Third Quarter Revenue Up 16% Year Over Year;
Strong Profit and Cash Generation
$200 Million Debt Redemption, $25 Million Share
Repurchases, Increased Common Stock Dividend
Full Year 2023 Guidance Increased
2024 Preliminary Revenue Growth Guidance
Approximately 7%
Howmet Aerospace (NYSE:HWM):
Third Quarter 2023 Highlights
- Revenue of $1.66 billion, up 16% year over year, driven by
commercial aerospace, up 23% year over year
- Net income of $188 million versus $80 million in the third
quarter 2022; earnings per share of $0.45 versus $0.19 in the third
quarter 2022; third quarter 2023 operating income margin of
18.5%
- Net income excluding special items of $192 million versus $152
million in the third quarter 2022; adjusted earnings per share
excluding special items of $0.46, up 28% year over year
- Adjusted EBITDA excluding special items of $382 million, up 18%
year over year
- Adjusted EBITDA margin excluding special items of 23.0%
- Generated $191 million cash from operations and $132 million of
free cash flow; $243 million of cash used for financing activities;
and $58 million of cash used for investing activities
- Cash balance at end of quarter of $425 million including
impacts of debt redemption, common stock repurchases and $0.04 per
share dividend on common stock
2023 Guidance
Q4 2023 Guidance
FY 2023 Guidance
Low
Baseline
High
Low
Baseline
High
Revenue
$1.620B
$1.635B
$1.650B
$6.530B
$6.545B
$6.560B
Adj. EBITDA*1
$370M
$375M
$380M
$1.480B
$1.485B
$1.490B
Adj. EBITDA Margin*1
22.8%
22.9%
23.0%
22.7%
22.7%
22.7%
Adj. Earnings per Share*1
$0.44
$0.45
$0.46
$1.76
$1.77
$1.78
Free Cash Flow1
$600M
$635M
$670M
________________________
* Excluding special items
1 Reconciliations of the forward-looking non-GAAP measures
to the most directly comparable GAAP measures, as well as the
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 “2023 Guidance” below.
Key Announcements
- On September 28, 2023, Howmet Aerospace completed an early
partial redemption of its 5.125% Notes due October 2024 (the “2024
Notes”) in the aggregate principal amount of $200 million with cash
on hand for approximately $205 million. Following this redemption,
the aggregate outstanding principal amount of the 2024 Notes is
approximately $705 million. This action will reduce annualized
interest expense by approximately $10 million.
- In the third quarter 2023, the Company repurchased $25 million
of common stock at an average price of $49.32 per share, retiring
approximately 0.5 million shares. As of October 31, 2023, total
share repurchase authorization available was $797 million.
- On September 28, 2023, the Company declared a quarterly
dividend of $0.05 per share on its common stock. The quarterly
dividend represents a 25% increase from the third quarter 2023
dividend of $0.04 per share.
- On August 23, 2023, Fitch Ratings upgraded Howmet Aerospace’s
Long-Term Issuer Default Rating to “BBB” from “BBB-,” moving the
Company from one to two notches above investment grade on its
credit rating scale. On September 18, 2023, Moody’s Investors
Service affirmed Howmet Aerospace’s Corporate Family Ratings at
Ba1, and also upgraded its current outlook from stable to
positive.
Howmet Aerospace (NYSE: HWM) today reported third quarter 2023
results. The Company reported third quarter revenues of $1.66
billion, up 16% year over year, primarily driven by growth in the
commercial aerospace market of 23%.
Howmet Aerospace reported net income of $188 million, or $0.45
per share, in the third quarter 2023 versus $80 million, or $0.19
per share, in the third quarter 2022. Net income excluding special
items was $192 million, or $0.46 per share, in the third quarter
2023, versus $152 million, or $0.36 per share, in the third quarter
2022. Net income included approximately $4 million in net charges
from special items.
Third quarter 2023 operating income was $307 million, up 35%
year over year. Third quarter adjusted operating income excluding
special items was $314 million, up 22% year over year. Operating
income margin was up approximately 260 basis points year over year
at 18.5% in the third quarter 2023. Third quarter adjusted
operating income margin excluding special items was 18.9%, up
approximately 90 basis points year over year.
Third quarter 2023 adjusted EBITDA excluding special items was
$382 million, up 18% year over year. The year-over-year increase
was driven by volume growth in the commercial aerospace market.
Adjusted EBITDA margin excluding special items was up approximately
50 basis points year over year at 23.0%, including approximately
$15 million of additional inflationary cost pass through year over
year. Excluding the additional year over year inflationary cost
pass through, adjusted EBITDA margin excluding special items was
23.3%.
