Business Wire | Aug 4, 2021 07:00AM EDT

Howmet Aerospace Delivers on Second Quarter 2021 Commitments with Expectations for a Stronger Second Half 2021

Aug. 04, 2021

PITTSBURGH--(BUSINESS WIRE)--Aug. 04, 2021--Howmet Aerospace (NYSE:HWM) today reported second quarter 2021 results. The Company reported second quarter revenues of $1.2 billion, down only 5% year over year due to disruptions in the commercial aerospace market, primarily driven by COVID-19 and Boeing 787 production declines, partially offset by growth in the commercial transportation and industrial markets.

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

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

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

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

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

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

Second Quarter 2021 Segment Performance

Engine Products

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

Fastening Systems

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

Engineered Structures

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

Forged Wheels

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

2021 Guidance*

3Q 2021 Guidance FY 2021 Guidance

Low Outlook High Low Outlook High

Revenue $1.28B $1.30B $1.32B $5.05B $5.10B $5.15B

Adj. EBITDA $285M $295M $305M $1.145B $1.170B $1.185B

Adj. EBITDA Margin^1 22.3% 22.7% 23.1% 22.7% 22.9% 23.0%

Adj. Earnings per Share^1 $0.23 $0.25 $0.27 $0.95 $0.99 $1.02

Adj. Free Cash Flow $415M $450M $485M

1) Excluding Special Items *Howmet Aerospace has not provided reconciliations of the forward-looking non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin, adjusted earnings per share or earnings per share excluding special items, and adjusted free cash flow, to the most directly comparable GAAP financial measures. Such reconciliations are not available without unreasonable efforts due to the variability and complexity with respect to the charges and other components excluded from the non-GAAP measures, such as the effects of foreign currency movements, gains or losses on sales of assets, taxes, and any future restructuring or impairment charges. These reconciling items are in addition to the inherent variability already included in the GAAP measures, which includes, but is not limited to, price/mix and volume.Howmet Aerospace believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

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

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

Share Repurchase of $200 Million Completed

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

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

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

Howmet Aerospace will hold its quarterly conference call at 10:00 AM Eastern Time on Wednesday, August 4, 2021. The call will be webcast via www.howmet.com. The press release and presentation materials will be available at approximately 7:00 AM ET on August 4, via the "Investors" section of the Howmet Aerospace website. A link to the press release will also be available via Howmet Aerospace's Twitter handle @HowmetAerospace at https://twitter.com/howmetaerospace.

About Howmet Aerospace

Howmet Aerospace Inc., headquartered in Pittsburgh, Pennsylvania, is a leading global provider of advanced engineered solutions for the aerospace and transportation industries. The Company's primary businesses focus on jet engine components, aerospace fastening systems, and titanium structural parts necessary for mission-critical performance and efficiency in aerospace and defense applications, as well as forged wheels for commercial transportation. With nearly 1,150 granted and pending patents, the Company's differentiated technologies enable lighter, more fuel-efficient aircraft to operate with a lower carbon footprint. For more information, visit www.howmet.com. Follow: LinkedIn, Twitter, Instagram, Facebook, and YouTube.

Dissemination of Company Information

Howmet Aerospace intends to make future announcements regarding Company developments and financial performance through its website at www.howmet.com.

