First Quarter 2023 Revenue Up 21% year over
year; Strong Profit Generation
$176 Million Debt Reduction, $25 Million Common
Stock Repurchases
Full Year 2023 Guidance Increased
Howmet Aerospace (NYSE:HWM):
First Quarter 2023 Highlights
- Revenue of $1.60 billion, up 21% year over year, driven by
commercial aerospace, up 29% year over year
- Net income of $148 million, or $0.35 per share, versus $131
million, or $0.31 per share, in the first quarter 2022, up 13% year
over year
- Net income excluding special items of $175 million, or $0.42
per share, versus $132 million, or $0.31 per share, in the first
quarter 2022; Adjusted earnings per share* grew 35% year over
year
- Adjusted EBITDA excluding special items of $360 million, up 20%
year over year
- Generated $23 million cash from operations; ($41 million) of
free cash flow; $214 million of cash used for financing activities;
and $64 million of cash used for investing activities
- Cash balance at end of quarter of $538 million including
impacts of $176 million of debt reduction, $25 million of common
stock repurchases, and $0.04 per share dividend on common
stock
2023 Guidance
Q2 2023 Guidance
FY 2023 Guidance
Low
Baseline
High
Low
Baseline
High
Revenue
$1.600B
$1.610B
$1.620B
$6.200B
$6.250B
$6.325B
Adj. EBITDA* 1
$359M
$362M
$365M
$1.400B
$1.415B
$1.435B
Adj. EBITDA Margin* 1
22.4%
22.5%
22.5%
22.6%
22.6%
22.7%
Adj. Earnings per Share* 1
$0.41
$0.42
$0.43
$1.65
$1.67
$1.70
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
- In the first quarter 2023, the Company redeemed $150 million
and additionally repurchased approximately $26 million of the
aggregate principal amount of its 5.125% Notes due 2024 (“2024
Notes”). These combined actions reduced the outstanding principal
amount of the 2024 Notes by $176 million and reduce annualized
interest expense by approximately $9 million.
- In the first quarter 2023, Howmet Aerospace repurchased
approximately 0.6 million shares of common stock for $25 million at
an average per share price of $43.36. As of May 1, 2023, total
share repurchase authorization available was $922 million.
- On February 27, 2023, the Company paid a quarterly dividend of
$0.04 per share on outstanding common stock.
- On April 25, 2023, S&P Global Ratings revised their outlook
to positive from stable and affirmed their ‘BB+’ issuer credit
rating.
Howmet Aerospace (NYSE: HWM) today reported first quarter 2023
results. The Company reported first quarter revenue of $1.60
billion, up 21% year over year, primarily driven by growth in the
commercial aerospace market of 29%.
Howmet Aerospace reported net income of $148 million, or $0.35
per share, in the first quarter 2023 versus $131 million, or $0.31
per share, in the first quarter 2022. Net income excluding special
items was $175 million, or $0.42 per share, in the first quarter
2023, versus $132 million, or $0.31 per share, in the first quarter
2022. Adjusted earnings per share excluding special items grew 35%
year over year. Net income included approximately $25 million in
net charges from special items, principally related to an
approximately $20 million charge for a tax reserve established in
France and costs associated with past plant fires. Operating income
margin was up approximately 40 basis points year over year at 17.8%
in the first quarter 2023.
First quarter 2023 Adjusted EBITDA excluding special items was
$360 million, up 20% 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 down
approximately 20 basis points year over year at 22.5% and included
approximately $35 million of additional inflationary cost pass
through year over year. Excluding year over year inflationary cost
pass through, Adjusted EBITDA margin excluding special items was
23.0%.
Howmet Aerospace Executive Chairman and Chief Executive Officer
John Plant said, “Howmet Aerospace delivered a solid start to 2023.
First quarter 2023 revenue grew 21% year over year and exceeded the
high end of our guidance range. Adjusted EBITDA* and Adjusted
Earnings Per Share* also exceeded the high end of guidance and grew
20% and 35% year over year, respectively, demonstrating continued
healthy operational execution as the aerospace recovery
continues.”
