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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.10pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.13pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.06pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+3
loss+2
expose+2
unpredictability+2
closing+2
Positive rising
able+2
successfully+2
favorable+1
advancements+1
effective+1
Risk Factors (Item 1A)
6,797 words
Item 1A. Risk Factors.
Howmet’s business, financial condition, and results of operations may be impacted by a number of factors. In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially harm the Company’s business, results of operations, financial condition and/or cash flows, including causing its actual results to differ materially from those projected in any forward-looking statements. The following list of risk factors is not all-inclusive or necessarily in order of importance. Additional risks and uncertainties not presently known to Howmet or that Howmet currently deems immaterial may also adversely affect the Company materially in future periods.
Risks Related to Our Business and Operations
The markets for Howmet’s products are cyclical, and such markets and Howmet’s operations are influenced by a number of factors, including global economic conditions and regulations.
Howmet is subject to cyclical fluctuations in global economic conditions and lightweight metals end-use markets. Howmet sells many products to industries that are cyclical, such as the aerospace and commercial transportation industries, and the demand for our products is sensitive to, and quickly impacted by, demand for the finished goods manufactured by our customers in these industries, which may change as a result of changes in regional or worldwide economies, currency exchange rates, interest rates, inflation, energy prices or other factors beyond our control. In particular, Howmet derives a significant portion of our revenue from products sold to the aerospace industry, which is cyclical and reflective of changes in the general economy. The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft and spare parts. Demand for commercial aircraft and spare parts is influenced by airline industry , trends in domestic and global airline passenger traffic, the state of U.S., regional and world economies, the ability of aircraft purchasers to obtain required financing and numerous other factors. Changes and uncertainties in the timing and level of future aircraft production by OEMs may cause our future results to differ from prior periods due to changes in the Company’s product mix. The defense aerospace cycle is highly dependent on U.S. and foreign government defense spending, which can be impacted by a government’s shifting priorities and budget compromises. It is also impacted by the effects of terrorism, a changing global geopolitical environment, U.S. foreign policy, the impact of government and federal debt ceiling on funding and appropriations, whether older military aircraft are retired, and technological to new engines and airframes. The demand for Howmet’s commercial transportation products is driven by the number of vehicles produced by commercial transportation manufacturers. Commercial transportation sales and production are affected by many factors, including the age of the vehicle fleet, labor relations issues, fuel prices, regulatory requirements, government initiatives, trade agreements, and levels of competition.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
default+4
restated+4
limitations+3
terminated+2
penalty+2
Positive rising
gains+8
benefit+1
favorable+1
effective+1
stable+1
MD&A (Item 7)
12,942 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(dollars in millions, except share and per-share amounts)
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto included in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K.
Overview
Our Business
Howmet 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.
Howmet is a global company operating in 19 countries. Based upon the country where the point of shipment occurred, North America and Europe generated 72% and 22%, respectively, of Howmet’s sales in 2025. In addition to the United States, Canada, and Mexico in North America and France, United Kingdom, Hungary, and Germany in Europe, Howmet has operating activities in numerous other countries and regions, including Japan and China. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and fluctuations in foreign currency exchange rates and interest rates, affect the results of operations in countries with such activities.
