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What changed in Howmet Aerospace's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Howmet Aerospace's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+256 added−274 removedSource: 10-K (2024-02-13) vs 10-K (2023-02-14)

Top changes in Howmet Aerospace's 2023 10-K

256 paragraphs added · 274 removed · 220 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

37 edited+3 added−2 removed46 unchanged
Biggest changeIn recent years, Forged Wheels has seen an increase in the number of aluminum wheel suppliers (both forged and cast aluminum wheels) from China, Taiwan, India and South Korea attempting to penetrate the global commercial transportation market. 6 Table of Contents Several of Howmet’s largest customers have captive superalloy furnaces for producing airfoil investment castings for their own use.
Biggest changeIts larger aluminum wheel competitors are Accuride Corporation, Speedline (member of the Ronal Group), Nippon Steel Corporation, Dicastal, Alux, and Wheels India Limited. 6 Table of Contents In recent years, Forged Wheels has seen an increase in the number of aluminum wheel suppliers (both forged and cast aluminum wheels) from China, Taiwan, India and South Korea attempting to penetrate the global commercial transportation market.
Cosme-en-Vairais (2) Fastening Systems Fasteners Toulouse Fastening Systems Fasteners Us-par-Vigny Fastening Systems Fasteners Germany Bestwig Engine Products Aerospace Castings Erwitte Engine Products Machining of Aerospace Castings Hildesheim-Bavenstedt (2) Fastening Systems Fasteners Kelkheim (2) Fastening Systems Fasteners Hungary Nemesvámos Fastening Systems Fasteners Székesfehérvár Engine Products; Forged Wheels Aerospace and Industrial Gas Turbine Castings and Forgings Japan J Ô etsu City (2) Forged Wheels Wheels Machining Nomi Engine Products Aerospace and Industrial Gas Turbine Castings Mexico Ciudad Acuña (2) Engine Products; Fastening Systems Aerospace Castings/Rings and Fasteners Monterrey Forged Wheels Forgings Morocco Casablanca (2) Fastening Systems Fasteners United Kingdom Ecclesfield Engine Products Metal, Billets Exeter (2) Engine Products Aerospace and Industrial Gas Turbine Castings and Alloy Glossop Engine Products Metal, Billets Ickles Engine Products Metal, Billets Leicester (2) Fastening Systems Fasteners Low Moor Engineered Structures Extrusions Redditch (2) Fastening Systems Fasteners Telford Fastening Systems Fasteners Welwyn Garden City Engineered Structures Aerospace Formed Parts 4 Table of Contents Country Facility Location Segment Products United States Tucson, AZ (2) Fastening Systems Fasteners Carson, CA (2) Fastening Systems Fasteners City of Industry, CA (2) Fastening Systems Fasteners Fontana, CA Engine Products Rings Fullerton, CA (2) Fastening Systems Fasteners Rancho Cucamonga, CA Engine Products Rings Torrance, CA Fastening Systems Fasteners Branford, CT Engine Products Aerospace Coatings Winsted, CT Engine Products Aerospace Machining Savannah, GA Engineered Structures Forgings, Disks La Porte, IN Engine Products Aerospace and Industrial Gas Turbine Castings Whitehall, MI Engine Products Aerospace and Industrial Gas Turbine Castings and Coatings, Titanium Alloy and Specialty Products Washington, MO Engineered Structures Aerospace Formed Parts, Titanium Mill Products Big Lake, MN Engineered Structures Aerospace Machining New Brighton, MN Engineered Structures Aerospace Machining Dover, NJ Engine Products Aerospace and Industrial Gas Turbine Castings and Alloy Kingston, NY (2) Fastening Systems Fasteners Rochester, NY Engine Products Rings Barberton, OH Forged Wheels Wheels Machining Canton, OH (2) Engineered Structures Titanium Mill Products Cleveland, OH Engine Products; Engineered Structures; Forged Wheels Forgings, Investment Casting Equipment, and Aerospace Components Niles, OH Engineered Structures Titanium Mill Products Morristown, TN (2) Engine Products Aerospace and Industrial Gas Turbine Ceramic Products Houston, TX (2) Engineered Structures Extrusions Waco, TX (2) Fastening Systems Fasteners Wichita Falls, TX Engine Products Aerospace and Industrial Gas Turbine Castings Hampton, VA (2) Engine Products Aerospace and Industrial Gas Turbine Castings Martinsville, VA Engineered Structures Titanium Mill Products (1) Principal facilities are listed by location, with certain locations having more than one facility.
Cosme-en-Vairais (2) Fastening Systems Fasteners Toulouse Fastening Systems Fasteners Us-par-Vigny Fastening Systems Fasteners Germany Bestwig Engine Products Aerospace Castings Erwitte Engine Products Machining of Aerospace Castings Hildesheim-Bavenstedt (2) Fastening Systems Fasteners Kelkheim (2) Fastening Systems Fasteners Hungary Nemesvámos Fastening Systems Fasteners Székesfehérvár Engine Products; Forged Wheels Aerospace and Industrial Gas Turbine Castings and Forgings Japan J Ô etsu City (2) Forged Wheels Wheels Machining Nomi Engine Products Aerospace and Industrial Gas Turbine Castings Mexico Ciudad Acuña (2) Engine Products; Fastening Systems Aerospace Castings/Rings and Fasteners Monterrey Forged Wheels Forgings Morocco Casablanca (2) Fastening Systems Fasteners United Kingdom Ecclesfield Engine Products Metal, Billets Exeter (2) Engine Products Aerospace and Industrial Gas Turbine Castings and Alloy Glossop Engine Products Metal, Billets Ickles Engine Products Metal, Billets Leicester (2) Fastening Systems Fasteners Redditch (2) Fastening Systems Fasteners Telford Fastening Systems Fasteners Welwyn Garden City Engineered Structures Aerospace Formed Parts 4 Table of Contents Country Facility Location Segment Products United States Tucson, AZ (2) Fastening Systems Fasteners Carson, CA (2) Fastening Systems Fasteners City of Industry, CA (2) Fastening Systems Fasteners Fontana, CA Engine Products Rings Fullerton, CA (2) Fastening Systems Fasteners Rancho Cucamonga, CA Engine Products Rings Torrance, CA Fastening Systems Fasteners Branford, CT Engine Products Aerospace Coatings Winsted, CT Engine Products Aerospace Machining Savannah, GA Engineered Structures Forgings, Disks La Porte, IN Engine Products Aerospace and Industrial Gas Turbine Castings Whitehall, MI Engine Products Aerospace and Industrial Gas Turbine Castings and Coatings, Titanium Alloy and Specialty Products Washington, MO Engineered Structures Titanium Mill Products Big Lake, MN Engineered Structures Aerospace Machining New Brighton, MN Engineered Structures Aerospace Machining Dover, NJ Engine Products Aerospace and Industrial Gas Turbine Castings and Alloy Kingston, NY (2) Fastening Systems Fasteners Rochester, NY Engine Products Rings Barberton, OH Forged Wheels Wheels Machining Canton, OH (2) Engineered Structures Titanium Mill Products Cleveland, OH Engine Products; Engineered Structures; Forged Wheels Forgings, Investment Casting Equipment, and Aerospace Components Niles, OH Engineered Structures Titanium Mill Products Morristown, TN (2) Engine Products Aerospace and Industrial Gas Turbine Ceramic Products Houston, TX (2) Engineered Structures Extrusions Waco, TX (2) Fastening Systems Fasteners Wichita Falls, TX Engine Products Aerospace and Industrial Gas Turbine Castings Hampton, VA (2) Engine Products Aerospace and Industrial Gas Turbine Castings Martinsville, VA Engineered Structures Titanium Mill Products (1) Principal facilities are listed by location, with certain locations having more than one facility.
The business’s high-tech, multi-material fastening systems are found nose to tail on commercial and military aircraft, as well as on jet engines, industrial gas turbines, automobiles, commercial transportation vehicles, wind turbines, solar power systems, and construction and industrial equipment .
The business’s high-tech, multi-material fastening systems are found nose to tail on commercial and military aircraft, as well as on jet engines, industrial gas turbines, commercial transportation vehicles, wind turbines, solar power systems, and construction and industrial equipment .
For a discussion of the risks associated with certain applicable laws and regulations, see “Risk Factors.” Information relating to environmental matters is included in Note V to the Consolidated Financial Statements in Part II, Item 8 under the caption “Environmental Matters.” Human Capital To attract, recruit, develop and retain world-class talent, the Company has created a culture that embraces diversity, drives inclusion, and empowers and engages our employees.
For a discussion of the risks associated with certain applicable laws and regulations, see “Risk Factors.” Information relating to environmental matters is included in Note U to the Consolidated Financial Statements in Part II, Item 8 under the caption “Environmental Matters.” Human Capital To attract, recruit, develop and retain world-class talent, the Company has created a culture that embraces diversity, drives inclusion, and empowers and engages our employees.
The Company’s proprietary Dura-Bright® surface treatment is unmatched in appearance and corrosion protection. 2 Table of Contents For additional discussion of each segment's business, see “Results of Operations—Segment Information” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note D to the Consolidated Financial Statements in Part II, Item 8 .
The Company’s proprietary Dura-Bright® surface treatment is unmatched in appearance and corrosion protection. 2 Table of Contents For additional discussion of each segment's business, see “Results of Operations—Segment Information” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note C to the Consolidated Financial Statements in Part II, Item 8 .
Government Regulations and Environmental Matters Our operations and activities are global and are subject to various federal, state, local, and foreign laws, rules and regulations, including those relating to the environment. In 2022, compliance with these laws, rules and regulations did not have a material effect on our capital expenditures, results of operations or competitive position.
Government Regulations and Environmental Matters Our operations and activities are global and are subject to various federal, state, local, and foreign laws, rules and regulations, including those relating to the environment. In 2023, compliance with these laws, rules and regulations did not have a material effect on our capital expenditures, results of operations or competitive position.
From January 2013 until October 2016, Mr. Giacobbe served as Chief Financial Officer of the Engineered Products and Solutions segment. Before joining Howmet, Mr. Giacobbe held senior finance roles at Avaya and Lucent Technologies. Lola F. Lin , 48, Executive Vice President, Chief Legal and Compliance Officer and Secretary. Ms.
From January 2013 until October 2016, Mr. Giacobbe served as Chief Financial Officer of the Engineered Products and Solutions segment. Before joining Howmet, Mr. Giacobbe held senior finance roles at Avaya and Lucent Technologies. Lola F. Lin , 49, Executive Vice President, Chief Legal and Compliance Officer and Secretary. Ms.
The Company’s executive officers are annually elected or appointed to serve until the next annual meeting of the Board of Directors (held in conjunction with the annual meeting of shareholders), except in the case of earlier death, retirement, resignation or removal. Michael N. Chanatry , 62, Vice President and Chief Commercial Officer. Mr.
The Company’s executive officers are annually elected or appointed to serve until the next annual meeting of the Board of Directors (held in conjunction with the annual meeting of shareholders), except in the case of earlier death, retirement, resignation or removal. Michael N. Chanatry , 63, Vice President and Chief Commercial Officer. Mr.
She then served as Director of Compliance for the Company’s then Structures business from July 2015 to February 2019, Director of Compliance from February 2019 to June 2020, and Assistant Controller from June 2020 to May 2021. Prior to joining Howmet, Ms. Shultz held several roles at PricewaterhouseCoopers LLP from 1995 to 2005. 8 Table of Contents
She then served as Director of Compliance for the Company’s then Structures business from July 2015 to February 2019, Director of Compliance from February 2019 to June 2020, and Assistant Controller from June 2020 to May 2021. Prior to joining Howmet, Ms. Shultz held several roles at PricewaterhouseCoopers LLP from 1995 to 2005. 9 Table of Contents
Chanatry held numerous positions within the General Electric Aviation & Aerospace divisions, as well as at Lockheed Martin from 1983 to 2009. Ken Giacobbe , 57, Executive Vice President and Chief Financial Officer. Mr. Giacobbe was initially elected Executive Vice President and Chief Financial Officer of Howmet effective November 1, 2016. Mr.