Mr. Plant continued, “The demand picture continues to be strong
for commercial aerospace, with higher aircraft production rates
underpinned by continued growth in air traffic. We are encouraged
by progress at aircraft OEM customers to meet their higher build
rate targets. Given our strong first quarter and improving
aerospace backcloth, we are increasing full year 2023 guidance for
revenue, Adjusted EBITDA*, Adjusted Earnings Per Share*, and Free
Cash Flow.”
“The Company’s balance sheet remains strong, further enhanced by
$176 million of debt reduction in the first quarter 2023. Howmet
Aerospace also continued to return cash to shareholders through $25
million in share repurchases in addition to the common stock
dividend. A healthy free cash flow outlook supports continued
capital allocation actions.”
_______________________
*
Excluding Special Items
First Quarter 2023 Segment Performance
Engine Products
Engine Products reported revenue of $795 million, an increase of
26% year over year, due to growth in the commercial aerospace,
defense aerospace, industrial gas turbine, and oil and gas markets.
Segment Adjusted EBITDA was $212 million, up 23% year over year,
driven by commercial aerospace, defense aerospace, industrial gas
turbine, and oil and gas volumes. The segment added approximately
260 net headcount in the quarter in anticipation of future revenue
increases. Segment Adjusted EBITDA margin decreased approximately
70 basis points year over year to 26.7%.
Fastening Systems
Fastening Systems reported revenue of $312 million, an increase
of 18% year over year due to growth in the narrow body commercial
aerospace and defense aerospace markets. Segment Adjusted EBITDA
was $58 million, up 4% year over year, driven by favorable volume
in the narrow body commercial aerospace and defense aerospace
markets partially offset by inflationary costs and the addition of
approximately 215 net headcount in the quarter in anticipation of
future revenue increases. Segment Adjusted EBITDA margin decreased
approximately 260 basis points year over year to 18.6%.
Engineered Structures
Engineered Structures reported revenue of $207 million, an
increase of 14% year over year due to growth in the commercial
aerospace market partially offset by declines in the defense
aerospace market. Segment Adjusted EBITDA was $30 million, up 30%
year over year, driven by favorable volume in the commercial
aerospace market more than offsetting unfavorable volume in the
defense aerospace market. Segment Adjusted EBITDA margin increased
approximately 190 basis points year over year to 14.5%.
Forged Wheels
Forged Wheels reported revenue of $289 million, an increase of
17% year over year due to an 18% increase in volume. Segment
Adjusted EBITDA was $79 million, up 18% year over year, driven by
favorable volume partially offset by unfavorable foreign currency
movements. Segment Adjusted EBITDA margin increased approximately
20 basis points year over year to 27.3% as the impact of lower
aluminum prices was mostly offset by inflationary cost pass through
and unfavorable foreign currency impacts.
Repurchased Approximately $25 Million of Common Shares in
First Quarter 2023
In the first quarter 2023, Howmet Aerospace repurchased
approximately 0.6 million shares of common stock for approximately
$25 million at an average per share price of $43.36. As of March
31, 2023, total share repurchase authorization available was $922
million. The first quarter 2023 marks the eighth consecutive
quarter of common stock repurchases. The Company has deployed $928
million to common stock repurchases since its April 2020
separation.
Reduced Debt by $176 Million in First Quarter 2023
In the first quarter 2023, the Company redeemed $150 million and
additionally repurchased approximately $26 million of the aggregate
principal amount of its 5.125% Notes due 2024 (“2024 Notes”). These
combined actions reduced the outstanding principal amount of the
2024 Notes by $176 million and reduce annualized interest expense
by approximately $9 million.
Common Stock Dividend of $0.04 Per Share Paid on February 27,
2023
On February 27, 2023, the Company paid a quarterly dividend of
$0.04 per share on outstanding common stock.
Company Outlook Revised To Positive from Stable by S&P
Global Ratings
On April 25, 2023, S&P Global Ratings revised their outlook
to positive from stable and affirmed their ‘BB+’ issuer credit
rating.
