Howmet Aerospace Inc

Previous wording

In the six months ended June 30, 2024, the Company derived approximately 51% of its revenue from products sold to the commercial aerospace market which is less than the pre-pandemic 2019 annual rate of approximately 60%. Aircraft production in the commercial aerospace industry continues to recover based on increases in demand for narrow body and wide body aircraft. We expect commercial aerospace wide body demand to grow faster than narrow body demand on a production percentage basis. Quality control issues at The Boeing Company (“Boeing”) are expected to negatively impact narrow body and wide body production rates in the near term. For instance, the Federal Aviation Administration stated that it will not approve production rate increases or additional production lines for the Boeing 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. Boeing production levels have a material impact on the financial performance of Howmet. The timing and level of future aircraft builds by original equipment manufacturers (“OEM”) are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

Current wording

In the nine months ended September 30, 2024, the Company derived approximately 52% of its revenue from products sold to the commercial aerospace market which is less than the pre-pandemic 2019 annual rate of approximately 60%. Aircraft production in the commercial aerospace industry continues to recover based on increases in demand for narrow body and wide body aircraft. We expect our commercial aerospace wide body and narrow body demand, including engine spares, also to continue to grow. Quality control issues at The Boeing Company (“Boeing”) are expected to negatively impact narrow body and wide body production rates in the near term. For instance, the Federal Aviation Administration stated that it will not approve production rate increases or additional production lines for the Boeing 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures. In addition, a labor union work stoppage at Boeing has negatively impacted results. Boeing production levels have a material impact on the financial performance of Howmet. The timing and level of future aircraft builds by original equipment manufacturers (“OEM”) are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

Previous wording

Sales. Sales were $1,880 in the second quarter of 2024 compared to $1,648 in the second quarter of 2023 and $3,704 in the six months ended June 30, 2024 compared to $3,251 in the six months ended June 30, 2023. The increase of $232, or 14%, in the second quarter of 2024 and the increase of $453, or 14%, in the six months ended June 30, 2024 was primarily due to higher volumes in the commercial aerospace, defense aerospace, and industrial and other markets, and favorable product pricing partially offset by lower volumes in the commercial transportation market.

Current wording

Sales. Sales were $1,835 in the third quarter of 2024 compared to $1,658 in the third quarter of 2023 and $5,539 in the nine months ended September 30, 2024 compared to $4,909 in the nine months ended September 30, 2023. The increase of $177, or 11%, in the third quarter of 2024 and the increase of $630, or 13%, in the nine months ended September 30, 2024 was primarily due to higher volumes in the commercial aerospace, defense aerospace, and industrial and other markets, and favorable product pricing, partially offset by lower volumes in the commercial transportation market.

Previous wording

Cost of goods sold (“COGS”). COGS as a percentage of Sales was 68.5% in the second quarter of 2024 compared to 72.6% in the second quarter of 2023 and 69.6% in the six months ended June 30, 2024 compared to 72.6% in the six months ended June 30, 2023. The decrease in the second quarter and six months ended June 30, 2024 was primarily due to higher volumes and favorable product pricing, partially offset by increased net headcount, primarily in the Engine Products segment, in support of expected revenue increases. There were total COGS net reimbursements of $6 in the second quarter and six months ended June 30, 2024 related to a mechanical failure resulting in substantial heat and fire-related damage to equipment at the Forged Wheels’ cast house in Barberton, Ohio in the third quarter of 2022 (the “Barberton Cast House Incident”), compared to total COGS net reimbursements of $4 and net charges of zero in the second quarter and six months ended June 30, 2023, respectively, related to the fire that occurred at a Fastening Systems plant in France in 2019 (the “France Plant Fire”) and Barberton Cast House Incident. The Company is negotiating resolution of the insurance claim related to the France Plant Fire. The insurance claim related to the Barberton Cast House Incident was settled in the second quarter of 2024.

