Second Quarter 2021 Highlights

  • Revenue of $1.20 billion, down only 5% year over year
  • Income from continuing operations of $74 million, or $0.17 per share, versus loss from continuing operations of $84 million, or $0.19 per share, in the second quarter 2020
  • Income from continuing operations excluding special items of $96 million, or $0.22 per share, versus $55 million, or $0.12 per share, in the second quarter 2020
  • Operating income of $207 million, up 180% year over year
  • Operating income excluding special items of $205 million, up 14% year over year
  • Generated $85 million cash from operations and $164 million of adjusted free cash flow; $700 million of cash used for financing activities; and $91 million of cash provided from investing activities
  • Cash balance at end of quarter at $716 million after redeeming approximately $476 million of debt and repurchasing $200 million of common stock with cash on hand; Revolving credit facility undrawn at $1 billion

2021 Guidance* Updated

  • Updated Full Year 2021 Guidance: Revenue at $5.05-$5.15 billion, versus prior $5.05-$5.20 billion, with an unchanged outlook of $5.10 billion; Adjusted EBITDA $1.145-$1.185 billion, versus prior $1.125-$1.20 billion, with an increased outlook of $1.17 billion; Earnings Per Share Excluding Special Items $0.95-$1.02, versus prior $0.91-$1.02, with an increased outlook of $0.99; Adjusted Free Cash Flow $415-$485 million, versus prior $390-$460 million, with an increased outlook of $450 million
  • Issued Third Quarter 2021 Guidance: Revenue $1.28-$1.32 billion with an outlook of $1.30 billion; Adjusted EBITDA $285-$305 million with an outlook of $295 million; Earnings Per Share Excluding Special Items $0.23-$0.27 with an outlook of $0.25

Key Announcements

  • On May 3, 2021, Howmet Aerospace completed the early redemption of all $476 million aggregate principal amount of its 5.87% Notes due 2022 at an aggregate redemption price of approximately $500 million.
  • In the second quarter 2021, the Company repurchased approximately 5.9 million shares for $200 million.
  • On July 19, 2021, the Board of Directors reinstated a quarterly dividend on the Company’s common stock, declaring a dividend of $0.02 per share to be paid on August 25, 2021.

*Reconciliations of the forward-looking non-GAAP measures to the most 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 “2021 Guidance” below.

PITTSBURGH–(BUSINESS WIRE)–Howmet Aerospace (NYSE:HWM) today reported second quarter 2021 results. The Company reported second quarter revenues of $1.2 billion, down only 5% year over year due to disruptions in the commercial aerospace market, primarily driven by COVID-19 and Boeing 787 production declines, partially offset by growth in the commercial transportation and industrial markets.

Howmet Aerospace reported income from continuing operations of $74 million, or $0.17 per share, in the second quarter 2021 versus loss from continuing operations of $84 million, or $0.19 per share, in the second quarter 2020. Income from continuing operations excluding special items was $96 million, or $0.22 per share, in the second quarter 2021, versus $55 million, or $0.12 per share, in the second quarter 2020. Income from continuing operations in the second quarter 2021 included a $22 million charge from special items, principally related to debt redemption and other financing costs.

Second quarter 2021 operating income was $207 million, up 180% year over year. Operating income excluding special items was $205 million, up 14% year over year. The year-over-year increase was due to growth in the commercial transportation and industrial markets, variable and fixed cost reductions, and favorable product pricing, partially offset by disruptions in the commercial aerospace market, driven by COVID-19 and Boeing 787 production declines. Operating income margin, excluding special items, was up approximately 280 basis points year over year to 17.2%.

Howmet Aerospace Executive Chairman and Co-Chief Executive Officer John Plant said, “Howmet Aerospace delivered another solid quarter of results despite the COVID-19 pandemic’s impact on the commercial aerospace market, supported by strong demand in commercial transportation and industrial markets. While second quarter revenues declined 5% year over year, driven by a 31% reduction in commercial aerospace revenues, profit and margins exceeded guidance and included strong cash generation. Second quarter 2021 adjusted EBITDA margin of 22.8% was similar to first quarter 2021’s 22.7%, despite absorbing ramp-up costs in preparation for anticipated commercial aerospace volume increases beginning in the second half 2021.”

