UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2023

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)

Delaware	25-0317820
(State of incorporation)	(I.R.S. Employer Identification No.)

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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $1.00 per share	HWM	New York Stock Exchange
$3.75 Cumulative Preferred Stock, par value $100.00 per share	HWM PR	NYSE 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 filer	x	Accelerated 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 April 28, 2023, there were 413,291,033 shares of common stock, par value $1.00 per share, of the registrant outstanding.

TABLE OF CONTENTS 

		Page
Part I
Item 1.	Financial Statements and Supplementary Data	3
	Statement of Consolidated Operations for the First Quarter Ended March 31, 2023 and 2022	3
	Statement of Consolidated Comprehensive Income for the First Quarter Ended March 31, 2023 and 2022	4
	Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022	5
	Statement of Consolidated Cash Flows for the First Quarter Ended March 31, 2023 and 2022	6
	Statement of Changes in Consolidated Equity for the First Quarter Ended March 31, 2023 and 2022	7
	Notes to the Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
Part II
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29
	Signatures	29

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data.

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Operations (unaudited)

(in millions, except per-share amounts)

	First quarter ended
	March 31,
	2023		2022
Sales (C)	$	1,603	$	1,324
Cost of goods sold (exclusive of expenses below)	1,164		950
Selling, general administrative, and other expenses	75		69
Research and development expenses	9		7
Provision for depreciation and amortization	69		66
Restructuring and other charges (D)	1		2
Operating income	285		230
Loss on debt redemption (N)	1		—
Interest expense, net	57		58
Other expense, net (F)	7		1
Income before income taxes	220		171
Provision for income taxes (G)	72		40
Net income	$	148	$	131
Amounts Attributable to Howmet Aerospace Common Shareholders (H):
Net income	$	147	$	130
Earnings per share:
Basic	$	0.36	$	0.31
Diluted	$	0.35	$	0.31
Average Shares Outstanding (H):
Basic	412		419
Diluted	418		425

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

3

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Comprehensive Income (unaudited)

(in millions)

	First quarter ended
	March 31,
	2023		2022
Net income	$	148	$	131
Other comprehensive income (loss), net of tax (I):
Change in unrecognized net actuarial loss and prior service cost related to pension and other postretirement benefits	5		10
Foreign currency translation adjustments	34		(31)
Net change in unrecognized (losses) gains on cash flow hedges	(4)		20
Total Other comprehensive income (loss), net of tax	35		(1)
Comprehensive income	$	183	$	130

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

4

Howmet Aerospace Inc. and subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	537	$	791
Receivables from customers, less allowances of $1 in both 2023 and 2022 (J)	655		506
Other receivables	16		31
Inventories (K)	1,662		1,609
Prepaid expenses and other current assets	187		206
Total current assets	3,057		3,143
Properties, plants, and equipment, net (L)	2,321		2,332
Goodwill	4,024		4,013
Deferred income taxes	59		54
Intangibles, net	518		521
Other noncurrent assets (M)	195		192
Total assets	$	10,174	$	10,255
Liabilities
Current liabilities:
Accounts payable, trade (B)	$	877	$	962
Accrued compensation and retirement costs	193		195
Taxes, including income taxes (G)	64		48
Accrued interest payable	63		75
Other current liabilities (M)(P)	206		202
Total current liabilities	1,403		1,482
Long-term debt, less amounts due within one year (N)(O)	3,988		4,162
Accrued pension benefits (E)	625		633
Accrued other postretirement benefits (E)	108		109
Other noncurrent liabilities and deferred credits (M)	289		268
Total liabilities	6,413		6,654
Contingencies and commitments (P)
Equity
Howmet Aerospace shareholders’ equity:
Preferred stock	55		55
Common stock	412		412
Additional capital	3,941		3,947
Retained earnings	1,159		1,028
Accumulated other comprehensive loss (I)	(1,806)		(1,841)
Total equity	3,761		3,601
Total liabilities and equity	$	10,174	$	10,255

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

5

Howmet Aerospace Inc. and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)

