UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 11, 2000
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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(a) The following news release was issued on February 11, 2000.
HOWMET REPORTS ANNUAL EARNINGS
SUBSTANTIAL GROWTH; RECORD SALES AND EARNINGS
GREENWICH, CONNECTICUT, FEBRUARY 11, 2000 - Howmet International Inc. reported
net income available to common shareholders of $135.9 million, or $1.36 per
share, for the year ended 1999 compared to $104.8 million, or $1.05 per share,
for 1998. Excluding a $.02 per share benefit related to a variable stock
compensation plan in 1999, 1999 earnings per share increased 28 percent over
1998.
Sales for 1999 increased eight percent over 1998. Reported income from
operations was 14 percent higher than in 1998 (12 percent after excluding the
variable stock compensation benefit, which is discussed on the attached full
year earnings table). Lower interest expense and the elimination of preferred
stock dividends contributed to the earnings improvement.
President and Chief Executive Officer David Squier commented, "Howmet had
another excellent year. Despite a greater than expected downturn in our aero
business and production problems at our aluminum casting facilities, the Company
achieved substantial growth resulting in record
(more)
HOWMET REPORTS ANNUAL EARNINGS, PG. 2
setting levels for both sales and earnings. We have again exceeded our long-term
goal of 15 percent growth in earnings per share, and we are well positioned for
continued improvement in 2000 and beyond."
FOURTH QUARTER RESULTS
- ----------------------
Net income available to common shareholders was $32.8 million, or $.33 per
share, for the three months ended December 31, 1999, compared to $19 million, or
$.19 per share, for 1998. Excluding the items discussed on the attached fourth
quarter earnings table, 1999 earnings per share increased 38 percent over the
1998 fourth quarter.
Sales for the three months ended December 31, 1999, increased two percent over
1998. Reported income from operations was 44 percent higher for the three months
ended 1999 in comparison to 1998. However, income from operations increased 18
percent after excluding the items discussed below the fourth quarter earnings
table. Lower interest expense and the elimination of preferred stock dividends
were significant contributors to the earnings improvement.
(more)
HOWMET REPORTS ANNUAL EARNINGS, PG. 3
Headquartered in Greenwich, CT, Howmet International Inc. is the world's largest
manufacturer of precision investment castings, primarily for jet aircraft and
industrial gas turbine engines. Howmet and its subsidiaries operate 29
production facilities in the United States, Canada, France, the United Kingdom
and Japan.
This press release includes forward-looking statements. Such statements include
those relating to future sales and earnings growth among others. 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 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 the
Company's Annual Report on Form 10-K for the year 1998 and other reports filed
with the Securities and Exchange Commission. The Company undertakes no
obligation to publicly update or revise any forward-looking statements to
reflect future events or developments.
HOWMET REPORTS ANNUAL EARNINGS, PG. 4
Summary unaudited financial information for the year ended December 31 follows:
(in millions, except per share Better
amounts) 1999 1998 (Worse) Percent
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Net sales $1,459.7 $1,350.6 $ 109.1 8
================================================================================
Income from operations 215.4 189.7 25.7 14
Interest income 1.0 1.6 (.6) (38)
Interest expense (6.3) (12.7) 6.4 50
Other, net (3.0) (3.4) .4 12
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Income before income taxes 207.1 175.2 31.9 18
Income taxes (70.4) (64.8) (5.6) (9)
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Net income 136.7 110.4 26.3 24
Preferred stock dividend (.8) (5.6) 4.8 86
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Net income available to
common stockholders $ 135.9 $ 104.8 $ 31.1 30
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Net income per common share,
basic and diluted $ 1.36 $ 1.05 $ .31 30
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The 1999 earnings include a $.02 per share positive impact related to a variable
stock compensation plan. This benefit results from a decline in Cordant
Technologies Inc. (Howmet's 85 percent owner) common stock price. It will
reverse ratably in future periods if the Cordant common stock price rises above
its December 31, 1999 closing price. Excluding this benefit, 1999 earnings per
share increased 28 percent over 1998.
In the 1999 fourth quarter, the effective tax rate was reduced retroactively to
the beginning of the year from a 36 percent to 34 percent rate, primarily as a
result of higher foreign sales corporation benefits and legislation extending
the R&D tax credit to June 2004.
