UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 8, 1999
HOWMET INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-13645 52-1946684
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Commission File Number IRS Employer Identification No.
475 Steamboat Road, Greenwich, CT 06830
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(Address of principal executive offices) (Zip Code)
(203) 661-4600
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Registrant's Telephone Number
Item 5. OTHER EVENTS
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The following news release was issued on February 8, 1999.
HOWMET REPORTS ANNUAL EARNINGS;
Strong EPS Growth in 1998
Greenwich, Connecticut, February 8, 1999 - Howmet International Inc. reported
net income applicable to common shareholders of $104.8 million, or $1.05 per
share, for the year ended December 31, 1998 compared to $66.9 million, or $.67
per share, for 1997. The 1997 amounts are before an extraordinary charge
related to debt restructuring. Sales increased 12 percent over 1997, after
adjusting for the sale of the Company's refurbishment business.
Net income for the 1998 year included $6.8 million of expenses, or $.07 per
share, from the Company's Stock Appreciation Rights (SAR) plan compared to 1997
SAR expense of $19.2 million, or $.19 per share. Excluding SAR expense from
both periods, the 1997 extraordinary loss, and a 1997 $.06 per share non-
recurring price adjustment, operating income was up 15 percent and earnings per
share increased 40 percent over 1997. Significantly reduced debt levels and
lower interest rates reduced interest expense by 59 percent.
President and Chief Executive Officer Dave Squier commented, "By all measures,
1998 was a very good year for Howmet. We have secured several key customer
alliances, particularly in the rapidly expanding industrial gas turbine market,
and have begun a
(more)
Howmet Annual Earnings Release
Page 2
significant capacity expansion program to capitalize on the growth that such
alliances and general market conditions have afforded the Company. Despite
sizable capital expenditures, cash flow remains strong, and we exceeded our
long-term goal of 15 percent per year growth in earnings per share.
"Howmet's 1998 fourth quarter earnings per share increased 65 percent over 1997,
on a comparable basis," Mr. Squier added. "This improvement was achieved
despite depressed margins in some of our new business areas. We remain
confident that these new businesses will play an important role in our future
earnings growth."
Fourth Quarter Results
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Net income applicable to common shareholders for the three-months ended December
31, 1998, was $19 million or $.19 per share compared to $11.4 million or $.11
per share for 1997. The 1997 amounts are before an extraordinary charge related
to debt restructuring.
Net income for the 1998 quarter included $8.6 million, or $.09 per share, of SAR
expense, including the reversal of a $5 million after-tax benefit recorded in
the third quarter when the Company stock price temporarily declined. 1997 SAR
expense was $6.3 million, or $.06 per share. Excluding SAR expense from both
periods and the 1997 extraordinary loss, earnings per share increased 65 percent
over 1997.
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Howmet Annual Earnings
Page 3
Sales increased 16 percent over the 1997 quarter, while income from operations
was up 10 percent, after excluding SAR expense from both quarters.
Significantly reduced debt levels and lower interest rates reduced interest
expense by 55 percent.
Howmet International Inc. (HWM-NYSE) is the world's largest manufacturer of
precision investment castings using superalloy and titanium alloy for jet
aircraft and industrial gas turbine engines. The Company is also the world's
largest producer of aluminum investment castings for the commercial aerospace
and defense electronics industries. The Company operates 29 manufacturing
facilities and employs approximately 11,500 people worldwide.
This press release includes forward-looking statements. Pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers that such forward-looking statements are subject to
certain risks and uncertainties, which could cause actual results to differ
materially from those projected in those statements. These risks and
uncertainties include, but are not limited to, worldwide economic and political
conditions, the effects of the IGT market and the aerospace industry economic
conditions and cyclicality, the nature of the Company's customer base,
competition, pricing pressures, availability and cost of raw materials, and
others detailed in Exhibit 99.1 to the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year 1997.
