F. Acquisitions and Divestitures

Pro forma results of the Company, assuming all acquisitions described below were made at the beginning of the earliest prior period presented, would not have been materially different from the results reported.

2016 Divestitures. In April 2016, Arconic completed the sale of the Remmele Medical business to LISI MEDICAL for $102 in cash ($99 net of transaction costs), which was included in Proceeds from the sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows. This business, which was part of the RTI International Metals Inc. (RTI) acquisition (see below), manufactures precision-machined metal products for customers in the minimally invasive surgical device and implantable device markets. Since this transaction occurred within a year of the completion of the RTI acquisition, no gain was recorded on this transaction as the excess of the proceeds over the carrying value of the net assets of this business was reflected as a purchase price adjustment (decrease to goodwill of $44) to the final allocation of the purchase price related to Arconic’s acquisition of RTI. While owned by Arconic, the operating results and assets and liabilities of this business were included in the Engineered Products and Solutions segment. This business generated sales of approximately $20 from January 1, 2016 through the divestiture date, April 29, 2016, and, at the time of the divestiture, had approximately 330 employees. This transaction is no longer subject to post-closing adjustments.

2015 Acquisitions. In March 2015, Arconic completed the acquisition of an aerospace structural castings company, TITAL, for $204 (€188) in cash (an additional $1 (€1) was paid in September 2015 to settle working capital in accordance with the purchase agreement). TITAL, a privately held company with approximately 650 employees based in Germany, produces aluminum and titanium investment casting products for the aerospace and defense markets. The purpose of this acquisition is to capture increasing demand for advanced jet engine components made of titanium, establish titanium-casting capabilities in Europe, and expand existing aluminum casting capacity. The assets, including the associated goodwill, and liabilities of this business were included within Arconic’s Engineered Products and Solutions segment since the date of acquisition. Based on the preliminary allocation of the purchase price, goodwill of $118 was recorded for this transaction. In the first quarter of 2016, the allocation of the purchase price was finalized, based, in part, on the completion of a third-party valuation of certain assets acquired, resulting in a $1 reduction of the initial goodwill amount. None of the $117 in goodwill is deductible for income tax purposes and no other intangible assets were identified. This transaction is no longer subject to post-closing adjustments.

In July 2015, Arconic completed the acquisition of RTI, a U.S. company that was publicly traded on the New York Stock Exchange under the ticker symbol “RTI.” Arconic purchased all outstanding shares of RTI common stock in a stock-for-stock transaction valued at $870 (based on the $9.96 per share July 23, 2015 closing price of Arconic’s common stock). Each issued and outstanding share of RTI common stock prior to the completion of the transaction was converted into the right to receive 2.8315 shares of Arconic common stock. In total, Arconic issued 29,132,471 shares (87,397,414 shares pre-reverse stock split – see Note A and Note P) of its common stock to consummate this transaction, which was not reflected in the accompanying Statement of Consolidated Cash Flows as it represents a noncash financing activity. The exchange ratio was the quotient of a $41 per RTI common share acquisition price and the $14.48 per share March 6, 2015 closing price of Arconic’s common stock. In addition to the transaction price, Arconic also paid $25 ($19 after-tax) in professional fees and costs related to this acquisition. This amount was recorded in Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations.

RTI is a global supplier of titanium and specialty metal products and services for the commercial aerospace, defense, energy, and medical device end markets. The purpose of this acquisition was to expand Arconic’s range of titanium offerings and add advanced technologies and materials, primarily related to the aerospace end market. In 2014, RTI generated net sales of $794 and had approximately 2,600 employees. The operating results and assets and liabilities of RTI were included within Arconic’s Engineered Products and Solutions segment since the date of acquisition. Third-party sales and after-tax operating income (Arconic’s primary segment performance measure – see Note O) of RTI from the acquisition date through December 31, 2015 were $309 and less than $(1), respectively. During the third quarter of 2016, the final purchase price allocation was completed.