	Three months ended
	March 31,
	2023		2022
Operating activities
Net income	$	148	$	131
Adjustments to reconcile net income to cash provided from operations:
Depreciation and amortization	69		66
Deferred income taxes	31		28
Restructuring and other charges	1		2
Net realized and unrealized losses	4		3
Net periodic pension cost (E)	9		6
Stock-based compensation	14		11
Loss on debt redemption (N)	1		—
Other	5		22
Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency translation adjustments:
Increase in receivables (J)	(137)		(123)
Increase in inventories	(45)		(87)
Decrease in prepaid expenses and other current assets	12		5
(Decrease) increase in accounts payable, trade	(67)		68
Decrease in accrued expenses	(19)		(54)
Increase in taxes, including income taxes	16		6
Pension contributions	(9)		(11)
Decrease (increase) in noncurrent assets	2		(1)
Decrease in noncurrent liabilities	(12)		(17)
Cash provided from operations	23		55
Financing Activities
Net change in short-term borrowings	—		(3)
Repurchases and payments on debt (N)	(176)		—
Premiums paid on early redemption of debt (N)	(1)		—
Repurchase of common stock	(25)		(175)
Proceeds from exercise of employee stock options	6		7
Dividends paid to shareholders	(17)		(9)
Other	(1)		(14)
Cash used for financing activities	(214)		(194)
Investing Activities
Capital expenditures (C)	(64)		(62)
Proceeds from the sale of assets and businesses	—		1
Cash used for investing activities	(64)		(61)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1		—
Net change in cash, cash equivalents and restricted cash	(254)		(200)
Cash, cash equivalents and restricted cash at beginning of period	792		722
Cash, cash equivalents and restricted cash at end of period	$	538	$	522

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)

(in millions, except per-share amounts)

	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at December 31, 2021	$	55	$	422	$	4,291	$	603	$	(1,863)	$	3,508
Net income	—		—		—		131		—		131
Other comprehensive loss (I)	—		—		—		—		(1)		(1)
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		(1)
Common @ $0.02 per share	—		—		—		(8)		—		(8)
Repurchase and retirement of common stock (H)	—		(5)		(170)		—		—		(175)
Stock-based compensation	—		—		11		—		—		11
Common stock issued: compensation plans	—		1		(9)		—		—		(8)
Balance at March 31, 2022	$	55	$	418	$	4,123	$	725	$	(1,864)	$	3,457

	Preferred stock		Common stock		Additional capital		Retained earnings		Accumulated other comprehensive loss		Total Equity
Balance at December 31, 2022	$	55	$	412	$	3,947	$	1,028	$	(1,841)	$	3,601
Net income	—		—		—		148		—		148
Other comprehensive income (I)	—		—		—		—		35		35
Cash dividends declared:
Preferred-Class A @ $0.9375 per share	—		—		—		(1)		—		(1)
Common @ $0.04 per share	—		—		—		(16)		—		(16)
Repurchase and retirement of common stock (H)	—		—		(25)		—		—		(25)
Stock-based compensation	—		—		14		—		—		14
Common stock issued: compensation plans	—		—		5		—		—		5
Balance at March 31, 2023	$	55	$	412	$	3,941	$	1,159	$	(1,806)	$	3,761

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

7

Howmet Aerospace Inc. and subsidiaries

Notes to the Consolidated Financial Statements (unaudited)

(U.S. dollars in millions, except share and per-share amounts)

A. Basis of Presentation

The interim Consolidated Financial Statements of Howmet Aerospace Inc. and subsidiaries (“Howmet” or the “Company” or “we” or “our”) 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 2022 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, 2022 (the “Form 10-K”), which includes all disclosures required by GAAP. Certain amounts in previously issued financial statements were reclassified to conform to the current period presentation.

In the first quarter of 2023, the Company derived approximately 47% of its revenue from products sold to the commercial aerospace market which is substantially less than the pre-pandemic 2019 annual rate of approximately 60%. During the global COVID-19 pandemic and its impact on the commercial aerospace industry to date, there was a decrease in domestic and international air travel, which in turn adversely affected demand for narrow body and wide body aircraft. Domestic air travel has rebounded and approximates pre-pandemic levels. International air travel continues to recover and is approximately 80% of pre-pandemic levels. We expect commercial aerospace growth to continue with narrow body demand returning faster than wide body demand. The commercial wide body aircraft market is taking longer to recover, which is creating a shift in our product mix compared to pre-pandemic conditions. In addition to the impact from the pandemic, the timing and level of future aircraft builds by original equipment manufacturers are subject to changes and uncertainties, which may cause our future results to differ from prior periods due to changes in product mix in certain segments.

