Howmet Aerospace Reports Fourth Quarter and Full Year 2023 Results
FY 2023: Revenue Up 17% Year Over Year; Record Profit and Record Cash from Operations
FY 2023: Approx.
FY 2024: Expect Revenue Growth of Approx. 7% and Improved Cash Generation
Fourth Quarter 2023 Highlights
-
Revenue of
$1.7 billion , up 14% year over year, driven by commercial aerospace, up 22% year over year -
Net income of
$236 million versus$111 million in the fourth quarter 2022; earnings per share of$0.57 versus$0.26 in the fourth quarter 2022; fourth quarter 2023 operating income margin of 18.8% -
Net income excluding special items of
$218 million versus$160 million in the fourth quarter 2022; adjusted earnings per share excluding special items of$0.53 , up 39% year over year -
Adjusted EBITDA excluding special items of
$398 million , up 18% year over year - Adjusted EBITDA margin excluding special items of 23.0%
-
Generated
$458 million cash from operations and$403 million of free cash flow;$222 million of cash used for financing activities; and$52 million of cash used for investing activities -
Cash balance at end of quarter of
$610 million , including impacts of debt redemption, common stock repurchases and$0.05 per share dividend on common stock
Full Year 2023 Highlights
-
Revenue of
$6.6 billion , up 17% year over year, driven by commercial aerospace, up 24% year over year -
Net income of
$765 million , or$1.83 per share, versus$469 million , or$1.11 per share, in the full year 2022 -
Net income excluding special items of
$766 million , or$1.84 per share, versus$593 million , or$1.40 per share, in the full year 2022 -
Adjusted EBITDA excluding special items of
$1.5 billion , up 18% year over year -
Generated
$901 million cash from operations and$682 million of free cash flow;$868 million of cash used for financing activities; and$215 million of cash used for investing activities,$476 million of debt paydown;$250 million of common stock repurchases;$73 million in common stock dividends
2024 Guidance
Q1 2024 Guidance |
FY 2024 Guidance |
||||||
Low |
Baseline |
High |
Low |
Baseline |
High |
||
Revenue |
|
|
|
|
|
|
|
Adj. EBITDA*1 |
|
|
|
|
|
|
|
Adj. EBITDA Margin*1 |
22.8% |
23.0% |
23.1% |
|
22.9% |
23.0% |
23.2% |
Adj. Earnings per Share*1 |
|
|
|
|
|
|
|
Free Cash Flow1 |
|
|
|
|
|
|
|
________________________
* 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 “2024 Guidance” below. |
Key Announcements
-
In the fourth quarter 2023,
Howmet Aerospace entered into two senior unsecured term loan agreements totaling approximately$400 million , which together with associated interest rate swaps have a weighted average fixed interest rate of approximately 3.9%. -
On
December 28, 2023 , the Company completed an early partial redemption of its 5.125% Notes dueOctober 2024 (the “2024 Notes”) in the aggregate principal amount of$500 million . -
In the fourth quarter 2023, the Company repurchased
$100 million of common stock at an average price of$52.52 per share, retiring approximately 1.9 million shares. As ofFebruary 1, 2024 , total share repurchase authorization available was$697 million . -
On
November 27, 2023 , the Company paid a quarterly dividend of$0.05 per share on its common stock. The quarterly dividend represents a 25% increase from the third quarter 2023 dividend of$0.04 per share. -
On
December 15, 2023 ,S&P Global Ratings upgraded Howmet Aerospace’s Long-Term Issue Credit Rating to “BBB-” from “BB+” and updated the rating outlook to stable. With this upgrade,Howmet Aerospace is now rated as investment grade by two of the three credit rating agencies.
Fourth quarter 2023 operating income was
Fourth quarter 2023 adjusted EBITDA excluding special items was
The Company reported net income of
Full year 2023 operating income was
Full year 2023 adjusted EBITDA excluding special items was
“Howmet Aerospace’s balance sheet has never been stronger, with solid cash generation supporting
________________________
* Excluding special items |
Fourth Quarter 2023 Segment Performance
Engine Products
Engine Products reported revenue of
Fastening Systems
Fastening Systems reported revenue of
Engineered Structures
Engineered Structures reported revenue of
Forged Wheels
Forged Wheels reported revenue of
Full Year 2023 Segment Performance
Segment performance in 2023 included the following:
-
Engine Products revenue of
$3.3 billion , up 21% year over year; segment Adjusted EBITDA of$887 million , up 22% year over year; segment Adjusted EBITDA margin of 27.2%, up 20 basis points year over year. -
Fastening Systems revenue of
$1.3 billion , up 21% year over year; segment Adjusted EBITDA of$278 million , up 19% year over year; segment Adjusted EBITDA margin of 20.6%, down 30 basis points year over year. -
Engineered Structures revenue of
$878 million , up 11% year over year; segment Adjusted EBITDA of$113 million , up 2% year over year; segment Adjusted EBITDA margin of 12.9%, down 120 basis points year over year. -
Forged Wheels revenue of
$1.1 billion , up 8% year over year; segment Adjusted EBITDA of$309 million , up 11% year over year; segment Adjusted EBITDA margin of 26.9%, up 60 basis points year over year.
