Howmet Aerospace HWM · USD

Segment and Geographic Area InformationHowmet is a global leader in lightweight metals engineering and manufacturing. Howmet’s innovative, multi-material products, which may include nickel, titanium, aluminum, and cobalt, are used worldwide in the aerospace (commercial and defense), commercial transportation, gas turbines, and other markets. Segment performance under Howmet’s management reporting system is evaluated based on Segment Adjusted EBITDA. The Company’s Chief Executive Officer, who has been determined to be our Chief Operating Decision Maker (“CODM”), believes that Segment Adjusted EBITDA provides information with respect to the Company’s operating performance and the Company’s ability to meet its financial obligations. 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 (“R&D”) expenses; and Provision for depreciation and amortization. Special items, including Restructuring and other charges, are excluded from net margin and Segment Adjusted EBITDA. The Company’s CODM considers forecast-to-actual variances for Segment Adjusted EBITDA when allocating resources across the Company’s reportable segments. 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 ProductsEngine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines and industrial gas turbine applications. Engine Products produces rotating parts, as well as structural parts.Fastening SystemsFastening 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 and construction, industrial, and renewable energy equipment.

Contingencies and CommitmentsContingenciesEnvironmental Matters. Howmet participates in environmental assessments and/or cleanups at more than 30 locations. These include owned or operating facilities and adjoining properties, previously owned or operated facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and Liability Act (“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 $16 and $19 as of December 31, 2025 and 2024, respectively, and was recorded in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet (of which $7 and $10, respectively, was 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 $5 and $2 in 2025 and 2024, respectively, 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 less than 1% of Cost of goods sold.Tax. In December 2013 and 2014, the Company received audit assessment notices from the French Tax Authority (“FTA”) for the 2010 through 2012 tax years. In 2016, the Company appealed to the Committee of the Abuse of Tax Law, where it received a favorable nonbinding decision. The FTA disagreed with the Committee of the Abuse of Tax Law’s opinion, and the Company appealed to the Montreuil Administrative Court, where in 2020 the Company prevailed on the merits. The FTA appealed this decision to the Paris Administrative Court of Appeal in 2021. On March 31, 2023, the Company received an adverse decision from the Paris Administrative Court of Appeal. The Company appealed this decision to the French Administrative Supreme Court.

DebtDebt.December 31,20252024USD Term Loan Agreement, due 2026(1)— 140 JPY Term Loan Agreement, due 2026(2)191 188 5.900% Notes, due 2027— 625 6.750% Bonds, due 2028300 300 3.000% Notes, due 2029700 700 4.850% Notes, due 2031(3)500 500 4.550% Notes, due 2032500 — 5.950% Notes, due 2037625 625 4.750% Iowa Finance Authority Loan, due 2042250 250 Other, net(4)(16)(13)3,050 3,315 Less: amount due within one year191 6 Total long-term debt$2,859 $3,309 (1)The Company completed the early prepayment of the remaining amount outstanding under the USD Term Loan Facility in 2025. The Company had entered into an interest rate swap to exchange the floating interest rate of this term loan facility to a fixed interest rate of 5.670% as of December 31, 2024, based on the Company’s long-term debt ratings. This swap was settled upon the prepayment of the USD Term Loan Facility with an immaterial impact to the Consolidated Financial Statements.(2)The Company entered into an interest rate swap to exchange the floating interest rate of the JPY Term Loan Facility to a fixed interest rate of 1.794% and 1.919% as of December 31, 2025 and December 31, 2024, respectively, based on the Company’s long-term debt ratings. The amounts outstanding under the JPY Term Loan Facility are due in November 2026.(3)The Company entered into a cross-currency swap to synthetically convert the 4.850% Notes due October 2031 (the “2031 Notes”) into a Euro liability of approximately €458 million with a fixed annual interest rate of 3.720%(4)Includes unamortized debt discounts and unamortized debt issuance costs related to outstanding notes and bonds listed in the table above and various financing arrangements related to subsidiaries.The principal amount of long-term debt maturing in each of the next five years is $191 in 2026, $0 in 2027, $300 in 2028, $700 in 2029, and $0 in 2030.Term Loan Facilities. On November 22, 2023, the Company entered into (i) a U.S. Dollar Term Loan Agreement, due 2026 (the “USD Term Loan Agreement”) and (ii) a Japanese Yen Term Loan Agreement, due 2026 (the “JPY Term Loan Agreement” and, together with the USD Term Loan Agreement, the “Term Loan Agreements” and each, individually, a “Term Loan Agreement”). Capitalized terms used in this “Term Loan Facilities” section but not otherwise defined shall have the meanings given to such terms in the applicable Term Loan Agreement.