Forward-Looking Statements

This release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as "anticipates," "believes," "could," "estimates," "expects," "forecasts," "goal," "guidance," "intends," "may," "outlook," "plans," "projects," "seeks," "sees," "should," "targets," "will," "would," or other words of similar meaning. All statements that reflect Howmet Aerospace's expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements, forecasts and outlook relating to the condition of end markets; future financial results or operating performance; future strategic actions; Howmet Aerospace's strategies, outlook, and business and financial prospects; and any future dividends and repurchases of its debt or equity securities. These statements reflect beliefs and assumptions that are based on Howmet Aerospace's perception of historical trends, current conditions and expected future developments, as well as other factors Howmet Aerospace believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and changes in circumstances that are difficult to predict, which could cause actual results to differ materially from those indicated by these statements. Such risks and uncertainties include, but are not limited to: (a) uncertainty of the duration, extent and impact of the COVID-19 pandemic on Howmet Aerospace's business, results of operations, and financial condition; (b) deterioration in global economic and financial market conditions generally, including as a result of pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the COVID-19 pandemic continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations); (c) unfavorable changes in the markets served by Howmet Aerospace; (d) the impact of potential cyber attacks and information technology or data security breaches; (e) the loss of significant customers or adverse changes in customers' business or financial conditions; (f) manufacturing difficulties or other issues that impact product performance, quality or safety; (g) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (h) the inability to achieve revenue growth, cash generation, cost savings, restructuring plans, cost reductions, improvement in profitability, or strengthening of competitiveness and operations anticipated or targeted; (i) competition from new product offerings, disruptive technologies or other developments; (j) geopolitical, economic, and regulatory risks relating to Howmet Aerospace's global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; (k) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation, which can expose Howmet Aerospace to substantial costs and liabilities; (l) failure to comply with government contracting regulations; (m) adverse changes in discount rates or investment returns on pension assets; and (n) the other risk factors summarized in Howmet Aerospace's Form 10-K for the year ended December 31, 2020 and other reports filed with the U.S. Securities and Exchange Commission. Market projections are subject to the risks discussed above and other risks in the market. The statements in this release are made as of the date of this release, even if subsequently made available by Howmet Aerospace on its website or otherwise. Howmet Aerospace disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.

Non-GAAP Financial Measures

Some of the information included in this release is derived from Howmet Aerospace's consolidated financial information but is not presented in Howmet Aerospace's financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Certain of these data are considered "non-GAAP financial measures" under SEC rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most directly comparable GAAP financial measures and management's rationale for the use of the non-GAAP financial measures can be found in the schedules to this release.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

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

Quarter ended

June 30, 2021 March 31, June 30, 2020 2021

Sales $ 1,195 $ 1,209 $ 1,253



Cost of goods sold (exclusive of 857 873 923 expenses below)

Selling, general administrative, 55 65 74 and other expenses

Research and development expenses 4 5 4

Provision for depreciation and 67 68 73 amortization

Restructuring and other charges^ 5 9 105 (1)

Operating income 207 189 74



Interest expense 89 72 144

Other expense, net 8 4 16



Income (loss) from continuing 110 113 (86 )operations before income taxes

Provision (benefit) for income 36 33 (2 )taxes

Income (loss) from continuing 74 80 (84 )operations after income taxes

Loss from discontinued operations - - (12 )after income taxes



Net income (loss) $ 74 $ 80 $ (96 )



Amounts Attributable to Howmet Aerospace Common Shareholders:

Earnings (loss) per share - Basic ^(2)(3)(5):

Continuing operations $ 0.17 $ 0.18 $ (0.19 )

Discontinued operations $ - $ - $ (0.03 )

Net income (loss) per share $ 0.17 $ 0.18 $ (0.22 )

Average number of shares^(3)(4) 431,593,607 433,598,797 436,110,495



Earnings (loss) per share - Diluted^(2)(3)(5):

Continuing operations $ 0.17 $ 0.18 $ (0.19 )

Discontinued operations $ - $ - $ (0.03 )

Net income (loss) per share $ 0.17 $ 0.18 $ (0.22 )

Average number of shares^(4) 436,992,917 439,337,643 436,110,495



Common stock outstanding at the 428,855,919 434,081,077 436,127,649end of the period

(1)

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

(2)

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

(3)

For the quarters presented, the difference between the diluted average number of shares and the basic average number of shares related to share equivalents associated with outstanding employee stock options and awards.

(4)

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

(5)

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

Restructuring and other charges for the quarters ended June 30, 2021 and^ March 31, 2021 included severance costs, asset impairments, pension(1) settlement charges and other exit costs. Restructuring and other charges for the quarter ended June 30, 2020 included severance costs, pension curtailments and other exit costs.

^ In order to calculate both basic and diluted earnings per share, preferred(2) stock dividends declared of $1 for the quarters ended June 30, 2021, March 31, 2021, and June 30, 2020 need to be subtracted from Net income (loss).

^ For the quarters presented, the difference between the diluted average(3) number of shares and the basic average number of shares related to share equivalents associated with outstanding employee stock options and awards.

