UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 20202021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3610
HOWMET AEROSPACE INC.
(Exact name of registrant as specified in its charter)

Delaware25-0317820
(State of incorporation)  (I.R.S. Employer Identification No.)
201 Isabella Street,Suite 200,Pittsburgh,Pennsylvania15212-5872
(Address of principal executive offices)(Zip code)

201 Isabella Street, Suite 200, Pittsburgh, Pennsylvania 15212-5872
(Address of principal executive offices)      (Zip code)

Investor Relations 412-553-1950
Office of the Secretary 412-553-1940
(Registrant’s telephone number including area code)

Arconic Inc.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)SymbolName of each exchange on which registered
Common Stock, par value $1.00 per shareHWMNew York Stock Exchange
$3.75 Cumulative Preferred Stock,
par value $100$100.00 per share		HWM PRNYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ✓    No     
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ✓    No      
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No  x
As of August 3, 2020,2, 2021, there were 436,141,507428,912,175 shares of common stock, par value $1.00 per share, of the registrant outstanding.


Explanatory Note
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 (Loss), and Statement of Changes in Consolidated Equity, respectively, for all periods prior to April 1, 2020.


TABLE OF CONTENTS
Page(s)
Part I
Item 1.
3
3
4
5
6
7
8
9
Item 2.
28
Item 3.
34
Item 4.
34
Part II
Item 1.
35
Item 1A.
35
Item 2.
36
Item 6.
37
37



PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Howmet Aerospace Inc. and subsidiaries
Statement of Consolidated Operations (unaudited)
(U.S. dollars in millions, except per-share amounts)
Second quarter endedSix months endedSecond quarter endedSix months ended
June 30,June 30, June 30,June 30,
2020201920202019 2021202020212020
Sales (D)
Sales (D)
$1,253  $1,818  $2,887  $3,570  
Sales (D)
$1,195 $1,253 $2,404 $2,887 
Cost of goods sold (exclusive of expenses below)Cost of goods sold (exclusive of expenses below)923  1,335  2,106  2,628  Cost of goods sold (exclusive of expenses below)857 923 1,730 2,106 
Selling, general administrative, and other expensesSelling, general administrative, and other expenses74  102  153  218  Selling, general administrative, and other expenses55 74 120 153 
Research and development expensesResearch and development expenses4  7  8  16  Research and development expenses4 4 9 8 
Provision for depreciation and amortizationProvision for depreciation and amortization73  78  144  154  Provision for depreciation and amortization67 73 135 144 
Restructuring and other charges (E)
Restructuring and other charges (E)
105  472  144  516  
Restructuring and other charges (E)
5 105 14 144 
Operating income (loss)74  (176) 332  38  
Interest expense144  86  228  171  
Operating incomeOperating income207 74 396 332 
Interest expense, netInterest expense, net89 144 161 228 
Other expense (income), net (F)
Other expense (income), net (F)
16  6  (8) 18  
Other expense (income), net (F)
8 16 12 (8)
Income (loss) before income taxesIncome (loss) before income taxes(86) (268) 112  (151) Income (loss) before income taxes110 (86)223 112 
Provision (benefit) for income taxes (H)
Provision (benefit) for income taxes (H)
(2) (132) 43  (101) 
Provision (benefit) for income taxes (H)
36 (2)69 43 
Income (loss) from continuing operations after income taxesIncome (loss) from continuing operations after income taxes$(84) $(136) $69  $(50) Income (loss) from continuing operations after income taxes$74 $(84)$154 $69 
Income (loss) from discontinued operations after income taxes$(12) $15  $50  116  
(Loss) income from discontinued operations after income taxes (B)
(Loss) income from discontinued operations after income taxes (B)
0 (12)0 50 
Net income (loss)Net income (loss)$(96) $(121) $119  $66  Net income (loss)$74 $(96)$154 $119 
Amounts Attributable to Howmet Aerospace Common Shareholders (H):
Amounts Attributable to Howmet Aerospace Common Shareholders (I):
Amounts Attributable to Howmet Aerospace Common Shareholders (I):
Net income (loss)Net income (loss)$(96) $(121) 118  65  Net income (loss)$73 $(96)$153 118 
Earnings (loss) per share - basicEarnings (loss) per share - basicEarnings (loss) per share - basic
Continuing operationsContinuing operations$(0.19) $(0.31) $0.16  $(0.11) Continuing operations$0.17 $(0.19)$0.35 $0.16 
Discontinued operationsDiscontinued operations$(0.03) $0.03  $0.11  $0.25  Discontinued operations$0 $(0.03)$0 $0.11 
Earnings (loss) per share - dilutedEarnings (loss) per share - dilutedEarnings (loss) per share - diluted
Continuing operationsContinuing operations$(0.19) $(0.31) $0.15  $(0.11) Continuing operations$0.17 $(0.19)$0.35 $0.15 
Discontinued operationsDiscontinued operations$(0.03) $0.03  $0.11  $0.25  Discontinued operations$0 $(0.03)$0 $0.11 
Average Shares Outstanding (I):
Average Shares Outstanding (I):
Average Shares Outstanding (I):
Average shares outstanding - basicAverage shares outstanding - basic436  445  436  458  Average shares outstanding - basic432 436 433 436 
Average shares outstanding - dilutedAverage shares outstanding - diluted436  445  440  462  Average shares outstanding - diluted437 436 438 440 
The accompanying notes are an integral part of the consolidated financial statements.

3

Howmet Aerospace Inc. and subsidiaries
Statement of Consolidated Comprehensive Income (Loss) (unaudited)
(U.S. dollars in millions)
Second quarter endedSix months endedSecond quarter endedSix months ended
June 30,June 30, June 30,June 30,
20202019202020192021202020212020
Net income (loss)Net income (loss)$(96) $(121) $119  $66  Net income (loss)$74 $(96)$154 $119 
Other comprehensive income (loss), net of tax (J):
Change in unrecognized net actuarial loss and prior service cost/benefit related to pension and other postretirement benefits9  23  46  63  
Other comprehensive income (loss), net of tax (J):
Other comprehensive income (loss), net of tax (J):
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefitsChange in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits35 9 77 46 
Foreign currency translation adjustmentsForeign currency translation adjustments(8) (30) (73) (4) Foreign currency translation adjustments18 (8)(26)(73)
Net change in unrealized gains (losses) on available-for-sale securities(1) —  —  3  
Net change in unrealized losses on debt securitiesNet change in unrealized losses on debt securities0 (1)0 0 
Net change in unrecognized gains (losses) on cash flow hedgesNet change in unrecognized gains (losses) on cash flow hedges9  (10) (4) (3) Net change in unrecognized gains (losses) on cash flow hedges4 9 8 (4)
Total Other comprehensive income (loss), net of taxTotal Other comprehensive income (loss), net of tax9  (17) (31) 59  Total Other comprehensive income (loss), net of tax57 9 59 (31)
Comprehensive income (loss)Comprehensive income (loss)$(87) $(138) $88  $125  Comprehensive income (loss)$131 $(87)$213 $88 
The accompanying notes are an integral part of the consolidated financial statements.
4

Howmet Aerospace Inc. and subsidiaries
Consolidated Balance Sheet (unaudited)
(U.S. dollars in millions)
June 30, 2020December 31, 2019June 30, 2021December 31, 2020
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$1,281  $1,577  Cash and cash equivalents$715 $1,610 
Receivables from customers, less allowances of $1 in 2020 and $1 in 2019 (K)
364  583  
Receivables from customers, less allowances of $0 in 2021 and $1 in 2020 (K)
Receivables from customers, less allowances of $0 in 2021 and $1 in 2020 (K)
316 328 
Other receivables (K)
Other receivables (K)
163  349  
Other receivables (K)
100 29 
Inventories (L)
Inventories (L)
1,673  1,607  
Inventories (L)
1,456 1,488 
Prepaid expenses and other current assetsPrepaid expenses and other current assets221  285  Prepaid expenses and other current assets212 217 
Current assets of discontinued operations—  1,442  
Total current assetsTotal current assets3,702  5,843  Total current assets2,799 3,672 
Properties, plants, and equipment, net (M)
Properties, plants, and equipment, net (M)
2,558  2,629  
Properties, plants, and equipment, net (M)
2,515 2,592 
Goodwill (D)
Goodwill (D)
4,051  4,067  
Goodwill (D)
4,090 4,102 
Deferred income taxesDeferred income taxes194  225  Deferred income taxes188 272 
Intangibles, netIntangibles, net589  599  Intangibles, net557 571 
Other noncurrent assets (N)
Other noncurrent assets (N)
269  316  
Other noncurrent assets (N)
230 234 
Noncurrent assets of discontinued operations—  3,899  
Total assetsTotal assets$11,363  $17,578  Total assets$10,379 $11,443 
LiabilitiesLiabilitiesLiabilities
Current liabilities:Current liabilities:Current liabilities:
Accounts payable, tradeAccounts payable, trade$632  $976  Accounts payable, trade$632 $599 
Accrued compensation and retirement costsAccrued compensation and retirement costs201  285  Accrued compensation and retirement costs195 205 
Taxes, including income taxesTaxes, including income taxes66  65  Taxes, including income taxes80 102 
Accrued interest payableAccrued interest payable91  112  Accrued interest payable75 89 
Other current liabilities (N)
Other current liabilities (N)
277  229  
Other current liabilities (N)
232 289 
Short-term debt (O)
Short-term debt (O)
391  1,034  
Short-term debt (O)
13 376 
Current liabilities of discontinued operations—  1,424  
Total current liabilitiesTotal current liabilities1,658  4,125  Total current liabilities1,227 1,660 
Long-term debt, less amount due within one year (O and P)
Long-term debt, less amount due within one year (O and P)
4,695  4,906  
Long-term debt, less amount due within one year (O and P)
4,227 4,699 
Accrued pension benefits (G)
Accrued pension benefits (G)
1,006  1,030  
Accrued pension benefits (G)
868 985 
Accrued other postretirement benefits (G)
Accrued other postretirement benefits (G)
190  200  
Accrued other postretirement benefits (G)
156 198 
Other noncurrent liabilities and deferred credits (N)365  438  
Noncurrent liabilities of discontinued operations—  2,258  
Other noncurrent liabilities and deferred credits (N)
Other noncurrent liabilities and deferred credits (N)
303 324 
Total liabilitiesTotal liabilities7,914  12,957  Total liabilities6,781 7,866 
Contingencies and commitments (R)
Contingencies and commitments (R)
Contingencies and commitments (R)
00
EquityEquityEquity
Howmet Aerospace shareholders’ equity:Howmet Aerospace shareholders’ equity:Howmet Aerospace shareholders’ equity:
Preferred stockPreferred stock55  55  Preferred stock55 55 
Common stockCommon stock436  433  Common stock429 433 
Additional capitalAdditional capital4,703  7,319  Additional capital4,481 4,668 
Retained earningsRetained earnings223  129  Retained earnings517 364 
Accumulated other comprehensive loss (J)
Accumulated other comprehensive loss (J)
(1,968) (3,329) 
Accumulated other comprehensive loss (J)
(1,884)(1,943)
Total Howmet Aerospace shareholders’ equity3,449  4,607  
Noncontrolling interests—  14  
Total equityTotal equity3,449  4,621  Total equity3,598 3,577 
Total liabilities and equityTotal liabilities and equity$11,363  $17,578  Total liabilities and equity$10,379 $11,443 
The accompanying notes are an integral part of the consolidated financial statements.
5

Howmet Aerospace Inc. and subsidiaries
Statement of Consolidated Cash Flows (unaudited)
(U.S. dollars in millions)
Six months endedSix months ended
June 30, June 30,
20202019 20212020
Operating activitiesOperating activitiesOperating activities
Net incomeNet income$119  $66  Net income$154 $119 
Adjustments to reconcile net income to cash used for operations:
Adjustments to reconcile net income to cash provided from (used for) operations:Adjustments to reconcile net income to cash provided from (used for) operations:
Depreciation and amortizationDepreciation and amortization203  276  Depreciation and amortization135 203 
Deferred income taxesDeferred income taxes25  (78) Deferred income taxes15 25 
Restructuring and other chargesRestructuring and other charges126  511  Restructuring and other charges14 126 
Net loss from investing activities—asset salesNet loss from investing activities—asset sales4  4  Net loss from investing activities—asset sales4 4 
Net periodic pension benefit cost (G)
Net periodic pension benefit cost (G)
34  58  
Net periodic pension benefit cost (G)
9 34 
Stock-based compensationStock-based compensation23  27  Stock-based compensation14 23 
OtherOther48  14  Other46 48 
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
(Increase) in receivables(70) (743) 
(Increase) in inventories(136) (117) 
(Increase) decrease in prepaid expenses and other current assets(11) 18  
(Decrease) in accounts payable, trade(403) (29) 
(Decrease) in accrued expenses(173) (46) 
Increase in receivablesIncrease in receivables(231)(70)
Decrease (increase) in inventoriesDecrease (increase) in inventories19 (136)
Decrease (increase) in prepaid expenses and other current assetsDecrease (increase) in prepaid expenses and other current assets10 (11)
Increase (decrease) in accounts payable, trade (A)
Increase (decrease) in accounts payable, trade (A)
48 (320)
Decrease in accrued expensesDecrease in accrued expenses(93)(173)
Increase in taxes, including income taxesIncrease in taxes, including income taxes96  41  Increase in taxes, including income taxes24 96 
Pension contributionsPension contributions(102) (140) Pension contributions(61)(102)
(Increase) in noncurrent assets(6) (5) 
(Decrease) in noncurrent liabilities(37) (9) 
Cash used for operations(260) (152) 
Increase in noncurrent assetsIncrease in noncurrent assets(4)(6)
Decrease in noncurrent liabilitiesDecrease in noncurrent liabilities(24)(37)
Cash provided from (used for) operationsCash provided from (used for) operations79 (177)
Financing ActivitiesFinancing ActivitiesFinancing Activities
Net change in short-term borrowings (original maturities of three months or less)Net change in short-term borrowings (original maturities of three months or less)(2) —  Net change in short-term borrowings (original maturities of three months or less)(1)(2)
Additions to debt (original maturities greater than three months) (B)(O)
Additions to debt (original maturities greater than three months) (B)(O)
2,400  226  
Additions to debt (original maturities greater than three months) (B)(O)
0 2,400 
Payments on debt (original maturities greater than three months) (O)
Payments on debt (original maturities greater than three months) (O)
(838)(2,041)
Debt issuance costs (B)(O)
Debt issuance costs (B)(O)
(61) —  
Debt issuance costs (B)(O)
(1)(61)
Payments on debt (original maturities greater than three months) (O)
(2,041) (226) 
Premiums paid on early redemption of debt (O)
Premiums paid on early redemption of debt (O)
(59) —  
Premiums paid on early redemption of debt (O)
(22)(59)
Proceeds from exercise of employee stock optionsProceeds from exercise of employee stock options30  11  Proceeds from exercise of employee stock options15 30 
Dividends paid to shareholdersDividends paid to shareholders(10) (39) Dividends paid to shareholders(1)(10)
Repurchase of common stockRepurchase of common stock—  (900) Repurchase of common stock(200)0 
Net cash transferred to Arconic Corporation at separation (B)
Net cash transferred to Arconic Corporation at separation (B)
(500) —  
Net cash transferred to Arconic Corporation at separation (B)
0 (500)
OtherOther(34) (14) Other(20)(34)
Cash used for financing activitiesCash used for financing activities(277) (942) Cash used for financing activities(1,068)(277)
Investing ActivitiesInvesting ActivitiesInvesting Activities
Capital expenditures(101) (304) 
Proceeds from the sale of assets and businesses (B)
114  12  
Capital expenditures (A)(D)
Capital expenditures (A)(D)
(91)(184)
Proceeds from the sale of assets and businesses (B)(Q)
Proceeds from the sale of assets and businesses (B)(Q)
8 114 
Sale of debt securitiesSale of debt securities—  47  Sale of debt securities5 0 
Cash receipts from sold receivables (K)
Cash receipts from sold receivables (K)
114  417  
Cash receipts from sold receivables (K)
172 114 
Other—  (1) 
Cash provided from investing activitiesCash provided from investing activities127  171  Cash provided from investing activities94 44 
Effect of exchange rate changes on cash, cash equivalents and restricted cashEffect of exchange rate changes on cash, cash equivalents and restricted cash(8) 1  Effect of exchange rate changes on cash, cash equivalents and restricted cash0 (8)
Net change in cash, cash equivalents and restricted cashNet change in cash, cash equivalents and restricted cash(418) (922) Net change in cash, cash equivalents and restricted cash(895)(418)
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period1,703  2,282  Cash, cash equivalents and restricted cash at beginning of period1,611 1,703 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$1,285  $1,360  Cash, cash equivalents and restricted cash at end of period$716 $1,285 
The accompanying notes are an integral part of the consolidated financial statements.
6

Howmet Aerospace Inc. and subsidiaries
Statement of Changes in Consolidated Equity (unaudited)
(U.S. dollars in millions, except per-share amounts)
 Howmet Aerospace Shareholders 
 Preferred
stock		Common
stock		Additional
capital		Accumulated deficitAccumulated
other
comprehensive
loss		Noncontrolling InterestsTotal
Equity
Balance at March 31, 2019$55  $453  $7,644  $(134) $(2,852) $12  $5,178  
Net loss—  —  —  (121) —  —  (121) 
Other comprehensive loss (J)
—  —  —  —  (17) —  (17) 
Repurchase and retirement of common stock—  (13) (187) —  —  —  (200) 
Stock-based compensation—  —  17  —  —  —  17  
Common stock issued: compensation plans—  —  10  —  —  —  10  
Other—  —  —  (1)—  —  (1) 
Balance at June 30, 2019$55  $440  $7,484  $(256) $(2,869) $12  $4,866  
 Howmet Aerospace Shareholders 
 Preferred
stock		Common
stock		Additional
capital		Retained earningsAccumulated
other
comprehensive
loss		Noncontrolling interestsTotal
Equity
Balance at March 31, 2020$55 $436 $7,326 $319 $(3,369)$14 $4,781 
Net loss— — — (96)— — (96)
Other comprehensive income (J)
— — — — 9 — 9 
Stock-based compensation— — 10 — — — 10 
Distributions to Arconic Corporation (B)
— — (2,633)— 1,392 (14)(1,255)
Balance at June 30, 2020$55 $436 $4,703 $223 $(1,968)$0 $3,449 

 Howmet Aerospace Shareholders 
 Preferred
stock		Common
stock		Additional
capital		Retained earningsAccumulated
other
comprehensive
loss		Noncontrolling interestsTotal
Equity
Balance at March 31, 2020$55  $436  $7,326  $335  $(3,369) $14$4,797  
Net loss—  —  —  (96) —  —  (96) 
Other comprehensive income (J)
—  —  —  —  9  —  9  
Stock-based compensation—  —  10  —  —  —  10  
Distributions to Arconic Corp (B)
—  —  (2,633) —  1,392  (14) (1,255) 
Other (H)
—  —  —  (16) —  —  (16) 
Balance at June 30, 2020$55  $436  $4,703  $223  $(1,968) $—  $3,449  
 Howmet Aerospace Shareholders 
 Preferred
stock		Common
stock		Additional
capital		Retained earningsAccumulated
other
comprehensive
loss		Total
Equity
Balance at March 31, 2021$55 $434 $4,671 $443 $(1,941)$3,662 
Net income— — — 74 — 74 
Other comprehensive income (J)
— — — — 57 57 
Repurchase and retirement of common stock— (6)(194)— — (200)
Stock-based compensation— — 8 — — 8 
Common stock issued: compensation plans— 1 (4)— — (3)
Balance at June 30, 2021$55 $429 $4,481 $517 $(1,884)$3,598 

The accompanying notes are an integral part of the consolidated financial statements.


