The spinoff of Arconic Corporation/Howmet Aerospace (HWM) from Arconic Inc. and the subsequent name change of Arconic Inc.

Arconic Inc. spun off Arconic Rolled Products effective April 1, 2020 in a transaction meant to be tax-free to its shareholders. The parent company changed its name and ticker symbol that same day to Howmet Aerospace (HWM). The daughter company also changed its name to Arconic Corporation and took the ticker symbol of the parent company (ARNC).

The cost basis allocation information is from IRS form 8937. A link to this form can be found on the Howmet Aerospace web site at https://www.howmet.com/global/en/investors/pdf/Form-8937-Howmet-Aerosapce-Inc-fka-Arconic-Inc-Separation.pdf .  In their form 8937, Arconic Inc. (now Howmet) indicated the average of the high and low prices on April 1, 2020 could be used to calculate the cost basis allocation. They did not provide a cost basis calculation example.

For details on the transactions see the SEC filing of Form 10 at the Howmet Aerospace web site at https://www.howmet.com/global/en/investment/pdfs/form-10-information-statement.pdf

 

NOTE regarding cost basis:

The cost basis allocation is dependent on the prices used for both Howmet Aerospace and Arconic Corporation in the cost basis allocation calculation. In our experience brokers tend to use the prices found in the guidance companies post on their websites including IRS form 8937. If your broker does not use that guidance, the cost basis of the companies involved as recorded in your accounting records and in your broker’s records will not match. This is not cause for concern. This is just due to the inexact nature of the tax code in this regard. Partnership tax returns have specific areas to reconcile these usually small differences. ICLUBcentral tax printer software automatically fills in these adjustments in the normal operation of the software using the data imported from your accounting records and that you enter from your 1099.

 

Resolution:

Due to the daughter company taking the ticker symbol of the old parent company, these transactions will work better by entering a merger of Arconic Inc. into their new name, Howmet Aerospace followed by a spinoff of Arconic Corporation from Howmet Aerospace. It is important to enter the merger first.

 

The Merger Entry

Go to Transactions > Merger or Accounting > Securities > Record merger of securities depending on the version of the software being used. If you are unfamiliar with merger transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_merger

 

Here is the information needed to complete the merger for the name change.

Date: 3/31/2020

Old Security or Merging Company: Arconic Inc (ARNC)

Price per share of old Security / ARNC:  16.06 (close on 3/31/2020)

Cash received:  See your broker statement for cash-in-lieu (With a 1:1 exchange this is unlikely)

New Security: Howmet Aerospace (HWM)

New Security Price: 16.06   (close of old ARNC on 3/31/2020)

Shares received : 1.0 x (# of old ARNC shares owned).

            (Remember to include fractional shares.)

 For example, if you owned 100 ARNC shares, you should receive 1.0 x 100 = 100 HWM shares.

Save the transaction and the merger has been entered.

 

The Spinoff Entry

Go to Transactions > Spinoff  or Accounting > Securities > Record spinoff of securities depending on the version of the software being used. If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_spinoff

Here is the information you need to complete the spinoff.

 

Date: 4/1/2020

Select Parent Security (or Parent Company) : Howmet Aerospace (HWM)

Remaining Basis Percentage: 83.92 (Based on average of open and close prices on 4/1/2020)

Cash received:  See your broker statement for cash-in-lieu received

Spinoff  Security (or Symbol of New Company) : Arconic Corporation Corp  (ARNC)

 Shares received : 0.25 x (# of HWM  shares owned)   (Remember to include fractional shares.)

For example, if you owned 100 HWM shares, you should receive 0.25 x 100 = 25 ARNC shares.

Price Per Share : 10.96 (average of opening and closing price on 4/1/2020)                                 

Save the transaction and the spinoff has been entered.

 

*Since the daughter company is taking the symbol of the old parent, this spinoff will look like a new acquisition of ARNC. This means your Valuation Statement may include the transactions of the old holding of ARNC in the return figures of the new ARNC and indicate the first acquisition date was the Arconic Inc spinoff from Alcoa. If you wish to prevent this, do the following:

In myICLUB.com go to Accounting > Utilities > Update club settings . On the settings page choose the No radio button by Include Earlier Ownership.

For Club Accounting 3 users, go to Tools > Settings and uncheck the box next to Include Earlier Ownership.