Completed Debt Actions in Fourth Quarter 2023, Reducing Outstanding 2024 Notes to
In the fourth quarter 2023,
In
On
The combined impact of the term loans and the early partial redemption of the 2024 Notes is expected to reduce annualized interest expense by approximately
In the full year 2023,
All of Howmet Aerospace’s outstanding long-term debt continues to be unsecured and at fixed interest rates, which will provide stability of interest expense into the future.
Repurchased
In the fourth quarter 2023,
Quarterly Common Stock Dividend Increased to
On
S&P Upgraded Howmet Aerospace Rating to Investment Grade
On
2024 Guidance
Q1 2024 Guidance |
FY 2024 Guidance |
||||||
Low |
Baseline |
High |
Low |
Baseline |
High |
||
Revenue |
|
|
|
|
|
|
|
Adj. EBITDA*1 |
|
|
|
|
|
|
|
Adj. EBITDA Margin*1 |
22.8% |
23.0% |
23.1% |
|
22.9% |
23.0% |
23.2% |
Adj. Earnings per Share*1 |
|
|
|
|
|
|
|
Free Cash Flow1 |
|
|
|
|
|
|
|
* 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. |
Full Year 2024 Guidance assumes the following aircraft build rates:
- Boeing 737-MAX: approximately 34 builds per month on average
- Airbus A320 family: approximately 56 builds per month on average
About
Dissemination of Company Information
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;
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
Other Information
In this press release, the acronym “FY” means “full year”; and references to
Statement of Consolidated Operations (unaudited)
(in |
||||||||
|
Quarter ended |
|||||||
|
|
|
|
|
|
|||
Sales |
$ |
1,731 |
|
$ |
1,658 |
|
$ |
1,513 |
|
|
|
|
|
|
|||
Cost of goods sold (exclusive of expenses below) |
|
1,230 |
|
|
1,183 |
|
|
1,110 |
Selling, general administrative, and other expenses |
|
83 |
|
|
87 |
|
|
63 |
Research and development expenses |
|
9 |
|
|
9 |
|
|
9 |
Provision for depreciation and amortization |
|
68 |
|
|
68 |
|
|
67 |
Restructuring and other charges(1) |
|
15 |
|
|
4 |
|
|
44 |
Operating income |
|
326 |
|
|
307 |
|
|
220 |
|
|
|
|
|
|
|||
Loss on debt redemption |
|
1 |
|
|
— |
|
|
— |
Interest expense, net |
|
52 |
|
|
54 |
|
|
57 |
Other expense, net |
|
3 |
|
|
11 |
|
|
15 |
|
|
|
|
|
|
|||
Income before income taxes |
|
270 |
|
|
242 |
|
|
148 |
Provision for income taxes |
|
34 |
|
|
54 |
|
|
37 |
Net income |
$ |
236 |
|
$ |
188 |
|
$ |
111 |
|
|
|
|
|
|
|||
Amounts Attributable to Howmet Aerospace Common Shareholders: |
|
|
|
|
|
|||
Earnings per share - basic(2)(3): |
|
|
|
|
|
|||
Net income per share |
$ |
0.57 |
|
$ |
0.45 |
|
$ |
0.27 |
Average number of shares(3)(4) |
|
411,218,336 |
|
|
412,072,828 |
|
|
413,657,108 |
|
|
|
|
|
|
|||
Earnings per share - diluted(2)(3): |
|
|
|
|
|
|||
Net income per share |
$ |
0.57 |
|
$ |
0.45 |
|
$ |
0.26 |
Average number of shares(4) |
|
413,941,353 |
|
|
414,574,848 |
|
|
419,082,115 |
|
|
|
|
|
|
|||
Common stock outstanding at the end of the period |
|
409,914,461 |
|
|
411,742,755 |
|
|
412,155,057 |
(1) |
Restructuring and other charges for the quarter ended |
|
(2) |
In order to calculate both basic and diluted earnings per share, preferred stock dividends declared of less than |
|
(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 restricted stock unit 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 earnings per share (“EPS”) in the year of repurchase for the periods presented. |
Statement of Consolidated Operations (unaudited)
(in |
|||||
For the year ended |
|
2023 |
|
|
2022 |
Sales |
$ |
6,640 |
|
$ |
5,663 |
Cost of goods sold (exclusive of expenses below) |
|
4,773 |
|
|
4,103 |
Selling, general administrative, and other expenses |
|
333 |
|
|
288 |
Research and development expenses |
