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Arconic Inc. Separation Transaction and Discontinued Operations | 9 Months Ended
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Sep. 30, 2020
Restructuring and Related Activities [Abstract] |
Arconic Inc. Separation Transaction and Discontinued Operations | Arconic Inc. Separation Transaction and Discontinued Operations On April 1, 2020, the Company completed the previously announced separation of its business into two independent, publicly-traded companies. Following the Arconic Inc. Separation Transaction, Arconic Corporation holds the Global Rolled Products businesses (global rolled products, aluminum extrusions, and building and construction systems) previously held by the Company. The Company retained the Engineered Products and Forgings businesses (engine products, fastening systems, engineered structures, and forged wheels). The Company's Board of Directors approved the completion of the separation on February 5, 2020, which was effected by the distribution (the “Distribution”) by the Company of all of the outstanding common stock of Arconic Corporation on April 1, 2020 to the Company’s stockholders who held shares as of the close of business on March 19, 2020 (the “Record Date”). In the Distribution, each Company stockholder of record as of the Record Date received one share of Arconic Corporation common stock for every four shares of the Company’s common stock held as of the Record Date. The Company did not issue fractional shares of Arconic Corporation common stock in the Distribution. Instead, each stockholder otherwise entitled to a fractional share of Arconic Corporation common stock received cash in lieu of fractional shares. On March 31, 2020, in connection with the Arconic Inc. Separation Transaction, the Company entered into several agreements with Arconic Corporation that govern the relationship between the Company and Arconic Corporation following the Distribution, including the following: a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and certain Patent, Know-How, Trade Secret License and Trademark License Agreements. On February 7, 2020 Arconic Corporation completed an offering of $600 aggregate principal amount of 6.125% senior secured second-lien notes due 2028. On March 25, 2020, Arconic Corporation entered into a credit agreement which provided for a $600 aggregate principal amount seven-year senior secured first-lien loan B facility and a revolving credit facility which is guaranteed by certain of Arconic Corporation's wholly-owned domestic subsidiaries and secured on a first-priority basis by liens on substantially all assets of Arconic Corporation and subsidiary guarantors. Arconic Corporation used the proceeds to make payment to the Company to fund the transfer of certain assets to Arconic Corporation relating to the Arconic Inc. Separation Transaction and for general corporate purposes. The Company incurred debt issuance costs of $45 associated with these issuances for the first quarter of 2020 and nine months ended September 30, 2020. On February 1, 2020, Arconic Corporation completed the sale of its rolling mill in Itapissuma, Brazil for $50 in cash which resulted in a loss of $59, of which $53 was recognized in discontinued operations in the second half of 2019 and $6 in the first quarter of 2020 and nine months ended September 30, 2020. On March 1, 2020, Arconic Corporation sold its hard alloy extrusions plant in South Korea for $62 in cash, which resulted in a gain that was recognized in discontinued operations in the first quarter of 2020 and nine months ended September 30, 2020. During the third quarter of 2020, the Company identified and corrected a prior period equity misclassification of $22 million related to the distribution of pension plans and their related financial statement impacts which related to the distributions to Arconic Corporation. Management evaluated the impact of the misclassification within the components of equity on previously issued financial statements and concluded that it was not material. Discontinued Operations The results of operations of Arconic Corporation are presented as discontinued operations in the Statement of Consolidated Operations as summarized below:
| Third quarter ended |  | Nine months ended
| September 30, |  | September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Sales | $ | — |  |  | $ | 1,765 |  |  | $ | 1,576 |  |  | $ | 5,427 |
Cost of goods sold | — |  |  | 1,483 |  |  | 1,292 |  |  | 4,612 |
Selling, general administrative, research and development and other expenses | — |  |  | 88 |  |  | 106 |  |  | 249 |
Provision for depreciation and amortization | — |  |  | 61 |  |  | 59 |  |  | 183 |
Restructuring and other charges | — |  |  | 63 |  |  | (18) |  |  | 58 |
Interest expense | — |  |  | — |  |  | 7 |  |  | — |
Other expense, net | — |  |  | 24 |  |  | 42 |  |  | 66 |
Income from discontinued operations | — |  |  | 46 |  |  | 88 |  |  | 259 |
Provision for income taxes | — |  |  | 9 |  |  | 38 |  |  | 106 |
Income from discontinued operations after income taxes | $ | — |  |  | $ | 37 |  |  | $ | 50 |  |  | $ | 153 |
The following table presents purchases of properties, plant and equipment, proceeds from the sale of businesses and the provision for depreciation and amortization of discontinued operations related to Arconic Corporation:
| Third quarter ended |  | Nine months ended
| September 30, |  | 2020
| 2020 |  | 2019 |  | 2020 |  | 2019
Capital expenditures | $ | — |  |  | $ | 40 |  |  | $ | 72 |  |  | $ | 175 |
Proceeds from the sales of businesses | $ | — |  |  | $ | — |  |  | $ | 112 |  |  | $ | — |
Provision for depreciation and amortization | — |  |  | 61 |  |  | 59 |  |  | 183 |
On April 1, 2020, management evaluated the net assets of Arconic Corporation for potential impairment and determined that no impairment charge was required. The cash flows and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows or Statement of Comprehensive Income for all periods presented. The carrying amount of the major classes of assets and liabilities related to Arconic Corporation classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheet consisted of the following:
|  | December 31, 2019
Total Assets of Discontinued Operations |  |
Cash and cash equivalents |  | $ | 71 |
Receivables from customers |  | 385 |
Other receivables |  | 135 |
Inventories |  | 822 |
Prepaid expenses and other current assets |  | 29 |
Current assets of discontinued operations |  | 1,442 |
Properties, plants, and equipment, net |  | 2,834 |
Goodwill |  | 426 |
Intangibles, net |  | 60 |
Deferred income taxes |  | 383 |
Other noncurrent assets |  | 196 |
Noncurrent assets of discontinued operations |  | 3,899 |
Total assets of discontinued operations |  | $ | 5,341 |
Total Liabilities of Discontinued Operations: |  |
Accounts payable, trade |  | $ | 1,067 |
Accrued compensation and retirement costs |  | 147 |
Taxes, including income taxes |  | 22 |
Other current liabilities |  | 188 |
Current liabilities of discontinued operations |  | 1,424 |
Accrued pension benefits |  | 1,430 |
Accrued other postretirement benefits |  | 514 |
Other noncurrent liabilities and deferred credits |  | 314 |
Noncurrent liabilities of discontinued operations |  | 2,258 |
Total liabilities of discontinued operations |  | $ | 3,682 |

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