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Howmet Aerospace Inc. Annual Report, Year Ended Dec 31, 2001

Filing Date
Filed March 5, 2002
Period End
December 31, 2001
Security
HWM
In the record · 2016–202610-K1110-Q328-K223

HWM filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 223 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Nov ’16Nov ’16
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Leadership change8-K · Oct ’21Oct ’21
  4. Leadership change8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed March 5, 2002. Cited figures are marked; the original filing is the authoritative source.

Alcoa Inc. (now Howmet Aerospace) reported 2001 net income of $908 milliona, or $1.05 per diluted share, down from $1.484 billion, or $1.80 per share, in 2000.

Results include special after-tax charges of $355 millionb (41 cents per share) tied to a strategic restructuring of its primary and fabricating businesses. Excluding those charges, earnings were $1.263 billion, or $1.46 per share, a 15% decrease from 2000 per the MD&A. Sales were essentially flat at $22.859 billion versus $22.936 billion, as lower realized aluminum prices and volumes in transportation, building and construction, and distribution markets offset cost savings and gains on business sales.

Cost of goods sold rose to 78.1% of sales, and the company announced a goal to cut costs by $1 billionc by December 2003. The company reduced its workforce by about 10,400 employees and plans to shut 18 locations, mostly in Europe and the U.S., with actions expected to be completed by the end of 2002. Cash from operations fell 15% to $2.411 billion.

Financing activities used $3.127 billiond, including $1.452 billion in share repurchases and $1.5 billion of notes issued in each of May and December 2001. Total debt was $6.491 billion at year-end, against total assets of $28.355 billion and shareholders' equity of $10.614 billion. The board eliminated the variable dividend and raised the quarterly dividend 20% to 15 cents per share.

The filing also flags material environmental exposures, most notably a Grasse River (Massena, NY) PCB remediation with alternatives ranging from $2 million to $525 million, for which the company proposes a range of $2 million to $90 million, and a Point Comfort, Texas mercury remedy that is fully reserved. Management states that pending legal matters are not expected to have a material adverse effect on financial position.

02—Key points

Key Highlights

  1. 2001 net income of $908 million ($1.05 per diluted share) versus $1.484 billion ($1.80 per share) in 2000; excluding special charges, earnings were $1.263 billion ($1.46 per share).
  2. Special charges of $566 million pretax ($355 million after tax and minority interests) for restructuring, including $372 million of asset write-downs and $178 million of employee termination and severance costs.
  3. Sales of $22.859 billion were essentially flat versus $22.936 billion in 2000; COGS rose to 78.1% of sales from 75.6%.
  4. Cash from operations fell 15% to $2.411 billion, and the company repurchased 39.3 million shares for $1.452 billion during 2001.
  5. Long-term debt rose to $6.491 billion from $5.414 billion, with $1.5 billion of notes issued in May 2001 and another $1.5 billion in December 2001.
  6. The board eliminated the variable dividend and raised the quarterly common dividend 20%, from 12.5 cents to 15 cents per share.
  7. Environmental exposure includes the Grasse River PCB remediation, with alternatives costed from $2 million to $525 million, and the Point Comfort mercury remedy, which is fully reserved.

03—Questions

Frequently Asked Questions

  1. Why did earnings decline in 2001?

    Management attributed the decline to lower realized aluminum prices, lower volumes from weak transportation, building and construction, and distribution markets, and costs for contract losses, customer claims and bad debts. These were partly offset by cost savings and gains on business sales. The company also recorded $355 million of after-tax special charges tied to restructuring.

  2. What restructuring actions did the company take?

    The company recorded $566 million of pretax special charges, covering asset write-downs, severance for about 10,400 employees, and exit costs. Shutdowns included three U.S. primary products facilities and 15 fabricating facilities in the U.S. and Europe, with completion expected by mid-2002 and the end of 2002, respectively. The company also set a goal to reduce costs by $1 billion by December 2003.

  3. How is the company's balance sheet and cash flow position?

    Total assets were $28.355 billion and shareholders' equity was $10.614 billion at year-end 2001. Long-term debt was $6.491 billion, and debt as a percentage of invested capital was 35.7%, down from 38.6% in 2000. Cash from operations was $2.411 billion, and asset sales generated $2.507 billion of proceeds.

  4. What are the key environmental and legal risks?

    The Grasse River PCB remediation in Massena, New York could be costed between $2 million and $525 million, and the company believes alternatives costing $2 million to $90 million should be selected, with a $2 million reserve recorded. The Point Comfort, Texas mercury remedy is fully reserved. Management believes pending legal matters will not have a material adverse effect on financial position.

04—Continue

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