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 and changes in the aerospace industry as a result of the pandemic. The impact of these changes is rapidly changing and of unknown duration and macroeconomic impact and, as a result, these considerations remain highly uncertain. Management has made its 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 judgments and estimations and assumptions.

B. Recently Adopted and Recently Issued Accounting Guidance

Adopted

In September 2022, the Financial Accounting Standards Board (“FASB”) issued guidance to enhance the transparency of disclosures regarding supplier finance programs. These changes become effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

On January 1, 2023, the Company adopted the changes issued by the FASB related to disclosure requirements of supplier finance program obligations. We offer voluntary supplier finance programs to suppliers who may elect to sell their receivables to third parties at the sole discretion of both the suppliers and the third parties. The program is at no cost to the Company and provides additional liquidity to our suppliers, if they desire, at their cost. Under these programs, the Company pays the third party bank rather than the supplier, the stated amount of the confirmed invoices on the original maturity date of the invoices. The Company or the third party bank may terminate a program upon at least 30 days’ notice. Supplier invoices under the program require payment in full no more than 120 days of the invoice date. As of March 31, 2023 and December 31, 2022, supplier invoices that are subject to future payment under these programs were $237 and $240, respectively, and are included in Accounts payable, trade in the Consolidated Balance Sheet.

8

Issued

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 London 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. In December 2022, the FASB deferred the sunset date to December 31, 2024. The Company has amended its agreements in accordance with the new guidance (See Note J and Note N). Management has concluded that the impact of these changes is not expected to have a material impact on the Consolidated Financial Statements.

C. Segment Information

Howmet 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 aerospace (commercial and defense), commercial transportation, and industrial and other 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 Adjusted EBITDA. Howmet’s definition of Segment Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; Research and development expenses; and Provision for depreciation and amortization. Special items, including Restructuring and other charges, are excluded from net margin and Segment Adjusted EBITDA. Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Differences between the total segment and consolidated totals are in Corporate.

Howmet’s operations consist of four 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. Fastening Systems’ products are also critical components of commercial transportation vehicles, automobiles, construction and industrial equipment, and renewable energy sectors.

Engineered Structures

Engineered Structures produces titanium ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, extrusions, forming 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 market.

9

The operating results of the Company’s reportable segments were as follows:

	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
First quarter ended March 31, 2023
Sales:
Third-party sales	$	795	$	312	$	207	$	289	$	1,603
Inter-segment sales	2		—		—		—		2
Total sales	$	797	$	312	$	207	$	289	$	1,605
Profit and loss:
Provision for depreciation and amortization	$	32	$	11	$	12	$	9	$	64
Segment Adjusted EBITDA	212		58		30		79		379
Restructuring and other charges	—		—		1		—		1
Capital expenditures	33		9		10		9		61
First quarter ended March 31, 2022
Sales:
Third-party sales	$	631	$	264	$	182	$	247	$	1,324
Inter-segment sales	1		—		1		—		2
Total sales	$	632	$	264	$	183	$	247	$	1,326
Profit and loss:
Provision for depreciation and amortization	$	31	$	12	$	12	$	10	$	65
Segment Adjusted EBITDA	173		56		23		67		319
Restructuring and other charges (credits)	3		(3)		2		—		2
Capital expenditures	27		15		7		9		58

The following table reconciles Total Segment Adjusted EBITDA to Income before income taxes. Differences between the total segment and consolidated totals are in Corporate.

	First quarter ended
	March 31,
	2023		2022
Total Segment Adjusted EBITDA	$	379	$	319
Segment provision for depreciation and amortization	(64)		(65)
Unallocated amounts:
Restructuring and other charges	(1)		(2)
Corporate expense	(29)		(22)
Operating income	$	285	$	230
Loss on debt redemption	(1)		—
Interest expense, net	(57)		(58)
Other expense, net	(7)		(1)
Income before income taxes	$	220	$	171

10

The following table reconciles total segment capital expenditures with Capital expenditures as presented in the Statement of Consolidated Cash Flows.