Chanatry held numerous positions within the General Electric Aviation & Aerospace divisions, as well as at Lockheed Martin from 1983 to 2009. Ken Giacobbe , 58, Executive Vice President and Chief Financial Officer. Mr. Giacobbe was initially elected Executive Vice President and Chief Financial Officer of Howmet effective November 1, 2016. Mr.
The 2017 Reincorporation in Delaware. On December 31, 2017, Arconic Inc., then a Pennsylvania corporation, changed its jurisdiction of incorporation from Pennsylvania to Delaware. The Alcoa Inc. Separation Transaction. On November 1, 2016, Alcoa Inc. completed the separation of its business (the “Alcoa Inc. Separation Transaction”) into two independent, publicly traded companies: Arconic Inc.
On December 31, 2017, Arconic Inc., then a Pennsylvania corporation, changed its jurisdiction of incorporation from Pennsylvania to Delaware. The Alcoa Inc. Separation Transaction. On November 1, 2016, Alcoa Inc. completed the separation of its business (the “Alcoa Inc. Separation Transaction”) into two independent, publicly traded companies: Arconic Inc.
Plant was President of Lucas Varity Automotive and managing director of the Electrical and Electronics division from 1991 through 1997. Barbara L. Shultz , 49, Vice President and Controller. Ms. Shultz was initially elected Vice President and Controller of Howmet effective May 25, 2021. Ms.
Plant was President of Lucas Varity Automotive and managing director of the Electrical and Electronics division from 1991 through 1997. Barbara L. Shultz , 50, Vice President and Controller. Ms. Shultz was initially elected Vice President and Controller of Howmet effective May 25, 2021. Ms.
The strength of the Company’s rivets, bolts and fasteners offers another light-weighting solution that delivers performance. Industrial and Other Markets. Industrial and other markets include industrial gas turbines, oil and gas, and other industrials, which represented approximately 15% of the Company’s revenue in 2022.
The strength of the Company’s rivets, bolts and fasteners offers another light-weighting solution that delivers performance. Industrial and Other Markets. Industrial and other markets include industrial gas turbines, oil and gas, and other industrials, which represented approximately 15% of the Company’s revenue in 2023.
The list in the above table does not include 19 locations that serve as sales and administrative offices, distribution centers or warehouses. (2) Leased property or partially leased property. 5 Table of Contents Sources and Availability of Raw Materials Important raw materials purchased in 2022 for each of the Company’s reportable segments are listed below.
The list in the above table does not include 18 locations that serve as sales and administrative offices, distribution centers or warehouses. (2) Leased property or partially leased property. 5 Table of Contents Sources and Availability of Raw Materials Important raw materials purchased in 2023 for each of the Company’s reportable segments are listed below.
With its precision engineering, materials science expertise and advanced manufacturing processes, Howmet aims to help its customers achieve greater fuel economies, reduced emissions, passenger comfort, and maintenance efficiencies. Commercial Transportation Market . The commercial transportation market represented approximately 23% of the Company’s revenue in 2022.
With its precision engineering, materials science expertise, and advanced manufacturing processes, Howmet aims to help its customers achieve greater fuel economies, reduced emissions, passenger comfort, and maintenance efficiencies. Commercial Transportation Market . The commercial transportation market represented approximately 21% of the Company’s revenue in 2023.
Its differentiated technologies enable lighter, more fuel-efficient aircraft and commercial trucks to operate with a lower carbon footprint and support more sustainable air and ground transportation. Howmet is a global company operating in 20 countries. Based upon the country where the point of shipment occurred, North America and Europe generated 71% and 22%, respectively, of Howmet’s sales in 2022.
Its differentiated technologies enable lighter, more fuel-efficient aircraft and commercial trucks to operate with a lower carbon footprint and support more sustainable air and ground transportation. Howmet is a global company operating in 20 countries. Based upon the country where the point of shipment occurred, North America and Europe generated 70% and 23%, respectively, of Howmet’s sales in 2023.
Additionally, we do not currently anticipate material capital expenditures for environmental control facilities in 2023.
Additionally, we do not currently anticipate material capital expenditures for environmental control facilities in 2024.
A significant trademark filing campaign for the names “Howmet” and “Howmet Aerospace” along with its “H” logo was initiated in 2019, in support of the corporate launch of Howmet Aerospace Inc. As of the end of 2022, the Company’s worldwide trademark portfolio consists of approximately 1,569 registered trademarks and 94 pending trademark applications.
A significant trademark filing campaign for the names “Howmet” and “Howmet Aerospace” along with its “H” logo was initiated in 2019, in support of the corporate launch of Howmet Aerospace Inc. As of the end of 2023, the Company’s worldwide trademark portfolio consists of approximately 1,470 registered trademarks and 116 pending trademark applications.
As of the end of 2022, the Company’s worldwide patent portfolio consists of approximately 938 granted patents and 205 pending patent applications. The Company also has a significant number of trade secrets, mostly regarding manufacturing processes and material compositions that give many of its businesses important advantages in their markets.
As of the end of 2023, the Company’s worldwide patent portfolio consists of approximately 940 granted patents and 215 pending patent applications. The Company also has a significant number of trade secrets, mostly regarding manufacturing processes and material compositions that give many of its businesses important advantages in their markets.
Following this separation, Howmet retained the Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels businesses; and its prior Rolled Products, Aluminum Extrusions, and Building and Construction Systems businesses were spun-off to Arconic Corporation. In connection with the Arconic Inc. Separation Transaction, Howmet and Arconic Corporation entered into several agreements that govern the relationship of the parties following the separation.
Following this separation, Howmet retained the Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels businesses; and its prior Rolled Products, Aluminum Extrusions, and Building and Construction Systems businesses were spun-off to Arconic Corporation. In connection with the Arconic Inc. Separation Transaction, Howmet and Arconic Corporation entered into several agreements that govern their post-separation relationship. The 2017 Reincorporation in Delaware.
Sales by Market and Significant Customer Revenue Sales by market for the years ended December 31, 2022, 2021, and 2020, were: For the Year Ended December 31, 2022 2021 2020 Aerospace - Commercial 46 % 41 % 50 % Aerospace - Defense 16 % 19 % 19 % Commercial Transportation 23 % 23 % 16 % Industrial and Other 15 % 17 % 15 % In 2022, General Electric Company and Raytheon Technologies Corporation represented approximately 12% and 9% , respectively, of the Company’s third-party sales.
Sales by Market and Significant Customer Revenue Sales by market for the years ended December 31, 2023, 2022, and 2021, were: For the Year Ended December 31, 2023 2022 2021 Aerospace - Commercial 49 % 46 % 41 % Aerospace - Defense 15 % 16 % 19 % Commercial Transportation 21 % 23 % 23 % Industrial and Other 15 % 15 % 17 % In 2023, General Electric Company and RTX Corporation represented approximately 12% and 9% , respectively, of the Company’s third-party sales.
Marchuk , 65, Executive Vice President, Chief Human Resources Officer and Interim President, Fastening Systems. Mr. Marchuk was initially elected Executive Vice President and Chief Human Resources Officer of Howmet effective March 1, 2019. Prior to joining Howmet, from January 2016 to February 2019, he was Executive Vice President and Chief Human Resources Officer at Adient, an automotive manufacturer.
Marchuk , 66, Executive Vice President, Chief Human Resources Officer and Interim President, Engineered Structures. Mr. Marchuk was initially elected Executive Vice President and Chief Human Resources Officer of Howmet effective March 1, 2019. Prior to joining Howmet, from January 2016 to February 2019, he was Executive Vice President and Chief Human Resources Officer at Adient, an automotive manufacturer.
From September 1999 to November 2001, Mr. Marchuk was Director, Global HR Delivery for E.I. Du Pont. From February 1999 to August 1999, Mr. Marchuk served E.I. Du Pont as its Global HR Director, Global Services Division. John C. Plant , 69, Executive Chairman and Chief Executive Officer. Mr.
From September 1999 to November 2001, Mr. Marchuk was Director, Global HR Delivery for E.I. Du Pont. From February 1999 to August 1999, Mr. Marchuk served E.I. Du Pont as its Global HR Director, Global Services Division. 8 Table of Contents John C. Plant , 70, Executive Chairman and Chief Executive Officer. Mr.
Our talent review and succession planning process is an ongoing priority and is sponsored and led by our CEO with oversight by the Board of Directors. We have started to use a data-driven approach to track how our employees are progressing through our organization.
Our talent review and succession planning process is an ongoing priority and is sponsored and led by our Chief Executive Officer (“CEO”) with oversight by the Board of Directors. We use a data-driven approach to track how our employees are progressing through our organization.
Aerospace (Commercial and Defense) Market. Howmet’s largest market is aerospace, which represented approximately 62% of the Company’s revenue in 2022.
Aerospace (Commercial and Defense) Market. Howmet’s largest market is aerospace, which represented approximately 64% of the Company’s revenue in 2023.
Engine Products produces rotating parts as well as structural parts. Engine Products principally serves the commercial and defense aerospace markets as well as the industrial gas turbine market. Fastening Systems Fastening Systems produces aerospace and industrial fasteners, latches, bearings, fluid fittings and installation tools .
Engine Products produces rotating parts as well as structural parts. Engine Products principally serves the commercial and defense aerospace, industrial gas turbine, and oil and gas markets. Fastening Systems Fastening Systems produces aerospace and industrial fastening systems as well as commercial transportation fasteners and installation tools .
We seek to identify high performers and support their development into potential future leaders, with a particular focus on providing equitable opportunities to individuals who are members of underrepresented groups. Our Employee Resource Groups continue to be fundamental to building our culture of inclusion.
We seek to identify high performers and support their development into potential future leaders, with a particular focus on providing equitable opportunities to individuals who are members of underrepresented groups.
Many other companies around the world also produce superalloy investment castings, and some of these companies currently compete with Howmet in the aerospace and other markets, while others are capable of competing with the Company should they choose to do so.
Several of Howmet’s largest customers have captive superalloy furnaces for producing airfoil investment castings for their own use. Many other companies around the world also produce superalloy investment castings, and some of these companies currently compete with Howmet in the aerospace and other markets, while others are capable of competing with the Company should they choose to do so.
Using a human capital management platform, employees can build a professional profile to share their career aspirations and learn new skills. This platform allows us to align employee goals and growth with the Company’s future business needs so that we can pinpoint potential successor candidates and build their readiness for their future roles.
This platform allows us to align employee goals and growth with the Company’s future business needs so that we can pinpoint potential successor candidates and build their readiness for their future roles.
Our Board of Directors and Executive Leadership team review diversity, equity and inclusion activity on a regular basis, and have been actively involved in ‘Meet the Leader’ sessions with our employees throughout the year. Howmet’s strong health and safety culture empowers our employees and contractors to take personal responsibility for their actions and the safety of their coworkers.
The Company also provides diversity awareness training and resources. Our Board of Directors and Executive Leadership team review diversity, equity and inclusion activity on a regular basis. Howmet’s strong health and safety culture empowers our employees and contractors to take personal responsibility for their actions and the safety of their coworkers.
We prioritize our risk management processes toward the prevention of fatality and serious injury. Employees Total worldwide employment at the end of 2022 was approximately 21,400 employees in 23 countries. Within the United States, there are eight collective bargaining agreements with varying expiration dates between Howmet and various labor unions.
We prioritize our risk management processes toward the prevention of fatality and serious injury. 7 Table of Contents Employees Total worldwide employment at the end of 2023 was approximately 23,200 employees in 23 countries. Approximately 3,400 employees, or 25% of the U.S. workforce, are represented by labor unions in the United States.
The Company’s new Applicant Tracking System supports the dissemination of our job vacancies to a wider range of diverse partners. As an example, our campus recruitment platform provides an ability to proactively reach a broad talent network as the system of record for more than 9.2 million students and 1,300 schools across the United States.
