Positive Cash Generation and Improved Capital Structure

PITTSBURGH–(BUSINESS WIRE)–Howmet Aerospace (NYSE:HWM):

Third Quarter 2021 Highlights

• Revenue of $1.28 billion, up 13% year over year and up 7% sequentially
• Income from continuing operations of $27 million, or $0.06 per share, versus $36 million, or $0.08 per share, in the third quarter 2020
• Income from continuing operations excluding special items of $120 million, or $0.27 per share, versus $13 million, or $0.03 per share, in the third quarter 2020
• Operating income of $205 million, up 181% year over year
• Operating income excluding special items of $224 million, up 124% year over year
• Generated $67 million cash from operations and $115 million of adjusted free cash flow; $106 million of cash used for financing activities; and $50 million of cash provided from investing activities
• Issued $700 million aggregate principal amount of 3.000% Notes due 2029; Tendered $600 million aggregate principal amount of 6.875% Notes due 2025; Repurchased $100 million aggregate principal amount of 5.125% Notes due 2024 across third quarter 2021 and October 2021
• Cash balance at end of quarter of $726 million including impacts of debt actions, common stock repurchase, and reinstatement of common stock dividend

2021 Guidance¹ Updated

Key Announcements

• In the third and fourth quarters 2021, the Company took additional actions to further reduce annualized interest expense by approximately $25 million, bringing the year-to-date annualized interest expense savings to approximately $70 million.
• On August 18, 2021, the Board of Directors of Howmet Aerospace authorized an additional share repurchase program of up to $1.5 billion of its outstanding common stock. During the third quarter 2021, the Company repurchased approximately 770,000 shares for $25 million. As of September 30, 2021, total share repurchase authorizations available were $1.55 billion.
• On July 19, 2021, the Board of Directors reinstated a quarterly dividend on the Company’s common stock, with a dividend of $0.02 per share paid on August 25, 2021. On October 15, 2021, the Company declared a dividend of $0.02 per share to be paid on November 25, 2021 to the holders of record of the common stock at the close of business on November 5, 2021.
• Effective October 14, 2021, John C. Plant assumed the position of sole Chief Executive Officer and continued in his role as Executive Chairman of the Board of Directors. Mr. Plant has elected to remain with Howmet Aerospace beyond his previously expected departure date and lead the Company through the aerospace market upturn. Tolga I. Oal, the Company’s prior Co-Chief Executive Officer, has departed the Company to pursue other opportunities.

Howmet Aerospace (NYSE:HWM) today reported third quarter 2021 results. The Company reported third quarter revenues of $1.28 billion, up 13% year over year, primarily driven by growth in the commercial transportation, commercial aerospace and industrial gas turbine markets as well as favorable product pricing, partially offset by declines in the defense aerospace market. Third quarter 2021 revenue increased 7% sequentially, driven by growth in the commercial aerospace market.

Howmet Aerospace reported income from continuing operations of $27 million, or $0.06 per share, in the third quarter 2021 versus $36 million, or $0.08 per share, in the third quarter 2020. Income from continuing operations excluding special items was $120 million, or $0.27 per share, in the third quarter 2021, versus $13 million, or $0.03 per share, in the third quarter 2020. Income from continuing operations in the third quarter 2021 included a $93 million charge from special items, principally related to debt tender and other financing costs.

Third quarter 2021 operating income was $205 million, up 181% year over year. Operating income excluding special items was $224 million, up 124% year over year. The year-over-year increase was driven by growth in the commercial transportation, commercial aerospace and industrial gas turbine markets, variable and fixed cost reductions, and favorable product pricing, partially offset by declines in the defense aerospace market. Operating income margin, excluding special items, was up approximately 870 basis points year over year to 17.5%.

Howmet Aerospace Executive Chairman and Chief Executive Officer John Plant said, “Howmet Aerospace delivered another quarter of strong performance, despite continued disruptions in key end markets. Third quarter 2021 revenue, adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS met guidance ranges provided. Third quarter 2021 marked the start of the commercial aerospace recovery, with commercial aerospace revenue up 16% sequentially, driving total revenue growth of 7% sequentially.”

Mr. Plant continued, “The leading indicators for air travel remain encouraging, particularly for domestic travel. We expect revenue growth to continue in the fourth quarter 2021, and carry into 2022 and beyond. As expected, Engine Products began to grow notably in the third quarter 2021. We expect modest sequential growth in Engineered Structures in the fourth quarter 2021, with Fastening Systems showing growth in the first half of 2022.”