Mr. Plant continued, “We continue to expect the commercial aerospace recovery to begin in the second half 2021, led by Engine Products, followed by Engineered Structures, with Fastening Systems lagging by approximately six months. The commercial transportation market remains strong, supporting Forged Wheels; however, customer supply chain constraints are expected to curb growth in the near term. As we look to the rest of 2021 and beyond, we are well positioned to emerge from the pandemic in a stronger, more profitable position.”

Our liquidity position remains strong as a result of our strict and disciplined approach to costs and spending. We ended the second quarter with approximately $716 million of cash after redeeming approximately $476 million of debt and repurchasing $200 million of common stock with cash on hand. Our $1 billion revolving credit facility remains undrawn and our next debt maturity is not until October 2024.”

On April 1, 2020, Arconic Inc. completed the separation of its business into two independent, publicly-traded companies: Howmet Aerospace Inc. (the new name for Arconic Inc.) and Arconic Corporation. The financial results of Arconic Corporation for all periods prior to April 1, 2020 have been retrospectively reflected in the Statement of Consolidated Operations as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods prior to April 1, 2020. Additionally, the assets and liabilities associated with Arconic Corporation prior to the separation are classified as assets and liabilities of discontinued operations. The cash flows, comprehensive income, and equity related to Arconic Corporation have not been segregated and are included in Howmet Aerospace’s financial statements for all periods prior to April 1, 2020.

Second Quarter 2021 Segment Performance

Engine Products

Engine Products reported revenue of $544 million, a decrease of 7% year over year due to declines in the commercial aerospace market driven by COVID-19 and Boeing 787 production declines, partly offset by growth in the industrial gas turbine market. Segment operating profit was $100 million, down 5% year over year, driven by volume declines in the commercial aerospace market, partially offset by variable and fixed cost reductions and favorable sales volumes in the industrial gas turbine market. The segment added approximately 300 headcount in the quarter in anticipation of revenue increases in the second half of the year. Segment operating profit margin increased approximately 50 basis points year over year to 18.4%.

Fastening Systems

Fastening Systems reported revenue of $262 million, a decrease of 20% year over year due to declines in the commercial aerospace market, primarily driven by COVID-19 and Boeing 787 production declines, partly offset by growth in the commercial transportation and industrial markets. Segment operating profit was $50 million, down 29% year over year, driven by volume declines in the commercial aerospace market, partially offset by variable and fixed cost reductions and favorable sales volumes in the commercial transportation and industrial markets. Segment operating profit margin decreased approximately 240 basis points year over year to 19.1%.

Engineered Structures

Engineered Structures reported revenue of $160 million, a decrease of 30% year over year due to declines in the commercial aerospace market, driven by COVID-19 and Boeing 787 production declines. Segment operating profit was $11 million, down 42% year over year, driven by volume declines, partially offset by variable and fixed cost reductions. Segment operating profit margin decreased approximately 140 basis points year over year to 6.9%.

Forged Wheels

Forged Wheels reported revenue of $229 million, an increase of 103% year over year due to strength in the commercial transportation market. Segment operating profit was $61 million, up 917% year over year, driven by volume increases, fixed cost reductions, and maximizing production in low-cost countries. Segment operating profit margin increased approximately 2,130 basis points year over year to 26.6%.