7

Howmet Aerospace Inc. and subsidiaries
Statement of Changes in Consolidated Equity (unaudited)
(U.S. dollars in millions, except per-share amounts)
 Howmet Aerospace Shareholders 
 Preferred
stock		Common
stock		Additional
capital		Retained earningsAccumulated
other
comprehensive
loss		Noncontrolling interestsTotal
Equity
Balance at December 31, 2019$55 $433 $7,319 $113 $(3,329)$14 $4,605 
Net income— — — 119 — — 119 
Other comprehensive loss (J)
— — — — (31)— (31)
Cash dividends declared:
Preferred-Class A @ $1.875 per share— — — (1)— — (1)
Common @ $0.02 per share— — — (8)— — (8)
Stock-based compensation— — 23 — — — 23 
Common stock issued: compensation plans— 3 (6)— — — (3)
Distributions to Arconic Corporation (B)
— — (2,633)— 1,392 (14)(1,255)
Balance at June 30, 2020$55 $436 $4,703 $223 $(1,968)$0 $3,449 
Howmet Aerospace Shareholders
 Preferred
stock		Common
stock		Additional
capital		Retained
earnings		Accumulated
other
comprehensive
loss		Total
Equity
Balance at December 31, 2020$55 $433 $4,668 $364 $(1,943)$3,577 
Net income— — — 154 — 154 
Other comprehensive income (J)
— — — — 59 59 
Cash dividends declared:
Preferred-Class A @ $1.875 per share— — — (1)— (1)
Repurchase and retirement of common stock— (6)(194)— — (200)
Stock-based compensation— — 14 — — 14 
Common stock issued: compensation plans— 2 (7)— — (5)
Balance at June 30, 2021$55 $429 $4,481 $517 $(1,884)$3,598 

 Howmet Aerospace Shareholders 
 Preferred
stock		Common
stock		Additional
capital		Accumulated
deficit		Accumulated
other
comprehensive
loss		Noncontrolling interestsTotal
Equity
Balance at December 31, 2018$55  $483  $8,319  $(358) $(2,926) $12  $5,585  
Adoption of accounting standards (1)
—  —  —  75  (2) —  73  
Net income—  —  —  66  —  —  66  
Other comprehensive income (J)
—  —  —  —  59  —  59  
Cash dividends declared:
Preferred-Class A @ $1.875 per share—  —  —  (1) —  —  (1) 
Common @ $0.08 per share—  —  —  (38) —  —  (38) 
Repurchase and retirement of common stock—  (45) (855) —  —  —  (900) 
Stock-based compensation—  —  25  —  —  —  25  
Common stock issued: compensation plans—  2  (5) —  —  —  (3) 
Balance at June 30, 2019$55  $440  $7,484  $(256) $(2,869) $12  $4,866  
Howmet Aerospace Shareholders
 Preferred
stock		Common
stock		Additional
capital		Retained
earnings		Accumulated
other
comprehensive
loss		Noncontrolling interestsTotal
Equity
Balance at December 31, 2019$55  $433  $7,319  $129  $(3,329) $14  $4,621  
Net income—  —  —  119  —  —  119  
Other comprehensive income (J)
—  —  —  —  (31) —  (31) 
Cash dividends declared:
Preferred-Class A @ $1.875 per share—  —  —  (1) —  —  (1) 
Common @ $0.02 per share—  —  —  (8) —  —  (8) 
Stock-based compensation—  —  23  —  —  —  23  
Common stock issued: compensation plans—  3  (6) —  —  —  (3) 
Distributions to Arconic Corp (B)
—  —  (2,633) —  1,392  (14) (1,255) 
Other (H)
—  —  —  (16) —  —  (16) 
Balance at June 30, 2020$55  $436  $4,703  $223  $(1,968) $—  $3,449  
(1)  The Company entered into a sale leaseback arrangement in October 2018 for a cast house that is now part of Arconic Corporation, and due to continuing involvement, the gain on sale was deferred. In connection with the adoption of the new lease accounting standard on January 1, 2019, the arrangement no longer required that the gain be deferred. As such, the associated $73 deferred gain, net of tax was recognized as a cumulative effect of an accounting change within Accumulated deficit. Also, the Company adopted the new hedge accounting guidance on January 1, 2019. As a result, an adjustment of $2 was recognized as a cumulative effect of an accounting change within Accumulated deficit with an offset to Accumulated other comprehensive loss related to the elimination of a separate measurement of ineffectiveness for its cash flow hedges.
The accompanying notes are an integral part of the consolidated financial statements.
8

Howmet Aerospace Inc. and subsidiaries
Notes to the Consolidated Financial Statements (unaudited)
(U.S. dollars in millions, except per-share amounts)
A. Basis of Presentation
The interim Consolidated Financial Statements of Howmet Aerospace Inc. (formerly known as Arconic Inc.) and its subsidiaries (“Howmet” or the “Company”) are unaudited. These Consolidated Financial Statements include all adjustments, consisting only of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position, and cash flows. The results reported in these Consolidated Financial Statements are not necessarily indicative of the results that may be expected for the entire year. The 20192020 year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). This Form 10-Q report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020, which includes all disclosures required by GAAP. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation (see Note D).presentation.
The separation of Arconic Inc. into 2 standalone, publicly-traded companies, Howmet Aerospace Inc. and Arconic Corporation, (the “Arconic Inc. Separation Transaction”) became effectiveoccurred on April 1, 2020 (see Note B).2020. The financial results of Arconic Corporation for all periods prior to the Arconic Inc. Separation Transaction 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 presented. In addition, the related assets and liabilities associated with Arconic Corporation in the December 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 (Loss), and Statement of Changes in Consolidated Equity, respectively, for all periods prior to the Arconic Inc. Separation Transaction. See Note B for additional information related to the Arconic Inc. Separation Transaction and discontinued operations.
TheFor the six months ended June 30, 2021 and 2020, the Company derivesderived approximately 60% and 70%, respectively, of its revenue from products sold to the aerospace end-market. As a result of the global pandemic coronavirus (“COVID-19”) pandemic and its impact on the aerospace industry to-date, the possibility exists that there could be a sustained impact to our operations and financial results. Since the start of the pandemic, certain original equipment manufacturer (“OEM”) customers have reduced production or suspended manufacturing operations in North America and Europe on a temporary basis. While the pandemic has resulted in the temporary closure of a small number of the Company's manufacturing facilities during 2020, all of our manufacturing facilities are currently operating. Since the duration of the pandemic is uncertain, the Company is takingmanagement has taken a series of actions to address the financial impact, including announcing certain headcount reductions and reducing certain cash outflows by suspending dividends on common stock and reducing the level of its capital expenditures to preserve cash and maintain liquidity.
The preparation of the Consolidated Financial Statements of the Company in conformity with GAAP requires management to make certain judgments, estimates, and assumptions. 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. The impact of COVID-19 is rapidly changing and of unknown duration and macroeconomic impact and as a result, these considerations remain highly uncertain. We haveManagement has made ourits best estimates using all relevant information available at the time, but it is possible that our estimates will differ from our actual results and affect the Consolidated Financial Statements in future periods and potentially require adverse adjustments to the recoverability of goodwill, intangible and long-lived assets, the realizability of deferred tax assets and other judgementsjudgments and estimations and assumptions that may be impacted by COVID-19.
As previously disclosed, during the third quarter of 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows for the six months ended June 30, 2020. Although management has determined that such misclassification was not material, the Company revised the accompanying Statement of Consolidated Cash Flows for the six months ended June 30, 2020, resulting in an $83 increase to previously reported capital expenditures and decrease to cash provided from investing activities with a corresponding reduction (decrease) in accounts payable, trade and increase in cash provided by operations.
Also as previously disclosed, in the third quarter of 2020, a $16 deferred tax error was identified related to periods prior to 2018. Although management determined it was not material to any periods, the Company has revised the accompanying Statement of Changes in Consolidated Equity for the three and six months ended June 30, 2020 to present the correction as a reduction to Retained earnings as of December 31, 2019.
B. Arconic Inc. Separation Transaction and Discontinued Operations
On April 1, 2020, the Company completed the previously announced separation of its business into 2 independent, publicly-traded companies. Following the Arconic Inc. Separation Transaction, Arconic Corporation holdsheld the Global Rolled Products (“GRP”) businesses (global rolled products, aluminum extrusions, and building and construction systems) previously held by the Company. The
9

Company retained the Engineered Products and Forgings businesses (engine products, fastening systems, engineered structures, and forged wheels).
The Company's Board of Directors approved the completion of the separation on February 5, 2020, which was effected by the distribution (the “Distribution”) by the Company of all of the outstanding common stock of Arconic Corporation on April 1, 2020 to the Company’s stockholders who held shares as of the close of business on March 19, 2020 (the “Record Date”). In the Distribution, each Company stockholder of record as of the Record Date received one share of Arconic Corporation common stock for every four shares of the Company’s common stock held as of the Record Date. The Company did not issue fractional shares of Arconic Corporation common stock in the Distribution. Instead, each stockholder otherwise entitled to a fractional share of Arconic Corporation common stock received cash in lieu of fractional shares.
9

On March 31, 2020, inIn 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 Distribution, including the following: a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and certain Patent, Know-How, Trade Secret License and Trademark License Agreements, and Raw Material Supply Agreements.
On February 7, 2020, Arconic Corporation completed an offering of $600 aggregate principal amount of 6.125% senior secured second-lien notes due 2028. On March 25, 2020.2020, Arconic Corporation entered into a credit agreement which provided for a $600 aggregate principal amount seven-yearseven-year senior secured first-lien loan B facility and a revolving credit facility which is guaranteed by certain of Arconic Corporation's wholly-owned domestic subsidiaries and secured on a first-priority basis by liens on substantially all assets of Arconic Corporation and subsidiary guarantors. Arconic Corporation used the proceeds to make payment to the Company to fund the transfer of certain assets to Arconic Corporation relating to the Arconic Inc. Separation Transaction and for general corporate purposes. The Company incurred debt issuance costs of $45 associated with these issuances for the first quarter of 2020 and six months ended June 30, 2020.
On February 1, 2020, Arconic Corpthe Company completed the sale of its rolling millionmill in Itapissuma, Brazil for $50 in cash which resulted in a loss of $59, of which $53 was recognized in Restructuring and other charges within discontinued operations in the second half of 2019 and $6 in the first quarter of 2020 and six months ended June 30, 2020. On March 1, 2020, Arconic Corporation sold its hard alloy extrusions plant in South Korea for $62 in cash, which resulted in a $27 gain that was recognized in Restructuring and other charges within discontinued operations in the first quarter of 2020 and six months ended June 30, 2020.
Discontinued Operations
The results of operations of Arconic Corporation are presented as discontinued operations in the Statement of Consolidated Operations as summarized below:
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Sales$—  $1,874  $1,576  $3,662  
Cost of goods sold—  1,603  1,292  3,129  
Selling, general administrative, research and development and other expenses4  85  106  160  
Provision for depreciation and amortization—  61  59  122  
Restructuring and other charges—  27  (18) (5) 
Interest expense—  —  7  —  
Other expense, net—  24  42  43  
Income (loss) from discontinued operations(4) 74  88  213  
Provision for income taxes8  59  38  97  
Income (loss) from discontinued operations after income taxes$(12) $15  $50  $116  
Second quarter endedSix months ended
June 30,June 30,
20202020
Sales$0 $1,575 
Cost of goods sold0 1,293 
Selling, general administrative, research and development and other expenses5 106 
Provision for depreciation and amortization0 58 
Restructuring and other charges0 (18)
Operating (loss) income from discontinued operations(5)136 
Interest expense0 7 
Other expense, net0 41 
(Loss) income from discontinued operations(5)88 
Provision for income taxes7 38 
(Loss) income from discontinued operations after income taxes$(12)$50 

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The following table presents purchases of property, plantproperties, plants, and equipment, proceeds from the sale of businesses and the provision for depreciation and amortization of discontinued operations related to Arconic Corporation:
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Capital Expenditures$—  $35  $25  $81  
Proceeds from the sales of businesses$—  $—  $112  $—  
Provision for depreciation and amortization$—  $61  $59  $122  

On April 1, 2020, management evaluated the net assets of Arconic Corporation for potential impairment and determined that no impairment charge was required.
Second quarter endedSix months ended
June 30,June 30,
20202020
Capital expenditures$0 $72 
Proceeds from the sales of businesses$0 $112 
Provision for depreciation and amortization$0 $58 
The cash flows and equity related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows or Statement of Comprehensive Income for all periods presented.

10

The carrying amount ofpresented prior to the major classes of assets and liabilities related to Arconic Corporation classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheet consisted of the following:
December 31, 2019
Total Assets of Discontinued Operations
Cash and cash equivalents$71 
Receivables from customers385 
Other receivables135 
Inventories822 
Prepaid expenses and other current assets29 
Current assets of discontinued operations1,442 
Properties, plants, and equipment, net2,834 
Goodwill426 
Intangibles, net60 
Deferred income taxes383 
Other noncurrent assets196 
Noncurrent assets of discontinued operations3,899 
Total assets of discontinued operations$5,341 
Total Liabilities of Discontinued Operations:
Accounts payable, trade$1,067 
Accrued compensation and retirement costs147 
Taxes, including income taxes22 
Other current liabilities188 
Current liabilities of discontinued operations1,424 
Accrued pension benefits1,430 
Accrued other postretirement benefits514 
Other noncurrent liabilities and deferred credits314 
Noncurrent liabilities of discontinued operations2,258 
Total liabilities of discontinued operations$3,682 

Inc. Separation Transaction.
C. Recently Adopted and Recently Issued Accounting Guidance
Adopted
On January 1, 2020,2021, the Company adopted changes issued by the Financial Accounting Standards Board ("FASB"(“FASB”) relatedthat were intended to the impairment modelsimplify various aspects of accounting for expected credit losses. The new impairment model (known as the current expected credit loss ("CECL") model) is based on expected losses rather than incurred losses. The Company recognizes as an allowance its estimate of expected credit losses. The CECL model appliesincome taxes by eliminating certain exceptions contained in existing guidance and amending other guidance to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, andsimplify several other loan commitments and requires the measurement of expected credit losses on assets including those that have a low risk of loss.income tax accounting matters. The adoption of this new guidance did not have a material impact on the Consolidated Financial Statements.
Issued
In August 2018, the FASB issued guidance that impacts disclosures for defined benefit pension plans and other postretirement benefit plans. These changes become effective for the Company's 2020 annual report. Management has determined that the adoption of this guidance will not have a material impact on the Consolidated Financial Statements and plans to adopt for the 2020 annual report.
In December 2019, the FASB issued guidance that is intended to simplify various aspects related to the accounting for income taxes. These changes become effective on January 1, 2021, with early adoption permitted. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements and plans to adopt on January 1, 2021.
11

In March 2020, the FASB issued amendments that provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform, if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBORLondon Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. Management is currently evaluating the potential impact of these changes on the Consolidated Financial Statements.
D. Segment Information
FollowingHowmet is a global leader in lightweight metals engineering and manufacturing. Howmet’s innovative, multi-material products, which include nickel, titanium, aluminum, and cobalt, are used worldwide in the Arconic Inc. Separation Transaction, aerospace (commercial and defense), commercial transportation, and industrial and other end markets. Segment performance under Howmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment operating profit. Howmet’s definition of Segment operating profit is Operating income excluding Special items. Special items include Restructuring and other charges. Segment operating profit may not be comparable to similarly titled measures of other companies. Differences between segment totals and consolidated Howmet are in Corporate.
Howmet’s operations consist of 4 worldwide reportable segments as follows:
Engine Products
Engine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines and industrial gas turbines. Engine Products produces rotating parts as well as structural parts.
Fastening Systems
Fastening Systems produces aerospace fastening systems, as well as commercial transportation, industrial and other fasteners. The business’s high-tech, multi-material fastening systems are found nose to tail on aircraft and aero engines. The business’s products are also critical components of industrial gas turbines, automobiles, commercial transportation vehicles, andautomobiles, construction and industrial equipment.equipment and renewable energy sector.

11

Engineered Structures
Engineered Structures produces titanium and aluminum ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, extrusions formingsforming and machining services for airframe, wing, aero-engine, and landing gear components. Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined components and assemblies for aerospace and defense applications.
Forged Wheels
Forged Wheels provides forged aluminum wheels and related products for heavy-duty trucks and the commercial transportation markets.
Goodwill     
The Company had $4,051$4,090 of Goodwill at June 30, 2020,2021 and the Company reviews it annually for impairment annually in the fourth quarter, or more frequently, if indicators exist or if a decision is made to sell or realign a business.
On January 1, 2020, management transferred the Savannah business from the Engine Products segment to the Engineered Structures segment, based on synergies with forgings technologies and manufacturing capabilities. As a result of the reorganization, goodwill of $17 was reallocated from Engine Products to Engineered Structures, and these reporting units were evaluated for impairment during the first quarter of 2020. The estimated fair value of each of these reporting units substantially exceeded their carrying value; thus, there was no0 goodwill impairment at the date the business was transferred.
During the first quarter of 2020, Howmet's market capitalization declined significantly compared to the fourth quarter of 2019. Over the same period, the equity value of our peer group companies, and the overall U.S. stock market also declined significantly amid market volatility. In addition, as a result of the COVID-19 pandemic and measures designed to contain the spread, global sales globally to customers in the aerospace and commercial transportation industries that are impacted by COVID-19 have been and are expected to be negatively impacted compared to 2019 as a result of disruption in demand. As a result of these macroeconomic factors, we performed a qualitative impairment test to evaluate whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value.
As a result of this assessment, the Company performed a quantitative impairment test in the first quarter of 2020 for the Engineered Structures reporting unit and concluded that though the margin between the fair value of the reporting unit and carrying value had declined from approximately 60% to approximately 15%, it was not impaired. Consistent with prior practice, a discounted cash flow model was used to estimate the current fair value of the reporting unit. The significant assumptions and estimates utilized to determine fair value were developed utilizing current market and forecast information reflecting the disruption in demand that has and is expected to negatively impact the Company’s sales globally in the aerospace industry. In the second quarter of 2020, there were no indicators of impairment identified for the Engineered Structures reporting unit as the margin between fair value of the reporting unit and carrying value exceeded 20%. If our actual results or external market factors decline significantly from management’s estimates, future goodwill impairment charges may be necessary and could be material.