|
36 |
|
|
32 |
Provision for depreciation and amortization |
|
272 |
|
|
265 |
Restructuring and other charges(1) |
|
23 |
|
|
56 |
Operating income |
|
1,203 |
|
|
919 |
Loss on debt redemption |
|
2 |
|
|
2 |
Interest expense, net |
|
218 |
|
|
229 |
Other expense, net(2) |
|
8 |
|
|
82 |
Income before income taxes |
|
975 |
|
|
606 |
Provision for income taxes |
|
210 |
|
|
137 |
Net income |
$ |
765 |
|
$ |
469 |
|
|
|
|
||
Amounts Attributable to Howmet Aerospace Common Shareholders: |
|
|
|
||
Earnings per share - basic(3)(4): |
|
|
|
||
Net income per share |
$ |
1.85 |
|
$ |
1.12 |
Average number of shares(5) |
|
412,173,414 |
|
|
416,043,332 |
Earnings per share - diluted(3)(4): |
|
|
|
||
Net income per share |
$ |
1.83 |
|
$ |
1.11 |
Average number of shares(5) |
|
415,956,582 |
|
|
421,438,922 |
(1) |
Restructuring and other charges for the year ended |
|
(2) |
Other expense, net for the year ended |
|
(3) |
In order to calculate both basic and diluted EPS, preferred stock dividends declared of |
|
(4) |
For the years presented, the difference between the diluted average number of shares and the basic average number of shares related to share equivalents associated with outstanding awards and employee stock options. |
|
(5) |
As average shares outstanding are used in the calculation of both basic and diluted earnings per share, the full impact of share repurchases is not realized in EPS in the year of repurchase for the years presented. |
Consolidated Balance Sheet (unaudited)
(in |
|||||||
|
|
|
|
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
610 |
|
|
$ |
791 |
|
Receivables from customers, less allowances of $— in 2023 and |
|
675 |
|
|
|
506 |
|
Other receivables |
|
17 |
|
|
|
31 |
|
Inventories |
|
1,765 |
|
|
|
1,609 |
|
Prepaid expenses and other current assets |
|
249 |
|
|
|
206 |
|
Total current assets |
|
3,316 |
|
|
|
3,143 |
|
Properties, plants, and equipment, net |
|
2,328 |
|
|
|
2,332 |
|
|
|
4,035 |
|
|
|
4,013 |
|
Deferred income taxes |
|
46 |
|
|
|
54 |
|
Intangibles, net |
|
505 |
|
|
|
521 |
|
Other noncurrent assets |
|
198 |
|
|
|
192 |
|
Total assets |
$ |
10,428 |
|
|
$ |
10,255 |
|
|
|
|
|
||||
Liabilities |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable, trade |
$ |
982 |
|
|
$ |
962 |
|
Accrued compensation and retirement costs |
|
263 |
|
|
|
195 |
|
Taxes, including income taxes |
|
68 |
|
|
|
48 |
|
Accrued interest payable |
|
65 |
|
|
|
75 |
|
Other current liabilities |
|
200 |
|
|
|
202 |
|
Long-term debt due within one year |
|
206 |
|
|
|
— |
|
Total current liabilities |
|
1,784 |
|
|
|
1,482 |
|
Long-term debt, less amount due within one year |
|
3,500 |
|
|
|
4,162 |
|
Accrued pension benefits |
|
664 |
|
|
|
633 |
|
Accrued other postretirement benefits |
|
92 |
|
|
|
109 |
|
Other noncurrent liabilities and deferred credits |
|
351 |
|
|
|
268 |
|
Total liabilities |
|
6,391 |
|
|
|
6,654 |
|
|
|
|
|
||||
Equity |
|
|
|
||||
|
|
|
|
||||
Preferred stock |
|
55 |
|
|
|
55 |
|
Common stock |
|
410 |
|
|
|
412 |
|
Additional capital |
|
3,682 |
|
|
|
3,947 |
|
Retained earnings |
|
1,720 |
|
|
|
1,028 |
|
Accumulated other comprehensive loss |
|
(1,830 |
) |
|
|
(1,841 |
) |
Total equity |
|
4,037 |
|
|
|
3,601 |
|
Total liabilities and equity |
$ |
10,428 |
|
|
$ |
10,255 |
|
Statement of Consolidated Cash Flows (unaudited)
(in |
|||||||
|
Year ended |
||||||
|
|
2023 |
|
|
|
2022 |
|
Operating activities |
|
|
|
||||
Net income |
$ |
765 |
|
|
$ |
469 |
|
Adjustments to reconcile net income to cash provided from operations: |
|
|
|
||||
Depreciation and amortization |
|
272 |
|
|
|
265 |
|
Deferred income taxes |