2021 Guidance*

 

3Q 2021 Guidance

FY 2021 Guidance

 

Low

Outlook

High

Low

Outlook

High

 

Revenue

$1.28B

$1.30B

$1.32B

$5.05B

$5.10B

$5.15B

 

Adj. EBITDA

$285M

$295M

$305M

$1.145B

$1.170B

$1.185B

 

Adj. EBITDA Margin1

22.3%

22.7%

23.1%

22.7%

22.9%

23.0%

 

Adj. Earnings per Share1

$0.23

$0.25

$0.27

$0.95

$0.99

$1.02

 

Adj. Free Cash Flow

 

$415M

$450M

$485M

 

1) Excluding Special Items

* Howmet Aerospace has not provided reconciliations of the forward-looking non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share or earnings per share excluding special items, and adjusted free cash flow, to the most directly comparable GAAP financial measures. Such reconciliations are not available without unreasonable efforts due to the variability and complexity with respect to 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. These reconciling items are in addition to the inherent variability already included in the GAAP measures, which includes, but is 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.

Completed Early Redemption of All Outstanding 5.87% Notes due 2022 with Cash on Hand

On May 3, 2021 Howmet Aerospace redeemed all $476 million aggregate principal amount of its outstanding 5.87% Notes due 2022 at an aggregate redemption price of approximately $500 million. As a result, interest costs to the Company will be reduced in 2021 by approximately $19 million and approximately $28 million on an annual basis. Including the January 15, 2021 early redemption of all $361 million aggregate principal amounts of its 5.40% Notes due 2021, these two transactions will reduce the Company’s interest expense by approximately $47 million on an annual basis. The Company’s next debt maturity is in October 2024.

Share Repurchase of $200 Million Completed

The accelerated share repurchase agreement announced on May 11, 2021 was completed on June 18, 2021. Howmet Aerospace received approximately 4.9 million shares on May 11, 2021 and an additional approximately 1 million shares on June 21, 2021. Approximately $77 million remains authorized by the Board of Directors for share repurchases.

Board of Directors Reinstates Common Stock Dividend of $0.02 Per Share

On July 19, 2021 the Board of Directors reinstated a quarterly dividend on the Company’s common stock, declaring a dividend of $0.02 per share. The dividend is to be paid on August 25, 2021, to the holders of record of the common stock at the close of business on August 6, 2021. Future dividends are subject to the discretion and final approval of the Board of Directors after the Board’s consideration of all factors it deems relevant and subject to applicable law and contractual considerations.

Howmet Aerospace will hold its quarterly conference call at 10:00 AM Eastern Time on Wednesday, August 4, 2021. 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 August 4, 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 titanium structural parts necessary for mission-critical performance and efficiency in aerospace and defense applications, as well as forged wheels for commercial transportation. With nearly 1,150 granted and pending patents, the Company’s differentiated technologies enable lighter, more fuel-efficient aircraft 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) uncertainty of the duration, extent and impact of the COVID-19 pandemic on Howmet Aerospace’s business, results of operations, and financial condition; (b) deterioration in global economic and financial market conditions generally, including as a result of pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the COVID-19 pandemic continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations); (c) unfavorable changes in the markets served by Howmet Aerospace; (d) the impact of potential cyber attacks and information technology or data security breaches; (e) the loss of significant customers or adverse changes in customers’ business or financial conditions; (f) manufacturing difficulties or other issues that impact product performance, quality or safety; (g) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (h) the inability to achieve revenue growth, cash generation, cost savings, restructuring plans, cost reductions, improvement in profitability, or strengthening of competitiveness and operations anticipated or targeted; (i) competition from new product offerings, disruptive technologies or other developments; (j) geopolitical, economic, and regulatory risks relating to Howmet Aerospace’s global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; (k) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation, which can expose Howmet Aerospace to substantial costs and liabilities; (l) failure to comply with government contracting regulations; (m) adverse changes in discount rates or investment returns on pension assets; and (n) the other risk factors summarized in Howmet Aerospace’s Form 10-K for the year ended December 31, 2020 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

 

June 30, 2021

 

March 31, 2021

 

June 30, 2020

Sales

$

1,195

 

 

$

1,209

 

 

$

1,253

 

 

 

 

 

 

 

Cost of goods sold (exclusive of expenses below)

857

 

 

873

 

 

923

 