 Since the first quarter of 2020, there have been no indicators of impairment identified for the Engineered Structures reporting unit or any other reporting units or indefinite-lived intangible assets.
12

The operating results of the Company’s reportable segments were as follows:
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Second quarter ended June 30, 2020
Sales:
Third-party sales$585  $326  $229  $113  $1,253  
Inter-segment sales1  —  2  —  3  
Total sales$586  $326  $231  $113  $1,256  
Profit and loss:
Segment operating profit$105  $70  $19  $6  $200  
Restructuring and other charges (credits)22  24  (5) 1  42  
Provision for depreciation and amortization31  12  14  9  66  
Capital expenditures14  7  5  4  30  
Second quarter ended June 30, 2019
Sales:
Third-party sales$835  $399  $331  $257  $1,822  
Inter-segment sales3  —  3  —  6  
Total sales$838  $399  $334  $257  $1,828  
Profit and loss:
Segment operating profit$163  $99  $25  $73  $360  
Restructuring and other charges250  1  193  1  445  
Provision for depreciation and amortization35  12  14  8  69  
Capital expenditures55  8  7  20  90  
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Six months ended June 30, 2020
Sales:
Third-party sales$1,366  $711  $504  $304  $2,885  
Inter-segment sales3  —  5  —  8  
Total sales$1,369  $711  $509  $304  $2,893  
Profit and loss:
Segment operating profit$270  $166  $47  $56  $539  
Restructuring and other charges (credits)35  26  12  3  76  
Provision for depreciation and amortization61  24  27  19  131  
Capital expenditures33  15  8  11  67  
Six months ended June 30, 2019
Sales:
Third-party sales$1,648  $794  $625  $511  $3,578  
Inter-segment sales8  —  6  —  14  
Total sales$1,656  $794  $631  $511  $3,592  
Profit and loss:
Segment operating profit$304  $195  $41  $133  $673  
Restructuring and other charges253  6  197  5  461  
Provision for depreciation and amortization69  24  31  16  140  
Capital expenditures126  17  18  45  206  

follows. Differences between total segment and consolidated totals are in Corporate.
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Second quarter ended June 30, 2021
Sales:
Third-party sales$544 $262 $160 $229 $1,195 
Inter-segment sales1 0 2 0 3 
Total sales$545 $262 $162 $229 $1,198 
Profit and loss:
Segment operating profit$100 $50 $11 $61 $222 
Restructuring and other charges5 3 0 0 8 
Provision for depreciation and amortization30 13 13 9 65 
Capital expenditures16 9 5 13 43 
Second quarter ended June 30, 2020
Sales:
Third-party sales$585 $326 $229 $113 $1,253 
Inter-segment sales1 0 2 0 3 
Total sales$586 $326 $231 $113 $1,256 
Profit and loss:
Segment operating profit$105 $70 $19 $6 $200 
Restructuring and other charges (credits)22 24 (5)1 42 
Provision for depreciation and amortization31 12 14 9 66 
Capital expenditures14 7 5 4 30 
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Six months ended June 30, 2021
Sales:
Third-party sales$1,078 $534 $336 $456 $2,404 
Inter-segment sales2 0 3 0 5 
Total sales$1,080 $534 $339 $456 $2,409 
Profit and loss:
Segment operating profit$201 $95 $21 $131 $448 
Restructuring and other charges10 5 1 0 16 
Provision for depreciation and amortization61 25 25 19 130 
Capital expenditures27 14 10 22 73 
Six months ended June 30, 2020
Sales:
Third-party sales$1,366 $711 $504 $304 $2,885 
Inter-segment sales3 0 5 0 8 
Total sales$1,369 $711 $509 $304 $2,893 
Profit and loss:
Segment operating profit$270 $166 $47 $56 $539 
Restructuring and other charges35 26 12 3 76 
Provision for depreciation and amortization61 24 27 19 131 
Capital expenditures33 15 8 11 67 
13

The following table reconciles Total segment operating profit to Income (loss) from continuing operations before income taxes:
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Total segment operating profit$222 $200 $448 $539 
Unallocated amounts:
Restructuring and other charges(5)(105)(14)(144)
Corporate expense(10)(21)(38)(63)
Consolidated operating income$207 $74 $396 $332 
Interest expense(89)(144)(161)(228)
Other (expense) income, net(8)(16)(12)8 
Income (loss) from continuing operations before income taxes$110 $(86)$223 $112 
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Total segment operating profit$200  $360  $539  $673  
Unallocated amounts:
Restructuring and other charges(105) (472) (144) (516) 
Corporate expense(21) (64) (63) (119) 
Consolidated operating income (loss)$74  $(176) $332  $38  
Interest expense(144) (86) (228) (171) 
Other expense, net(16) (6) 8  (18) 
Income (loss) from continuing operations before income taxes$(86) $(268) $112  $(151) 
The following table reconciles Total segment capital expenditures, which are presented on an accrual basis, with Capital expenditures as presented on the Statement of Consolidated Cash Flows. Differences between segment and consolidated totals are in Corporate and discontinued operations, including the impact of changes in accrued capital expenditures during the period.
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Total segment capital expenditures$43 $30 $73 $67 
Corporate and discontinued operations(7)2 18 117 
Capital expenditures$36 $32 $91 $184 
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The following table disaggregates segment revenue by major end market served. Differences between total segment and consolidated totals are in Corporate.
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Second quarter ended June 30, 2020
Aerospace$437  $263  $208  $—  $908  
Commercial Transportation—  35  —  113  148  
Industrial and Other148  28  21  —  197  
Total end-market revenue$585  $326  $229  $113  $1,253  
Second quarter ended June 30, 2019
Aerospace$676  $304  $303  $—  $1,283  
Commercial Transportation5  62  —  257  324  
Industrial and Other154  33  28  —  215  
Total end-market revenue$835  $399  $331  $257  $1,822  
Six months ended June 30, 2020
Aerospace$1,071  $564  $462  $—  $2,097  
Commercial Transportation—  80  —  304  384  
Industrial and Other295  67  42  —  404  
Total end-market revenue$1,366  $711  $504  $304  $2,885  
Six months ended June 30, 2019
Aerospace$1,348  $610  $575  $—  $2,533  
Commercial Transportation12  120  —  513  645  
Industrial and Other288  64  50  (2) 400  
Total end-market revenue$1,648  $794  $625  $511  $3,578  
Engine ProductsFastening SystemsEngineered StructuresForged WheelsTotal
Segment
Second quarter ended June 30, 2021
Aerospace - Commercial$260 $129 $79 $0 $468 
Aerospace - Defense121 41 64 0 226 
Commercial Transportation0 49 0 229 278 
Industrial and Other163 43 17 0 223 
Total end-market revenue$544 $262 $160 $229 $1,195 
Second quarter ended June 30, 2020
Aerospace - Commercial$312 $224 $144 $0 $680 
Aerospace - Defense125 39 64 0 228 
Commercial Transportation0 34 0 113 147 
Industrial and Other148 29 21 0 198 
Total end-market revenue$585 $326 $229 $113 $1,253 
Six months ended June 30, 2021
Aerospace - Commercial$487 $277 $159 $0 $923 
Aerospace - Defense272 83 141 0 496 
Commercial Transportation0 95 0 456 551 
Industrial and Other319 79 36 0 434 
Total end-market revenue$1,078 $534 $336 $456 $2,404 
Six months ended June 30, 2020
Aerospace - Commercial$819 $481 $328 $0 $1,628 
Aerospace - Defense252 83 134 0 469 
Commercial Transportation0 80 0 304 384 
Industrial and Other295 67 42 0 404 
Total end-market revenue$1,366 $711 $504 $304 $2,885 

In the six months ended June 30, 2020, theThe Company derivedderived 59% and 73% of its revenue from aerospace end markets of which 12% related to for the six months ended June 30, 2021 and 2020, respectively.
General Electric Company.
Company represented approximately 12% of the Company’s third-party sales for both the six months ended June 30, 2021 and 2020, primarily from Engine Products.

E. Restructuring and Other Charges
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Layoff costs$2 $54 $2 $76 
Net reversals of previously recorded layoff reserves(2)(8)(1)(10)
Pension, Other post-retirement benefits and Deferred Compensation - net settlements (G)
3 64 6 64 
Non-cash asset impairments4 0 4 0 
Net loss related to divestitures of assets and businesses (Q)
0 (7)4 9 
Other(2)2 (1)5 
Restructuring and other charges$5 $105 $14 $144 
14
15

E.In the second quarter and six months ended June 30, 2021, the Company recorded Restructuring and Other Chargesother charges of $5 and $14, respectively, which was primarily due to charges for pension plan settlements and exit related costs.
In the second quarter of 2020, the Company recorded Restructuring and other charges of $105, ($80 after-tax), which included a $64 ($53 after-tax) charge for United Kingdom (U.K.) and U.S. pension plans' settlement accounting;plan settlements; a $54 ($38 after-tax) charge for layoff costs, including the separation of approximately 2,521 employees (1,169 in Fastening Systems, 1,116 in Engine Products, 200 in Engineered Structurescosts; and 36 in Forged Wheels); anda $2 ($2 after-tax) charge for various other exit costs.These charges were partially offset by an $8 ($6 after-tax) benefit from the reversal of several existing layoff reserves;reserves and a $7 ($7 after-tax) benefit from the reversal of an impairment due to change in classification from held for sale to held for use related to a U.K. plant.an aerospace components business in the United Kingdom (U.K.).
In the six months ended June 30, 2020, the Company recorded Restructuring and other charges of $144, ($114 after-tax), which included a $76 ($55 after-tax)charge for layoff costs, including the separation of approximately 2,981 employees (1,291 in Engine Products, 1,275 in Fastening Systems, 300 in Engineered Structures, 92 in Forged Wheels and 23 in Corporate );costs; a $64 ($53 after-tax) charge for U.K. and U.S. pension plans' settlement accounting;plan settlements; a $6 ($6 after-tax) post-closing adjustment related to the sale of the Company’s U.K. forgings business;business (which was formerly part of the Engine Products segment); $5 ($5 after-tax) for impairment of assets associated with an agreement to sell an aerospace components business in the U.K. (within the Engineered Structures segment);and a $5 ($5 after-tax) charge for various other exit costs.These charges were partially offset by a benefit of $10 ($8 after-tax) related to the reversal of a number of prior period programs;programs and a gain of $2 ($2 after-tax) on the sale of assets.
In the second quarter of 2019, the Company recorded Restructuring and other charges of $472 ($377 after-tax), which included a $ $428 ($345 after-tax) charge for impairment of the Disks long-lived asset group; a $15 ($11 after-tax) charge for layoff costs including the separation of approximately 220 employees (53 in Engine Products, 53 in Engineered Structures, 69 in Corporate, 39 in Fastening Systems and 6 in Forged Wheels); a $12 ($9 after-tax) charge for other exit costs from lease terminations, primarily related to the exit of the corporate aircraft; a $12 ($9 after-tax) loss on sale primarily related to a small additive business within the Engineered Structures segment; a $6 ($5 after-tax) charge for impairment of properties, plant, and equipment; a $2 ($1 after-tax) charge for pension plan settlement accounting; offset by a benefit of $3 ($3 after-tax) for the reversal of a number of small layoff reserves related to prior periods.
In the six months ended June 30, 2019, the Company recorded Restructuring and other charges of $516 ($411 after-tax), which included a $428 ($345 after-tax) charge for impairment of the Disks long-lived asset group; a $68 ($52 after-tax) charge for layoff costs, including the separation of approximately 901 employees (103 in Engine Products, 112 in Engineered Structures, 132 in Fastening Systems, 60 in Forged Wheels and 494 in Corporate); a $12 ($9 after-tax) charge for other exit costs from lease terminations, primarily related to the exit of the corporate aircraft; a $12 ($9 after-tax) loss on sale of assets primarily related to a small additive business; a $6 ($5 after-tax) charge for impairment of properties, plant, and equipment; a $4 ($3 after-tax) charge for pension plan settlement accounting; a $2 ($1 after-tax) net charge for executive severance net of the benefit of forfeited executive stock compensation and $3 ($3 after-tax) charge for other exit costs; partially offset by a benefit of $15 ($12 after-tax) related to the elimination of the life insurance benefit for the U.S. salaried and non-bargaining hourly retirees of the Company and its subsidiaries, and a benefit of $4 ($4 after-tax) for the reversal of a number of small layoff reserves related to prior periods.
The Company recorded an impairment charge of $428 related to the Disks long-lived asset group in the second quarter and six months ended 2019, of which $247 and $181 was related to the Engine Products and Engineered Structures segments, respectively, as the carrying value exceeded the forecasted undiscounted cash flows composed of a write-down of properties, plant and equipment, intangible assets and certain other noncurrent assets.
Layoff costsOther exit costsTotal
Reserve balances at December 31, 2019$13  $—  13  
Cash payments(24) —  (24) 
Restructuring charges131  13  144  
Other(1)
(64) (13) (77) 
Reserve balances at June 30, 2020$56  $—  $56  

(1) In 2020, Layoff costs included a $64 charge for U.K. and U.S. pension plans' settlement accounting while Other exit costs included a charge of $6 for impairment of assets and a $6 post-closing adjustment, both associated with an agreement to sell an aerospace component business in the U.K.; and a $3 charge for other exit costs which were offset by a gain of $2 on the sale of assets.
Layoff costsOther exit costsTotal
Reserve balances at December 31, 2020$54 $0 $54 
Cash payments(32)0 (32)
Restructuring charges7 7 14 
Other(1)
(8)(7)(15)
Reserve balances at June 30, 2021$21 $0 $21 

(1)In the six months ended June 30, 2021, layoff costs included a $6 charge for pension plan settlements and a $2 charge for other layoffs costs; while other exit costs included a $4 charge for impairment of assets associated with the sale of a small manufacturing business and a $6 charge for other exit costs including accelerated depreciation, partially offset by a $3 favorable working capital related settlement.
The remaining Layoff cost reserves are expected to be paid in cash during 2020.by the end of 2021.
F. Other Expense (Income), Net
Second quarter endedSix months ended
 June 30,June 30,
2021202020212020
Non-service related net periodic benefit cost$3 $5 $6 $11 
Interest income(1)0 (1)(4)
Foreign currency losses (gains), net1 (7)3 (7)
Net loss from asset sales1 2 4 4 
Deferred compensation4 7 6 (3)
Other, net0 9 (6)(9)
Other expense (income), net$8 $16 $12 $(8)

1516

F. Other Expense (Income), Net
Second quarter endedSix months ended
 June 30,June 30,
2020201920202019
Non-service related net periodic benefit cost$5  $4  11  8  
Interest income—  (5) (4) (15) 
Foreign currency (gains) losses, net(7) (4) (7) 1  
Net loss from asset sales2  5  4  7  
Deferred compensation7  5  (3) 15  
Other, net9  1  (9) 2  
$16  $6  $(8) $18  

G. Pension and Other Postretirement Benefits
The components of net periodic benefit cost were as follows:
Second quarter endedSix months ended
 June 30,June 30,
2021202020212020
Pension benefits
Service cost$1 $2 $2 $9 
Interest cost12 17 24 64 
Expected return on plan assets(23)(24)(46)(94)
Recognized net actuarial loss15 12 29 54 
Settlements3 64 6 64 
Net periodic benefit cost(1)
8 71 15 97 
Discontinued operations0 0 0 20 
Net amount recognized in continuing operations in Statement of Consolidated Operations$8 $71 $15 $77 
Other postretirement benefits    
Service cost$1 $1 $1 $2 
Interest cost2 1 3 7 
Recognized net actuarial loss0 0 0 2 
Amortization of prior service benefit(3)(1)(4)(3)
Net periodic benefit cost(1)
0 1 0 8 
Discontinued operations0 0 0 6 
Net amount recognized in continuing operations in Statement of Consolidated Operations$0 $1 $0 $2 
Second quarter endedSix months ended
 June 30,June 30,
2020201920202019
Pension benefits
Service cost$2  $6  $9  $13  
Interest cost17  59  64  118  
Expected return on plan assets(24) (71) (94) (143) 
Recognized net actuarial loss12  34  54  69  
Amortization of prior service cost (benefit)—  1  —  1  
Settlements64  2  64  4  
Net periodic benefit cost(1)
71  31  97  62  
Discontinued operations—  24  20  48  
Net amount recognized in Statement of Consolidated Operations$71  $7  $77  $14  
Other postretirement benefits    
Service cost$1  $2  $2  $4  
Interest cost1  7  7  14  
Recognized net actuarial loss—  1  2  2  
Amortization of prior service cost (benefit)(1) (2) (3) (3) 
Curtailments—  —  —  (58) 
Net periodic benefit cost(1)
18  8  (41) 
Discontinued operations—  7  6  (29) 
Net amount recognized in Statement of Consolidated Operations$1  $1  $2  $(12) 
(1)Service cost for continuing operations was included within Cost of goods sold, Selling, general administrative, and other expenses, and Research and development expenses; settlements and curtailments were included in Restructuring and other charges; and all other cost components were recorded in Other expense (income), net in the Statement of Consolidated Operations. The amounts included in Net periodic benefit cost include costs related to both continuing and discontinued operations for the six months ended June 30, 2020.
Pension benefits
In the second quarter of 2021, the Company applied settlement accounting to certain U.S. pension plans due to lump sum payments made to participants, which resulted in settlement charges of $3 and $6 in the second quarter and six months ended June 30, 2021, respectively, that were recorded in Restructuring and other charges.
On March 11, 2021, the American Rescue Plan Act of 2021 (“ARPA 2021”) was signed into law in the United States. ARPA 2021, in part, provides temporary relief for employers who sponsor defined benefit pension plans related to funding contributions under the Employee Retirement Income Security Act of 1974. Management expects Howmet’s estimated pension contributions and other postretirement benefit payments in 2021 to be approximately $120.
In the second quarter of 2020, the Company undertook a number of actions to reduce pension obligations in the U.K. by offering lump sum payments to certain plan participants and entering into group annuity contracts with a third party carrier to pay and administer future annuity payments. The Company applied settlement accounting to these U.K. pension plans which resulted in settlement charges of $62 that were recorded in Restructuring and other charges in the Statement of Consolidated Operations. The Company also applied settlement accounting to a U.S. pension plan due to lump sum payments to participants which resulted in settlement charges of $2 that were recorded in Restructuring and other charges.
Other postretirement benefits
In the first quarter of 2021, the Company announced a plan administration change of certain of its Medicare-eligible prescription drug benefits to an Employer Group Waiver Plan with wrap-around secondary plan effective July 1, 2021. The administration change is expected to reduce costs to the Company through the usage of Medicare Part D and drug manufacturer subsidies. Due to this amendment, along with the associated plan remeasurements, the Company recorded a decrease to its
16
17