New technology that increases the automation of job postings enables us to more widely disseminate our job vacancies to diverse partners and job boards, such as our campus recruitment platform that provides an ability to proactively reach a broad talent network of students and schools across the United States.
Of these eight, the largest workforce covered under a collective bargaining agreement is between Howmet and the United Autoworkers (“UAW”) at our Whitehall, Michigan location. This covers approximately 1,300 employees; the current agreement expires on March 31, 2023.
Within the United States, there are eight collective bargaining agreements with varying expiration dates between Howmet and various labor unions. Of these eight, the largest workforce covered under a collective bargaining agreement is between Howmet and the United Autoworkers (“UAW”) at our Whitehall, Michigan location.
The Company believes that it has positive relationships with its employees and any respective labor union representatives. Executive Officers of the Registrant The names, ages, positions and areas of responsibility of the executive officers of the Company as of February 14, 2023 are listed below.
Executive Officers of the Registrant The names, ages, positions and areas of responsibility of the executive officers of the Company as of February 13, 2024 are listed below.
Focusing on Gender, LGBTQ+, African Heritage, Hispanic, Veteran, European and Next Generation, these networks provide colleagues with valuable support and advice, create development opportunities, and provide leadership with feedback that raises awareness of issues and challenges. The Company also provides diversity awareness training and resources.
Our Employee Resource Groups, composed of the African Heritage, EurAsian Diversity & Inclusion, Latin+, Next Generation, Pride, Veterans, and Women’s Networks, continue to be fundamental to building our culture of inclusion. These networks provide colleagues with valuable support and advice, create development opportunities, and provide leadership with feedback that raises awareness of issues and challenges.
To retain new talent, the Company offers an onboarding program to develop a sense of belonging, teamwork and productivity that is uniform across the organization. The Company enables our employees to own their development and create rewarding careers that draw on their aptitudes and support their ambitions.
To retain new talent, the Company offers an onboarding program to develop a sense of belonging, teamwork and productivity. In addition to existing training development programs for salaried employees, we extended training access using technology to our hourly employees during 2023.
In addition to the employees covered by the Whitehall UAW collective bargaining agreement, approximately 1,700 other employees in the United States are also represented by labor unions. On a regional basis, collective bargaining agreements with varying expiration dates cover employees in Europe, North America, South America, and Asia.
The Cleveland location began negotiations with the UAW in February 2024. On a regional basis, collective bargaining agreements with varying expiration dates cover employees in Europe, North America, South America, and Asia. The Company believes that it has positive relationships with its employees and any respective labor union representatives.
Removed
Its larger aluminum wheel competitors are Accuride Corporation, Speedline (member of the Ronal Group), Nippon Steel Corporation, Dicastal, Alux, and Wheels India Limited.
Added
We believe providing employees with avenues to new skills contributes to increased motivation and engagement, resulting in higher employee retention. The Company enables our employees to own their development and create rewarding careers that draw on their aptitudes and support their ambitions.
Removed
The Whitehall, Michigan location has been preparing for the expiration of this collective bargaining agreement over the course of several months and has started negotiations with the union prior to the 7 Table of Contents agreement’s expiration date.
Added
Our development process framework provides tools and resources to identify career options, skills gaps and actions they can take to progress within the Company. Using a human capital management platform, employees can build a professional profile to share their career aspirations and learn new skills.
Added
This covers approximately 1,400 employees; the current agreement, which was ratified in 2023, expires on April 1, 2028. The second largest workforce covered under a collective bargaining agreement is between Howmet and the UAW at our Cleveland, Ohio location. This covers approximately 750 employees; the current agreement expires on April 28, 2024.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

33 edited+7 added−18 removed80 unchanged
Biggest changeAny such labor disputes or work stoppages (or potential work stoppages) could have a material adverse effect on Howmet’s business, financial condition or results of operations. Howmet is exposed to environmental, health and safety risks and is subject to a broad range of health, safety and environmental laws and regulations which may result in substantial costs and liabilities.
Biggest changeHowmet is exposed to environmental, health and safety risks and is subject to a broad range of health, safety and environmental laws and regulations which may result in substantial costs and liabilities. Howmet’s operations worldwide are subject to numerous complex and increasingly stringent health, safety and environmental laws and regulations.
For additional information regarding the legal proceedings involving the Company, see Note V to the Consolidated Financial Statements in Part II, Item 8 . Our business may be adversely affected if we fail to comply with government contracting regulations. We derive a portion of our revenue from sales to U.S. and foreign governments and their respective agencies.
For additional information regarding the legal proceedings involving the Company, see Note U to the Consolidated Financial Statements in Part II, Item 8 . Our business may be adversely affected if we fail to comply with government contracting regulations. We derive a portion of our revenue from sales to U.S. and foreign governments and their respective agencies.
Any of the foregoing supply chain disruptions or those due to trade barriers, business continuity, quality, cyberattacks, transportation, delivery or logistics challenges, weather, natural disaster, or pandemic events could adversely affect Howmet’s business, results of operations or financial condition. Howmet’s business depends, in part, on its ability to successfully meet program demand, production targets and commitments.
Any of the foregoing supply chain disruptions or those due to trade barriers, business continuity, quality, cyberattacks, transportation, delivery or logistics challenges, weather, natural disaster, war, or pandemic events could adversely affect Howmet’s business, results of operations or financial condition. Howmet’s business depends, in part, on its ability to successfully meet program demand, production targets and commitments.
For a discussion regarding how Howmet’s financial statements can be affected by pension and other postretirement benefits accounting policies, see “Critical Accounting Policies and Estimates—Pension and Other Postretirement Benefits” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note H to the Consolidated Financial Statements in Part II, Item 8 .
For a discussion regarding how Howmet’s financial statements can be affected by pension and other postretirement benefits accounting policies, see “Critical Accounting Policies and Estimates—Pension and Other Postretirement Benefits” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note G to the Consolidated Financial Statements in Part II, Item 8 .
As a result, Howmet’s global operations are affected by economic, political, legal, and other conditions in the United States and foreign countries in which Howmet does business, including (i) economic and commercial instability risks, including changes in local government laws, regulations and policies, such as those related to tariffs, sanctions and trade barriers, taxation, exchange controls, employment regulations and repatriation of assets or earnings; (ii) geopolitical risks such as political instability, civil unrest, expropriation, nationalization of properties by a government, imposition of sanctions, and renegotiation or nullification of existing agreements; (iii) war, cyber threats, terrorist activities or other dangerous conditions; (iv) compliance with applicable U.S. and foreign laws, including antitrust and competition regulations, the Foreign Corrupt Practices Act and other anti-bribery and corruption laws, and laws concerning trade, including the International Traffic in Arms Regulations, the Export Administration Regulations, and the sanctions, regulations and embargoes administered by the U.S.
As a result, Howmet’s global operations are affected by economic, political, legal, and other conditions in the United States and foreign countries in which Howmet does business, including (i) economic and commercial instability risks, including changes in local government laws, regulations and policies, such as those related to tariffs, sanctions and trade barriers, taxation, exchange controls, employment regulations and repatriation of assets or earnings; (ii) geopolitical risks such as political instability, civil unrest, expropriation, nationalization of properties by a government, imposition of sanctions, and renegotiation or nullification of existing agreements; (iii) wars such as those in Ukraine and the Middle East, cyber threats, terrorist activities or other dangerous conditions; (iv) compliance with applicable U.S. and foreign laws, including antitrust and competition regulations, the Foreign Corrupt Practices Act and other anti-bribery and corruption laws, and laws concerning trade, including the International Traffic in Arms Regulations, the Export Administration Regulations, and the sanctions, regulations and embargoes administered by the U.S.
Howmet’s information technology systems could be subject to damage or interruption from power outages; computer network and telecommunications failures; computer viruses; catastrophic events, such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism; and usage errors by employees.
Howmet’s information technology systems could be subject to damage or interruption from power outages; computer network and telecommunications failures; cyberattacks; catastrophic events, such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war or terrorism; and usage errors by employees.
In addition, Howmet derives a significant portion of our revenue from products sold to the aerospace industry, which is cyclical and reflective of changes in the general economy. The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft and spare parts.
In particular, Howmet derives a significant portion of our revenue from products sold to the aerospace industry, which is cyclical and reflective of changes in the general economy. The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft and spare parts.
The willingness of customers to accept alternate solutions for the products sold by Howmet, pricing pressure from competitors, and technological advancements or other developments by or affecting Howmet’s competitors or customers could adversely affect Howmet’s business, financial condition or results of operations.
The willingness of customers to accept alternative solutions for the products sold by Howmet, pricing pressure from competitors, and technological advancements or other developments by or affecting Howmet’s competitors or customers could adversely affect Howmet’s business, financial condition or results of operations.
Material liabilities relating to injury, death or other workers’ compensation claims could have a material adverse effect on our results of operations and financial condition or result in negative publicity and/or significant reputational harm. 14 Table of Contents Howmet may be affected by global climate change or by legal, regulatory, customer or supplier responses to such change.
Material liabilities relating to injury, death or other workers’ compensation claims could have a material adverse effect on our results of operations and financial condition or result in negative publicity and/or significant reputational harm. Howmet may be affected by global climate change or by legal, regulatory, customer or supplier responses to such change.
The foregoing factors may adversely affect the Company’s financial condition, liquidity and results of operations. 12 Table of Contents Dividends and share repurchases fall within the discretion of our Board of Directors and depend on a number of factors.
The foregoing factors may adversely affect the Company’s financial condition, liquidity and results of operations. 13 Table of Contents Dividends and share repurchases fall within the discretion of our Board of Directors and depend on a number of factors.
Consolidation within Howmet’s customer base may result in customers who are better able to exert leverage in negotiating prices and other terms of sale, or may lead to reduced demand for Howmet’s products if a combined entity replaces Howmet with a Howmet competitor with which it had prior relationships.
Consolidation within Howmet’s customer base may result in customers who are better able to exert leverage in negotiating prices and other terms of sale, or may lead to 12 Table of Contents reduced demand for Howmet’s products if a combined entity replaces Howmet with a Howmet competitor with which it had prior relationships.
Manufacturing problems arising from equipment failure or malfunction, inadvertent failure to follow regulatory or customer specifications and procedures, including those related to quality or safety, and problems with raw materials could have an adverse impact on the Company’s ability to fulfill orders or meet product quality or performance requirements, which may result in negative publicity and damage to our reputation, adversely impacting product demand and customer relationships.
Manufacturing problems arising from equipment failure or malfunction, inadvertent failure to follow regulatory or customer specifications and procedures, including those related to quality or safety, and problems with raw materials could have 10 Table of Contents an adverse impact on the Company’s ability to fulfill orders or meet product quality or performance requirements, which may result in negative publicity and damage to our reputation, adversely impacting product demand and customer relationships.
While the Company continually works to safeguard its systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cyberattacks or security breaches that manipulate or improperly use the Company’s systems or networks, compromise confidential, personal or otherwise protected information, destroy or corrupt data, block access to its systems, or otherwise disrupt its operations.
While the Company continually works to safeguard its systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cybersecurity incidents that manipulate or improperly use the Company’s systems or networks, compromise confidential, personal or otherwise protected information, destroy or corrupt data, block access to its systems, or otherwise disrupt its operations.
Interruptions in production capability could increase Howmet’s costs and reduce its sales, including causing the Company to 9 Table of Contents incur costs for premium freight, make substantial capital expenditures, or purchase alternative material at higher costs to fulfill customer orders.
Interruptions in production capability could increase Howmet’s costs and reduce its sales, including causing the Company to incur costs for premium freight, make substantial capital expenditures, or purchase alternative material at higher costs to fulfill customer orders.