Current wording

Cost of goods sold (“COGS”). COGS as a percentage of Sales was 68.3% in the third quarter of 2024 compared to 71.4% in the third quarter of 2023 and 69.1% in the nine months ended September 30, 2024 compared to 72.2% in the nine months ended September 30, 2023. The decrease in the third quarter and nine months ended September 30, 2024 was primarily due to higher volumes and favorable product pricing, partially offset by increased net headcount, primarily in the Engine Products segment, in support of expected revenue increases. There were no COGS net reimbursements in the third quarter and $6 in the nine months ended September 30, 2024 due to the final settlement of the insurance claim related to a prior year mechanical failure resulting in substantial heat and fire-related damage to equipment at the Forged Wheels’ cast house in Barberton, Ohio (the “Barberton Cast House Incident”) in the second quarter of 2024, compared to total COGS net charges of $1 in both the third quarter and nine months ended September 30, 2023, related to the fire that occurred at a Fastening Systems plant in France in 2019 (the “France Plant Fire”) and Barberton Cast House Incident. The Company is negotiating resolution of the insurance claim related to the France Plant Fire.

Previous wording

Selling, general administrative, and other expenses (“SG&A”). SG&A expenses were $97 in the second quarter of 2024 compared to $88 in the second quarter of 2023 and $185 in the six months ended June 30, 2024 compared to $163 in the six months ended June 30, 2023. The increase of $9, or 10%, in the second quarter of 2024 and $22, or 13% in the six months ended June 30, 2024 was primarily due to higher employment costs.

Current wording

Selling, general administrative, and other expenses (“SG&A”). SG&A expenses were $85 in the third quarter of 2024 compared to $87 in the third quarter of 2023 and $270 in the nine months ended September 30, 2024 compared to $250 in the nine months ended September 30, 2023. The decrease of $2, or 2%, in the third quarter of 2024 was primarily due to lower costs associated with closures, supply chain disruptions, and other items. The increase of $20, or 8% in the nine months ended September 30, 2024 was primarily due to higher employment costs.

Previous wording

Restructuring and other charges. Restructuring and other charges were $22 in the second quarter of 2024 compared to $3 in the second quarter of 2023 or an increase of $19. Restructuring and other charges were $22 in the six months ended June 30, 2024 compared to $4 in the six months ended June 30, 2023 or an increase of $18. Restructuring and other charges for the second quarter and six months ended June 30, 2024 were primarily due to a loss on the sale of a small U.K. manufacturing facility in Engineered Structures of $14 and layoff costs of $7. Restructuring and other charges for the second quarter of 2023 were primarily due to charges for a U.S. pension plan settlement of $3. Restructuring and other charges for the six months ended June 30, 2023 were primarily due to charges for a U.S. pension plan settlement of $3 and exit related costs, including accelerated depreciation, of $2.

Current wording

Restructuring and other (credits) charges. Restructuring and other (credits) charges were $(1) in the third quarter of 2024 compared to $4 in the third quarter of 2023 or a decrease of $5. Restructuring and other (credits) charges were $21 in the nine months ended September 30, 2024 compared to $8 in the nine months ended September 30, 2023 or an increase of $13. Restructuring and other (credits) charges for the third quarter of 2024 were primarily due to a $1 gain related to the resolution of post-closing adjustments from the May 2024 sale of a small U.K. manufacturing facility in Engineered Structures. Restructuring and other (credits) charges for the nine months ended September 30, 2024 were primarily due to a net loss on the sale of a small U.K. manufacturing facility in Engineered Structures of $13 and layoff costs of $8. Restructuring and other

Previous wording

Interest expense, net. Interest expense, net was $49 in the second quarter of 2024 compared to $55 in the second quarter of 2023 and $98 in the six months ended June 30, 2024 compared to $112 in the six months ended June 30, 2023. The decrease of $6, or 11%, in the second quarter of 2024 and $14, or 13%, in the six months ended June 30, 2024 was primarily due to early partial redemptions of the 5.125% Notes due October 2024 (the “5.125% Notes”) in September 2023 and December 2023 that, in addition to the early partial redemptions of such notes in January 2023 and March 2023, reduced the average level of long-term debt.