Income TaxesThe components of income before income taxes were as follows:For the year ended December 31,202520242023United States$1,374 $901 $538 Foreign466 482 437 Total$1,840 $1,383 $975 The provision for income taxes consisted of the following:For the year ended December 31,202520242023Current:Federal(1)$181 $70 $5 Foreign116 98 94 State and local18 4 2 315 172 101 Deferred:Federal34 43 92 Foreign(15)17 16 State and local(2)(4)1 17 56 109 Total$332 $228 $210 (1)Federal includes U.S. taxes related to foreign income.A reconciliation of the U.S. federal statutory rate to Howmet’s effective tax rate, with prior years recategorized based on guidance issued by the FASB in December 2023, was as follows (the effective tax rate for 2025, 2024, and 2023 was a provision on income):For the year ended December 31,202520242023AmountPercentAmountPercentAmountPercentU.S. federal statutory tax rate$387 21.0 %$290 21.0 %$205 21.0 %U.S. state and local income tax, net of federal income tax effect (1)12 0.6 1 0.1 3 0.3 Foreign tax effectsHungaryStatutory tax rate difference between Hungary and United States(19)(1.0)(18)(1.3)(17)(1.7)Other(1)(0.1)1 0.1 (3)(0.3)Other foreign jurisdictions24 1.3 29 2.1 25 2.6 Effect of changes in tax laws or rates enacted in the current period10 0.6 — — — — Effect of cross-border tax laws (2)Foreign-derived intangible income(38)(2.1)(25)(1.8)(13)(1.3)Global intangible low-taxed income19 1.0 10 0.7 12 1.2 Other (15)(0.7)(8)(0.6)— — Tax creditsResearch and development tax credits (3)(21)(1.2)(55)(4.0)(4)(0.4)Changes in valuation allowancesChange in valuation allowance on foreign tax credits(8)(0.4)(4)(0.3)(14)(1.4)Nontaxable or nondeductible items(20)(1.1)6 0.4 (2)(0.2)Changes in unrecognized tax benefits (4)2 0.1 — — 20 2.0 Other adjustments— — 1 0.1 (2)(0.2)Effective tax rate$332 18.0 %$228 16.5 %$210 21.5 %(1)Primarily due to state taxes in California in all periods presented.(2)Taxes due from future inclusions in U.S. taxable income related to GILTI are treated as current period expenses when incurred.(3)In 2024, the Company completed an R&D study and as a result recorded a discrete tax benefit for $42 of prior year federal R&D credits approved under audit by the U.S. Internal Revenue Service and $8 of prior year state R&D credits. The Company also recorded a tax benefit for federal and state R&D credits earned during 2024 of $13 and $3, respectively. The $8 and $3 of state R&D credits are included in the U.S.