In connection with our separation transactions, we entered into various agreements with Arconic Corporation and Alcoa Corporation, including respective Separation and Distribution agreements pursuant to which Arconic Corporation and Alcoa Corporation agreed to indemnify us for certain liabilities, and we agreed to indemnify those parties for certain liabilities.
In connection with our separation transactions, we entered into various agreements with Arconic Corporation and Alcoa Corporation, including respective Separation and Distribution agreements pursuant to which Arconic Corporation and Alcoa 15 Table of Contents Corporation agreed to indemnify us for certain liabilities, and we agreed to indemnify those parties for certain liabilities.
Department of Treasury’s Office of Foreign Assets Control; (v) aggressive, selective or lax enforcement of laws and regulations by foreign governmental authorities; (vi) exposure to fluctuations in foreign currency exchange rates and interest rates, as well as inflation, economic factors, and currency controls in the countries in which it operates; and (vii) imposition of currency controls.
Department of Treasury’s Office of Foreign Assets Control; (v) aggressive, selective or lax enforcement of laws and regulations by foreign governmental authorities; (vi) exposure to fluctuations in foreign currency exchange rates and interest rates, as well as inflation, economic factors, and currency controls in the countries in which it operates; and (vii) major public health issues, such as an outbreak of a pandemic or epidemic.
If such constraints continue or escalate, it could result in an adverse impact on our business. Because of approval, license and qualification requirements applicable to manufacturers and/or their suppliers, sources of alternatives to mitigate supply disruptions may not be readily available to Howmet. Any delay in supply from these suppliers could prevent us from meeting customer demand for our products.
Because of approval, license and qualification requirements applicable to manufacturers and/or their suppliers, sources of alternatives to mitigate supply disruptions may not be readily available to Howmet. Any delay in supply from these suppliers could prevent us from meeting customer demand for our products.
Further, the demand for Howmet’s commercial transportation products is driven by the number of vehicles produced by commercial transportation manufacturers. Commercial transportation sales and production are affected by many factors, including the age of the vehicle fleet, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements, and levels of competition.
Commercial transportation sales and production are affected by many factors, including the age of the vehicle fleet, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements, and levels of competition.
Labor disputes and other employee relations issues could adversely affect Howmet’s business, financial condition or results of operations. A significant portion of Howmet’s employees are represented by labor unions in several countries under various collective bargaining agreements, each with varying durations and expiration dates. For more information, see “Employees” in Part I, Item 1 (Business) of this report.
Labor disputes and other employee relations issues could adversely affect Howmet’s business, financial condition or results of operations. A significant portion of Howmet’s employees are represented by labor unions in the United States and other countries under various collective bargaining agreements, each with varying durations and expiration dates.
If either Alcoa Corporation or Arconic Corporation, as applicable, is not able to fully satisfy its indemnification obligations to us, we may be required to bear such losses. Each of these risks could negatively affect our business, results of operations and financial condition. The Arconic Inc. Separation Transaction could result in substantial tax liability.
If either Alcoa Corporation or Arconic Corporation, as applicable, is not able to fully satisfy its indemnification obligations to us, we may be required to bear such losses. Each of these risks could negatively affect our business, results of operations and financial condition. Item 1B. Unresolved Staff Comments. None.
Howmet’s 10 Table of Contents customers may experience delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, supply chain constraints or other difficulties in their businesses.
Howmet’s customers may experience delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, decreases in production rates due to regulatory investigations or otherwise, supply chain constraints or other difficulties in their businesses.
Howmet’s operations worldwide are subject to numerous complex and increasingly stringent health, safety and environmental laws and regulations. The costs of complying with such laws and regulations, as well as participation in assessments and cleanups of sites, and internal voluntary programs, have been, and in the future could be, significant.
The costs of complying with such laws and regulations, as well as participation in assessments and cleanups of sites, and internal voluntary programs, have been, and in the future could be, significant.
Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyberattacks pose a risk to the security of our and our customers’, suppliers’ and third-party service providers’ products, systems and networks, and the confidentiality, availability and integrity of our data.
Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyberattacks pose a risk to the security of our systems and networks, and the confidentiality, availability and integrity of our data, as well as those of our customers, suppliers and other counterparties.
If our government contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our financial condition and results of operation could be adversely affected.
If our government contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our financial condition and results of operation could be adversely affected. Howmet may face challenges to its intellectual property rights which could adversely affect the Company’s reputation, business and competitive position.
The defense aerospace cycle is highly dependent on U.S. and foreign government funding; and, it is also driven by the effects of terrorism, a changing global geopolitical environment, U.S. foreign policy, whether older military aircraft are retired, and technological improvements to new engines and airframes.
It is also impacted by the effects of terrorism, a changing global geopolitical environment, U.S. foreign policy, whether older military aircraft are retired, and technological improvements to new engines and airframes. The demand for Howmet’s commercial transportation products is driven by the number of vehicles produced by commercial transportation manufacturers.
Howmet’s failure to successfully renew, renegotiate or favorably re-price such agreements, or a material deterioration in or termination of these customer relationships, could result in a reduction or loss in customer revenue. Additionally, a significant downturn or deterioration in the business or financial condition or loss of a key customer supplied by Howmet could adversely affect Howmet’s financial results.
Howmet’s failure to successfully renew, 11 Table of Contents renegotiate or favorably re-price such agreements, or a material deterioration in or termination of these customer relationships, could result in a reduction or loss in customer revenue.
The result of these circumstances could have a material adverse effect on Howmet’s business, operating results and financial condition. Risks Related to Liquidity and Capital Resources A decline in Howmet’s financial performance or outlook could negatively impact its credit profile, its access to capital markets and its borrowing costs.
Although the effect of any of the foregoing factors is difficult to predict, any one or more of them could adversely affect Howmet’s business, financial condition or results of operations. Risks Related to Liquidity and Capital Resources A decline in Howmet’s financial performance or outlook could negatively impact its credit profile, its access to capital markets and its borrowing costs.
For certain raw materials and services, we depend on a number of limited source or sole source suppliers. Supply constraints could impact our production or force us to purchase materials and other supplies from alternative sources, which may not be available in sufficient quantities or at prices that are favorable to us.
Supply constraints could impact our production or force us to purchase materials and other supplies from alternative sources, which may not be available in sufficient quantities or at prices that are favorable to us. Howmet could also have exposure if a key supplier is unable to deliver sufficient quantities of a necessary material on a timely basis.
Changes in applicable domestic or foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect the Company’s tax expense and profitability. Howmet’s tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions.
Changes in applicable domestic or foreign tax laws and regulations, including enactment of the Organization for Economic Cooperation and Development’s Pillar 2 framework, or their interpretation and application, including the possibility of retroactive effect, could affect the Company’s tax expense and profitability.
Howmet could also have exposure if a key supplier is unable to deliver sufficient quantities of a necessary material on a timely basis. Several of our suppliers have recently had constraints on their ability to supply Howmet with its full requirements due to lack of capacity, labor shortages and/or material availability.
Several of our suppliers have had constraints on their ability to supply Howmet with its full requirements due to lack of capacity, labor shortages and/or material availability. If such constraints continue or escalate, it could result in an adverse impact on our business.
Howmet’s global operations expose Howmet to risks that could adversely affect its business, financial condition, results of operations, cash flows or the market price of its securities. Howmet has operations or activities in numerous countries and regions outside the United States, including Europe, Mexico, China, and Japan.
The result of these circumstances could have a material adverse effect on Howmet’s business, operating results and financial condition. Howmet’s global operations expose Howmet to risks that could adversely affect its business, financial condition, results of operations, cash flows or the market price of its securities.
The assumptions include assessments of future earnings of the Company that could impact the valuation of its deferred tax assets.
Howmet’s tax expense includes estimates of additional tax that may be incurred for 14 Table of Contents tax exposures and reflects various estimates and assumptions. The assumptions include assessments of future earnings of the Company that could impact the valuation of its deferred tax assets.
Howmet may not be able to negotiate successor collective bargaining agreements upon expiration, in the United States and other countries, without a risk of labor disputes, including strikes or work stoppages. Howmet may also be subject to general country strikes or work stoppages unrelated to its business or collective bargaining agreements.
For more information, see “Employees” in Part I, Item 1 (Business) of this report. Howmet may not be able to negotiate successor collective bargaining agreements upon expiration without a risk of labor disputes, including strikes or work stoppages, or we may be unable to renegotiate such contracts on favorable terms.
Removed
For example, our sales were negatively affected by Boeing’s pause in deliveries of its 787 aircraft from May 2021 through 2022 as a result of Boeing’s significantly reduced 787 production rates.
Added
Changes and uncertainties in the timing and level of future aircraft production by OEMs may cause our future results to differ from prior periods due to changes in the Company’s product mix. The defense aerospace cycle is highly dependent on U.S. and foreign government funding.
Removed
Our business, results of operations, financial condition and/or cash flows have been and could continue to be adversely impacted materially by the continued effects of the COVID-19 pandemic.
Added
For example, as the Russia-Ukraine conflict continues, global titanium prices may continue to fluctuate or increase. Our customers’ failure to return titanium revert (reusable scrap) to Howmet can result in an increase of the amount of titanium purchased at inflated costs.
Removed
The COVID-19 pandemic affecting the global community has had and may continue to have a material adverse effect on our business, results of operations, financial condition and/or cash flows, and the nature and extent of the impact over time remain uncertain.
Added
For certain raw materials and services, we depend on a number of limited source or sole source suppliers, such as for titanium sponge and specialized metal alloys.
Removed
A sustained impact to our operations, financial results and market capitalization may require material impairments of our assets, including, but not limited to, goodwill and other intangible assets, long-lived assets, and right-of-use assets.
Added
Additionally, a significant downturn or deterioration in the business or financial condition or loss of a key customer supplied by Howmet could adversely affect Howmet’s financial results.
Removed
The impact over time will depend on future developments that are beyond our control, including the duration of the pandemic, the continued severity of the virus, resurgences and emergence of variants of the virus, the efficacy and availability or uptake of vaccines and related drugs, and the actions that may be taken in response to COVID-19, such as travel limitations.
Added
Howmet has operations or activities in numerous countries and regions outside the United States, including Europe, Mexico, China, and Japan.
Removed
For instance, the decrease in domestic and international air travel due to the pandemic adversely affected demand for narrow-body and wide-body aircraft. Although domestic air travel now approximates pre-pandemic levels, China domestic air travel is still below pre-pandemic 2019 levels on an average monthly basis in 2022. International travel also continues to be lower than pre-pandemic 2019 levels.
Added
Labor organizations may attempt to organize groups of additional employees from time to time, and potential changes in labor laws could make it easier for them to do so. Howmet may also be subject to general country strikes or work stoppages unrelated to its business or collective bargaining agreements.
Removed
We expect commercial aerospace growth to continue, with narrow-body demand returning faster than wide-body demand. The commercial wide-body aircraft market is taking longer to recover, which is creating a shift in our product mix compared to pre-pandemic conditions.
Added
If we experience any extended interruption of operations at any of our facilities as a result of labor disputes, strikes or other work stoppages, our business, financial condition or results of operations could be adversely affected.
Removed
In addition, several of our commercial aerospace and transportation customers have encountered, and may continue to encounter, challenges in their ability to increase production rates to meet demand due to labor and supply chain constraints stemming from the pandemic.
Removed
Additionally, the COVID-19 pandemic has or may continue to exacerbate other risks disclosed herein, including, but not limited to, risks related to global economic conditions, competition, 11 Table of Contents loss of customers, costs of supplies, supply chain disruptions, manufacturing difficulties and disruptions, investment returns, our credit profile, our credit ratings, and interest rates.
Removed
Although the effect of any of the foregoing factors is difficult to predict, any one or more of them could adversely affect Howmet’s business, financial condition or results of operations. 13 Table of Contents Howmet may face challenges to its intellectual property rights which could adversely affect the Company’s reputation, business and competitive position.
Removed
It was a condition to the distribution of all outstanding shares of Arconic Corporation common stock to the Company’s stockholders (the “Distribution of Arconic”), which effected the Arconic Inc.
