Howmet Aerospace Inc. [HWM] Filings

10-Q 1 hwm-20240630.htm 10-Q hwm-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended June 30, 2024


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

Commission File Number 1-3610

HOWMET AEROSPACE INC.

(Exact name of registrant as specified in its charter)


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

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

(Address of principal executive offices) (Zip code)

Investor Relations 412-553-1950

Office of the Secretary 412-553-1940

(Registrant’s telephone numbers, including area code)

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


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

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

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

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


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

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

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

As of July 26, 2024, there were 408,146,607 shares of common stock, par value $1.00 per share, of the registrant outstanding.

TABLE OF CONTENTS


		Page
Part I
Item 1.	Financial Statements and Supplementary Data	3
	Statement of Consolidated Operations for the Second Quarter and Six Months Ended June 3 0 , 2024 and 2023	3
	Statement of Consolidated Comprehensive Income for the Second Quarter and Six Months Ended June 3 0 , 2024 and 2023	4
	Consolidated Balance Sheet as of June 3 0 , 2024 and December 31, 2023	5
	Statement of Consolidated Cash Flows for the Six Months Ended June 3 0 , 2024 and 2023	6
	Statement of Changes in Consolidated Equity for the Second Quarter Ended June 3 0 , 2024 and 2023	7
	Statement of Changes in Consolidated Equity for the Six Months Ended June 30, 202 4 and 202 3	8
	Notes to the Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
Part II
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
	Signatures	35

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Sales (C)	$	1,880	$	1,648	$	3,704	$	3,251
Cost of goods sold (exclusive of expenses below)	1,287		1,196		2,577		2,360
Selling, general administrative, and other expenses	97		88		185		163
Research and development expenses	7		9		17		18
Provision for depreciation and amortization	69		67		136		136
Restructuring and other charges (D)	22		3		22		4
Operating income	398		285		767		570
Loss on debt redemption (N)	—		—		—		1
Interest expense, net	49		55		98		112
Other expense (income), net (F)	15		(13)		32		(6)
Income before income taxes	334		243		637		463
Provision for income taxes (G)	68		50		128		122


Net income	$	266	$	193	$	509	$	341

Amounts Attributable to Howmet Aerospace Common Shareholders (H):
Net income	$	266	$	193	$	508	$	340
Earnings per share:
Basic	$	0.65	$	0.47	$	1.24	$	0.82


Diluted	$	0.65	$	0.46	$	1.23	$	0.81

Average Shares Outstanding (H):
Basic	408		413		409		413
Diluted	411		417		411		417

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

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Comprehensive Income (unaudited)

(in millions)


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Net income	$	266	$	193	$	509	$	341
Other comprehensive income (loss), net of tax (I):
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits	4		4		7		9
Foreign currency translation adjustments	(4)		4		(41)		38

Net change in unrecognized gains (losses) on cash flow hedges	3		(10)		6		(14)
Total Other comprehensive income (loss), net of tax	3		(2)		(28)		33
Comprehensive income	$	269	$	191	$	481	$	374

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

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	752	$	610
Receivables from customers, less allowances of $— in both 2024 and 2023 (J)	749		675
Other receivables	19		17
Inventories (K)	1,848		1,765
Prepaid expenses and other current assets	235		249

Total current assets	3,603		3,316
Properties, plants, and equipment, net (L)	2,307		2,328
Goodwill	4,016		4,035
Deferred income taxes	32		46
Intangibles, net	489		505
Other noncurrent assets (M)	232		198

Total assets	$	10,679	$	10,428
Liabilities
Current liabilities:
Accounts payable, trade (Q)	$	971	$	982
Accrued compensation and retirement costs	235		263
Taxes, including income taxes (G)	81		68
Accrued interest payable	64		65
Other current liabilities (M)(Q)	225		200
Long-term debt due within one year (N)	782		206

Total current liabilities	2,358		1,784
Long-term debt (N)(O)	2,877		3,500
Accrued pension benefits (E)	645		664
Accrued other postretirement benefits (E)	90		92
Other noncurrent liabilities and deferred credits (M)	432		351

Total liabilities	6,402		6,391
Contingencies and commitments (Q)
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock	55		55
Common stock	408		410
Additional capital	3,486		3,682
Retained earnings	2,186		1,720
Accumulated other comprehensive loss (I)	(1,858)		(1,830)


