Howmet Aerospace Inc. · NYSE:HWM
Howmet Aerospace — Arconic — Proxy Contest (January 2017)
26 slides from Howmet Aerospace's proxy contest presentation, Jan 31, 2017
Slide 1: New Leadership Is Needed At Arconic
New Leadership Is Needed At Arconic January 31, 2017 www.NewArconic.com
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS FOR DISCUSSION AND GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY, OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE O
Slide 3: Why Are We Here?
Why Are We Here? SS Prolonged disappointing financial results combined with the irreparably damaged credibility of Arconic’s current management have created a circumstance whereby Arconic will never approach its potential under the current CEO @ For more than a year, Elliott has engaged in private d
Slide 4: Our Goals at Arconic
Our Goals at Arconic ) Elliott is Arconic’s largest shareholder, owning approximately 10.5% of shares outstanding. We are seeking sustained improvements at Arconic to benefit all long-term stakeholders ‘pease note that Eliott holds economic interest of over 12.196 of Arconic | Change the Culture Imp
Slide 5: Change the Culture: Remove Dr. Klaus Kleinfeld from Arconic
Change the Culture: Remove Dr. Klaus Kleinfeld from Arconic SS Despite years of poor performance, a culture of grandiose rhetoric devoid of any real substance or follow-through has been tolerated sg wei as Arconic points to this performance metric to assert that Dr. i Kleinfeld “saved the Company.”
Slide 6: Change the Culture: Consider Larry Lawson for CEO
Change the Culture: Consider Larry Lawson for CEO SS Elliott has engaged Mr. Lawson as a consultant on its investment in Arconic and believes that Mr. Lawson should be a leading candidate to become the Company’s CEO, as he has the ideal set of skills needed to turn around Arconic’s woefully and cont
Slide 7: Drive Sustainable Shareholder Value Through Operational Improvement
Drive Sustainable Shareholder Value Through Operational Improvement 1 EPS margins have consistently lagged 700-1100 basis points below PCC despite the fact that there are few (if any) structural reasons for this gap Improving margins by 900 basis- 10.50/share 2 -5 year goal of increasing GRP margins
Slide 8: Even Modest Improvement Produces Dramatic Returns
Even Modest Improvement Produces Dramatic Returns sv Hf Elliott’s targets are based on the mid-point of Arconic’s 2017 revenue target @ Unlike management, Elliott believes that Arconic margins can be improved even absent additional scale — Inshort, even without growth, Arconic could be worth at leas
Slide 9: Shareholder Nominees
Shareholder Nominees Xd Ideal mix of skills and experience to deliver meaningful change at Arconic Please note that if the Company renominates Ulrich Schmidt at the 2016 annual Christopher Ayers ‘meeting, Elliott does not intend to seek his replacement. — Former Chief Executive Officer of WireCo Wor
Slide 10: Kleinfeld quote on shareholder value
% = “On a short, meaning next year or this year, and midterm, three- to five-year timeframe, we will continue to produce outstanding shareholder value across all businesses, and take my word, that's our promise.” Dr. Klaus Kleinfeld, 1/10/2011
Slide 11: TSR Under Dr. Klaus Kleinfeld
TSR Under Dr. Klaus Kleinfeld ) Since becoming CEO, Dr. Klaus Kleinfeld has underperformed the Company’s proxy peer median by 156% and the S&P 500 by 151% Alcoa Cumulative TSR Relative to Peer Median and S&P 500 Under Dr. Klaus Kleinfeld 87 82 (69) 2008 2009 2010 2011 2012 2013 2014 2015 2016 ——AA P
Slide 12: TSR Under Dr. Klaus Kleinfeld vs. Company Selected Peers
TSR Under Dr. Klaus Kleinfeld vs. Company Selected Peers Sv Under Dr. Kleinfeld, the Company massively underperformed virtually all peer groups over virtually all periods Alcoa Cumulative TSR Relative to Each Peer Median and S&P 500 Under Dr. Klaus Kleinfeld 1-Year (2.0) t (3.0) 0 (5.6) @ (12.6) & W
Slide 13: Alcoa vs. S&P During CEO Tenure
Alcoa vs. S&P 500 During CEO Tenure SS 465 of the current S&P 500 companies have been in the index since May 1, 2008. Out of those 465 companies, Alcoa ranks 456". All of the companies to the left of Alcoa have changed CEOs during this period ‘But we are also very focused on ensuring that each and e