Removed
Separation Transaction, that we receive an opinion of our outside counsel regarding the qualification of the distribution as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”). This condition was satisfied prior to the Distribution of Arconic.
Removed
However, if any of the facts, representations, or undertakings of the opinion is, or becomes, inaccurate or incomplete, the opinion of counsel may be invalid and the conclusions reached therein could be jeopardized. Further, the Internal Revenue Service (the “IRS”) could determine that any of the facts, representations or undertakings are false or have been violated.
Removed
Additionally, the opinion of counsel is not binding on the IRS or any court and the IRS or a court may disagree with the conclusions in the opinion of counsel. In the event the IRS were to prevail with such challenge, we, our stockholders and Arconic Corporation could be subject to significant U.S. federal income tax liability.
Removed
In addition, even if the Distribution of Arconic, together with certain related transactions, otherwise qualifies for tax-free treatment under current U.S. federal income tax law, the Distribution of Arconic may nevertheless be rendered taxable to us as a result of certain post-distribution transactions, including certain acquisitions of shares or assets of ours or Arconic Corporation.
Removed
Under the tax matters agreement we entered into with Arconic Corporation in connection with the Arconic Inc.
Removed
Separation Transaction, Arconic Corporation may be required to indemnify us for any taxes resulting from the separation due to certain actions, including Arconic Corporation’s representations, covenants or undertakings contained in the separation agreement and certain other agreements, including the opinion of counsel, being incorrect or violated. However, Arconic Corporation may not be able to fully satisfy its indemnification obligations.
Removed
In addition, we may incur other tax costs in connection with the Arconic Inc. Separation Transaction, including non-U.S. tax costs resulting from transactions in non-U.S. jurisdictions, which may be material. Each of these risks could negatively affect our business, results of operations and financial condition.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed3 unchanged
Biggest changeAlthough no title examination of properties owned by Howmet has been made for the purpose of this report, the Company knows of no material defects in title to any such properties. See Note A and Note O to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Biggest changeAlthough no title examination of properties owned by Howmet has been made for the purpose of this report, the Company knows of no material defects in title to any such properties. See Note A and Note N to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for additional information.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings. In the ordinary course of its business, Howmet is involved in a number of lawsuits and claims, both actual and potential. For a discussion of legal proceedings, see Note V to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. PART II
Biggest changeItem 3. Legal Proceedings. In the ordinary course of its business, Howmet is involved in a number of lawsuits and claims, both actual and potential. For a discussion of legal proceedings, see Note U to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. Item 4. Mine Safety Disclosures. Not applicable. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 16 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 16 Item 6. Selected Financial Data Financial Data 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 18 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18 Item 6. Selected Financial Data 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+0 added−1 removed1 unchanged
Biggest changeAs of December 31, 2017 2018 2019 2020 2021 2022 Howmet Aerospace Inc. $ 100.00 $ 62.78 $ 115.45 $ 139.82 $ 156.14 $ 193.87 S&P 500 ® Index 100.00 95.62 125.72 148.85 191.58 156.89 S&P 500 ® Industrials Index 100.00 86.71 112.17 124.59 150.89 142.63 S&P Aerospace & Defense Index 100.00 91.93 119.81 100.56 113.86 133.64 17 Table of Contents Issuer Purchases of Equity Securities The following table presents information with respect to the Company’s open-market repurchases of its common stock during the quarter ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)(2) October 1 - October 31, 2022 — $ — — $ 1,012 November 1 - November 30, 2022 — $ — — $ 1,012 December 1 - December 31, 2022 1,677,711 (3) $ 38.83 1,674,082 $ 947 Total for quarter ended December 31, 2022 1,677,711 $ 38.83 1,674,082 (1) Excludes commissions cost.
Biggest changeAs of December 31, 2018 2019 2020 2021 2022 2023 Howmet Aerospace Inc. $ 100.00 $ 183.89 $ 222.71 $ 248.70 $ 308.80 $ 425.67 S&P 500 ® Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 ® Industrials Index 100.00 129.37 143.68 174.02 164.49 194.31 S&P Aerospace & Defense Index 100.00 130.33 109.39 123.86 145.37 155.21 19 Table of Contents Issuer Purchases of Equity Securities The following table presents information with respect to the Company’s open-market repurchases of its common stock during the quarter ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) (1)(2) October 1 - October 31, 2023 — $ — — $ 797 November 1 - November 30, 2023 381,400 $ 52.44 381,400 $ 777 December 1 - December 31, 2023 1,531,335 (3) $ 52.54 1,522,813 $ 697 Total for quarter ended December 31, 2023 1,912,735 $ 52.52 1,904,213 (1) Excludes commissions cost.
The graph assumes, in each case, an initial investment of $100 on December 31, 2017, and the reinvestment of dividends. The historical prices of the Company presented in the graph and table have been adjusted to reflect the impact of the April 2020 Arconic Inc. Separation Transaction.
The graph assumes, in each case, an initial investment of $100 on December 31, 2018, and the reinvestment of dividends. The historical prices of the Company presented in the graph and table have been adjusted to reflect the impact of the April 2020 Arconic Inc. Separation Transaction.
There is no stated expiration for the Share Repurchase Programs. Under its Share Repurchase Programs, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations.
There is no stated expiration for the Share Repurchase Program. Under its Share Repurchase Program, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations.
The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the Share Repurchase Programs may be suspended, modified or terminated at any time without prior notice.
The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the Share Repurchase Program may be suspended, modified, or terminated at any time without prior notice.
(3) Amount includes the surrender of 3,629 shares of Howmet common stock by a participant in the Company’s stock incentive plan to the Company to satisfy the exercise price and tax withholding obligations of employee stock options at the time of exercise. These surrendered shares are not part of any Share Repurchase Programs.
(3) Amount includes the surrender of 8,522 shares of Howmet common stock by a participant in the Company’s stock incentive plan to the Company to satisfy the exercise price and tax withholding obligations of employee stock options at the time of exercise. These surrendered shares are not part of any Share Repurchase Programs.
Under the Company’s share repurchase programs (the “Share Repurchase Programs”), the Company may repurchase shares by means of trading plans established from time to time in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases and/or accelerated share repurchase agreements or other derivative transactions.
Under the Company’s share repurchase program (the “Share Repurchase Program”), the Company may repurchase shares by means of trading plans established from time to time in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, block trades, private transactions, open market repurchases and/or accelerated share repurchase agreements or other derivative transactions.
(2) On August 18, 2021, the Company announced that its Board of Directors authorized a share repurchase program of up to $1,500 million of the Company's outstanding common stock. After giving effect to the share repurchases made through the fourth quarter of 2022, approximately $947 million Board authorization remained available as of January 1, 2023.
(2) On August 18, 2021, the Company announced that its Board of Directors authorized a share repurchase program of up to $1,500 million of the Company's outstanding common stock. After giving effect to the share repurchases made through the fourth quarter of 2023, approximately $697 million Board authorization remained available as of January 1, 2024.
Separation Transaction on April 1, 2020, the Company was known as Arconic Inc. and was listed under the stock symbol “ARNC.” The number of holders of record of common stock was 9,404 as of February 13, 2023. 16 Table of Contents Stock Performance Graph The following graph compares the most recent five-year performance of the Company’s common stock with (1) the Standard & Poor’s (“S&P”) 500 ® Index, (2) the S&P 500 ® Industrials Index, a group of 70 companies categorized by Standard & Poor’s as active in the “industrials” market sector, and (3) the S&P Aerospace & Defense Index, which comprises General Dynamics Corporation, Howmet Aerospace Inc., Huntington Ingalls Industries, L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, Raytheon Technologies Corporation, Textron Inc., The Boeing Company, and Transdigm Group Inc.
The Company’s common stock is listed on the New York Stock Exchange under the symbol “HWM.” The number of holders of record of common stock was 8,883 as of February 12, 2024. 18 Table of Contents Stock Performance Graph The following graph compares the most recent five-year performance of the Company’s common stock with (1) the Standard & Poor’s (“S&P”) 500 ® Index, (2) the S&P 500 ® Industrials Index, a group of 78 companies categorized by Standard & Poor’s as active in the “industrials” market sector, and (3) the S&P Aerospace & Defense Index, which comprises General Dynamics Corporation, Howmet Aerospace Inc., Huntington Ingalls Industries, L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation, Textron Inc., The Boeing Company, and Transdigm Group Inc.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s common stock is listed on the New York Stock Exchange under the symbol “HWM.” Prior to the Arconic Inc.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Removed
Because the starting point of the graph is December 31, 2017, the effect of the November 2016 Alcoa Inc. Separation Transaction is already reflected in the Company’s stock price on December 31, 2017.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

138 edited+26 added−33 removed69 unchanged
Biggest changeThe effective rate differs from the U.S. federal statutory rate primarily as a result of a $64 benefit related to the release of an income tax reserve following a favorable Spanish tax case decision, a $30 benefit related to the recognition of a previously uncertain U.S. tax position, and a $30 benefit for a U.S. tax law change related to the issuance of final regulations that provide for an exclusion of certain high-taxed foreign earnings from the calculation of GILTI, partially offset by U.S. tax on foreign earnings, $8 of charges related to the remeasurement of deferred tax balances as a result of the Arconic Inc.
Biggest changeThe effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $21 charge for a tax reserve established in France, $10 of incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, and $8 of charges related to nondeductible expenses, partially offset by a $14 benefit to release a valuation allowance related to U.S. foreign tax credits, a $9 excess benefit for stock compensation, $7 of benefits related to tax credits, a $2 benefit to release a valuation allowance related to U.S. state tax losses and credits, and a $2 benefit to revalue deferred taxes for changes to apportioned U.S. state tax rates.
The effective rate differs from the U.S. federal statutory rate primarily as a result of a $12 charge related to an increase in the valuation allowance on a foreign tax credit carryforward in the U.S., $8 of charges related to U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, $8 of charges related to nondeductible expenses, and $5 of incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, partially offset by a $6 benefit for the release of a valuation allowance on interest deduction carryforwards in the U.K., a $5 benefit related to a tax accounting method change, a $5 excess benefit for stock compensation, and a $3 benefit related to a distribution of foreign earnings.
The effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $12 charge related to an increase in the valuation allowance on a foreign tax credit carryforward in the U.S., $8 of charges related to U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, $8 of charges related to nondeductible expenses, and $5 of incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, partially offset by a $6 benefit for the release of a valuation allowance on interest deduction carryforwards in the U.K., a $5 benefit related to a tax accounting method change, a $5 excess benefit for stock compensation, and a $3 benefit related to a distribution of foreign earnings.
The effective rate differs from the U.S. federal statutory rate primarily as a result of a $32 benefit from the recognition of income tax credits related to development incentives in Hungary, and a $9 benefit related to updated U.S. regulatory guidance concerning the utilization of foreign tax credits in connection with the one-time transition tax on the deemed repatriation of previously non-taxed post-1986 earnings and profits of certain foreign subsidiaries enacted as part of the U.S.
The effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $32 benefit from the recognition of income tax credits related to development incentives in Hungary and a $9 benefit related to updated U.S. regulatory guidance concerning the utilization of foreign tax credits in connection with the one-time transition tax on the deemed repatriation of previously non-taxed post-1986 earnings and profits of certain foreign subsidiaries enacted as part of the U.S.
Tax Cuts and Jobs Act of 2017 (the “2017 Act”), partially offset by $9 of charges from the decision to no longer permanently reinvest earnings in certain foreign subsidiaries, $7 of charges from distributions of foreign earnings, $8 of charges to establish a valuation allowance on certain net operating losses in Switzerland, $6 of charges related to U.S. tax on foreign income, and other impacts related to nondeductible expenses including foreign losses with no tax benefit.