2023 Guidance
Q2 2023 Guidance
FY 2023 Guidance
Low
Baseline
High
Low
Baseline
High
Revenue
$1.600B
$1.610B
$1.620B
$6.200B
$6.250B
$6.325B
Adj. EBITDA* 1
$359M
$362M
$365M
$1.400B
$1.415B
$1.435B
Adj. EBITDA Margin* 1
22.4%
22.5%
22.5%
22.6%
22.6%
22.7%
Adj. Earnings per Share*1
$0.41
$0.42
$0.43
$1.65
$1.67
$1.70
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 expects higher Adjusted EBITDA excluding
special items to drive growth in Adjusted Earnings per Share
excluding special items in full year 2023. The Company expects the
impact of higher non-cash pension expense to be offset by capital
allocation actions. Capital allocation to common stock repurchases
and/or debt reduction depends on market conditions, profitability,
and cash generation, among other factors.
Howmet Aerospace will hold its quarterly conference call at
10:00 AM Eastern Time on Tuesday, May 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 May 2,
via the “Investors” section of the Howmet Aerospace website. A link
to the press release will also be available via Howmet Aerospace’s
Twitter handle @HowmetAerospace at
https://twitter.com/howmetaerospace.
About Howmet Aerospace
Howmet Aerospace Inc., headquartered in Pittsburgh,
Pennsylvania, is a leading global provider of advanced engineered
solutions for the aerospace and transportation industries. The
Company’s primary businesses focus on jet engine components,
aerospace fastening systems, and 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. Follow: LinkedIn, Twitter, Instagram, Facebook, and
YouTube.
Dissemination of Company Information
Howmet Aerospace intends to make future announcements regarding
Company developments and financial performance through its website
at www.howmet.com.
Forward-Looking Statements
This release contains statements that relate to future events
and expectations and as such constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include those containing such
words as "anticipates," "believes," "could," "estimates,"
"expects," "forecasts," "goal," "guidance," "intends," "may,"
"outlook," "plans," "projects," "seeks," "sees," "should,"
"targets," "will," "would," or other words of similar meaning. All
statements that reflect Howmet Aerospace’s expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, statements, forecasts and outlook relating to
the condition of end markets; future financial results or operating
performance; future strategic actions; Howmet Aerospace's
strategies, outlook, and business and financial prospects; and any
future 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
duration, extent and 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 and conflicts, 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, 2022 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
March 31, 2023
December 31, 2022
March 31, 2022
Sales
$
1,603
$
1,513
$
1,324
Cost of goods sold (exclusive of expenses
below)
1,164
1,110
950
Selling, general administrative, and other
expenses
75
63
69
Research and development expenses
9
9
7
Provision for depreciation and
amortization
69
67
66
Restructuring and other charges(1)
1
44
2
Operating income
285
220
230
Loss on debt redemption
1
—
—
Interest expense, net
57
57
58
Other expense, net
7
15
1
Income before income taxes
220
148
171
Provision for income taxes
72
37
40
Net income
$
148
$
111
$
131
Amounts Attributable to Howmet
Aerospace Common Shareholders:
Earnings per share - basic(2)(3):
Net income per share
$
0.36
$
0.27
$
0.31
Average number of shares(3)(4)
412,164,982
413,657,108
418,872,181
Earnings per share - diluted(2)(3):
Net income per share
$
0.35
$
0.26
$
0.31
Average number of shares(4)
418,260,459
419,082,115
424,747,801
Common stock outstanding at the end of the
period
411,810,073
412,155,057
417,622,524
(1)
Restructuring and other charges for the
quarter ended March 31, 2023 included other exit costs and
severance reversals. Restructuring and other charges for the
quarter ended December 31, 2022 included pension settlement
charges, gain on sale of assets, and asset impairments and
accelerated depreciation. Restructuring and other charges for the
quarter ended March 31, 2022 included other exit costs, pension
settlement charges, and severance reversals.