Total equity	4,277		4,037
Total liabilities and equity	$	10,679	$	10,428

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

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)


	Six months ended
	June 30,
	2024		2023
Operating activities
Net income	$	509	$	341
Adjustments to reconcile net income to cash provided from operations:
Depreciation and amortization	136		136
Deferred income taxes	67		57
Restructuring and other charges	22		4
Net realized and unrealized losses	13		11
Net periodic pension cost (E)	20		19
Stock-based compensation	38		26
Loss on debt redemption (N)	—		1
Other	7		—
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
Increase in receivables (J)	(100)		(141)
Increase in inventories	(109)		(99)
Decrease (increase) in prepaid expenses and other current assets	5		(9)
Increase (decrease) in accounts payable, trade	6		(80)
Decrease in accrued expenses	(17)		(15)
Increase in taxes, including income taxes	13		31
Pension contributions	(17)		(12)
(Increase) decrease in noncurrent assets	(7)		1
Decrease in noncurrent liabilities	(12)		(19)
Cash provided from operations	574		252
Financing Activities


Repurchases and payments on debt (N)	(23)		(176)

Premiums paid on early redemption of debt (N)	—		(1)
Repurchases of common stock	(210)		(125)
Proceeds from exercise of employee stock options	6		9
Dividends paid to shareholders	(42)		(35)

Taxes paid for net share settlement of equity awards	(32)		(75)
Cash used for financing activities	(301)		(403)
Investing Activities
Capital expenditures (C)	(137)		(105)
Proceeds from the sale of assets and businesses (D and P)	8		—



Cash used for investing activities	(129)		(105)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(2)		—
Net change in cash, cash equivalents and restricted cash	142		(256)
Cash, cash equivalents and restricted cash at beginning of period	610		792
Cash, cash equivalents and restricted cash at end of period	$	752	$	536

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

Howmet Aerospace Inc. and subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

(in millions, except per-share amounts)



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at March 31, 2023	$	55	$	412	$	3,941	$	1,159	$	(1,806)	$	3,761

Net income	—		—		—		193		—		193
Other comprehensive loss (I)	—		—		—		—		(2)		(2)
Cash dividends declared:

Common @ $0.04 per share	—		—		—		(18)		—		(18)
Repurchase and retirement of common stock (H)	—		(3)		(97)		—		—		(100)
Stock-based compensation	—		—		12		—		—		12
Common stock issued: compensation plans	—		3		(74)		—		—		(71)

Balance at June 30, 2023	$	55	$	412	$	3,782	$	1,334	$	(1,808)	$	3,775



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at March 31, 2024	$	55	$	408	$	3,542	$	1,942	$	(1,861)	$	4,086

Net income	—		—		—		266		—		266
Other comprehensive income (I)	—		—		—		—		3		3
Cash dividends declared:

Common @ $0.05 per share	—		—		—		(22)		—		(22)
Repurchase and retirement of common stock (H)	—		(1)		(60)		—		—		(61)
Stock-based compensation	—		—		23		—		—		23
Common stock issued: compensation plans	—		1		(19)		—		—		(18)


Balance at June 30, 2024	$	55	$	408	$	3,486	$	2,186	$	(1,858)	$	4,277

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

Howmet Aerospace Inc. and subsidiaries

Statement of Changes in Consolidated Equity (unaudited)

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



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

Net income	—		—		—		341		—		341
Other comprehensive income (I)	—		—		—		—		33		33
Cash dividends declared:
Preferred-Class A @ $1.8750 per share	—		—		—		(1)		—		(1)

Common @ $0.08 per share	—		—		—		(34)		—		(34)
Repurchase and retirement of common stock (H)	—		(3)		(122)		—		—		(125)
Stock-based compensation	—		—		26		—		—		26
Common stock issued: compensation plans	—		3		(69)		—		—		(66)




Balance at June 30, 2023	$	55	$	412	$	3,782	$	1,334	$	(1,808)	$	3,775



	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at December 31, 2023	$	55	$	410	$	3,682	$	1,720	$	(1,830)	$	4,037
Net income	—		—		—		509		—		509
Other comprehensive loss (I)	—		—		—		—		(28)		(28)
Cash dividends declared:
Preferred-Class A @ $1.8750 per share	—		—		—		(1)		—		(1)
Common @ $0.10 per share	—		—		—		(42)		—		(42)
Repurchase and retirement of common stock (H)	—		(3)		(208)		—		—		(211)
Stock-based compensation	—		—		38		—		—		38
Common stock issued: compensation plans	—		1		(26)		—		—		(25)