|
108 |
|
|
|
79 |
|
Restructuring and other charges |
|
23 |
|
|
|
56 |
|
Net realized and unrealized losses |
|
22 |
|
|
|
18 |
|
Net periodic pension cost |
|
37 |
|
|
|
24 |
|
Stock-based compensation |
|
50 |
|
|
|
54 |
|
Loss on debt redemption |
|
2 |
|
|
|
2 |
|
Other |
|
3 |
|
|
|
12 |
|
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments: |
|
|
|
||||
Increase in receivables |
|
(164 |
) |
|
|
(161 |
) |
Increase in inventories |
|
(142 |
) |
|
|
(234 |
) |
Increase in prepaid expenses and other current assets |
|
(24 |
) |
|
|
(6 |
) |
(Decrease) increase in accounts payable, trade |
|
(7 |
) |
|
|
246 |
|
Increase in accrued expenses |
|
37 |
|
|
|
23 |
|
Decrease in taxes, including income taxes |
|
(7 |
) |
|
|
(12 |
) |
Pension contributions |
|
(36 |
) |
|
|
(43 |
) |
(Increase) decrease in noncurrent assets |
|
(4 |
) |
|
|
1 |
|
Decrease in noncurrent liabilities |
|
(34 |
) |
|
|
(60 |
) |
Cash provided from operations |
|
901 |
|
|
|
733 |
|
Financing Activities |
|
|
|
||||
Net change in short-term borrowings |
|
— |
|
|
|
(5 |
) |
Additions to debt |
|
400 |
|
|
|
— |
|
Repurchases and payments on debt |
|
(876 |
) |
|
|
(69 |
) |
Debt issuance costs |
|
(2 |
) |
|
|
— |
|
Premiums paid on early redemption of debt |
|
(1 |
) |
|
|
(2 |
) |
Repurchases of common stock |
|
(250 |
) |
|
|
(400 |
) |
Proceeds from exercise of employee stock options |
|
11 |
|
|
|
16 |
|
Dividends paid to shareholders |
|
(73 |
) |
|
|
(44 |
) |
Taxes paid for net share settlement of equity awards |
|
(77 |
) |
|
|
(22 |
) |
Cash used for financing activities |
|
(868 |
) |
|
|
(526 |
) |
Investing Activities |
|
|
|
||||
Capital expenditures |
|
(219 |
) |
|
|
(193 |
) |
Proceeds from the sale of assets and businesses |
|
2 |
|
|
|
58 |
|
Proceeds from the sale of securities |
|
2 |
|
|
|
— |
|
Cash used for investing activities |
|
(215 |
) |
|
|
(135 |
) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
— |
|
|
|
(2 |
) |
Net change in cash, cash equivalents and restricted cash |
|
(182 |
) |
|
|
70 |
|
Cash, cash equivalents and restricted cash at beginning of year |
|
792 |
|
|
|
722 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
610 |
|
|
$ |
792 |
|
Segment Information (unaudited)
(in |
||||||||||||||||||||||||||
|
|
1Q22 |
|
|
2Q22 |
|
|
3Q22 |
|
|
4Q22 |
|
2022 |
|
1Q23 |
|
|
2Q23 |
|
|
3Q23 |
|
|
4Q23 |
|
2023 |
Engine Products |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Third-party sales |
$ |
631 |
|
$ |
652 |
|
$ |
683 |
|
$ |
732 |
|
|
$ |
795 |
|
$ |
821 |
|
$ |
798 |
|
$ |
852 |
|
|
Inter-segment sales |
$ |
1 |
|
$ |
1 |
|
$ |
1 |
|
$ |
1 |
|
|
$ |
2 |
|
$ |
5 |
|
$ |
5 |
|
$ |
1 |
|
|
Provision for depreciation and amortization |
$ |
31 |
|
$ |
31 |
|
$ |
31 |
|
$ |
32 |
|
|
$ |
32 |
|
$ |
32 |
|
$ |
33 |
|
$ |
33 |
|
|
Segment Adjusted EBITDA |
$ |
173 |
|
$ |
179 |
|
$ |
186 |
|
$ |
191 |
|
|
$ |
212 |
|
$ |
223 |
|
$ |
219 |
|
$ |
233 |
|
|
Segment Adjusted EBITDA Margin |
|
27.4 |
% |
|
27.5 |
% |
|
27.2 |
% |
|
26.1 |
% |
27.0% |
|
26.7 |
% |
|
27.2 |
% |
|
27.4 |
% |
|
27.3 |
% |
27.2% |
Restructuring and other charges (credits) |
$ |
3 |
|
$ |
4 |
|
$ |
2 |
|
$ |
20 |
|
|
$ |
— |
|
$ |
(1 |
) |
$ |
— |
|
$ |
(1 |
) |
|
Capital expenditures |
$ |
27 |
|
$ |
24 |
|
$ |
23 |
|
$ |
20 |
|
|
$ |
33 |
|
$ |
21 |
|
$ |
30 |
|
$ |
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fastening Systems |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Third-party sales |
$ |
264 |
|
$ |
277 |
|
$ |
291 |
|
$ |
285 |
|
|
$ |
312 |
|
$ |
329 |
|
$ |
348 |
|
$ |
360 |
|
|
Provision for depreciation and amortization |
$ |
12 |
|
$ |
11 |
|
$ |
11 |
|
$ |