Accrued other postretirement benefits liability of $39, which was offset in Accumulated other comprehensive loss in the Consolidated Balance Sheet.
In the second quarter of 2020, the Company communicated to plan participants that for its U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries, it would eliminate certain health care subsidies effective December 31, 2021 and that for certain bargained retirees of the Company, it would eliminate certain health care subsidies effective December 31, 2021 and the life insurance benefit effective August 1, 2020. As a result of these changes, in the second quarter of 2020, the Company recorded a decrease to the Accrued other postretirement benefits liability of $6, which was offset in Accumulated other comprehensive loss.
In the first quarter of 2019, the Company communicated to plan participants that for its U.S. salaried and non-bargained hourly retirees of the Company and its subsidiaries, it would eliminate the life insurance benefit effective May 1, 2019, and certain health care subsidies effective December 31, 2019. As a result of these changes, in the first quarter of 2019, the Company recorded a decrease to the Accrued other postretirement benefits liability of $75, which was offset by a curtailment benefit of $58 in Restructuring and other charges in the Statement of Consolidated Operations and $17 in Accumulated other comprehensive loss in the Statement of Changes in Consolidated Equity.
In the second quarter and six months ended June 30, 2019, the Company applied settlement accounting to a U.S. pension plan due to lump sum payments to participants, which resulted in settlement charges of $2 and $4, respectively, that were recorded in Restructuring and other charges.
H. Income Taxes
The Company’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pre-tax ordinary income. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur. In addition, the tax provision is adjusted for the interim period impact of non-benefited pre-tax losses.
The estimated annual effective tax rate, before discrete items, applied to ordinary income was 29.1% in both the second quarter and six months ended June 30, 2021, and 36.1% in both the second quarter and six months ended June 30, 2020,2020. The 2021 rate was higher than the U.S. federal statutory rate of 21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income and 51.8% in both the second quarterother foreign earnings, incremental state tax and six months ended June 30, 2019.foreign taxes on earnings also subject to U.S. federal income tax, and nondeductible expenses. The 2020 rate was higher than the U.S. federal statutory rate of 21% primarily due to U.S. tax on foreign earnings, incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax and higher nondeductible expenses. The 2019 rate was higher due to U.S. tax on foreign earnings including estimated U.S. tax on Global Intangible Low Taxed Income, nondeductible impairment of certain domestic and foreign long-lived assets and other nondeductible expenses.
For the second quarter of 20202021 and 2019,2020, the tax rate including discrete items was 32.7% (provision on income) and 2.3% and 49.3% (both are benefits(benefit on losses)loss), respectively. For the second quarter of 2021, the Company recorded a discrete tax charge of $4 related to a $2 charge for a U.K. tax rate change and a net $2 charge for other items. For the second quarter of 2020, the Company recorded a discrete tax chargebenefit of $10 related to a $6 charge for the remeasurement of deferred tax balances in various jurisdictions as a result of the Arconic Inc. Separation Transaction and a net $4 charge for prior year items. For the second quarter of 2019, the Company recorded a discrete tax benefit of $37 related to a $25 benefit to deduct prior year foreign taxes rather than claim a U.S. foreign tax credit and a $12 benefit to remeasure certain deferred tax assets as a result of a foreign tax rate change.
For the six months ended June 30, 20202021 and 2019,2020, the tax rate including discrete items was 2.3% (provision30.9% and 38.4% (both are provisions on income) and 49.3% (benefit on loss), respectively. For the six months ended June 30, 2019,2021, the Company recorded a discrete tax benefitcharge of $37$3 related to a $25 benefit to deduct prior year foreign taxes rather than claim$2 charge for a U.S. foreignU.K. tax creditrate change and a $12 benefitnet charge of $1 for other items.For the six months ended June 30, 2020, the Company recorded a discrete tax charge of $2 related to remeasure certaina $6 charge for the remeasurement of deferred tax assetsbalances in various jurisdictions as a result of the Arconic Inc. Separation Transaction, a foreign tax rate change.net $3 charge for prior year items, partially offset by a $5 benefit related to stock compensation and a net $2 benefit for other small items.
The tax provisionsprovision (benefit) for the second quarter and six months ended June 30, 20202021 and 20192020 were comprised of the following:
Second quarter endedSix months ended
 June 30,June 30,
 2020201920202019
Pre-tax income (loss) at estimated annual effective income tax rate before discrete items$(31) $(139) $40  $(78) 
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income18  31  —  —  
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized1  13  1  14  
Other discrete items10  (37) 2  (37) 
Provision (benefit) for income taxes$(2) $(132) $43  $(101) 
Second quarter endedSix months ended
 June 30,June 30,
 2021202020212020
Pre-tax income (loss) at estimated annual effective income tax rate before discrete items$32 $(31)$65 $40 
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income(1)18 0 0 
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized1 1 1 1 
Other discrete items4 10 3 2 
Provision (benefit) for income taxes$36 $(2)$69 $43 

1718

During the period, a $16 tax adjustment was identified related to periods prior to 2018. The adjustment was evaluated and determined not to be material to any periods. As such, it was corrected through Retained earnings in the Statement of Changes in Consolidated Equity.
I. Earnings Per Share
Basic earnings per share ("EPS"(“EPS”) amounts are computed by dividing earnings, after the deduction of preferred stock dividends declared, by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.
The information used to compute basic and diluted EPS attributable to the Company'sHowmet common shareholders was as follows (shares in millions):
Second quarter endedSix months ended
 June 30,June 30,
 2020201920202019
Net income (loss) attributable to common shareholders:
Income (loss) from continuing operations attributable to common shareholders$(84) $(136) $69  $(50) 
Income (loss) attributable from discontinued operations(12) 15  50  116  
Net income (loss) attributable to common shareholders(96) (121) 119  66  
Less: preferred stock dividends declared—  —  (1) (1) 
Net income available to the Company's common shareholders - basic(96) (121) 118  65  
Add: Interest expense related to convertible notes—  3  —  6  
Net income available to the Company's common shareholders - diluted$(96) $(118) $118  $71  
Average shares outstanding - basic436  445  436  458  
Effect of dilutive securities:
Stock options—  —  —  —  
Stock and performance awards—  —  4  4  
Convertible notes(1)
—  —  —  —  
Average shares outstanding - diluted436  445  440  462  
(1)The convertible notes matured on October 15, 2019. No shares of the Company’s common stock were issued in connection with the maturity or the final conversion of the convertible notes. As of October 15, 2019, the calculation of average diluted shares outstanding ceased to include the approximately 15 million shares of common stock and the corresponding interest expense previously attributable to the convertible notes.
Second quarter endedSix months ended
 June 30,June 30,
 2021202020212020
Net income (loss) from continuing operations attributable to common shareholders$74 $(84)$154 $69 
(Loss) income from discontinued operations0 (12)0 50 
Net income (loss) attributable to common shareholders74 (96)154 119 
Less: preferred stock dividends declared1 0 1 1 
Net income (loss) available to Howmet Aerospace common shareholders - basic and diluted$73 $(96)$153 $118 
Average shares outstanding - basic432 436 433 436 
Effect of dilutive securities:
Stock options1 0 1 0 
Stock and performance awards4 0 4 4 
Average shares outstanding - diluted437 436 438 440 
Common stock outstanding at June 30, 2021 and 2020 was approximately 429 million and 436 million, respectively.
On May 20, 2019, the Company announced that its Board of Directors authorized the repurchase of $500 of the Company's outstanding common stock (the “Share Repurchase Program”) 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. There was 436no stated expiration for the Share Repurchase Program under which the Company may repurchase shares from time to time and 440, respectively.pursuant to such terms, as and if it deems appropriate. The Share Repurchase Program may be suspended, modified or terminated at any time without prior notice. The decrease in common stock outstanding at June 30, 20202021 was primarily due to the impact of 8 of share repurchases duringof approximately 6 million shares in the second halfquarter ended June 30, 2021, which were purchased at an average price of 2019.$34.02 per share for approximately $200 in cash. All of the shares repurchased have been retired. After giving effect to the share repurchases made through June 30, 2021, approximately $77 remains available under the prior authorizations by the Board of Directors for the Share Repurchase Program. As average shares outstanding are used in the calculation for both basic and diluted EPS, the full impact of share repurchases was not realized in EPS in the second quarter and six months ended June 30, 2019,2021 as the share repurchases occurred at varying points during 2019.the second quarter of 2021.
On July 19, 2021, the Company’s Board of Directors declared a dividend of $0.02 per share on the outstanding common stock of the Company, to be paid on August 25, 2021, to the holders of record of the common stock at the close of business on August 6, 2021.
The following shares were excluded from the calculation of average shares outstanding – diluted as their effect was anti-dilutive (shares in millions).:
Second quarter endedSix months ended
 June 30,June 30,
 2021202020212020
Stock options(1)
0 3 0 3 
Stock and performance awards0 3 0 0 
Second quarter endedSix months ended
 June 30,June 30,
 2020201920202019
Convertible notes—  14  —  14  
Stock options(1)
3  3  3  3  
Stock and performance awards3  4  —  —  
(1)The weighted average exercise price per share of options excluded from diluted EPS was $26.04 and $32.66 as of June 30, 2020 and June 30, 2019, respectively. 2020.

1819

J. Accumulated Other Comprehensive Loss
The following table details the activity of the four components that comprise Accumulated other comprehensive loss:
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Pension and other postretirement benefits (G)
Balance at beginning of period$(938)$(2,695)$(980)$(2,732)
Other comprehensive income:
Unrecognized net actuarial gain (loss) and prior service cost/benefit30 (60)67 (59)
Tax (expense) benefit(7)8 (15)8 
Total Other comprehensive income (loss) before reclassifications, net of tax23 (52)52 (51)
Amortization of net actuarial loss and prior service cost(1)
15 74 31 117 
Tax expense(2)
(3)(13)(6)(20)
Total amount reclassified from Accumulated other comprehensive loss, net of tax(3)
12 61 25 97 
Total Other comprehensive income35 9 77 46 
Transfer to Arconic Corporation0 1,820 0 1,820 
Balance at end of period$(903)$(866)$(903)$(866)
Foreign currency translation
Balance at beginning of period$(1,010)$(661)$(966)$(596)
Foreign currency translation18 (8)(26)(87)
Net amount reclassified from Accumulated other comprehensive loss(4)
0 0 0 14 
Other comprehensive income (loss)18 (8)(26)(73)
Transfer to Arconic Corporation0 (428)0 (428)
Balance at end of period$(992)$(1,097)$(992)$(1,097)
Debt securities
Balance at beginning of period$0 $1 $0 $0 
Other comprehensive loss(5)
0 (1)0 0 
Balance at end of period$0 $0 $0 $0 
Cash flow hedges
Balance at beginning of period$7 $(14)$3 $(1)
Other comprehensive income (loss):
Net change from periodic revaluations11 3 19 (8)
Tax (expense) income(2)1 (4)0 
Total Other comprehensive income (loss) before reclassifications, net of tax9 4 15 (8)
Net amount reclassified to earnings(5)5 (8)4 
Tax expense(2)
0 0 1 0 
Total amount reclassified from Accumulated other comprehensive (loss) income, net of tax(3)
(5)5 (7)4 
Total Other comprehensive income (loss)4 9 8 (4)
Balance at end of period$11 $(5)$11 $(5)
Accumulated other comprehensive loss$(1,884)$(1,968)$(1,884)$(1,968)
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Pension and other postretirement benefits (G)
Balance at beginning of period$(2,695) $(2,304) $(2,732) $(2,344) 
Other comprehensive income:
Unrecognized net actuarial loss and prior service cost/benefit(60) (6) (59) 66  
Tax expense8  1  8  (15) 
Total Other comprehensive income (loss) before reclassifications, net of tax(52) (5) (51) 51  
Amortization of net actuarial loss and prior service cost(1)
74  36  117  15  
Tax (expense) benefit (2)
(13) (8) (20) (3) 
Total amount reclassified from Accumulated other comprehensive loss, net of tax(3)
61  28  97  12  
Total Other comprehensive income9  23  46  63  
Transfer to Arconic Corporation$1,820  $—  $1,820  $—  
Balance at end of period$(866) $(2,281) $(866) $(2,281) 
Foreign currency translation
Balance at beginning of period$(661) $(557) $(596) $(583) 
Foreign currency translation(8) (30) (87) (4) 
Net amount reclassified from Accumulated other comprehensive loss(4)
—  —  14  —  
Other comprehensive (loss) income(8) (30) (73) (4) 
Transfer to Arconic Corporation(428) —  (428) —  
Balance at end of period$(1,097) $(587) $(1,097) $(587) 
Available-for-sale securities
Balance at beginning of period$1  $—  $—  $(3) 
Other comprehensive income (loss)(5)
(1) —  —  3  
Balance at end of period$—  $—  $—  $—  
Cash flow hedges
Balance at beginning of period$(14) $9  $(1) $4  
Adoption of accounting standard—  —  —  (2) 
Other comprehensive (loss) income:
Net change from periodic revaluations3  (13) (8) (5) 
Tax expense1  3  —  2  
Total Other comprehensive loss (income) before reclassifications, net of tax4  (10) (8) (3) 
Net amount reclassified to earnings5  (1) 4  (1) 
Tax expense(2)
—  1  —  1  
Total amount reclassified from Accumulated other comprehensive loss, net of tax(3)
5  —  4  —  
Total Other comprehensive (loss) income9  (10) (4) (3) 
Balance at end of period$(5) $(1) $(5) $(1) 
Accumulated other comprehensive loss$(1,968) $(2,869) $(1,968) $(2,869) 

20

(1)These amounts were recorded in Other expense (income), net on the Statement of Consolidation Operations (see Note F).
(2)These amounts were included in Provision (benefit) for income taxes on the Statement of Consolidated Operations.
(3)A positive amount indicates a corresponding charge to earnings and a negative amount indicates a corresponding benefit to earnings.
(4)Foreign currency translation charges were included in Restructuring and other charges on the Statement of Consolidated Operations due to the sale of foreign entities.
(5)Realized gains and losses were included in Other expense (income), net on the Statement of Consolidated Operations.
19

K. Receivables
Sale of Receivables Programs
The Company has 2 accounts receivablereceivables securitization arrangements.
The first is an arrangement with several financial institutions to sell certain customer receivables without recourse on a revolving basis ("Receivables(the “Receivables Sale Program"Program”). The sale of such receivables is completed using a bankruptcy remote special purpose entity, which is a consolidated subsidiary of the Company. This arrangement historically provided up to a maximum funding of $400 for receivables sold. The Company maintains a beneficial interest, or a right to collect cash, on the sold receivables that have not been funded (deferred purchase program receivable).
In the first quarter of 2020, the Company entered into an amendment to remove subsidiaries of Arconic Corporationthe GRP business from the sale of receivables program in preparation for the Arconic Inc. Separation Transaction and repurchased the remaining $282 unpaid receivables of Arconic CorporationGRP customers in a non-cash transaction by reducing the amount of the deferred purchase program receivable. This amendment also reduced the maximum funding for receivables sold to $300. The concentration limit of one customer may be reduced at the discretion of the financial institutions or automatically upon the downgrade of its debt rating as defined in the Receivables Sale Program agreement. A reduction in the customer's concentration limit would reduce the eligible receivable funding base thereby reducing the amount of future draws available and may require repayment of a portion of existing draws.
The Company had net cash repayments totaling $22 ($41 in draws and $63 in repayments) and $136 ($138 in draws and $274 in repayments) for the six months ended June 30, 2020.2021 and June 30, 2020, respectively.
As of June 30, 20202021 and December 31, 2019,2020, the deferred purchase program receivable was $97$49 and $246,$12, respectively, which was included in Other receivables on the accompanying Consolidated Balance Sheet. The deferred purchase program receivable is reduced as collections of the underlying receivables occur; however, as this is a revolving program, the sale of new receivables will result in an increase in the deferred purchase program receivable. The Company services the customer receivables for the financial institutions at market rates; therefore, no servicing asset or liability was recorded.
Cash receipts from customer payments on sold receivables (which are cash receipts on the underlying trade receivables that have been previously sold in this program)sold) as well as cash receipts and cash disbursements from draws and repayments under the program are presented as cash receipts from sold receivables within investing activities in the Statement of Consolidated Cash Flows.
On April 14, 2020, the Company’s credit rating was downgraded by Moody’s Investors Service, Inc., which resulted in a termination event under the provisions of the Receivables Sale Program agreement for which a waiver was obtained. This termination event under the Receivables Sale Program is not an event of default under the Company’s other financing and commercial agreements, including the Credit Agreement. On May 5, 2020, an amendment to the Receivables Sale Program was executed that cured the termination event.
The second arrangement is one in which the Company, through a wholly-owned special purpose entity (“SPE”), entered intohas a receivables purchase agreement (the “Receivables Purchase Agreement”) on June 30, 2020 such that the SPE may sell certain receivables to financial institutions until the earlier of June March 30, 20212022 or a termination event. The Receivables Purchase Agreement also contains customary representations and warranties, as well as affirmative and negative covenants. Pursuant to the Receivables Purchase Agreement, the Company does not maintain effective control over the transferred receivables, and therefore accounts for these transfers as sales of receivables.
The SPE sold $77$71 and $155 of its receivables without recourse and received cash funding under this program during the second quarter and six months ended June 30, 20202021, respectively, resulting in derecognition of the receivables from the Company’s consolidated balance sheets.Consolidated Balance Sheets. As of June 30, 2021 and December 31, 2020, $68 and $46 remained outstanding from the customer, respectively. Cash received from collections of sold receivables is used by the SPE to fund additional purchases of receivables on a revolving basis, not to exceed $125, which is the aggregate maximum limit. As collateral against the sold receivables, the SPE maintains a certain level of unsold receivables, which was $30$10 and $33 at June 30, 2020.2021 and December 31, 2020, respectively. Costs associated with the sales of receivables are reflected in the Company’s Consolidated statementsStatements of operationsOperations for the periods in which the sales occur. Cash receipts from sold receivables under the Receivables Purchase Agreement are presented within Operating Activitiesoperating activities in the Statement of Consolidated Cash Flows.
The Company had accounts receivable securitization arrangements totaling $425 at both June 30, 2021 and December 31, 2020, of which $250 was drawn at June 30, 2021 and at December 31, 2020. The net cash funding from the sale of accounts receivable was neither a use of cash nor a source of cash in 2021.

