PITTSBURGH--(BUSINESS WIRE)--Howmet Aerospace (NYSE:HWM) today reported fourth quarter 2020 and full year 2020 results. The Company reported fourth quarter revenues of $1.2 billion, down 29% year over year due to disruptions in the commercial aerospace and commercial transportation markets, primarily driven by COVID-19 and Boeing 737 MAX production declines, partially offset by growth in the defense aerospace and industrial gas turbine markets. Fourth quarter 2020 revenues increased 9% sequentially from the third quarter 2020.

Howmet Aerospace reported income from continuing operations of $106 million, or $0.24 per share, in the fourth quarter 2020 versus income from continuing operations of $118 million, or $0.27 per share, in the fourth quarter 2019. Income from continuing operations excluding special items was $92 million, or $0.21 per share, in the fourth quarter 2020, versus $164 million, or $0.37 per share, in the fourth quarter 2019. Income from continuing operations in the fourth quarter 2020 included a $14 million benefit from special items, principally related to plant fire insurance proceeds and tax related items, partially offset by restructuring and other charges.

Full year 2020 income from continuing operations was $211 million, or $0.48 per share, versus income from continuing operations of $126 million, or $0.27 per share, in the full year 2019. Full year income from continuing operations excluding special items was $354 million, or $0.80 per share ($0.77 per share including pre-separation allocations), versus $590 million, or $1.29 per share, in the full year 2019. Income from continuing operations in full year 2020 included a $143 million charge from special items, principally related to separation costs and charges associated with cost reduction initiatives.

Fourth quarter 2020 operating income was $221 million, down 22% year over year. Operating income excluding special items was $215 million, down 28% year over year. The year-over-year decline was due to significant disruptions in the commercial aerospace market, driven by COVID-19 and Boeing 737 MAX and 787 production declines, and the commercial transportation market, driven by COVID-19, resulting in unfavorable volume and product mix. The decline was partially offset by growth in the defense aerospace and industrial gas turbine markets, variable and fixed cost reductions, and favorable product pricing. Operating income margin, excluding special items, was up approximately 20 basis points year over year to 17.4%.

Full year 2020 operating income was $626 million versus $579 million in the full year 2019. Operating income excluding special items for full year 2020 was $809 million ($814 million including pre-separation allocations), versus $1,199 million in the full year 2019. The year-over-year decline was due to significant disruptions in the commercial aerospace market, driven by COVID-19 and Boeing 737 MAX and 787 production declines, and the commercial transportation market, driven by COVID-19, resulting in unfavorable volume and product mix. The decline was partially offset by growth in the defense aerospace and industrial gas turbine markets, variable and fixed cost reductions, and favorable product pricing.

Howmet Aerospace Executive Chairman and Co-Chief Executive Officer John Plant said, Howmet Aerospace continued to manage effectively through the impact of the COVID-19 pandemic. While fourth quarter 2020 revenues declined 29% year over year, driven by a 51% reduction in commercial aerospace revenues, results surpassed our outlook and included strong cash generation. We generated improved decremental margins, and our fourth quarter 2020 adjusted EBITDA margin of 22.8% was the same as the fourth quarter 2019 despite the 29% revenue decline and unfavorable commercial aerospace mix. We continue to be highly focused on all aspects of operational performance and cash generation as we manage through the effects of COVID-19 and the Boeing build rate reductions on commercial aerospace.

Mr. Plant continued, Turning to 2021, our defense aerospace, commercial transportation, and industrial gas turbine markets continue to be healthy and growing. Commercial aerospace has less visibility, though we expect increased aircraft build as we move into 2022. We are positioning the Company to emerge from the pandemic in a stronger, more profitable position.

Our liquidity position is strong as a result of our strict and disciplined approach to costs and spending. We ended 2020 with approximately $1.6 billion of cash. Our $1 billion revolving credit facility remains undrawn and our next significant debt maturity is not until October 2024.

Howmet Aerospace ended the year with a cash balance of approximately $1.6 billion. For the second quarter 2020 through fourth quarter 2020, cash provided from operations was $217 million; cash used for financing activities was $1.5 billion; and cash provided from investing activities was $260 million. Adjusted Free Cash Flow for the second quarter 2020 through the fourth quarter 2020 was $487 million, inclusive of an approximate $80 million reduction in our accounts receivable securitization program, $70 million impact from voluntary pension contributions, $46 million of cash severance payments, and $45 million tax refund.

On April 1, 2020, Arconic Inc. completed the separation of its business into two independent, publicly-traded companies: Howmet Aerospace Inc. (the new name for Arconic Inc.) and Arconic Corporation. The financial results of Arconic Corporation for all periods prior to April 1, 2020 have been retrospectively reflected in the Statement of Consolidated Operations as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods prior to April 1, 2020. Additionally, the related assets and liabilities associated with Arconic Corporation in the December 31, 2019 Consolidated Balance Sheet are classified as assets and liabilities of discontinued operations. The cash flows, comprehensive income, and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows, Statement of Consolidated Comprehensive Income, and Statement of Changes in Consolidated Equity, respectively, for all periods prior to April 1, 2020.

Fourth Quarter 2020 Segment Performance

Engine Products

Engine Products reported revenue of $555 million, a decrease of 33% year over year due to declines in the commercial aerospace market driven by COVID-19 and Boeing 737 MAX production declines, partly offset by growth in the defense aerospace and industrial gas turbine markets. Segment operating profit was $108 million, down 31% year over year, driven by volume declines, partially offset by variable and fixed cost reductions and favorable product pricing. Segment operating profit margin increased approximately 70 basis points year over year to 19.5%.

Fastening Systems

Fastening Systems reported revenue of $263 million, a decrease of 30% year over year due to declines in the commercial aerospace and commercial transportation markets, primarily driven by COVID-19 and Boeing 737 MAX and 787 production declines. Segment operating profit was $48 million, down 52% year over year, driven by volume declines and unfavorable product mix, partially offset by variable and fixed cost reductions. Segment operating profit margin decreased approximately 800 basis points year over year to 18.3%.

Engineered Structures

Engineered Structures reported revenue of $217 million, a decrease of 30% year over year due to declines in the commercial aerospace market, driven by COVID-19 and Boeing 787 and 737 MAX production declines, partly offset by growth in defense aerospace. Segment operating profit was $16 million, down 59% year over year, driven by volume declines and unfavorable product mix, partially offset by variable and fixed cost reductions. Segment operating profit margin decreased approximately 510 basis points year over year to 7.4%.

Forged Wheels

Forged Wheels reported revenue of $203 million, a decrease of 6% year over year due to declines in the commercial transportation markets, primarily driven by COVID-19. Segment operating profit was $62 million, up 3% year over year, driven by fixed cost reductions and maximizing production in low-cost countries, partially offset by volume declines. Segment operating profit margin increased approximately 290 basis points year over year to 30.5%.

Full Year 2020 Segment Performance

Segment performance in 2020 included the following:

2021 Outlook*

1Q 21 Outlook

FY 2021 Outlook

Low

Baseline

High

Low

Baseline

High

Revenue

$1.15B

$1.2B

$1.25B

$5.05B

$5.1B

$5.25B

Adj. EBITDA1

$245M

$250M

$265M

$1.07B

$1.1B

$1.15B

Adj. EBITDA Margin1

21.3%

20.8%

21.2%

21.2%

21.6%

21.9%

Adj. Earnings per Share1

$0.15

$0.16

$0.19

$0.75

$0.80

$0.89

Adj. Free Cash Flow

$350M

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Howmet Aerospace Reports Fourth Quarter 2020 and Full Year 2020 Results - Business Wire