Balance at June 30, 2024	$	55	$	408	$	3,486	$	2,186	$	(1,858)	$	4,277

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

Howmet Aerospace Inc. and subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

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

A. Basis of Presentation

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

In the 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 are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

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

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

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

Issued

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

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

C. Segment Information

Howmet is a global leader in lightweight metals engineering and manufacturing. Howmet’s innovative, multi-material products, which include nickel, titanium, aluminum, and cobalt, are used worldwide in the aerospace (commercial and defense), commercial transportation, and industrial and other markets. Segment performance under Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment Adjusted EBITDA. Howmet’s definition of Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. Special items, including Restructuring and other charges, are excluded from net margin and Segment Adjusted EBITDA. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences between the total segment and consolidated totals are in Corporate.

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

Engine Products

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

Fastening Systems

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

Engineered Structures

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

Forged Wheels

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

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


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Second quarter ended June 30, 2024
Sales:
Third-party sales	$	933	$	394	$	275	$	278	$	1,880
Inter-segment sales	1		—		3		—		4
Total sales	$	934	$	394	$	278	$	278	$	1,884
Profit and loss:

Provision for depreciation and amortization	$	33	$	13	$	11	$	10	$	67
Segment Adjusted EBITDA	292		101		40		75		508
Restructuring and other (credits) charges	(1)		2		14		—		15
Capital expenditures	33		5		5		9		52

Second quarter ended June 30, 2023
Sales:
Third-party sales	$	821	$	329	$	200	$	298	$	1,648
Inter-segment sales	5		—		1		—		6
Total sales	$	826	$	329	$	201	$	298	$	1,654
Profit and loss:

Provision for depreciation and amortization	$	32	$	12	$	12	$	10	$	66
Segment Adjusted EBITDA	223		64		20		81		388
Restructuring and other (credits) charges	(1)		—		5		—		4
Capital expenditures	21		5		5		7		38

	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Six months ended June 30, 2024
Sales:
Third-party sales	$	1,818	$	783	$	537	$	566	$	3,704
Inter-segment sales	3		—		4		—		7
Total sales	$	1,821	$	783	$	541	$	566	$	3,711
Profit and loss:

Provision for depreciation and amortization	$	66	$	24	$	22	$	20	$	132
Segment Adjusted EBITDA	541		193		77		157		968
Restructuring and other (credits) charges	(1)		2		14		—		15
Capital expenditures	88		12		11		21		132

Six months ended June 30, 2023
Sales:
Third-party sales	$	1,616	$	641	$	407	$	587	$	3,251
Inter-segment sales	7		—		1		—		8
Total sales	$	1,623	$	641	$	408	$	587	$	3,259
Profit and loss:

Provision for depreciation and amortization	$	64	$	23	$	24	$	19	$	130
Segment Adjusted EBITDA	435		122		50		160		767
Restructuring and other (credits) charges	(1)		—		6		—		5
Capital expenditures	54		14		15		16		99

The following table reconciles Total Segment Adjusted EBITDA to Income before income taxes. Differences between the total segment and consolidated totals are in Corporate.


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Total Segment Adjusted EBITDA	$	508	$	388	$	968	$	767
Segment provision for depreciation and amortization	(67)		(66)		(132)		(130)
Unallocated amounts:
Restructuring and other charges	(22)		(3)		(22)		(4)
Corporate expense	(21)		(34)		(47)		(63)
Operating income	$	398	$	285	$	767	$	570
Loss on debt redemption	—		—		—		(1)
Interest expense, net	(49)		(55)		(98)		(112)
Other (expense) income, net	(15)		13		(32)		6
Income before income taxes	$	334	$	243	$	637	$	463

The following table reconciles total segment capital expenditures with Capital expenditures as presented in the Statement of Consolidated Cash Flows.


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Total segment capital expenditures	$	52	$	38	$	132	$	99
Corporate	3		3		5		6
Capital expenditures	$	55	$	41	$	137	$	105

The following table disaggregates segment revenue by major market served. Differences between the total segment and consolidated totals are in Corporate.