Basic and diluted average number of shares and common stock outstanding at^ the end of the period for the quarter ended June 30, 2021 do not reflect(4) the full impact of the share repurchases made at different times during the second quarter of 2021.

^ Per share amounts are calculated independently for Continuing and(5) Discontinued operations, therefore, the sum of the amounts may not equal the total Net Income (loss) per share.

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in U.S. dollar millions)

June 30, December 31, 2021 2020

Assets

Current assets:

Cash and cash equivalents $ 715 $ 1,610

Receivables from customers, less allowances of $- in 316 328 2021 and $1 in 2020

Other receivables^(1) 100 29

Inventories 1,456 1,488

Prepaid expenses and other current assets 212 217

Total current assets 2,799 3,672

Properties, plants, and equipment, net 2,515 2,592

Goodwill 4,090 4,102

Deferred income taxes 188 272

Intangibles, net 557 571

Other noncurrent assets 230 234

Total assets $ 10,379 $ 11,443



Liabilities

Current liabilities:

Accounts payable, trade $ 632 $ 599

Accrued compensation and retirement costs 195 205

Taxes, including income taxes 80 102

Accrued interest payable 75 89

Other current liabilities 232 289

Short-term debt 13 376

Total current liabilities 1,227 1,660

Long-term debt, less amount due within one year 4,227 4,699

Accrued pension benefits 868 985

Accrued other postretirement benefits 156 198

Other noncurrent liabilities and deferred credits 303 324

Total liabilities 6,781 7,866



Equity

Howmet Aerospace shareholders' equity:

Preferred stock 55 55

Common stock 429 433

Additional capital 4,481 4,668

Retained earnings 517 364

Accumulated other comprehensive loss (1,884 ) (1,943 )

Total equity 3,598 3,577

Total liabilities and equity $ 10,379 $ 11,443

(1)

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

^ Includes deferred purchase program receivable of $49 as of June 30, 2021(1) and $12 as of December 31, 2020.

Howmet Aerospace and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in U.S. dollar millions)

Six months ended June 30,

2021 2020

Operating activities

Net income $ 154 $ 119

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

Depreciation and amortization 135 203

Deferred income taxes 15 25

Restructuring and other charges 14 126

Net loss from investing activities-asset sales 4 4

Net periodic pension benefit cost 9 34

Stock-based compensation 14 23

Other 46 48

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

Increase in receivables (231 ) (70 )

Decrease (increase) in inventories 19 (136 )

Decrease (increase) in prepaid expenses and other current 10 (11 )assets

Increase (decrease) in accounts payable, trade^(1) 48 (320 )

Decrease in accrued expenses (93 ) (173 )

Increase in taxes, including income taxes 24 96

Pension contributions (61 ) (102 )

Increase in noncurrent assets (4 ) (6 )

Decrease in noncurrent liabilities (24 ) (37 )

Cash provided from (used for) operations 79 (177 )



Financing Activities

Net change in short-term borrowings (original maturities (1 ) (2 )of three months or less)

Additions to debt (original maturities greater than three - 2,400 months)^(2)

Payments on debt (original maturities greater than three (838 ) (2,041 )months)^(3)

Debt issuance costs (1 ) (61 )

Premiums paid on early redemption of debt (22 ) (59 )

Proceeds from exercise of employee stock options 15 30

Dividends paid to shareholders (1 ) (10 )

Repurchase of common stock (200 ) -

Net cash transferred to Arconic Corporation at separation - (500 )

Other (20 ) (34 )

Cash used for financing activities (1,068 ) (277 )

Investing Activities

Capital expenditures^(1) (91 ) (184 )

Proceeds from the sale of assets and businesses^(4) 8 114

Sale of debt securities 5 -

Cash receipts from sold receivables 172 114

Cash provided from investing activities 94 44

Effect of exchange rate changes on cash, cash equivalents - (8 )and restricted cash

Net change in cash, cash equivalents and restricted cash (895 ) (418 )

Cash, cash equivalents and restricted cash at beginning of 1,611 1,703 year

Cash, cash equivalents and restricted cash at end of $ 716 $ 1,285 period

The separation of Arconic Inc. into two standalone, publicly-traded companies,Howmet Aerospace Inc. and Arconic Corporation, (the "Arconic Inc. SeparationTransaction") occurred on April 1, 2020. The cash flows related to ArconicCorporation have not been segregated and are included in the Statement ofConsolidated Cash Flows for the first quarter of 2020.