Current wording

Interest expense, net. Interest expense, net was $44 in the third quarter of 2024 compared to $54 in the third quarter of 2023 and $142 in the nine months ended September 30, 2024 compared to $166 in the nine months ended September 30, 2023. The decrease of $10, or 19%, in the third quarter of 2024 and $24, or 14%, in the nine months ended September 30, 2024 was primarily due to the early redemptions of the 6.875% Notes due May 2025 (the “2025 Notes”) during various periods in 2024, the early redemptions of the 5.125% Notes due October 2024 (the “2024 Notes”) during various periods during 2023 and 2024, partially offset by the August 2024 issuance of $500 aggregate principal amount of 4.850% Notes due October 2031 (the “2031 Notes”), net of the cross-currency swap that synthetically converted the 2031 Notes into a lower fixed-interest-rate Euro liability. Long-term debt, including long-term debt due within one year, has been reduced by $768 from December 31, 2022 to September 30, 2024.

Previous wording

Loss on debt redemption. Debt redemption or tender premiums include the cost to redeem or repurchase certain of the Company’s notes at a price which may be equal to the greater of the principal amount or the sum of the present values of the remaining scheduled payments, discounted using a defined treasury rate plus a spread, or a price based on the market price of its notes. Loss on debt redemption was less than $1 in the second quarter of 2024 compared to zero in the second quarter of 2023 and less than $1 in the six months ended June 30, 2024 compared to $1 in the six months ended June 30, 2023. The decrease in the six months ended June 30, 2024 was due to the debt premiums paid on the early partial redemption of the 5.125% Notes in the first quarter of 2023.

Current wording

Loss on debt redemption. Debt redemption or tender premiums include the cost to redeem or repurchase certain of the Company’s notes at a price which may be equal to the greater of the principal amount or the sum of the present values of the remaining scheduled payments, discounted using a defined treasury rate plus a spread, or a price based on the market price of its notes. Loss on debt redemption was $6 in the third quarter of 2024 compared to less than $1 in the third quarter of 2023 and $6 in the nine months ended September 30, 2024 compared to $1 in the nine months ended September 30, 2023. The increase in both the third quarter and nine months ended September 30, 2024 was primarily due to the debt premiums paid on the early redemption of the 2025 Notes in the third quarter of 2024.

Previous wording

Other expense (income), net. Other expense, net was $15 in the second quarter of 2024 compared to Other income, net of $13 in the second quarter of 2023 and Other expense, net was $32 in the six months ended June 30, 2024 compared to Other income, net of $6 in the six months ended June 30, 2023. The increase in expense of $28 in the second quarter of 2024 was primarily due to the reversal in the second quarter ended June 30, 2023 of $25, net of legal fees of $1, (the “LBIE Reversal in 2023”) of the $65 pre-tax charge taken in the third quarter of 2022 related to the Lehman Brothers International (Europe) legal proceeding as a result of the final settlement of such proceeding in June 2023 (See Note Q to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference) and an increase of foreign currency losses of $4. The increase in expense of $38 in the six months ended June 30, 2024 was primarily due to the LBIE Reversal in 2023 and increases in foreign currency losses, net, of $9. Non-service related net periodic benefit costs related to defined benefit plans is expected to increase by approximately $5 for the full year 2024 versus 2023.

Current wording

Other expense, net. Other expense, net was $17 in the third quarter of 2024 compared to Other expense, net of $11 in the third quarter of 2023 and Other expense, net was $49 in the nine months ended September 30, 2024 compared to Other expense, net of $5 in the nine months ended September 30, 2023. The increase in expense of $6 in the third quarter of 2024 was primarily due to an increase in deferred compensation of $7. The increase in expense of $44 in the nine months ended September 30, 2024 was primarily due to the reversal in the second quarter ended June 30, 2023 of $25, net of legal fees of $1, of the $65 pre-tax charge taken in the third quarter of 2022 related to the Lehman Brothers International (Europe) legal proceeding as a result of the final settlement of such proceeding in June 2023 (See Note Q to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), an increase in deferred compensation of $9, and increases in foreign currency losses, net, of $6. Non-service related net periodic benefit costs related to defined benefit plans and other postretirement benefit plans is expected to be relatively flat for the full year 2024 versus 2023.

