hwm-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-3610

HOWMET AEROSPACE INC.

(Exact name of registrant as specified in its charter)


Delaware						25-0317820
(State of incorporation)						(I.R.S. Employer Identification No.)

201 Isabella Street, Suite 200, Pittsburgh, Pennsylvania 15212-5872

(Address of principal executive offices) (Zip code)

Investor Relations 412-553-1950

Office of the Secretary 412-553-1940

(Registrant’s telephone numbers, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $1.00 per share	HWM	New York Stock Exchange
$3.75 Cumulative Preferred Stock, par value $100.00 per share	HWM PR	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ✓ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ✓ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of April 29, 2024, there were 408,183,459 shares of common stock, par value $1.00 per share, of the registrant outstanding.

TABLE OF CONTENTS


		Page
Part I
Item 1.	Financial Statements and Supplementary Data	3
	Statement of Consolidated Operations for the F irst Quarter Ended March 3 1 , 202 4 and 2023	3
	Statement of Consolidated Comprehensive Income for the First Quarter Ended March 3 1 , 202 4 and 2023	4
	Consolidated Balance Sheet as of March 3 1 , 202 4 and December 31, 2023	5
	Statement of Consolidated Cash Flows for the First Quarter Ended March 3 1 , 202 4 and 202 3	6
	Statement of Changes in Consolidated Equity for the First Quarter Ended March 3 1 , 202 4 and 2023	7

	Notes to the Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
Part II
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 6.	Exhibits	28
	Signatures	29

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)


	First quarter ended
	March 31,
	2024		2023
Sales (C)	$	1,824	$	1,603
Cost of goods sold (exclusive of expenses below)	1,290		1,164
Selling, general administrative, and other expenses	88		75
Research and development expenses	10		9
Provision for depreciation and amortization	67		69
Restructuring and other charges (D)	—		1
Operating income	369		285
Loss on debt redemption (N)	—		1
Interest expense, net	49		57
Other expense, net (F)	17		7
Income before income taxes	303		220
Provision for income taxes (G)	60		72


Net income	$	243	$	148

Amounts Attributable to Howmet Aerospace Common Shareholders (H):
Net income	$	242	$	147
Earnings per share:
Basic	$	0.59	$	0.36


Diluted	$	0.59	$	0.35

Average Shares Outstanding (H):
Basic	410		412
Diluted	412		418

The accompanying notes are an integral part of the consolidated financial statements.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Comprehensive Income (unaudited)

(in millions)


	First quarter ended
	March 31,
	2024		2023
Net income	$	243	$	148
Other comprehensive income (loss), net of tax (I):
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits	3		5
Foreign currency translation adjustments	(37)		34

Net change in unrecognized gains (losses) on cash flow hedges	3		(4)
Total Other comprehensive (loss) income, net of tax	(31)		35
Comprehensive income	$	212	$	183

The accompanying notes are an integral part of the consolidated financial statements.

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	533	$	610
Receivables from customers, less allowances of $— in both 2024 and 2023 (J)	785		675
Other receivables	18		17
Inventories (K)	1,783		1,765
Prepaid expenses and other current assets	221		249

Total current assets	3,340		3,316
Properties, plants, and equipment, net (L)	2,294		2,328
Goodwill	4,020		4,035
Deferred income taxes	38		46
Intangibles, net	498		505
Other noncurrent assets (M)	220		198

Total assets	$	10,410	$	10,428
Liabilities
Current liabilities:
Accounts payable, trade (P)	$	964	$	982
Accrued compensation and retirement costs	201		263
Taxes, including income taxes (G)	84		68
Accrued interest payable	45		65
Other current liabilities (M)(P)	198		200
Long-term debt due within one year (N)	206		206

Total current liabilities	1,698		1,784
Long-term debt (N)(O)	3,486		3,500
Accrued pension benefits (E)	662		664
Accrued other postretirement benefits (E)	91		92
Other noncurrent liabilities and deferred credits (M)	387		351

Total liabilities	6,324		6,391
Contingencies and commitments (P)
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock	55		55
Common stock	408		410
Additional capital	3,542		3,682
Retained earnings	1,942		1,720
Accumulated other comprehensive loss (I)	(1,861)		(1,830)


Total equity	4,086		4,037
Total liabilities and equity	$	10,410	$	10,428

The accompanying notes are an integral part of the consolidated financial statements.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)


	Three months ended
	March 31,
	2024		2023
Operating activities
Net income	$	243	$	148
Adjustments to reconcile net income to cash provided from operations:
Depreciation and amortization	67		69
Deferred income taxes	32		31
Restructuring and other charges	—		1
Net realized and unrealized losses	7		4
Net periodic pension cost (E)	10		9
Stock-based compensation	15		14
Loss on debt redemption (N)	—		1
Other	1		5
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
Increase in receivables (J)	(127)		(137)
Increase in inventories	(31)		(45)
Decrease in prepaid expenses and other current assets	23		12
Increase (decrease) in accounts payable, trade	22		(67)
Decrease in accrued expenses	(87)		(19)
Increase in taxes, including income taxes	15		16
Pension contributions	(2)		(9)
(Increase) decrease in noncurrent assets	(2)		2
Decrease in noncurrent liabilities	(9)		(12)
Cash provided from operations	177		23
Financing Activities


Repurchases and payments on debt (N)	—		(176)

Premiums paid on early redemption of debt (N)	—		(1)
Repurchases of common stock	(150)		(25)
Proceeds from exercise of employee stock options	5		6
Dividends paid to shareholders	(21)		(17)

Taxes paid for net share settlement of equity awards	(12)		(1)
Cash used for financing activities	(178)		(214)
Investing Activities
Capital expenditures (C)	(82)		(64)
Proceeds from the sale of assets and businesses (D)	7		—



Cash used for investing activities	(75)		(64)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—		1
Net change in cash, cash equivalents and restricted cash	(76)		(254)
Cash, cash equivalents and restricted cash at beginning of period	610		792
Cash, cash equivalents and restricted cash at end of period	$	534	$	538

The accompanying notes are an integral part of the consolidated financial statements.