As previously disclosed, during the third quarter of 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows for the six months ended June 30, 2020. Although^ management has determined that such misclassification was not material, the(1) Company revised the accompanying Statement of Consolidated Cash Flows for the six months ended June 30, 2020, resulting in an $83 increase to previously reported capital expenditures and decrease to cash provided from investing activities with a corresponding reduction (decrease) in accounts payable, trade and increase in cash provided by (used for) operations.

The proceeds from financing activities primarily related to long-term debt^ issuance of $1,200 in the first quarter of 2020 which went with Arconic(2) Corporation at separation and long-term debt issuance of $1,200 in the second quarter of 2020.

The use of cash from financing activities in 2021 was related to the^ repayment of the aggregate outstanding principal amount of the 5.870% Notes(3) due 2022 of approximately $476 and the 5.400% Notes due 2021 of approximately $361.

Proceeds from the sale of assets and businesses in 2020 were primarily^ related to sale of a rolling mill in Itapissuma, Brazil and hard alloy(4) extrusions plant in South Korea for $50 and $62 in cash, respectively, which were related to Arconic Corporation.

Howmet Aerospace Inc. and subsidiaries

Segment Information (unaudited)

(in U.S. dollar millions)

1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21

Engine Products

Third-party sales $ 781 $ 585 $ 485 $ 555 $ 2,406 $ 534 $ 544

Inter-segment sales $ 2 $ 1 $ 1 $ 1 $ 5 $ 1 $ 1

Segment operating $ 165 $ 105 $ 39 $ 108 $ 417 $ 101 $ 100 profit

Segment operating 21.1 % 17.9 % 8.0 % 19.5 % 17.3 % 18.9 % 18.4 %profit margin

Provision fordepreciation and $ 30 $ 31 $ 31 $ 31 $ 123 $ 31 $ 30 amortization

Restructuring andother charges $ 13 $ 22 $ 9 $ (8 ) $ 36 $ 5 $ 5 (credits)

Capital expenditures $ 19 $ 14 $ 15 $ 29 $ 77 $ 11 $ 16



Fastening Systems

Third-party sales $ 385 $ 326 $ 271 $ 263 $ 1,245 $ 272 $ 262

Inter-segment sales $ - $ - $ - $ - $ - $ - $ -

Segment operating $ 96 $ 70 $ 33 $ 48 $ 247 $ 45 $ 50 profit

Segment operating 24.9 % 21.5 % 12.2 % 18.3 % 19.8 % 16.5 % 19.1 %profit margin

Provision fordepreciation and $ 12 $ 12 $ 12 $ 12 $ 48 $ 12 $ 13 amortization

Restructuring and $ 2 $ 24 $ - $ 13 $ 39 $ 2 $ 3 other charges

Capital expenditures $ 8 $ 7 $ 9 $ 15 $ 39 $ 5 $ 9



Engineered Structures

Third-party sales $ 275 $ 229 $ 206 $ 217 $ 927 $ 176 $ 160

Inter-segment sales $ 3 $ 2 $ 1 $ 1 $ 7 $ 1 $ 2

Segment operating $ 28 $ 19 $ 10 $ 16 $ 73 $ 10 $ 11 profit

Segment operating 10.2 % 8.3 % 4.9 % 7.4 % 7.9 % 5.7 % 6.9 %profit margin

Provision fordepreciation and $ 13 $ 14 $ 13 $ 12 $ 52 $ 12 $ 13 amortization

Restructuring andother charges $ 17 $ (5 ) $ 9 $ 7 $ 28 $ 1 $ - (credits)