11 |
|
|
$ |
11 |
|
$ |
12 |
|
$ |
12 |
|
$ |
11 |
|
|
Segment Adjusted EBITDA |
$ |
56 |
|
$ |
56 |
|
$ |
64 |
|
$ |
58 |
|
|
$ |
58 |
|
$ |
64 |
|
$ |
76 |
|
$ |
80 |
|
|
Segment Adjusted EBITDA Margin |
|
21.2 |
% |
|
20.2 |
% |
|
22.0 |
% |
|
20.4 |
% |
20.9% |
|
18.6 |
% |
|
19.5 |
% |
|
21.8 |
% |
|
22.2 |
% |
20.6% |
Restructuring and other (credits) charges |
$ |
(3 |
) |
$ |
— |
|
$ |
— |
|
$ |
11 |
|
|
$ |
— |
|
$ |
— |
|
$ |
1 |
|
$ |
— |
|
|
Capital expenditures |
$ |
15 |
|
$ |
8 |
|
$ |
7 |
|
$ |
9 |
|
|
$ |
9 |
|
$ |
5 |
|
$ |
9 |
|
$ |
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Engineered Structures |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Third-party sales |
$ |
182 |
|
$ |
185 |
|
$ |
193 |
|
$ |
230 |
|
|
$ |
207 |
|
$ |
200 |
|
$ |
227 |
|
$ |
244 |
|
|
Inter-segment sales |
$ |
1 |
|
$ |
1 |
|
$ |
3 |
|
$ |
1 |
|
|
$ |
— |
|
$ |
1 |
|
$ |
— |
|
$ |
2 |
|
|
Provision for depreciation and amortization |
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
|
$ |
12 |
|
$ |
12 |
|
$ |
12 |
|
$ |
11 |
|
|
Segment Adjusted EBITDA |
$ |
23 |
|
$ |
26 |
|
$ |
28 |
|
$ |
34 |
|
|
$ |
30 |
|
$ |
20 |
|
$ |
30 |
|
$ |
33 |
|
|
Segment Adjusted EBITDA Margin |
|
12.6 |
% |
|
14.1 |
% |
|
14.5 |
% |
|
14.8 |
% |
14.1% |
|
14.5 |
% |
|
10.0 |
% |
|
13.2 |
% |
|
13.5 |
% |
12.9% |
Restructuring and other charges |
$ |
2 |
|
$ |
1 |
|
$ |
1 |
|
$ |
3 |
|
|
$ |
1 |
|
$ |
5 |
|
$ |
1 |
|
$ |
14 |
|
|
Capital expenditures |
$ |
7 |
|
$ |
2 |
|
$ |
3 |
|
$ |
5 |
|
|
$ |
10 |
|
$ |
5 |
|
$ |
6 |
|
$ |
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Forged Wheels |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Third-party sales |
$ |
247 |
|
$ |
279 |
|
$ |
266 |
|
$ |
266 |
|
|
$ |
289 |
|
$ |
298 |
|
$ |
285 |
|
$ |
275 |
|
|
Provision for depreciation and amortization |
$ |
10 |
|
$ |
10 |
|
$ |
10 |
|
$ |
10 |
|
|
$ |
9 |
|
$ |
10 |
|
$ |
10 |
|
$ |
10 |
|
|
Segment Adjusted EBITDA |
$ |
67 |
|
$ |
75 |
|
$ |
64 |
|
$ |
72 |
|
|
$ |
79 |
|
$ |
81 |
|
$ |
77 |
|
$ |
72 |
|
|
Segment Adjusted EBITDA Margin |
|
27.1 |
% |
|
26.9 |
% |
|
24.1 |
% |
|
27.1 |
% |
26.3% |
|
27.3 |
% |
|
27.2 |
% |
|
27.0 |
% |
|
26.2 |
% |
26.9% |
Restructuring and other charges |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
2 |
|
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$— |
Capital expenditures |
$ |
9 |
|
$ |
5 |
|
$ |
6 |
|
$ |
8 |
|
|
$ |
9 |
|
$ |
7 |
|
$ |
9 |
|
$ |
11 |
|
|
Differences between the total segment and consolidated totals are in Corporate. |
Calculation of Financial Measures (unaudited)
(in |
||||||||||||||||||||||||||
Reconciliation of Total Segment Adjusted EBITDA to Consolidated Income Before Income Taxes |
||||||||||||||||||||||||||
|
|
1Q22 |
|
2Q22 |
|
|
3Q22 |
|
4Q22 |
|
2022 |
|
1Q23 |
|
2Q23 |
|
|
3Q23 |
|
4Q23 |
|
2023 |
||||
Income before income taxes |
$ |
171 |
$ |
183 |
|
$ |
104 |
$ |
148 |
$ |
606 |
$ |
220 |
$ |
243 |
|
$ |
242 |
$ |
270 |
$ |
975 |
||||
Loss on debt redemption |
|
— |
|
2 |
|
|
— |
|
— |
|
2 |
|
1 |
|
— |
|
|
— |
|
1 |
|
2 |
||||
Interest expense, net |
|
58 |
|
57 |
|
|
57 |
|
57 |
|
229 |
|
57 |
|
55 |
|
|
54 |
|
52 |
|
218 |
||||
Other expense (income), net |
|
1 |
|
(1 |
) |
|
67 |
|
15 |
|
82 |
|
7 |
|
(13 |
) |
|
11 |
|
3 |
|
8 |
||||
Operating income |
$ |
230 |
$ |
241 |
|
$ |
228 |
$ |
220 |
$ |
919 |
$ |
285 |
$ |
285 |
|
$ |
307 |
$ |
326 |
$ |
1,203 |
||||
Segment provision for depreciation and amortization |
|
65 |
|
64 |
|
|
64 |
|
65 |
|
258 |
|
64 |
|
66 |
|
|
67 |
|
65 |
|
262 |
||||
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Restructuring and other charges |
|
2 |
|
6 |
|
|
4 |
|