Selling, general administrative, and other expenses

55

 

 

65

 

 

74

 

Research and development expenses

4

 

 

5

 

 

4

 

Provision for depreciation and amortization

67

 

 

68

 

 

73

 

Restructuring and other charges(1)

5

 

 

9

 

 

105

 

Operating income

207

 

 

189

 

 

74

 

 

 

 

 

 

 

Interest expense

89

 

 

72

 

 

144

 

Other expense, net

8

 

 

4

 

 

16

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

110

 

 

113

 

 

(86

)

Provision (benefit) for income taxes

36

 

 

33

 

 

(2

)

Income (loss) from continuing operations after income taxes

74

 

 

80

 

 

(84

)

Loss from discontinued operations after income taxes

 

 

 

 

(12

)

 

 

 

 

 

 

Net income (loss)

$

74

 

 

$

80

 

 

$

(96

)

 

 

 

 

 

 

Amounts Attributable to Howmet Aerospace Common Shareholders:

 

 

 

 

 

Earnings (loss) per share – Basic(2)(3)(5):

 

 

 

 

 

Continuing operations

$

0.17

 

 

$

0.18

 

 

$

(0.19

)

Discontinued operations

$

 

 

$

 

 

$

(0.03

)

Net income (loss) per share

$

0.17

 

 

$

0.18

 

 

$

(0.22

)

Average number of shares(3)(4)

431,593,607

 

 

433,598,797

 

 

436,110,495

 

 

 

 

 

 

 

Earnings (loss) per share – Diluted(2)(3)(5):

 

 

 

 

 

Continuing operations

$

0.17

 

 

$

0.18

 

 

$

(0.19

)

Discontinued operations

$

 

 

$

 

 

$

(0.03

)

Net income (loss) per share

$

0.17

 

 

$

0.18

 

 

$

(0.22

)

Average number of shares(4)

436,992,917

 

 

439,337,643

 

 

436,110,495

 

 

 

 

 

 

 

Common stock outstanding at the end of the period

428,855,919

 

 

434,081,077

 

 

436,127,649

(1)

Restructuring and other charges for the quarters ended June 30, 2021 and March 31, 2021 included severance costs, asset impairments, pension settlement charges and other exit costs. Restructuring and other charges for the quarter ended June 30, 2020 included severance costs, pension curtailments and other exit costs.

 

(2)

In order to calculate both basic and diluted earnings per share, preferred stock dividends declared of $1 for the quarters ended June 30, 2021, March 31, 2021, and June 30, 2020 need to be subtracted from Net income (loss).

 

(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 employee stock options and awards.

 

(4)

Basic and diluted average number of shares and common stock outstanding at the end of the period for the quarter ended June 30, 2021 do not reflect the full impact of the share repurchases made at different times during the second quarter of 2021.

 

(5)

Per share amounts are calculated independently for Continuing and Discontinued operations, therefore, the sum of the amounts may not equal the total Net Income (loss) per share.

 
 

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in U.S. dollar millions)

 

 

June 30, 2021

 

December 31, 2020

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

715

 

 

$

1,610

 

Receivables from customers, less allowances of $— in 2021 and $1 in 2020

316

 

 

328

 

Other receivables(1)

100

 

 

29

 

Inventories

1,456

 

 

1,488

 

Prepaid expenses and other current assets

212

 

 

217

 

Total current assets

2,799

 

 

3,672

 

Properties, plants, and equipment, net

2,515

 

 

2,592

 

Goodwill

4,090

 

 

4,102

 

Deferred income taxes

188

 

 

272

 

Intangibles, net

557

 

 

571

 

Other noncurrent assets

230

 

 

234

 

Total assets

$

10,379

 

 

$

11,443

 

 

 

 

 

Liabilities

 

 

 

Current liabilities:

 

 

 

Accounts payable, trade

$

632

 

 

$

599

 

Accrued compensation and retirement costs

195

 

 

205

 

Taxes, including income taxes

80

 

 

102

 