(2)
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.
(3)
For the quarters presented, the difference
between the diluted average number of shares and the basic average
number of shares related to share equivalents associated with
outstanding awards and employee stock options.
(4)
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)
March 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
537
$
791
Receivables from customers, less
allowances of $1 in both 2023 and 2022
655
506
Other receivables
16
31
Inventories
1,662
1,609
Prepaid expenses and other current
assets
187
206
Total current assets
3,057
3,143
Properties, plants, and equipment, net
2,321
2,332
Goodwill
4,024
4,013
Deferred income taxes
59
54
Intangibles, net
518
521
Other noncurrent assets
195
192
Total assets
$
10,174
$
10,255
Liabilities
Current liabilities:
Accounts payable, trade
$
877
$
962
Accrued compensation and retirement
costs
193
195
Taxes, including income taxes
64
48
Accrued interest payable
63
75
Other current liabilities
206
202
Total current liabilities
1,403
1,482
Long-term debt, less amount due within one
year
3,988
4,162
Accrued pension benefits
625
633
Accrued other postretirement benefits
108
109
Other noncurrent liabilities and deferred
credits
289
268
Total liabilities
6,413
6,654
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock
55
55
Common stock
412
412
Additional capital
3,941
3,947
Retained earnings
1,159
1,028
Accumulated other comprehensive loss
(1,806
)
(1,841
)
Total equity
3,761
3,601
Total liabilities and equity
$
10,174
$
10,255
Howmet Aerospace and
subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in U.S. dollar millions)
Three months ended March
31,
2023
2022
Operating activities
Net income
$
148
$
131
Adjustments to reconcile net income to
cash provided from operations:
Depreciation and amortization
69
66
Deferred income taxes
31
28
Restructuring and other charges
1
2
Net realized and unrealized losses
4
3
Net periodic pension cost
9
6
Stock-based compensation
14
11
Loss on debt redemption
1
—
Other
5
22
Changes in assets and liabilities,
excluding effects of acquisitions, divestitures, and foreign
currency translation adjustments:
Increase in receivables
(137
)
(123
)
Increase in inventories
(45
)
(87
)
Decrease in prepaid expenses and other
current assets
12
5
(Decrease) increase in accounts payable,
trade
(67
)
68
Decrease in accrued expenses
(19
)
(54
)
Increase in taxes, including income
taxes
16
6
Pension contributions
(9
)
(11
)
Decrease (increase) in noncurrent
assets
2
(1
)
Decrease in noncurrent liabilities
(12
)
(17
)
Cash provided from operations
23
55
Financing Activities
Net change in short-term borrowings
—
(3
)
Repurchases and payments on debt
(176
)
—
Premiums paid on early redemption of
debt
(1
)
—
Repurchase of common stock
(25
)
(175
)
Proceeds from exercise of employee stock
options
6
7
Dividends paid to shareholders
(17
)
(9
)
Other
(1
)
(14
)
Cash used for financing
activities
(214
)
(194
)
Investing Activities
Capital expenditures
(64
)
(62
)
Proceeds from the sale of assets and
businesses
—
1
Cash used for investing
activities
(64
)
(61
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
1
—
Net change in cash, cash equivalents and
restricted cash
(254
)
(200
)
Cash, cash equivalents and restricted cash
at beginning of year
792
722
Cash, cash equivalents and restricted
cash at end of period
$
538
$
522
Howmet Aerospace Inc. and
subsidiaries
Segment Information (unaudited)
(in U.S. dollar millions)
1Q22
2Q22
3Q22
4Q22
2022
1Q23
Engine
Products
Third-party sales
$
631
$
652
$
683
$
732
$
2,698
$
795
Inter-segment sales
$
1
$
1
$
1
$
1
$
4
$
2
Provision for depreciation and
amortization
$
31
$
31
$
31
$
32
$
125
$
32
Segment Adjusted EBITDA
$
173
$
179
$
186
$
191
$
729
$
212
Segment Adjusted EBITDA Margin