LeasesOperating lease cost includes short-term leases and variable lease payments and approximates cash paid. Operating lease cost was $73, $67, and $63 in 2025, 2024, and 2023, respectively. Operating lease right-of-use assets and lease liabilities in the Consolidated Balance Sheet were as follows:December 31,20252024Right-of-use assets classified in Other noncurrent assets$162 $155 Current portion of lease liabilities classified in Other current liabilities$42 $37 Long-term portion of lease liabilities classified in Other noncurrent liabilities and deferred credits121 119 Total lease liabilities$163 $156 Future minimum contractual operating lease obligations were as follows at December 31, 2025:2026$52 202742 202829 202919 203014 Thereafter40 Total lease payments$196 Less: Imputed interest(33)Present value of lease liabilities$163 December 31,202520242023Right-of-use assets obtained in exchange for operating lease obligations$50 $66 $68 Weighted-average remaining lease term in years5.75.96.4Weighted-average discount rate5.4 %5.7 %5.

AcquisitionsOn December 22, 2025, the Company entered into an agreement with Stanley Black & Decker, Inc. (“Stanley Black & Decker”) to acquire Consolidated Aerospace Manufacturing, LLC (“CAM”), a wholly owned subsidiary of Stanley Black & Decker, for a cash purchase price of approximately $1,800 (the “Proposed CAM Acquisition”). The Proposed CAM Acquisition is expected to close in the first half of 2026, subject to customary closing conditions and regulatory approvals. Howmet intends to finance the Proposed CAM Acquisition through utilizing a variety of financing sources, which may include borrowing under its commercial paper program or debt facilities, the issuance of debt securities and cash on hand. On February 6, 2026, the Company acquired Brunner Manufacturing Co. Inc., a small privately-held manufacturer of high-quality fastener products in the U.S., for an all-cash purchase price of approximately $120. Both acquisitions will become part of the Fastening Systems segment.

Cybersecurity is a critical component of the Company’s overall enterprise risk management program. Howmet has implemented a framework of principles, policies, and technology designed to protect our systems and data from cybersecurity threats. The Company’s Board of Directors (the “Board”), through its Cybersecurity Committee, is actively engaged in overseeing and reviewing the Company’s cybersecurity programs and risk management. Although past cybersecurity incidents did not have a material impact on the Company, including our strategy, financial condition, or results of operations, the scope and impact of any future cybersecurity threat or incident cannot be predicted. See Part I, Item 1A. (Risk Factors) for more information on how material cybersecurity incidents may impact the Company.Howmet has implemented a multi-faceted cybersecurity risk management framework, which includes progressing toward alignment with cybersecurity standards published by the National Institute of Standards and Technology (NIST) and International Organization for Standardization 27001 (ISO 27001) Framework, and achievement of the U.S. Department of War (DoW) Cybersecurity Maturity Model Certification, which will require companies like Howmet that do business with the DoW to obtain specific third-party certifications relating to specified cybersecurity standards to be eligible for new contract awards. We deploy and operate preventive and detective controls and processes to mitigate cybersecurity threats, including monitoring our network for known vulnerabilities and signs of unauthorized attempts to access our data and systems. Our approach includes conducting internal vulnerability assessments, external penetration testing, and attack simulation. In addition, the Company subscribes to third-party managed security service providers that continuously monitor the Company’s systems to assist with early cybersecurity threat detection and protection. Howmet conducts cybersecurity risk assessments of key vendors and other counterparties for any potential risks. Risk-based action plans are further developed to take into account evolving threats, which result in recommendations for new protocols and infrastructure. The Company has a robust program of employee education on the prevention of unauthorized access to Company information and systems. The Company's cybersecurity risk management is integrated in our overall risk management processes.

InventoriesDecember 31,20252024Finished goods$462 $458 Work-in-process885 903 Purchased raw materials424 408 Operating supplies78 71 Total inventories$1,849 $1,840 As of December 31, 2025 and 2024, the portion of inventories valued on a LIFO basis was $642 and $544, respectively. If valued on an average-cost basis, total inventories would have been $333 and $280 higher as of December 31, 2025 and 2024, respectively. Reductions in LIFO inventory quantities caused partial liquidation of LIFO inventory layers resulting in recognition of a benefit of $3 and $1 in 2025 and 2023, respectively. In 2024, we did not have any LIFO inventory layer liquidations.