Previous wording

Provision for income taxes. The estimated annual effective tax rate, before discrete items, applied to ordinary income was 21.7% in both the second quarter and six months ended June 30, 2024 compared to 23.0% in both the second quarter and six months ended June 30, 2023. The tax rate including discrete items was 20.4% in the second quarter of 2024 compared to 20.6% in the second quarter of 2023. A discrete tax benefit of $5 was recorded in the second quarter of 2024 compared to a discrete net tax benefit of $7 in the second quarter of 2023. The tax rate including discrete items was 20.1% in the six months ended June 30, 2024 compared to 26.3% in the six months ended June 30, 2023. A discrete net tax benefit of $12 was recorded in the six months ended June 30, 2024 compared to a discrete net tax charge of $14, which included the income tax reserve recorded as a result of the French tax litigation (See Note Q to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), recorded in the six months ended June 30, 2023. The 2024 estimated annual effective tax rate is lower than the 2023 rate primarily due to a U.S. tax benefit recognized for foreign tax credits in 2024 and lower net U.S. tax on Global Intangible Low-Taxed Income and other foreign earnings.

Current wording

Provision for income taxes. The estimated annual effective tax rate, before discrete items, applied to ordinary income was 20.9% in both the third quarter and nine months ended September 30, 2024 compared to 23.0% in both the third quarter and nine months ended September 30, 2023. The tax rate including discrete items was 6.2% in the third quarter of 2024 compared to 22.3% in the third quarter of 2023. A discrete net tax benefit of $46 primarily attributable to additional U.S. federal and state R&D credits claimed for prior years upon completion of the Company’s R&D study was recorded in the third quarter of 2024 compared to a discrete net tax benefit of $1 in the third quarter of 2023. The tax rate including discrete items was 15.1% in the nine months ended September 30, 2024 compared to 25.0% in the nine months ended September 30, 2023. A discrete net tax benefit of $58 primarily attributable to additional U.S. federal and state R&D credits claimed for prior years upon completion of the Company’s R&D study and approved under audit by the U.S. Internal Revenue Service was recorded in the nine months ended September 30, 2024 compared to a discrete net tax charge of $13, which included the income tax reserve recorded as a result of the French tax litigation (See Note Q to the Consolidated Financial Statements in Part I, Item I of this Form 10-Q for reference), recorded in the nine months ended September 30, 2023. The 2024 estimated annual effective tax rate is lower than the 2023 rate primarily due to a net benefit related to U.S. federal and state R&D credits, a higher U.S. deduction on Foreign Derived Intangible Income (“FDII”), and a U.S. tax benefit recognized for foreign tax credits.

Previous wording

Net income. Net income was $266, or $0.65 per diluted share, in the second quarter of 2024 compared to $193, or $0.46 per diluted share, in the second quarter of 2023 and $509, or $1.23 per diluted share, in the six months ended June 30, 2024 compared to $341, or $0.81 per diluted share, in the six months ended June 30, 2023. The increase of $73 in the second quarter of 2024 and $168 in the six months ended June 30, 2024 was primarily due to higher volumes in the commercial aerospace, defense aerospace, and industrial and other markets, favorable product pricing, and a reduction in interest expense due to lower long-term debt levels.

Current wording

Net income. Net income was $332, or $0.81 per diluted share, in the third quarter of 2024 compared to $188, or $0.45 per diluted share, in the third quarter of 2023 and $841, or $2.04 per diluted share, in the nine months ended September 30, 2024 compared to $529, or $1.27 per diluted share, in the nine months ended September 30, 2023. The increase of $144 in the third quarter of 2024 and $312 in the nine months ended September 30, 2024 was primarily due to higher volumes in the commercial aerospace, defense aerospace, and industrial and other markets, including engines spares, favorable product pricing, and a reduction in interest expense due to lower long-term debt levels, partially offset by lower volumes in the commercial transportation market.