The following table represents the final allocation of the purchase price by major asset acquired and liability assumed, as well as the amount of goodwill recognized:


Assets:
Cash	$	303
Receivables from customers		94
Inventories		483
Prepaid expenses and other current assets		47
Properties, plants, and equipment		321
Goodwill		298
Other noncurrent assets		60
Total assets	$	1,606
Liabilities:
Accounts payable	$	86
Other current liabilities		94
Long-term debt due within one year		115
Long-term debt, less amount due within one year		387
Other noncurrent liabilities		96
Total liabilities	$	778
Equity:
Additional capital	$	60
Total equity	$	60

As reflected in the table above, Arconic recognized goodwill of $298, which represents the earnings growth potential of RTI, Arconic’s ability to expand its titanium capabilities in the aerospace market, and expected synergies from combining the operations of the two companies. This goodwill was allocated to a new Arconic reporting unit associated with the Engineered Products and Solutions segment, Arconic Titanium and Engineered Products, which consists solely of the acquired RTI business. None of this goodwill is deductible for income tax purposes.

The other noncurrent assets in the table above primarily represent intangible assets. These intangible assets consist mainly of customer relationships which are being amortized over a period of 20 years.

As part of this acquisition, Arconic assumed the obligation to repay two tranches of convertible debt; one tranche was due and settled in cash on December 1, 2015 (principal amount of $115) and the other tranche is due on October 15, 2019 (principal amount of $403). Upon conversion of the 2019 convertible notes in accordance with their terms, holders will receive, at Arconic’s election, cash, shares of common stock (approximately 14,156,000 shares currently, which gives the effect to the Reverse Stock Split (See Note A) and the Distribution of Alcoa Corporation), or a combination of cash and shares. This cash conversion feature requires the convertible notes to be bifurcated into a liability component and an equity component. The fair value of the liability component was determined by calculating the net present value of the cash flows of the convertible notes using the interest rate of a similar instrument without a conversion feature. The fair value of the equity component is the difference between the fair value of the entire instrument on the date of acquisition and the fair value of the liability and is included as Additional capital on the accompanying Consolidated Balance Sheet.

2015 Divestitures. In 2015, Arconic completed the divestiture of an operation in Russia (see below) and had post-closing adjustments, as provided for in the respective purchase agreements, related to the divestiture completed in December 2014 (see 2014 Divestitures below). The divestiture and post-closing adjustments combined resulted in net cash paid of $11 and a net loss of $137, which was recorded in Restructuring and other charges (see Note D) on the accompanying Statement of Consolidated Operations. These two divestitures are no longer subject to post-closing adjustments.

In March 2015, Arconic completed the sale of a rolling mill located in Belaya Kalitva, Russia to a wholly-owned subsidiary of Stupino Titanium Company. While owned by Arconic, the operating results and assets and liabilities of the rolling mill were included in the Global Rolled Products segment. The rolling mill generated sales of approximately $130 in 2014 and, at the time of divestiture, had approximately 1,870 employees.

2014 Acquisitions. In June 2014, Arconic signed a purchase agreement to acquire an aerospace jet engine components company, Firth Rixson, from Oak Hill Capital Partners for $2,850. The purchase price was composed of $2,350 in cash and $500 of Arconic common stock. The common stock component was equivalent to 12,174,337 shares (36,523,010 shares pre-reverse stock split – see Note A and Note P) at a per share price of $41.07 ($13.69 per share pre-reverse stock split), as determined in the agreement. In conjunction with the purchase agreement, Arconic also entered into an earn-out agreement, which states that Arconic will make earn-out payments up to an aggregate maximum amount of $150 through December 31, 2020 upon certain conditions (see below for additional information). On November 19, 2014, after satisfying all customary closing conditions and receiving the required regulatory approvals, Arconic completed the acquisition of Firth Rixson for $2,995. The purchase price was composed of $2,385 in cash (net of cash acquired) and $610 of Arconic common stock. The cash portion of the transaction price increased by $35 due to working capital and other adjustments based on the provisions of the purchase agreement. The common stock portion of the transaction price was based on the closing market price of $50.07 per share ($16.69 per share pre-reverse stock split) of Arconic’s common stock on the acquisition date.