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
Second quarter ended June 30, 2024
Aerospace - Commercial	$	528	$	251	$	200	$	—	$	979
Aerospace - Defense	192		37		61		—		290
Commercial Transportation	—		68		—		278		346
Industrial and Other	213		38		14		—		265
Total end-market revenue	$	933	$	394	$	275	$	278	$	1,880

Second quarter ended June 30, 2023
Aerospace - Commercial	$	446	$	184	$	141	$	—	$	771
Aerospace - Defense	174		46		42		—		262
Commercial Transportation	—		62		—		298		360
Industrial and Other	201		37		17		—		255
Total end-market revenue	$	821	$	329	$	200	$	298	$	1,648

Six months ended June 30, 2024
Aerospace - Commercial	$	1,020	$	495	$	392	$	—	$	1,907
Aerospace - Defense	377		76		117		—		570
Commercial Transportation	—		134		—		566		700
Industrial and Other	421		78		28		—		527
Total end-market revenue	$	1,818	$	783	$	537	$	566	$	3,704

Six months ended June 30, 2023
Aerospace - Commercial	$	878	$	354	$	293	$	—	$	1,525
Aerospace - Defense	337		90		86		—		513
Commercial Transportation	—		125		—		587		712
Industrial and Other	401		72		28		—		501
Total end-market revenue	$	1,616	$	641	$	407	$	587	$	3,251

The Company derived 67% and 63% of its revenue from the aerospace (commercial and defense) markets for the six months ended June 30, 2024 and 2023, respectively.

On April 2, 2024, General Electric Company, one of our largest customers, completed the spin-off of its energy-focused business into GE Vernova, a new publicly traded company. Since then, General Electric Company operates as GE Aerospace. GE Aerospace and RTX Corporation each represented approximately 10% of the Company’s third-party sales in the six months ended June 30, 2024. General Electric Company and RTX Corporation represented approximately 13% and 10%, respectively, of the Company’s third-party sales in the six months ended June 30, 2023. These sales were primarily from the Engine Products segment.

D. Restructuring and Other Charges


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Layoff costs	$	7	$	—	$	7	$	—
Reversals of previously recorded layoff reserves	$	—	$	—	—		(1)
Pension and Other post-retirement benefits - net settlements (E)	—		3		—		3

Net loss related to divestitures of assets and businesses (P)	14		—		13		—
Other	1		—		2		2
Total restructuring and other charges	$	22	$	3	$	22	$	4

In the second quarter of 2024, the Company recorded Restructuring and other charges of $22, which were primarily due to a loss on the sale of a small U.K. manufacturing facility in Engineered Structures of $14, a charge for layoff costs of $7, including the separation of 283 employees (144 in Fastening Systems, 112 in Engineered Structures and 27 in Forged Wheels) and other exit related costs, including accelerated depreciation, of $1.

In the six months ended June 30, 2024, the Company recorded Restructuring and other charges of $22, which were primarily due to a loss on the sale of a small U.K. manufacturing facility in Engineered Structures of $14, a charge for layoff costs of $7, and other exit related costs, including accelerated depreciation, of $2, partially offset by a gain on the sale of assets at a small U.K. manufacturing facility in Engine Products of $1.

In the second quarter of 2023, the Company recorded Restructuring and other charges of $3, which were primarily due to charges for a U.S. pension plan settlement of $3.

In the six months ended June 30, 2023, the Company recorded Restructuring and other charges of $4, which were primarily due to charges for a U.S. pension plan settlement of $3 and exit related costs, including accelerated depreciation, of $2, partially offset by a reversal of $1 for a layoff reserve related to a prior period.


	Layoff costs		Other exit costs		Total
Reserve balances at December 31, 2023	$	5	$	2	$	7
Cash payments	(2)		(1)		(3)
Restructuring charges	7		15		22
Other(1)	—		(14)		(14)
Reserve balances at June 30, 2024	$	10	$	2	$	12

(1)In the second quarter of 2024, other for other exit costs included a loss of $14 on the sale of a small U.K. manufacturing facility.

The remaining reserves as of June 30, 2024 are expected to be paid in cash during the remainder of 2024 and 2025.

