Record Quarterly Revenue, Up 14% Year Over
Year; Record Operating Income, Strong Cash Generation
Common Stock Repurchase Authorization Increased
by $2 Billion to $2.487 Billion
Third Quarter 2024 Common Stock Dividend 60%
Higher; 2025 Dividend Policy Payout Ratio 15% +/- 5%1
Full Year 2024 Guidance Raised for All Metrics
Above Second Quarter 2024 Beat
Howmet Aerospace (NYSE:HWM):
Second Quarter 2024 GAAP Financial Results
- Revenue of $1.88 billion, up 14% year over year, driven by
commercial aerospace, up 27%
- Net income of $266 million versus $193 million in the second
quarter 2023; earnings per share of $0.65 versus $0.46 in the
second quarter 2023
- Operating income margin of 21.2%
- Generated $397 million of cash from operations; $123 million of
cash used for financing activities; and $54 million of cash used
for investing activities
- Share repurchases of $60 million; $0.05 per share dividend on
common stock
Second Quarter 2024 Adjusted Financial Results
- Adjusted EBITDA excluding special items of $483 million, up 31%
year over year
- Adjusted EBITDA margin excluding special items of 25.7%
- Adjusted operating income margin excluding special items of
22.0%
- Adjusted earnings per share excluding special items of $0.67,
up 52% year over year
- Generated $342 million of free cash flow
2024 Guidance
Q3 2024 Guidance
FY 2024 Guidance
Low
Baseline
High
Low
Baseline
High
Revenue
$1.845B
$1.855B
$1.865B
$7.400B
$7.440B
$7.480B
Adj. EBITDA*2
$460M
$465M
$470M
$1.855B
$1.865B
$1.875B
Adj. EBITDA Margin*2
24.9%
25.1%
25.2%
25.1%
25.1%
25.1%
Adj. Earnings per Share*2
$0.63
$0.64
$0.65
$2.53
$2.55
$2.57
Free Cash Flow2
$840M
$870M
$900M
1
Payout ratio of net income excluding
special items
*
Excluding special items
2
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 “2024 Guidance” below.
Key Announcements
- On July 1, 2024, Howmet Aerospace completed the early
redemption of all the remaining outstanding aggregate principal
amount of $205 million of its 5.125% Notes due October 2024 with
cash on hand at par value plus accrued interest at an aggregate
redemption price of approximately $208 million. In the second
quarter 2024, the Company repurchased approximately $23 million
aggregate principal amount of its 6.875% Notes due May 2025 with
cash on hand. These combined actions will reduce annualized
interest expense by approximately $12 million.
- In the second quarter 2024, the Company repurchased $60 million
of common stock at an average price of $81.66 per share, retiring
approximately 0.73 million shares.
- On July 30, 2024, the Board of Directors of Howmet Aerospace
(the “Board of Directors”) authorized an increase in the Company’s
share repurchase program by $2 billion to $2.487 billion of its
outstanding common stock.
- On July 30, 2024, the Board of Directors declared a dividend of
$0.08 per share on its common stock to be paid on August 26, 2024
to holders of record as of the close of business on August 9, 2024.
The quarterly dividend represents a 60% increase from the second
quarter 2024 dividend of $0.05 per share.
- On July 30, 2024, the Board of Directors approved the
establishment of a 2025 dividend policy on common stock at 15% plus
or minus 5% of net income excluding special items.
Howmet Aerospace (NYSE:HWM) today reported second quarter 2024
results. The Company reported record second quarter 2024 revenue of
$1.88 billion, up 14% year over year, primarily driven by growth in
the commercial aerospace market of 27%.
Howmet Aerospace reported net income of $266 million, or $0.65
per share, in the second quarter 2024 versus $193 million, or $0.46
per share, in the second quarter 2023. Net income included
approximately $10 million in net charges from special items in the
second quarter 2024. Second quarter 2024 operating income was $398
million, up 40% year over year. Operating income margin was 21.2%,
up approximately 390 basis points year over year.