44 |
|
56 |
|
1 |
|
3 |
|
|
4 |
|
15 |
|
23 |
||||
Corporate expense(1) |
|
22 |
|
25 |
|
|
46 |
|
26 |
|
119 |
|
29 |
|
34 |
|
|
24 |
|
12 |
|
99 |
||||
Total Segment Adjusted EBITDA |
$ |
319 |
$ |
336 |
|
$ |
342 |
$ |
355 |
$ |
1,352 |
$ |
379 |
$ |
388 |
|
$ |
402 |
$ |
418 |
$ |
1,587 |
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 |
Calculation of Financial Measures (unaudited), continued
(in |
|||||||||||||||||||
Reconciliation of Free cash flow |
Quarter ended |
|
Year ended |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
Cash provided from operations |
$ |
23 |
|
|
$ |
229 |
|
|
$ |
191 |
|
|
$ |
458 |
|
|
$ |
901 |
|
Capital expenditures |
|
(64 |
) |
|
|
(41 |
) |
|
|
(59 |
) |
|
|
(55 |
) |
|
|
(219 |
) |
Free cash flow |
$ |
(41 |
) |
|
$ |
188 |
|
|
$ |
132 |
|
|
$ |
403 |
|
|
$ |
682 |
|
The Accounts Receivable Securitization program remains unchanged at
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. |
Calculation of Financial Measures (unaudited), continued
(in |
|||||||||||||||||||
Reconciliation of Net income excluding Special items |
Quarter ended |
|
Year ended |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ |
111 |
|
|
$ |
188 |
|
|
$ |
236 |
|
|
$ |
469 |
|
|
$ |
765 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted earnings per share (EPS) |
$ |
0.26 |
|
|
$ |
0.45 |
|
|
$ |
0.57 |
|
|
$ |
1.11 |
|
|
$ |
1.83 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Special items: |
|
|
|
|
|
|
|
|
|
||||||||||
Restructuring and other charges |
|
44 |
|
|
|
4 |
|
|
|
15 |
|
|
|
56 |
|
|
|
23 |
|
Loss on debt redemption and related costs |
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Plant fire costs (reimbursements), net |
|
4 |
|
|
|
1 |
|
|
|
(13 |
) |
|
|
36 |
|
|
|
(12 |
) |
Collective bargaining agreement negotiation |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Judgment (settlement) from legal proceeding(1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
65 |
|
|
|
(24 |
) |
Legal and other advisory reimbursements |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
Costs associated with closures, supply chain disruptions, and other items(2) |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
13 |
|
Subtotal: Pre-tax special items |
|
49 |
|
|
|
7 |
|
|
|
5 |
|
|
|
159 |
|
|
|
10 |
|
Tax impact of Pre-tax special items(3) |
|
(3 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
Subtotal |
|
46 |
|
|
|
6 |
|
|
|
5 |
|
|
|
132 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Discrete and other tax special items(4) |
|
3 |
|
|
|
(2 |
) |
|
|
(23 |
) |
|
|
(8 |
) |
|
|
(9 |
) |
Total: After-tax special items |
|
49 |
|
|
|
4 |
|
|
|
(18 |
) |
|
|
124 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income excluding Special items |
$ |
160 |
|
|
$ |
192 |
|
|
$ |
218 |
|
|
$ |
593 |
|
|
$ |
766 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted EPS excluding Special items |
$ |
0.38 |
|
|
$ |
0.46 |
|
|
$ |
0.53 |
|
|
$ |
1.40 |
|
|
$ |
1.84 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Average number of shares - diluted EPS excluding Special items |
|
419,082,115 |
|
|
|
414,574,848 |
|
|
|
413,941,353 |
|
|
|
421,438,922 |
|
|
|
415,956,582 |
|
Net income excluding Special items and Diluted EPS excluding Special items are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company excluding the impacts of Restructuring and other charges, Discrete tax items, and Other special items (collectively, “Special items”). There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Net income determined under GAAP as well as Net income excluding Special items and Diluted EPS excluding Special items.