27.4
%
27.5
%
27.2
%
26.1
%
27.0
%
26.7
%
Restructuring and other charges
$
3
$
4
$
2
$
20
$
29
$
—
Capital expenditures
$
27
$
24
$
23
$
20
$
94
$
33
Fastening
Systems
Third-party sales
$
264
$
277
$
291
$
285
$
1,117
$
312
Provision for depreciation and
amortization
$
12
$
11
$
11
$
11
$
45
$
11
Segment Adjusted EBITDA
$
56
$
56
$
64
$
58
$
234
$
58
Segment Adjusted EBITDA Margin
21.2
%
20.2
%
22.0
%
20.4
%
20.9
%
18.6
%
Restructuring and other (credits)
charges
$
(3
)
$
—
$
—
$
11
$
8
$
—
Capital expenditures
$
15
$
8
$
7
$
9
$
39
$
9
Engineered
Structures
Third-party sales
$
182
$
185
$
193
$
230
$
790
$
207
Inter-segment sales
$
1
$
1
$
3
$
1
$
6
$
—
Provision for depreciation and
amortization
$
12
$
12
$
12
$
12
$
48
$
12
Segment Adjusted EBITDA
$
23
$
26
$
28
$
34
$
111
$
30
Segment Adjusted EBITDA Margin
12.6
%
14.1
%
14.5
%
14.8
%
14.1
%
14.5
%
Restructuring and other charges
$
2
$
1
$
1
$
3
$
7
$
1
Capital expenditures
$
7
$
2
$
3
$
5
$
17
$
10
Forged
Wheels
Third-party sales
$
247
$
279
$
266
$
266
$
1,058
$
289
Provision for depreciation and
amortization
$
10
$
10
$
10
$
10
$
40
$
9
Segment Adjusted EBITDA
$
67
$
75
$
64
$
72
$
278
$
79
Segment Adjusted EBITDA Margin
27.1
%
26.9
%
24.1
%
27.1
%
26.3
%
27.3
%
Restructuring and other charges
$
—
$
—
$
—
$
2
$
2
$
—
Capital expenditures
$
9
$
5
$
6
$
8
$
28
$
9
Differences between the total segment and consolidated totals
are in Corporate.
Howmet Aerospace Inc. and
subsidiaries
Segment Information (unaudited)
(in U.S. dollar millions)
Reconciliation of Total Segment
Adjusted EBITDA to Consolidated Income Before Income Taxes
1Q22
2Q22
3Q22
4Q22
2022
1Q23
Income before income taxes
$
171
$
183
$
104
$
148
$
606
$
220
Loss on debt redemption
—
2
—
—
2
1
Interest expense, net
58
57
57
57
229
57
Other expense (income), net
1
(1
)
67
15
82
7
Operating income
$
230
$
241
$
228
$
220
$
919
$
285
Segment provision for depreciation and
amortization
65
64
64
65
258
64
Unallocated amounts:
Restructuring and other charges
2
6
4
44
56
1
Corporate expense(1)
22
25
46
26
119
29
Total Segment Adjusted EBITDA
$
319
$
336
$
342
$
355
$
1,352
$
379
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.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollars millions)
Reconciliation of Free cash
flow
Quarter ended
March 31, 2023
Cash provided from operations
$
23
Capital expenditures
(64
)
Free cash flow
$
(41
)
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
March 31, 2022
December 31, 2022
March 31, 2023
Net income
$
131
$
111
$
148
Diluted earnings per share (EPS)
$
0.31
$
0.26
$
0.35
Special items:
Restructuring and other charges
2
44
1
Discrete tax items:
Tax litigation
—
—
20
Other discrete tax items
(2
)
3
1
Total Discrete tax items(1)
(2
)
3
21
Other special items
Loss on debt redemption and related
costs
—
—
1
Plant fire costs, net
5
4
4
Legal and other advisory
reimbursements
(3
)
—
—
Costs associated with closures, shutdowns,
and other items
—
1
1
Total Other special items
2
5
6
Tax impact(2)
(1
)
(3
)
(1
)
Net income excluding Special items
$
132
$
160
$
175
Diluted EPS excluding Special items
$
0.31
$
0.38
$
0.42
Average number of shares - diluted EPS
excluding Special items
424,747,801
419,082,115
418,260,459
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)
Discrete tax items for each period
included the following:
- for the quarter ended March 31, 2022, a net benefit for other
small items ($2);
- for the quarter ended December 31, 2022, a charge to record a
valuation allowance related to U.S. foreign tax credits $12, a
benefit related to a tax depreciation accounting method change in
the U.S. ($5), and a net benefit for other small items ($4);
and
- for the quarter ended March 31, 2023, a charge for a tax
reserve established in France $20 and a net charge for other small
items $1.