Capital expenditures $ 3 $ 5 $ 3 $ 8 $ 19 $ 5 $ 5



Forged Wheels

Third-party sales $ 191 $ 113 $ 172 $ 203 $ 679 $ 227 $ 229

Inter-segment sales $ - $ - $ - $ - $ - $ - $ -

Segment operating $ 50 $ 6 $ 35 $ 62 $ 153 $ 70 $ 61 profit

Segment operating 26.2 % 5.3 % 20.3 % 30.5 % 22.5 % 30.8 % 26.6 %profit margin

Provision fordepreciation and $ 10 $ 9 $ 10 $ 10 $ 39 $ 10 $ 9 amortization

Restructuring and $ 2 $ 1 $ - $ - $ 3 $ - $ - other charges

Capital expenditures $ 7 $ 4 $ 6 $ 6 $ 23 $ 9 $ 13



Differences between the total segment and consolidated totals are in Corporate.

Howmet Aerospace Inc. and subsidiaries

Segment Information (unaudited)

(in U.S dollar millions)

Reconciliation of Total Segment Operating Profit to Consolidated Income BeforeIncome Taxes

1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21

Income (loss) fromcontinuing operations $ 198 $ (86 ) $ (12 ) $ 71 $ 171 $ 113 $ 110 before income taxes

Interest expense 84 144 77 76 381 72 89

Other (income) expense, (24 ) 16 8 74 74 4 8 net

Consolidated operating 258 74 73 221 626 189 207 income

Unallocated amounts:

Restructuring and other 39 105 22 16 182 9 5 charges

Corporate expense 42 21 22 (3 ) 82 28 10 (income)^(1)

Total segment operating $ 339 $ 200 $ 117 $ 234 $ 890 $ 226 $ 222 profit

Reconciliation of Total Segment Capital Expenditures to Consolidated CapitalExpenditures

1Q20 2Q20 3Q20 4Q20 2020 1Q21 2Q21

Total segment capital $ 37 $ 30 $ 33 $ 58 $ 158 $ 30 $ 43 expenditures

Corporate and 115 2 3 (11 ) 109 25 (7 )discontinued operations

Capital expenditures $ 152 $ 32 $ 36 $ 47 $ 267 $ 55 $ 36

Total segment operating profit and Total segment capital expenditures are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company by Segment excluding the impacts of Corporate, Restructuring and other charges, and Other special items (collectively, "Special items"). There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both Income from continuing operations determined under GAAP as well as Total segment operating profit.

Differences between the total segment and consolidated totals are in Corporate.

(1)

For the quarter ended March 31, 2020, Corporate expense included $4 of costs associated with the Arconic Inc. Separation Transaction, $11 of net costs related to fires at two plants, and impairment costs related to facilities closures of $3 offset by ($1) net reimbursement related to legal and advisory charges related to Grenfell Tower. For the quarter ended June 30, 2020, Corporate expense included $3 of costs associated with the Arconic Inc. Separation Transaction, ($6) of reimbursement related to legal and advisory charges related to Grenfell Tower, and $4 of net costs related to a fire at two plants (net of insurance reimbursements). For the quarter ended September 30, 2020, Corporate expense included ($2) of reimbursement related to legal and advisory charges related to Grenfell Tower, and $7 of net costs related to fires at two plants. For the quarter ended December 31, 2020, Corporate expense included ($3) of reimbursement related to legal and advisory charges related to Grenfell Tower, and ($19) of net reimbursements related to fires at two plants. For the quarter ended March 31, 2021, Corporate expense included $10 of costs related to fires at two plants. For the quarter ended June 30, 2021, Corporate expense included ($4) of reimbursement related to legal and advisory charges related to Grenfell Tower, and ($3) of net reimbursement related to fires at two plants.

Total segment operating profit and Total segment capital expenditures arenon-GAAP financial measures. Management believes that these measures aremeaningful to investors because management reviews the operating results of theCompany by Segment excluding the impacts of Corporate, Restructuring and othercharges, and Other special items (collectively, "Special items"). There can beno assurances that additional Special items will not occur in future periods.To compensate for this limitation, management believes that it is appropriateto consider both Income from continuing operations determined under GAAP aswell as Total segment operating profit.



Differences between the total segment and consolidated totals are in Corporate.