	First quarter ended
	March 31,
	2023		2022
Total segment capital expenditures	$	61	$	58
Corporate	3		4
Capital expenditures	$	64	$	62

The following table disaggregates segment revenue by major market served. Differences between the total segment and consolidated totals are in Corporate.

	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total Segment
First quarter ended March 31, 2023
Aerospace - Commercial	$	432	$	170	$	152	$	—	$	754
Aerospace - Defense	163		44		44		—		251
Commercial Transportation	—		63		—		289		352
Industrial and Other	200		35		11		—		246
Total end-market revenue	$	795	$	312	$	207	$	289	$	1,603
First quarter ended March 31, 2022
Aerospace - Commercial	$	329	$	148	$	109	$	—	$	586
Aerospace - Defense	137		32		57		—		226
Commercial Transportation	—		53		—		247		300
Industrial and Other	165		31		16		—		212
Total end-market revenue	$	631	$	264	$	182	$	247	$	1,324

The Company derived 63% and 61% of its revenue from the aerospace (commercial and defense) market for the first quarter ended March 31, 2023 and 2022, respectively.

General Electric Company and Raytheon Technologies Corporation represented approximately 13% and 10%, respectively, of the Company’s third-party sales in the first quarter ended March 31, 2023. General Electric Company and Raytheon Technologies Corporation represented approximately 13% and 9%, respectively, of the Company’s third-party sales in the first quarter ended March 31, 2022. These sales were primarily from the Engine Products segment.

D. Restructuring and Other Charges

	First quarter ended
	March 31,
	2023		2022
Reversals of previously recorded layoff reserves	$	(1)	$	(1)
Pension and Other post-retirement benefits - net settlements (E)	—		1
Other	2		2
Restructuring and other charges	$	1	$	2

In the first quarter of 2023, the Company recorded Restructuring and other charges of $1, which were primarily due to exit related costs, including accelerated depreciation, of $2, partially offset by a reversal of $1 for a layoff reserve related to a prior period.

In the first quarter of 2022, the Company recorded Restructuring and other charges of $2, which were primarily due to exit related costs of $2 and charges for U.S. pension plan settlement of $1, partially offset by a reversal of $1 for a layoff reserve related to a prior period.

11

	Layoff costs		Other exit costs		Total
Reserve balances at December 31, 2022	$	6	$	2	$	8
Cash payments	(1)		(1)		(2)
Restructuring charges	(1)		2		1
Other(1)	—		(1)		(1)
Reserve balances at March 31, 2023	$	4	$	2	$	6

(1)In the first quarter of 2023, other for other exit costs included a $1 charge for accelerated depreciation.

The remaining reserves as of March 31, 2023 are expected to be paid in cash during the remainder of 2023 and 2024.

E. Pension and Other Postretirement Benefits

The components of net periodic cost (benefit) were as follows:

	First quarter ended
	March 31,
	2023		2022
Pension benefits
Service cost	$	1	$	1
Interest cost	20		12
Expected return on plan assets	(19)		(20)
Recognized net actuarial loss	7		13
Settlements	—		1
Net periodic cost(1)	$	9	$	7
Other postretirement benefits
Service cost	$	—	$	—
Interest cost	2		1
Recognized net actuarial gain	(1)		—
Amortization of prior service benefit	(2)		(2)
Net periodic benefit(1)	$	(1)	$	(1)

 

(1)Service cost was included within Cost of goods sold, and Selling, general administrative, and other expenses; settlements were included in Restructuring and other charges; and all other cost components were recorded in Other expense, net in the Statement of Consolidated Operations.

Pension benefits

In the first quarter of 2022, 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 $1 that were recorded in Restructuring and other charges in the Statement of Consolidated Operations. Settlement accounting did not occur in 2023.

For the first quarter of 2023 and 2022, Howmet’s combined pension contributions and other postretirement benefit payments were approximately $12 and $13, respectively.