(2)
The Tax impact on Special items is based
on the applicable statutory rates whereby the difference between
such rates and the Company’s consolidated estimated annual
effective tax rate is itself a Special item.
Howmet Aerospace Inc. and
subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in U.S. dollar millions)
Reconciliation of Operational tax
rate
Quarter ended March 31,
2023
Effective tax rate, as
reported
Special items(1)(2)
Operational tax rate, as
adjusted
Income before income taxes
$
220
$
7
$
227
Provision for income taxes
$
72
$
(20
)
$
52
Tax rate
32.7
%
22.9
%
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 March
31, 2023 include costs related to fires at two plants of $4, loss
on debt redemption and related costs $1, Restructuring and other
charges $1, and costs associated with closures, shutdowns, and
other items $1.
(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 March 31, 2023, a charge for a tax
reserve established in France $20 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
March 31, 2022
December 31, 2022
March 31, 2023
Sales
$
1,324
$
1,513
$
1,603
Operating income
$
230
$
220
$
285
Operating income margin
17.4
%
14.5
%
17.8
%
Net income
$
131
$
111
$
148
Add:
Provision for income taxes
$
40
$
37
$
72
Other expense, net
1
15
7
Loss on debt redemption
—
—
1
Interest expense, net
58
57
57
Restructuring and other charges
2
44
1
Provision for depreciation and
amortization
66
67
69
Adjusted EBITDA
$
298
$
331
$
355
Add:
Plant fire costs, net
$
5
$
4
$
4
Legal and other advisory
reimbursements
(3
)
—
—
Costs associated with closures, shutdowns,
and other items
—
1
1
Adjusted EBITDA excluding Special
items
$
300
$
336
$
360
Adjusted EBITDA margin excluding Special
items
22.7
%
22.2
%
22.5
%
Incremental margin
Quarter ended
March 31, 2022
March 31, 2023
Q1 2023 YoY
Third-party sales
$
1,324
$
1,603
Year-over-Year Material and other
inflationary cost pass through
(35
)
Third-party sales excluding Material and
other inflationary cost pass through (b)
$
1,324
$
1,568
$
244
Adjusted EBITDA excluding Special items
(a)
$
300
$
360
$
60
Incremental margin (a)/(b)
25
%
Adjusted EBITDA, Adjusted EBITDA excluding Special items,
Adjusted EBITDA margin excluding Special items, 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. 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
Net income
$
148
Add:
Provision for income taxes
$
72
Other expense, net
7
Loss on debt redemption
1
Interest expense, net
57
Restructuring and other charges
1
Provision for depreciation and
amortization
69
Adjusted EBITDA
$
355
Add:
Plant fire costs, net
$
4
Costs associated with closures, shutdowns,
and other items
1
Adjusted EBITDA excluding Special items
(a)
$
360
Third-party sales (b)
$
1,603
Year-over-Year Material and other
inflationary cost pass through
(35
)
Third-party sales excluding Year-over-Year
Material and other inflationary cost pass through (c)
$
1,568
Adjusted EBITDA margin excluding Special
items (a)/(b)
22.5
%
Adjusted EBITDA margin excluding Special
items and Year-over-Year Material and other inflationary cost pass
through (a)/(c)
23.0
%
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/20230502005208/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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