In addition to the transaction price, Arconic also paid $42 ($34 after-tax) in professional fees and costs related to this acquisition. This amount was recorded in Selling, general administrative, and other expenses on the accompanying Statement of Consolidated Operations. Additionally, Arconic recorded $13 ($8 after-tax) in Interest expense on the accompanying Statement of Consolidated Operations for costs associated with the execution (in June 2014) and termination (in September 2014) of a $2,500 364-day senior unsecured bridge term loan facility. This facility was entered into for the purpose of financing all or a portion of the cash consideration for this acquisition and to pay fees and expenses incurred in connection therewith. However, in September 2014, the facility was no longer necessary as Arconic completed the issuance of $2,500 in debt and equity (see Note P) instruments to finance the acquisition.

Firth Rixson manufactures rings, forgings, and metal products for the aerospace end market, as well as other markets requiring highly engineered material applications. At acquisition, this business had 13 operating facilities in the United States, United Kingdom, Europe, and Asia employing approximately 2,400 people combined. The purpose of this acquisition was to strengthen Arconic’s aerospace business and position the Company to capture additional aerospace growth with a broader range of high-growth, value-add jet engine components. The operating results and assets and liabilities of Firth Rixson were included within the Engineered Products and Solutions segment since the date of acquisition. Third-party sales and after-tax operating income (Arconic’s primary segment performance measure—see Note O) of Firth Rixson from the acquisition date through December 31, 2014 were $81 and $(12), respectively.

The following table represents the final allocation of the purchase price by major asset acquired and liability assumed, as well as the amount of goodwill recognized and the net present value of the potential earn-out:


Assets:
Receivables from customers	$	193
Inventories		227
Prepaid expenses and other current assets		22
Properties, plants, and equipment		493
Goodwill		1,801
Other noncurrent assets		758
Total assets	$	3,494
Liabilities:
Accounts payable	$	162
Other current liabilities		100
Contingent consideration		130
Other noncurrent liabilities		107
Total liabilities	$	499

As reflected in the table above, Arconic recognized goodwill of $1,801, which represents the earnings growth potential of Firth Rixson and expected synergies from combining the operations of the two companies. The goodwill was allocated to two of Arconic’s reporting units associated with the Engineered Products and Solutions segment, Arconic Fastening Systems and Rings ($1,117) and Arconic Forgings and Extrusions ($684), on a relative fair value basis. None of the goodwill is deductible for income tax purposes.

The other noncurrent assets in the table above represent intangible assets, which were included in the other intangibles class (see Note E). These intangible assets consist primarily of customer relationships and contracts, backlog, qualifications, and technology, and have a weighted-average amortization period of 35 years.

The contingent consideration liability presented in the table above represents the net present value of the potential earn-out of $150 (Level 3 in the fair value hierarchy – see Note V). This earn-out is contingent on the Firth Rixson forging business in Savannah, Georgia achieving certain identified financial targets through December 31, 2020. During the fourth quarter of 2016, management determined that payment of the maximum amount was not probable based on the forecasted financial performance of this location. Therefore, the fair value of this liability was reduced by $56 with a corresponding credit to Other income, net on the accompanying Statement of Consolidated Operations. It is estimated that the earn-out will be paid in 2019 through 2020.

In August 2014, Arconic completed the acquisition of the 30% outstanding noncontrolling interest in the aluminum brazing sheet venture in Kunshan City, China from Shanxi Yuncheng Engraving Group for $28.

2014 Divestitures. In 2014, Arconic completed the sale of three rolling mills located in Spain (Alicante and Amorebieta) and France (Castelsarrasin) to a subsidiary of Atlas Holdings LLC. While owned by Arconic, the operating results and assets and liabilities of the rolling mills were included in the Global Rolled Products segment. The rolling mills combined generated sales of approximately $500 in 2013 and, at the time of divestiture, had approximately 750 employees. This transaction yielded net cash proceeds of $24 and resulted in a net loss of $116, which was recorded in Restructuring and other charges (see Note D) on the accompanying Statement of Consolidated Operations. This transaction was subject to certain post-closing adjustments as defined in the purchase agreement as of December 31, 2014 (see 2015 Divestitures above).