XML 21 R12.htm IDEA: XBRL DOCUMENT v3.21.2
Segment Information
 9 Months Ended
Sep. 30, 2021
Segment Reporting [Abstract]  
Segment Information Segment Information
Howmet is a global leader in lightweight metals engineering and manufacturing. Howmet’s innovative, multi-material products, which include nickel, titanium, aluminum, and cobalt, are used worldwide in the aerospace (commercial and defense), commercial transportation, and industrial and other end markets. Segment performance under Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment operating profit. Howmet’s definition of Segment operating profit is Operating income excluding Special items. Special items include Restructuring and other charges. Segment operating profit may not be comparable to similarly titled measures of other companies. Differences between the total segment and consolidated totals are in Corporate.
Howmet’s operations consist of four worldwide reportable segments as follows:
Engine Products
Engine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines and industrial gas turbines. Engine Products produces rotating parts as well as structural parts.
Fastening Systems
Fastening Systems produces aerospace fastening systems, as well as commercial transportation, industrial and other fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines. The business’s products are also critical components of commercial transportation vehicles, automobiles, construction and industrial equipment and renewable energy sector.
Engineered Structures
Engineered Structures produces titanium ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, extrusions forming and machining services for airframe, wing, aero-engine, and landing gear components. Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined components and assemblies for aerospace and defense applications.
Forged Wheels
Forged Wheels provides forged aluminum wheels and related products for heavy-duty trucks and the commercial transportation markets.
Goodwill     
The Company had $4,077 of Goodwill at September 30, 2021 and reviews it annually for impairment in the fourth quarter, or more frequently, if indicators exist or if a decision is made to sell or realign a business.
On January 1, 2020, management transferred the Savannah business from the Engine Products segment to the Engineered Structures segment, based on synergies with forgings technologies and manufacturing capabilities. As a result of the reorganization, goodwill of $17 was reallocated from Engine Products to Engineered Structures, and these reporting units were evaluated for impairment during the first quarter of 2020. The estimated fair value of each of these reporting units substantially exceeded their carrying value; thus, there was no goodwill impairment at the date the business was transferred.
During the first quarter of 2020, Howmet's market capitalization declined significantly compared to the fourth quarter of 2019. Over the same period, the equity value of our peer group companies, and the overall U.S. stock market also declined significantly amid market volatility. In addition, as a result of the COVID-19 pandemic and measures designed to contain the spread, global sales to customers in the aerospace and commercial transportation industries impacted by COVID-19 have been and are expected to be negatively impacted compared to 2019 as a result of disruption in demand. As a result of these macroeconomic factors, we performed a qualitative impairment test to evaluate whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value. As a result of this assessment, the Company performed a quantitative impairment test in the first quarter of 2020 for the Engineered Structures reporting unit and concluded that though the margin between the fair value of the reporting unit and carrying value had declined from approximately 60% to
approximately 15%, it was not impaired. Consistent with prior practice, a discounted cash flow model was used to estimate the current fair value of the reporting unit. The significant assumptions and estimates utilized to determine fair value were developed utilizing current market and forecast information reflecting the disruption in demand that has and is expected to negatively impact the Company’s sales globally in the aerospace industry. If our actual results or external market factors decline significantly from management’s estimates, future goodwill impairment charges may be necessary and could be material. Since the first quarter of 2020, there have been no indicators of impairment identified for the Engineered Structures reporting unit or any other reporting units or indefinite-lived intangible assets.The operating results of the Company’s reportable segments were as follows. Differences between the total segment and consolidated totals are in Corporate.
