL Credit Facility") to be used, generally, for working capital or other general corporate purposes. See Note Q to the Consolidated Financial Statements in Part II Item 8 ofArconic's Annual Report on Form 10-K for the year endedDecember 31, 2021 (filed onFebruary 22, 2022 ) for additional information related to the ABL Credit Agreement. OnFebruary 16, 2022 , the Company's ABL Credit Agreement was amended to increase the revolving commitments under the ABL Credit Facility to$1,200 from$800 (available balance as of September 30, 2022 was$1,039 - see Note N to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q). Additionally, the accordion feature of the ABL Credit Facility was revised to provide for the Company to request a further increase to the revolving commitments in an aggregate principal amount equal to the greater of$350 and the excess of the borrowing base over the ABL Credit Facility commitments. Furthermore, the LIBOR-based floating interest rate was replaced with a term SOFR-based interest rate, plus a credit spread adjustment equal to 0.10%, 0.15% or 0.25% per annum for SOFR-based borrowings with interest periods of one month, three months, or six months, respectively, under the ABL Credit Facility.Arconic paid$1 in upfront costs associated with these amendments. In the 2022 nine-month period, the Company borrowed$250 and repaid$100 under the ABL Credit Facility. These borrowings were designated as SOFR loans with either an initial one-month or three-month interest period.Arconic may repay early or extend a part or all of these borrowings. In the 2022 third quarter and nine-month period, the weighted-average interest rate and weighted-average days outstanding of the borrowings was 5.03% and 4.02%, respectively, and 74 days and 105 days, respectively.
In
2021 Debt Activity-OnMarch 3, 2021 , the Company completed a Rule 144A (U.S. Securities Act of 1933, as amended) debt offering for an additional$300 aggregate principal amount of 6.125% Senior Secured Second-Lien Notes due 2028 (the "Additional 2028 Notes"). The Additional 2028 Notes were issued under the indenture governingArconic's existing 6.125% Senior Secured Second-Lien Notes due 2028 (the "Existing 2028 Notes"). Other than with respect to the date of issuance and issue price, the Additional 2028 Notes are treated as a single series with and have the same terms as the Existing 2028 Notes. See Note Q to the Consolidated Financial Statements in Part II Item 8 ofArconic's Annual Report on Form 10-K for the year endedDecember 31, 2021 (filed onFebruary 22, 2022 ) for additional information related to the Existing 2028 Notes. The Additional 2028 Notes were sold at 106.25% of par (i.e., a premium) and, after reflecting a discount to the initial purchasers of the Additional 2028 Notes, the Company received$315 in net proceeds from the debt offering.Arconic used the net proceeds of this issuance to fund an annuitization of certainU.S. defined benefit pension plan obligations inApril 2021 . The premium ($19 ) and costs to complete the financing ($5 ) were deferred and are being amortized to interest expense over the term of the Additional 2028 Notes. The amortization of the premium is reflected as a reduction to interest expense and the amortization of the costs to complete the financing is reflected as an addition to interest expense. Interest on the Additional 2028 Notes is paid semi-annually in February and August and commencedAugust 15, 2021 . Share Repurchase Program-OnMay 4, 2021 ,Arconic announced that its Board of Directors approved a share repurchase program authorizing the Company to repurchase shares of its outstanding common stock up to an aggregate transactional value of$300 over a two-year period expiringApril 28, 2023 . In the 2022 and 2021 nine-month periods,Arconic repurchased 4,863,672 and 3,108,705, respectively, shares of the Company's common stock for$139 and$106 , respectively, under this program (see Part II Item 2 in this Form 10-Q for additional information).
Investing Activities
Cash used for investing activities was$171 in the 2022 nine-month period compared with$125 in the 2021 nine-month period. The use of cash in the 2022 nine-month period was due to$175 in capital expenditures, mostly due to growth spend at theU.S. rolling mills. The use of cash in the 2021 nine-month period was due to$123 in capital expenditures, largely attributable to sustaining spend at theU.S. rolling mills. 46
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Recently Adopted and Recently Issued Accounting Guidance
See Note B to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q. 47
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