Previous wording

The Company’s operations consist of four worldwide reportable segments: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. Segment performance under Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment Adjusted EBITDA. Howmet’s definition of Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. Special items, including Restructuring and other charges, are excluded from Net margin and Segment Adjusted EBITDA. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences between the total segment and consolidated totals are in Corporate (See Note C to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a description of each segment).

Current wording

The Company’s operations consist of four worldwide reportable segments: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. Segment performance under Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment Adjusted EBITDA. Howmet’s definition of Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. Special items, including Restructuring and other (credits) charges, are excluded from Net margin and Segment Adjusted EBITDA. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences between the total segment and consolidated totals are in Corporate (See Note C to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a description of each segment).

Previous wording

On March 3, 2024, Howmet and the United Autoworkers at our Cleveland, Ohio location approved a new five-year collective bargaining agreement, covering approximately 750 employees within our Engineered Structures and Forged Wheels segments. The agreement positions our Cleveland location to continue to offer market competitive wages and benefits. The new agreement expires on February 28, 2029.

Current wording

On March 3, 2024, Howmet and the United Autoworkers at our Cleveland, Ohio location approved a new five-year collective bargaining agreement, covering approximately 750 employees within our Engineered Structures and Forged Wheels segments. The agreement positions our Cleveland location to continue to offer market competitive wages and benefits. The new agreement expires on February 28, 2029. The Company’s next significant plant collective bargaining agreement in the U.S. expires in 2027.

Previous wording

Segment Adjusted EBITDA for the Engine Products segment increased $69, or 31%, in the second quarter of 2024 compared to the second quarter of 2023, primarily due to growth in the commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets. The segment absorbed approximately 315 net headcount in the second quarter of 2024, in support of expected revenue increases.

Current wording

Segment Adjusted EBITDA for the Engine Products segment increased $88, or 40%, in the third quarter of 2024 compared to the third quarter of 2023, primarily due to growth in the commercial aerospace, defense aerospace, industrial gas turbine, and oil and gas markets. The segment absorbed approximately 235 net headcount in the third quarter of 2024, in support of expected revenue increases.

Previous wording

Segment Adjusted EBITDA for the Engine Products segment increased $106, or 24%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to growth in the commercial aerospace, defense aerospace, oil and gas, and industrial gas turbine markets. The segment absorbed approximately 750 net headcount in the six months ended June 30, 2024, in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs.

Current wording

Segment Adjusted EBITDA for the Engine Products segment increased $194, or 30%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to growth in the commercial aerospace, defense aerospace, industrial gas turbine, and oil and gas markets. The segment absorbed approximately 985 net headcount in the nine months ended September 30, 2024, in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs.

Previous wording

In 2024, as compared to 2023, demand in the commercial aerospace and industrial markets is expected to increase. However, quality control issues at Boeing are expected to negatively impact narrow body and wide body production rates in the near term.

Current wording

In 2024, as compared to 2023, demand in the commercial aerospace and industrial markets is expected to increase. However, quality control issues and a labor union work stoppage at Boeing are expected to negatively impact narrow body and wide body production rates in the near term. In addition, demand in the commercial transportation markets is expected to decrease in the second half of 2024 due to lower OEM builds.

Previous wording

Segment Adjusted EBITDA Margin for the Engineered Structures segment increased approximately 200 basis points in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to growth in the commercial aerospace and defense aerospace markets, partially offset by an increase in headcount and inflationary costs.

Current wording

Segment Adjusted EBITDA Margin for the Engineered Structures segment increased approximately 200 basis points in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to growth in the commercial aerospace and defense aerospace markets, partially offset by an increase in headcount and inflationary costs.

Previous wording

In 2024, as compared to 2023, demand in the commercial aerospace and defense aerospace markets is expected to increase. However, quality control issues at Boeing are expected to negatively impact narrow body and wide body production rates in the near term.