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Third quarter ended September 30, 2021
Sales:
Third-party sales$599 $254 $199 $231 $1,283 
Inter-segment sales1 — 1 — 2 
Total sales$600 $254 $200 $231 $1,285 
Profit and loss:
Segment operating profit$120 $47 $14 $62 $243 
Restructuring and other charges5 3 — — 8 
Provision for depreciation and amortization31 12 12 10 65 
Capital expenditures21 8 3 15 47 
Third quarter ended September 30, 2020
Sales:
Third-party sales$485 $271 $206 $172 $1,134 
Inter-segment sales1 — 1 — 2 
Total sales$486 $271 $207 $172 $1,136 
Profit and loss:
Segment operating profit$39 $33 $10 $35 $117 
Restructuring and other charges9 — 9 — 18 
Provision for depreciation and amortization31 12 13 10 66 
Capital expenditures15 9 3 6 33 
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Nine months ended September 30, 2021
Sales:
Third-party sales$1,677 $788 $535 $687 $3,687 
Inter-segment sales3 — 4 — 7 
Total sales$1,680 $788 $539 $687 $3,694 
Profit and loss:
Segment operating profit$321 $142 $35 $193 $691 
Restructuring and other charges15 8 1 — 24 
Provision for depreciation and amortization92 37 37 29 195 
Capital expenditures48 22 13 37 120 
Nine months ended September 30, 2020
Sales:
Third-party sales$1,851 $982 $710 $476 $4,019 
Inter-segment sales4 — 6 — 10 
Total sales$1,855 $982 $716 $476 $4,029 
Profit and loss:
Segment operating profit$309 $199 $57 $91 $656 
Restructuring and other charges44 26 21 3 94 
Provision for depreciation and amortization92 36 40 29 197 
Capital expenditures48 24 11 17 100 
The following table reconciles Total segment operating profit to Income (loss) from continuing operations before income taxes:
Third quarter endedNine months ended
September 30,September 30,
2021202020212020
Total segment operating profit$243 $117 $691 $656 
Unallocated amounts:
Restructuring and other charges(8)(22)(22)(166)
Corporate expense(30)(22)(68)(85)
Operating income$205 $73 $601 $405 
Loss on debt redemption(118)— (141)(64)
Interest expense, net(63)(77)(201)(241)
Other expense, net(1)(8)(13)— 
Income (loss) from continuing operations before income taxes$23 $(12)$246 $100 
The following table reconciles total segment capital expenditures, which are presented on an accrual basis, with Capital expenditures as presented on the Statement of Consolidated Cash Flows. Differences between the total segment and consolidated totals are in Corporate and discontinued operations, including the impact of changes in accrued capital expenditures during the period.
Third quarter endedNine months ended
September 30,September 30,
2021202020212020
Total segment capital expenditures$47 $33 $120 $100 
Corporate and discontinued operations— 3 18 120 
Capital expenditures$47 $36 $138 $220 
The following table disaggregates segment revenue by major end market served. Differences between the total segment and consolidated totals are in Corporate.
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Third quarter ended September 30, 2021
Aerospace - Commercial$299 $126 $118 $— $543 
Aerospace - Defense 130 37 65 — 232 
Commercial Transportation— 59 — 231 290 
Industrial and Other170 32 16 — 218 
Total end-market revenue$599 $254 $199 $231 $1,283 
Third quarter ended September 30, 2020
Aerospace - Commercial$199 $169 $104 $— $472 
Aerospace - Defense 142 37 82 — 261 
Commercial Transportation— 38 — 172 210 
Industrial and Other144 27 20 — 191 
Total end-market revenue$485 $271 $206 $172 $1,134 
Nine months ended September 30, 2021
Aerospace - Commercial$786 $403 $277 $— $1,466 
Aerospace - Defense 402 120 206 — 728 
Commercial Transportation— 154 — 687 841 
Industrial and Other489 111 52 — 652 
Total end-market revenue$1,677 $788 $535 $687 $3,687 
Nine months ended September 30, 2020
Aerospace - Commercial$1,018 $650 $432 $— $2,100 
Aerospace - Defense 394 120 216 — 730 
Commercial Transportation— 118 — 476 594 
Industrial and Other439 94 62 — 595 
Total end-market revenue$1,851 $982 $710 $476 $4,019 
The Company derived 60% and 70% of its revenue from the aerospace end-market for the nine months ended September 30, 2021 and 2020, respectively.
General Electric Company represented approximately 13% and 11% of the Company’s third-party sales for the nine months ended September 30, 2021 and 2020, respectively, primarily from Engine Products.