10-QPeriod: Q1 FY2013

Howmet Aerospace Inc. Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 18, 2013For Securities:HWM

Summary

Howmet Aerospace Inc. (HWM), formerly Alcoa Inc., reported its first quarter 2013 financial results, showing a net income attributable to Alcoa common shareholders of $149 million, or $0.13 per diluted share, an increase from $94 million, or $0.09 per diluted share, in the prior year's first quarter. This improvement was driven by productivity gains, favorable foreign currency movements, and higher realized prices for alumina, partially offset by lower aluminum prices and an increased tax provision. Sales decreased by 3% to $5.833 billion, primarily due to lower primary aluminum volumes and unfavorable pricing in the midstream segment. The company continued its restructuring efforts, incurring $7 million in charges related to layoffs and other miscellaneous items. Liquidity remained a focus, with cash used for operations at $70 million, an improvement from $236 million in the prior year, supported by lower pension contributions and changes in working capital. The company also managed its debt, with significant additions and payments during the quarter, and provided updates on ongoing legal and environmental matters, including a settlement in principle for natural resource damage claims in New York and a revised demand from Italian energy regulators.

Financial Highlights

52 data points
Beta

Revenue

$5.83B

16.9% Gross Margin

Net Income

$149.00M

2.6% Net Margin

EPS (Diluted)

$0.13

Total Assets

$40.11B

Cash & Equivalents

$1.55B

Free Cash Flow

-$305.00M

Financial Statements
Beta
Revenue$5.83B
Cost of Revenue$4.85B
Gross Profit$986.00M
R&D Expenses$45.00M
SG&A Expenses$251.00M
Operating Expenses$5.60B
Interest Expense$115.00M
Net Income$149.00M
EPS (Basic)$0.14
EPS (Diluted)$0.13
Shares Outstanding (Basic)1.07B
Shares Outstanding (Diluted)1.17B

Key Highlights

  • 1Net income attributable to Alcoa common shareholders increased to $149 million ($0.13/share) from $94 million ($0.09/share) in Q1 2012.
  • 2Sales decreased by 3% to $5.833 billion, primarily due to lower primary aluminum volumes and pricing.
  • 3Restructuring and other charges totaled $7 million in Q1 2013.
  • 4Cash used for operations improved significantly to $70 million from $236 million in Q1 2012.
  • 5The company is actively managing its debt structure, with new credit facilities and commercial paper activity.
  • 6Significant legal and environmental matters are ongoing, including a proposed settlement for natural resource damages and Italian energy regulator disputes.
  • 7The effective tax rate for Q1 2013 was 27.4%, benefiting from a discrete tax adjustment related to new U.S. tax legislation.

Frequently Asked Questions

The increase in net income was primarily driven by net productivity improvements across segments, favorable foreign currency movements due to a stronger U.S. dollar, and higher realized prices for alumina. These positive factors were partially offset by lower realized prices for aluminum, unfavorable mix in the midstream segment, and a higher income tax provision, including discrete items.

Sales decreased by 3% to $5.833 billion in the first quarter of 2013 compared to $6.006 billion in the first quarter of 2012. This decline was mainly due to lower primary aluminum volumes resulting from curtailed smelter capacity, unfavorable pricing in the midstream segment, and a decrease in realized aluminum prices, partially offset by higher volumes in the Alumina and downstream segments.

Alcoa is actively engaged in several significant legal and environmental matters. These include a proposed settlement for natural resource damage claims in New York totaling approximately $20 million, a dispute with Italian energy regulators regarding power price drawbacks for which a revised demand of $97 million was received, and ongoing investigations by the DOJ and SEC related to the Alba matter, with no settlement yet reached. The company also has various other environmental remediation obligations.

Cash used for operations significantly improved, decreasing to $70 million in the first quarter of 2013 from $236 million in the same period of 2012. This improvement was driven by higher operating results and lower pension contributions, partially offset by changes in working capital. The company also engaged in debt financing activities, including new credit facilities and commercial paper issuance, while also making significant debt repayments.