Current wording

In 2024, as compared to 2023, demand in the commercial aerospace and defense aerospace markets is expected to increase. However, quality control issues and a labor union work stoppage at Boeing are expected to negatively impact narrow body and wide body production rates in the near term.

Previous wording

Third-party sales for the Forged Wheels segment decreased $20, or 7%, in the second quarter of 2024 compared to the second quarter of 2023, primarily due to lower volumes in the commercial transportation market as well as a decrease in aluminum price and other inflationary cost pass through.

Current wording

Third-party sales for the Forged Wheels segment decreased $40, or 14%, in the third quarter of 2024 compared to the third quarter of 2023, primarily due to lower volumes in the commercial transportation market as well as a decrease in aluminum cost pass through.

Previous wording

Third-party sales for the Forged Wheels segment decreased $21, or 4%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to lower volumes in the commercial transportation market as well as a decrease in aluminum price and other inflationary cost pass through.

Current wording

Third-party sales for the Forged Wheels segment decreased $61, or 7%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to lower volumes in the commercial transportation market as well as a decrease in aluminum and other inflationary cost pass through.

Previous wording

Segment Adjusted EBITDA for the Forged Wheels segment decreased $6, or 7%, in the second quarter of 2024 compared to the second quarter of 2023, primarily due to lower volumes in the commercial transportation market.

Current wording

Segment Adjusted EBITDA for the Forged Wheels segment decreased $16, or 7%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to lower volumes in the commercial transportation market.

Previous wording

Segment Adjusted EBITDA Margin for the Forged Wheels segment decreased approximately 20 basis points in the second quarter of 2024 compared to the second quarter of 2023, primarily due to lower volumes in the commercial transportation market partially offset by aluminum prices and other inflationary cost pass through.

Current wording

Segment Adjusted EBITDA Margin for the Forged Wheels segment decreased approximately 90 basis points in the third quarter of 2024 compared to the third quarter of 2023, primarily due to lower volumes in the commercial transportation market, partially offset by lower aluminum cost pass through.

Previous wording

Segment Adjusted EBITDA Margin for the Forged Wheels segment increased approximately 40 basis points in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to lower aluminum prices and other inflationary cost pass through partially offset by lower volumes in the commercial transportation market.

Current wording

Segment Adjusted EBITDA Margin for the Forged Wheels segment increased approximately 10 basis points in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to lower aluminum and other inflationary cost pass through, partially offset by lower volumes in the commercial transportation market.

Previous wording

In 2024, as compared to 2023, demand in the commercial transportation markets served by Forged Wheels is expected to decrease in the second half in most regions due to lower OEM builds.

Current wording

In 2024, as compared to 2023, demand in the commercial transportation markets served by Forged Wheels is expected to decrease in the second half of 2024 in most regions due to lower OEM builds.

Previous wording

See Restructuring and other charges, Interest expense, net, Loss on debt redemption, and Other expense (income), net discussions above, under “Results of Operations” for reference.

Current wording

See Restructuring and other (credits) charges, Interest expense, net, Loss on debt redemption, and Other expense, net discussions above, under “Results of Operations” for reference.

Previous wording

Corporate expense decreased $13, or 38%, in the second quarter of 2024 compared to the second quarter of 2023, primarily due to lower costs associated with closures, supply chain disruptions, and other items of $10, lower costs related to the collective bargaining agreement negotiations of $7, and higher net reimbursements related to the France Plant Fire and the Barberton Cast House Incident of $2, partially offset by higher employment costs in 2024.

Current wording

Corporate expense increased $1, or 4%, in the third quarter of 2024 compared to the third quarter of 2023, primarily due to higher employment costs in 2024, partially offset by lower costs associated with closures, supply chain disruptions, and other items of $2, lower costs related to the collective bargaining agreement negotiations of $1, and higher net reimbursements related to the France Plant Fire and the Barberton Cast House Incident of $1.

Previous wording

Corporate expense decreased $16, or 25%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to lower costs associated with closures, supply chain disruptions, and other items of $10, lower costs related to the collective bargaining agreement negotiations of $7, and higher net reimbursements related to the France Plant Fire and the Barberton Cast House Incident of $6, partially offset by higher employment and legal costs in 2024.