|
||
(1) |
Judgment (settlement) from legal proceeding for the year ended |
|
(2) |
For the year ended |
|
(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: |
|
|
Calculation of Financial Measures (unaudited), continued
(in |
|||||||||||||||||||||||||||||||||
Reconciliation
|
Quarter ended |
|
Year ended |
|
Year ended |
|
|||||||||||||||||||||||||||
Effective
|
|
Special
|
|
Operational
|
|
Effective
|
|
Special
|
|
Operational
|
|
Effective
|
|
Special items
|
|
Operational
|
|
||||||||||||||||
Income before income taxes |
$ |
270 |
|
|
$ |
5 |
|
$ |
275 |
|
|
$ |
606 |
|
|
$ |
159 |
|
$ |
765 |
|
|
$ |
975 |
|
|
$ |
10 |
|
$ |
985 |
|
|
Provision for income taxes |
$ |
34 |
|
|
$ |
23 |
|
$ |
57 |
|
|
$ |
137 |
|
|
$ |
35 |
|
$ |
172 |
|
|
$ |
210 |
|
|
$ |
9 |
|
$ |
219 |
|
|
Tax rate |
|
12.6 |
% |
|
|
|
|
20.7 |
% |
|
|
22.6 |
% |
|
|
|
|
22.5 |
% |
|
|
21.5 |
% |
|
|
|
|
22.2 |
% |
|
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 |
|
(2) |
Pre-tax special items for the year ended |
|
(3) |
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: |
|
|
Calculation of Financial Measures (unaudited), continued
(in |
|||||||||||||||||||
Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin excluding Special items |
Quarter ended |
|
Year ended |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
Sales |
$ |
1,513 |
|
|
$ |
1,658 |
|
|
$ |
1,731 |
|
|
$ |
5,663 |
|
|
$ |
6,640 |
|
Operating income |
$ |
220 |
|
|
$ |
307 |
|
|
$ |
326 |
|
|
$ |
919 |
|
|
$ |
1,203 |
|
Operating income margin |
|
14.5 |
% |
|
|
18.5 |
% |
|
|
18.8 |
% |
|
|
16.2 |
% |
|
|
18.1 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income |
$ |
111 |
|
|
$ |
188 |
|
|
$ |
236 |
|
|
$ |
469 |
|
|
$ |
765 |
|
Add: |
|
|
|
|
|
|
|
|
|
||||||||||
Provision for income taxes |
$ |
37 |
|
|
$ |
54 |
|
|
$ |
34 |
|
|
$ |
137 |
|
|
$ |
210 |
|
Other expense, net |
|
15 |
|
|
|
11 |
|
|
|
3 |
|
|
|
82 |
|
|
|
8 |
|
Loss on debt redemption |
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Interest expense, net |
|
57 |
|
|
|
54 |
|
|
|
52 |
|
|
|
229 |
|
|
|
218 |
|
Restructuring and other charges |
|
44 |
|
|
|
4 |
|
|
|
15 |
|
|
|
56 |
|
|
|
23 |
|
Provision for depreciation and amortization |
|
67 |
|
|
|
68 |
|
|
|
68 |
|
|
|
265 |
|
|
|
272 |
|
Adjusted EBITDA |
$ |
331 |
|
|
$ |
379 |
|
|
$ |
409 |
|
|
$ |
1,240 |
|
|
$ |
1,498 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Add: |
|
|
|
|
|
|
|
|
|
||||||||||
Plant fire costs (reimbursements), net |
$ |
4 |
|
|
$ |
1 |
|
|
$ |
(13 |
) |
|
$ |
36 |
|
|
$ |
(12 |
) |
Collective bargaining agreement negotiations |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Legal and other advisory reimbursements |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
Costs associated with closures, supply chain disruptions, and other items |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
14 |
|
Adjusted EBITDA excluding Special items |
$ |
336 |
|
|
$ |
382 |
|
|
$ |
398 |
|
|
$ |
1,276 |
|
|
$ |
1,508 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted EBITDA margin excluding Special items |
|
22.2 |
% |
|
|
23.0 |
% |
|
|
23.0 |
% |
|
|
22.5 |
% |
|
|
22.7 |
% |
Incremental margin |
Quarter ended |
|
|
|
Year Ended |
|
|
||||||||||||||
|
|
|
|
Q4 2023
|
|
|
|
|
|
FY 2023
|
|||||||||||
Third-party sales |
$ |
1,513 |
|
$ |
1,731 |
|
|
|
|
$ |
5,663 |
|
$ |
6,640 |
|
|
|
||||
Year-over-Year Material and other inflationary cost pass through |
|
|
|
(15 |
) |
|
|
|
|
|
|
(90 |
) |
|
|
||||||
Third-party sales excluding Material and other inflationary cost pass through (b) |
$ |
1,513 |
|
$ |
1,716 |
|
|
$ |
203 |
|
|
$ |
5,663 |
|
$ |
6,550 |
|
|
$ |
887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted EBITDA excluding Special items (a) |
$ |
336 |
|
$ |
398 |
|
|
$ |
62 |
|
|
$ |
1,276 |
|
$ |
1,508 |
|
|
$ |
232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Incremental margin (a)/(b) |
|
|
|
|
|
31 |
% |
|
|
|
|
|
|
26 |
% |
Adjusted EBITDA, Adjusted EBITDA excluding Special items, Adjusted EBITDA margin excluding Special items, Third-party sales excluding Material and other inflationary cost pass through, and Incremental margin are non-GAAP financial measures. Management believes that these measures are meaningful to investors because they provide additional information with respect to the Company's operating performance and the Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies. The Company's definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold, Selling, general administrative, and other expenses, Research and development expenses, and Provision for depreciation and amortization. |