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Other Customer Receivable Sales
In the second quarter and six months ended June 30, 2021, the Company sold $98 and $164, respectively, of certain customers’ receivables in exchange for cash (of which $92 remained outstanding from the customers at June 30, 2021), the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. In the second quarter and six months ended June 30, 2020, the Company supplemented the first accounts receivable securitization arrangement by selling $10sold $58 and $24$89, respectively, of a certain customer’scustomers’ receivables in exchange for cash, the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. The sale of these customer receivables partially offset the maximum funding reduction resulting from the Arconic Inc. Separation Transaction as well as customer concentration limits within the first accounts receivable securitization arrangement.
In the second quarter and six months ended June 30, 2020, the Company also began to sell another customer’s receivables of $48 and $65 in exchange for cash, the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. The sale of these customer receivables is being undertaken to offset a change in the customer’s payment patterns in which the customer had been taking a contractually available discount for paying early.
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L. Inventories
June 30, 2020December 31, 2019
Finished goods$525  $524  
Work-in-process764  741  
Purchased raw materials339  299  
Operating supplies45  43  
Total inventories$1,673  $1,607  
June 30, 2021December 31, 2020
Finished goods$500 $528 
Work-in-process656 629 
Purchased raw materials263 292 
Operating supplies37 39 
Total inventories$1,456 $1,488 

At June 30, 20202021 and December 31, 2019,2020, the portion of inventories valued on a last-in, first-out (LIFO)(“LIFO”) basis was $510$490 and $503,$458, respectively. If valued on an average-cost basis, total inventories would have been $124$152 and $133$131 higher at June 30, 20202021 and December 31, 2019,2020, respectively.
M. Properties, Plants, and Equipment, net
June 30, 2020December 31, 2019
Land and land rights$96  $101  
Structures1,004  1,058  
Machinery and equipment3,767  3,742  
4,867  4,901  
Less: accumulated depreciation and amortization2,506  2,620  
2,361  2,281  
Construction work-in-progress197  348  
Properties, plants, and equipment, net$2,558  $2,629  
June 30, 2021December 31, 2020
Land and land rights$92 $98 
Structures1,025 1,033 
Machinery and equipment3,910 3,879 
5,027 5,010 
Less: accumulated depreciation and amortization2,701 2,626 
2,326 2,384 
Construction work-in-progress189 208 
Properties, plants, and equipment, net$2,515 $2,592 

The Company incurred capital expenditures which remained unpaid at June 30, 2021 and June 30, 2020 of $39 and $29, respectively, which result in cash outflows for investing activities in subsequent periods.
N. Leases
Operating lease cost, which includes short-term leases and variable lease payments and approximates cash paid, was $18$16 and $22$18 in the second quarter of 20202021 and 2019,2020, respectively. Operating lease cost, which includes short-term leases and variable lease payments and approximates cash paid, was $36$33 and $43$36 in the first half ofsix months ended June 30, 2021 and 2020, and 2019, respectively.
Operating lease right-of-use assets and lease liabilities in the Consolidated Balance Sheet were as follows:
June 30, 2020December 31, 2019
Right-of-use assets classified in Other noncurrent assets$118  $125  
Current portion of lease liabilities classified in Other current liabilities
36  38  
Long-term portion of lease liabilities classified in Other noncurrent liabilities91  98  
Total lease liabilities$127  $136  
June 30, 2021December 31, 2020
Right-of-use assets classified in Other noncurrent assets$123 $131 
Current portion of lease liabilities classified in Other current liabilities
36 38 
Long-term portion of lease liabilities classified in Other noncurrent liabilities93 100 
Total lease liabilities$129 $138 

2122

O. Debt
June 30, 2020December 31, 2019
6.150% Notes, due 2020—  1,000  
5.400% Notes due 2021361  1,250  
5.870% Notes, due 2022476  627  
5.125% Notes, due 20241,250  1,250  
6.875% Notes, due 20251,200  —  
5.900% Notes, due 2027625  625  
6.750% Bonds, due 2028300  300  
5.950% Notes, due 2037625  625  
4.750% Iowa Finance Authority Loan, due 2042250  250  
Other (1)
(1) 13  
5,086  5,940  
Less: amount due within one year391  1,034  
Total long-term debt$4,695  $4,906  
June 30, 2021December 31, 2020
5.400% Notes, due 2021(1)
$0 $361 
5.870% Notes, due 2022(2)
0 476 
5.125% Notes, due 20241,250 1,250 
6.875% Notes, due 20251,200 1,200 
5.900% Notes, due 2027625 625 
6.750% Bonds, due 2028300 300 
5.950% Notes due 2037625 625 
4.750% Iowa Finance Authority Loan, due 2042250 250 
Other(3)
(10)(12)
4,240 5,075 
Less: amount due within one year13 376 
Total long-term debt$4,227 $4,699 
 
(1)Redeemed on January 15, 2021.
(2)Redeemed on May 3, 2021.
(3)Includes various financing arrangements related to subsidiaries, unamortized debt discounts and unamortized debt issuance costs related to outstanding notes and bonds listed in the table aboveabove.
Public Debt.
On April 6, 2020, the Company completed the early redemption of all $1,000 of its 6.150% Notes due 2020 (the "6.150% Notes"“6.150% Notes”) and the early partial redemption of $300 of its 5.400% Notes due 2021 (the “5.400% Notes"). Holders of the 6.150% Notes were paid an aggregate of $1,020 and holders of the 5.400% Notes were paid an aggregate of $315, plus accrued and unpaid interest up to, but not including, the redemption date. The Company incurred early termination premium and accrued interest of $35 and $17, respectively, which has been recorded in Interest expense, net during the second quarter ofended June 30, 2020 in the Statement of Consolidated Operations.
On April 16, 2020, The Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission, which became effective automatically (the “Shelf Registration Statement”). The Shelf Registration Statement allows for offerings of debt securities from time to time.
On April 24, 2020, the Company completed an offering of $1,200 aggregate principal amount of 6.875% Notes due 2025, the proceeds of which have been used to fund the cash tender offers noted belowabove and to pay related transaction fees, including applicable premiums and expenses, with the remaining amount to be used for general corporate purposes. The Company incurred deferred financing costs of $14 associated with the issuance in the second quarter of 2020.
On May 21, 2020, the Company completed a cash tender offer and redeemed $589 and $151 of principal amount of the 5.400% Notes due 2021 and its 5.870% Notes due 2022 (the “5.870% Notes”), respectively. The amount of early tender premium and accrued interest and associated with the notes accepted for early settlement were $24 and $4, respectively, which was recorded in Interest expense, net during the second quarter ofended June 30, 2020 in Interest expense, net in the Statement of Consolidated Operations.
22On January 15, 2021, the Company completed the early redemption of all the remaining $361 of its 5.400% Notes at par and paid $5 in accrued interest.

On May 3, 2021, the Company completed the early redemption of all the remaining $476 aggregate principal amount of its 5.870% Notes and paid an aggregate of $503, including $5 of accrued interest. The Company also incurred an early termination premium and other costs of $23, which was recorded in Interest expense, net in the second quarter of 2021.
On an annual basis, the redemption of the 5.400% Notes and the 5.870% Notes will decrease Interest expense, net by approximately $47.
Credit Facilities.
In MarchDuring 2020, the Company entered into an amendmentseveral amendments to its Five-YearFive-Year Revolving Credit Agreement (the “Credit Agreement”). The amendment was entered into to permit the Arconic Inc. Separation Transaction and to amend certain terms of the Credit Agreement, including a change to the existing financial covenant, anda reduction of total commitments available from $3,000 to $1,500, effective April 1, 2020$1,000 and extendedextension of the maturity date from June 29, 2023 to April 1, 2025. The Company was required to maintain a ratio of Consolidated Net Debt (as defined in the Credit Agreement) to Consolidated EBITDA (as defined in the Credit Agreement) to be no greater than 3.50 to 1.00.
On June 26, 2020,March 29, 2021, the Company entered into another amendment to its Credit Agreement to provide extended relief from its existing financial covenant for the quarters ended March 31, 2021 through December 31, 2021 and reduce total commitment available from $1,500 to $1,000. 2022.
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The Company will beis required to maintain a ratio of Consolidated Net Debt (as defined in the Credit Agreement) to Consolidated EBITDA (as defined in the Credit Agreement) as of the end of each fiscal quarter for the period of the four fiscal quarters of the Company most recently ended as follows:
No greater than
(i) for the quarter ending June 30, 20215.50 to 1.00
(ii) for the quarter ending September 30, 20215.00 to 1.00
(iii) for the quarter ending December 31, 20214.75 to 1.00
(iv) for the quarter ending March 31, 20224.50 to 1.00
(v) for the quarter ending June 30, 20224.50 to 1.00
(vi) for the quarter ending September 30, 20224.25 to 1.00
(vii) for the quarter ending December 31, 20223.75 to 1.00
(viii) for the quarter ending March 31, 2023 and thereafter3.50 to 1.00
Under the March 2021 amendment to be no greater than (i)5.00 to 1.00 for any quarter ending on or prior tothe Credit Agreement, during the covenant relief period through December 31, 2020, (ii) 5.252022 (unless the Company ends the covenant relief period earlier in accordance with the amendment), common stock dividends (see Note I) and share repurchases (see Note I) are permitted only if no loans under the Credit Agreement are outstanding at the time and are limited to 1.00 foran aggregate amount not to exceed $250 during the quarter ending March 31, 2021, (iii) 5.00 to 1.00 for the quarter ending June 30, 2021, (iv) 4.50 to 1.00 for the quarter ending September 30, 2021, and (v) 4.00 to 1.00 for the quarteryear ending December 31, 2021. The ratio returns to 3.50 to 1.00 for all periods thereafter. 2021 with an incremental amount of $400 available during the year ending December 21, 2022 provided that any amount that remains unused as of December 31, 2021 may be carried forward and used during the year ending December 31, 2022.
There were 0 amounts outstanding at June 30, 20202021 or December 31, 2019,2020, and 0 amounts were borrowed during 20202021 or 20192020 under the Credit Agreement. At June 30, 2020,2021, the Company was in compliance with all covenants under the Credit Agreement.
In addition to Availability under the Credit Agreement could be reduced in future periods if the Company has a number of other credit agreements that provide a combined borrowing capacity of $250 at June 30, 2020 which is duefails to expire at various dates inmaintain the second half of 2020. The purpose of any borrowings under these credit arrangements is to provide for working capital requirements and for other general corporate purposes. The covenants contained in all these arrangements are the same as the Credit Agreement. During the six months ended June 30, 2020, there were no borrowings or repayments under these other credit facilities.required ratios referenced above.
P. Fair Value of Financial Instruments
The carrying values of Cash and cash equivalents, Restricted cash, Derivatives, Noncurrent receivables, and Short-term debt included in the Consolidated Balance Sheet approximate their fair value. The Company holds exchange-traded fixed income securities which are considered available-for-sale securities that are carried at fair value which is based on quoted market prices which are classified in Level 1 of the fair value hierarchy. The fair value of Long-term debt, less amount due within one year was based on quoted market prices for public debt and on interest rates that are currently available to the CompanyHowmet for issuance of debt with similar terms and maturities for non-public debt. The fair value amounts for all Long-term debt were classified in Level 2 of the fair value hierarchy.
 June 30, 2020December 31, 2019
 Carrying
value		Fair
value		Carrying
value		Fair
value
Long-term debt, less amount due within one year$4,695  $4,997  $4,906  $5,337  
 June 30, 2021December 31, 2020
 Carrying
value		Fair
value		Carrying
value		Fair
value
Long-term debt, less amount due within one year$4,227 $4,886 $4,699 $5,426 
Restricted cash, which was included in Prepaid assetsexpenses and other current liabilitiesassets in the Consolidated Balance Sheet, was $4 and $55$1 at both June 30, 20202021 and December 31, 2019, respectively.2020.
Q. AcquisitionsDivestitures
2021 Divestiture
On June 1, 2021, the Company completed the sale of a small manufacturing plant in France within the Fastening Systems segment for $10 (of which $8 of cash was received in the second quarter of 2021), subject to working capital and Divestituresother adjustments. An agreement to sell was reached on March 15, 2021, which resulted in a charge of $4 related to the non-cash impairment of the net book value of the business, primarily goodwill, in the first quarter of 2021 which was recorded in Restructuring and other charges in the Statement of Consolidated Operations.
2020 Divestitures.Divestiture
On January 31, 2020, the Company reached an agreement to sell a small manufacturing plant in the U.K. within the Engineered Structures segment for $12 in cash, subject to working capital and other adjustments. The operating results and assets and liabilities of this plant are included in the Engineered Structures segment.therefore was classified as held for sale. As a result of entering into the agreement, to sell, the Company recognized a charge of $12 was recognized related to a non-cash impairment of the net book value of the business, primarily properties, plants, and equipment in the first quarter of 2020. The2020, which was recorded in Restructuring and other charges in the Statement of Consolidated Operations. As the sale isdid not expected to occur. As a resultclose, the Company changed the classification of the assets from held for sale to held for use in
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the second quarter of 2020 and recorded these assets at their lower of carrying value (assuming no initial reclassification for held for sale was made) or fair value. The result was a reversal of $7 related to a non-cash impairment in the second quarter of 2020. These charges were recorded in Restructuring and other charges in the Statement of Consolidated Operations.
2019 Divestiture.
On December 1, 2019, the Company completed the sale of its forgings business in the U.K. for $64 in cash, which resulted in a loss on sale of $46 that was recognized in 2019 and an incremental charge of $6 related to certain post-closing adjustments in the first quarter of 2020. These charges were recorded in Restructuring and other charges in the Statement of Consolidated Operations. Of the cash proceeds received, $53 was recorded as Restricted cash within Prepaid expenses and other current
23

assets on the Consolidated Balance Sheet at December 31, 2019 as its use is subject to restriction by the U.K. pension authority until certain U.K. pension plan changes were made and approved. In the second quarter of 2020, the restriction was removed, and the proceeds were reclassified to Cash and cash equivalents. The forgings business primarily produces steel, titanium, and nickel based forged components for aerospace, mining, and off-highway markets and its operating results and assets and liabilities were included in the Engine Products segment. The sale remains subject to certain remaining post-closing adjustments. This business generated sales of $34 and $66 in the second quarter and six months ended June 30, 2019, respectively, and had 540 employees at the time of divestiture.
On May 31, 2019, the Company sold a small additive manufacturing facility within the Engineered Structures segment for $1 in cash, which resulted in a loss of $13 related to the non-cash impairment of the net book value of the business recorded in Restructuring and other charges in the Statement of Consolidated Operations.
On August 15, 2019, the Company sold inventories and properties, plant and equipment related to a small energy business within the Engineered Structures segment for $13 in cash. As the sale was substantially complete as of June 30, 2019, and the sale price was estimated to be less than the carrying value, the Company recognized a charge of $9 in the second quarter of 2019 related to inventory impairment and recorded the charge in Cost of goods sold in the Statement of Consolidated Operations.
R. Contingencies and Commitments
Contingencies
The following information supplements and, as applicable, updates the discussion of the contingencies and commitments in Note V to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”), and should be read in conjunction with the complete descriptions provided in the Form 10-K.
Environmental Matters
The CompanyHowmet participates in environmental assessments and cleanups at more than 30 locations. These include owned or operating facilities and adjoining properties, previously owned or operating facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"(“CERCLA”)) sites.
A liability is recorded for environmental remediation when a cleanup program becomes probable and the costs can be reasonably estimated. As assessments and cleanups proceed, the liability is adjusted based on progress made in determining the extent of remedial actions and related costs. The liability can change substantially due to factors such as the nature and extent of contamination, changes in remedial requirements, and technological changes, among others.
The Company’s remediation reserve balance was $8$10 at both June 30, 20202021 and $8 at December 31, 2019,2020, recorded in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet (of which $4$6 and $3,$5, respectively, were classified as a current liability), and reflects the most probable costs to remediate identified environmental conditions for which costs can be reasonably estimated. Payments related to remediation expenses applied against the reserve were less than $1 in the second quarter ended June 30, 2020, which includes2021 and included expenditures currently mandated, as well as those not required by any regulatory authority or third party.
Included in annual operating expenses are the recurring costs of managing hazardous substances and environmental programs. These costs are estimated to be approximatelyless than 1% or less of Cost of goods sold.
Reynobond PE
The Company previously reported on a remediation project related to the Grasse River, which is adjacent to the Massena West, New York plant site that is now part of Arconic Corporation. In connectionindemnified for all potential liabilities associated with the Arconic Inc. Separation Transaction,fire at the Company entered into a separation and distribution agreement (the “Separation and Distribution Agreement”) withGrenfell Tower in London, U.K., which occurred on June 14, 2017, by Arconic Corporation which, together with the documents and agreements by which the internal reorganization of the Company prior to the separation was effected, determined the allocation of assets and liabilities between the Company and Arconic Corporation following the separation and included any necessary indemnifications related to liabilities and obligations. In general, the respective parties will be responsible for the environmental matters associated with their operations, and with the properties and other assets assigned to each. Pursuantpursuant to the Separation and Distribution Agreement Arconic Corporation agreed to assume and indemnify the Company against potential liabilities associateddated March 31, 2020, including, with the remediation project relatedrespect to the Grasse River. Therefore,following legal proceedings, as updated from the Company will no longer reportForm 10-K:
United Kingdom Litigation (various claims on behalf of survivors and estates of decedents). These suits have been further stayed until a hearing can be held by the relevant court on the Grasse River matter unless and until some eventfirst available date after April 4, 2022.
Howard v. Arconic Inc. et al. (securities law related claims). As described in the future causes it to become material and reportable.

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Tax
Pursuant toForm 10-K, lead plaintiffs in this case, which alleges violations of the October 31, 2016 Tax Matters Agreement betweenfederal securities law, filed an amended complaint (“Second Amended Complaint”) in July of 2019 after the Company and Alcoa Corporation, Alcoa Corporation shares responsibilitythe other defendants were granted a motion to dismiss the case, without prejudice. In the Second Amended Complaint, plaintiffs provided additional facts for the Court’s consideration. On June 23, 2021, the Court ruled that certain claims related to a particular registration statement, other SEC filings, product brochures and websites can proceed. All other claims against the defendants were permanently dismissed, with prejudice. Defendants will file an answer to the Second Amended Complaint by August 12, 2021.
With respect to the Behrens et al. v. Arconic Inc. et al. (various claims on behalf of survivors and estates of decedents)and the Raul v. Albaugh, et al. (derivative related claim) proceedings, there are no updates.
Lehman Brothers International (Europe) (“LBIE”) Claim. On June 26, 2020, LBIE filed formal proceedings against 2 Firth Rixson entities (“Firth”) in the High Court of Justice, Business and Property Courts of England and Wales. The proceedings relate to interest rate swap transactions that Firth entered into with LBIE in 2007 to 2008. In 2008, LBIE commenced insolvency proceedings, an event of default under the agreements, rendering LBIE unable to meet its obligations under the swaps and suspending Firth’s payment obligations. In the Court proceedings, LBIE seeks a declaration that Firth has agreeda contractual obligation to partially indemnifypay the amounts owing to LBIE under the agreements upon its emergence from insolvency proceedings which is expected to occur by 2022, which LBIE claims to be approximately $64, plus applicable interest. Firth will continue to maintain its position that multiple events of default under the agreements related to LBIE’s insolvency proceeding cannot be cured or continue indefinitely, which the Company forbelieves are meritorious defenses. The parties filed position papers on July 24, 2020 and October 19, 2020 (LBIE) and September 21, 2020 (Firth). A virtual hearing in this matter occurred on January 13 and 14, 2021 in London, England, and a ruling has yet to be issued to date. Given the following matter. Additionally, as partimportance of the March 31, 2020 Tax Matters Agreement between the Companycase for LBIE and Arconic Corporation, Arconic Corporation also shares partial responsibility with and has agreed to partially indemnify the Company for its own shareFirth, it is expected that irrespective of the same matter. In connection with these indemnities, Alcoa Corporation and Arconic Corporation retain 49% and 34% of the total liability, respectively, for the following matter, and the Company retains the remaining 17% of the total liability.
As previously reported, in July 2013, following a Spanish corporate income tax audit covering the 2006 through 2009 tax years, an assessment was received mainly disallowing certain interest deductions claimed by a Spanish consolidated tax group owned by the Company. In August 2013, the Company filed an appeal of this assessment in Spain’s Central Tax Administrative Court, which was denied in January 2015. The Company filed another appeal in Spain’s National Court in March 2015 which was denied in July 2018. The National Court’s decision requires the assessment for the 2006 through 2009 tax years to be reissued to take into account the outcome of the 2003 to 2005 audit which was closed in 2017. The Company estimates the revised assessment to be $174 (€154), including interest.
In March 2019, the Supreme Court of Spain accepted the Company's petition to review the National Court’s decision, and the Company has filed a formal appeal of the assessment. The Supreme Court is reviewing the assessment on its merits and will render a final decision. In the event the Company receives an unfavorable ruling from the Supreme Court of Spain, a portion ofmost recent hearing, the assessment may be offset with existing net operating losses and tax credits available to the Spanish consolidated tax group in existence during the audit period.
In the third quarter of 2018, the Company established an income tax reserve and an indemnification receivable representing Alcoa Corporation’s 49% share of the liability. Pursuant to the Tax Matters Agreement with Arconic Corporation, as of the second quarter of 2020 the Company established an additional income tax receivable representing Arconic Corporation's 34% share of the total liability. As of June 30, 2020, the balances of the Company's reserve, including interest, and the receivables are $60 (€54) and $50 (€45), respectively.
The tax years 2010 through 2013 are closed to audit. In July of 2020, a Spanish corporate income tax audit covering the period 2014 through 2018 commenced. Any potential assessment for the tax period open to audit is not expected to be material to the Company’s consolidated operations.
Reynobond PE
Prior to the Arconic Inc. Separation Transaction on April 1, 2020, the Company was known as Arconic Inc.References to “Arconic Inc.” in this “Reynobond PE” section refer to Arconic Inc. only and do not include its subsidiaries, except as otherwise stated.
On June 13, 2017, the Grenfell Tower in London, U.K. caught fire resulting in fatalities, injuries and damage. A French subsidiary of Arconic Inc., Arconic Architectural Products SAS (AAP SAS), supplied a product, Reynobond PE, to its customer, a cladding system fabricator, which used the product as one component of the overall cladding system on Grenfell Tower. The fabricator supplied its portion of the cladding system to the façade installer, who then completed and installed the system under the direction of the general contractor. Neither Arconic Inc. nor AAP SAS was involved in the design or installation of the system used at the Grenfell Tower, nor did it have a role in any other aspect of the building’s refurbishment or original design. Regulatory investigations into the overall Grenfell Tower matter are being conducted, including a criminal investigation by the London Metropolitan Police Service (the “Police”), a Public Inquiry by the British government and a consumer protection inquiry by a French public authority. The Public Inquiry was announced by the U.K. Prime Minister on June 15, 2017 and subsequently was authorized to examine the circumstances leading up to and surrounding the Grenfell Tower fire in order to make findings of fact and recommendations to the U.K. Government on matters such as the design, construction and modification of the building, the role of relevant public authorities and contractors, the implications of the fire for the adequacy and enforcement of relevant regulations, arrangements in place for handling emergencies and the handling of concerns from residents, among other things. Hearings for Phase 1 of the Public Inquiry began on May 21, 2018 and concluded on December 12, 2018. Phase 2 hearings of the Public Inquiry began in early 2020, following which a final reportcase will be written and subsequently published. AAP SAS is participating as a Core Participant in the Public Inquiry and is also cooperating with the ongoing parallel investigation by the Police. The Company no longer sells the PE product for architectural use on buildings. Given the preliminary nature of these investigations and the uncertainty of potential future litigation, the Company cannot reasonably estimate at this time the likelihood of an unfavorable outcome or the possible loss or range of losses in the event of an unfavorable outcome.

