Segment Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

I. Segment Information

Arconic is a producer of multi-material products including sheet, plate, precision castings, forgings, rolled rings, extrusions, wheels and fasteners. Arconic’s products are used worldwide in transportation (including aerospace, automotive, truck, trailer, rail, and shipping), packaging, building and construction, oil and gas, defense, and industrial applications. Arconic’s segments are organized by product on a worldwide basis. In the first quarter of 2017, the Company changed its primary measure of segment performance from after-tax operating income (ATOI) to adjusted earnings before interest, tax, depreciation and amortization (“adjusted EBITDA”). Segment performance under Arconic’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is adjusted EBITDA. Arconic’s definition of adjusted EBITDA 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.

Items required to reconcile combined segment adjusted EBITDA to consolidated net income attributable to Arconic include: the impact of LIFO inventory accounting; metal price lag (the timing difference created when the average price of metal sold differs from the average cost of the metal when purchased by the respective segment - generally, when the price of metal increases, metal price lag is favorable, and when the price of metal decreases, metal price lag is unfavorable); corporate expense (general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities and corporate research and development expenses); the provision for depreciation and amortization; interest expense; restructuring and other charges; other income, net; the results of discontinued operations; income tax expense; and other items, including intersegment profit eliminations. Prior period information has been recast to conform to current year presentation. The operating results of Arconic’s reportable segments were as follows:

	Engineered				Transportation
	Products and		Global Rolled		and Construction		Combined
	Solutions		Products		Solutions		Segment
First quarter ended
March 31, 2017
Sales:
Third-party sales	$	1,485	$	1,249	$	449	$	3,183
Intersegment sales		—		34		—		34
Total sales	$	1,485	$	1,283	$	449	$	3,217
Profit and loss:
Depreciation and amortization		64		50		12		126
Adjusted EBITDA		306		171		72		549
First quarter ended
March 31, 2016
Sales:
Third-party sales	$	1,449	$	1,184	$	429	$	3,062
Intersegment sales		—		29		—		29
Total sales	$	1,449	$	1,213	$	429	$	3,091
Profit and loss:
Depreciation and amortization		65		50		11		126
Adjusted EBITDA		305		155		64		524

The following table reconciles combined segment adjusted EBITDA to consolidated net income attributable to Arconic:

	First quarter ended
	March 31,
	2017			2016
Combined segment adjusted EBITDA	$	549		$	524
Unallocated amounts:
Depreciation and amortization		(133	)		(133	)
Interest expense		(115	)		(121	)
Restructuring and other charges		(73	)		(16	)
Other income, net		354			12
Discontinued operations		—			(94	)
Income taxes		(162	)		(51	)
Impact of LIFO		(19	)		(12	)
Metal price lag		22			—
Corporate expense		(91	)		(76	)
Other		(10	)		(17	)
Consolidated net income attributable to Arconic	$	322		$	16