(more)
HOWMET REPORTS ANNUAL EARNINGS, PG. 5
Summary unaudited financial information for the three months ended December 31
follows:
(in millions, except per share Better
amounts) 1999 1998 (Worse) Percent
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Net sales $362.1 $354.9 $ 7.2 2
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Income from operations 46.7 32.5 14.2 44
Interest income .5 .5 - -
Interest expense (1.1) (2.3) 1.2 52
Other, net (1.3) (.6) (.7) (117)
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Income before income taxes 44.8 30.1 14.7 49
Income taxes (12.0) (9.7) (2.3) (24)
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Net income 32.8 20.4 12.4 61
Preferred stock dividend - (1.4) 1.4 -
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Net income available to
common stockholders $ 32.8 $ 19.0 $ 13.8 73
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Net income per common share,
basic and diluted $ .33 $ .19 $ .14 74
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The 1999 fourth quarter earnings were reduced by a $.03 per share reversal of a
third quarter benefit related to the Company's Stock Appreciation Rights (SAR)
plan and another variable stock compensation plan. The Company warned of this
unusual charge in its third quarter earnings release, where it described the
third quarter benefit as one that would reverse when Howmet's common stock price
rose above $15 per share and when Cordant's common stock price rose above its
September 30, 1999 closing price. The 1998 fourth quarter earnings were reduced
by a $.07 per share reversal of a prior quarter SAR benefit, resulting from
fluctuations in Howmet's common stock price.
In the 1999 and 1998 fourth quarters, the effective tax rates were reduced
retroactively to the beginning of the years by 2 percent and 1 percent,
respectively. The retroactive effect of the change on the first nine-month
periods benefited the fourth quarters by $.03 per share in 1999 and $.02 per
share in 1998.
Excluding both the effects of all of the items discussed above, 1999 earnings
per share increased 38 percent over the 1998 fourth quarter.
####
HOWMET REPORTS ANNUAL EARNINGS, PG. 6
Contact:
Doreen L. Deary Shannon P. Sebahar
Corporate Communications Investor Relations
(203) 625-8735 (801) 933-4030
ddeary@howmet.com shannon.sebahar@cordant.com
(End of Press Release)
(b) The following additional information is provided for the benefit of
investors.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Year ended December 31,
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(in millions, except per share data) 1999 1998 1997
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Net sales $1,459.7 $1,350.6 $1,258.2
Operating expenses:
Cost of sales 1,115.8 1,039.1 963.8
Selling, general and administrative
expense 108.6 101.6 122.3
Research and development expense 19.9 20.2 17.6
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Total operating expenses 1,244.3 1,160.9 1,103.7
Income from operations 215.4 189.7 154.5
Interest income 1.0 1.6 1.2
Interest expense (6.3) (12.7) (31.0)
Other, net (3.0) (3.4) (6.4)
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Income before income taxes and
extraordinary item 207.1 175.2 118.3
Income taxes (70.4) (64.8) (46.3)
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Income before extraordinary item 136.7 110.4 72.0
Extraordinary item - loss on early
retirement of debt, net of income
taxes of $7.9 - - (12.3)
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Net income 136.7 110.4 59.7
Dividends on redeemable preferred
stock (.8) (5.6) (5.1)
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Net income applicable to common stock $ 135.9 $ 104.8 $ 54.6
================================================================================
Per common share amounts, basic and diluted:
Income before extraordinary item $ 1.36 $ 1.05 $ .67
Extraordinary item - - (.12)
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Net income $ 1.36 $ 1.05 $ .55
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CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31,
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(in millions, except share data) 1999 1998
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ASSETS
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Current assets:
Cash and cash equivalents $ 39.4 $ 37.6
Accounts receivable (less allowance of $3.7 and $5.2) 80.7 84.1
Inventories 165.3 161.9
Retained receivables 35.6 32.0
Deferred income taxes 14.3 16.2
Other current assets 3.7 3.0
Restricted Trust (a) - 716.4
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Total current assets 339.0 1,051.2
Property, plant and equipment, net 396.5 334.9
Goodwill, net 209.5 221.1
Patents and technology and other intangible assets, net 94.9 115.1
Deferred income taxes 11.9 -
Other noncurrent assets 68.3 78.3
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Total assets $1,120.1 $ 1,800.6
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LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
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EQUITY
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Current liabilities:
Accounts payable $ 81.3 $ 101.5
Accrued compensation 59.8 45.0
Other accrued liabilities 98.0 108.7
Advance on accounts receivable 40.0 -
Income taxes payable 47.8 44.8
Short-term debt 45.7 28.0
Pechiney Notes (a) - 716.4
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Total current liabilities 372.6 1,044.4
Noncurrent liabilities:
Accrued retiree benefits other than pensions 101.2 96.8
Accrued pension liability 35.9 49.0
Other noncurrent liabilities 109.7 108.4
Deferred income taxes - 2.1
Long-term debt - 63.0
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Total noncurrent liabilities 246.8 319.3
Commitments and contingencies
Redeemable preferred stock - 65.6
Stockholders' equity:
Preferred stock, authorized - 9,993,470 shares,
issued and outstanding - 0 shares - -
Common stock, $.01 par value; authorized - 400,000,000
shares,issued and outstanding: 1999 - 100,028,833 shares;
1998 - 100,005,356 shares 1.0 1.0