Calculation of Financial Measures (unaudited), continued
(in |
|||||||||||||||||||
Reconciliation of Adjusted Operating Income Excluding Special Items and Adjusted Operating Income Margin Excluding Special Items |
Quarter ended |
|
Year ended |
||||||||||||||||
December
|
|
September
|
|
December
|
|
December
|
|
December
|
|||||||||||
Sales |
$ |
1,513 |
|
|
$ |
1,658 |
|
|
$ |
1,731 |
|
|
$ |
5,663 |
|
|
$ |
6,640 |
|
Operating income |
$ |
220 |
|
|
$ |
307 |
|
|
$ |
326 |
|
|
$ |
919 |
|
|
$ |
1,203 |
|
Operating income margin |
|
14.5 |
% |
|
|
18.5 |
% |
|
|
18.8 |
% |
|
|
16.2 |
% |
|
|
18.1 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||||
Add: |
|
|
|
|
|
|
|
|
|
||||||||||
Restructuring and other charges |
$ |
44 |
|
|
$ |
4 |
|
|
$ |
15 |
|
|
$ |
56 |
|
|
$ |
23 |
|
Plant fire costs (reimbursements), net |
|
4 |
|
|
|
1 |
|
|
|
(13 |
) |
|
|
36 |
|
|
|
(12 |
) |
Collective bargaining agreement negotiation |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Legal and other advisory reimbursements |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
Costs associated with closures, supply chain disruptions, and other items |
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
14 |
|
Adjusted operating income excluding Special items |
$ |
269 |
|
|
$ |
314 |
|
|
$ |
330 |
|
|
$ |
1,011 |
|
|
$ |
1,236 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted operating income margin excluding Special items |
|
17.8 |
% |
|
|
18.9 |
% |
|
|
19.1 |
% |
|
|
17.9 |
% |
|
|
18.6 |
% |
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. |
Calculation of Financial Measures (unaudited), continued
(in |
|||||||||||||||||||
Reconciliation of Adjusted EBITDA and Adjusted EBITDA margin excluding Special items and Material and other inflationary cost pass through |
Quarter ended |
|
Year ended |
||||||||||||||||
|
|
|
|
September
|
|
December
|
|
December
|
|||||||||||
Net income |
$ |
148 |
|
|
$ |
193 |
|
|
$ |
188 |
|
|
$ |
236 |
|
|
$ |
765 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Add: |
|
|
|
|
|
|
|
|
|
||||||||||
Provision for income taxes |
$ |
72 |
|
|
$ |
50 |
|
|
$ |
54 |
|
|
$ |
34 |
|
|
$ |
210 |
|
Other expense (income), net |
|
7 |
|
|
|
(13 |
) |
|
|
11 |
|
|
|
3 |
|
|
|
8 |
|
Loss on debt redemption |
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
Interest expense, net |
|
57 |
|
|
|
55 |
|
|
|
54 |
|
|
|
52 |
|
|
|
218 |
|
Restructuring and other charges |
|
1 |
|
|
|
3 |
|
|
|
4 |
|
|
|
15 |
|
|
|
23 |
|
Provision for depreciation and amortization |
|
69 |
|
|
|
67 |
|
|
|
68 |
|
|
|
68 |
|
|
|
272 |
|
Adjusted EBITDA |
$ |
355 |
|
|
$ |
355 |
|
|
$ |
379 |
|
|
$ |
409 |
|
|
$ |
1,498 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Add: |
|
|
|
|
|
|
|
|
|
||||||||||
Plant fire costs (reimbursements), net |
$ |
4 |
|
|
$ |
(4 |
) |
|
$ |
1 |
|
|
$ |
(13 |
) |
|
$ |
(12 |
) |
Collective bargaining agreement negotiation |
|
— |
|
|
|
7 |
|
|
|
1 |
|
|
|
— |
|
|
|
8 |
|
Costs associated with closures, supply chain disruptions, and other items |
|
1 |
|
|
|
10 |
|
|
|
1 |
|
|
|
2 |
|
|
|
14 |
|
Adjusted EBITDA excluding Special items (a) |
$ |
360 |
|
|
$ |
368 |
|
|
$ |
382 |
|
|
$ |
398 |
|
|
$ |
1,508 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Third-party sales (b) |
$ |
1,603 |
|
|
$ |
1,648 |
|
|
$ |
1,658 |
|
|
$ |
1,731 |
|
|
$ |
6,640 |
|
Year-over-Year Material and other inflationary cost pass through |
|
(35 |
) |
|
|
(25 |
) |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(90 |
) |
Third-party sales excluding Year-over-Year Material and other inflationary cost pass through (c) |
$ |
1,568 |
|
|
$ |
1,623 |
|
|
$ |
1,643 |
|
|
$ |
1,716 |
|
|
$ |
6,550 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted EBITDA margin excluding Special items (a)/(b) |
|
22.5 |
% |
|
|
22.3 |
% |
|
|
23.0 |
% |
|
|
23.0 |
% |
|
|
22.7 |
% |
Adjusted EBITDA margin excluding Special items and Year-over-Year Material and other inflationary cost pass through (a)/(c) |
|
23.0 |
% |
|
|
22.7 |
% |
|
|
23.3 |
% |
|
|
23.2 |
% |
|
|
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/20240213820077/en/
Investor Contact
(412) 553-1950
Paul.Luther@howmet.com
Media Contact
(412) 553-2666
Rob.Morrison@howmet.com
Source: