10-QPeriod: Q3 FY2009

Howmet Aerospace Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 23, 2009For Securities:HWM

Summary

Howmet Aerospace Inc. (HWM), formerly Alcoa Inc., reported its third quarter and nine-month results for the period ending September 30, 2009. The company experienced a significant decline in sales and profitability compared to the prior year, reflecting the challenging global economic environment. Sales for the third quarter dropped by 34% year-over-year, and the company reported a net loss for the nine-month period. Cost of goods sold as a percentage of sales increased, indicating pressure on margins. However, the company implemented several cost-saving measures, including workforce reductions and procurement efficiencies, which helped to partially offset the decline in revenue. Alcoa also strengthened its financial position through strategic actions such as reducing its dividend and issuing new common stock and convertible notes. The company continues to manage its operations and financial resources prudently in the prevailing economic climate.

Financial Highlights

53 data points
Beta

Revenue

$4.62B

15.8% Gross Margin

Net Income

$77.00M

1.7% Net Margin

EPS (Diluted)

$0.08

Total Assets

$38.10B

Cash & Equivalents

$1.07B

Free Cash Flow

-$187.00M

Financial Statements
Beta
Revenue$4.62B
Cost of Revenue$3.89B
Gross Profit$727.00M
R&D Expenses$39.00M
SG&A Expenses$234.00M
Operating Income$719.00M
Interest Expense$120.00M
Net Income$77.00M
EPS (Basic)$0.08
EPS (Diluted)$0.08
Shares Outstanding (Diluted)978.00M

Key Highlights

  • 1Net sales for the third quarter of 2009 decreased by 34% to $4.615 billion, compared to $6.970 billion in the same period of 2008.
  • 2Net income attributable to Alcoa for the third quarter of 2009 was $77 million, or $0.08 per diluted share, a significant decrease from $268 million, or $0.33 per diluted share, in the third quarter of 2008.
  • 3The company reported a net loss of $874 million, or ($0.95) per diluted share, for the nine months ended September 30, 2009, compared to a net income of $1,117 million, or $1.35 per diluted share, for the same period in 2008.
  • 4Cost of goods sold as a percentage of sales increased to 84.2% in Q3 2009 from 81.0% in Q3 2008, reflecting margin pressures.
  • 5Alcoa implemented cost reduction initiatives, including procurement efficiencies and overhead rationalization, leading to a decrease in Selling, General, and Administrative (SG&A) expenses.
  • 6The company reduced its quarterly common stock dividend from $0.17 per share to $0.03 per share to improve liquidity.
  • 7Significant restructuring and other charges were recorded, particularly in the nine-month period, related to employee layoffs and adjustments for businesses held for sale.

Frequently Asked Questions

The global economic downturn significantly impacted Alcoa's financial performance. This was evident in a 34% decrease in net sales for the third quarter of 2009 compared to the prior year, driven primarily by lower realized prices for alumina and aluminum and reduced volumes in downstream segments. This led to a substantial decline in net income and resulted in a net loss for the nine-month period.

Alcoa implemented several measures to navigate the economic downturn. These included operational actions such as procurement efficiencies and overhead rationalization to reduce costs, and working capital initiatives to improve cash flow. Financially, the company reduced its quarterly common stock dividend and issued new common stock and convertible notes to enhance liquidity. Production curtailments were also a significant operational response to lower demand.

Restructuring and other charges had a notable impact, particularly in the nine-month period. These charges were primarily related to employee layoffs across various segments, adjustments for businesses held for sale due to unfavorable foreign currency movements and fair value changes, and the write-off of capitalized third-party costs associated with new accounting standards for business combinations. These charges contributed to the net loss reported.

The Alumina and Primary Metals segments saw significant declines in After-Tax Operating Income (ATOI) due to lower realized prices and volumes. The Flat-Rolled Products segment's ATOI also decreased, influenced by reduced volumes and lower metal prices. The Engineered Products and Solutions segment experienced lower sales and ATOI due to weak end markets and pricing pressures. The Packaging and Consumer segment no longer has operations.