Howmet Aerospace Executive Chairman and Chief Executive Officer
John Plant said, “The Howmet Aerospace team delivered solid results
in the third quarter 2023 in all respects. Total revenue increased
16% year over year, led by commercial aerospace revenue up 23%. The
Company exceeded the high end of all aspects of its guidance range
with adjusted EBITDA margin* increasing to a healthy 23.0%, and
adjusted earnings per share* up 28% year over year.”
Mr. Plant continued, “The outlook for the commercial aerospace
market continues to be robust, supported by demand for new, more
fuel-efficient aircraft, as well as increased spares demand. Our
defense aerospace and industrial markets also continue to be
healthy. Commercial transportation markets have been resilient, but
we remain cautious given softening leading indicators. Given the
Company’s solid execution and healthy market backdrop, we are again
raising our full year 2023 guidance for revenue, adjusted EBITDA*,
and adjusted earnings per share*. We expect above-trend growth to
continue in full year 2024, with a cautious view on commercial
aerospace growth until we see sustained achievement of build rate
increases at aircraft OEMs. Our preliminary view envisions year
over year revenue growth of approximately 7%.”
“Howmet Aerospace’s balance sheet continues to be a source of
strength, with healthy cash flows supporting a $200 million bond
redemption and $25 million in common stock repurchases in the third
quarter 2023. In the first three quarters of 2023, the Company has
reduced gross debt by approximately $376 million, generating $19
million of annualized interest expense savings, and repurchased
$150 million of common stock.”
________________________
* Excluding special items
Third Quarter 2023 Segment Performance
Engine Products
Engine Products reported revenue of $798 million, an increase of
17% year over year, due to growth in the commercial aerospace,
defense aerospace, oil and gas, and industrial gas turbine markets.
Segment revenue declined 3% sequentially from the second quarter
2023, reflecting expected seasonality. Adjusted EBITDA was $219
million, up 18% year over year, driven by favorable volume in the
commercial aerospace, defense aerospace, oil and gas, and
industrial gas turbine markets. The Segment absorbed approximately
500 net headcount in the quarter and approximately 850 net
headcount year to date in support of expected revenue increases.
Segment Adjusted EBITDA margin increased approximately 20 basis
points year over year to 27.4%.
Fastening Systems
Fastening Systems reported revenue of $348 million, an increase
of 20% year over year due to growth in the commercial aerospace
market, including emerging wide body recovery, and growth in the
commercial transportation market. Segment Adjusted EBITDA was $76
million, up 19% year over year, driven by favorable volume in the
commercial aerospace and commercial transportation markets. Segment
Adjusted EBITDA margin decreased approximately 20 basis points year
over year to 21.8%. Segment EBITDA margin increased approximately
230 basis points sequentially from the second quarter 2023.
Engineered Structures
Engineered Structures reported revenue of $227 million, an
increase of 18% year over year due to growth in the commercial
aerospace market driven by Russian titanium share gains and
emerging wide body recovery, partially offset by declines in the
defense aerospace market driven by certain legacy fighter programs.
Segment Adjusted EBITDA was $30 million, up 7% year over year,
driven by favorable volume in the commercial aerospace market,
partially offset by unfavorable volume in the defense aerospace
market. The Segment absorbed approximately 145 net headcount in the
quarter and approximately 195 net headcount year to date in support
of expected revenue increases. Segment Adjusted EBITDA margin
decreased approximately 130 basis points year over year to 13.2%.
The Segment improved production rates in the third quarter 2023 and
increased sequential revenue by 14% and Segment Adjusted EBITDA
margin by 320 basis points versus the second quarter 2023.
Forged Wheels
Forged Wheels reported revenue of $285 million, an increase of
7% year over year due to a 13% increase in volume driven by growth
in the commercial transportation market, partially offset by lower
aluminum prices. Segment Adjusted EBITDA was $77 million, up 20%
year over year, driven by favorable volume. Segment Adjusted EBITDA
margin increased approximately 290 basis points year over year to
27.0% as the impact of lower aluminum prices was partially offset
by inflationary cost pass through.
Redeemed $200 Million of Debt in Third Quarter 2023
On September 28, 2023, Howmet Aerospace completed an early
partial redemption of its 5.125% Notes due October 2024 in the
aggregate principal amount of $200 million. Such 2024 Notes were
redeemed with cash on hand at an aggregate redemption price of
approximately $205 million, including accrued interest of
approximately $5 million. Following this redemption, the aggregate
outstanding principal amount of the 2024 Notes is approximately
$705 million. This action will reduce annualized interest expense
by approximately $10 million. In the first quarter 2023, the
Company redeemed $150 million and additionally repurchased
approximately $26 million of the aggregate principal amount of the
2024 Notes. These three combined actions reduce annualized interest
expense by approximately $19 million. All of the Company’s
outstanding debt is unsecured and at fixed interest rates.
Repurchased $25 Million of Common Stock in Third Quarter
2023
In the third quarter 2023, Howmet Aerospace repurchased $25
million of common stock at an average price of $49.32 per share,
retiring approximately 0.5 million shares, which represents the
10th consecutive quarter of share repurchase activity. Year to
date, the Company repurchased $150 million of common stock at an
average price of $45.05 per share, retiring approximately 3.3
million shares. As of October 31, 2023, total share repurchase
authorization available was $797 million.
Quarterly Common Stock Dividend Increased to $0.05 Per Share
in Fourth Quarter 2023
On September 28, 2023, the Company declared a quarterly dividend
of $0.05 per share on its common stock to be paid on November 27,
2023, to the holders of record on November 10, 2023. The quarterly
dividend represents a 25% increase from the third quarter 2023
dividend of $0.04 per share.
Fitch Rating Upgrade; Moody’s Outlook Upgrade
On August 23, 2023, Fitch Ratings upgraded Howmet Aerospace’s
Long-Term Issuer Default Rating to “BBB” from “BBB-,” moving the
Company from one to two notches above investment grade on its
credit rating scale. On September 18, 2023, Moody’s Investors
Service affirmed Howmet Aerospace’s Corporate Family Ratings at
Ba1, and also upgraded the Company’s current outlook from stable to
positive. Earlier in the year, on April 25, 2023, S&P affirmed
Howmet’s long-term debt rating at BB+ and upgraded the current
outlook from stable to positive.
2023 Guidance
Q4 2023 Guidance
FY 2023 Guidance
Low
Baseline
High
Low
Baseline
High
Revenue
$1.620B
$1.635B
$1.650B
$6.530B
$6.545B
$6.560B
Adj. EBITDA*1
$370M
$375M
$380M
$1.480B
$1.485B
$1.490B
Adj. EBITDA Margin*1
22.8%
22.9%
23.0%
22.7%
22.7%
22.7%
Adj. Earnings per Share*1
$0.44
$0.45
$0.46
$1.76
$1.77
$1.78
Free Cash Flow1
$600M
$635M
$670M
* Excluding Special Items
1 Reconciliations of the forward-looking
non-GAAP financial measures to the most directly comparable GAAP
financial measures, as well as the 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, such as the effects of foreign
currency movements, gains or losses on sales of assets, taxes, and
any future restructuring or impairment charges. In addition, there
is inherent variability already included in the GAAP measures,
including, but 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.
Howmet Aerospace will hold its quarterly conference call at
9:30 AM Eastern Time on Thursday, November 2, 2023. 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 November
2, via the “Investors” section of the Howmet Aerospace
website.
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 airframe structural components
necessary for mission-critical performance and efficiency in
aerospace and defense applications, as well as forged aluminum
wheels for commercial transportation. With nearly 1,150 granted and
pending patents, the Company’s differentiated technologies enable
lighter, more fuel-efficient aircraft and commercial trucks to
operate with a lower carbon footprint. For more information, visit
www.howmet.com.
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," “envisions,”
"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 dividends and repurchases of its debt or equity securities.
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) deterioration in global economic and financial
market conditions generally; (b) unfavorable changes in the markets
served by Howmet Aerospace; (c) the impact of potential cyber
attacks and information technology or data security breaches; (d)
the loss of significant customers or adverse changes in customers’
business or financial conditions; (e) manufacturing difficulties or
other issues that impact product performance, quality or safety;
(f) inability of suppliers to meet obligations due to supply chain
disruptions or otherwise; (g) failure to attract and retain a
qualified workforce and key personnel; (h) uncertainty of the
residual impact of the COVID-19 pandemic on Howmet Aerospace’s
business, results of operations, and financial condition; (i) the
inability to achieve revenue growth, cash generation, restructuring
plans, cost reductions, improvement in profitability, or
strengthening of competitiveness and operations anticipated or
targeted; (j) inability to meet increased demand, production
targets or commitments; (k) competition from new product offerings,
disruptive technologies or other developments; (l) geopolitical,
economic, and regulatory risks relating to Howmet Aerospace’s
global operations, including geopolitical and diplomatic tensions,
instabilities, conflicts and wars, as well as compliance with U.S.
and foreign trade and tax laws, sanctions, embargoes and other
regulations; (m) the outcome of contingencies, including legal
proceedings, government or regulatory investigations, and
environmental remediation, which can expose Howmet Aerospace to
substantial costs and liabilities; (n) failure to comply with
government contracting regulations; (o) adverse changes in discount
rates or investment returns on pension assets; and (p) the other
risk factors summarized in Howmet Aerospace’s Form 10-K for the
year ended December 31, 2021 and 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)
Quarter ended
September 30, 2023
June 30, 2023
September 30, 2022
Sales
$
1,658
$
1,648
$
1,433
Cost of goods sold (exclusive of expenses
below)
1,183
1,196
1,056
Selling, general administrative, and other
expenses
87
88
73
Research and development expenses
9
9
7
Provision for depreciation and
amortization
68
67
65
Restructuring and other charges(1)
4
3
4
Operating income
307
285
228
Loss on debt redemption
—
—
—
Interest expense, net
54
55
57
Other expense (income), net(2)
11
(13
)
67
Income before income taxes
242
243
104
Provision for income taxes
54
50
24
Net income
$
188
$
193
$
80
Amounts Attributable to Howmet
Aerospace Common Shareholders:
Earnings per share - basic(3)(4):
Net income per share
$
0.45
$
0.47
$
0.19
Average number of shares(4)(5)
412,072,828
413,240,220
414,646,509
Earnings per share - diluted(3)(4):
Net income per share
$
0.45
$
0.46
$
0.19
Average number of shares(5)
414,574,848
417,005,522
419,748,839
Common stock outstanding at the end of the
period
411,742,755
412,169,561
413,704,596
(1)
Restructuring and other charges for the
quarter ended September 30, 2023 included pension settlement
charges, layoff costs, and other exit costs. Restructuring and
other charges for the quarter ended June 30, 2023 included pension
settlement charges. Restructuring and other charges for the quarter
ended September 30, 2022 included pension settlement charges, other
exit costs, and accelerated depreciation.
(2)
Other expense (income), net for the
quarter ended June 30, 2023 included the reversal of $25, net of
legal fees of $1, of the $65 pre-tax charge taken in the third
quarter of 2022 related to the Lehman Brothers International
(Europe) (“LBIE”) legal proceeding.
(3)
In order to calculate both basic and
diluted earnings per share, preferred stock dividends declared of
$1 for the quarters presented need to be subtracted from Net
income.
(4)
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 awards and employee stock options.
(5)
As average shares outstanding are used in
the calculation of both basic and diluted earnings per share, the
full impact of share repurchases is not realized in EPS in the year
of repurchase for the periods presented.
Howmet Aerospace Inc. and
subsidiaries
Consolidated Balance Sheet
(unaudited)
(in U.S. dollar millions)
September 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
424
$
791
Receivables from customers, less
allowances of $1 in both 2023 and 2022
714
506
Other receivables
13
31
Inventories
1,748
1,609
Prepaid expenses and other current
assets
212
206
Total current assets
3,111
3,143
Properties, plants, and equipment, net
2,296
2,332
Goodwill
4,007
4,013
Deferred income taxes
45
54
Intangibles, net
507
521
Other noncurrent assets
200
192
Total assets
$
10,166
$
10,255
Liabilities
Current liabilities:
Accounts payable, trade
$
894
$
962
Accrued compensation and retirement
costs
240
195
Taxes, including income taxes
73
48
Accrued interest payable
58
75
Other current liabilities
189
202
Total current liabilities
1,454
1,482
Long-term debt, less amount due within one
year
3,794
4,162
Accrued pension benefits
618
633
Accrued other postretirement benefits
98
109
Other noncurrent liabilities and deferred
credits
330
268
Total liabilities
6,294
6,654
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock
55
55
Common stock
412
412
Additional capital
3,770
3,947
Retained earnings
1,485
1,028
Accumulated other comprehensive loss
(1,850
)
(1,841
)
Total equity
3,872
3,601
Total liabilities and equity
$
10,166
$
10,255
Howmet Aerospace and
subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in U.S. dollar millions)
Nine months ended September
30,
2023
2022
Operating activities
Net income
$
529
$
358
Adjustments to reconcile net income to
cash provided from operations:
Depreciation and amortization
204
198
Deferred income taxes
92
58
Restructuring and other charges
8
12
Net realized and unrealized losses