appealed
25

Pursuantand any requirement for the parties to pay amounts under the Separation and Distribution Agreement, Arconic Corporation agreed to indemnify the Company for certain liabilities and the Company agreed to indemnify Arconic Corporation for certain liabilities.As a resultagreements will be stayed. An appeal of the Arconic Inc. Separation Transaction, Arconic Corporation holdscase could continue past the building and construction systems businesses previously held by theend of 2022 into 2023. The Company and AAP SAS is a subsidiary of Arconic Corporation; accordingly, Arconic Corporation has agreedintends to assume and indemnify the Companyvigorously defend against potential liabilities associated with the June 13, 2017 fire at the Grenfell Tower in London, U.K., including the following legal proceedings:
Behrens et al. v. Arconic Inc. et al. On June 6, 2019, 247 plaintiffs comprised of survivors and estates of decedents of the Grenfell Tower fire filed a complaint against “Arconic Inc., Alcoa Inc. and Arconic Architectural Products, LLC” (collectively, for purposes of the description of such proceeding, the “Arconic Defendants”), as well as Saint-Gobain Corporation, d/b/a Celotex and Whirlpool Corporation alleging claims under Pennsylvania state law for products liability and wrongful death related to the fire. In particular, the plaintiffs allege that the Arconic Defendants knowingly supplied a dangerous product ("Reynobond PE") for installation on the Grenfell Tower despite knowing that Reynobond PE was unfit for use above a certain height. The case has been removed to the United States District Court for the Eastern District of Pennsylvania and discovery is ongoing on defendants’ motion to have the case dismissed in favor of a UK forum (forum non conveniens).
Howard v. Arconic Inc. et al. A purported class action complaint related to the Grenfell Tower fire was filed on August 11, 2017 in the United States District Court for the Western District of Pennsylvania against Arconic Inc. and Klaus Kleinfeld. A related purported class action complaint was filed in the United States District Court for the Western District of Pennsylvania on September 15, 2017, under the caption Sullivan v. Arconic Inc. et al., against Arconic Inc., three former Arconic Inc. executives, several current and former directors, and certain banks Howard and Sullivan were subsequently consolidated and the lead plaintiffs in the consolidated purported class action filed a consolidated amended complaintalleging violations of the federal securities laws and seeking, among other things, unspecified compensatory damages and an award of attorney and expert fees and expenses. After the Court granted the defendants’ motion to dismiss in full, the lead plaintiffs filed a second amended complaint, and all defendants have moved to dismiss the second amended complaint.
Raul v. Albaugh, et al. On June 22, 2018, a derivative complaint was filed nominally on behalf of Arconic Inc. by a purported Arconic Inc. stockholder against the then members of Arconic Inc.’s Board of Directors and Klaus Kleinfeld and Ken Giacobbe, naming Arconic Inc. as a nominal defendant, in the United States District Court for the District of Delaware. The complaint raises similar allegations as the consolidated amended complaint and second amended complaint in Howard, as well as allegations that the defendants improperly authorized the sale of Reynobond PE for unsafe uses, and asserts claims under federal securities laws and Delaware state law. The case has been stayed until the final resolution of the Howard case, the Grenfell Tower Public Inquiry in London, and the investigation by the Police.
There can be no assurances regarding the ultimate resolution of these matters.
Stockholder Demands. Prior to the Arconic Inc. Separation Transaction the Board of Directors also received letters, purportedly sent on behalf of stockholders, reciting allegations similar to those made in the federal court lawsuits and demanding that the Board authorize the Company to initiate litigation against members of management, the Board and others. The Board of Directors appointed a Special Litigation Committee of the Board to review, investigate, and make recommendations to the Board regarding the appropriate course of action with respect to these stockholder demand letters. On May 22, 2019, the Special Litigation Committee, following completion of its investigation into the claims demanded in the demand letters, recommended to the Board that it reject the demands to authorize commencement of litigation. On May 28, 2019, the Board adopted the Special Litigation Committee’s findings and recommendations and rejected the demands that it authorize commencement of actions to assert the claims set forth in the demand letters.claims.
Other
In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against the Company, including those pertaining to environmental, product liability, safety and health, employment, tax and antitrust matters. While the amounts claimed in these other matters may be substantial, the ultimate liability cannot currently be determined because of the considerable uncertainties that exist. Therefore, it is possible that the Company’s liquidity or results of operations in a period could be materially affected by one or more of these other matters. However, based on facts currently available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the results of operations, financial position or cash flows of the Company.

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Commitments
Guarantees
At June 30, 2020, the Company2021, Howmet 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 20202021 and 2040, was $25$18 at June 30, 2020.2021.
In addition, pursuantPursuant to the Separation and Distribution Agreement between the CompanyHowmet and Alcoa Corporation, the CompanyHowmet was required to provide a guaranteecertain guarantees for an energy supply agreement at an Alcoa Corporation, facility that expires in 2047. This guaranteewhich had a fair value of $16$6 and $9$12 at June 30, 20202021 and December 31, 2019,2020, respectively, and waswere included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet. The Company was required to provide a guarantee up to an estimated present value amount of approximately $1,167$1,435 and $1,353$1,398 at June 30, 20202021 and December 31, 2019,2020, respectively. For this guarantee, subject to its provisions, the Company is secondarily liable in the event of a payment default by Alcoa Corporation. The Company currently views the risk of an Alcoa Corporation payment default on its obligations under the contract to be remote.
Letters of Credit
The Company has outstanding letters of credit, primarily related to workers’ compensation, environmental obligations, accounts receivable securitization and leasing obligations. The total amount committed under these letters of credit, which automatically renew or expire at various dates, mostly in 2020,2021, was $66$133 at June 30, 2020.2021.
Pursuant to the Separation and Distribution Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company wasis required to retain letters of credit of $54$53 that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims which occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016. Arconic Corporation and Alcoa Corporation workers’ compensation and letters of credit fees paid by the Company are being proportionally billed to and are being reimbursed by Arconic Corporation and Alcoa Corporation, respectively. Also, the Company was required to provide letters of credit for certain Arconic Corporation environmental obligations and, as a result, the Company has $23 of outstanding letters of credit relating to liabilities (which are included in the $133 in the above paragraph). $6 of these outstanding letters of credit are pending cancellation and will be deemed cancelled once returned by the beneficiary. Arconic Corporation has issued surety bonds to cover these environmental obligations. 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.
Surety Bonds
The Company has outstanding surety bonds, primarily related to tax matters, contract performance, workers’ compensation, environmental-related matters, and customs duties. The total amount committed under these annual surety bonds, which expire and automatically renew at various dates, primarily in 2021 and 2022, was $46 at June 30, 2021.
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 $25 (which are included in the $46 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims which occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016. Arconic Corporation and Alcoa Corporation workers’ compensation claims and letter of credit fees paid by the Company are being proportionally billed to and are being fully reimbursed by Arconic Corporation and Alcoa Corporation.
Surety Bonds
The Company has outstanding surety bonds, primarily related to tax matters, contract performance, workers’ compensation, environmental-related matters, and customs duties. The total amount committed under these surety bonds, which expire at various dates, primarily in 2020, was $43 at June 30, 2020.
Pursuant to the Separation and Distribution Agreements between the Company and Arconic Corporation and between the Company and Alcoa Corporation, the Company was required to provide surety bonds of $26 (which are included in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims which occurred prior to the respective separation transactions of April 1, 2020 and November 1, 2016. Arconic Corporation and Alcoa Corporation workers’ compensation claims and surety bond fees paid by the Company are being proportionately billed to and are being fully reimbursed by Arconic Corporation and Alcoa Corporation.
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S. Subsequent Events
Management evaluated all activity of the CompanyHowmet and concluded that no subsequent events have occurred that would require recognition in the Consolidated Financial Statements or disclosure in the Notes to the Consolidated Financial Statements.Statements, except as noted below:
See Note I for the common stock dividend declaration.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(dollars in millions, except per share amounts)
Overview
On April 1, 2020, Howmet Aerospace Inc. (formerly known as Arconic Inc.) ("Howmet"(“Howmet” or the “Company”) completed the previously announced separation of its business into two independent, publicly-traded companies (the “Arconic Inc. Separation Transaction”). Following the Arconic Inc. Separation Transaction, Arconic Corporation holds the Global Rolled Products businesses (global rolled products, aluminum extrusions, and building and construction systems) previously held by the Company. The Company retained the Engineered Products and Forgings businesses (Engine Products, Engineered Structures, Fastening Systems, and Forged Wheels).
The Company's Board of Directors approved the completion of the Arconic Inc. Separation Transaction on February 5, 2020, which was effected by the distribution (the “Distribution”) by the Company of all of the outstanding common stock of Arconic Corporation on April 1, 2020 to the Company’s stockholders who held shares as of the close of business on March 19, 2020 (the “Record Date”). In the Distribution, each Company stockholder of record as of the Record Date received one share of Arconic Corporation common stock for every four shares of the Company’s common stock held as of the Record Date. The Company did not issue fractional shares of Arconic Corporation common stock in the Distribution. Instead, each stockholder otherwise entitled to a fractional share of Arconic Corporation common stock received cash in lieu of fractional shares.
On March 31, 2020, 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 Distribution, including the following: a Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement, Transition Services Agreement and certain Patent, Know-How, Trade Secret License and Trademark License Agreements.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations excludes the historical results of Arconic Corporation, as the Arconic Inc. Separation Transaction took placeoccurred on April 1, 2020. The financial results of Arconic Corporation for all periods prior to the Arconic IncInc. Separation Transaction 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 presented. In addition, the related assets and liabilities associated with Arconic Corporation in the December 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 (Loss), and Statement of Changes in Consolidated Equity, respectively, for all periods prior to the Arconic Inc. Separation Transaction.
COVID-19
TheYear-to-date 2021, the Company derivesderived approximately 70%60% of its revenue from products sold to the aerospace end-market. As a result of COVID-19the global coronavirus (“COVID-19”) pandemic and its impact on the aerospace industry to-date, the possibility exists that there could be a sustained impact to our operations and our financial results. Since the start of the pandemic, certain original equipment manufacturer (“OEM”) customers have reduced production or suspended manufacturing operations in North America and Europe on a temporary basis. While the pandemic has resulted in the temporary closure of a small number of the Company's manufacturing facilities during 2020, all of our manufacturing facilities are currently operating. Since the duration of the pandemic is uncertain, the Company is takingmanagement has taken a series of actions to address the financial impact, including announcing certain headcount reductions and reducing certain cash outflows, by suspending our dividends and reducing the levelslevel of our capital expenditures to preserve cash and maintain liquidity.
For additional information regarding the risks of COVID-19 on our business, see section Part I, Item 1A in the section entitled “Item 1A. RiskCompany’s Annual Report on Form 10-K for the year ended December 31, 2020, “Risk Factors — Our business, results of operations, financial condition and/or cash flows have been and could continue to be materially adversely affected by the effects of widespread public health epidemics/pandemics, includingthe COVID-19 that are beyond our control.pandemic.”
Results of Operations
Earnings Summary:
Sales. Sales were $1,195 in the second quarter of 2021 compared to $1,253 in the second quarter of 2020 compared to $1,818and $2,404 in the second quarter of 2019 andsix months ended June 30, 2021 compared to $2,887 in the six months ended June 30, 2020 compared to $3,570 in the six months ended June 30, 2019.2020. The decrease of $565,$58, or 31%5%, in the second quarter of 20202021 was primarily due to lower sales volumes in the commercial aerospace market driven by the impact of COVID-19 and $683,Boeing 787 production declines, partially offset by growth in the commercial transportation and industrial markets as well as favorable product pricing of $21. The decrease of $483, or 19%17%, in the six months ended June 30, 2020,2021 was primarily due to lower sales volumes in the commercial aerospace and commercial transportation marketsmarket driven by the impactsimpact of COVID-19, and Boeing 737 MAX (“737 MAX”) and Boeing 787 production declines, and a decrease in sales of $65 from the divestiture of the forgings business in the U.K. in December 2019, partially offset by growth in the commercial transportation, defense aerospace, and industrial gas turbine markets as well as favorable product pricing.pricing of $38.
Cost of goods sold (COGS). COGS as a percentage of Sales was 71.7% in the second quarter of 2021 compared to 73.7% in the second quarter of 2020 compared to 73.4%and 72.0% in the second quarter of 2019 and wassix months ended June 30, 2021 compared to 72.9% in the six months ended June 30, 2020 compared to 73.6%2020. The decrease in the second quarter of 2021 and in the six months ended June 30, 2019. The increase in the second quarter of 20202021 was primarily due to lower volumesnet cost savings and favorable product pricing. Additionally, the impactsCompany recorded total COGS reimbursements of COVID-19
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partially offset by intentional product exits, the impairment of energy business assets$2 and net charges of $9 in the second quarter of 20192020 and favorable pricing. In the second quarter of 2020, the Company incurred costs related to fires at two plants of $14. The Company submitted an insurance claim and received a partial settlement of $10, which was in excess of its $10 insurance deductible which has already been met. The decrease in the six months ended June 30, 2020, was primarily duerespectively, related to intentional product exits, the impairmentfires that occurred at a Fastening Systems’ plant in France in 2019 and at a Forged Wheels plant in Barberton, Ohio in mid-February 2020. The Company recorded total COGS reimbursements of energy business assets$3 and net charges of $9$6 in the second quarter of 2019,2021 and favorable pricing partially offset by the impacts of COVID-19 and lower volumes in the second quarter.six months ended June 30, 2021, respectively, related to the fires in France and Barberton in 2021. The Company anticipates additional charges of approximately $5$3 to $15$7 in the third quarter of 2020,2021, with additionalfurther impacts in subsequent quarters as the businesses continue to recover from the fires.fires.
Selling, general administrative, and other expenses (SG&A). SG&A expenses were $55 in the second quarter of 2021 compared to $74 in the second quarter of 2020 compared to $102and $120 in the second quarter of 2019 andsix months ended June 30, 2021 compared to $153 in the six months ended June 30, 2020 compared to $218 in the six months ended June 30, 2019.2020. The decrease of $28,$19, or 27%26%, in the second quarter of 20202021 and $65,$33, or 30%22%, in the six months ended June 30, 2020,
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2021 was primarily due to lower costs driven by overhead cost reductions as well as costs incurred in the second quarter and lower net legal and other advisory costs related to Grenfell Tower primarily due to insurance reimbursements, partially offset by higher costssix months ended June 30, 2020 associated with the Arconic Inc. Separation Transaction.
Research and development expenses (R&D). R&D expenses were $4 in both the second quarter of 2020 compared to $7 in2021 and the second quarter of 2019 and2020. R&D expenses were $9 in the six months ended June 30, 2021 compared to $8 in the six months ended June 30, 2020, compared to $16 in the six months ended June 30, 2019. The decreasean increase of $3,$1, or 43%, in the second quarter of 2020 and $8, or 50%, in the six months ended June 30, 2020, was primarily due to the consolidation of the Company's primary R&D facility in conjunction with ongoing cost reduction efforts.13%.
Restructuring and other charges. Restructuring and other charges waswere $5 in the second quarter of 2021 compared to $105 in the second quarter of 2020 compared to $472 in the second quarter of 2019 or a decrease of $367;$100 and was$14 in the six months ended June 30, 2021 compared to $144 in the six months ended June 30, 2020 comparedor a decrease of $130.
Restructuring and other charges for the second quarter and six months ended June 30, 2021 were primarily due to $516charges for pension plan settlements and exit related costs.
Restructuring and other charges for the second quarter of 2020 were primarily comprised of a $64 charge for pension plan settlements and a $54 charge for layoff costs. These charges were partially offset by an $8 benefit from the reversal of several existing layoff reserves and a $7 benefit from the reversal of an impairment due to change in classification from held for sale to held for use related to a United Kingdom (U.K.) plant.
Restructuring and other charges in the six months ended June 30, 2019 or2020 were primarily comprised of a decrease$76 charge for layoff costs, a $64 charge for pension plan settlements, a $6 post-closing adjustment related to the sale of $372. The decrease for the six months ended June 30, 2020Company’s U.K. forgings business (which was primarily due to a chargeformerly part of the Engine Products segment), $5 for impairment of a long-lived asset group of $428assets associated with an agreement to sell an aerospace components business in the U.K. (within the Engineered Structures segment), and a loss on sale of an additives business of $12 both of which occurred in the second quarter of 2019 as well as a decrease in severance cost reversals of $6, a decrease in lease termination costs of $12 and a decrease in$5 charge for various other exit costs and other items of $8; whichcosts. These charges were partially offset by a net increasebenefit of $10 related to pension and other postretirement benefit settlement accountingthe reversal of $75, an increase in layoff chargesa number of $8 and charges related to an impairment of assets associated with agreements to sell two businesses in the United Kingdom of $11 in the six months ended June 30, 2020. prior period programs.
See Note E to the Consolidated Financial Statements for additional detail.
Interest expense. Interest expense was $89 in the second quarter of 2021 compared to $144 in the second quarter of 2020 compared to $86and $161 in the second quarter of 2019 andsix months ended June 30, 2021 compared to $228 in the six months ended June 30, 2020 compared to $171 in the six months ended June 30, 2019.2020. The increasedecrease of $58,$55, or 67%38%, in the second quarter of 20202021 and an increase of $57,$67, or 33%29%, in the six months ended June 30, 2020, were2021, was primarily due to a $59 premium paid onlower debt outstanding in the second quarter of 2021 and in the six months ended June 30, 2021 driven by the early redemption of debt.$1,000, $889, and $151 of the principal amounts of the 6.150% Notes due 2020, 5.400% Notes due 2021 (the “5.400% Notes”) and 5.870% Notes due 2022 (the “5.870% Notes”), respectively, in the second quarter of 2020, the early redemption of $361 of the principal amount of the 5.400% Notes in the first quarter of 2021, and the early redemption of $476 of the 5.870% Notes in the second quarter of 2021, which was partially offset by the issuance on April 24, 2020 of the 6.875% Notes due 2025 in the aggregate principal amount of $1,200.
Other expense (income), net. Other expense, (income), net was $8 in the second quarter of 2021 compared to Other expense, net of $16 in the second quarter of 2020 and Other expense, net was $12 in the six months ended June 30, 2021 compared to $6Other income, net of $8 in the second quartersix months ended June 30, 2020. The decrease of 2019. The increase of $10,$8, or 167%50%, in the second quarter of 20202021 was primarily due to a decrease in certain guarantees for Alcoa Corporation of $9, the impacts of deferred compensation arrangements of $3, favorable change in foreign currency and $9lower non-service related net periodic benefit cost of various small items,$2, partially offset by $2 higher deferred compensation. Other expense (income)foreign currency losses of $8. The increase of $20, or 250%, net was $(8) income forin the six months ended June 30, 2020 compared to $18 expense for the six months ended June 20, 2019 The lower expense of $(26), or (144)%2021, was primarily due to foreign currency losses of $10, the lowerimpacts of deferred compensation arrangements of $18, favorable foreign currency movements$9, and lower interest income of $8 and various small items of $11,$3, partially offset by lower interest incomenon-service related net periodic benefit cost of $11.$5.
Provision for income taxes. The tax rate including discrete items was 2.3% (benefit on a loss) in the second quarter of 2020 compared to 49.3% (benefit on a loss) in the second quarter of 2019. A discrete tax charge of $10 was recorded in the second quarter of 2020 compared to a discrete tax benefit of $37 in the second quarter of 2019. The estimated annual effective tax rate, before discrete items, applied to ordinary income was 29.1% in both the second quarter and six months ended June 30, 2021 compared to 36.1% in both the second quarter and six months ended June 30, 2020. The tax rate including discrete items was 32.7% (provision on income) in the second quarter of 20202021 compared to 51.8%2.3% (benefit on loss) in the second quarter of 2019.2020. A discrete tax charge of $4 was recorded in the second quarter of 2021 compared to a discrete tax charge of $10 in the second quarter of 2020. The tax rate including discrete items was 30.9% (provision on income) for the six months ended June 30, 2021 compared to 38.4% (provision on income) for the six months ended June 30, 2020. A discrete tax charge of $3 was recorded in the six months ended June 30, 2021 compared to a discrete tax charge of $2 for the six months ended June 30, 2020. See Note H to the Consolidated Financial Statements.
Net Income (loss)(Loss) from Continuing and Discontinued Operations Operations.Income (loss) from continuing operations was $74, or $0.17 per diluted share, in the second quarter of 2021 compared to Loss from continuing operations of $(84), or $(0.19) per diluted share, in the second quarter of 2020 compared to $(136),and Income from continuing operations was $154, or $(0.31)$0.35 per diluted share, in the second quartersix months ended June 30, 2021 compared to Income from continuing operations of 2019, and $69, or $0.15 per diluted share, in the six months ended June 30, 2020 , compared to $(50), or $(0.11) per diluted share, in the six months ended June 30, 2019.2020. The improvementincrease of $52$158 in the second quarter of 2020 and $119 in the six months ended June 30, 2020,2021 was primarily due to lower Restructuring and other charges, higher Income taxes, higher SG&A expenses primarily related to costs related to the Arconic Inc. Separation Transaction,lower COGS, and higher Othera reduction in Interest expense, net, partially offset by volume growth, favorable product pricing, net cost savings,a decrease in operating income due to lower Interest expense,sales volumes in the commercial aerospace market driven by the impact of COVID-19 and lower R&D expenses.
Income (loss) from discontinued operationsBoeing 787 production declines, and an increase in the Provision for income taxes. The increase of $85 in the six months ended June 30, 2021 was $(12) or $(0.03) per diluted share for the second quarter of 2020 comparedprimarily due to $15 or $0.03 per diluted share for the second quarter of 2019. Income from discontinued operations was $50 or $0.11 per diluted share for the second quarter of 2020 compared to $116 or $0.25 per diluted share for the second quarter of 2019. See details of discontinued operations in Note B to the Consolidated Financial Statements.lower
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SinceRestructuring and other charges, lower COGS, and a reduction in Interest expense, partially offset by a decrease in operating income due to lower sales volumes in the announcementcommercial aerospace market driven by the impact of COVID-19, and 737 MAX and Boeing 787 production declines, and an increase in the Provision for income taxes.
Net Income (Loss). As the Arconic Inc. Separation Transaction in the first quarter of 2019, separation costs recorded inoccurred on April 1, 2020, there was no Income from discontinued operations for the second quarter of 2021 or for the six months ended June 30, 2021. Net income was $74 for the second quarter of 2021, all of which was composed of $74 of Income from continuing operations, or $0.17 per diluted share, and $154 in Selling, general administrative,the six months ended June 30, 2021, all of which was composed of $154 of Income from continuing operations, or $0.35 per diluted share.
Net loss was $(96) for the second quarter of 2020 composed of $(84) of Loss from continuing operations and other expenses totaled $124 as well as debt issuance costs$(12) from discontinued operations, or $(0.19) and capital expenditures$(0.03) per diluted share, respectively. Net income was $119 for the six months ended June 30, 2020 composed of $45$69 of Income from continuing operations and $10,$50 from discontinued operations, or $0.15 and $0.11 per diluted share, respectively.
Segment Information
The Company’s operations consist of four worldwide reportable segments: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. Segment performance under the Company'sHowmet’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is Segment operating profit. The Company'sHowmet's definition of Segment operating profit is Operating income excluding Special items. Special items include Restructuring and other charges and Impairment of goodwill.charges. Segment operating profit may not be comparable to similarly titled measures of other companies. Differences between segment totals and consolidated totalsHowmet are in Corporate. The Company has four segments - Engine Products, Fastening Systems, Engineered Structures and Forged Wheels. (See Note D to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a description of each segment).
In the second quarter of 2020, the Company realigned its operations consistent with how the Co-Chief Executive Officers are assessingassess operating performance and allocating capital in conjunction with the Arconic Inc. Separation Transaction (see Note B to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q). Prior period financial information has been recast to conform to current year presentation.
The Company produces aerospace engine parts and components and aerospace fastening systems for Boeing 737 MAX airplanes. The temporary reduction in the production rate of the 737 MAX airplanes that was announced by Boeing in April 2019 did not have a significant impact on the Company's sales or segment operating profit in 2019. In late December 2019, Boeing announced a temporary suspension of production of the 737 MAX airplanes. This decline in production had a negative impact on sales and segmentSegment operating profit in the Engine Products, Fastening Systems and Engineered Structures segmentssegments. While regulatory authorities in the second quarterUnited States and six months ended June 30, 2020. The Company expectscertain other jurisdictions lifted grounding orders beginning in late 2020, our sales have remained at lower levels due to the reduction inresidual impacts of the 737 MAX production rates to continue to have a negative impact on its financial performance for the remainder of 2020.
Engine Products
Second quarter endedSix months ended
 June 30,June 30,
 2020201920202019
Third-party sales$585  $835  $1,366  $1,648  
Inter-segment sales1  3  3  8  
Total sales$586  $838  $1,369  $1,656  
Segment operating profit105  163  270  304  
grounding.