Slide 14: Arconic's "Dr. Klaus" Discount — 2017 Numbers
Arconic’s “Dr. Klaus” Discount — 2017 Numbers ) Arconic’s discount, we believe, can principally be attributed to current management's lack of credibility EV/EBITDA vs. Peers Adj. EV/EBITDAP vs. Peers 11x 10.0% 10.5x 11x 5 10.4x 10x 10x _ 9.8x ox 8.7x ox 8.7x 8x 8x 7x 7x 6x 6x 5 5x 5x , T Arconic Mea
Slide 15: Arconic's "Dr. Klaus" Discount — 2018 Numbers
Arconic’s “Dr. Klaus” Discount — 2018 Numbers Xd Larger discount on 2018 estimates suggests lack of confidence in management's ability to hit targets EV/EBITDA vs. Peers Adj. EV/EBITDAP vs. Peers 10x 5 95: 10x 9.3x * 9.2x OSE 9x 9x & 4 75x 8x 7.6x 7x 7x 6x 6x Sx + T T Sx + 1 Arconic Median Mean Arco
Slide 16: Kleinfeld quote on disciplined execution
“Now, I mean, talking to managers, you'd say disciplined execution? Really? I mean, is that a strategic priority? Isn't that what business is about? I mean, it's not just warm words and nice plans, you've got to execute, right? But we actually have put I think more of a discipline around it than wha
Slide 17: "New" 2019 Guidance Closely Resembles Original 2016 Guidance
“New” 2019 Guidance Closely Resembles Original 2016 Guidance After a series of massive guidance misses, the Company released three year targets which are nearly identical to the Company’s original 2016 guidance, which pertained until as recently as April 2016 2016 and 2019 Revenue Guidance 2016 and
Slide 18: Returns Lower Than Cost of Capital
Returns Lower Than Cost of Capital SS During Dr. Klaus Kleinfeld’s tenure, returns on invested capital have remained consistently below the Company's weighted average cost of capital We look at IRRs versus cost of capital, right. So we're breaking in part of the synergies, we look at the returns cos
Slide 19: "You can only win the 'war' with ideas, not with spending cuts"
“You can only win the 'war' with ideas, not with spending cuts” Dr. Klaus Kleinfeld
Slide 20: Arconic EPS: Unable to Close the PCC Margin Gap
Arconic EPS: Unable to Close the PCC Margin Gap Elliott worked with a number of experts including: former employees and customers of both Arconic EPS and Precision Castparts, external consulting firm, and an investment bank. The conclusion is unambiguous. EPS and PCC are substantially similar busine
Slide 21: GRP: Massive Room to Improve
GRP: Massive Room to Improve SS Going bottoms-up, we analyzed GRP’s mix and cost position relative to peers. The opportunity for improvement is enormous CAN BODY BRAZING HEAT AUTO STOCK PLATE SHEET AUTO BODY TREATED STRUCTURAL OTHER TOTAL Arconic Production Cost $2,613 $3,858 $2,854 $3,255 $3,356 $3
Slide 22: "We're in this together."
f \S is on A ; ‘ + re “We're in this together.” | a pet & —- _— he Dr. Klaus Kleinfeld, 11/4/2015
Slide 23: Poor Corporate Governance Practices
Poor Corporate Governance Practices SS “[O]ne of the things about Alcoa Corp. that is fundamentally different than Alcoa Inc. is that we were given the opportunity to come out with a much better governance structure. So as a new company, we separated the Chairman and the CEO role. I personally belie
Slide 24: Generous Compensation Despite Continually Poor Performance
Generous Compensation Despite Continually Poor PerformanceSW) Dr. Klaus Kleinfeld has been paid more than $111M during his tenure despite generating massively negative returns. He has also sold more shares than he owns, including $46M of stock since 2014 Cumulative TSR vs. Cumulative CEO Compensatio
Slide 25: Culture of High C-Suite Turnover
Culture of High C-Suite Turnover SS Dr. Klaus Kleinfeld has been the only constant among Company leadership. Notably there have been 7 heads of investor relations # of leaders since 2008 cc 8 — oo tt LL vnc TTT ncaa 3 I ME 3 Predera ce TTT i > — 2 Prien cs eon anne TTT sence tpn 4 eoroee: seonsincoe
Slide 26: Contact Information
Contact Information Arconic Shareholders =XAPI PARTNERS 1212 Avenue of the Americas, 24th Floor New York, NY 10036 Tel: +1.212.297.0720 Toll Free: +1.877.796.5274 Fax: +1.212.297.1710 Email: info@okapipartners.com Media Inquiries Stephen Spruiell 212-478-2017 sspruiell@elliottmgmt.com 26 ELLIOTT®