Howmet Aerospace reported net income excluding special items of
$276 million, or $0.67 per share, in the second quarter 2024 versus
$181 million, or $0.44 per share, in the second quarter 2023.
Adjusted EBITDA excluding special items was $483 million, up 31%
year over year. The year-over-year increase was driven by strong
growth in the commercial aerospace market. Adjusted EBITDA margin
excluding special items was up approximately 340 basis points year
over year at 25.7%. Second quarter 2024 adjusted operating income
excluding special items was $414 million, up 38% year over year.
Adjusted operating income margin excluding special items was 22.0%,
up approximately 370 basis points year over year.
Howmet Aerospace Executive Chairman and Chief Executive Officer
John Plant said, “In the second quarter 2024, the Howmet Aerospace
team drove another very strong set of results, again exceeding the
high end of guidance on all fronts. Revenue grew a healthy 14% year
over year, with commercial aerospace revenue up 27%, continuing a
strong trend. For the second consecutive quarter, Howmet achieved
record quarterly results in revenue, adjusted EBITDA*, adjusted
EBITDA margin* and adjusted earnings per share*. Adjusted EBITDA
margin* of 25.7% was up approximately 340 basis points year over
year, and adjusted earnings per share* grew 52%.”
Mr. Plant continued, “The outlook for commercial aerospace
continues to be robust, with strong travel demand and an aging
aircraft fleet, leading to an extremely high backlog at the
aircraft OEMs. The issue faced by Howmet Aerospace continues to be
the aircraft manufacturers’ ability to build and deliver aircraft
on a consistent basis. We continue to take these factors into
account in our guidance. Despite these challenges, we are again
raising full year 2024 guidance above the second quarter 2024 beat,
reflecting strong continued performance at Howmet Aerospace.”
“Howmet Aerospace generated very healthy free cash flow of $342
million in the second quarter 2024 and $437 million in the first
half 2024, which enabled the Company to redeem the remaining $205
million of our notes due in October 2024 and $23 million of our
notes due in May 2025, and repurchase $210 million of common stock
year to date. We are pleased that the Board of Directors approved a
60% increase in the common stock dividend to $0.08 per share for
the third quarter 2024. Moreover, the Board of Directors approved
the establishment of a 2025 dividend policy on common stock of 15%
plus or minus 5% of net income excluding special items. Finally,
the Board of Directors authorized an increase in the share
repurchase program by $2 billion to $2.487 billion, reflecting the
Company’s strong free cash flow outlook.”
*
Excluding special items
Second Quarter 2024 Segment Performance
Engine
Products
(in U.S. dollar millions)
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Third-party sales
$ 821
$ 798
$ 852
$ 885
$ 933
Inter-segment sales
$ 5
$ 5
$ 1
$ 2
$ 1
Provision for depreciation and
amortization
$ 32
$ 33
$ 33
$ 33
$ 33
Segment Adjusted EBITDA
$ 223
$ 219
$ 233
$ 249
$ 292
Segment Adjusted EBITDA Margin
27.2 %
27.4 %
27.3 %
28.1 %
31.3 %
Restructuring and other credits
$ (1)
$ —
$ (1)
$ —
$ (1)
Capital expenditures
$ 21
$ 30
$ 28
$ 55
$ 33
Engine Products reported revenue of $933 million, an increase of
14% year over year, due to growth in the commercial aerospace,
defense aerospace, oil & gas, and industrial gas turbine
markets. Segment Adjusted EBITDA was a record $292 million, up 31%
year over year, driven by growth in the commercial aerospace,
defense aerospace, oil & gas, and industrial gas turbine
markets. The Segment absorbed approximately 315 net headcount in
the quarter and 750 in the first half 2024 in support of expected
revenue increases. Segment Adjusted EBITDA margin increased
approximately 410 basis points year over year to a record
31.3%.