Engine Products
Second quarter endedSix months ended
 June 30,June 30,
 2021202020212020
Third-party sales$544 $585 $1,078 $1,366 
Segment operating profit100 105 201 270 
Third-party sales for the Engine Products segment decreased $250,$41, or 30%7%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lower volumes in the commercial aerospace end market driven by the impact of COVID-19 and 737 MAXBoeing 787 production declines, and a decrease in sales of $33 from the divestiture of the forgings business in the U.K. (December 2019) (see Note Q to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q), partially offset by higher volumes in the industrial gas turbines and defense aerospace end markets as well as price increases.turbine market.
Third-party sales for the Engine Products segment decreased $282,$288, or 17% for21%, in the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lower volumes in the commercial aerospace end market driven by the impact of COVID-19, and 737 MAX and Boeing 787 production declines, and a decrease in sales of $65 from the divestiture of the forgings business in the U.K. (December 2019) (see Note Q to the Consolidated Financial Statements in Part I Item 1 of this Form 10-Q), partially offset by higher volumes in the defense aerospace and industrial gas turbines and defense aerospace end markets as well as price increases.
Segment operating profit for the Engine Products segment decreased $58, or 36%, in the second quarter of 2020 compared to the second quarter of 2019, primarily due to lower commercial aerospace volumes, partially offset by cost reductions, price increases, and favorable volumes and mix in the industrial gas turbines and defense aerospace endturbine markets.
Segment operating profit for the Engine Products segment decreased $34,$5, or 11%5%, in the second quarter of 2021 compared to the second quarter of 2020, primarily due to lower volumes in the commercial aerospace market driven by the impact of COVID-19 and Boeing 787 production declines, partially offset by cost reductions, favorable sales volumes in the industrial gas turbine market, and favorable product pricing. The segment added approximately 300 headcount in the quarter in anticipation of revenue increases in the second half of the year.
Segment operating profit for the Engine Products segment decreased $69, or 26%, in the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lower volumes in the commercial aerospace volumes, partially offset by cost reductions, price increases and favorable volumes and mix in the industrial gas turbines and defense aerospace end markets.market driven
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by the impact of COVID-19, and 737 MAX and Boeing 787 production declines, partially offset by cost reductions, favorable sales volumes in the defense aerospace and industrial gas turbine markets, and favorable product pricing.
For the full year 2021 compared to 2020, demand in the industrial gas turbine market is expected to increase while demand in the commercial aerospace market is expected to be down, driven by the impact of COVID-19 and Boeing 787 production declines. Favorable cost reductions are expected to continue.
Fastening Systems
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Third-party sales$326  $399  $711  $794  
Segment operating profit70  99  166  195  
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Third-party sales$262 $326 $534 $711 
Segment operating profit50 70 95 166 
Third-party sales for the Fastening Systems segment decreased $73,$64, or 18%20%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lower volumes in the commercial aerospace market driven by the impact of COVID-19 and Boeing 787 production declines, partially offset by higher volumes in the commercial transportation and aerospace end markets driven by COVID-19 and 737 MAX production declines.industrial markets.
Third-party sales for the Fastening Systems segment decreased $83,$177, or 10%25%, forin the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lower volumes in the commercial transportation and aerospace end marketsmarket driven by the impact of COVID-19, and 737 MAX and Boeing 787 production declines.declines, partially offset by higher volumes in the commercial transportation and industrial markets.
Segment operating profit for the Fastening Systems segment decreased $29,$20, or 29%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lower volumes in the commercial aerospace market driven by the impact of COVID-19 and COVID-19,Boeing 787 production declines, partially offset by cost reductions.reductions and favorable sales volumes in the commercial transportation and industrial markets.
Segment operating profit for the Fastening Systems segment decreased $29,$71, or 15%43%, forin the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lower volumes in the commercial aerospace market driven by the impact of COVID-19, and COVID-19,737 MAX and Boeing 787 production declines, partially offset by cost reductions.reductions and favorable sales volumes in the commercial transportation and industrial markets.
For the full year 2021 compared to 2020, demand in the commercial transportation and industrial markets is expected to increase while demand in the commercial aerospace market is expected to be down, driven by the impact of COVID-19 and Boeing 787 production declines. Favorable cost reductions are expected to continue.
Engineered Structures
Second quarter endedSix months ended
 June 30,June 30,
 2020201920202019
Third-party sales$229  $331  $504  $625  
Inter-segment sales2  3  5  6  
Total sales$231  $334  $509  $631  
Segment operating profit19  25  47  41  
Second quarter endedSix months ended
 June 30,June 30,
 2021202020212020
Third-party sales$160 $229 $336 $504 
Segment operating profit11 19 21 47 
Third-party sales for the Engineered Structures segment decreased $102,$69, or 31%30%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lower volumes in the commercial aerospace end market driven by the impact of COVID-19 and 737 MAXBoeing 787 production declines, partially offset by price increases.declines.
Third-party sales for the Engineered Structures segment decreased $121,$168, or 19% 33%, forin the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lower volumes in the commercial aerospace end market driven by the impact of COVID-19, and 737 MAX and Boeing 787 production declines, partially offset by price increases.declines.
Segment operating profit for the Engineered Structuressegment decreased $6,$8, or 24%42%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lower sales volumes in the commercial aerospace market driven by the impact of COVID-19 and COVID-19,Boeing 787 production declines, partially offset by cost reductions, intentional product exits and price increases.reductions.
Segment operating profit for the Engineered Structuressegment increased $6,decreased $26, or 15%55%, forin the six months ended June 30, 2021 compared to the six months ended June 30, 2020, compared to six months ended June 30, 2019, primarily due to cost reductions, price increaseslower volumes in the commercial aerospace market driven by the impact of COVID-19, and intentional product exits,737 MAX and Boeing 787 production declines, partially offset by lower sales volumes.
Forged Wheels
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Third-party sales$113  $257  $304  $511  
Segment operating profit6  73  56  133  
cost reductions.
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For the full year 2021 compared to 2020, demand in the commercial aerospace market is expected to be down, driven by the impact of COVID-19 and Boeing 787 production declines. Favorable cost reductions are expected to continue.

Forged Wheels
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Third-party sales$229 $113 $456 $304 
Segment operating profit61 6 131 56 
Third-party sales for the Forged Wheels segment decreased $144,increased $116, or 56%103%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lowerhigher volumes in the commercial transportation market driven by market softness and COVID-19, unfavorable foreign currency movements and aluminum prices.market.
Third-party sales for the Forged Wheels segment decreased $207,increased $152, or 41%50%, forin the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lowerhigher volumes in the commercial transportation market driven by market softness and COVID-19, unfavorable foreign currency movements and aluminum prices.market.
Segment operating profit for the Forged Wheels segment decreased $67,increased $55, or 92%917%, in the second quarter of 20202021 compared to the second quarter of 2019,2020, primarily due to lowerhigher commercial transportation sales volumes COVID-19 disruptions and unfavorable aluminum prices, partially offset by cost reductions.maximizing production in low-cost countries.
Segment operating profit for the Forged Wheels segment deceased $77,increased $75, or 58%134%, forin the six months ended June 30, 20202021 compared to the six months ended June 30, 2019,2020, primarily due to lowerhigher commercial transportation sales volumes and maximizing production in low-cost countries.
For the full year 2021 compared to 2020, demand in the commercial transportation markets served by Forged Wheels is expected to increase in most regions. Commercial transportation OEMs are expected to increase output as global economies recover from 2020 COVID-19 disruptions, partially offsetlows. However, sales in the Forged Wheels segment could be negatively impacted by cost reductions.customer supply chain constraints.
Reconciliation of Total segment operating profit to Income (loss) from continuing operations before income taxes to Total segment operating profit
Second quarter endedSix months ended
June 30,June 30,
2021202020212020
Income (loss) from continuing operations before income taxes$110 $(86)$223 $112 
Interest expense89 144 161 228 
Other expense (income), net8 16 12 (8)
Consolidated operating income$207 $74 $396 $332 
Unallocated amounts:
Restructuring and other charges5 105 14 144 
Corporate expense10 21 38 63 
Total segment operating profit$222 $200 $448 $539 
Second quarter endedSix months ended
June 30,June 30,
2020201920202019
Total segment operating profit$200  $360  $539  $673  
Unallocated amounts:
Restructuring and other charges(105) (472) (144) (516) 
Corporate expense(21) (64) (63) (119) 
Consolidated operating income (loss)$74  $(176) $332  $38  
Interest expense(144) (86) (228) (171) 
Other (expense) income, net(16) (6) 8  (18) 
Income (loss) from continuing operations before income taxes$(86) $(268) $112  $(151) 
Total segment operating profit is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of the segments of the Company excluding Corporate results.
See Restructuring and other charges, Interest expense, and Other (expense) income,expense (income), net discussions above under Results of Operations for reference.
Corporate expense decreased $11, or 52%, in the second quarter of 2021 compared to the second quarter of 2020, primarily due to costs incurred in 2020 associated with the Arconic Inc. Separation Transaction of $3, lower costs related to fires at two plants of $7, and lower costs driven by overhead cost reductions.
Corporate expense decreased $25, or 40%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to costs incurred in 2020 associated with the Arconic Inc. Separation Transaction of $7, lower costs related to fires at two plants of $8, impairment costs related to facility closures of $3 incurred in 2020 that did not recur in 2021, and lower costs driven by overhead cost reductions.
Environmental Matters
See the Environmental Matters section of Note R to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
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Subsequent Events
See Note S to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for subsequent events.
Liquidity and Capital Resources
As previously disclosed, during the third quarter of 2020, the Company identified a misclassification in the presentation of changes in accounts payable and capital expenditures in its previously issued Statement of Consolidated Cash Flows for the six months ended June 30, 2020. Although management has determined that such misclassification was not material, the Company revised the accompanying Statement of Consolidated Cash Flows for the six months ended June 30, 2020, resulting in an $83 increase to previously reported capital expenditures and decrease to cash provided from investing activities with a corresponding reduction (decrease) in accounts payable, trade and increase in cash provided by operations.
The cash flows related to Arconic Corporation have not been segregated and are included in the Statement of Consolidated Cash Flows for all periods prior to the Arconic Inc. Separation Transaction. See Note A to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference.
Operating Activities
Cash used forprovided from operations was $260$79 in the six months ended June 30, 2020,2021 compared to $152cash used for operations of $177 in the six months ended June 30, 2019.2020. The increasechange of $108,$256, or 71%145%, was primarily due to lower operating results of $296, partially$191, which were more than offset by lower working capital of $179.$391, including the impact of employee retention credit receivables, lower pension contributions of $41, and noncurrent liabilities of $13. The components of the change in working capital included favorable changes in receivables of $673 and in taxes, including income taxes of $55, partially offset by unfavorable changes in accounts payable of $374,$368, inventories of $155, accrued expenses of $127,$80, and prepaid expenses and other current assets of $29$21, offset by unfavorable changes in receivables of $161 and inventoriestaxes, including income taxes of $19.$72.
As a result of the American Rescue Plan Act of 2021, management expects Howmet’s estimated pension contributions and other postretirement benefit payments in 2021 to be approximately $120.
Financing Activities
Cash used for financing activities was $1,068 in the six months ended June 30, 2021 compared to $277 in the six months ended June 30, 2020 compared to $942 in the six months ended June 30, 2019.2020. The increasechange of $665,$791, or 71%286%, was primarily due to a decreasedebt issued of $2,400 in repurchasesthe first half of 2020 (of which $1,200 went with Arconic Corporation in the Arconic Inc. Separation Transaction) and the repurchase of common stock of $900 and an increase$200 in debt issuedthe second quarter of $2,174, which were2021, partially offset by an increase inpayments on the redemption of long-term debt redemptions of $1,815,$1,203 ($838 in the first half of 2021 compared to $2,041 in the first half of 2020) (See Note O to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference), cash distributed to Arconic Corporation at the Arconic Inc. Separation Transaction of $500, a reduction in debt issuance costs of $61 and$60, a reduction in premiums paid on the redemption of debt of $59.
$37 and a reduction in dividends paid to common stock shareholders of $9. On an annual basis, the redemption of the 5.400% Notes
 and the 5.870% Notes will decrease Interest expense, net by approximately $47.
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On July 19, 2021, the Board of Directors of Howmet declared a dividend of $0.02 per share on the outstanding common stock of the Company, to be paid on August 25, 2021, to the holders of record of the common stock at the close of business on August 6, 2021.
The Company maintains a Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and issuers named therein. In addition to the Credit Agreement, the Company has a number of other credit agreements. On June 26, 2020,March 29, 2021, the Company entered into ananother amendment to its Credit Agreement to modify certain terms which providedprovide extended relief from its existing financial covenant through December 31, 2021 and reduced total commitment available from $1,500 to $1,000.2022. See Note O to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for reference.
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. The timing, prices, and sizes of purchases depend upon prevailing trading prices, general economic and market conditions, and other factors, including applicable securities laws. Such purchases may be completed 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, tender offers, and/or accelerated share repurchase agreements or other derivative transactions.
The Company’s costs of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short-short and long-term debt ratings assigned to the Company by the major credit rating agencies.
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The Company'sCompany’s credit ratings from the three major credit rating agencies are as follows:
 Long-Term DebtIssuer RatingShort-Term DebtOutlookDate of Last Update
Standard and Poor’s Ratings Service (S&P)BB+NegativeSeptember 9, 2020
Moody’s Investors Service (Moody’s)Ba2StableApril 20, 2021
Fitch Investors Service (Fitch)BBB-A-3NegativeApril 22, 2020
Moody’sBa3Speculative Grade Liquidity-2NegativeApril 23, 2020
FitchBBB-BStableApril 22, 2020March 26, 2021
Investing Activities
Cash provided from investing activities was $127$94 in the six months ended June 30, 20202021 compared to $171$44 in the six months ended June 30, 2019.2020. The decreaseincrease in cash provided from investing activities of $44,$50, or 26%114%, was primarily due to decreases in Cash receipts from sold receivables of $303 and lower sales of fixed-income securities of $47, which were partially offset by a decrease in capital expenditures of $203 and an increase in proceeds from the sale of assets and businesses of $102 primarily$106 ($8 is related to the sale of a small manufacturing plant in France in the second quarter of 2021 and $114 is related to the sale of a hard extrusions plant in South Korea and an aluminum rolling mill in Brazil in the first quarter of 2020 (both of which related to Arconic Corporation) compared to the), substantially offset by a decrease in capital expenditures of $93 and an increase in cash receipts from sold receivables of $58 and sale of a small additives business within the Engineered Structures segment in the first halffixed income securities of 2019.
Critical Accounting Policies and Estimates
Goodwill. Goodwill is not amortized; instead, it is reviewed for impairment annually (in the fourth quarter) or more frequently if indicators of impairment exist or if a decision is made to sell or realign a business. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may differ from that used to evaluate the impairment of goodwill.
Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. For the second quarter of 2020, Howmet had four reporting units (Engine Products, Fastening Systems, Engineered Structures and Forged Wheels).
In reviewing goodwill for impairment, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (greater than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to perform a qualitative assessment and determines that an impairment is more likely than not, the entity is then required to perform the quantitative impairment test (described below); otherwise no further analysis is required. An entity also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether an entity chooses to perform the qualitative assessment or proceeds directly to the quantitative impairment test.
Howmet determines annually, based on facts and circumstances, which of its reporting units will be subject to the qualitative assessment. For those reporting units where a qualitative assessment is either not performed or for which the conclusion is that an impairment is more likely than not, a quantitative impairment test will be performed. Howmet’s policy is that a quantitative impairment test be performed for each reporting unit at least once during every three-year period.
Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value of a reporting unit are identified (similar to impairment indicators above). These factors are then classified by the type of impact they would have on the estimated fair value using positive, neutral, and adverse categories based on current business conditions. Additionally, an assessment of the level of impact that a particular factor would have on the estimated fair value is determined using high, medium, and low weighting. Furthermore, management considers the results of the most recent quantitative impairment test completed for a reporting unit and compares the weighted average cost of capital (WACC) between the current and prior years for each reporting unit.