Tax Cuts and Jobs Act of 2017 (the “2017 Act”), partially offset by $9 of charges from the decision to no longer permanently reinvest earnings in certain foreign subsidiaries, $8 of charges to establish a valuation allowance on certain net operating losses in Switzerland, $7 of charges from distributions of foreign earnings, $6 of charges related to U.S. tax on foreign income, and other impacts related to nondeductible expenses including foreign losses with no tax benefit.
See the Recently Adopted Accounting Guidance section of Note B to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K. Recently Issued Accounting Guidance.
See the Recently Adopted and Recently Issued Accounting Guidance section of Note B to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K.
Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined components, and assemblies for aerospace and defense applications. The segment’s products are sold directly to customers and through distributors, and sales and costs and expenses of this segment are generally transacted in the local currency of the respective operations, which are mostly the U.S. dollar and British pound.
Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined components, and assemblies for aerospace and defense applications. The segment’s products are sold directly to customers and through distributors, and sales and costs and expenses of this segment are generally transacted in the local currency of the respective operations, which are mostly the U.S. dollar.
Many of these purchase obligations contain variable pricing components, and, as a result, actual cash payments may differ from the estimates provided in the preceding table. The Company generally passes through metal costs in customer contracts with limited exceptions. As a result, the Company expects higher metal costs to contribute to increased sales in 2023.
Many of these purchase obligations contain variable pricing components, and, as a result, actual cash payments may differ from the estimates provided in the preceding table. The Company generally passes through metal costs in customer contracts with limited exceptions. As a result, the Company expects higher metal costs to contribute to increased sales in 2024.
Accordingly, amounts have not been included in the preceding table. See “Liquidity and Capital Resources” for additional information. Obligations for Investing Activities Capital projects in the preceding table only include amounts approved by management as of December 31, 2022. Funding levels may vary in future years based on anticipated construction schedules of the projects.
Accordingly, amounts have not been included in the preceding table. See “Liquidity and Capital Resources” for additional information. Obligations for Investing Activities Capital projects in the preceding table only include amounts approved by management as of December 31, 2023. Funding levels may vary in future years based on the anticipated construction schedules of the projects.
Management continued its focus on liquidity and cash flows as well as improving its operating performance through profitable revenue, efficient operations, and margin enhancement. Management has also continued its intensified focus on capital efficiency. Management’s focus and the related results enabled Howmet to end 2022 with a solid financial position.
Management continued its focus on liquidity and cash flows as well as improving its operating performance through profitable revenue, efficient operations, and margin enhancement. Management has also continued its intensified focus on capital efficiency. Management’s focus and the related results enabled Howmet to end 2023 with a solid financial position.
Also, the Company was required to provide letters of credit for certain Arconic Corporation environmental obligations and, as a result, the Company has $17 of outstanding letters of credit relating to such liabilities (which are included in the $120 in the above paragraph). Arconic Corporation has issued surety bonds to cover these environmental obligations.
Also, the Company was required to provide letters of credit for certain Arconic Corporation environmental obligations and, as a result, the Company has $17 of outstanding letters of credit relating to such liabilities (which are also included in the $114 in the above paragraph). Arconic Corporation has issued surety bonds to cover these environmental obligations.
The Company may in the future repurchase additional portions of its debt or equity securities from time to time, in either the open market or through privately negotiated transactions, in accordance with applicable SEC and other legal requirements.
In the future, the Company may, from time to time, redeem portions of its debt securities or repurchase portions of its debt or equity securities in either the open market or through privately negotiated transactions, in accordance with applicable SEC and other legal requirements.
Pursuant to the Separation and Distribution Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company is required to provide surety bonds of $22 (which are included in the $43 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation and Alcoa Corporation workers’ compensation claims paid that occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016.
Pursuant to the Separation and Distribution Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company is required to provide surety bonds of $21 (which are included in the $43 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims that occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016.
Arconic Corporation is being billed for these letter of credit fees paid by the Company and will reimburse the Company for any payments made under these letters of credit. 30 Table of Contents Howmet has outstanding surety bonds primarily related to tax matters, contract performance, workers’ compensation, environmental-related matters, energy contracts, and customs duties.
Arconic Corporation is being billed for these letter of credit fees paid by the Company and will reimburse the Company for any payments made under these letters of credit. Howmet has outstanding surety bonds primarily related to tax matters, contract performance, workers’ compensation, environmental-related matters, energy contracts, and customs duties.
If it is determined that it is more likely than not that a deferred tax asset will be realized, the appropriate amount of the valuation allowance, if any, is released. Deferred tax assets and liabilities are also re-measured to reflect changes in underlying tax rates due to law changes and the granting and lapse of tax holidays.
If it is determined that it is more likely than not that a deferred tax asset will be realized, the appropriate amount of the valuation allowance, if any, is released. Deferred tax assets and liabilities are also remeasured to reflect changes in underlying tax rates due to law changes and the granting and lapse of tax holidays.
Management considers historical experience and all available information at the time the estimates are made; however, the fair value that is ultimately realized upon the divestiture of a business may differ from the estimated fair value reflected in the Consolidated Financial Statements. 31 Table of Contents Pension and Other Postretirement Benefits.
Management considers historical experience and all available information at the time the estimates are made; however, the fair value that is ultimately realized upon the divestiture of a business may differ from the estimated fair value reflected in the Consolidated Financial Statements. Pension and Other Postretirement Benefits.
Areas that require significant judgments, estimates, and assumptions include the testing of goodwill, properties, plants, and equipment, and other intangible assets for impairment; estimating fair value of businesses acquired or divested; pension plans and other postretirement benefits obligations; stock-based compensation; and income taxes.
Areas that require significant judgments, estimates, and assumptions include the testing of goodwill, properties, plants, and equipment, and other intangible assets for impairment; estimating fair value of businesses acquired or divested; pension plans and other postretirement benefits obligations; stock-based compensation; income taxes; and litigation and contingent liabilities.
Loss on debt redemption was $2 in 2022 compared with $146 in 2021. The decrease of $144 was primarily due to higher debt premiums paid in 2021 related to the repurchases of the 6.875% Notes due 2025 (the “6.875% Notes”), the 5.870% Notes due 2022, and the 5.125% Notes.
Loss on debt redemption was $2 in both 2023 and 2022. Loss on debt redemption was $2 in 2022 compared with $146 in 2021. The decrease of $144 was primarily due to debt premiums paid in 2021 related to the repurchases of the 6.875% Notes due 2025 (the “6.875% Notes”), the 5.870% Notes due 2022, and the 5.125% Notes.
The business’s products are also critical components of automobiles, commercial transportation vehicles, and construction and industrial equipment. Fastening Systems are sold directly to customers and through distributors. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are mostly the U.S. dollar, British pound, and euro.
The business’s 25 Table of Contents products are also critical components of commercial transportation vehicles and construction and industrial equipment. Fastening Systems are sold directly to customers and through distributors. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are mostly the U.S. dollar, British pound, and euro.
Pursuant to the Separation and Distribution Agreement, dated as of October 31, 2016, between Howmet and Alcoa Corporation, Howmet was required to provide certain guarantees for Alcoa Corporation, which had a combined fair value of $6 at both December 31, 2022 and 2021, and were included in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet.
Pursuant to the Separation and Distribution Agreement, dated as of October 31, 2016, between Howmet and Alcoa Corporation, Howmet was required to provide certain guarantees for Alcoa Corporation, which had a fair value of $6 as of both December 31, 2023 and 2022, and were included in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet.
In 2023, management projects sales to increase as we expect solid growth in the commercial aerospace market, and the Company’s strong position in that market is expected to continue. Earnings per share is expected to grow as management continues to focus on operational performance.
In 2024, management projects sales to increase as we expect solid growth in the commercial aerospace market, and the Company’s strong position in that market is expected to continue. Earnings per share is expected to grow as management continues to focus on revenue growth and operational performance.
Arconic Corporation and Alcoa Corporation workers’ compensation and letter of credit fees paid by the Company are proportionally billed to, and are reimbursed by, Arconic Corporation and Alcoa Corporation, respectively.
Arconic Corporation and Alcoa Corporation workers’ compensation and letters of credit fees paid by the Company are proportionally billed to, and are reimbursed by, Arconic Corporation and Alcoa Corporation, respectively.
During the fourth quarter of 2022, the Company settled the insurance claim related to the Barberton Plant Fire. In 2023, as compared to 2022, demand in the commercial transportation markets served by Forged Wheels is expected to decrease in most regions due to lower OEM builds.
During the fourth quarter of 2022, the Company settled the insurance claim related to the Barberton Plant Fire. 27 Table of Contents In 2024, as compared to 2023, demand in the commercial transportation markets served by Forged Wheels is expected to decrease in most regions due to lower OEM builds.
Arconic Corporation and Alcoa Corporation workers’ compensation claims and surety bond fees paid by the Company are proportionally billed to, and are reimbursed by, Arconic Corporation and Alcoa Corporation.
Arconic Corporation and Alcoa Corporation workers’ compensation claims and surety bond fees paid by the Company are proportionately billed to, and are reimbursed by, Arconic Corporation and Alcoa Corporation.
Management Review of 2022 and Outlook The Company derived approximately 46% of its revenue from products sold to the commercial aerospace market for the year ended December 31, 2022 which is substantially less than the pre-pandemic 2019 annual rate of approximately 60%.
Management Review of 2023 and Outlook The Company derived approximately 49% of its revenue from products sold to the commercial aerospace market for the year ended December 31, 2023 which is substantially less than the pre-pandemic 2019 annual rate of approximately 60%.
Additionally, in the fourth quarter of 2022, the Company sold the property of an Engine Products segment’s manufacturing facility. The proceeds from the sale of this property were $15 and a carrying value of $7.
Additionally, in the fourth quarter of 2022, the Company sold the property of a manufacturing facility in the Engine Products segment. The proceeds from the sale of this property were $15 and a carrying value of $7.
The Company had total COGS charges of $59 in 2022, offset by partial insurance claims reimbursements of $23, related to fires that occurred in 2019 at a Fastening Systems plant in France (the “France Plant Fire”), at a Forged Wheels plant in Barberton, Ohio in mid-February 2020 (the “Barberton Plant Fire”), and a mechanical failure resulting in substantial heat and fire-related damage to equipment at the Company’s cast house in Barberton, Ohio in the third quarter of 2022 (the “Barberton Cast House Incident”), compared to total COGS charges of $28 in 2021, offset by partial insurance claims reimbursements of $32, related to the France Plant Fire and the Barberton Plant Fire.
The Company had total COGS insurance claims reimbursements of $19 in 2023, partially offset by charges of $7, related to fires that occurred in 2019 at a Fastening Systems plant in France (the “France Plant Fire”) and a mechanical failure resulting in substantial heat and fire-related damage to equipment at the Company’s cast house in Barberton, Ohio in the third quarter of 2022 (the “Barberton Cast House Incident”), compared to total COGS charges of $59 in 2022, offset by partial insurance claims reimbursements of $23, related to a fire at a Forged Wheels plant in Barberton, Ohio in mid-February 2020 (the “Barberton Plant Fire”) and the France Plant Fire.
For 2022, 2021, and 2020 , management used 6.70%, 6.20%, and 6.00%, respectively, as its weighted-average global expected long-term rate of return on plan assets, which was based on the prevailing and planned strategic asset allocations, as well as estimates of future returns by asset class for each plan.
Management used 6.70% for both 2023 and 2022 and 6.20% for 2021 as its weighted-average global expected long-term rate of return on plan assets, which was based on the prevailing and planned strategic asset allocations, as well as estimates of future returns by asset class for each plan.
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. Howmet is a global company operating in 20 countries. Based upon the country where the point of shipment occurred, North America and Europe generated 71% and 22%, respectively, of Howmet’s sales in 2022.
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. Howmet is a global company operating in 20 countries. Based upon the country where the point of shipment occurred, North America and Europe generated 70% and 23%, respectively, of Howmet’s sales in 2023.
In 2022, 2021, and 2020, the discount rate used to determine benefit obligations for pension and other postretirement benefit plans was 5.40%, 2.70%, and 2.40%, respectively.