“Our liquidity position remains strong, supporting healthy free cash flow generation. We ended the third quarter 2021 with approximately $726 million of cash including impacts of debt actions, common stock repurchase, and reinstatement of the common stock dividend. Debt actions taken over the course of 2021 will reduce annualized interest costs by approximately $70 million. Also in the third quarter 2021, we repurchased $25 million of common stock and reinstated the $0.02 per share dividend on common stock, illustrating confidence in future cash flow generation.”

Third Quarter 2021 Segment Performance

Engine Products

Engine Products reported revenue of $599 million, an increase of 24% year over year, driven by growth in the commercial aerospace and industrial gas turbine markets, partially offset by declines in the defense aerospace market. Segment operating profit was $120 million, up 208% year over year, driven by favorable sales volumes in the commercial aerospace and industrial gas turbine markets as well as variable and fixed cost reductions. The segment added approximately 500 headcount in the quarter in anticipation of revenue increases into 2022. Segment operating profit margin increased approximately 1,200 basis points year over year to 20.0%.

Fastening Systems

Fastening Systems reported revenue of $254 million, a decrease of 6% year over year due to declines in the commercial aerospace market, primarily driven by the impact of COVID-19 and Boeing 787 production declines, partly offset by growth in the commercial transportation and industrial markets. Segment operating profit was $47 million, up 42% year over year, driven by variable and fixed cost reductions and favorable sales volumes in the commercial transportation and industrial markets, partially offset by volume declines in the commercial aerospace market. Segment operating profit margin increased approximately 630 basis points year over year to 18.5%.

Engineered Structures

Engineered Structures reported revenue of $199 million, a decrease of 3% year over year due to declines in the defense aerospace market. Commercial aerospace revenue in this segment increased year over year on narrow body recovery, partially offset by Boeing 787 production declines. Segment operating profit was $14 million, up 40% year over year, driven by variable and fixed cost reductions as well as growth in the commercial aerospace market, partially offset by volume declines in the defense aerospace market. Segment operating profit margin increased approximately 210 basis points year over year to 7.0%.

Forged Wheels

Forged Wheels reported revenue of $231 million, an increase of 34% year over year due to strength in the commercial transportation market. Segment operating profit was $62 million, up 77% year over year, driven by volume increases, fixed cost reductions, and maximizing production in low-cost countries. Segment operating profit margin increased approximately 650 basis points year over year to 26.8%.

2021 Guidance¹

Debt Actions During 2021 Reduce Annualized Interest Expense by Approximately $70 Million

In the third and fourth quarters 2021, the Company took additional actions to further reduce annualized interest expense by approximately $25 million, bringing the year-to-date annualized interest expense savings to approximately $70 million.

Board of Directors Authorized Additional $1.5 Billion Share Repurchase Program; Repurchased $25 Million of Stock in the Third Quarter 2021

On August 18, 2021, the Company’s Board of Directors authorized an additional share repurchase program up to $1.5 billion of its outstanding common stock. During the third quarter 2021, the Company repurchased approximately 770,000 shares for $25 million. As of September 30, 2021, total share repurchase authorizations available were $1.55 billion.

Board of Directors Reinstated 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, with a dividend of $0.02 per share paid on August 25, 2021. In addition, on October 15, 2021, the Company declared a dividend of $0.02 per share to be paid on November 25, 2021 to the holders of record of the common stock at the close of business on November 5, 2021.

John C. Plant to Continue Leading Company as Executive Chairman and sole Chief Executive Officer through the Aerospace Market Upturn

Effective October 14, 2021, John C. Plant assumed the position of sole Chief Executive Officer and continued in his role as Executive Chairman of the Board of Directors. Mr. Plant has elected to remain with Howmet Aerospace beyond his previously expected departure date and lead the Company through the aerospace market upturn. Tolga I. Oal, the Company’s prior Co-Chief Executive Officer, has departed the Company to pursue other opportunities.

Howmet Aerospace will hold its quarterly conference call at 10:00 AM Eastern Time on Thursday, November 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 November 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; any future dividends and repurchases of its debt or equity securities; and expected employment plans. 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.

Contacts

Investor Contact
Paul T. Luther

(412) 553-1950

[email protected]

Media Contact
Paul Erwin

(412) 553-2666

[email protected]

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