Howmet Aerospace Inc. and subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(in millions, except per-share amounts)



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at December 31, 2022	$	55	$	412	$	3,947	$	1,028	$	(1,841)	$	3,601

Net income	—		—		—		148		—		148
Other comprehensive income (I)	—		—		—		—		35		35
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		(1)
Common @ $0.04 per share	—		—		—		(16)		—		(16)
Repurchase and retirement of common stock (H)	—		—		(25)		—		—		(25)
Stock-based compensation	—		—		14		—		—		14
Common stock issued: compensation plans	—		—		5		—		—		5

Balance at March 31, 2023	$	55	$	412	$	3,941	$	1,159	$	(1,806)	$	3,761



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at December 31, 2023	$	55	$	410	$	3,682	$	1,720	$	(1,830)	$	4,037

Net income	—		—		—		243		—		243
Other comprehensive loss (I)	—		—		—		—		(31)		(31)
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		(1)
Common @ $0.05 per share	—		—		—		(20)		—		(20)
Repurchase and retirement of common stock (H)	—		(2)		(148)		—		—		(150)
Stock-based compensation	—		—		15		—		—		15
Common stock issued: compensation plans	—		—		(7)		—		—		(7)


Balance at March 31, 2024	$	55	$	408	$	3,542	$	1,942	$	(1,861)	$	4,086

The accompanying notes are an integral part of the consolidated financial statements.

Howmet Aerospace Inc. and subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

(U.S. dollars in millions, except share and per-share amounts)

A. Basis of Presentation

The interim Consolidated Financial Statements of Howmet Aerospace Inc. and its subsidiaries (“Howmet” or the “Company” or “we” or “our”) are unaudited. These Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The 2023 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). This Form 10-Q report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”), which includes all disclosures required by GAAP. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation.

In the first quarter of 2024, the Company derived approximately 51% of its revenue from products sold to the commercial aerospace market which is less than the pre-pandemic 2019 annual rate of approximately 60%. Aircraft production in the commercial aerospace industry continues to recover based on increases in demand for narrow body and wide body aircraft. We expect commercial aerospace wide body demand to grow faster than narrow body demand on a production percentage basis. Quality control issues at The Boeing Company (“Boeing”) are expected to negatively impact narrow body and wide body production rates in the near term. For instance, the Federal Aviation Administration stated that it will not approve production rate increases or additional production lines for the Boeing 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. Boeing production levels have a material impact on the financial performance of Howmet. The timing and level of future aircraft builds by original equipment manufacturers are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

The preparation of the Consolidated Financial Statements of the Company in conformity with GAAP requires management to make certain judgments, estimates, and assumptions. These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience, including considerations relating to changes in the aerospace industry. The impact of these changes, including the macroeconomic considerations, remains highly uncertain. Management has made its best estimates using all relevant information available at the time, but it is possible that our estimates will differ from our actual results and affect the Consolidated Financial Statements in future periods and potentially require adverse adjustments to the recoverability of goodwill, intangible and long-lived assets, the realizability of deferred tax assets and other judgments and estimations and assumptions.

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

In September 2022, the Financial Accounting Standards Board (“FASB”) issued guidance to enhance the transparency of disclosures regarding supplier finance programs (See Note P). These changes became effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

Issued

In December 2023, the FASB issued guidance to enhance the transparency of income tax disclosures including additional details on the rate reconciliation and taxes paid by jurisdiction. These changes become effective for fiscal years beginning after December 15, 2024. Management is currently evaluating the impact of these changes on the Consolidated Financial Statements.

In November 2023, the FASB issued guidance to enhance disclosures related to significant segment expenses and other matters related to reportable segments. These changes become effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Management is currently evaluating the impact of these changes on the Consolidated Financial Statements.

C. Segment Information

Howmet is a global leader in lightweight metals engineering and manufacturing. Howmet’s innovative, multi-material products, which include nickel, titanium, aluminum, and cobalt, are used worldwide in the aerospace (commercial and defense), commercial transportation, and industrial and other markets. Segment performance under Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment Adjusted EBITDA. Howmet’s definition of 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. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences between the total segment and consolidated totals are in Corporate.

Howmet’s operations consist of four worldwide reportable segments as follows:

Engine Products

Engine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines and industrial gas turbine applications. Engine Products produces rotating parts as well as structural parts.

Fastening Systems

Fastening Systems produces aerospace fastening systems, as well as commercial transportation, industrial and other fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines. Fastening Systems’ products are also critical components of commercial transportation vehicles, construction and industrial equipment, and renewable energy sectors.

Engineered Structures

Engineered Structures produces titanium ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, extrusions, forming and machining services for airframe, wing, aero-engine, and landing gear components. Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined components and assemblies for aerospace and defense applications.

Forged Wheels

Forged Wheels provides forged aluminum wheels and related products for heavy-duty trucks and the commercial transportation market.

The operating results of the Company’s reportable segments were as follows:


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
First quarter ended March 31, 2024
Sales:
Third-party sales	$	885	$	389	$	262	$	288

SEC Form 10-Q filed by Howmet Aerospace Inc.