Arconic Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Arconic Corporation Fourth Quarter 2020 Earnings Conference Call. At this time, all participant lines are in listen-only mode, so if you require operator assistance, please press star, then zero. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, then one. Please be advised that today's conference may be recorded. I'd now like to hand the conference over to your host today, Mr. Shane Roark, Director of Investor Relations. Please go ahead.

Thank you, Liz. Good morning, and welcome to the Arconic Corporation fourth quarter and full year 2020 results conference call. I'm joined today by Tim Myers, Chief Executive Officer, and Eric Asmussen, Executive Vice President and Chief Financial Officer. After comments by Tim and Eric, we will have a question and answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release in our most recent SEC filings. In addition, we've included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings press release and in the appendix in today's presentation. With that, I'd like to turn the call over to Tim.

Thank you, Shane, and good morning, everyone. Welcome to our fourth quarter and full year 2020 earnings call. For those of you who would like to follow along with the presentation, the slides are posted under the Investors tab on our website. The fourth quarter capped off a challenging year that demonstrated the company's agility and solid performance in the face of pandemic-driven lower demand and uncertainty. In April of last year, we completed the launch of Arconic as a standalone company, and focused on becoming a stronger and more dynamic organization. As we look forward to 2020 and beyond, we see multiple paths to growth on both the top and bottom line through driving asset utilization, de-bottlenecking operations, maintaining permanent cost outs, and capturing productivity-driven cost savings. Let's begin with a review of the financial highlights for the quarter. Revenue in the fourth quarter was $1.5 billion, up 3% from prior quarter, and down 14 percent, or 12 percent organically year over year. The decline in revenue was primarily a result of continued softness in aerospace and was partially offset by the strength in industrial and packaging sales. The company recorded a net loss of $64 million, primarily as a result of an after-tax charge of $108 million related to a partial annuitization of our U.S. pension plan, which we executed in the fourth quarter. As can be the case with accounting, no good deed goes unpunished. This annuitization de-risked the balance sheet of the company by $240 million with no current cash cost to the company. Adjusted EBITDA was in the center of guidance provided in November of $151 million, and adjusted EBITDA margin was 10.3%. Free cash flow for the quarter also fell within guidance with the use of $49 million. primarily due to U.S. pension payments that were deferred during the year as permitted under the CARES Act. We ended the quarter with a cash balance of $787 million, net debt of $504 million, and total liquidity of approximately $1.5 billion. Now, turning to slide five and full year 2020, I would like to highlight financial results and then walk through a few key takeaways for the year. Revenue for the year was $5.7 billion, down 22% from the prior year, or 17% organically, reflecting the impact of the global pandemic and production declines due to delays associated with the Boeing 737 MAX. The company recorded a net loss of $109 million, which included after-tax charges of $156 million related to partial annuitizations of our U.S. and U.K. pension plans, which were executed throughout the year as part of our strategy to reduce legacy liabilities. Adjusted EBITDA was $619 million and adjusted EBITDA margin for the year was 10.9%. Free cash flow generation from Q2 2020 to Q4 2020 was $161 million. It's worth noting that included in this number is the funding of approximately $350 million for pension, OPEB, and legacy environmental liabilities over this period. Our cash generation, absent these funding requirements for legacy issues, exceeded half a billion over three quarters. Looking back on 2020, we accomplished much over our first nine months as a company, not only managing the pandemic, but building a foundation for increasing profit and cash generation as we look to the future. After launching the company on April 1st, we immediately took actions to conserve cash, manage working capital more efficiently, and preserve operational flexibility as the pandemic continued to adversely impact global economy. We've implemented 260 million of cash conservation actions, or 60 million more than our original target of 200 million. Approximately 40 million of the structural cost actions implemented as part of the program will benefit our 2021 run rates and are included in our 2021 guidance. In the weeks that followed our launch, we optimized our capital structure through new debt offerings and a new credit facility. The new capital structure created greater financial flexibility and improved our liquidity. We also took steps to make our financial results more transparent and in line with peers as we eliminated the use of LIFO inventory accounting and began adjusting metal lag out of our EBITDA definition. Lastly, we identified several opportunities that are expected to drive volume growth and increase market penetration to continue to deliver value creation. We're continuing to ramp up incremental capacity for automotive and industrial products at our Tennessee facility. We expect to benefit from tailwinds in the industrial market through 2021 due to favorable outcomes in the common alloy aluminum sheet trade case. We're also in the process of re-entering packaging in several markets following the expiration of a non-compete agreement at the end of October. We're bringing our Tennessee can sheet facility back online and are executing multiple qualification runs with packaging customers to support new volumes in 2022 and beyond. Our timing is good as surging aluminum demand has, packaging demand has driven multiple recently announced capacity additions by North American can makers resulting in increased demand for our can sheet. Turning to slide six, I'll provide a little more detail on how we performed across the markets we serve. Ground transportation sales increased 5% from the prior quarter due to ongoing growth in commercial transportation, which continues to benefit from increasing heavy-duty truck builds. Year over year, sales declined 5% organically, the solid retail demand in the automotive market was offset by the Ford F-150 model changeover that suppressed volume. In total, ground transportation made up 38% of our total revenue, which is slightly higher than our historical levels. Sales in the industrial market increased 14% from prior quarter and 7% organically year over year, despite broader economic challenges. Sales benefited from the continued ramp-up at our Tennessee facility, as well as the early impact of U.S. trade actions. As we stated last quarter, tariffs on imports from the relevant 18 countries became subject to cash deposits in October. As a result, we saw imports from the 18 countries steadily decline through the year. Sales in the building and construction market were down 6% year over year, but were flat with prior quarter. Sales in the packaging market increased 7% organically year over year, and we're flat with the prior quarter. As a reminder, packaging sales continue to represent only our operations in China and Russia, and the non-compete agreement, which restricted sales growth, expired late last year. We're now exploring opportunities in the U.S. and elsewhere previously unavailable to us as demand for can sheet continues to increase globally. Finally, our aerospace sales further decelerated in the quarter to a decline of over 60% year over year on an organic basis. Large commercial aircraft build rates remain soft as uncertainty in the airline industry continues to curb demand. As a result, elevated inventory in the supply chain and subsequent destocking is driving the decline in our sales, and we anticipate destocking to keep our sales depressed year on year through the first half of 2021. Now I'll turn it over to Eric to discuss fourth quarter results in more detail.