Howmet Aerospace(HWM) - 2024 Q1 - Quarterly Report

Part I – Financial Information Financial Statements and Supplementary Data This section presents unaudited consolidated financial statements for Q1 2024, including operations, balance sheet, cash flows, and equity, with detailed notes on segments, debt, and contingencies Statement of Consolidated Operations For Q1 2024, Howmet Aerospace reported sales of $1,824 million, a 13.8% increase, with operating income up 29.5% to $369 million and net income rising 64.2% to $243 million Consolidated Operations - Q1 2024 vs Q1 2023 | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $1,824 | $1,603 | +13.8% | | Operating Income | $369 | $285 | +29.5% | | Net Income | $243 | $148 | +64.2% | | Diluted EPS | $0.59 | $0.35 | +68.6% | Consolidated Balance Sheet As of March 31, 2024, total assets were $10,410 million, total liabilities decreased to $6,324 million, and total equity increased to $4,086 million Balance Sheet Summary | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $3,340 | $3,316 | | Total Assets | $10,410 | $10,428 | | Total Current Liabilities | $1,698 | $1,784 | | Total Liabilities | $6,324 | $6,391 | | Total Equity | $4,086 | $4,037 | Statement of Consolidated Cash Flows In Q1 2024, cash from operations significantly improved to $177 million, while financing activities used $178 million, primarily for stock repurchases, and investing activities used $75 million Cash Flow Summary - Q1 2024 vs Q1 2023 | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | Cash from Operations | $177 | $23 | | Cash for Financing | $(178) | $(214) | | Cash for Investing | $(75) | $(64) | | Net Change in Cash | $(76) | $(254) | Notes to the Consolidated Financial Statements These notes detail financial statements, highlighting strong aerospace market performance, segment revenue and profitability, share repurchase activities, debt structure, and legal contingency updates - Approximately 51% of Q1 2024 revenue came from the commercial aerospace market. The company notes that quality control issues at Boeing are expected to negatively impact narrow and wide body production rates in the near term[21] Segment Sales and Adjusted EBITDA - Q1 2024 | Segment | Third-Party Sales (in millions) | Segment Adjusted EBITDA (in millions) | | :--- | :--- | :--- | | Engine Products | $885 | $249 | | Fastening Systems | $389 | $92 | | Engineered Structures | $262 | $37 | | Forged Wheels | $288 | $82 | | Total | $1,824 | $460 | - In Q1 2024, the company repurchased approximately 2.2 million shares of common stock for about $150 million. Approximately $547 million remains available under the current board authorization for share repurchases[48] - A legal dispute with Lockheed Martin regarding the F-35 Program was settled confidentially on April 2, 2024, with no material impact on current year results[85][86] Management's Discussion and Analysis (MD&A) Management discusses Q1 2024 financial results, noting a 14% sales increase driven by aerospace and industrial demand, improved operating cash flow, strategic capital allocation, and recent investment-grade credit rating upgrades Results of Operations Q1 2024 sales increased 14% to $1,824 million due to higher volumes and favorable pricing, with cost of goods sold improving to 70.7% of sales, leading to a $95 million net income increase - Sales increased by $221 million (14%) in Q1 2024 compared to Q1 2023, primarily due to higher volumes in commercial aerospace, defense aerospace, and industrial markets, along with favorable pricing[101] - Cost of goods sold (COGS) as a percentage of sales improved to 70.7% in Q1 2024 from 72.6% in Q1 2023, due to higher volumes and better pricing[102] - Net income increased by $95 million, driven by higher volumes, favorable pricing, and a reduction in interest expense from lower debt levels[112] Segment Information All aerospace segments showed strong growth in Q1 2024, with Engine Products, Fastening Systems, and Engineered Structures reporting significant sales and EBITDA increases, while Forged Wheels maintained flat sales but improved EBITDA Segment Performance Highlights - Q1 2024 vs Q1 2023 | Segment | Sales Change | Adj. EBITDA Change | Key Driver | | :--- | :--- | :--- | :--- | | Engine Products | +11% | +17% | Higher volumes in commercial aerospace, defense, and oil & gas | | Fastening Systems | +25% | +59% | Higher volumes in commercial aerospace, including wide body recovery | | Engineered Structures | +27% | +23% | Higher volumes in commercial and defense aerospace | | Forged Wheels | -0.3% | +4% | Higher volumes offset by lower aluminum price pass-through | Liquidity and Capital Resources Operating cash flow significantly increased to $177 million in Q1 2024, supported by a new $1 billion commercial paper program and recent investment-grade credit rating upgrades - Cash from operations increased by $154 million year-over-year, primarily due to higher operating results ($93 million) and lower working capital usage ($55 million)[137] - On April 4, 2024, the company established a $1 billion commercial paper program for general corporate purposes, enhancing liquidity[141] - The company's debt has been upgraded to investment grade by all three major credit rating agencies, with Moody's upgrading to Baa3 in February 2024[145] Quantitative and Qualitative Disclosures About Market Risk The company reports no material quantitative and qualitative disclosures regarding market risk for the period - The company reported no material disclosures regarding market risk[151] Controls and Procedures The CEO and CFO confirmed the effectiveness of disclosure controls and procedures, with no material changes to internal control over financial reporting in Q1 2024 - The CEO and CFO have evaluated and concluded that the company's disclosure controls and procedures are effective[152] - No material changes were made to the internal control over financial reporting during Q1 2024[152] Part II – Other Information Legal Proceedings This section refers to Note P of the Consolidated Financial Statements for detailed information regarding legal proceedings - For details on legal proceedings, the report refers to Note P in the financial statements[153] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2023 were reported - No material changes to risk factors were reported compared to the 2023 Form 10-K[154] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2024, the company repurchased 2,243,259 shares of common stock for approximately $150 million, with $547 million remaining available under the current authorization Common Stock Repurchases - Q1 2024 | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | January 2024 | — | $— | | February 2024 | 463,137 | $64.78 | | March 2024 | 1,780,122 | $67.41 | | Total | 2,243,259 | $66.87 | - As of March 31, 2024, approximately $547 million remains available under the company's share repurchase program[155] Exhibits This section lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley Act certifications and Inline XBRL documents - The report includes required certifications under Sections 302 and 906 of the Sarbanes-Oxley Act and provides financial data in Inline XBRL format[156]