For the quarter ended March 31, 2020, Corporate expense included $4 of costs associated with the Arconic Inc. Separation Transaction, $11 of net costs related to fires at two plants, and impairment costs related to facilities closures of $3 offset by ($1) net reimbursement related to legal and advisory charges related to Grenfell Tower. For the quarter ended June 30, 2020, Corporate expense included $3 of costs associated with the Arconic Inc. Separation Transaction, ($6) of reimbursement related to legal and advisory charges related to Grenfell Tower, and $4 of net costs related to a fire at two plants (net of insurance reimbursements). For the quarter^ ended September 30, 2020, Corporate expense included ($2) of reimbursement(1) related to legal and advisory charges related to Grenfell Tower, and $7 of net costs related to fires at two plants. For the quarter ended December 31, 2020, Corporate expense included ($3) of reimbursement related to legal and advisory charges related to Grenfell Tower, and ($19) of net reimbursements related to fires at two plants. For the quarter ended March 31, 2021, Corporate expense included $10 of costs related to fires at two plants. For the quarter ended June 30, 2021, Corporate expense included ($4) of reimbursement related to legal and advisory charges related to Grenfell Tower, and ($3) of net reimbursement related to fires at two plants.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollars millions)

Quarter Ended Six months endedAdjusted free cash flow March 31, June 30, June 30, 2021 2021 2021

Cash (used for) provided from $ (6 ) $ 85 $ 79 operations

Cash receipts from sold receivables 57 115 172

Capital expenditures (55 ) (36 ) (91 )

Adjusted free cash flow (4 ) $ 164 $ 160

The net cash funding from the sale of accounts receivables was neither a useof cash nor a source of cash for all periods presented.

Adjusted free cash flow is a non-GAAP financial measure. Management believesthat this measure is meaningful to investors because management reviews cashflows generated from operations after taking into consideration capitalexpenditures (due to the fact that these expenditures are considerednecessary to maintain and expand the Company's asset base and are expectedto generate future cash flows from operations), as well as cash receiptsfrom net sales of beneficial interest in sold receivables. It is importantto note that Adjusted free cash flow does not represent the residual cashflow available for discretionary expenditures since other non-discretionaryexpenditures, such as mandatory debt service requirements, are not deductedfrom the measure.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

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

Income from Quarter ended Six months endedcontinuingoperationsexcluding Special March 31,items June 30, 2020 2021 June 30, 2021 June 30, 2020 June 30, 2021

(Loss) incomefrom continuing $ (84 ) $ 80 $ 74 $ 69 $ 154 operations



Diluted (loss)earnings per share (EPS)

Continuing $ (0.19 ) $ 0.18 $ 0.17 $ 0.15 $ 0.35 operations

Discontinued $ (0.03 ) $ - $ - $ 0.11 $ - operations



Special items:

Restructuring and 105 9 5 144 14 other charges

Discrete tax 10 (1 ) 4 2 3 items^(1)

Other special items

New financing and 65 - 23 65 23 debt tender fees

Costs, includinginterest,associated with 3 - - 14 - the Arconic Inc.SeparationTransaction

Plant fire costs(reimbursements), 4 10 (3 ) 15 7 net

Legal and otheradvisoryreimbursements (6 ) - (4 ) (7 ) (4 )related toGrenfell Tower,net

Other 2 (3 ) 2 1 (1 )

Total Other 68 7 18 88 25 special items

Tax impact^(2) (44 ) 1 (5 ) (54 ) (4 )



Income fromcontinuingoperations $ 55 $ 96 $ 96 $ 249 $ 192 excluding Specialitems



Diluted EPSexcluding Special $ 0.12 $ 0.22 $ 0.22 $ 0.56 $ 0.44 items



Average number ofshares - diluted 438,669,853 439,337,643 436,992,917 439,660,786 438,173,107 EPS excludingSpecial items

Income from continuing operations excluding Special items and Diluted EPS excluding Special items are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews the operating results of the Company excluding the impacts of Restructuring and other charges, Discrete tax items, and Other special items (collectively, "Special items"). There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both (Loss) income from continuing operations determined under GAAP as well as Income from continuing operations excluding Special items.