Geopolitical tensions, conflicts, and wars have impacted, and may in the future impact, global energy markets, leading to high volatility and increasing prices for crude oil, natural gas, and other energy supplies. Energy costs impact operating expenses at our manufacturing facilities, the expense of shipping raw materials to our facilities, and the expense of shipping products to our customers. The costs of certain raw materials (including, but not limited to, nickel, titanium, aluminum, cobalt, and superalloy materials) necessary for the manufacture of Howmet’s products and other manufacturing and operating costs are influenced by market forces, including inflation, supply and demand, and shortages. For example, as the Russia-Ukraine conflict continues, global titanium prices may continue to fluctuate. Our customers’ failure to return titanium revert (reusable scrap) to Howmet can result in an increase of the amount of titanium purchased at inflated costs. Governmental constraints, including export restrictions, sanctions, new or increased import duties or tariffs, and countervailing or anti-dumping duties, also impact the cost of raw materials and other manufacturing and operating costs. The global trade landscape is growing more volatile, including as a result of 2025 and early 2026 executive orders in the U.S. for the imposition of new tariffs, the retaliatory counter measures by other countries and the likelihood and unpredictability of further tariffs and related countermeasures . We continually monitor the global trade environment and any changes in tariffs, trade agreements, restrictions, or sanctions that may impact the Company or our suppliers or customers, and work to mitigate potential impacts. Inflation worldwide and in the United States has resulted in an increase in the costs of materials and labor. While we generally intend to pass along higher raw material and energy costs to our customers through contractual agreements in the form of price increases, there can be a delay between an increase in our costs and our ability to increase the prices of our products. Additionally, we may not be able to increase the prices of our products due to competitive pricing pressure and other factors. If the Company is unable to pass through or offset significant cost increases through customer price increases, productivity improvements, cost reduction or other programs, Howmet’s business, operating results or financial condition could be materially adversely affected. The timing, extent, application, and level of tariffs by various governments and our ability to recover tariffs are subject to changes and uncertainties and given the unpredictability and frequency of these changes, there can be no assurance we will be able to successfully mitigate the impacts of changes in the global trade environment and if the Company is unable to mitigate these impacts, Howmet’s business, operating results or financial condition could be materially adversely affected.
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Howmet is unable to predict the future course of industry variables, the strength of the U.S., regional or global economies, or the effects of government actions. Negative economic conditions, such as a major economic downturn or recession, continued inflation, changes in the global trade landscape or disruptions in the financial markets, could have a material adverse effect on Howmet’s business, financial condition, or results of operations.
A material disruption of, or manufacturing difficulties at, Howmet’s manufacturing operations could adversely affect Howmet’s business.
If Howmet’s operations, particularly at one of its key manufacturing facilities, were to be disrupted, including because of significant equipment failures, natural disasters, power outages, fires, explosions, terrorism, violence, theft, sabotage, adverse weather conditions, public health crises, labor disputes, labor shortages, or other reasons, Howmet may be unable to effectively meet its obligations to, or demand from, its customers. In addition, the manufacture of many of Howmet’s products is a complex process. Manufacturing problems arising from equipment failure or malfunction, inadvertentfailure to follow regulatory or customer specifications and procedures, including those related to quality or safety, and problems with raw materials could have an adverse impact on the Company’s ability to fulfill orders or meet product quality or performance requirements, which may result in negative publicity and damage to our reputation, adversely impacting product demand and customer relationships. Interruptions in production capability could increase Howmet’s costs and reduce its sales, including causing the Company to incur costs for premium freight, make substantial capital expenditures, or purchase alternative material at higher costs to fulfill customer orders. Additionally, a delivery delay by us due to production interruptions could subject us to liability from customer claims that such delay resulted in losses to the customer. Furthermore, product manufacturing or performance issues could result in recalls, customer penalties, contract cancellation, and product liability exposure in addition to a material adverse effect on our business, financial condition or results of operations. Because of approval, license, and qualification requirements applicable to manufacturers and/or their suppliers, sources of alternatives to mitigate manufacturing disruptions may not be readily available to Howmet or its customers.
Howmet is dependent on a limited number of suppliers for materials and services essential to our operations, including raw materials, and supply chain disruptions could have a material adverse effect on our business.
Howmet has supply arrangements with suppliers for various materials and services, including raw materials. We maintain annual or long-term contracts for a majority of our supply requirements, and, for the remainder, we depend on spot purchases. There can be no assurance that we will be able to renew, or obtain replacements for, any of our long-term contracts when they expire on terms that are as favorable as our existing agreements, or at all. For certain raw materials and services, we depend on a number of limited source or sole source suppliers, such as for titanium sponge and specialized metal alloys. Supply constraints could impact our production or force us to purchase materials and other supplies from alternative sources, which may not be available in sufficient quantities, at prices that are favorable to us or in a timely manner. Howmet could also have exposure if a key supplier is unable to deliver sufficient quantities of a necessary material on a timely basis. Several of our suppliers have had, in the past, constraints on their ability to supply Howmet with its full requirements due to lack of capacity, labor shortages and/or material availability. If such constraints were to continue or escalate, it could result in an adverse impact on our business. Because of approval, license and qualification requirements applicable to manufacturers and/or their suppliers, sources of alternatives to mitigate supply disruptions may not be readily available to Howmet. Any delay in supply from these suppliers could prevent us from meeting customer demand for our products. The availability and costs of certain raw materials necessary for the production of Howmet’s products may also be influenced by private or government entities, including as a result of changes in geopolitical conditions or regulatory requirements, labor relations between the producers and their work forces, and unstable governments in exporting nations. Any of the foregoing supply chain disruptions or those due to trade barriers, business continuity, quality, cyberattacks, transportation, delivery or logistics challenges, weather, natural disaster, war, or pandemic events could adversely affect Howmet’s business, results of operations or financial condition.