Capital surplus 195.4 195.1
Retained earnings 316.0 180.1
Accumulated other comprehensive income (11.7) (4.9)
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Total stockholders' equity 500.7 371.3
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Total liabilities, redeemable preferred stock and
stockholders' equity $1,120.1 $ 1,800.6
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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. Pechiney, S.A. (the
Company's previous owner) paid the Notes in full on January 4, 1999 and the
Restricted Trust was terminated. No Company funds were used in the payment
of the Notes.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Year ended December 31,
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(in millions) 1999 1998 1997
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OPERATING ACTIVITIES
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Net income $ 136.7 $ 110.4 $ 59.7
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 66.8 60.2 66.9
Equity in income of unconsolidated
affiliates - (.4) (1.5)
Extraordinary item - - 12.3
Changes in assets and liabilities:
Receivables (2.5) (3.5) 8.4
Inventories (4.6) 2.2 (17.9)
Accounts payable and accrued
liabilities (12.6) 10.3 12.1
Deferred income taxes (14.8) (2.1) (.3)
Income taxes payable 3.4 17.8 16.9
Long-term SARs accrual 6.3 5.5 31.4
Advance on accounts receivable 40.0 - -
Other, net 14.2 7.0 4.6
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Net cash provided by operating 232.9 207.4 192.6
activities
INVESTING ACTIVITIES
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Purchases of property, plant and equipment (112.9) (83.0) (56.9)
Payments made for investments and other
assets - (3.0) (1.8)
Proceeds from sale of refurbishment
business, net - - 44.9
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Net cash used by investing activities (112.9) (86.0) (13.8)
FINANCING ACTIVITIES
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Net change in short-term debt 14.6 15.1 -
Issuance of long-term debt 65.0 36.6 326.2
Repayment of long-term debt (128.0) (182.0) (467.6)
Redemption of preferred stock (66.4) - -
Premiums paid on early retirement of debt - - (13.7)
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Net cash used by financing activities (114.8) (130.3) (155.1)
Foreign currency rate changes (3.4) 1.1 (1.7)
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(Decrease) increase in cash and cash
equivalents 1.8 (7.8) 22.0
Cash and cash equivalents at beginning of
period 37.6 45.4 23.4
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Cash and cash equivalents at end of period $ 39.4 $ 37.6 $ 45.4
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CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED
STOCK (UNAUDITED)
Accumulated Total
Other Common Redeemable
Common Stock Capital Retained Comprehensive Stockholders' Preferred Stock
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(in millions, except share data) Shares Amount Surplus Earnings Income Equity Shares Amount
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Balance, December 31, 1996 100,000,000 $1.0 $195.0 $ 20.7 $ 2.1 $218.8 5,490 $ 54.9
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Comprehensive income:
Net income 59.7 59.7
Othercomprehensive income
Foreign exchange
translation adjustment (7.7) (7.7)
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Total comprehensive income 52.0
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Dividends - redeemable
preferred stock (5.1) (5.1) 511 5.1
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Balance, December 31, 1997 100,000,000 $1.0 $195.0 $ 75.3 $ (5.6) $265.7 6,001 $ 60.0
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Comprehensive income:
Net income 110.4 110.4
Other comprehensive income
Foreign exchange
translation adjustment 3.1 3.1
Minimum pension liability
adjustment (2.4) (2.4)
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Total comprehensive income 111.1
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Dividends - redeemable
preferred stock (5.6) (5.6) 559 5.6
Shares issued 5,356 .1 .1
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Balance, December 31, 1998 100,005,356 $1.0 $195.1 $180.1 $ (4.9) $371.3 6,560 $ 65.6
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Comprehensive income:
Net income 136.7 136.7
Other comprehensive income
Foreign exchange
translation adjustment (10.4) (10.4)
Minimum pension liability
adjustment 2.4 2.4
Unrealized gain on
securities 1.2 1.2
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Total comprehensive income 129.9
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Dividends - redeemable
preferred stock (.8) (.8) 78 .8
Redeemable preferred stock
redemption (6,638) (66.4)
Shares issued 23,527 .3 .3
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BALANCE, DECEMBER 31, 1999 100,028,883 $1.0 $195.4 $316.0 $(11.7) $500.7 - $ -
=============================================================================================================
(c) On February 9, 2000, Howmet Corporation terminated its $300 Million
revolving credit agreement with Bank One, NA and entered into a new Credit
Agreement, also with Bank One, NA for a $25 million line of credit.
Item 7 Financial Statements and Exhibits
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(c) Exhibits
4.8 Credit Agreement between Howmet Corporation and Bank One, NA
dated February 9, 2000.
This Form 8-K includes forward-looking statements. Such statements include those
relating to future sales and earnings growth among others. 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 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 the
Company's Annual Report on Form 10-K for the year 1998 and other reports filed
with the Securities and Exchange Commission. The Company undertakes no
obligation to publicly update or revise any forward-looking statements to
reflect future events or developments.
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/ John C.Ritter
---------------
John C. Ritter
Senior Vice President and
Chief Financial Officer
Date: February 11, 2000