(1)

Discrete tax items for each period included the following:

* for the quarter ended June 30, 2020, charges resulting from the remeasurement of deferred tax balances in various jurisdictions as a result of the Arconic Inc. Separation Transaction $6, and a net charge for prior year items $4;

* for the quarter ended March 31, 2021, a net benefit for other items ($1);

* for the quarter ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $2;

* for the six months ended June 30, 2020, charges resulting from the remeasurement of deferred tax balances in various jurisdictions as a result of the Arconic Inc. Separation Transaction $6, a net charge for prior year items $3, a benefit related to stock compensation ($5), and a net benefit for other small items ($2); and

* for the six months ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $1.

(2)

The tax impact on Special items is based on the applicable statutory rates whereby the difference between such rates and the Company's consolidated estimated annual effective tax rate is itself a Special item.

Income from continuing operations excluding Special items and Diluted EPSexcluding Special items are non-GAAP financial measures. Management believesthat these measures are meaningful to investors because management reviews theoperating results of the Company excluding the impacts of Restructuring andother charges, Discrete tax items, and Other special items (collectively,"Special items"). There can be no assurances that additional Special items willnot occur in future periods. To compensate for this limitation, managementbelieves that it is appropriate to consider both (Loss) income from continuingoperations determined under GAAP as well as Income from continuing operationsexcluding Special items.

^ Discrete tax items for each period included the following:(1)

* for the quarter ended June 30, 2020, charges resulting from the remeasurement of deferred tax balances in various jurisdictions as a result of the Arconic Inc. Separation Transaction $6, and a net charge for prior year items $4;

* for the quarter ended March 31, 2021, a net benefit for other items ($1);

* for the quarter ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $2;

* for the six months ended June 30, 2020, charges resulting from the remeasurement of deferred tax balances in various jurisdictions as a result of the Arconic Inc. Separation Transaction $6, a net charge for prior year items $3, a benefit related to stock compensation ($5), and a net benefit for other small items ($2); and

* for the six months ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $1.

^ The tax impact on Special items is based on the applicable statutory rates(2) whereby the difference between such rates and the Company's consolidated estimated annual effective tax rate is itself a Special item.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollar millions)

Quarter ended June 30, 2021 Six months ended June 30, 2021Operational TaxRate As Special As As Special As reported items^ adjusted reported items^ adjusted (1)(2) (1)(2)

Income fromcontinuing $ 110 $ 21 $ 131 $ 223 $ 40 $ 263 operations beforeincome taxes

Provision(benefit) for 36 (1 ) 35 69 2 71 income taxes

Operational tax 32.7 % 26.7 % 30.9 % 27.0 %rate

Operational tax rate is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of the Company excluding the impacts of Special items. There can be no assurances that additional Special items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both the Effective tax rate determined under GAAP as well as the Operational tax rate.(1)

Special items for the quarter ended June 30, 2021 include new financing and debt tender fees $23 and Restructuring and other charges $5, partially offset by ($3) of net reimbursements related to fires at two plants and a reimbursement of legal and other advisory costs related to Grenfell Tower ($4). Special items for the six months ended June 30, 2021 include new financing and debt tender fees $23, Restructuring and other charges $14, and $7 related to net costs related to fires at two plants, net of reimbursement, partially offset by a reimbursement of legal and other advisory costs related to Grenfell Tower ($4).

(2)

Tax Special items includes discrete tax items, the tax impact on Special items based on the applicable statutory rates, the difference between such rates and the Company's consolidated estimated annual effective tax rate and other tax related items. Discrete tax items included the following:

* for the quarter ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $2; and

* for the six months ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $1.

Operational tax rate is a non-GAAP financial measure. Management believes thatthis measure is meaningful to investors because management reviews theoperating results of the Company excluding the impacts of Special items. Therecan be no assurances that additional Special items will not occur in futureperiods. To compensate for this limitation, management believes that it isappropriate to consider both the Effective tax rate determined under GAAP aswell as the Operational tax rate.