E. Pension and Other Postretirement Benefits

The components of net periodic cost (benefit) were as follows:


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Pension benefits
Service cost	$	—	$	1	$	1	$	2
Interest cost	19		20		38		40
Expected return on plan assets	(17)		(18)		(35)		(37)
Recognized net actuarial loss	8		7		16		14

Settlements	—		3		—		3


Net periodic cost(1)	$	10	$	13	$	20	$	22



Other postretirement benefits
Service cost	$	—	$	—	$	—	$	—
Interest cost	2		1		3		3
Recognized net actuarial gain	—		—		(1)		(1)
Amortization of prior service benefit	(3)		(2)		(5)		(4)


Net periodic benefit(1)	$	(1)	$	(1)	$	(3)	$	(2)

(1)Service cost was included within Cost of goods sold and Selling, general administrative, and other expenses; settlements were included in Restructuring and other charges; all other cost components were recorded in Other expense (income), net in the Statement of Consolidated Operations.

Pension benefits

In the second quarter and six months ended June 30, 2023, the Company undertook additional actions to reduce gross pension obligations by $19 by purchasing group annuity contracts from a third-party carrier to pay and administer future annuity payments. These actions resulted in settlement charges of $3.

For the second quarter and six months ended June 30, 2024, Howmet’s combined pension contributions and other postretirement benefit payments were approximately $17 and $22, respectively. For the second quarter and six months ended June 30, 2023, Howmet’s combined pension contributions and other postretirement benefit payments were approximately $7 and $19, respectively

F. Other Expense (Income), Net


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Non-service costs - pension and other postretirement benefits (E)	$	9	$	8	$	16	$	15
Interest income	(6)		(5)		(11)		(10)
Foreign currency losses (gains), net	4		—		7		(2)
Net realized and unrealized losses	6		7		13		11

Deferred compensation	3		3		8		6
Other, net	(1)		(26)		(1)		(26)
Total other expense (income), net	$	15	$	(13)	$	32	$	(6)

In the second quarter and six months ended June 30, 2023, Other, net primarily includes the reversal 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 (See Note Q) due to the final settlement of such proceeding in June 2023.

G. Income Taxes

The Company’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pre-tax ordinary income. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur. In addition, the tax provision is adjusted for the interim period impact of non-benefited pre-tax losses.

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, and 23.0% in both the second quarter and six months ended June 30, 2023. The 2024 and 2023 rates were higher than the U.S. federal statutory rate of 21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, incremental state tax, nondeductible expenses, and foreign earnings subject to tax in jurisdictions with tax rates higher than the U.S. federal statutory rate of 21%. Foreign taxes on earnings also subject to U.S. federal income tax also contributed to the 2023 rate being higher than the U.S. federal statutory rate of 21%. The 2024 rate was 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 GILTI and other foreign earnings.

For the second quarter of 2024 and 2023, the tax rate including discrete items was 20.4% and 20.6%, respectively. In the second quarter of 2024, the Company recorded a discrete tax benefit of $5 related to an excess tax benefit for stock compensation. In the second quarter of 2023, the Company recorded a discrete net tax benefit of $7 related to an $8 excess tax benefit for stock compensation and a net charge of $1 for other small items.

For the six months ended June 30, 2024 and 2023, the tax rate including discrete items was 20.1% and 26.3%, respectively. For the six months ended June 30, 2024, the Company recorded a discrete net tax benefit of $12 attributable to a $7 excess tax benefit for stock compensation, a $6 benefit to release a valuation allowance related to a U.S. foreign tax credits, and a net tax charge of $1 for other small items. For the six months ended June 30, 2023, the Company recorded a discrete net tax charge of $14 attributable to a $20 charge for a tax reserve established in France (See Note Q) and a net tax charge of $2 for other small items, reduced by an $8 excess tax benefit for stock compensation.

The tax provision was comprised of the following:


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Pre-tax income at estimated annual effective income tax rate before discrete items	$	72	$	56	$	138	$	107

Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	1		1		2		1
Tax reserve (Q)	—		—		—		20
Other discrete items	(5)		(7)		(12)		(6)
Provision for income taxes	$	68	$	50	$	128	$	122

H. Earnings Per Share and Common Stock

Basic earnings per share (“EPS”) amounts are computed by dividing earnings, after the deduction of preferred stock dividends declared, by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.

The information used to compute basic and diluted EPS attributable to Howmet common shareholders was as follows (shares in millions in the table below):


	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023


Net income	$	266	$	193	$	509

Howmet Aerospace Inc. [HWM] Filings

Howmet Aerospace Inc. [HWM-P] Filings