Current wording

Corporate expense decreased $15, or 17%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to lower costs associated with closures, supply chain disruptions, and other items of $12, lower costs related to the collective bargaining agreement negotiations of $8, and higher net reimbursements related to the France Plant Fire and the Barberton Cast House Incident of $7, partially offset by higher employment and legal costs in 2024.

Previous wording

Cash provided from operations was $574 in the six months ended June 30, 2024 compared to $252 in the six months ended June 30, 2023. The increase of $322 was primarily due to higher operating results of $217 and lower working capital of $111, partially offset by higher pension contributions of $5. The components of the change in working capital primarily included favorable changes in accounts payable of $86, receivables of $41, prepaid expenses and other current assets of $14, partially offset by $18 of taxes, including income taxes, inventories of $10 and compensation related payments and other accrued expenses of $2.

Current wording

Cash provided from operations was $818 in the nine months ended September 30, 2024 compared to $443 in the nine months ended September 30, 2023. The increase of $375 was primarily due to higher operating results of $298 and lower working capital of $88, partially offset by higher pension contributions of $14. The components of the change in working capital primarily included favorable changes in receivables of $114, prepaid expenses and other current assets of $21, inventories of $9, partially offset by compensation related payments and other accrued expenses of $24, taxes, including income taxes of $22, and accounts payable of $10.

Previous wording

Cash used for financing activities was $301 in the six months ended June 30, 2024 compared to $403 in the six months ended June 30, 2023. The decrease of $102, or 25%, was primarily due to payments made in 2023 in connection with the reduction of long-term debt of $153 (See Note N to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference) and a decrease in taxes paid for the net share settlement of equity awards of $43, partially offset by an increase in common stock repurchases of $85 and increased dividends paid to common stock shareholders of $7 due to a $0.01 increase in dividends per common share.

Current wording

Cash used for financing activities was $742 in the nine months ended September 30, 2024 compared to $646 in the nine months ended September 30, 2023. The increase of $96, or 15%, was primarily due to long-term debt payments made in 2024 of $433 (See Note N to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference), an increase in common stock repurchases of $160, increased dividends paid to common stock shareholders of $24 due to a $0.04 increase in dividends per common share, from $0.04 to $0.08 per share from the third quarter of 2023 to the third quarter of 2024, respectively, and $5 related to debt issuance costs for the 2031 Notes, partially offset by proceeds from the 2031 Notes debt issuance of $500 and a decrease in taxes paid for the net share settlement of equity awards of $29. On an annual basis, the current year debt actions are expected to reduce Interest expense, net by approximately $33.

Previous wording

On July 30, 2024, the Company’s Board of Directors declared a dividend of $0.08 per share on its common stock to be paid on August 26, 2024 to holders of record as of the close of business on August 9, 2024. The quarterly dividend represents a 60% increase from the second quarter 2024 dividend of $0.05 per share. On July 30, 2024, the Board of Directors of Howmet Aerospace approved the establishment of a 2025 dividend policy to pay cash dividends on the Company’s common stock in 2025 at a rate of 15% plus or minus 5% of net income excluding special items. The declaration of future common stock dividends is subject to the discretion and approval of the Board of Directors of Howmet after the Board’s consideration of all factors it deems relevant and subject to applicable law. The Company may modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate.

Current wording

On July 30, 2024, the Board of Directors of Howmet Aerospace approved the establishment of a 2025 dividend policy to pay cash dividends on the Company’s common stock in 2025 at a rate of 15% plus or minus 5% of net income excluding special items. The declaration of future common stock dividends is subject to the discretion and approval of the Board of Directors of Howmet after the Board’s consideration of all factors it deems relevant and subject to applicable law. The Company may modify, suspend, or cancel the dividend policy in any manner and at any time that it may deem necessary or appropriate.