Howmet’s business depends, in part, on its ability to successfully meet program demand, production targets, and commitments.
Howmet is currently under contract to supply components for a number of existing and new commercial, general aviation, military aircraft, and aircraft engine programs. Many of these contracts contemplate production increases over the next several years. If Howmet fails to meet production targets and commitments, or encounters difficulty or unexpected costs in meeting such levels, it could have a material adverse effect on the Company’s reputation, business, operating results, or financial condition. Similarly, to the extent demand for our products increases rapidly and significantly in future periods, we may not be able to ramp up production quickly enough to meet the demand, which could result in lostopportunities for growth and adversely affect our business, financial condition, results of operations, or competitive position.
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Failure to attract and retain a qualified workforce and key personnel or to provide adequate succession planning could adversely affect Howmet’s operations and competitiveness.
Howmet’s global operations require qualified and skilled personnel with relevant industry and technical experience. Additionally, the increase in aerospace demand requires the Company to successfully recruit, train, and retain new workers and talent. Shortages in certain skills, in areas such as engineering, manufacturing, and technology, and other labor market inadequacies have created more competition for talent. A sustained labor shortage, lack of skilled labor, increased turnover, labor inflation, or increase in general labor costs could lead to higher labor, recruiting, or training costs to attract and retain personnel. If the Company fails to attract, train, develop, and retain a global workforce with the skills and in the locations we need to operate and grow our business, our business and operations could be adversely impacted. Furthermore, the continuity of key personnel and the preservation of institutional knowledge are vital to the success of the Company’s growth and business strategy. The loss of key personnel could significantly harm Howmet’s business, and any unplanned turnover or failure to develop adequate succession plans for key positions could deplete the Company’s institutional knowledge base, result in loss of technical or other expertise, delay or impede the execution of the Company’s business plans, and erode Howmet’s competitiveness.
Howmet could be adversely affected by the loss of key customers or significant changes in the business or financial condition of its customers.
Howmet has long-term contracts with a significant number of its customers, some of which are subject to renewal, renegotiation, or re-pricing at periodic intervals or upon changes in competitive supply conditions. Howmet’s failure to successfully renew, renegotiate, or favorably re-price such agreements, or a material deterioration in or termination of these customer relationships, could result in a reduction or loss in customer revenue. Additionally, a significant downturn, adverse development or deterioration in the business or financial condition of a key customer, or the loss of a key customer, could adversely affect Howmet’s financial results. For example, quality control issues at The Boeing Company (“Boeing”) relating to which the Federal Aviation Administration did not approve production rate increases for the Boeing 737 MAX until October 2025 and a Boeing labor union work stoppage in late 2024 negatively impacted narrow body and wide body production rates. Boeing production rates have had and are expected to have a material impact on the financial performance of Howmet. Howmet’s customers may experience delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, decreases in production rates due to regulatory investigations or otherwise, supply chain constraints or other difficulties in their businesses. Howmet’s customers may also change their business strategies or modify their business relationships with Howmet, including to reduce the amount of Howmet’s products they purchase, to switch to alternative suppliers, or to enter into the markets themselves to compete with Howmet. If Howmet’s customers reduce, terminate or delay purchases from Howmet due to the foregoing factors or otherwise and Howmet is unsuccessful in enforcing its contract rights or replacing such business in whole or in part or replaces it with less profitable business, our financial condition and results of operations may be adversely affected.
Howmet’s products are used in a variety of military applications, including military aircraft. Although many of the military programs in which Howmet participates extend several years, changes in military strategy, policy and priorities, or reductions in defense spending, may affect current and future funding of these programs and could reduce the demand for Howmet’s products, which could adversely affect Howmet’s business, financial condition, or results of operations.