Accrued interest payable

75

 

 

89

 

Other current liabilities

232

 

 

289

 

Short-term debt

13

 

 

376

 

Total current liabilities

1,227

 

 

1,660

 

Long-term debt, less amount due within one year

4,227

 

 

4,699

 

Accrued pension benefits

868

 

 

985

 

Accrued other postretirement benefits

156

 

 

198

 

Other noncurrent liabilities and deferred credits

303

 

 

324

 

Total liabilities

6,781

 

 

7,866

 

 

 

 

 

Equity

 

 

 

Howmet Aerospace shareholders’ equity:

 

 

 

Preferred stock

55

 

 

55

 

Common stock

429

 

 

433

 

Additional capital

4,481

 

 

4,668

 

Retained earnings

517

 

 

364

 

Accumulated other comprehensive loss

(1,884

)

 

(1,943

)

Total equity

3,598

 

 

3,577

 

Total liabilities and equity

$

10,379

 

 

$

11,443

 

(1)

Includes deferred purchase program receivable of $49 as of June 30, 2021 and $12 as of December 31, 2020.

 
 

Howmet Aerospace and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in U.S. dollar millions)

 

 

Six months ended June 30,

 

2021

 

2020

Operating activities

 

 

 

Net income

$

154

 

 

$

119

 

Adjustments to reconcile net income to cash provided from (used for) from operations:

 

 

 

Depreciation and amortization

135

 

 

203

 

Deferred income taxes

15

 

 

25

 

Restructuring and other charges

14

 

 

126

 

Net loss from investing activities—asset sales

4

 

 

4

 

Net periodic pension benefit cost

9

 

 

34

 

Stock-based compensation

14

 

 

23

 

Other

46

 

 

48

 

Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:

 

 

 

Increase in receivables

(231

)

 

(70

)

Decrease (increase) in inventories

19

 

 

(136

)

Decrease (increase) in prepaid expenses and other current assets

10

 

 

(11

)

Increase (decrease) in accounts payable, trade(1)

48

 

 

(320

)

Decrease in accrued expenses

(93

)

 

(173

)

Increase in taxes, including income taxes

24

 

 

96

 

Pension contributions

(61

)

 

(102

)

Increase in noncurrent assets

(4

)

 

(6

)

Decrease in noncurrent liabilities

(24

)

 

(37

)

Cash provided from (used for) operations

79

 

 

(177

)

 

 

 

 

Financing Activities

 

 

 

Net change in short-term borrowings (original maturities of three months or less)

(1

)

 

(2

)

Additions to debt (original maturities greater than three months)(2)

 

 

2,400

 

Payments on debt (original maturities greater than three months)(3)

(838

)

 

(2,041

)

Debt issuance costs

(1

)

 

(61

)

Premiums paid on early redemption of debt

(22

)

 

(59

)

Proceeds from exercise of employee stock options

15

 

 

30

 

Dividends paid to shareholders

(1

)

 

(10

)

Repurchase of common stock

(200

)

 

 

Net cash transferred to Arconic Corporation at separation

 

 

(500

)

Other

(20

)

 

(34

)

Cash used for financing activities

(1,068

)

 

(277

)

Investing Activities

 

 

 

Capital expenditures(1)

(91

)

 

(184

)

Proceeds from the sale of assets and businesses(4)

8

 

 

114

 

Sale of debt securities

5

 

 

 

Cash receipts from sold receivables

172

 

 

114

 

Cash provided from investing activities

94

 

 

44

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(8

)

Net change in cash, cash equivalents and restricted cash

(895

)

 

(418

)

Cash, cash equivalents and restricted cash at beginning of year

1,611

 

 

1,703

 

Cash, cash equivalents and restricted cash at end of period

$

716

 

 

$

1,285

 

Contacts

Investor Contact
Paul T. Luther

(412) 553-1950

Paul.Luther@howmet.com

Media Contact
Paul Erwin

(412) 553-2666

Paul.Erwin@howmet.com

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