Fastening
Systems
(in U.S. dollar
millions)
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Third-party sales
$ 329
$ 348
$ 360
$ 389
$ 394
Provision for depreciation and
amortization
$ 12
$ 12
$ 11
$ 11
$ 13
Segment Adjusted EBITDA
$ 64
$ 76
$ 80
$ 92
$ 101
Segment Adjusted EBITDA Margin
19.5 %
21.8 %
22.2 %
23.7 %
25.6 %
Restructuring and other charges
$ —
$ 1
$ —
$ —
$ 2
Capital expenditures
$ 5
$ 9
$ 8
$ 7
$ 5
Fastening Systems reported revenue of $394 million, an increase
of 20% year over year due to growth in the commercial aerospace
market, including wide body aircraft recovery. Segment Adjusted
EBITDA was $101 million, up 58% year over year, driven by growth in
the commercial aerospace market as well as labor productivity
gains. Segment Adjusted EBITDA margin increased approximately 610
basis points year over year to 25.6%.
Engineered
Structures
(in U.S. dollar
millions)
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Third-party sales
$ 200
$ 227
$ 244
$ 262
$ 275
Inter-segment sales
$ 1
$ —
$ 2
$ 1
$ 3
Provision for depreciation and
amortization
$ 12
$ 12
$ 11
$ 11
$ 11
Segment Adjusted EBITDA
$ 20
$ 30
$ 33
$ 37
$ 40
Segment Adjusted EBITDA Margin
10.0 %
13.2 %
13.5 %
14.1 %
14.5 %
Restructuring and other charges
$ 5
$ 1
$ 14
$ —
$ 14
Capital expenditures
$ 5
$ 6
$ 5
$ 6
$ 5
Engineered Structures reported revenue of $275 million, an
increase of 38% year over year due to growth in the commercial
aerospace market, including wide body aircraft recovery, and the
defense aerospace market. Segment Adjusted EBITDA was $40 million,
up 100% year over year, driven by growth in the commercial
aerospace and defense aerospace markets. Segment Adjusted EBITDA
margin increased approximately 450 basis points year over year to
14.5%.
Forged
Wheels
(in U.S. dollar
millions)
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Third-party sales
$ 298
$ 285
$ 275
$ 288
$ 278
Provision for depreciation and
amortization
$ 10
$ 10
$ 10
$ 10
$ 10
Segment Adjusted EBITDA
$ 81
$ 77
$ 72
$ 82
$ 75
Segment Adjusted EBITDA Margin
27.2 %
27.0 %
26.2 %
28.5 %
27.0 %
Capital expenditures
$ 7
$ 9
$ 11
$ 12
$ 9
Forged Wheels reported revenue of $278 million, a decrease of 7%
year over year due to 4% lower volumes in the commercial
transportation market as well as a decrease in aluminum and other
inflationary cost pass through. Segment Adjusted EBITDA was $75
million, a decrease of approximately 7% year over year. Segment
Adjusted EBITDA margin decreased approximately 20 basis points year
over year to 27.0%.
Redeemed $205 Million of Debt in July 2024
On July 1, 2024, Howmet Aerospace completed the early redemption
of all the remaining outstanding principal amount of $205 million
of its 5.125% Notes due October 2024 (the “2024 Notes”) at par
value plus accrued interest. The 2024 Notes were redeemed with cash
on hand at an aggregate redemption price of approximately $208
million, including accrued interest of approximately $3 million. In
the second quarter 2024, the Company repurchased approximately $23
million aggregate principal amount of its 6.875% Notes due May 2025
with cash on hand. These combined actions will reduce annualized
interest expense by approximately $12 million. All of the Company’s
outstanding debt is unsecured and at fixed interest rates.
Repurchased $60 Million of Common Stock in Second Quarter
2024
In the second quarter 2024, Howmet Aerospace repurchased $60
million of common stock at an average price of $81.66 per share,
retiring approximately 0.73 million shares. Through the first half
2024, the Company repurchased $210 million of common stock at an
average price of $70.52 per share, retiring approximately 3.0
million shares.
Board of Directors Approved Share Repurchase Program
Authorization Increase to $2.487 Billion
On July 30, 2024, the Board of Directors authorized an increase
in the Company’s share repurchase program by $2 billion, which,
together with the remaining authorization of $487 million, results
in authorization to repurchase up to $2.487 billion of the
Company’s outstanding common stock. There is no stated expiration,
and the Company is not obligated to repurchase any specific number
of shares.
Quarterly Common Stock Dividend Increased 60% to $0.08 Per
Share in Third Quarter 2024
On July 30, 2024, the Board of Directors declared a dividend of
$0.08 per share on its common stock to be paid on August 26, 2024
to holders of record as of the close of business on August 9, 2024.
The quarterly dividend represents a 60% increase from the second
quarter 2024 dividend of $0.05 per share.
Board of Directors Approved a 2025 Dividend Policy with a
Payout Ratio of 15% +/- 5%
On July 30, 2024, the Board of Directors approved the
establishment of a 2025 dividend policy that would pay dividends on
the Company’s common stock in 2025 at a rate of 15% plus or minus
5% of net income excluding special items, subject to Board approval
of the declaration of any future dividends.
2024 Guidance
Q3 2024 Guidance
FY 2024 Guidance
Low
Baseline
High
Low
Baseline
High
Revenue
$1.845B
$1.855B
$1.865B
$7.400B
$7.440B
$7.480B
Adj. EBITDA*1
$460M
$465M
$470M
$1.855B
$1.865B
$1.875B
Adj. EBITDA Margin*1
24.9%
25.1%
25.2%
25.1%
25.1%
25.1%
Adj. Earnings per Share*1
$0.63
$0.64
$0.65
$2.53
$2.55
$2.57
Free Cash Flow1
$840M
$870M
$900M
*
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
10:00 AM Eastern Time on Tuesday, July 30, 2024. 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 July 30,
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 approximately 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, debt issuances, debt reduction and repurchases of
its common stock. 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, labor disputes or other
employee relations issues; (h) the inability to achieve revenue
growth, cash generation, restructuring plans, cost reductions,
improvement in profitability, or strengthening of competitiveness
and operations anticipated or targeted; (I) inability to meet
increased demand, production targets or commitments; (j)
competition from new product offerings, disruptive technologies or
other developments; (k) 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; (l) the outcome
of contingencies, including legal proceedings, government or
regulatory investigations, and environmental remediation, which can
expose Howmet Aerospace to substantial costs and liabilities; (m)
failure to comply with government contracting regulations; (n)
adverse changes in discount rates or investment returns on pension
assets; and (o) the other risk factors summarized in Howmet
Aerospace’s Form 10-K for the year ended December 31, 2023 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. Under its share repurchase
program, the Company may repurchase shares from time to time, in
amounts, at prices, and at such times as the Company deems
appropriate, subject to market conditions, legal requirements and
other considerations. The Company is not obligated to repurchase
any specific number of shares or to do so at any particular time.
The declaration of any future dividends is subject to the
discretion and approval of the Board of Directors after the Board’s
consideration of all factors it deems relevant and subject to
applicable law. The Company may modify, suspend, or cancel its
share repurchase program or its dividend policy in any manner and
at any time that it may deem necessary or appropriate. Credit
ratings are not a recommendation to buy or hold any Howmet
Aerospace securities, and they may be revised or revoked at any
time at the sole discretion of the credit rating organizations. 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.
Other Information
In this press release, the acronym “FY” means “full year” and
“Q” means “quarter”; and references to Howmet Aerospace performance
that is “record” means its best result since April 1, 2020 when
Howmet Aerospace Inc. (previously named Arconic Inc.) separated
from Arconic Corporation.
Howmet Aerospace Inc. and
subsidiaries
Statement of Consolidated Operations
(unaudited)
(in U.S. dollar millions, except
per-share and share amounts)
Quarter ended
June 30, 2024
March 31, 2024
June 30, 2023
Sales
$
1,880
$
1,824
$
1,648
Cost of goods sold (exclusive of expenses
below)
1,287
1,290
1,196
Selling, general administrative, and other
expenses
97
88
88
Research and development expenses
7
10
9
Provision for depreciation and
amortization
69
67
67
Restructuring and other charges
22
—
3
Operating income
398
369
285
Interest expense, net
49
49
55
Other expense (income), net
15
17
(13
)
Income before income taxes
334
303
243
Provision for income taxes
68
60
50
Net income
$
266
$
243
$
193
Amounts Attributable to Howmet
Aerospace Common Shareholders:
Earnings per share - basic(1):
Net income per share
$
0.65
$
0.59
$
0.47
Average number of shares(2)(3)
408
410
413
Earnings per share - diluted(1):
Net income per share
$
0.65
$
0.59
$
0.46
Average number of shares(2)(3)
411
412
417
Common stock outstanding at the end of the
period
408
408
412
(1)
In order to calculate both basic and
diluted earnings per share, preferred stock dividends declared of
less than $1 for the quarters presented need to be subtracted from
Net income.
(2)
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 restricted stock unit awards and employee stock
options.
(3)
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 fully realized in earnings
per share ("EPS") in the period of repurchase since share
repurchases may occur at varying points during a period.
Howmet Aerospace Inc. and
subsidiaries
Consolidated Balance Sheet
(unaudited)
(in U.S. dollar millions)
June 30, 2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
752
$
610
Receivables from customers, less
allowances of $— in both 2024 and 2023
749
675
Other receivables
19
17
Inventories
1,848
1,765
Prepaid expenses and other current
assets
235
249
Total current assets
3,603
3,316
Properties, plants, and equipment, net
2,307
2,328
Goodwill
4,016
4,035
Deferred income taxes
32
46
Intangibles, net
489
505
Other noncurrent assets
232
198
Total assets
$
10,679
$
10,428
Liabilities
Current liabilities:
Accounts payable, trade
$
971
$
982
Accrued compensation and retirement
costs
235
263
Taxes, including income taxes
81
68
Accrued interest payable
64
65
Other current liabilities
225
200
Short-term debt
782
206
Total current liabilities
2,358
1,784
Long-term debt, less amount due within one
year
2,877
3,500
Accrued pension benefits
645
664
Accrued other postretirement benefits
90
92
Other noncurrent liabilities and deferred
credits
432
351
Total liabilities
6,402
6,391
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock
55
55
Common stock
408
410
Additional capital
3,486
3,682
Retained earnings
2,186
1,720
Accumulated other comprehensive loss
(1,858
)
(1,830
)
Total equity
4,277
4,037
Total liabilities and equity
$
10,679
$
10,428
Howmet Aerospace and
subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in U.S. dollar millions)
Six months ended June
30,
2024
2023
Operating activities
Net income
$
509
$
341
Adjustments to reconcile net income to
cash provided from operations:
Depreciation and amortization
136
136
Deferred income taxes
67
57
Restructuring and other charges
22
4
Net realized and unrealized losses
13
11
Net periodic pension cost
20
19
Stock-based compensation
38
26
Loss on debt redemption
—
1
Other
7
—
Changes in assets and liabilities,
excluding effects of acquisitions, divestitures, and foreign
currency translation adjustments:
Increase in receivables
(100
)
(141
)
Increase in inventories
(109
)
(99
)
Decrease (increase) in prepaid expenses
and other current assets
5
(9
)
Increase (decrease) in accounts payable,
trade
6
(80
)
Decrease in accrued expenses
(17
)
(15
)
Increase in taxes, including income
taxes
13
31
Pension contributions
(17
)
(12
)
(Increase) decrease in noncurrent
assets
(7
)
1
Decrease in noncurrent liabilities
(12
)
(19
)
Cash provided from operations
574
252
Financing Activities
Repurchases and payments on debt
(23
)
(176
)
Premiums paid on early redemption of
debt
—
(1
)
Repurchases of common stock
(210
)
(125
)
Proceeds from exercise of employee stock
options
6
9
Dividends paid to shareholders
(42
)
(35
)
Taxes paid for net share settlement of
equity awards
(32
)
(75
)
Cash used for financing
activities
(301
)
(403
)
Investing Activities
Capital expenditures
(137
)
(105
)
Proceeds from the sale of assets and
businesses
8
—
Cash used for investing
activities
(129
)
(105
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(2
)
—
Net change in cash, cash equivalents and
restricted cash
142
(256
)
Cash, cash equivalents and restricted cash
at beginning of period
610
792
Cash, cash equivalents and restricted
cash at end of period
$
752
$
536
Howmet Aerospace Inc. and
subsidiaries
Segment Information (unaudited)
(in U.S. dollar millions)
1Q23
2Q23
3Q23
4Q23
2023
1Q24
2Q24
Engine
Products
Third-party sales
$ 795
$ 821
$ 798
$ 852
$ 3,266
$ 885
$ 933
Inter-segment sales
$ 2
$ 5
$ 5
$ 1
$ 13
$ 2
$ 1
Provision for depreciation and
amortization
$ 32
$ 32
$ 33
$ 33
$ 130
$ 33
$ 33
Segment Adjusted EBITDA
$ 212
$ 223
$ 219
$ 233
$ 887
$ 249
$ 292
Segment Adjusted EBITDA Margin
26.7 %
27.2 %
27.4 %
27.3 %
27.2 %
28.1 %
31.3 %
Restructuring and other credits
$ —
$ (1)
$ —
$ (1)
$ (2)
$ —
$ (1)
Capital expenditures
$ 33
$ 21
$ 30
$ 28
$ 112
$ 55
$ 33
Fastening
Systems
Third-party sales
$ 312
$ 329
$ 348
$ 360
$ 1,349
$ 389
$ 394
Provision for depreciation and
amortization
$ 11
$ 12
$ 12
$ 11
$ 46
$ 11
$ 13
Segment Adjusted EBITDA
$ 58
$ 64
$ 76
$ 80
$ 278
$ 92
$ 101
Segment Adjusted EBITDA Margin
18.6 %
19.5 %
21.8 %
22.2 %
20.6 %
23.7 %
25.6 %
Restructuring and other charges
$ —
$ —
$ 1
$ —
$ 1
$ —
$ 2
Capital expenditures
$ 9
$ 5
$ 9
$ 8
$ 31
$ 7
$ 5
Engineered
Structures
Third-party sales
$ 207
$ 200
$ 227
$ 244
$ 878
$ 262
$ 275
Inter-segment sales
$ —
$ 1
$ —
$ 2
$ 3
$ 1
$ 3
Provision for depreciation and
amortization
$ 12
$ 12
$ 12
$ 11
$ 47
$ 11
$ 11
Segment Adjusted EBITDA
$ 30
$ 20
$ 30
$ 33
$ 113
$ 37
$ 40
Segment Adjusted EBITDA Margin
14.5 %
10.0 %
13.2 %
13.5 %
12.9 %
14.1 %
14.5 %
Restructuring and other charges
$ 1
$ 5
$ 1
$ 14
$ 21
$ —
$ 14
Capital expenditures
$ 10
$ 5
$ 6
$ 5
$ 26
$ 6
$ 5
Forged
Wheels
Third-party sales
$ 289
$ 298
$ 285
$ 275
$ 1,147
$ 288
$ 278
Provision for depreciation and
amortization
$ 9
$ 10
$ 10
$ 10
$ 39
$ 10
$ 10
Segment Adjusted EBITDA
$ 79
$ 81
$ 77
$ 72
$ 309
$ 82
$ 75
Segment Adjusted EBITDA Margin
27.3 %
27.2 %
27.0 %
26.2 %
26.9 %
28.5 %
27.0 %
Capital expenditures
$ 9
$ 7
$ 9
$ 11
$ 36
$ 12
$ 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
1Q23
2Q23
3Q23
4Q23
2023
1Q24
2Q24
Income before income taxes
$ 220
$ 243
$ 242
$ 270
$ 975
$ 303
$ 334
Loss on debt redemption
1
—
—
1
2
—
—
Interest expense, net
57
55
54
52
218
49
49
Other expense (income), net
7
(13)
11
3
8
17
15
Operating income
$ 285
$ 285
$ 307
$ 326
$ 1,203
$ 369
$ 398
Segment provision for depreciation and
amortization
64
66
67
65
262
65
67
Unallocated amounts:
Restructuring and other charges
1
3
4
15
23
—
22
Corporate expense(1)
29
34
24
12
99
26
21
Total Segment Adjusted EBITDA
$ 379
$ 388
$ 402
$ 418
$ 1,587
$ 460
$ 508
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) Pre-tax special items included in
Corporate expense
1Q23
2Q23
3Q23
4Q23
2023
1Q24
2Q24
Plant fire costs (reimbursements), net
$ 4
$ (4)
$ 1
$ (13)
$ (12)
$ —
$ (6)
Collective bargaining agreement
negotiation
—
7
1
—
8
—
—
Costs associated with closures, supply
chain disruptions, and other items
1
9
1
2
13
1
—
Total Pre-tax special items included in
Corporate expense
$ 5
$ 12
$ 3
$ (11)
$ 9
$ 1
$ (6)
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollars millions)
Reconciliation of Free cash
flow
Quarter ended
Six months ended
1Q24
2Q24
2Q24
Cash provided from operations
$
177
$
397
$
574
Capital expenditures
(82
)
(55
)
(137
)
Free cash flow
$
95
$
342
$
437
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
Six months ended
2Q23
1Q24
2Q24
June 30, 2023
June 30, 2024
Net income
$
193
$
243
$
266
$
341
$
509
Diluted earnings per share (EPS)
$
0.46
$
0.59
$
0.65
$
0.81
$
1.23
Special items:
Restructuring and other charges(1)
3
—
22
4
22
Loss on debt redemption and related
costs
—
—
—
1
—
Plant fire reimbursements, net
(4
)
—
(6
)
—
(6
)
Collective bargaining agreement
negotiations
7
—
—
7
—
Settlement from legal proceeding(2)
(24
)
—
—
(24
)
—
Costs associated with closures, supply
chain disruptions, and other items
9
1
—
10
1
Subtotal: Pre-tax special items
(9
)
1
16
(2
)
17
Tax impact of Pre-tax special items(3)
2
—
—
1
—
Subtotal
(7
)
1
16
(1
)
17
Discrete and other tax special
items(4)
(5
)
(6
)
(6
)
16
(12
)
Total: After-tax special items
(12
)
(5
)
10
15
5
Net income excluding Special items
$
181
$
238
$
276
$
356
$
514
Diluted EPS excluding Special items
$
0.44
$
0.57
$
0.67
$
0.85
$
1.25
Average number of shares - diluted EPS
excluding Special items
417
412
411
417
411
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 and Diluted EPS
determined under GAAP as well as Net income excluding Special items
and Diluted EPS excluding Special items.
(1)
Q2 2024 includes non-cash Special items of
a loss on sale of a small manufacturing facility in Engineered
Structures $14 and other exit costs, including accelerated
depreciation $1.