17
12
Net periodic pension cost
28
17
Stock-based compensation
39
43
Loss on debt redemption
1
2
Other
2
26
Changes in assets and liabilities,
excluding effects of acquisitions, divestitures, and foreign
currency translation adjustments:
Increase in receivables
(211
)
(246
)
Increase in inventories
(148
)
(271
)
(Increase) decrease in prepaid expenses
and other current assets
(12
)
5
(Decrease) increase in accounts payable,
trade
(57
)
130
(Decrease) increase in accrued
expenses
(18
)
18
Increase (decrease) in taxes, including
income taxes
17
(1
)
Pension contributions
(19
)
(34
)
Increase in noncurrent assets
(2
)
(5
)
Decrease in noncurrent liabilities
(27
)
(44
)
Cash provided from operations
443
278
Financing Activities
Net change in short-term borrowings
—
(4
)
Repurchases and payments on debt
(376
)
(60
)
Premiums paid on early redemption of
debt
(1
)
(2
)
Repurchases of common stock
(150
)
(335
)
Proceeds from exercise of employee stock
options
10
14
Dividends paid to shareholders
(52
)
(27
)
Taxes paid for net share settlement of
equity awards
(77
)
(23
)
Cash used for financing
activities
(646
)
(437
)
Investing Activities
Capital expenditures
(164
)
(148
)
Proceeds from the sale of assets and
businesses
1
42
Cash used for investing
activities
(163
)
(106
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(1
)
(3
)
Net change in cash, cash equivalents and
restricted cash
(367
)
(268
)
Cash, cash equivalents and restricted cash
at beginning of period
792
722
Cash, cash equivalents and restricted
cash at end of period
$
425
$
454
Howmet Aerospace Inc. and
subsidiaries
Segment Information (unaudited)
(in U.S. dollar millions)
1Q22
2Q22
3Q22
4Q22
2022
1Q23
2Q23
3Q23
Engine
Products
Third-party sales
$
631
$
652
$
683
$
732
$2,698
$
795
$
821
$
798
Inter-segment sales
$
1
$
1
$
1
$
1
$4
$
2
$
5
$
5
Provision for depreciation and
amortization
$
31
$
31
$
31
$
32
$125
$
32
$
32
$
33
Segment Adjusted EBITDA
$
173
$
179
$
186
$
191
$729
$
212
$
223
$
219
Segment Adjusted EBITDA Margin
27.4
%
27.5
%
27.2
%
26.1
%
27.0%
26.7
%
27.2
%
27.4
%
Restructuring and other charges
(credits)
$
3
$
4
$
2
$
20
$29
$
—
$
(1
)
$
—
Capital expenditures
$
27
$
24
$
23
$
20
$94
$
33
$
21
$
30
Fastening
Systems
Third-party sales
$
264
$
277
$
291
$
285
$1,117
$
312
$
329
$
348
Provision for depreciation and
amortization
$
12
$
11
$
11
$
11
$45
$
11
$
12
$
12
Segment Adjusted EBITDA
$
56
$
56
$
64
$
58
$234
$
58
$
64
$
76
Segment Adjusted EBITDA Margin
21.2
%
20.2
%
22.0
%
20.4
%
20.9%
18.6
%
19.5
%
21.8
%
Restructuring and other (credits)
charges
$
(3
)
$
—
$
—
$
11
$8
$
—
$
—
$
1
Capital expenditures
$
15
$
8
$
7
$
9
$39
$
9
$
5
$
9
Engineered
Structures
Third-party sales
$
182
$
185
$
193
$
230
$790
$
207
$
200
$
227
Inter-segment sales
$
1
$
1
$
3
$
1
$6
$
—
$
1
$
—
Provision for depreciation and
amortization
$
12
$
12
$
12
$
12
$48
$
12
$
12
$
12
Segment Adjusted EBITDA
$
23
$
26
$
28
$
34
$111
$
30
$
20
$
30
Segment Adjusted EBITDA Margin
12.6
%
14.1
%
14.5
%
14.8
%
14.1%
14.5
%
10.0
%
13.2
%
Restructuring and other charges
$
2
$
1
$
1
$
3
$7
$
1
$
5
$
1
Capital expenditures
$
7
$
2
$
3
$
5
$17
$
10
$
5
$
6
Forged
Wheels
Third-party sales
$
247
$
279
$
266
$
266
$1,058
$
289
$
298
$
285
Provision for depreciation and
amortization
$
10
$
10
$
10
$
10
$40
$
9
$
10
$
10
Segment Adjusted EBITDA
$
67
$
75
$
64
$
72
$278
$
79
$
81
$
77
Segment Adjusted EBITDA Margin
27.1
%
26.9
%
24.1
%
27.1
%
26.3%
27.3
%
27.2
%
27.0
%
Restructuring and other charges
$
—
$
—
$
—
$
2
$2
$
—
$
—
$
—
Capital expenditures
$
9
$
5
$
6
$
8
$28
$
9
$
7
$
9
Differences between the total segment and consolidated totals
are in Corporate.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited)
(in U.S. dollar millions)
Reconciliation of Total Segment
Adjusted EBITDA to Consolidated Income Before Income Taxes
1Q22
2Q22
3Q22
4Q22
2022
1Q23
2Q23
3Q23
Income before income taxes
$
171
$
183
$
104
$
148
$
606
$
220
$
243
$
242
Loss on debt redemption
—
2
—
—
2
1
—
—
Interest expense, net
58
57
57
57
229
57
55
54
Other expense (income), net
1
(1
)
67
15
82
7
(13
)
11
Operating income
$
230
$
241
$
228
$
220
$
919
$
285
$
285
$
307
Segment provision for depreciation and
amortization
65
64
64
65
258
64
66
67
Unallocated amounts:
Restructuring and other charges
2
6
4
44
56
1
3
4
Corporate expense(1)
22
25
46
26
119
29
34
24
Total Segment Adjusted EBITDA
$
319
$
336
$
342
$
355
$
1,352
$
379
$
388
$
402
Total Segment Adjusted EBITDA is a non-GAAP financial measure.