Information technology system failures, cyberattacks, and security breaches may threaten the integrity of Howmet’s intellectual property and other sensitive information, disrupt its business operations, and result in reputational harm and other negative consequences having a material adverse effect on its financial condition and results of operations.
Howmet’s information technology systems could be subject to damage or interruption from power outages; computer network and telecommunications failures; cyberattacks; catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, acts of war, or terrorism; and usage errors by employees. If Howmet’s information technology systems are damaged or cease to function properly, the Company may have to make a significant investment to fix or replace them, and Howmet may sufferloss of critical data and interruptions or delays in its operations. Any material disruption in the Company’s information technology systems, or delays or difficulties in implementing or integrating new systems or enhancing current systems, could have an adverse effect on Howmet’s business, financial condition, or results of operations.
Increased global cybersecurity vulnerabilities, threats, and more sophisticated and targeted cyberattacks pose a risk to the security of our systems and networks, and the confidentiality, availability, and integrity of our data, as well as those of our customers, suppliers, and other counterparties. The Company believes that it faces threats of cyberattacks due to the industries it serves, the locations of its operations, and its technological innovations. The Company has experienced cybersecurity attacks in the past, including breaches of its information technology systems in which information was taken, and may experience them in the future, potentially with more frequency or sophistication. Although past attacks did not result in known losses of any critical data or have a material impact on Howmet’s financial condition or results of operations, the scope and impact of any future incident cannot be predicted. The use of new and evolving technologies, such as AI, presents risks and challenges that can
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impact our business. Unauthorized use or misuse of AI by the Company's employees, vendors or others may result in the disclosure of confidential Company or customer data, reputational harm, privacy law violations, cybersecurity risks, and legal liability. Additionally, while the use of AI can be beneficial to the Company, AI algorithms are currently known to sometimes produce unexpected results or behave in unpredictable ways that can generate, among other things, irrelevant, nonsensical, inaccurate, harmful, discriminatory or infringing results, which could harm the Company’s business, reputation, or result in legal or regulatory actions.
While the Company continually works to safeguard its systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cybersecurity incidents that manipulate or improperly use the Company’s systems or networks, compromise confidential, personal or otherwise protected information, destroy or corrupt data, block access to its systems, or otherwise disrupt its operations. The occurrence of such events could negatively impact Howmet’s reputation and its competitive position and could result in litigation with third parties, regulatory action, loss of business, potential liability, and increased remediation costs, any of which could have a material adverse effect on its financial condition and results of operations.
Howmet faces significant competition, which may have an adverse effect on profitability.
As discussed in “Competitive Conditions” in Part I, Item 1 (Business) of this report, the markets for Howmet’s products are highly competitive. Howmet’s competitors include a variety of both U.S. and non-U.S. companies in our product markets, which could include existing customers. New entrants in our markets, new product offerings, new and/or emerging technologies in the marketplace, or new facilities may compete with or replace Howmet products. The willingness of customers to accept alternative solutions for the products sold by Howmet, pricing pressure from competitors, and technological advancements or other developments, including the use of AI, by or affecting Howmet’s competitors or customers could adversely affect Howmet’s business, financial condition, or results of operations. Howmet’s competitive position and future performance depend, in part, on the Company’s ability to develop and innovate products, deploy technology initiatives, and implement advanced manufacturing technologies, including through the use of new and evolving technologies, including AI. The Company's competitors may adopt new technological initiatives and implement technological advancements using AI to pursue new or improved products and services more quickly, profitably, successfully and effectively than the Company. While Howmet intends to continue to develop innovative new products and services, and implement advanced technologies, including through the use of AI, it may not be able to successfully differentiate its products or services from those of its competitors or achieve and maintain technological advantages.
In addition, Howmet may face increased competition due to industry consolidation. Companies that are strategic partners in some areas of Howmet’s business may acquire or form alliances with Howmet’s competitors, thereby reducing their business with Howmet. Industry consolidation may result in stronger competitors who are betterable to obtain favorable terms from suppliers or who are betterable to compete as sole-source vendors for customers. Consolidation within Howmet’s customer base may result in customers who are betterable to exert leverage in negotiating prices and other terms of sale, or may lead to reduced demand for Howmet’s products if a combined entity replaces Howmet with a Howmet competitor with which it had prior relationships. The result of these circumstances could have a material adverse effect on Howmet’s business, operating results and financial condition.