In 2023, 2022, and 2021, the discount rate used to determine benefit obligations for pension and other postretirement benefit plans was 5.10%, 5.40%, and 2.70%, respectively.
In 2023, as compared to 2022, demand in the commercial aerospace and industrial markets is expected to increase.
In 2024, as compared to 2023, demand in the commercial aerospace and industrial markets is expected to increase.
Interest related to total debt is based on interest rates in effect as of December 31, 2022 and is calculated on debt with maturities that extend to 2042.
Interest related to total debt is based on fixed interest rates in effect as of December 31, 2023 and is calculated on debt with maturities that extend to 2042.
For more information on these matters, see Note V to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K. 33 Table of Contents Recently Adopted Accounting Guidance.
For more information on these matters, see Note U to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K. 35 Table of Contents Recently Adopted and Recently Issued Accounting Guidance.
Separation Transaction on April 1, 2020, compared to an increase of 55% for both the S&P 500 ® Index and S&P Aerospace & Defense Select Industry Index over the same period. (1) See below in Results of Operations for the reconciliation of Total Segment Adjusted EBITDA to Income from continuing operations before income taxes.
Separation Transaction on April 1, 2020, compared to an increase of 93% for the S&P 500 ® Index and 91% for the S&P Aerospace & Defense Select Industry Index over the same period. (1) See below in Results of Operations for the reconciliation of Total Segment Adjusted EBITDA to Income before income taxes.
Net income from continuing operations was $469, or $1.11 per diluted share, for 2022 compared to $258, or $0.59 per diluted share, in 2021.
Net income was $469, or $1.11 per diluted share, for 2022 compared to $258, or $0.59 per diluted share, in 2021.
The Company’s Board of Directors authorized a share repurchase program of up to $1,500 of the Company's outstanding common stock. After giving effect to the share repurchases made through the fourth quarter of 2022, approximately $947 Board authorization remained available as of January 1, 2023. There is no stated expiration for the Share Repurchase Programs.
The Board authorized a share repurchase program of up to $1,500 of the Company's outstanding common stock. After giving effect to the share repurchases made through the fourth quarter of 2023, approximately $697 Board authorization remained available as of January 1, 2024. There is no stated expiration for the Share Repurchase Program.
In December 2020, December 2021, and December 2022, a surety bond with a limit of $80 relating to this guarantee was obtained by Alcoa Corporation to protect Howmet's obligation. This surety bond is expected to be renewed on an annual basis by Alcoa Corporation. Howmet has outstanding letters of credit primarily related to workers’ compensation, environmental obligations, and insurance obligations.
In December 2021, December 2022, and December 2023, a surety bond with a limit of $80 relating to this guarantee was obtained by Alcoa Corporation to protect Howmet’s obligation. This surety bond will be renewed on an annual basis by Alcoa Corporation. Howmet has outstanding letters of credit primarily related to workers’ compensation, environmental obligations, and insurance obligations, among others.
See below for the reconciliation of Income from continuing operations before income taxes to Total Segment Adjusted EBITDA. The following information provides Sales, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each reportable segment for each of the three years in the period ended December 31, 2022.
See below for the reconciliation of Total Segment Adjusted EBITDA to Income before income taxes. The following information provides Sales, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each reportable segment for each of the three years in the period ended December 31, 2023.
Forged Wheels 2022 2021 2020 Third-party sales $ 1,058 $ 921 $ 679 Segment Adjusted EBITDA 278 294 192 Segment Adjusted EBITDA Margin 26.3 % 31.9 % 28.3 % Forged Wheels produces forged aluminum wheels and related products for heavy-duty trucks, trailers, and buses globally. Forged Wheels' products are sold directly to OEMs and through distributors.
Forged Wheels 2023 2022 2021 Third-party sales $ 1,147 $ 1,058 $ 921 Segment Adjusted EBITDA 309 278 294 Segment Adjusted EBITDA Margin 26.9 % 26.3 % 31.9 % Forged Wheels produces forged aluminum wheels and related products globally for heavy-duty trucks, trailers, and buses. Forged Wheels’ products are sold directly to OEMs and through distributors.
In 2021 , net income of $181 (after-tax) was recorded in other comprehensive loss, primarily due to the increase in the discount rate, plan asset performance that was greater than expected, and amortization of actuarial losses.
In 2021 , net income of $181 (after-tax) was recorded in other comprehensive loss, primarily due to the increase in the discount rate, plan asset performance that was greater than expected, and amortization of actuarial losses. 34 Table of Contents Stock-Based Compensation.
The total amount committed under these annual surety bonds, which expire and automatically renew at various dates, primarily in 2023 and 2024, was $43 at December 31, 2022.
The total amount committed under these annual surety bonds, which automatically renew or expire at various dates, primarily in 2024 and 2025, was $43 as of December 31, 2023.
The Act includes various tax provisions, including a 1% excise tax on stock repurchases, expanded tax credits for clean energy incentives, and a corporate alternative minimum tax that generally applies to U.S. corporations with average adjusted financial statement income over a three-year period in excess of $1,000. The Company does not expect the Act to materially impact its financial statements.
The Act includes various tax provisions, including a 1% excise tax on net stock repurchases, expanded tax credits for clean energy incentives, and a corporate alternative minimum tax that generally applies to U.S. corporations with average adjusted financial statement income over a three-year period in excess of $1,000.
The fair values of all businesses to be divested are estimated using accepted valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative bids, when available.
Discontinued Operations and Assets Held for Sale. The fair values of all businesses to be divested are estimated using accepted valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative bids, when available.
Non-service related net periodic benefit costs related to defined benefit plans is expected to increase by approximately $20 from 2022 to 2023. Other expense, net was $19 in 2021 compared with $74 in 2020.
Non-service related net periodic benefit costs related to defined benefit plans is expected to increase by approximately $15 from 2023 to 2024. Other expense, net was $82 in 2022 compared with $19 in 2021.
Fastening Systems 2022 2021 2020 Third-party sales $ 1,117 $ 1,044 $ 1,245 Segment Adjusted EBITDA 234 239 295 Segment Adjusted EBITDA Margin 20.9 % 22.9 % 23.7 % Fastening Systems produces aerospace fastening systems, as well as commercial transportation fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines.
Fastening Systems 2023 2022 2021 Third-party sales $ 1,349 $ 1,117 $ 1,044 Segment Adjusted EBITDA 278 234 239 Segment Adjusted EBITDA Margin 20.6 % 20.9 % 22.9 % Fastening Systems produces aerospace and industrial fastening systems, as well as commercial transportation fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines.
The Company and Arconic Corporation are required to provide a guarantee up to an estimated present value amount of approximately $1,040 and $1,406 at December 31, 2022 and 2021, respectively, in the event of an Alcoa Corporation payment default.
The Company and Arconic Corporation are required to provide a guarantee up to an estimated present value amount of approximately $1,131 and $1,040 as of December 31, 2023 and 2022, respectively, in the event of an Alcoa Corporation default.
Off-Balance Sheet Arrangements At December 31, 2022, the Company had outstanding bank guarantees related to tax matters, outstanding debt, workers’ compensation, environmental obligations, energy contracts, and customs duties, among others. The total amount committed under these guarantees, which expire at various dates between 2023 and 2040, was $13 at December 31, 2022.
Off-Balance Sheet Arrangements As of December 31, 2023, Howmet had outstanding bank guarantees related to tax matters, outstanding debt, workers’ compensation, environmental obligations, and customs duties, among others. The total amount committed under these guarantees, which expire at various dates between 2024 and 2040, was $24 as of December 31, 2023.
Howmet recognizes compensation expense for employee equity grants using the non-substantive vesting period approach, in which the expense is recognized ratably over the requisite service period based on the grant date fair value. Forfeitures are accounted for as they occur. The fair value of new stock options is estimated on the date of grant using a lattice-pricing model.
Howmet recognizes compensation expense for employee equity grants using the non-substantive vesting period approach, in which the expense is recognized ratably over the requisite service period based on the grant date fair value. Forfeitures are accounted for as they occur.
See Note R to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K. Loss on debt redemption.
See Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail related to the Company’s debt. Loss on debt redemption.
Investing Activities Cash used for investing activities was $135 in 2022 compared with cash provided from investing activities of $107 in 2021 and $271 in 2020.
Investing Activities Cash used for investing activities was $215 and $135 in 2023 and 2022, respectively, compared with cash provided from investing activities of $107 in 2021.
Interest expense, net was $259 in 2021 compared with $317 in 2020. The decrease of $58, or 18%, was primarily due to a reduced average level of debt for the year ended December 31, 2021 compared to the year ended December 31, 2020.
Interest expense, net was $229 in 2022 compared with $259 in 2021. The decrease of $30, or 12%, was primarily due to a reduced average level of debt for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The provision (benefit) for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, the provision (benefit) for income taxes represents income taxes paid or payable (or received or receivable) based on current year pre-tax income plus the change in deferred taxes during the year.
Under this approach, the provision (benefit) for income taxes represents income taxes paid or payable (or received or receivable) based on current year pre-tax income plus the change in deferred taxes during the year.
Engine Products 2022 2021 2020 Third-party sales $ 2,698 $ 2,282 $ 2,406 Segment Adjusted EBITDA 729 564 540 Segment Adjusted EBITDA Margin 27.0 % 24.7 % 22.4 % Engine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines (aerospace commercial and defense) and industrial gas turbines.
Engine Products 2023 2022 2021 Third-party sales $ 3,266 $ 2,698 $ 2,282 Segment Adjusted EBITDA 887 729 564 Segment Adjusted EBITDA Margin 27.2 % 27.0 % 24.7 % Engine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines (aerospace commercial and defense) and industrial gas turbine applications.
Cash provided from operations is expected to increase for the full year in 2023 compared with 2022, resulting from a continued focus on operating performance and on capital efficiency. Capital expenditures are expected to be less than depreciation and amortization. Results of Operations Earnings Summary Sales.
Cash provided from operations is expected to increase for the full year in 2024 compared with 2023, resulting from a continued focus on operating performance and on capital efficiency. Capital expenditures are expected to increase with additional investments in capacity expansions. Results of Operations Earnings Summary Sales.
Reconciliation of Total Segment Adjusted EBITDA to Income from continuing operations before income taxes 2022 2021 2020 Income from continuing operations before income taxes $ 606 $ 324 $ 171 Loss on debt redemption 2 146 64 Interest expense, net 229 259 317 Other expense, net (1) 82 19 74 Operating income $ 919 $ 748 $ 626 Segment provision for depreciation and amortization 258 261 262 Unallocated amounts: Restructuring and other charges 56 90 182 Corporate expense 119 101 82 Total Segment Adjusted EBITDA $ 1,352 $ 1,200 $ 1,152 (1) See the Contingencies section of Note V to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Reconciliation of Total Segment Adjusted EBITDA to Income before income taxes 2023 2022 2021 Income before income taxes $ 975 $ 606 $ 324 Loss on debt redemption 2 2 146 Interest expense, net 218 229 259 Other expense, net (1) 8 82 19 Operating income $ 1,203 $ 919 $ 748 Segment provision for depreciation and amortization 262 258 261 Unallocated amounts: Restructuring and other charges 23 56 90 Corporate expense 99 119 101 Total Segment Adjusted EBITDA $ 1,587 $ 1,352 $ 1,200 (1) See Note F to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience, including considerations relating to the impact of COVID-19 and changes in the aerospace industry as a result of the pandemic.
These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience, including considerations relating to changes in the aerospace industry.
The total amount of uncertain tax positions is included in the “Thereafter” column as the Company is not able to reasonably estimate the timing of potential future payments. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary.
Amounts for uncertain tax positions in which the timing of future potential payments are not reasonably estimable are included in the “Thereafter” column. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary.