Management believes that this measure is meaningful to investors
because Total Segment Adjusted EBITDA provides additional
information with respect to the Company's operating performance and
the Company’s ability to meet its financial obligations. The Total
Segment Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies. Howmet’s definition
of Total Segment Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for
depreciation and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation and amortization. Special
items, including Restructuring and other charges, are excluded from
net margin and Segment Adjusted EBITDA. Differences between the
total segment and consolidated totals are in Corporate.
(1)
For the quarter ended March 31, 2022,
Corporate expense included $5 of costs related to fires at two
plants and ($3) of reimbursement related to legal and advisory
charges. For the quarter ended June 30, 2022, Corporate expense
included $2 of costs related to fires at two plants and $1 of costs
associated with closures, shutdowns, and other items. For the
quarter ended September 30, 2022, Corporate expense included $25 of
costs related to fires at three plants and $1 of costs associated
with closures, shutdowns, and other items. In the third quarter of
2022, the Company’s cast house in Barberton, Ohio, which produces
aluminum ingot used in the production of wheels for the North
American commercial transportation market, experienced a mechanical
failure resulting in substantial heat and fire-related damage to
equipment. For the quarter ended December 31, 2022, Corporate
expense included $4 of costs related to fires at three plants, net
of reimbursement, and $1 of costs associated with closures,
shutdowns, and other items. For the quarter ended March 31, 2023,
Corporate expense included $4 of costs related to fires at two
plants and $1 of costs associated with closures, shutdowns, and
other items. For the quarter ended June 30, 2023, Corporate expense
included $9 of costs associated with closures, supply chain
disruptions, and other items, $7 of costs related to a collective
bargaining agreement negotiation, and ($4) of net reimbursements
related to fires at two plants. For the quarter ended September 30,
2023, Corporate expense included $1 of costs associated with
closures, supply chain disruptions, and other items, $1 of costs
related to a collective bargaining agreement negotiation, and $1 of
costs associated with fires at two plants.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollars millions)
Reconciliation of Free cash
flow
Quarter ended
Nine months ended
March 31, 2023
June 30, 2023
September 30, 2023
September 30, 2023
Cash provided from operations
$
23
$
229
$
191
$
443
Capital expenditures
(64
)
(41
)
(59
)
(164
)
Free cash flow
$
(41
)
$
188
$
132
$
279
The Accounts Receivable Securitization program remains unchanged
at $250 outstanding.