(2)
Settlement from legal proceeding, net of
legal fees for the quarter and six months ended June 30, 2023
related to 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
LBIE legal proceeding.
(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 June 30, 2023, an excess benefit for
stock compensation ($8) and a net charge for other small items
$1;
- for the quarter ended March 31, 2024, a benefit to release a
valuation allowance related to U.S. foreign tax credits ($6), and a
net benefit for other small items ($1).
- for the quarter ended June 30, 2024, an excess benefit for
stock compensation ($5).
- for the six months ended June 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 $2.
- for the six months ended June 30, 2024, an excess benefit for
stock compensation ($7), a benefit to release a valuation allowance
related to U.S. foreign tax credits ($6), 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
2Q24
Six months ended June 30,
2024
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
$
334
$
16
$
350
$
637
$
17
$
654
Provision for income taxes
$
68
$
6
$
74
$
128
$
12
$
140
Tax rate
20.4
%
21.1
%
20.1
%
21.4
%
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)
Pre-tax special items for the quarter
ended June 30, 2024 included Restructuring and other charges $22
offset by Plant fire reimbursements ($6). Pre-tax special items for
the six months ended June 30, 2024 included Restructuring and other
charges $22 and Costs associated with closures, supply chain
disruptions, and other items $1 offset by Plant fire reimbursements
($6).
(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 June 30, 2024, an excess benefit for
stock compensation ($5).
- for the six months ended June 30, 2024, an excess benefit for
stock compensation ($7), a benefit to release a valuation allowance
related to U.S. foreign tax credits ($6), 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
2Q23
1Q24
2Q24
Sales
$
1,648
$
1,824
$
1,880
Operating income
$
285
$
369
$
398
Operating income margin
17.3
%
20.2
%
21.2
%
Net income
$
193
$
243
$
266
Add:
Provision for income taxes
$
50
$
60
$
68
Other expense, net
(13
)
17
15
Interest expense, net
55
49
49
Restructuring and other charges
3
—
22
Provision for depreciation and
amortization
67
67
69
Adjusted EBITDA
$
355
$
436
$
489
Add:
Plant fire costs reimbursements, net
$
(4
)
$
—
$
(6
)
Collective bargaining agreement
negotiations
7
—
—
Costs associated with closures, supply
chain disruptions, and other items
10
1
—
Adjusted EBITDA excluding Special
items
$
368
$
437
$
483
Adjusted EBITDA margin excluding Special
items
22.3
%
24.0
%
25.7
%
Incremental margin
Quarter ended
June 30, 2023
June 30, 2024
Q2 2024 YoY
Third-party sales (b)
$
1,648
$
1,880
$
232
Adjusted EBITDA excluding Special items
(a)
$
368
$
483
$
115
Incremental margin (a)/(b)
50 %
Adjusted EBITDA, Adjusted EBITDA excluding Special items,
Adjusted EBITDA margin excluding Special items, Third-party sales,
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. Special items, including Restructuring and other
charges, are excluded from Adjusted EBITDA.
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
2Q23
1Q24
2Q24
Sales
$
1,648
$
1,824
$
1,880
Operating income
$
285
$
369
$
398
Operating income margin
17.3
%
20.2
%
21.2
%
Add:
Restructuring and other charges
$
3
$
—
$
22
Plant fire reimbursements, net
(4
)
—
(6
)
Collective bargaining agreement
negotiations
7
—
—
Costs associated with closures, supply
chain disruptions, and other items
10
1
—
Adjusted operating income excluding
Special items
$
301
$
370
$
414
Adjusted operating income margin excluding
Special items
18.3
%
20.3
%
22.0
%
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240730419327/en/
Investor Contact Paul T. Luther (412) 553-1950
Paul.Luther@howmet.com
Media Contact Rob Morrison (412) 553-2666
Rob.Morrison@howmet.com
Howmet Aerospace (NYSE:HWM)
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