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Howmet Annual Earnings
Page 4
Summary financial information the year ended December 31, follows:
(dollars in millions, except per share amounts)
1998 1997 $ Change Percent
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Net sales $1350.6 $1258.2 $ 92.4 7
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Income from operations 189.7 154.5 35.2 23
Interest income 1.6 1.2 .4 33
Interest expense (12.7) (31.0) 18.3 59
Other, net (3.4) (6.4) 3.0 47
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Income before taxes 175.2 118.3 56.9 48
Income taxes (64.8) (46.3) (18.5) (40)
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Income before extraordinary items 110.4 72.0 38.4 53
Extraordinary item - loss on early
retirement of debt - (12.3) 12.3 -
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Net income 110.4 59.7 50.7 85
Preferred stock dividend (5.6) (5.1) (.5) (10)
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Net income applicable to
common stockholders $ 104.8 $ 54.6 $ 50.2 92
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Per common share (basic and diluted)
Income before extraordinary item $ 1.05 $ .67 $ .38 57
Net income $ 1.05 $ .55 $ .50 91
(more)
Howmet Annual Earnings
Page 5
Summary unaudited financial information the three-months ended December 31,
follows:
(dollars in millions, except per share amounts)
1998 1997 $ Change Percent
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Net sales $354.9 $306.2 $48.7 16
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Income from operations 32.5 31.5 1.0 3
Interest income .5 .4 .1 25
Interest expense (2.3) (5.1) 2.8 55
Other, net (.6) (4.3) 3.7 86
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Income before taxes 30.1 22.5 7.6 34
Income taxes (9.7) (9.8) .1 1
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Income before extraordinary items 20.4 12.7 7.7 61
Extraordinary item - loss on early
retirement of debt - (12.3) 12.3 -
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Net income 20.4 .4 20.0 -
Preferred stock dividend (1.4) (1.3) (.1) (8)
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Net income (loss) applicable to
common stockholders $ 19.0 $ (.9) $19.9 -
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Per common share (basic and diluted)
Income before extraordinary item $ .19 $ .11 $ .08 73
Net income (loss) $ .19 $ (.01) $ .20 -
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Contact:
Doreen L. Deary Shannon Polk
(203) 625-8735 (801) 933-4030
ddeary@howmet.com polksb@cordanttech.com
Corporate Communications Investor Relations
(End of Press Release)
The following additional information is provided for the benefit of investors.
Condensed Consolidated Statements of Cash Flows
Year ended December 31,
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(in millions) 1998 1997 1996
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OPERATING ACTIVITIES
Net income $ 110.4 $ 59.7 $ 25.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 60.2 66.9 63.3
Equity in (income) loss of unconsolidated affiliates (.4) (1.5) 1.4
Extraordinary item - 12.3 -
Changes in assets and liabilities:
Receivables (3.5) 8.4 29.9
Inventories 2.2 (17.9) 17.2
Accounts payable and accrued liabilities 10.3 12.1 39.1
Deferred income taxes (2.1) (.3) (3.2)
Income taxes payable 17.8 16.9 6.1
Long-term SARs accrual 5.5 31.4 6.6
Other - net 7.0 4.6 (1.5)
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Net cash provided by operating activities 207.4 192.6 184.5
INVESTING ACTIVITIES
Proceeds from disposal of fixed assets .4 .2 .3
Purchases of property, plant and equipment (83.0) (56.9) (33.7)
Payments made for investments and other assets (3.4) (2.0) -
Proceeds from sale of refurbishment business, net - 44.9 -
Other - - 3.6
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Net cash used by investing activities (86.0) (13.8) (29.8)
FINANCING ACTIVITIES
Net change in short-term debt 15.1 - -
Issuance of long-term debt 36.6 326.2 147.2
Repayment of long-term debt (182.0) (467.6) (288.1)
Premiums paid on early retirement of debt - (13.7) -
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Net cash used by financing activities (130.3) (155.1) (140.9)
Foreign currency rate changes 1.1 (1.7) -
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(Decrease) increase in cash and cash equivalents (7.8) 22.0 13.8
Cash and cash equivalents at beginning of period 45.4 23.4 9.6
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Cash and cash equivalents at end of period $ 37.6 $ 45.4 $ 23.4
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Condensed Consolidated Balance Sheets
December 31,
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(in millions, except share data) 1998 1997
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Assets
Current assets:
Cash and cash equivalents $ 37.6 $ 45.4
Accounts receivable (less allowance of $5.2 and $4.4) 84.1 78.7
Inventories 161.9 155.5
Retained receivables 32.0 20.2
Deferred income taxes 16.2 16.3
Other current assets 3.0 3.9
Restricted Trust (a) 716.4 -
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Total current assets 1,051.2 320.0
Property, plant and equipment, net 334.9 275.5
Goodwill, net 221.1 226.5
Patents and technology and other intangible assets, net 106.6 118.4
Other noncurrent assets 86.8 80.2
Restricted Trust (a) - 716.4
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Total assets $1,800.6 $1,737.0
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Liabilities, redeemable preferred stock and stockholders' equity
Current liabilities:
Accounts payable $ 101.5 $ 84.2
Accrued liabilities 153.7 145.1
Income taxes payable 44.8 28.2
Short-term debt 28.0 -
Pechiney Notes (a) 716.4 -
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Total current liabilities 1,044.4 257.5
Noncurrent liabilities
Accrued retiree benefits other than pensions 96.8 93.1
Accrued pension liability 49.0 37.8
Other noncurrent liabilities 108.4 94.7
Deferred income taxes 2.1 3.4
Long-term debt, excluding the Pechiney Notes 63.0 208.4
Pechiney Notes (a) - 716.4
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Total noncurrent liabilities 319.3 1,153.8
Commitments and contingencies
Redeemable preferred stock, 9% payment-in-kind dividends, $.01 par value;
liquidation value $10,000 per share; authorized - 15,000 shares; issued and
outstanding: 1998 - 6,560 shares; 1997 - 6,001 shares 65.6 60.0
Stockholders' equity:
Preferred stock, authorized - 9,985,000 shares, issued and outstanding - 0 shares - -
Common stock, $.01 par value; authorized - 400,000,000 shares,
issued and outstanding: 1998 - 100,005,356 shares; 1997 - 100,000,000 shares 1.0 1.0
Capital surplus 195.1 195.0
Retained earnings 180.1 75.3
Accumulated other comprehensive income (4.9) (5.6)
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Total stockholders' equity 371.3 265.7
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Total liabilities, redeemable preferred stock and stockholders' equity $1,800.6 $1,737.0
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(a) The Restricted Trust held a note receivable from Pechiney, S.A., the
Company's previous owner, and related letters of credit that secured
Pechiney, S.A.'s agreement to repay the Pechiney Notes. Subsequent to
December 31, 1998, Pechiney, S.A. paid the Pechiney Notes in full on
January 4, 1999. No Howmet funds were used in the payment of the notes.
As a result the $716.4 million Restricted Trust has been terminated and
like the Pechiney Notes, subsequent to December 31, 1998, will no longer be
included on the Company's balance sheet.
Following is additional unaudited information.
1. The Company has discovered certain testing and specification non-compliance
issues at its aluminum casting operations. No formal warranty claims have
been asserted, and the Company knows of no in-service problems associated
with these issues. The Company and its customers must complete data
collection and analysis before a definitive estimate of the Company's cost
to resolve this matter can be completed. Based on a preliminary evaluation,
however, the Company has recorded an estimated loss of $4 million in its
financial statements for the year ended December 31, 1998. Based on
currently known facts, the Company believes that additional cost beyond $4
million, if any, would not have a material adverse effect on the Company's
financial position, cash flow, or annual operating results.
2. Subsequent to December 31, 1998, Pechiney, S.A., the Company's previous
owner, paid the $716.4 million Pechiney Notes in full on January 4, 1999. No
Howmet funds were used in the payment of the notes. As a result, the $716.4
million Restricted Trust has been terminated and like the Pechiney Notes,
subsequent to December 31, 1998, will no longer be included on the Company's
balance sheet.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOWMET INTERNATIONAL INC.
(Registrant)
By: /s/ Roland Paul
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Roland Paul
Vice President
Date: February 9, 1999