Free cash flow is a non-GAAP financial measure. Management
believes that this measure is 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). It is important to note that Free cash
flow does 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), continued
(in U.S. dollar millions, except
per-share and share amounts)
Reconciliation of Net income excluding
Special items
Quarter ended
Nine months ended
September 30, 2022
June 30, 2023
September 30, 2023
September 30, 2022
September 30, 2023
Net income
$
80
$
193
$
188
$
358
$
529
Diluted earnings per share (EPS)
$
0.19
$
0.46
$
0.45
$
0.84
$
1.27
Special items:
Restructuring and other charges
4
3
4
12
8
Loss on debt redemption and related
costs
—
—
—
2
1
Plant fire costs (reimbursements), net
25
(4
)
1
32
1
Collective bargaining agreement
negotiation
—
7
1
—
8
Judgment (settlement) from legal
proceeding(1)
65
(24
)
—
65
(24
)
Legal and other advisory
reimbursements
—
—
—
(3
)
—
Costs associated with closures, supply
chain disruptions, and other items(2)
1
9
1
2
11
Subtotal: Pre-tax special items
95
(9
)
7
110
5
Tax impact of Pre-tax special items(3)
(21
)
2
(1
)
(24
)
—
Subtotal
74
(7
)
6
86
5
Discrete and other tax special
items(4)
(2
)
(5
)
(2
)
(11
)
14
Total: After-tax special items
72
(12
)
4
75
19
Net income excluding Special items
$
152
$
181
$
192
$
433
$
548
Diluted EPS excluding Special items
$
0.36
$
0.44
$
0.46
$
1.02
$
1.32
Average number of diluted shares
419,748,839
417,005,522
414,574,848
422,202,809
416,579,643
Net income excluding Special items and Diluted EPS 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 Restructuring and other charges, Discrete tax items, and Other
special items (collectively, “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 Net income determined under
GAAP as well as Net income excluding Special items and Diluted EPS
excluding Special items.
(1)
Judgment (settlement) from legal
proceeding for the quarter ended June 30, 2023 and nine months
ended September 30, 2023 related to the reversal in the second
quarter of 2023 of $25, net of legal fees of $1, of the $65 pre-tax
charge taken in the third quarter of 2022 related to the LBIE legal
proceeding.
(2)
For the quarter ended June 30, 2023 and
nine months ended September 30, 2023, Costs associated with
closures, supply chain disruptions, and other items included costs
for a site closure and inventory disposal, an impact from supply
disruptions, and remediation and separation expenses.
(3)
The Tax impact of Pre-tax 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)
Discrete tax items for each period
included the following:
- for the quarter ended September 30, 2022, a benefit for other
small items ($2);
- for the quarter ended June 30, 2023, an excess benefit for
stock compensation ($8) and a net charge for other small items
$1;
- for the quarter ended September 30, 2023, a net benefit for
other small items ($1);
- for the nine months ended September 30, 2022, a benefit to
release a valuation allowance related to an interest carryforward
tax attribute in the U.K. ($6) and an excess benefit for stock
compensation ($5); and
- for the nine months ended September 30, 2023, a charge for a
tax reserve established in France $20, an excess benefit for stock
compensation ($8), and a net charge for other small items $1.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollar millions)
Reconciliation of Operational tax
rate
Quarter ended September 30,
2023
Nine months ended September
30, 2023
Effective tax rate, as
reported
Special items(1)(2)
Operational tax rate, as
adjusted
Effective tax rate, as
reported
Special items(1)(2)
Operational tax rate, as
adjusted
Income before income taxes
$
242
$
7
$
249
$
705
$
5
$
710
Provision for income taxes
$
54
$
3
$
57
$
176
$
(14
)
$
162
Tax rate
22.3
%
22.9
%
25.0
%
22.8
%
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
September 30, 2023 included Restructuring and other charges $4,
costs associated with closures, supply chain disruptions, and other
items $1, costs related to a collective bargaining agreement
negotiation $1, and costs related to fires at two plants $1.
Special items for the nine months ended September 30, 2023 included
costs associated with closures, supply chain disruptions, and other
items $11, costs related to a collective bargaining agreement
negotiation $8, Restructuring and other items $8, loss on debt
redemption and related costs $1, and net costs related to fires at
two plants $1, partially offset by net settlement from legal
proceeding ($24).