Special items for the quarter ended June 30, 2021 include new financing and debt tender fees $23 and Restructuring and other charges $5, partially offset by ($3) of net reimbursements related to fires at two plants and a^ reimbursement of legal and other advisory costs related to Grenfell Tower(1) ($4). Special items for the six months ended June 30, 2021 include new financing and debt tender fees $23, Restructuring and other charges $14, and $7 related to net costs related to fires at two plants, net of reimbursement, partially offset by a reimbursement of legal and other advisory costs related to Grenfell Tower ($4).

Tax Special items includes discrete tax items, the tax impact on Special^ items based on the applicable statutory rates, the difference between such(2) rates and the Company's consolidated estimated annual effective tax rate and other tax related items. Discrete tax items included the following:

* for the quarter ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $2; and

* for the six months ended June 30, 2021, a charge related to a U.K. tax rate change $2, and a net charge for other items $1.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollars millions)

Net Debt June 30, September December March 31, June 30, 2020 30, 2020 31, 2020 2021 2021

Short-term debt $ 391 $ 384 $ 376 $ 489 $ 13

Long-term debt, less amount 4,695 4,697 4,699 4,224 4,227 due within one year

Total debt $ 5,086 $ 5,081 $ 5,075 $ 4,713 $ 4,240

Less: Cash, cash equivalents, 1,285 1,368 1,611 1,239 716 and restricted cash

Net debt $ 3,801 $ 3,713 $ 3,464 $ 3,474 $ 3,524

Net debt is a non-GAAP financial measure. Management believes that this measureis meaningful to investors because management assesses the Company's leverageposition after factoring in cash that could be used to repay outstanding debt.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollars millions)

Operating income excluding Special items Quarter ended

June 30, March 31, June 30, 2020 2021 2021

Operating income $ 74 $ 189 $ 207



Special items:

Restructuring and other charges 105 9 5

Costs associated with the Arconic Inc. 3 - - Separation Transaction

Legal and other advisory reimbursements (6 ) - (4 )related to Grenfell Tower, net

Plant fire costs (reimbursements), net 4 10 (3 )

Impairment costs related to facilities - - - closures

Operating income excluding Special items $ 180 $ 208 $ 205



Sales $ 1,253 $ 1,209 $ 1,195



Operating income margin, excluding Special 14.4 % 17.2 % 17.2 %items

Operating income excluding Special items and Operating income margin, excludingSpecial items are non-GAAP financial measures. Management believes that thesemeasures are meaningful to investors because management reviews the operatingresults of the Company excluding the impacts of Special items. There can be noassurances that additional Special items will not occur in future periods. Tocompensate for this limitation, management believes that it is appropriate toconsider both Operating income determined under GAAP as well as Operatingincome excluding Special items.

Howmet Aerospace Inc. and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in U.S. dollars millions)

Reconciliation of Adjusted EBITDA excluding Quarter endedSpecial Items Margin

March 31, 2021 June 30, 2021

Income from continuing operations after income 80 $ 74 taxes



Add:

Provision for income taxes 33 36

Other expense, net 4 8

Interest expense 72 89

Restructuring and other charges 9 5

Provision for depreciation and amortization 68 67

Adjusted EBITDA $ 266 $ 279



Add:

Plant fire costs (reimbursements), net 9 (3 )

Legal and other advisory reimbursements - (4 )related to Grenfell Tower

Adjusted EBITDA excluding Special items $ 275 $ 272



Sales $ 1,209 $ 1,195

Adjusted EBITDA excluding Special items Margin 22.7 % 22.8 %

The Company's definition of Adjusted EBITDA (Earnings before interest, taxes,depreciation, and amortization) is net margin plus an add-back fordepreciation and amortization. Net margin is equivalent to Sales minus thefollowing items: Cost of goods sold; Selling, general administrative, andother expenses; Research and development expenses; and Provision fordepreciation and amortization. Management believes that Adjusted EBITDA andAdjusted EBITDA excluding Special items Margin are meaningful to investorsbecause it provides additional information with respect to the Company'soperating performance and the Company's ability to meet its financialobligations. The Adjusted EBITDA presented may not be comparable to similarlytitled measures of other companies.

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CONTACT: Investor Contact Paul T. Luther (412) 553-1950 Paul.Luther@howmet.com Media Contact Paul Erwin (412) 553-2666 Paul.Erwin@howmet.com