However, the Company’s CEO believes that Segment Adjusted EBITDA is now a better representation of its business because it provides additional information with respect to the Company’s operating performance and the Company’s ability to meet its financial obligations.
Prior to the first quarter of 2022, the Company used Segment operating profit as its primary measure of performance. However, the Company’s CEO believes that Segment Adjusted EBITDA is a better representation of its business because it provides additional information with respect to the Company’s operating performance and the Company’s ability to meet its financial obligations.
In 2022, Sales increased 14% over 2021 primarily as a result of higher sales in the commercial aerospace market, an increase in material cost pass through of $225, and favorable product pricing of $67, partially offset by lower sales in the defense aerospace market. Price increases are in excess of material and inflationary cost pass through to our customers.
The increase was primarily due to higher sales in the commercial aerospace market, an increase in material cost pass through of $225, and favorable product pricing of $67, partially offset by lower sales in the defense aerospace market. Product price increases are in excess of inflationary pass through to our customers. Cost of goods sold (“COGS”).
A dividend of $0.10 per share on the Company’s common stock was paid in 2022 ($0.02 per share in each of the first, second, and third quarters of 2022 and $0.04 in the fourth quarter of 2022). Fully diluted shares outstanding as of December 31, 2022 were 418,011,145.
A dividend of $0.17 per share on the Company’s common stock was paid in 2023 ($0.04 per share in each of the first, second, and third quarters of 2023 and $0.05 in the fourth quarter of 2023). Fully diluted shares outstanding as of December 31, 2023 were 412,897,456.
Howmet’s effective tax rate was 23.4% (benefit on pre-tax income) in 2020 compared with the U.S. federal statutory rate of 21%.
Howmet’s effective tax rate was 21.5% (provision on pre-tax income) in 2023 compared with the U.S. federal statutory rate of 21%.
See Note R to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K. Other expense, net. Other expense, net was $82 in 2022 compared with $19 in 2021.
See Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail related to the Company’s debt. Other expense, net. Other expense, net was $8 in 2023 compared with $82 in 2022.
The increase in expense of $63 was primarily driven by the adverse judgment of $65 related to Lehman Brothers International (Europe) (“LBIE”) swaps that were entered into in 2007 and 2008, which were assumed as part of the Firth Rixson acquisition in 2014, an increase from net realized and unrealized losses of $9, primarily related to mark-to-market adjustments on exchange-traded fixed income securities and losses on sales of receivables, and higher non-service related net periodic benefit costs related to pension and other postretirement benefit plans in 2022 of $7, partially offset by the impacts of deferred compensation arrangements of $16 21 Table of Contents and higher interest income of $4.
The increase in expense of $63 was primarily driven by the adverse judgment of $65 related to the LBIE swaps, an increase from net realized and unrealized losses of $9, primarily related to mark-to-market adjustments on exchange-traded fixed income securities and losses on sales of receivables, and higher non-service related net periodic benefit costs related to pension and other postretirement benefit plans in 2022 of $7, partially offset by the impacts of deferred compensation arrangements of $16 and higher interest income of $4. 23 Table of Contents Income taxes.
For further details regarding the Company’s debt and stock repurchases, see Note R and Note J , respectively, to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K. 27 Table of Contents The Company maintains a credit facility pursuant to its Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and issuers named therein.
The Company maintains a credit facility (the “Credit Facility”) pursuant to its Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and issuers named therein (See Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for reference).
The interest rate used to discount future estimated liabilities for the U.S. is determined using a Company-specific yield curve model (above-median) developed with the assistance of an external actuary, while both the U.K. and Canada utilize models developed by the respective actuary.
Howmet’s funded status under the Employee Retirement Income Security Act was approximately 70% as of January 1, 2023. The interest rate used to discount future estimated liabilities for the U.S. is determined using a Company-specific yield curve model (above-median) developed with the assistance of an external actuary, while both the U.K. and Canada utilize models developed by the respective actuary.
Tax assessments received may also result in payments to be made in order to preserve our right to appeal any tax positions challenged by tax authorities for which we have concluded that we are more likely than not to prevail. 29 Table of Contents Contingencies such as legal proceedings and environmental matters may also result in additional cash payments.
Tax assessments received may also result in payments to be made in order to preserve our right to appeal any tax positions challenged by tax authorities for which we have concluded that we are more likely than not to prevail.
The increase of $15, or 88%, was primarily due to higher spending on technology projects across all segments. R&D expenses were $17 in both 2021 and 2020. 20 Table of Contents Provision for depreciation and amortization (“D&A”). The provision for D&A was $265 in 2022 compared with $270 in 2021.
The increase of $4, or 13%, was primarily due to higher spending on technology projects intending to support the aerospace business. R&D expenses were $32 in 2022 compared with $17 in 2021. The increase of $15, or 88%, was primarily due to higher spending on technology projects across all segments. Provision for depreciation and amortization (“D&A”).
The Company may opportunistically issue new debt securities under such registration statement or otherwise in accordance with securities laws, including but not limited to in order to refinance existing indebtedness.
The Company may opportunistically issue new debt securities in accordance with securities laws or utilize commercial paper in order to, but not limited to, refinance existing indebtedness.
In addition to the impact from the pandemic, the timing and level of future aircraft builds by OEMs are subject to changes and uncertainties, such as declines in Boeing 787 production rates due to delays in its recertification, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.
The timing and level of future aircraft builds by OEMs 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 increase in SG&A of $37, or 15%, was primarily due to higher employment, travel, and lease costs in 2022, as well as legal and other advisory reimbursements received in 2021 that did not recur in 2022. SG&A expenses were $251, or 5.0% of Sales, in 2021 compared with $277, or 5.3% of Sales, in 2020.
The increase in SG&A of $37, or 15%, was primarily due to higher employment, travel, and lease costs in 2022, as well as legal and other advisory reimbursements received in 2021 that did not recur in 2022. Research and development expenses (“R&D”). R&D expenses were $36 in 2023 compared with $32 in 2022.
The improvement in the funded status of $181 was primarily driven by changes in discount rates partially offset by actual asset losses in comparison to expected asset returns. Excluding settlements and curtailments, net periodic benefit cost of pension and other postretirement benefits is expected to be approximately $40 in 2023 compared to $22 and $16 in 2022 and 2021, respectively.
The decline in the funded status of $21 was primarily driven by service and interest costs and changes in discount rates, partially offset by asset returns and contributions. Excluding settlements and curtailments, net periodic benefit cost of pension and other postretirement benefits is expected to be approximately $46 in 2024 compared to $33 and $22 in 2023 and 2022, respectively.
It is expected that significant expansion projects will be funded through various sources, including cash provided from operations. Total capital expenditures are anticipated to be approximately 4% of sales in 2023.
It is expected that significant expansion projects will be funded through various sources, including cash provided from operations. Total capital expenditures are anticipated to be approximately 4% of sales in 2024 and include additional capital expenditures related to the Engine Products capacity and Forged Wheels expansions.
The decrease of $30, or 12%, was primarily due to a reduced average level of debt for the year ended December 31, 2022 compared to the year ended December 31, 2021. On an annual basis, the partial repayment of the 5.125% Notes in 2022 will decrease Interest expense, net by approximately $4.
The decrease of $11, or 5%, was primarily due to a reduced average level of debt for the year ended December 31, 2023 compared to the year ended December 31, 2022 . On an annual basis, the debt reduction and refinancing activities in 2023 will decrease Interest expense, net by approximately $29.
Segment Adjusted EBITDA for the Engineered Structures segment increased $8, or 8%, in 2022 compared with 2021, primarily due to higher volumes in the narrow body commercial aerospace market and favorable product pricing, partially offset by lower volumes in the defense aerospace market, including lower F-35 program volumes, and Boeing 787 production declines as well as inflationary costs.
The segment absorbed approximately 280 net headcount since the end of 2022 in support of expected revenue increases, resulting in unfavorable near-term recruiting, training and operational costs. 26 Table of Contents Segment Adjusted EBITDA for the Engineered Structures segment increased $8, or 8%, in 2022 compared with 2021, primarily due to higher volumes in the narrow body commercial aerospace market and favorable product pricing, partially offset by lower volumes in the defense aerospace market, including lower F-35 program volumes, and Boeing 787 production declines as well as inflationary costs.
These costs increased by $6, or 38%, in 2022 compared to 2021 as a result of changes in discount rates and annuity purchases. Employer contributions for pension benefits were $43 and $96 for the years ended December 31, 2022 and 2021, respectively. No additional employer contributions for pension benefits were required for the pension settlements in 2022.
These costs increased by $11, or 50%, in 2023 compared to 2022 as a result of changes in discount rates and asset returns. Employer contributions for pension benefits were $36 and $43 for the years ended December 31, 2023 and 2022, respectively.
Layoff and other restructuring payments to be paid within one year primarily relate to severance costs. Uncertain tax positions taken or expected to be taken on an income tax return may result in additional payments to tax authorities. The amount in the preceding table includes interest and penalties accrued related to such positions as of December 31, 2022.
Uncertain tax positions taken or expected to be taken on an income tax return may result in additional payments to tax authorities. The amounts in the preceding table include interest and penalties accrued related to such positions as of December 31, 2023.
The source of cash in 2021 was primarily cash receipts from sold receivables of $267 and proceeds from the sale of a small manufacturing plant in France of $8 and the sale of assets at a small U.S. manufacturing facility in Fastening Systems of $23, partially offset by capital expenditures of $199 primarily related to capacity expansion investments in Hungary and Mexico in Forged Wheels and various automation projects.
The source of cash in 2021 was primarily cash receipts from sold receivables of $267 and proceeds from the sale of a small manufacturing plant in France of $8 and the sale of assets at a small U.S. manufacturing facility in Fastening Systems of $23, partially offset by capital expenditures of $199 primarily related to capacity expansion investments in Hungary and Mexico in Forged Wheels and various automation projections. 30 Table of Contents Contractual Obligations and Off-Balance Sheet Arrangements Contractual Obligations Howmet is required to make future payments under various contracts, including long-term purchase obligations, financing arrangements, and lease agreements.
In connection with the Arconic Inc. Separation Transaction , the Company entered into several agreements with Arconic Corporation that govern the relationship between the Company and Arconic Corporation following the separation, including raw material supply agreements. Operating leases represent multi-year obligations for certain land and buildings, plant equipment, vehicles, and computer equipment.
In connection with the Arconic Inc. Separation Transaction , the Company entered into several agreements with Arconic Corporation that govern the relationship between the Company and Arconic Corporation following the separation, including raw material supply agreements.
The insurance claims related to these three plant fires were in excess of the insurance deductible. During the fourth quarter of 2022, the Company settled the insurance claim related to the Barberton Plant Fire. The downtime related to these plant fires in 2022 and 2021 reduced production levels and affected productivity at the plants.
The insurance claims related to these three plant fires were in excess of the insurance deductible. The downtime related to these plant fires in 2022 and 2021 reduced production levels and affected productivity at the plants. Selling, general administrative, and other expenses (“SG&A”).
Pursuant to the Separation and Distribution Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company is required to retain letters of credit of $53 (which are included in the $120 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims that occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016.
The total amount committed under these letters of credit, which automatically renew or expire at various dates, mostly in 2024, was $114 as of December 31, 2023. 32 Table of Contents Pursuant to the Separation and Distribution Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company is required to retain letters of credit of $52 (which are included in the $114 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims that occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016.
Third-party sales for the Forged Wheels segment increased $242, or 36%, in 2021 compared with 2020, primarily due to higher commercial transportation volumes and an increase in aluminum material cost pass through. 25 Table of Contents Segment Adjusted EBITDA for the Forged Wheels segment decreased $16, or 5%, in 2022 compared with 2021, primarily due to unfavorable foreign currency movements, partially offset by higher commercial transportation volumes.
Segment Adjusted EBITDA for the Forged Wheels segment decreased $16, or 5%, in 2022 compared with 2021, primarily due to unfavorable foreign currency movements, partially offset by higher commercial transportation volumes.

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