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F. Other Expense, Net

	First quarter ended
	March 31,
	2023		2022
Non-service costs - pension and other postretirement benefits (E)	$	7	$	4
Interest income	(5)		—
Foreign currency gains, net	(2)		(3)
Net realized and unrealized losses	4		3
Deferred compensation	3		(3)
Other expense, net	$	7	$	1

G. 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 23.4% in the first quarter of 2023 and 24.3% in the first quarter of 2022. The 2023 and 2022 rates were higher than the U.S. federal statutory rate of 21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, foreign earnings subject to tax in higher rate jurisdictions, and nondeductible expenses.

For the first quarter of 2023 and 2022, the tax rate including discrete items was 32.7% and 23.4%, respectively. For the first quarter of 2023, the Company recorded a charge for a tax reserve established in France of $20 (See Note P) and a discrete net tax charge of $1 for other small items. For the first quarter of 2022, the Company recorded a discrete net tax benefit of $2 for other small items.

The tax provision was comprised of the following:

	First quarter ended
	March 31,
	2023		2022
Pre-tax income at estimated annual effective income tax rate before discrete items	$	51	$	42
Tax reserve (P)	20		—
Other discrete items	1		(2)
Provision for income taxes	$	72	$	40

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H. Earnings Per Share and Common Stock

Basic earnings per share (“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 Howmet common shareholders was as follows (shares in millions in table below):

	First quarter ended
	March 31,
	2023		2022
Net income attributable to common shareholders	$	148	$	131
Less: preferred stock dividends declared	1		1
Net income available to Howmet Aerospace common shareholders - basic and diluted	$	147	$	130
Average shares outstanding - basic	412		419
Effect of dilutive securities:
Stock and performance awards	6		6
Average shares outstanding - diluted	418		425

Common stock outstanding as of March 31, 2023 and 2022 was approximately 412 million and 418 million, respectively.

On August 18, 2021, the Company announced that its Board of Directors authorized a share repurchase program of up to $1,500 of the Company's outstanding common stock. After giving effect to the share repurchases made through March 31, 2023, approximately $922 Board authorization remains available. In the quarter ended March 31, 2023, the Company repurchased approximately 0.6 million shares of its common stock at an average price of $43.36 per share (excluding commissions cost) for approximately $25 in cash. In the quarter ended March 31, 2022, the Company repurchased approximately 5 million shares of its common stock at an average price of $34.00 per share (excluding commissions costs) for approximately $175 in cash. All of the shares repurchased have been retired.

Under the Company’s share repurchase program (the “Share Repurchase Program”), the Company may repurchase shares 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 is no stated expiration for the Share Repurchase Program. Under its Share Repurchase Program, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations. The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the Share Repurchase Program may be suspended, modified or terminated at any time without prior notice.

The approximately 7 million decrease in average shares outstanding (basic) for the first quarter of 2023 compared to the first quarter of 2022 was primarily due to the approximately 7 million shares repurchased between April 1, 2022 and March 31, 2023. As average shares outstanding are used in the calculation for both basic and diluted EPS, the full impact of share repurchases may not be fully realized in EPS in the period of repurchase since share repurchases may occur at varying points during a period.

There were no shares relating to outstanding stock options excluded from the calculation of average shares outstanding – diluted for the first quarter ended March 31, 2023 and 2022.

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I. Accumulated Other Comprehensive Loss

The following table details the activity of the three components that comprise Accumulated other comprehensive loss:

	First quarter ended
	March 31,
	2023		2022
Pension and other postretirement benefits (E)
Balance at beginning of period	$	(653)	$	(799)
Other comprehensive income (loss):
Unrecognized net actuarial gain and prior service cost/benefit	3		1
Tax expense	(1)		—
Total Other comprehensive income before reclassifications, net of tax	2		1
Amortization of net actuarial loss and prior service cost(1)	4		12
Tax expense(2)	(1)		(3)
Total amount reclassified from Accumulated other comprehensive loss, net of tax(3)	3		9
Total Other comprehensive income	5		10
Balance at end of period	$	(648)	$	(789)
Foreign currency translation
Balance at beginning of period	$	(1,193)	$	(1,062)
Other comprehensive income (loss)	34		(31)
Balance at end of period	$	(1,159)	$	(1,093)
Cash flow hedges
Balance at beginning of period	$	5	$	(2)
Other comprehensive (loss) income:
Net change from periodic revaluations	(4)		25
Tax income (expense)	1		(6)
Total Other comprehensive (loss) income before reclassifications, net of tax	(3)		19
Net amount reclassified to earnings	(1)		1
Total amount reclassified from Accumulated other comprehensive (loss) income, net of tax(3)	(1)		1
Total Other comprehensive (loss) income	(4)		20
Balance at end of period	$	1	$	18
Accumulated other comprehensive loss	$	(1,806)	$	(1,864)

(1)These amounts were recorded in Other expense, net (See Note F) and Restructuring and other charges (See Note D) in the Statement of Consolidated Operations.