Previous wording

The Company has an effective shelf registration statement on Form S-3, filed with the SEC, which allows for offerings of debt securities from time to time. The Company may opportunistically issue new debt securities in accordance with securities laws or utilize commercial paper in order to, but not limited to, refinance existing indebtedness. The Company continues to evaluate whether, when, and to what extent it may access capital markets, including any plans to refinance the 6.875% Notes due May 2025. Our ability to refinance our indebtedness or enter into alternative financings in adequate amounts on commercially reasonable terms, or terms acceptable to us, may be affected by circumstances and economic events outside of our control. In the event that a refinancing does not occur before the May 2025 maturity date of the 6.875% Notes, the Company believes that its projected cash on hand, availability under the Credit Facility, and its commercial paper program will enable the Company to repay the 6.875% Notes.

Current wording

The Company has an effective shelf registration statement on Form S-3, filed with the SEC, which allows for offerings of debt securities from time to time. The Company may opportunistically issue new debt securities in accordance with securities laws or utilize commercial paper in order to, but not limited to, refinance existing indebtedness.

Previous wording

In the future, the Company may, from time to time, redeem portions of its debt securities or repurchase portions of its debt or equity securities, including but not limited to the 6.875% Notes, in either the open market or through privately negotiated transactions, in accordance with applicable SEC and other legal requirements. The timing, prices, and sizes of purchases depend upon prevailing trading prices, general economic and market conditions, and other factors, including applicable securities laws. Such purchases may be completed by means of trading plans established from time to time in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases, tender offers, and/or accelerated share repurchase agreements or other derivative transactions.

Current wording

In the future, the Company may, from time to time, redeem portions of its debt securities or repurchase portions of its debt or equity securities, in either the open market or through privately negotiated transactions, in accordance with applicable SEC and other legal requirements. The timing, prices, and sizes of purchases depend upon prevailing trading prices, general economic and market conditions, and other factors, including applicable securities laws. Such purchases may be completed by means of trading plans established from time to time in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases, tender offers, and/or accelerated share repurchase agreements or other derivative transactions.

Previous wording

The Company’s costs of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short-term and long-term debt ratings assigned to the Company by the major credit rating agencies. The Company believes that its cash on hand, cash provided from operations and availability of its Credit Facility, its commercial paper program, and its accounts receivables securitization program will continue to be sufficient to fund our operating and capital allocation activities, including repayments of indebtedness.

Current wording

The Company’s costs of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short-term and long-term debt ratings assigned to the Company by the major credit rating agencies. The Company believes that its cash on hand, cash provided from operations and availability of its Credit Facility, its commercial paper program, and its accounts receivables securitization program will continue to be sufficient to fund our operating and capital allocation activities.

Previous wording

On February 29, 2024, Moody’s upgraded Howmet’s long-term debt rating from Ba1 to Baa3, citing demand in the markets served by Howmet along with the Company’s improved financial leverage, and affirmed the current outlook at positive.

Current wording

On August 6, 2024, Moody’s upgraded Howmet’s short-term debt rating from P-3 to P-2, further upgraded Howmet’s long-term debt rating two notches from Baa3 to Baa1, which was previously upgraded to Baa3 from Ba1 on February 29, 2024 citing demand in the markets served by Howmet along with the Company’s improved financial leverage and updated the current outlook from positive to stable.

Previous wording

Cash used for investing activities was $129 in the six months ended June 30, 2024 compared to $105 in the six months ended June 30, 2023. The increase of $24, or 23%, was primarily due to an increase in capital expenditures of $32 primarily related to capacity expansion projects in Engine Products and Forged Wheels and various automation projects, partially offset by proceeds primarily from the sale of assets at a small U.K. manufacturing facility in Engine Products of $8.

Current wording

Cash used for investing activities was $209 in the nine months ended September 30, 2024 compared to $163 in the nine months ended September 30, 2023. The increase of $46, or 28%, was primarily due to an increase in capital expenditures of $55 primarily related to capacity expansion projects in Engine Products and Forged Wheels and various automation projects, partially offset by proceeds primarily from the sale of assets at a small U.K. manufacturing facility in Engine Products of $8.