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(State of Incorporation)
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(Commission File Number) |
(IRS Employer
Identification No.)
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(Address of Principal Executive Offices)
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(Zip Code)
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Office of Investor Relations (412) 553-1950
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Office of the Secretary (
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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104
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The cover page of this Current Report on Form 8-K, formatted in Inline XBRL.
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HOWMET AEROSPACE INC.
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|||
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Dated: February 3, 2021
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By:
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/s/ Katherine H. Ramundo | |
| Name: |
Katherine H. Ramundo | ||
| Title: |
Executive Vice President, Chief Legal Officer and Secretary | ||
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Exhibit 99.1
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Fourth Quarter 2020 Highlights
Full Year 2020 Highlights
2021 Outlook*
Key Announcements
* Reconciliations of the forward-looking non-GAAP measures to the most directly comparable GAAP measures are not available without unreasonable efforts due to the variability and complexity of the charges and other components excluded from the non-GAAP measures – for further detail, see “2021 Outlook” below.
PITTSBURGH--(BUSINESS WIRE)--February 3, 2021--Howmet Aerospace (NYSE:HWM) today reported fourth quarter 2020 and full year 2020 results. The Company reported fourth quarter revenues of $1.2 billion, down 29% year over year due to disruptions in the commercial aerospace and commercial transportation markets, primarily driven by COVID-19 and Boeing 737 MAX production declines, partially offset by growth in the defense aerospace and industrial gas turbine markets. Fourth quarter 2020 revenues increased 9% sequentially from the third quarter 2020.
Howmet Aerospace reported income from continuing operations of $106 million, or $0.24 per share, in the fourth quarter 2020 versus income from continuing operations of $118 million, or $0.27 per share, in the fourth quarter 2019. Income from continuing operations excluding special items was $92 million, or $0.21 per share, in the fourth quarter 2020, versus $164 million, or $0.37 per share, in the fourth quarter 2019. Income from continuing operations in the fourth quarter 2020 included a $14 million benefit from special items, principally related to plant fire insurance proceeds and tax related items, partially offset by restructuring and other charges.
Full year 2020 income from continuing operations was $211 million, or $0.48 per share, versus income from continuing operations of $126 million, or $0.27 per share, in the full year 2019. Full year income from continuing operations excluding special items was $354 million, or $0.80 per share ($0.77 per share including pre-separation allocations), versus $590 million, or $1.29 per share, in the full year 2019. Income from continuing operations in full year 2020 included a $143 million charge from special items, principally related to separation costs and charges associated with cost reduction initiatives.
Fourth quarter 2020 operating income was $221 million, down 22% year over year. Operating income excluding special items was $215 million, down 28% year over year. The year-over-year decline was due to significant disruptions in the commercial aerospace market, driven by COVID-19 and Boeing 737 MAX and 787 production declines, and the commercial transportation market, driven by COVID-19, resulting in unfavorable volume and product mix. The decline was partially offset by growth in the defense aerospace and industrial gas turbine markets, variable and fixed cost reductions, and favorable product pricing. Operating income margin, excluding special items, was up approximately 20 basis points year over year to 17.4%.
Full year 2020 operating income was $626 million versus $579 million in the full year 2019. Operating income excluding special items for full year 2020 was $809 million ($814 million including pre-separation allocations), versus $1,199 million in the full year 2019. The year-over-year decline was due to significant disruptions in the commercial aerospace market, driven by COVID-19 and Boeing 737 MAX and 787 production declines, and the commercial transportation market, driven by COVID-19, resulting in unfavorable volume and product mix. The decline was partially offset by growth in the defense aerospace and industrial gas turbine markets, variable and fixed cost reductions, and favorable product pricing.
Howmet Aerospace Executive Chairman and Co-Chief Executive Officer John Plant said, “Howmet Aerospace continued to manage effectively through the impact of the COVID-19 pandemic. While fourth quarter 2020 revenues declined 29% year over year, driven by a 51% reduction in commercial aerospace revenues, results surpassed our outlook and included strong cash generation. We generated improved decremental margins, and our fourth quarter 2020 adjusted EBITDA margin of 22.8% was the same as the fourth quarter 2019 despite the 29% revenue decline and unfavorable commercial aerospace mix. We continue to be highly focused on all aspects of operational performance and cash generation as we manage through the effects of COVID-19 and the Boeing build rate reductions on commercial aerospace.”
Mr. Plant continued, “Turning to 2021, our defense aerospace, commercial transportation, and industrial gas turbine markets continue to be healthy and growing. Commercial aerospace has less visibility, though we expect increased aircraft build as we move into 2022. We are positioning the Company to emerge from the pandemic in a stronger, more profitable position.”
“Our liquidity position is strong as a result of our strict and disciplined approach to costs and spending. We ended 2020 with approximately $1.6 billion of cash. Our $1 billion revolving credit facility remains undrawn and our next significant debt maturity is not until October 2024.”
Howmet Aerospace ended the year with a cash balance of approximately $1.6 billion. For the second quarter 2020 through fourth quarter 2020, cash provided from operations was $217 million; cash used for financing activities was $1.5 billion; and cash provided from investing activities was $260 million. Adjusted Free Cash Flow for the second quarter 2020 through the fourth quarter 2020 was $487 million, inclusive of an approximate $80 million reduction in our accounts receivable securitization program, $70 million impact from voluntary pension contributions, $46 million of cash severance payments, and $45 million tax refund.
On April 1, 2020, Arconic Inc. completed the separation of its business into two independent, publicly-traded companies: Howmet Aerospace Inc. (the new name for Arconic Inc.) and Arconic Corporation. The financial results of Arconic Corporation for all periods prior to April 1, 2020 have been retrospectively reflected in the Statement of Consolidated Operations as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods prior to April 1, 2020. Additionally, the related assets and liabilities associated with Arconic Corporation in the December 31, 2019 Consolidated Balance Sheet are classified as assets and liabilities of discontinued operations. The cash flows, comprehensive income, and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows, Statement of Consolidated Comprehensive Income, and Statement of Changes in Consolidated Equity, respectively, for all periods prior to April 1, 2020.
Fourth Quarter 2020 Segment Performance
Engine Products
Engine Products reported revenue of $555 million, a decrease of 33% year over year due to declines in the commercial aerospace market driven by COVID-19 and Boeing 737 MAX production declines, partly offset by growth in the defense aerospace and industrial gas turbine markets. Segment operating profit was $108 million, down 31% year over year, driven by volume declines, partially offset by variable and fixed cost reductions and favorable product pricing. Segment operating profit margin increased approximately 70 basis points year over year to 19.5%.
Fastening Systems
Fastening Systems reported revenue of $263 million, a decrease of 30% year over year due to declines in the commercial aerospace and commercial transportation markets, primarily driven by COVID-19 and Boeing 737 MAX and 787 production declines. Segment operating profit was $48 million, down 52% year over year, driven by volume declines and unfavorable product mix, partially offset by variable and fixed cost reductions. Segment operating profit margin decreased approximately 800 basis points year over year to 18.3%.
Engineered Structures
Engineered Structures reported revenue of $217 million, a decrease of 30% year over year due to declines in the commercial aerospace market, driven by COVID-19 and Boeing 787 and 737 MAX production declines, partly offset by growth in defense aerospace. Segment operating profit was $16 million, down 59% year over year, driven by volume declines and unfavorable product mix, partially offset by variable and fixed cost reductions. Segment operating profit margin decreased approximately 510 basis points year over year to 7.4%.
Forged Wheels
Forged Wheels reported revenue of $203 million, a decrease of 6% year over year due to declines in the commercial transportation markets, primarily driven by COVID-19. Segment operating profit was $62 million, up 3% year over year, driven by fixed cost reductions and maximizing production in low-cost countries, partially offset by volume declines. Segment operating profit margin increased approximately 290 basis points year over year to 30.5%.
Full Year 2020 Segment Performance
Segment performance in 2020 included the following:
2021 Outlook*
|
1Q 21 Outlook |
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FY 2021 Outlook |
|||||||||||
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Low |
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Baseline |
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High |
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|
Low |
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Baseline |
|
High |
|||
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Revenue |
$1.15B |
|
$1.2B |
|
$1.25B |
|
|
$5.05B |
|
$5.1B |
|
$5.25B |
||
|
Adj. EBITDA1 |
$245M |
|
$250M |
|
$265M |
|
|
$1.07B |
|
$1.1B |
|
$1.15B |
||
|
Adj. EBITDA Margin1 |
21.3% |
|
20.8% |
|
21.2% |
|
|
21.2% |
|
21.6% |
|
21.9% |
||
|
Adj. Earnings per Share1 |
$0.15 |
|
$0.16 |
|
$0.19 |
|
|
$0.75 |
|
$0.80 |
|
$0.89 |
||
|
Adj. Free Cash Flow |
|
|
|
|
|
|
|
$350M |
|
$400M |
|
$450M |
||
|
1) Excluding Special Items |
||||||||||||||
* Howmet Aerospace has not provided reconciliations of the forward-looking non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share or earnings per share excluding special items, and adjusted free cash flow, to the most directly comparable GAAP financial measures. Such reconciliations are not available without unreasonable efforts due to the variability and complexity with respect to the charges and other components excluded from the non-GAAP measures, such as the effects of foreign currency movements, gains or losses on sales of assets, taxes, and any future restructuring or impairment charges. These reconciling items are in addition to the inherent variability already included in the GAAP measures, which includes, but is not limited to, price/mix and volume. Howmet Aerospace believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.
Achieved $197 million of cost reductions in full year 2020
In response to the significant market disruptions associated with COVID-19, Howmet Aerospace commenced plans in March 2020 to reduce costs. The Company achieved $197 million of cost reductions in full year 2020, above its outlook of $185 million. This structural cost reduction is in addition to the flexing of variable costs.
Repurchased $22 Million of Common Stock in the Fourth Quarter 2020; $277 Million Authorization Remains
During the fourth quarter 2020, the Company repurchased 0.9 million shares of its common stock for $22 million. During the full year 2020, Howmet Aerospace repurchased 3.8 million shares of its common stock for $73 million. $277 million remains available under prior authorization by the Board of Directors for share repurchases. Total common shares outstanding as of the end of December were approximately 433 million. Repurchases will be subject to market conditions, legal requirements and other considerations. The share repurchase program may be suspended, modified or terminated at any time without prior notice.
Redeemed All Outstanding 5.40% Notes due 2021 for approximately $361 Million on January 15, 2021
Howmet Aerospace redeemed all outstanding 5.40% Notes due 2021 in the aggregate principal amount of approximately $361 million on January 15, 2021. The notes were redeemed at 100% of the principal amount of the notes, plus accrued and unpaid interest up to, but not including, the redemption date. As a result, interest costs to the Company will be reduced in 2021 by approximately $19 million. The Company’s next significant debt maturity is not until October 2024.
Howmet Aerospace will hold its quarterly conference call at 10:00 AM Eastern Time on Wednesday, February 3, 2021. The call will be webcast via www.howmet.com. The press release and presentation materials will be available at approximately 7:00 AM ET on February 3, via the “Investors” section of the Howmet Aerospace website. A link to the press release will also be available via Howmet Aerospace’s Twitter handle @HowmetAerospace at https://twitter.com/howmetaerospace.
About Howmet Aerospace
Howmet Aerospace Inc., headquartered in Pittsburgh, Pennsylvania, is a leading global provider of advanced engineered solutions for the aerospace and transportation industries. The Company’s primary businesses focus on jet engine components, aerospace fastening systems, and titanium structural parts necessary for mission-critical performance and efficiency in aerospace and defense applications, as well as forged wheels for commercial transportation. With nearly 1,150 granted and pending patents, the Company’s differentiated technologies enable lighter, more fuel-efficient aircraft to operate with a lower carbon footprint. For more information, visit www.howmet.com. Follow: LinkedIn, Twitter, Instagram, Facebook, and YouTube.
Dissemination of Company Information
Howmet Aerospace intends to make future announcements regarding Company developments and financial performance through its website at www.howmet.com.
Forward-Looking Statements
This release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "goal," "guidance," "intends," "may," "outlook," "plans," "projects," "seeks," "sees," "should," "targets," "will," "would," or other words of similar meaning. All statements that reflect Howmet Aerospace’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements, forecasts and outlook relating to the condition of end markets; future financial results or operating performance; future strategic actions; Howmet Aerospace's strategies, outlook, and business and financial prospects; and any future share repurchases, which may be subject to market conditions, legal requirements and other considerations. These statements reflect beliefs and assumptions that are based on Howmet Aerospace’s perception of historical trends, current conditions and expected future developments, as well as other factors Howmet Aerospace believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and changes in circumstances that are difficult to predict, which could cause actual results to differ materially from those indicated by these statements. Such risks and uncertainties include, but are not limited to: (a) uncertainty of the duration, extent and impact of the COVID-19 pandemic on Howmet Aerospace’s business, results of operations, and financial condition; (b) deterioration in global economic and financial market conditions generally, including as a result of pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the COVID-19 pandemic continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations); (c) unfavorable changes in the markets served by Howmet Aerospace; (d) the impact of potential cyber attacks and information technology or data security breaches; (e) the loss of significant customers or adverse changes in customers’ business or financial conditions; (f) manufacturing difficulties or other issues that impact product performance, quality or safety; (g) the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated or targeted; (h) competition from new product offerings, disruptive technologies or other developments; (i) geopolitical, economic, and regulatory risks relating to Howmet Aerospace’s global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; (j) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation, which can expose Howmet Aerospace to substantial costs and liabilities; (k) failure to comply with government contracting regulations; (l) adverse changes in discount rates or investment returns on pension assets; (m) inability of suppliers to deliver goods due to disruptions; (n) the impact of changes in raw material prices and foreign currency exchange rates on costs and results; and (o) the other risk factors summarized in Howmet Aerospace’s Form 10-K for the year ended December 31, 2019 and Forms 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, along with other reports filed with the U.S. Securities and Exchange Commission. Market projections are subject to the risks discussed above and other risks in the market. The statements in this release are made as of the date of this release, even if subsequently made available by Howmet Aerospace on its website or otherwise. Howmet Aerospace disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.
Non-GAAP Financial Measures
Some of the information included in this release is derived from Howmet Aerospace’s consolidated financial information but is not presented in Howmet Aerospace’s financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Certain of these data are considered “non-GAAP financial measures” under SEC rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most directly comparable GAAP financial measures and management’s rationale for the use of the non-GAAP financial measures can be found in the schedules to this release.
|
Howmet Aerospace Inc. and subsidiaries |
||||||||||||
|
Statement of Consolidated Operations (unaudited) |
||||||||||||
|
(in U.S. dollar millions, except per-share and share amounts) |
||||||||||||
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|
Quarter ended |
|||||||||||
|
|
December 31, 2020 |
|
September 30, 2020 |
|
December 31, 2019 |
|||||||
|
Sales |
$ |
1,238 |
|
|
$ |
1,134 |
|
|
$ |
1,734 |
|
|
|
|
|
|
|
|
|
|||||||
|
Cost of goods sold (exclusive of expenses below) |
872 |
|
|
900 |
|
|
1,269 |
|
||||
|
Selling, general administrative, and other expenses |
58 |
|
|
66 |
|
|
93 |
|
||||
|
Research and development expenses |
4 |
|
|
5 |
|
|
6 |
|
||||
|
Provision for depreciation and amortization |
67 |
|
|
68 |
|
|
71 |
|
||||
|
Restructuring and other charges(1) |
16 |
|
|
22 |
|
|
10 |
|
||||
|
Operating income |
221 |
|
|
73 |
|
|
285 |
|
||||
|
|
|
|
|
|
|
|||||||
|
Interest expense |
76 |
|
|
77 |
|
|
82 |
|
||||
|
Other expense, net |
74 |
|
|
8 |
|
|
5 |
|
||||
|
|
|
|
|
|
|
|||||||
|
Income (loss) from continuing operations before income taxes |
71 |
|
|
(12 |
) |
|
198 |
|
||||
|
Provision (benefit) for income taxes |
(35 |
) |
|
(48 |
) |
|
80 |
|
||||
|
Income from continuing operations after income taxes |
106 |
|
|
36 |
|
|
118 |
|
||||
|
Income from discontinued operations after income taxes |
— |
|
|
— |
|
|
191 |
|
||||
|
|
|
|
|
|
|
|||||||
|
Net income |
$ |
106 |
|
|
$ |
36 |
|
|
$ |
309 |
|
|
|
|
|
|
|
|
|
|||||||
|
Amounts Attributable to Howmet Aerospace Common Shareholders: |
|
|
|
|
|
|||||||
|
Earnings per share - Basic(2)(3)(5): |
|
|
|
|
|
|||||||
|
Continuing Operations |
$ |
0.24 |
|
|
$ |
0.08 |
|
|
$ |
0.27 |
|
|
|
Discontinued Operations |
$ |
— |
|
|
$ |
— |
|
|
$ |
0.44 |
|
|
|
Net income per share |
$ |
0.24 |
|
|
$ |
0.08 |
|
|
$ |
0.71 |
|
|
|
Average number of shares(3)(4) |
433,280,936 |
|
|
436,123,504 |
|
|
432,802,445 |
|
||||
|
|
|
|
|
|
|
|||||||
|
Earnings per share - Diluted(2)(3)(5): |
|
|
|
|
|
|||||||
|
Continuing Operations |
$ |
0.24 |
|
|
$ |
0.08 |
|
|
$ |
0.27 |
|
|
|
Discontinued Operations |
$ |
— |
|
|
$ |
— |
|
|
$ |
0.44 |
|
|
|
Net income per share |
$ |
0.24 |
|
|
$ |
0.08 |
|
|
$ |
0.71 |
|
|
|
Average number of shares(4) |
437,979,216 |
|
|
439,389,489 |
|
|
441,941,647 |
|
||||
|
|
|
|
|
|
|
|||||||
|
Common stock outstanding at the end of the period |
432,906,377 |
|
|
433,598,864 |
|
|
432,855,183 |
|
||||
|
(1) |
Restructuring and other charges for the quarter ended December 31, 2020 included severance costs, asset impairments, and other exit costs. Restructuring and other charges for the quarter ended September 30, 2020 included severance costs, pension settlements and other exit costs. Restructuring and other charges for the quarter ended December 31, 2019 included charges for asset impairments, accelerated depreciation, and other exit costs. |
|
|
(2) |
In order to calculate both basic and diluted earnings per share, preferred stock dividends declared of $1 for the quarters ended December 31, 2020, September 30, 2020, and December 31, 2019 need to be subtracted from Net income (loss). |
|
|
(3) |
For the quarters presented, the difference between the diluted average number of shares and the basic average number of shares related to share equivalents associated with outstanding employee stock options and awards. |
|
|
(4) |
Basic and diluted average number of shares and common stock outstanding at the end of the period for the quarter ended December 31, 2020 do not reflect the full impact of the share repurchases made at different times during 2020. Basic and diluted average number of shares and common stock outstanding at the end of the period for the quarter ended December 31, 2019 do not reflect the impact of the convertible notes, the difference between the diluted average number of shares and the respective basic average number of shares related to share equivalents associated with outstanding employee stock options and awards and the full impact of the share repurchases made at different times during 2019. |
|
|
(5) |
Per share amounts are calculated independently for Continuing and Discontinued operations, therefore, the sum of the amounts may not equal the total Net Income per share |
|
Howmet Aerospace Inc. and subsidiaries |
||||||||
|
Statement of Consolidated Operations (unaudited) |
||||||||
|
(in U.S. dollar millions, except per-share and share amounts) |
||||||||
|
For the year ended December 31, |
2020 |
|
2019 |
|||||
|
Sales |
$ |
5,259 |
|
|
$ |
7,098 |
|
|
|
Cost of goods sold (exclusive of expenses below) |
3,878 |
|
|
5,214 |
|
|||
|
Selling, general administrative, and other expenses |
277 |
|
|
400 |
|
|||
|
Research and development expenses |
17 |
|
|
28 |
|
|||
|
Provision for depreciation and amortization |
279 |
|
|
295 |
|
|||
|
Restructuring and other charges (1) |
182 |
|
|
582 |
|
|||
|
Operating income |
626 |
|
|
579 |
|
|||
|
Interest expense |
381 |
|
|
338 |
|
|||
|
Other expense, net |
74 |
|
|
31 |
|
|||
|
Income before income taxes |
171 |
|
|
210 |
|
|||
|
Provision (benefit) for income taxes |
(40 |
) |
|
84 |
|
|||
|
Income from continuing operations after income taxes |
$ |
211 |
|
|
$ |
126 |
|
|
|
Income from discontinued operations after income taxes |
50 |
|
|
344 |
|
|||
|
Net income |
$ |
261 |
|
|
$ |
470 |
|
|
|
|
|
|
|
|||||
|
Amounts Attributable to Howmet Aerospace Common Shareholders: |
|
|
|
|||||
|
Net income |
$ |
259 |
|
|
$ |
477 |
|
|
|
Earnings per share - basic (2)(3)(5): |
|
|
|
|||||
|
Continuing operations |
$ |
0.48 |
|
|
$ |
0.28 |
|
|
|
Discontinued operations |
$ |
0.11 |
|
|
$ |
0.77 |
|
|
|
Earnings per share - diluted (2)(3)(5): |
|
|
|
|||||
|
Continuing operations |
$ |
0.48 |
|
|
$ |
0.27 |
|
|
|
Discontinued operations |
$ |
0.11 |
|
|
$ |
0.76 |
|
|
|
Average Shares Outstanding: |
|
|
|
|||||
|
Average shares outstanding - basic (4) |
435,134,173 |
|
|
446,217,357 |
|
|||
|
Average shares outstanding - diluted (4) |
439,296,141 |
|
|
462,827,223 |
|
|||
|
(1) |
Restructuring and other charges for the year ended December 31, 2020 included severance costs, asset impairments, and other exit costs. Restructuring and other charges for the year ended December 31, 2019 included charges for asset impairments, primarily related to its forgings business in the U.K, associated with the agreement to sell the business; an impairment of a long-lived asset group of $428; net layoff costs and other exit costs, partially offset by a credit related to the elimination of life insurance benefits for U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries. |
|
|
(2) |
In order to calculate both basic and diluted earnings per share, preferred stock dividends declared of $2 for the years ended December 31, 2020 and 2019 need to be subtracted from Net income. |
|
|
(3) |
For the years ended December 31, 2020 and 2019, the difference between the respective diluted average number of shares and the respective basic average number of shares related to share equivalents associated with outstanding employee stock options and awards and shares underlying outstanding convertible debt (convertible debt matured and was repaid in October 2019). |
|
|
(4) |
Basic and diluted average number of shares and Common stock outstanding at the end of the period for the year ended December 31, 2019 reflects the impact of share repurchase programs of the Company’s common stock. |
|
|
(5) |
Per share amounts are calculated independently for Continuing and Discontinued operations, therefore, the sum of the amounts may not equal the total Net Income per share. |
|
Howmet Aerospace Inc. and subsidiaries |
||||||||
|
Consolidated Balance Sheet (unaudited) |
||||||||
|
(in U.S. dollar millions) |
||||||||
|
|
December 31, 2020 |
|
December 31, 2019 |
|||||
|
Assets |
|
|
|
|||||
|
Current assets: |
|
|
|
|||||
|
Cash and cash equivalents |
$ |
1,610 |
|
|
$ |
1,577 |
|
|
|
Receivables from customers, less allowances of $1 in 2020 and $1 in 2019 |
328 |
|
|
583 |
|
|||
|
Other receivables(1)(2) |
29 |
|
|
349 |
|
|||
|
Inventories |
1,488 |
|
|
1,607 |
|
|||
|
Prepaid expenses and other current assets |
217 |
|
|
285 |
|
|||
|
Current assets of discontinued operations |
— |
|
|
1,442 |
|
|||
|
Total current assets |
3,672 |
|
|
5,843 |
|
|||
|
|
|
|
|
|||||
|
Properties, plants, and equipment, net |
2,592 |
|
|
2,629 |
|
|||
|
Goodwill |
4,102 |
|
|
4,067 |
|
|||
|
Deferred income taxes(3) |
275 |
|
|
209 |
|
|||
|
Intangibles, net |
571 |
|
|
599 |
|
|||
|
Other noncurrent assets |
234 |
|
|
316 |
|
|||
|
Non current assets of discontinued operations |
— |
|
|
3,899 |
|
|||
|
Total assets |
$ |
11,446 |
|
|
$ |
17,562 |
|
|
|
|
|
|
|
|||||
|
Liabilities |
|
|
|
|||||
|
Current liabilities: |
|
|
|
|||||
|
Accounts payable, trade |
$ |
599 |
|
|
$ |
976 |
|
|
|
Accrued compensation and retirement costs |
205 |
|
|
285 |
|
|||
|
Taxes, including income taxes |
102 |
|
|
65 |
|
|||
|
Accrued interest payable |
89 |
|
|
112 |
|
|||
|
Other current liabilities |
289 |
|
|
229 |
|
|||
|
Short-term debt |
376 |
|
|
1,034 |
|
|||
|
Current liabilities of discontinued operations |
— |
|
|
1,424 |
|
|||
|
Total current liabilities |
1,660 |
|
|
4,125 |
|
|||
|
Long-term debt, less amount due within one year |
4,699 |
|
|
4,906 |
|
|||
|
Accrued pension benefits |
985 |
|
|
1,030 |
|
|||
|
Accrued other postretirement benefits |
198 |
|
|
200 |
|
|||
|
Other noncurrent liabilities and deferred credits |
324 |
|
|
438 |
|
|||
|
Non current liabilities of discontinued operations |
— |
|
|
2,258 |
|
|||
|
Total liabilities |
7,866 |
|
|
12,957 |
|
|||
|
|
|
|
|
|||||
|
Equity |
|
|
|
|||||
|
Howmet Aerospace shareholders’ equity: |
|
|
|
|||||
|
Preferred stock |
55 |
|
|
55 |
|
|||
|
Common stock |
433 |
|
|
433 |
|
|||
|
Additional capital |
4,671 |
|
|
7,319 |
|
|||
|
Retained earnings(3) |
364 |
|
|
113 |
|
|||
|
Accumulated other comprehensive loss |
(1,943 |
) |
|
(3,329 |
) |
|||
|
Total Howmet Aerospace shareholders’ equity |
3,580 |
|
|
4,591 |
|
|||
|
Noncontrolling interests |
— |
|
|
14 |
|
|||
|
Total equity |
3,580 |
|
|
4,605 |
|
|||
|
Total liabilities and equity |
$ |
11,446 |
|
|
$ |
17,562 |
||
|
(1) |
Approximately $280 out of the total $350 related to the sale of receivables program was recast into discontinued operations for the December 31, 2019 period. |
|
|
(2) |
Includes a deferred purchase program receivable of $12 for the December 31, 2020 period and $246 for the December 31, 2019 period. |
|
|
(3) |
During the second quarter of 2020, a $16 tax adjustment was identified related to periods prior to 2018. Although management has determined it was not material to any periods, it was corrected as an adjustment to Retained Earnings (Accumulated Deficit) and Deferred income taxes. The accompanying Consolidated Balance Sheet at December 31, 2019 reflects the revision for such tax item. |
|
Howmet Aerospace and subsidiaries |
||||||||
|
Statement of Consolidated Cash Flows (unaudited) |
||||||||
|
(in U.S. dollar millions) |
||||||||
|
|
Year ended December 31, |
|||||||
|
|
2020 |
|
2019 |
|||||
|
Operating activities |
|
|
|
|||||
|
Net income |
$ |
261 |
|
|
$ |
470 |
|
|
|
Adjustments to reconcile net income to cash provided from operations: |
|
|
|
|||||
|
Depreciation and amortization |
338 |
|
|
536 |
|
|||
|
Deferred income taxes |
2 |
|
|
(19 |
) |
|||
|
Restructuring and other charges |
164 |
|
|
620 |
|
|||
|
Net loss from investing activities—asset sales |
8 |
|
|
7 |
|
|||
|
Net periodic pension benefit cost |
51 |
|
|
115 |
|
|||
|
Stock-based compensation |
45 |
|
|
60 |
|
|||
|
Other |
59 |
|
|
13 |
|
|||
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|
|
|
|||||
|
(Increase) in receivables |
(238 |
) |
|
(977 |
) |
|||
|
Decrease (increase) in inventories |
74 |
|
|
(3 |
) |
|||
|
Decrease (increase) in prepaid expenses and other current assets |
(2 |
) |
|
4 |
|
|||
|
(Decrease) increase in accounts payable, trade(2) |
(381 |
) |
|
(1 |
) |
|||
|
(Decrease) in accrued expenses |
(217 |
) |
|
(42 |
) |
|||
|
(Decrease) increase in taxes, including income taxes |
98 |
|
|
(2 |
) |
|||
|
Pension contributions |
(257 |
) |
|
(268 |
) |
|||
|
Decrease (increase) in noncurrent assets |
39 |
|
|
(7 |
) |
|||
|
(Decrease) in noncurrent liabilities |
(35 |
) |
|
(45 |
) |
|||
|
Cash provided by operations |
9 |
|
|
461 |
|
|||
|
|
|
|
|
|||||
|
Financing Activities |
|
|
|
|||||
|
Net change in short-term borrowings (original maturities of three months or less) |
(15 |
) |
|
2 |
|
|||
|
Additions to debt (original maturities greater than three months)(1) |
2,400 |
|
|
400 |
|
|||
|
Payments on debt (original maturities greater than three months)(1) |
(2,043 |
) |
|
(806 |
) |
|||
|
Debt issuance costs |
(61 |
) |
|
— |
|
|||
|
Premiums paid on early redemption of debt |
(59 |
) |
|
— |
|
|||
|
Proceeds from exercise of employee stock options |
33 |
|
|
56 |
|
|||
|
Dividends paid to shareholders |
(11 |
) |
|
(57 |
) |
|||
|
Repurchases of common stock |
(73 |
) |
|
(1,150 |
) |
|||
|
Net cash transferred from Arconic Corporation at separation |
(500 |
) |
|
— |
|
|||
|
Other |
(40 |
) |
|
(13 |
) |
|||
|
Cash used for financing activities |
(369 |
) |
|
(1,568 |
) |
|||
|
Investing Activities |
|
|
|
|||||
|
Capital expenditures(2) |
(267 |
) |
|
(641 |
) |
|||
|
Proceeds from the sale of assets and businesses |
114 |
|
|
103 |
|
|||
|
Sales of investments |
— |
|
|
73 |
|
|||
|
Cash receipts from sold receivables |
422 |
|
|
995 |
|
|||
|
Other |
2 |
|
|
(2 |
) |
|||
|
Cash provided from investing activities |
271 |
|
|
528 |
|
|||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(3 |
) |
|
— |
|
|||
|
Net change in cash, cash equivalents and restricted cash |
(92 |
) |
|
(579 |
) |
|||
|
Cash, cash equivalents and restricted cash at beginning of year |
1,703 |
|
|
2,282 |
|
|||
|
Cash, cash equivalents and restricted cash at end of year |
$ |
1,611 |
|
|
$ |
1,703 |
||
|
(1) |
The use of cash from financing activities in 2020 was primarily related to the repayments on borrowings under certain revolving credit facilities (see below) and repayments on debt, primarily the aggregate outstanding principal amount of the 6.15% Convertible Notes of approximately $2,040. These items were partially offset by long-term debt issuance of $2,400 (of which $1,200 went with Arconic Corporation at Separation). |
|
|
(2) |
During the third quarter ended September 30, 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows. Although management has determined that such misclassification did not materially misstate such prior financial statements, the Company has revised its Statement of Consolidated Cash Flows for the twelve months ended December 31, 2019 resulting in an increase of $55 to previously reported capital expenditures within cash provided from investing activities with a corresponding offset in accounts payable, trade within cash used for operations. |
|
Howmet Aerospace Inc. and subsidiaries |
|||||||||||||||||||||||||||||||||||||||||
|
Segment Information (unaudited) |
|||||||||||||||||||||||||||||||||||||||||
|
(in U.S. dollar millions) |
|||||||||||||||||||||||||||||||||||||||||
|
|
1Q19 |
|
2Q19 |
|
3Q19 |
|
4Q19 |
|
2019 |
|
1Q20 |
|
2Q20 |
|
3Q20 |
|
4Q20 |
|
2020 |
||||||||||||||||||||||
|
Engine Products |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Third-party sales |
$ |
813 |
|
$ |
835 |
|
$ |
844 |
|
$ |
828 |
|
$ |
3,320 |
|
$ |
781 |
|
$ |
585 |
|
$ |
485 |
|
$ |
555 |
|
$ |
2,406 |
|
|
||||||||||
|
Inter-segment sales |
$ |
5 |
|
$ |
3 |
|
$ |
1 |
|
$ |
2 |
|
$ |
11 |
|
$ |
2 |
|
$ |
1 |
|
$ |
1 |
|
$ |
1 |
|
$ |
5 |
|
|
||||||||||
|
Segment operating profit |
$ |
141 |
|
$ |
163 |
|
$ |
161 |
|
$ |
156 |
|
$ |
621 |
|
$ |
165 |
|
$ |
105 |
|
$ |
39 |
|
$ |
108 |
|
$ |
417 |
|
|
||||||||||
|
Segment operating profit margin |
17.3 |
% |
19.5 |
% |
19.1 |
% |
18.8 |
% |
18.7 |
% |
21.1 |
% |
17.9 |
% |
8.0 |
% |
19.5 |
% |
17.3 |
% |
|||||||||||||||||||||
|
Provision for depreciation and amortization |
$ |
34 |
|
$ |
35 |
|
$ |
31 |
|
$ |
31 |
|
$ |
131 |
|
$ |
30 |
|
$ |
31 |
|
$ |
31 |
|
$ |
31 |
|
$ |
123 |
|
|
||||||||||
|
Restructuring and other charges |
$ |
3 |
|
$ |
250 |
|
$ |
43 |
|
$ |
1 |
|
$ |
297 |
|
$ |
13 |
|
$ |
22 |
|
$ |
9 |
|
$ |
(8) |
|
$ |
36 |
|
|
||||||||||
|
Capital expenditures |
$ |
71 |
|
$ |
55 |
|
$ |
39 |
|
$ |
46 |
|
$ |
211 |
|
$ |
19 |
|
$ |
14 |
|
$ |
15 |
|
$ |
29 |
|
$ |
77 |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Fastening Systems |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Third-party sales |
$ |
395 |
|
$ |
399 |
|
$ |
391 |
|
$ |
376 |
|
$ |
1,561 |
|
$ |
385 |
|
$ |
326 |
|
$ |
271 |
|
$ |
263 |
|
$ |
1,245 |
|
|
||||||||||
|
Inter-segment sales |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
||||||||||
|
Segment operating profit |
$ |
96 |
|
$ |
99 |
|
$ |
102 |
|
$ |
99 |
|
$ |
396 |
|
$ |
96 |
|
$ |
70 |
|
$ |
33 |
|
$ |
48 |
|
$ |
247 |
|
|
||||||||||
|
Segment operating profit margin |
24.3 |
% |
24.8 |
% |
26.1 |
% |
26.3 |
% |
25.4 |
% |
24.9 |
% |
21.5 |
% |
12.2 |
% |
18.3 |
% |
19.8 |
% |
|||||||||||||||||||||
|
Provision for depreciation and amortization |
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
$ |
48 |
|
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
$ |
48 |
|
|
||||||||||
|
Restructuring and other charges |
$ |
5 |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
6 |
|
$ |
2 |
|
$ |
24 |
|
$ |
— |
|
$ |
13 |
|
$ |
39 |
|
|
||||||||||
|
Capital expenditures |
$ |
9 |
|
$ |
8 |
|
$ |
7 |
|
$ |
12 |
|
$ |
36 |
|
$ |
8 |
|
$ |
7 |
|
$ |
9 |
|
$ |
15 |
|
$ |
39 |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Engineered Structures |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Third-party sales |
$ |
294 |
|
$ |
331 |
|
$ |
318 |
|
$ |
312 |
|
$ |
1,255 |
|
$ |
275 |
|
$ |
229 |
|
$ |
206 |
|
$ |
217 |
|
$ |
927 |
|
|
||||||||||
|
Inter-segment sales |
$ |
3 |
|
$ |
3 |
|
$ |
4 |
|
$ |
3 |
|
$ |
13 |
|
$ |
3 |
|
$ |
2 |
|
$ |
1 |
|
$ |
1 |
|
$ |
7 |
|
|
||||||||||
|
Segment operating profit |
$ |
16 |
|
$ |
25 |
|
$ |
40 |
|
$ |
39 |
|
$ |
120 |
|
$ |
28 |
|
$ |
19 |
|
$ |
10 |
|
$ |
16 |
|
$ |
73 |
|
|
||||||||||
|
Segment operating profit margin |
5.4 |
% |
7.6 |
% |
12.6 |
% |
12.5 |
% |
9.6 |
% |
10.2 |
% |
8.3 |
% |
4.9 |
% |
7.4 |
% |
7.9 |
% |
|||||||||||||||||||||
|
Provision for depreciation and amortization |
$ |
17 |
|
$ |
14 |
|
$ |
15 |
|
$ |
12 |
|
$ |
58 |
|
$ |
13 |
|
$ |
14 |
|
$ |
13 |
|
$ |
12 |
|
$ |
52 |
|
|
||||||||||
|
Restructuring and other charges |
$ |
4 |
|
$ |
193 |
|
$ |
1 |
|
$ |
1 |
|
$ |
199 |
|
$ |
17 |
|
$ |
(5) |
|
$ |
9 |
|
$ |
7 |
|
$ |
28 |
|
|
||||||||||
|
Capital expenditures |
$ |
11 |
|
$ |
7 |
|
$ |
4 |
|
$ |
5 |
|
$ |
27 |
|
$ |
3 |
|
$ |
5 |
|
$ |
3 |
|
$ |
8 |
|
$ |
19 |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Forged Wheels |
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
|
Third-party sales |
$ |
254 |
|
$ |
257 |
|
$ |
241 |
|
$ |
217 |
|
$ |
969 |
|
$ |
191 |
|
$ |
113 |
|
$ |
172 |
|
$ |
203 |
|
$ |
679 |
|
|
||||||||||
|
Inter-segment sales |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
||||||||||
|
Segment operating profit |
$ |
60 |
|
$ |
73 |
|
$ |
60 |
|
$ |
60 |
|
$ |
253 |
|
$ |
50 |
|
$ |
6 |
|
$ |
35 |
|
$ |
62 |
|
$ |
153 |
|
|
||||||||||
|
Segment operating profit margin |
23.6 |
% |
28.4 |
% |
24.9 |
% |
27.6 |
% |
26.1 |
% |
26.2 |
% |
5.3 |
% |
20.3 |
% |
30.5 |
% |
22.5 |
% |
|||||||||||||||||||||
|
Provision for depreciation and amortization |
$ |
8 |
|
$ |
8 |
|
$ |
8 |
|
$ |
8 |
|
$ |
32 |
|
$ |
10 |
|
$ |
9 |
|
$ |
10 |
|
$ |
10 |
|
$ |
39 |
|
|
||||||||||
|
Restructuring and other charges |
$ |
4 |
|
$ |
1 |
|
$ |
— |
|
$ |
(1) |
|
$ |
4 |
|
$ |
2 |
|
$ |
1 |
|
$ |
— |
|
$ |
— |
|
$ |
3 |
|
|
||||||||||
|
Capital expenditures |
$ |
25 |
|
$ |
20 |
|
$ |
11 |
|
$ |
14 |
|
$ |
70 |
|
$ |
7 |
|
$ |
4 |
|
$ |
6 |
|
$ |
6 |
|
$ |
23 |
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Differences between the total segment and consolidated totals are in Corporate.
|
Howmet Aerospace Inc. and subsidiaries |
||||||||||||||||||||||||||||||||||||||||
|
Segment Information (unaudited) |
||||||||||||||||||||||||||||||||||||||||
|
(in U.S dollar millions) |
||||||||||||||||||||||||||||||||||||||||
|
Reconciliation of Total Segment Operating Profit to Income (Loss) from Continuing Operations Before Income Taxes |
||||||||||||||||||||||||||||||||||||||||
|
|
1Q19 |
|
2Q19 |
|
3Q19 |
|
4Q19 |
|
2019 |
|
1Q20 |
|
2Q20 |
|
3Q20 |
|
4Q20 |
|
2020 |
|||||||||||||||||||||
|
Total segment operating profit |
$ |
313 |
|
$ |
360 |
|
$ |
363 |
|
$ |
354 |
|
$ |
1,390 |
|
$ |
339 |
|
$ |
200 |
|
$ |
117 |
|
$ |
234 |
|
$ |
890 |
|
||||||||||
|
Unallocated amounts |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
Restructuring and other charges |
(44 |
) |
(472 |
) |
(56 |
) |
(10 |
) |
(582 |
) |
(39 |
) |
(105 |
) |
(22 |
) |
(16 |
) |
(182 |
) |
||||||||||||||||||||
|
Corporate expense(1) |
(55 |
) |
(64 |
) |
(51 |
) |
(59 |
) |
(229 |
) |
(42 |
) |
(21 |
) |
(22 |
) |
3 |
|
(82 |
) |
||||||||||||||||||||
|
Consolidated operating income (loss) |
214 |
|
(176 |
) |
256 |
|
285 |
|
579 |
|
258 |
|
74 |
|
73 |
|
221 |
|
626 |
|
||||||||||||||||||||
|
Interest expense |
(85 |
) |
(86 |
) |
(85 |
) |
(82 |
) |
(338 |
) |
(84 |
) |
(144 |
) |
(77 |
) |
(76 |
) |
(381 |
) |
||||||||||||||||||||
|
Other expense (income), net |
(12 |
) |
(6 |
) |
(8 |
) |
(5 |
) |
(31 |
) |
24 |
|
(16 |
) |
(8 |
) |
(74 |
) |
(74 |
) |
||||||||||||||||||||
|
Income (loss) from continuing operations before income taxes |
$ |
117 |
|
$ |
(268 |
) |
$ |
163 |
|
$ |
198 |
|
$ |
210 |
|
$ |
198 |
|
$ |
(86 |
) |
$ |
(12 |
) |
$ |
71 |
|
$ |
171 |
|
||||||||||
Differences between the total segment and consolidated totals are in Corporate.
|
(1)
|
|
For the quarter ended March 31, 2019, Corporate expense included $1 of costs associated with the Arconic Inc. Separation Transaction, $8 of legal and advisory charges related to the strategic review and Grenfell tower. For the quarter ended June 30, 2019, Corporate expense included $1 of costs associated with the Arconic Inc. Separation Transaction, $9 impairment of assets of the energy business, $4 of costs related to a fire at a fasteners plant and $3 of legal and advisory charges related to Grenfell tower. For the quarter ended September 30, 2019, Corporate expense included $1 of costs associated with the Arconic Inc. Separation Transaction, $5 of costs related to a fire a fasteners plant and $2 of legal and advisory charges related to Grenfell tower. For the quarter ended December 31, 2019, Corporate expense included $2 of costs associated with the Arconic Inc. Separation Transaction, $1 in an impairment of assets of the energy business, and $1 of legal and advisory charges related to Grenfell tower. For the quarter ended March 31, 2020, Corporate expense included $4 of costs associated with the Arconic Inc. Separation Transaction, $11 of net costs related to fires at two plants, and impairment costs related to facilities closures of $3 offset by ($1) net reimbursement related to legal and advisory charges related to Grenfell Tower. For the quarter ended June 30, 2020, Corporate expense included $3 of costs associated with the Arconic Inc. Separation Transaction, ($6) of reimbursement related to legal and advisory charges related to Grenfell Tower, and $4 of net costs related to a fire at two plants (net of insurance reimbursements). For the quarter ended September 30, 2020, Corporate expense included ($2) of reimbursement related to legal and advisory charges related to Grenfell Tower, and $7 of net costs related to fires at two plants. For the quarter ended December 31, 2020, Corporate expense included ($3) of reimbursement related to legal and advisory charges related to Grenfell Tower, and ($19) of net reimbursements related to fires at two plants. |
|
Howmet Aerospace Inc. and subsidiaries |
||||||||||||||||
|
Calculation of Financial Measures (unaudited), continued |
||||||||||||||||
|
(in U.S. dollars millions) |
||||||||||||||||
|
Adjusted free cash flow |
Quarter ended |
|
Year ended |
|||||||||||||
|
|
September 30, 2020 |
|
December 31, 2020 |
|
December 31, 2019 |
|
December 31, 2020 |
|||||||||
|
Cash provided from operations |
|
$ |
35 |
|
|
$ |
151 |
|
|
$ |
461 |
|
|
$ |
9 |
|
|
Cash receipts from sold receivables |
|
144 |
|
|
164 |
|
|
995 |
|
|
422 |
|
||||
|
Capital expenditures |
|
(36 |
) |
|
(47 |
) |
|
(641 |
) |
|
(267 |
) |
||||
|
Adjusted free cash flow |
|
143 |
|
|
268 |
|
|
815 |
|
|
164 |
|
||||
|
Costs associated with the Arconic Inc. Separation Transaction |
|
— |
|
|
— |
|
|
55 |
|
|
77 |
|
||||
|
Adjusted free cash flow, excluding costs associated with Arconic Inc. Separation Transaction |
|
$ |
143 |
|
|
$ |
268 |
|
|
$ |
870 |
|
|
$ |
241 |
|
The net cash funding from the sale of accounts receivables was $350 million in the fourth quarter of 2019. The net cash funding from the sale of accounts receivables was $329 million in the first quarter of 2020 which represented a $21 million use of cash in the first quarter. The net cash funding from the sale of accounts receivables was $299 million in the second quarter of 2020 which represented a $30 million use of cash in the second quarter. The net cash funding from the sale of accounts receivables was $255 million in the third quarter of 2020 which represented a $45 million use of cash in the third quarter. The net cash funding from the sale of accounts receivables was $250 million in the fourth quarter of 2020 which represented a $5 million use of cash in the fourth quarter.
During the third quarter ended September 30, 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows. Although management has determined that such misclassification did not materially misstate such prior financial statements, the Company has revised its Statement of Consolidated Cash Flows for the twelve months ended December 31, 2019 resulting in an increase of $55 to previously reported capital expenditures within cash provided from investing activities with a corresponding offset in accounts payable, trade within cash used for operations.
Adjusted free cash flow and Adjusted free cash flow, excluding costs associated with the Arconic Inc. Separation Transaction are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures (due to the fact that these expenditures are considered necessary to maintain and expand the Company's asset base and are expected to generate future cash flows from operations), cash receipts from net sales of beneficial interest in sold receivables, as well as costs associated with the Arconic Inc. Separation Transaction. It is important to note that Adjusted free cash flow and Adjusted free cash flow, excluding costs associated with the Arconic Inc. Separation Transaction do not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.
|
Howmet Aerospace Inc. and subsidiaries |
||||||||||||||||||||
|
Calculation of Financial Measures (unaudited) |
||||||||||||||||||||
|
(in U.S. dollar millions, except per-share and share amounts) |
||||||||||||||||||||
|
Income from continuing operations, excluding Special items |
Quarter ended |
|
Year ended |
|||||||||||||||||
|
December 31, 2019 |
|
September 30, 2020 |
|
December 31, 2020 |
|
December 31, 2019 |
|
December 31, 2020 |
||||||||||||
|
Income from continuing operations |
$ |
118 |
|
|
$ |
36 |
|
|
$ |
106 |
|
|
$ |
126 |
|
|
$ |
211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Diluted earnings per share (EPS) |
|
|
|
|
|
|
|
|
|
|||||||||||
|
Continuing operations |
$ |
0.27 |
|
|
$ |
0.08 |
|
|
$ |
0.24 |
|
|
$ |
0.27 |
|
|
$ |
0.48 |
|
|
|
Discontinued operations |
$ |
0.44 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.76 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Special items: |
|
|
|
|
|
|
|
|
|
|||||||||||
|
Restructuring and other charges |
10 |
|
|
22 |
|
|
16 |
|
|
582 |
|
|
182 |
|
||||||
|
Discrete tax items(1) |
(2) |
|
|
(41) |
|
|
(76) |
|
|
(25) |
|
|
(115) |
|
||||||
|
Other special items(2) |
52 |
|
|
3 |
|
|
44 |
|
|
37 |
|
|
135 |
|
||||||
|
Tax impact(3) |
(14) |
|
|
(7) |
|
|
2 |
|
|
(130) |
|
|
(59) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income from continuing operations, excluding Special items |
$ |
164 |
|
|
$ |
13 |
|
|
$ |
92 |
|
|
$ |
590 |
|
|
$ |
354 |
|
|
|
|
Allocation adjustments(4) |
|
(13) |
|
||||||||||||||||
|
|
Income from continuing operations excluding Special items and Allocation adjustments |
|
$ |
341 |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Diluted EPS excluding Special items |
$ |
0.37 |
|
|
$ |
0.03 |
|
|
$ |
0.21 |
|
|
$ |
1.29 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
Diluted EPS excluding Special items and Allocation adjustments |
|
$ |
0.77 |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Average number of shares - diluted EPS excluding Special items |
441,941,647 |
|
|
439,389,489 |
|
|
437,979,216 |
|
|
462,827,223 |
|
|
439,296,141 |
|
||||||
Income from continuing operations excluding Special items, Income from continuing operations excluding Special items and Allocation adjustments, Diluted EPS excluding Special items and Diluted EPS excluding Special items and Allocation adjustments are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company excluding the impacts of Restructuring and other charges, Discrete tax items, and Other special items (collectively, “Special items”). In addition, management believes that the Income from continuing operations excluding Special items and Allocation adjustments and Diluted EPS excluding Special items and Allocation adjustments are meaningful to investors as it reflects how management reviewed the standalone costs of Howmet in the quarter ended March 31, 2020 as if the Arconic Inc. Separation Transaction had happened on January 1, 2020. There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Income (loss) from continuing operations determined under GAAP as well as Income (loss) from continuing operations excluding Special items.
|
(1) |
Discrete tax items for each period included the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
Other special items for each period included the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
The tax impact on Special items is based on the applicable statutory rates whereby the difference between such rates and the Company’s consolidated estimated annual effective tax rate is itself a Special item. |
|
|
|
|
|
|
(4) |
Adjustments include differences between allocations as required under discontinued operations as part of generally accepted accounting principles and estimated actual spending in selling, general, administrative, and other expenses and miscellaneous non-operating income related to pension, other post retirement benefits, and foreign exchange related to Howmet on a standalone basis as if the Arconic Inc. Separation Transaction had occurred on January 1, 2020. |
| Howmet Aerospace Inc. and subsidiaries | |||||||||||||||||||||||||
|
Calculation of Financial Measures (unaudited), continued |
|||||||||||||||||||||||||
|
(in U.S. dollar millions) |
|||||||||||||||||||||||||
|
Operational Tax Rate |
Quarter ended December 31, 2020 |
|
|
Year ended December 31, 2020 |
|||||||||||||||||||||
|
As reported |
|
Special items(1)(2) |
|
As adjusted |
|
|
As reported |
|
Special items(1)(2) |
|
As adjusted |
||||||||||||||
|
Income from continuing operations before income taxes |
$ |
71 |
|
|
$ |
56 |
|
|
$ |
127 |
|
|
|
$ |
171 |
|
|
$ |
317 |
|
|
$ |
488 |
|
|
|
Provision (benefit) for income taxes |
(35 |
) |
|
70 |
|
|
35 |
|
|
|
(40 |
) |
|
174 |
|
|
134 |
|
|||||||
|
Operational tax rate |
(49.3 |
)% |
|
|
|
27.6 |
% |
|
|
(23.4 |
)% |
|
|
|
27.5 |
% |
|||||||||
Operational tax rate is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of the Company excluding the impacts of Special items. There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both the Effective tax rate determined under GAAP as well as the Operational tax rate.
|
(1)
|
|
Special items for the quarter ended December 31, 2020 include $16 of Restructuring and other charges and ($22) related to plant-related fire costs and legal and other advisory costs related to Grenfell Tower. Special items for the year ended December 31, 2020 include $182 of Restructuring and other charges, $72 of new debt and tender fees, $5 costs associated with the Arconic Inc. Separation Transaction, $3 in net costs related to plant-related fire costs, ($12) reimbursement of legal and advisory costs related to Grenfell Tower, $7 in interest costs and $3 for impairment costs related to facilities closures. |
|
|
||
|
(2) |
Tax Special items includes discrete tax items and tax impact on Special items which is based on the applicable statutory rates whereby the difference between such rates and the Company’s consolidated estimated annual effective tax rate and other tax related items. Discrete tax items for each period included the following: |
|
|
|
||
|
||
|
|
Howmet Aerospace Inc. and subsidiaries |
||||||||||||||||||||||||
|
Calculation of Financial Measures (unaudited), continued |
||||||||||||||||||||||||
|
(in U.S. dollars millions) |
||||||||||||||||||||||||
|
Net Debt |
September 30, 2019 |
|
December 31, 2019 |
|
March 31, 2020 |
|
June 30, 2020 |
|
September 30, 2020 |
|
December 31, 2020 |
|||||||||||||
|
Short-term debt |
$ |
1,434 |
|
|
$ |
1,034 |
|
$ |
1,336 |
|
|
$ |
391 |
|
|
$ |
384 |
|
$ |
376 |
|
|||
|
Long-term debt, less amount due within one year |
4,905 |
|
|
4,906 |
|
4,608 |
|
|
4,695 |
|
|
4,697 |
|
4,699 |
|
|||||||||
|
Total debt |
$ |
6,339 |
|
|
$ |
5,940 |
|
$ |
5,944 |
|
|
$ |
5,086 |
|
|
$ |
5,081 |
|
$ |
5,075 |
|
|||
|
Less: Cash, cash equivalents, and restricted cash |
1,278 |
|
|
1,632 |
|
2,143 |
|
|
1,285 |
|
|
1,368 |
|
1,611 |
|
|||||||||
|
Net debt |
$ |
5,061 |
|
|
$ |
4,308 |
|
$ |
3,801 |
|
|
$ |
3,801 |
|
|
$ |
3,713 |
|
$ |
3,464 |
|
|||
Net debt is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management assesses the Company's leverage position after factoring in cash that could be used to repay outstanding debt.
|
Howmet Aerospace Inc. and subsidiaries |
||||||||||||||||||||
|
Calculation of Financial Measures (unaudited), continued |
||||||||||||||||||||
|
(in U.S. dollars millions) |
||||||||||||||||||||
|
Operating income excluding Special items |
Quarter ended |
|
Year ended |
|||||||||||||||||
|
December 31, 2019 |
|
September 30, 2020 |
|
December 31, 2020 |
|
December 31, 2019 |
|
December 31, 2020 |
||||||||||||
|
Operating income |
$ |
285 |
|
|
$ |
73 |
|
|
$ |
221 |
|
|
$ |
579 |
|
|
$ |
626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Special items: |
|
|
|
|
|
|
|
|
|
|||||||||||
|
Restructuring and other charges |
10 |
|
|
22 |
|
|
16 |
|
|
582 |
|
|
182 |
|
||||||
|
Costs associated with the Arconic Inc. Separation Transaction |
2 |
|
|
— |
|
|
— |
|
|
5 |
|
|
7 |
|
||||||
|
Impairment of energy business assets |
1 |
|
|
— |
|
|
— |
|
|
10 |
|
|
— |
|
||||||
|
Legal and other advisory costs (reimbursements) related to Grenfell Tower, net |
1 |
|
|
(2 |
) |
|
(3 |
) |
|
8 |
|
|
(12 |
) |
||||||
|
Strategy and portfolio review costs |
— |
|
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
||||||
|
Plant fire costs (reimbursements), net |
— |
|
|
7 |
|
|
(19 |
) |
|
9 |
|
|
3 |
|
||||||
|
Impairment costs related to facilities closures |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3 |
|
||||||
|
Operating income excluding Special items |
$ |
299 |
|
|
$ |
100 |
|
|
$ |
215 |
|
|
$ |
1,199 |
|
|
$ |
809 |
|
|
|
|
Allocation adjustments(1) |
5 |
|
|||||||||||||||||
|
|
Operating income excluding Special items and Allocation adjustments |
$ |
814 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Sales |
$ |
1,734 |
|
|
$ |
1,134 |
|
|
$ |
1,238 |
|
|
$ |
7,098 |
|
|
$ |
5,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Operating income margin, excluding Special items |
17.2 |
% |
|
8.8 |
% |
|
17.4 |
% |
|
16.9 |
% |
|
15.4 |
% |
||||||
Operating income excluding Special items, Operating income excluding Special items and Allocation adjustments, and Operating income margin, excluding Special items are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company excluding the impacts of Special items. In addition, management believes that the Operating income excluding Special items and Allocation adjustments are meaningful to investors as it reflects how management reviewed the standalone costs of Howmet in the quarter ended March 31, 2020 as if the Arconic Inc. Separation Transaction had happened on January 1, 2020. There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Operating income determined under GAAP as well as Operating income excluding Special items.
|
(1) |
Adjustments include differences between allocations as required under discontinued operations as part of generally accepted accounting principles and estimated actual spending in selling, general, administrative, and other expenses related to Howmet on a standalone basis as if the Arconic Inc. Separation Transaction had occurred on January 1, 2020. |
Investor Contact
Paul T. Luther
(412) 553-1950
Paul.Luther@howmet.com
Media Contact
Paul Erwin
(412) 553-2666
Paul.Erwin@howmet.com