(2)These amounts were included in Provision for income taxes (See Note G) in 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.

J. Receivables

Sale of Receivables Programs

The Company maintains an accounts receivables securitization arrangement through a wholly-owned special purpose entity (“SPE”). The net cash funding from the sale of accounts receivable through the SPE was neither a use of cash nor a source of cash for the first quarter of 2023 or 2022.

The accounts receivables securitization arrangement is one in which the Company, through an SPE, has a receivables purchase agreement (the “Receivables Purchase Agreement”) pursuant to which the SPE may sell certain receivables to financial institutions until the earlier of August 30, 2024 or a termination event. The Receivables Purchase Agreement 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 Receivables Purchase Agreement was amended on February 17, 2023 to update the reference rate and reduce the facility limit to $250 from $325, with a provision to increase the limit to $325.

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The facility limit under the Receivables Purchase Agreement was $250 and $325 as of March 31, 2023 and December 31, 2022, respectively. A total of $250 was drawn as of both March 31, 2023 and December 31, 2022. As collateral against the sold receivables, the SPE maintains a certain level of unsold receivables, which were $155 and $190 as of March 31, 2023 and December 31, 2022, respectively.

The Company sold $337 and $464 of its receivables without recourse and received cash funding under this program during the three months ended March 31, 2023 and March 31, 2022, respectively, resulting in derecognition of the receivables from the Company’s Consolidated Balance Sheet. Costs associated with the sales of receivables are reflected in the Company’s Statement of Consolidated Operations for the periods in which the sales occur. Cash receipts from sold receivables under the Receivables Purchase Agreement are presented within operating activities in the Statement of Consolidated Cash Flows.

Other Customer Receivable Sales

In the first quarter of 2023, the Company sold $138 of certain customers’ receivables in exchange for cash ($144 was outstanding from customers as of March 31, 2023), the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows. In the first quarter of 2022, the Company sold $106 of certain customers’ receivables in exchange for cash ($110 was outstanding from customers as of March 31, 2022), the proceeds from which are presented in changes in receivables within operating activities in the Statement of Consolidated Cash Flows.

K. Inventories

	March 31, 2023		December 31, 2022
Finished goods	$	501	$	490
Work-in-process	782		748
Purchased raw materials	322		317
Operating supplies	57		54
Total inventories	$	1,662	$	1,609

At March 31, 2023 and December 31, 2022, the portion of inventories valued on a last-in, first-out (“LIFO”) basis was $438 and $441, respectively. If valued on an average-cost basis, total inventories would have been $224 and $220 higher as of March 31, 2023 and December 31, 2022, respectively.

L. Properties, Plants, and Equipment, net

	March 31, 2023		December 31, 2022
Land and land rights	$	85	$	84
Structures	997		986
Machinery and equipment	3,986		3,941
	5,068		5,011
Less: accumulated depreciation and amortization	2,919		2,858
	2,149		2,153
Construction work-in-progress	172		179
Properties, plants, and equipment, net	$	2,321	$	2,332

The Company incurred capital expenditures which remained unpaid as of March 31, 2023 and March 31, 2022 of $32 and $29, respectively, and will result in cash outflows within investing activities in the Statement of Consolidated Cash Flows in subsequent periods.

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M. Leases

Operating lease cost, which includes short-term leases and variable lease payments and approximates cash paid, was $16 in both the first quarter of 2023 and 2022.

Operating lease right-of-use assets and lease liabilities in the Consolidated Balance Sheet were as follows:

	March 31, 2023	December 31, 2022
Right-of-use assets classified in Other noncurrent assets