(2)
Tax Special items includes discrete tax
items, the tax impact on Special items based on the applicable
statutory rates, 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:
- for the quarter ended September 30, 2023, a net benefit for
other small items ($1); and
- for the nine months ended September 30, 2023, a charge for a
tax reserve established in France $20, an excess benefit for stock
compensation ($8), and a net charge for other small items $1.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollars millions)
Reconciliation of Adjusted EBITDA and
Adjusted EBITDA margin excluding Special items
Quarter ended
September 30, 2022
June 30, 2023
September 30, 2023
Sales
$
1,433
$
1,648
$
1,658
Operating income
$
228
$
285
$
307
Operating income margin
15.9
%
17.3
%
18.5
%
Net income
$
80
$
193
$
188
Add:
Provision for income taxes
$
24
$
50
$
54
Other expense (income), net
67
(13
)
11
Interest expense, net
57
55
54
Restructuring and other charges
4
3
4
Provision for depreciation and
amortization
65
67
68
Adjusted EBITDA
$
297
$
355
$
379
Add:
Plant fire costs (reimbursements), net
$
25
$
(4
)
$
1
Collective bargaining agreement
negotiation
—
7
1
Costs associated with closures, supply
chain disruptions, and other items
1
10
1
Adjusted EBITDA excluding Special
items
$
323
$
368
$
382
Adjusted EBITDA margin excluding Special
items
22.5
%
22.3
%
23.0
%
Incremental margin
Quarter ended
September 30, 2022
September 30, 2023
Q3 2023 YoY
Third-party sales
$1,433
$1,658
Year-over-Year Material and other
inflationary cost pass through
(15)
Third-party sales excluding Material and
other inflationary cost pass through (b)
$1,433
$1,643
$210
Adjusted EBITDA excluding Special items
(a)
$323
$382
$59
Incremental margin (a)/(b)
28%
Adjusted EBITDA, Adjusted EBITDA excluding Special items,
Adjusted EBITDA margin excluding Special items, Third-party sales
excluding Material and other inflationary cost pass through, and
Incremental margin are non-GAAP financial measures. Management
believes that these measures are meaningful to investors because
they provide additional information with respect to the Company's
operating performance and the Company’s ability to meet its
financial obligations. The Adjusted EBITDA presented may not be
comparable to similarly titled measures of other companies. The
Company's definition of Adjusted EBITDA (Earnings before interest,
taxes, depreciation, and amortization) is net margin plus an
add-back for depreciation and amortization. Net margin is
equivalent to Sales minus the following items: Cost of goods sold,
Selling, general administrative, and other expenses, Research and
development expenses, and Provision for depreciation and
amortization.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollar millions)
Reconciliation of Adjusted Operating
Income Excluding Special Items and Adjusted Operating Income Margin
Excluding Special Items
Quarter ended
September 30, 2022
June 30, 2023
September 30, 2023
Sales
$
1,433
$
1,648
$
1,658
Operating income
$
228
$
285
$
307
Operating income margin
15.9
%
17.3
%
18.5
%
Add:
Restructuring and other charges
$
4
$
3
$
4
Plant fire costs (reimbursements), net
25
(4
)
1
Collective bargaining agreement
negotiation
—
7
1
Costs associated with closures, supply
chain disruptions, and other items
1
10
1
Adjusted operating income excluding
Special items
$
258
$
301
$
314
Adjusted operating income margin excluding
Special items
18.0
%
18.3
%
18.9
%
Adjusted operating income excluding Special items and Adjusted
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.
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.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollars millions)
Reconciliation of Adjusted EBITDA and
Adjusted EBITDA margin excluding Special items and Material and
other inflationary cost pass through
Quarter ended
March 31, 2023
June 30, 2023
September 30, 2023
Net income
$
148
$
193
$
188
Add:
Provision for income taxes
$
72
$
50
$
54
Other expense (income), net
7
(13
)
11
Loss on debt redemption
1
—
—
Interest expense, net
57
55
54
Restructuring and other charges
1
3
4
Provision for depreciation and
amortization
69
67
68
Adjusted EBITDA
$
355
$
355
$
379
Add:
Plant fire costs (reimbursements), net
$
4
$
(4
)
$
1
Collective bargaining agreement
negotiation
—
7
1
Costs associated with closures, supply
chain disruptions, and other items
1
10
1
Adjusted EBITDA excluding Special items
(a)
$
360
$
368
$
382
Third-party sales (b)
$
1,603
$
1,648
$
1,658
Year-over-Year Material and other
inflationary cost pass through
(35
)
(25
)
(15
)
Third-party sales excluding Year-over-Year
Material and other inflationary cost pass through (c)
$
1,568
$
1,623
$
1,643
Adjusted EBITDA margin excluding Special
items (a)/(b)
22.5
%
22.3
%
23.0
%
Adjusted EBITDA margin excluding Special
items and Year-over-Year Material and other inflationary cost pass
through (a)/(c)
23.0
%
22.7
%
23.3
%
Adjusted EBITDA, Adjusted EBITDA excluding Special items,
Third-party sales excluding Year-over-Year Material and other
inflationary cost pass through, Adjusted EBITDA margin excluding
Special items, and Adjusted EBITDA margin excluding Special items
and Year-over-Year Material and other inflationary cost pass
through are non-GAAP financial measures. Management believes that
these measures are meaningful to investors because they provide
additional information with respect to the Company's operating
performance and the Company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies. The Company's
definition of Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for
depreciation and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold, Selling, general
administrative, and other expenses, Research and development
expenses, and Provision for depreciation and amortization.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102173638/en/
Investor Contact Paul T. Luther (412) 553-1950
Paul.Luther@howmet.com
Media Contact Rob Morrison (412) 553-2666
Rob.Morrison@howmet.com
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