Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview Our Business Management Review of 2019 and Outlook for the Future (dollars in millions, except per-share amounts; shipments in thousands of metric tons [kmt]) Arconic Inc. (“Arconic” or the “Company”) is a global leader in lightweight metals engineering and manufacturing. Arconic’s innovative, multi- material products, which include aluminum, titanium, and nickel, are used worldwide in aerospace, automotive, commercial transportation, building and construction, industrial applications, defense, and packaging. Arconic is a global company operating in 18 countries. Based upon the country where the point of sale occurred, the United States and Europe generated 67% and 23%, respectively, of Arconic’s sales in 2019. In addition, Arconic has operating activities in numerous countries and regions outside the United States, including Europe, Canada, China, Japan, and Russia. Governmental policies, laws and regulations, and other economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates, affect the results of operations in countries with such operating activities . In 2019, Sales increased 1% over 2018 as a result of volume growth in the aerospace, packaging, commercial transportation, and industrial end markets; and favorable product pricing in the Global Rolled Products (GRP) and Engineered Products and Forgings (EP&F) segments; partially offset by lower aluminum prices; and lower sales of $216 from divestitures of forgings businesses in the United Kingdom (divested in December 2019) and Eger, Hungary (divested in December 2018), Latin America extrusions (divested in April 2018), and the completed ramp down of Arconic's North American packaging operations (in December 2018). In the segments, Segment operating profit increased 27% from 2018 due to favorable product pricing, net cost savings, lower raw material costs including aluminum price, and higher volumes, partially offset by the impact of the Tennessee plant transition to industrial production, operational challenges at one aluminum extrusions plant, and higher variable compensation costs. Management continued its focus on liquidity and cash flows as well as improving its operating performance through cost reductions, streamlined organizational structures, margin enhancement, and profitable revenue generation. Management has continued its intensified focus on capital efficiency. This focus and the related results enabled Arconic to end 2019 with a solid financial position. The following financial information reflects certain key highlights of Arconic’s 2019 results: The Company rapidly executed on the separation plan that was announced in February 2019 and is targeting completion of the separation on April 1, 2020. The company will separate into two independent, publicly-traded companies, to be named Howmet Aerospace Inc. (Remain Co.) and Arconic Corporation (Spin Co.) (the “Separation of Arconic”). Remain Co. will be comprised of the Company’s Engineered Products and Forgings businesses (engine products, fastening systems, engineered structures and forged wheels) and will be renamed Howmet Aerospace Inc. at separation and change its stock ticker from “ARNC” to “HWM.” Spin Co. will be comprised of the Company’s Global Rolled Products businesses (global rolled products, aluminum extrusions and building and construction systems) and will be held by a new company that will be named Arconic Corporation at separation and that intends to list its common stock on the New York Stock Exchange under the symbol “ARNC.”  On February 5, 2020, Arconic’s Board of Directors approved the completion of the Separation of Arconic by means of a pro rata distribution by the Company of all of the outstanding common stock of Arconic Corporation, with each Arconic Inc. stockholder of record as of the close of business on March 19, 2020 receiving one share of Arconic Corporation common stock for every four shares of the Company’s common stock held as of the record date. On February 7, 2020, the Company announced that Arconic Rolled Products Corporation (the “Issuer”), which is currently a wholly- owned subsidiary of Arconic, $^{(1) }$For the reconciliation of Total segment operating profit to Consolidated income before income taxes and related information, see page 43. • Sales of $14,192, up 1% from 2018, with growth in key end markets, and Net income of $470, or $1.03 per diluted share; • Total segment operating profit of $2,015, an increase of $429, or 27%, from 2018$^{1}$; • Cash provided from operations of $406; cash used for financing activities of $1,568, reflecting the Company’s repurchase of $1,150 of its common stock and the repayment of convertible notes in 2019; and cash provided from investing activities of $583; • Cash on hand at the end of the year of $1,648; and • Total debt of $5,940, a decrease of $390 from 2018, reflecting repayment of $403 of convertible notes in October 2019. 37