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During the first quarter of 2020, Howmet’s market capitalization declined significantly compared to the fourth quarter of 2019. Over the same period, the equity value of our peer group companies, and the overall U.S. stock market also declined significantly amid market volatility. In addition, as a result of the COVID-19 pandemic and measures designed to contain the spread, sales globally to customers in the aerospace and commercial transportation industries that are impacted by COVID-19 have been and are expected to be negatively impacted as a result of disruption in demand. As a result of these macroeconomic factors, we performed a qualitative impairment test in the first quarter to evaluate whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value. As a result of this assessment, the Company performed a quantitative impairment test in the first quarter for the Engineered Structures reporting unit and concluded that though the margin between the fair value of the reporting unit and carrying value had declined from approximately 60% to approximately 15%, it was not impaired. Consistent with prior practice, a discounted cash flow model was used to estimate the current fair value of the reporting unit. The significant assumptions and estimates utilized to determine fair value were developed utilizing current market and forecast information reflecting the disruption in demand that has and is expected to negatively impact the Company’s sales globally in the aerospace industry.
In the second quarter of 2020, there were no indicators of impairment identified for the Engineered Structures reporting unit as the margin between fair value of the reporting unit and carrying value exceeded 20%. As such, the fair values of all of our reporting units substantially exceeded their carrying values at June 30, 2020. If our actual results or external market factors decline significantly from management’s estimates, future goodwill impairment charges may be necessary and could be material.$5.
Recently Adopted and Recently Issued Accounting Guidance
See Note C to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
Forward-Looking Statements
This report contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “would,” or other words of similar meaning. All statements that reflect Howmet’s expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements, forecasts and expectationsoutlook relating to the growthcondition of the aerospace, automotive, commercial transportation and other end markets; statements and guidance regarding future financial results, operating performance, or operating performance; statements regardingestimated or expected future capital expenditures; future strategic actions; and statements about Howmet’s strategies, outlook, and business and financial prospects.prospects; and any future dividends and repurchases of its debt or equity securities. These statements reflect beliefs and assumptions that are based on Howmet’s perception of historical trends, current conditions and expected future developments, as well as other factors Howmet believes are appropriate in the circumstances. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and changes in circumstances that are difficult to predict, which could cause actual results to differ materially from those indicated by these statements. Such risks and uncertainties include, but are not limited to: (a)a) uncertainty of the duration, extent and impact of the separationCOVID-19 pandemic on Howmet’s business, results of Arconic Corporation from Howmet on the businesses of Howmet;operations, and financial condition; (b) deterioration in global economic and financial market conditions generally, including as a result of pandemic health issues (including COVID-19 and its effects, among other things, on global supply, demand, and distribution disruptions as the COVID-19 outbreakpandemic continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations); (c) unfavorable changes in the markets served by Howmet; (d) the impact of potential cyber attacks and information technology or data security breaches; (e) the loss of significant customers or adverse changes in customers’ business or financial conditions; (f) manufacturing difficulties or other issues that impact product performance, quality or safety; (g) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (h) the inability to achieve the level of revenue growth, cash generation, cost savings, restructuring plans, cost reductions, improvement in profitability, and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated or targeted; (e)(i) competition from new product offerings, disruptive technologies or other developments; (f) political,(j) geopolitical, economic, and regulatory risks relating to Howmet’s global operations, including compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; (g) manufacturing difficulties or other issues that impact product performance, quality or safety; (h) Howmet’s inability to realize expected benefits, in each case as planned and by targeted completion dates, from acquisitions, divestitures, facility closures, curtailments, expansions, or joint ventures; (i) the impact of potential cyber attacks and information technology or data security breaches; (j) the loss of significant customers or adverse changes in customers’ business or financial conditions; (k) adverse changes in discount rates or investment returns on pension assets; (l) the impact of changes in aluminum prices and foreign currency exchange rates on costs and results; (m) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation, which can expose Howmet to substantial costs and liabilities; (l) failure to comply with government contracting regulations; (m) adverse changes in discount rates or investment returns on pension assets; and (n) the possible impacts and our preparedness to respond to implications of COVID-19; and (o) the other risk factors summarized in Howmet’s Form 10-K for the year ended December 31, 2019, Form 10-Q for the quarter ended March 31, 2020 and other reports filed with the U.S. Securities and Exchange Commission. Market projections are subject to the risks discussed above and other risks in the market. Howmet disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not material.
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Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
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The Company's Co-Chief Executive Officers and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the second quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
See Note R to the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.
Item 1.1A. Risk Factors.
Howmet’s business, financial condition and results of operations may be impacted by a number of factors. In addition toThere have been no material changes from the risk factors discussed elsewhere in this report,previously disclosed in Part I, Item 1A, of Howmet’s“Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A. of Howmet’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in other reports filed by Howmet with the Securities and Exchange Commission, the following risks and uncertainties, updated from and in addition to those in the Form 10-K and Form 10-Q, could materially harm its business, financial condition or results of operations, including causing Howmet’s actual results to differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to Howmet or that Howmet currently deems immaterial also may materially adversely affect the Company in future periods.2020.
Our business, results of operations, financial condition and/or cash flows have been and could continue to be materially adversely affected by the effects of widespread public health epidemics/pandemics, including COVID-19, that are beyond our control.
Any outbreaks of contagious diseases, public health epidemics or pandemics and other adverse public health developments in countries where we, our employees, customers and suppliers operate could have a material and adverse effect on our business, results of operations, financial condition and/or cash flows. Specifically, the novel strain of COVID-19, affecting the global community on a pandemic basis, including the United States, Europe and South America, is adversely impacting our operations, and the nature and extent of the impact over time is highly uncertain and beyond our control. The extent to which COVID-19 further affects our operations over time will depend on future developments, which are highly uncertain, including the duration of the outbreak, the continued severity of the virus, resurgences of the virus, and the efficacy and the extent of actions that have been or may be taken to contain or treat its impact. These actions include, but are not limited to, declarations of states of emergency, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations, many of which have been implemented across much of the globe and all of which have negatively affected our business. The longer the period of duration, the greater impact on our businesses and the heightened risk of a continuing material adverse impact on our business, results of operations, financial conditions and/or cash flows, as well as on our business strategies and initiatives. While some of the restrictions and limitations noted above have been and may continue to be relaxed or rolled back, certain actions have been and may continue to be reinstated as the pandemic continues to evolve including as a result of resurgences. The scope and timing of such reinstatements are difficult to predict and may materially affect our operations in the future. We continue to monitor guidelines proposed by federal, state and local governments with respect to the “reopening” measures and measures for continued operation, which may change over time depending on public health, safety and other considerations. We are continuing to focus on the safety and protection of our workforce by continuing to implement additional safety protocols in light of COVID-19.
As a result of COVID-19 and the measures designed to contain its spread, our sales globally, including to customers in the aerospace and commercial transportation industries that are impacted by COVID-19, have been and are expected to be negatively impacted as a result of disruption in demand, which has had and over time could continue to have a material adverse effect on our business, results of operations, financial condition and/or cash flows. The COVID-19 pandemic has already subjected our operations, financial performance and financial condition to a number of risks, including, but not limited to those discussed below:
35

•
Business
Item 2. Unregistered Sales of Equity Securities and operations risks: We continue to monitor the evolving situation relating to COVID-19 to determine whether we will need to significantly modify our business practices or take actions as may be required by government authorities or that we determine are in the best interestsUse of our employees, customers, partners, suppliers and shareholders. We have had a number of smaller manufacturing locations that have experienced periods of shutdowns. Future shutdowns will be dependent on facts and circumstances as they unfold, including based on the restrictions and limitations noted above. Additional shutdowns, while not required by governmental authorities, may be necessary to match our production of materialsProceeds.

The following table presents information with respect to the reduced demandCompany’s repurchases of our customers. In addition, given these factors and potential further disruptions, we may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. We may also face challenges in restoring our production levels if and when COVID-19 abates, including as a result of government-imposed or other limitations that prevent the return of all or a portion of our workforce and/or continue to disrupt demand and limit the capabilities of our suppliers. We continue to monitor the situation, to assess further possible implications to our business, employees, customers and supply chain, and to take actions in an effort to mitigate adverse consequences. As a result of COVID-19 and its potential impact on the aerospace industry, the possibility exists that a sustained impact to our operations, financial results and market capitalization may require material impairments of our assets including, but not limited to, goodwill, intangible assets, long-lived assets, and right-of-use assets. While we have already commenced plans to reduce costs, including certain headcount reductions, reductions in certain cash outflows, suspension of our common stock dividend and reductions induring the levels of our capital expenditures, we cannot at this time predict the longer term impact of the COVID-19 pandemic, but it could continue to have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
•Customer and supplier risks: We have limited visibility into future demand given the disruptions resulting from COVID-19. The sharp decrease in air travel resulting from the COVID-19 outbreak and the measures governments and private organizations worldwide have implemented in an attempt to contain its spread is adversely affecting, and will likely continue to adversely affect, airlines and airframers and their respective demand for our customers’ products and services. Aircraft manufacturers are reducing production rates due to fewer expected aircraft deliveries and, as a result, demand for products in the original equipment manufacturer market has significantly decreased. Several of our aerospace and commercial transportation customers have temporarily suspended operations at certain production sites, reduced operations and production rates and/or taken cost-cutting actions, the duration and extent of which we cannot predict, including, but not limited to, General Electric Company, The Boeing Company, and Raytheon Technologies Corporation, which represented approximately 12%, 9% and 9%, respectively, of our third party sales for the six monthsquarter ended June 30, 2020. Due to these cost-cutting measures and others, we are experiencing, and expect to continue experiencing, lower demand and volume for products and services, customer requests for potential payment deferrals, pricing concessions or other contract modifications, delays of deliveries and the achievement of other billing milestones. COVID-19 may also limit the ability of our counterparties generally to perform their obligations to us, including, but not limited to, our customers’ ability to make timely payments to us. These trends may lead to charges, impairments and other adverse financial impacts over time, as noted above, as we have historically depended upon the strength of these industries, particularly the aerospace industry. In addition, the ongoing COVID-19 pandemic may negatively impact customer contract negotiations, including the ability to negotiate acceptable terms in contract renewal negotiations and our ability to obtain new customers. Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications. To date, we have not experienced significant disruption to our supply chain. If our suppliers’ operations were to be impacted, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our business, results of operations, financial condition and/or cash flows. The duration of the current disruptions to our customers and to our supply chain, and related financial impact to us, cannot be estimated at this time. Should such disruption continue for an extended period of time, the impact will have a material adverse effect on our business, results of operations, financial condition and/or cash flows. Ultimately, the demand for our products is, in turn, driven by demand for transportation and for people to travel within and between various countries around the world. Should the COVID-19 outbreak cause a long term deterioration in demand for transportation or travel due to fear or anxiety related to health concerns, governmental restriction, economic hardships, or increased use of electronic communication technologies embraced during the COVID-19 related shutdowns, the effects of the COVID-19 virus on our business may extend well beyond the COVID-19 current health crisis and immediate related governmental actions.2021:
•Market risks: The current financial market dynamics and volatility pose heightened risks to our liquidity. For example, dramatically lowered interest rates and lower expected asset valuations and returns can materially impact the calculation of long-term liabilities such as our pension. In addition, extreme volatility in financial and commodities markets has had and may continue to have adverse impacts on other asset valuations such as the value of the investment portfolios supporting our pension. Our long-term liabilities are sensitive to numerous factors and assumptions that can move in offsetting directions and should be considered as of the time of a relevant measurement event.
•Liquidity and credit risks: We currently have the ability to borrow up to $1.0 billion under our revolving credit agreement, which was amended in June 2020. A prolonged period of generating lower financial results and cash from
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operations could adversely affect our ability to draw under such amended revolving credit agreement, could also adversely affect our financial condition, including in respect of satisfying both required and voluntary pension funding requirements, and could otherwise negatively affect our ability to achieve our strategic objectives. These factors could also adversely affect our ability to maintain compliance with the debt covenants under our amended revolving credit agreement, including as a result of potential increases in net debt or future reductions in EBITDA. There can also be no assurance that we will not face credit rating downgrades as a result of weaker than anticipated performance of our businesses or other factors including overall market conditions. Future downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse commercial impact on our businesses. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding (including for receivables securitization or supply chain finance programs used to finance working capital) or our ability to refinance certain of our indebtedness, which could adversely affect our business, financial position, results of operations and/or cash flows. Although the U.S. federal and other governments have announced a number of funding programs to support businesses, our ability or willingness to access funding under such programs may be limited by regulations or other guidance, including eligibility criteria, or by further change or uncertainty related to the terms of these programs.
(in millions except share and per share amounts)
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal 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(1)
April 1 - April 30, 2021— —— $277.0
May 1 - May 31, 2021(2)
4,910,988$34.024,910,988$77.0
June 1 - June 30, 2021(2)
967,803$34.02967,803$77.0
Total for quarter ended June 30, 20215,878,791$34.025,878,791

The COVID-19 pandemic may also exacerbate(1)On May 20, 2019, the Company announced that its Board of Directors authorized the repurchase of $500 million of the Company's outstanding common stock (the “Share Repurchase Program”) 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 risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-Kderivative transactions. There was no stated expiration for the year ended December 31, 2019Share Repurchase Program under which the Company may repurchase shares from time to time and Part II, Item 1A. Risk Factors in our Quarterly Report on Form 10-Qpursuant to such terms, as and if it deems appropriate. The Share Repurchase Program may be suspended, modified or terminated at any time without prior notice. After giving effect to the share repurchases made through June 30, 2021, approximately $77 million remains available under the prior authorization by the Board of Directors for the quarter ended March 31, 2020, including, but notShare Repurchase Program. The amount of share repurchases by the Company may be limited under the terms of the Five-Year Revolving Credit Agreement (See Note Oto risks related to global economic conditions, competition, loss of customers, costs of supplies, manufacturing difficulties and disruptions, investment returns, our credit profile, our credit ratings and interest rates. We expect that the longer the period of disruption from COVID-19 continues, the more material the adverse impacts will be on our business operations, financial performance, results of operations and/or cash flows. In addition, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our business, results of operations, financial conditions and/or cash flows.Consolidated Financial Statements for additional detail).

(2)On May 10, 2021, the Company entered into an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC to repurchase $200 million of its common stock. The Company received an initial delivery of 4,910,988 shares in May 2021, and 967,803 additional shares in June 2021. A total of 5,878,791 shares, at an average price of $34.02 per share, were purchased under the agreement.
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Item 6. Exhibits.
Employment Letter Agreement, by and between Howmet Aerospace Inc. and John C. Plant,Lola Lin, dated as of June 9, 2020, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 12, 2020.May 5, 2021.
Amendment No. Restricted Share Unit Award Agreement - Annual Equity Award for Lola Lin, effective July 15, 2021.
Restricted Share Unit Award Agreement - Sign-On Equity Award for Lola Lin, effective July 15, 2021.
Form of June 26, 2020, to the Five-Year Revolving Credit Agreement dated as of July 25, 2014, among Howmet Aerospace Inc., the lendersConfidentiality, Non-Competition, and issuers named therein, Citibank, N.A., as administrative agent, and JPMorgan Chase Bank, N.A., as syndication agent, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 29, 2020.Non-Solicitation Agreement.
Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104.Cover Page Interactive Data File - the cover page from this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,June 30, 2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Howmet Aerospace Inc.
August 7, 20204, 2021/s/ Ken Giacobbe
DateKen Giacobbe
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
August 7, 20204, 2021/s/ Paul MyronBarbara L. Shultz
DatePaul MyronBarbara L. Shultz
Vice President and Controller
(Principal Accounting Officer)

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