Howmet’s global operations expose Howmet to risks that could adversely affect its business, financial condition, results of operations or cash flows, or the market price of its securities.
Howmet has operations or activities in numerous countries and regions outside the United States, including Europe, Mexico, China, and Japan. As a result, Howmet’s global operations are affected by economic, political, legal, and other conditions in the United States and foreign countries in which Howmet does business, including (i) economic and commercial instability risks, including changes in local government laws, regulations and policies, such as those related to tariffs, sanctions and trade barriers, taxation, exchange controls, employment regulations, and repatriation of assets or earnings; (ii) geopolitical risks such as political instability, civil unrest, expropriation, nationalization of properties by a government, imposition of sanctions, and renegotiation or nullification of existing agreements; (iii) wars such as those in Ukraine and the Middle East, cyber threats, terrorist activities, or other dangerous conditions; (iv) compliance with applicable U.S. and foreign laws, including antitrust and competition regulations, the Foreign Corrupt Practices Act and other anti-bribery and corruption laws, and laws concerning trade, including the International Traffic in Arms Regulations, the Export Administration Regulations, and the sanctions, regulations and embargoes administered by the U.S. Department of Treasury’s Office of Foreign Assets Control; (v) aggressive, selective or lax enforcement of laws and regulations by foreign governmental authorities; (vi) exposure to fluctuations in foreign currency exchange rates and interest rates, as well as inflation, economic factors, and currency controls in the countries in which it operates; and (vii) major public health issues, such as an outbreak of a pandemic or epidemic. Although the effect of any of the foregoing factors is difficult to predict, any one or more of them could adversely affect Howmet’s business, financial condition, or results of operations.
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Howmet may not realize the expected benefits of acquisitions on the anticipated time frame or at all.
On December 22, 2025, Howmet entered into a purchase agreement with Stanley Black & Decker, pursuant to which the Company has agreed to purchase CAM for a cash purchase price of approximately $1.8 billion, subject to customary adjustments. Completion of the Proposed CAM Acquisition is subject to a number of conditions set forth in the purchase agreement, some of which are beyond the Company’s control. These conditions may impact the ability of the Company to complete the Proposed CAM Acquisition on the expected terms and within the anticipated closing time period or at all because required regulatory approval or other conditions to closing are not received or satisfied on a timely basis or at all. In addition, the occurrence of certain events, changes or other circumstances could give rise to the termination of the purchase agreement and prevent the completion of the Proposed CAM Acquisition. Howmet may not realize the expected benefits of the Proposed CAM Acquisition, including the anticipated synergies and favorable tax treatment of the proposed transaction and the anticipated broader offering of fastening solutions within the anticipated time frame, or at all. 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. For more information, see “Liquidity and Capital Resources—Planned Financing for the Proposed CAM Acquisition” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations). However, no assurance can be given that Howmet will obtain the intended financing for the Proposed CAM Acquisition on commercially reasonable terms or terms acceptable to us, and the Company may be required to finance a portion of the purchase price of the Proposed CAM Acquisition at interest rates higher than currently expected. Any failure to complete the Proposed CAM Acquisition on the anticipated time frame or at all, and any limitations on Howmet’s ability to obtain financing and related reductions in the Company’s liquidity or increases in the Company’s borrowing costs may adversely affect Howmet’s business, financial condition, or results of operations.
In addition to the Proposed CAM Acquisition, Howmet may continue to pursue other acquisitions and take other strategic actions to grow or streamline its portfolio. There can be no assurance that we will be able to execute upon any such acquisitions or strategic actions, or that any anticipated benefits of such acquisitions or actions will be realized. Acquisitions, including the planned Proposed CAM Acquisition, present significant operational challenges and risks, including the effective integration of the business into the Company, which may be more difficult, time consuming or more costly than expected and may divert management attention from the Company’s existing business. Acquisitions, including the Proposed CAM Acquisition, may increase operating costs, expose the Company to potential unforeseen issues and legal liabilities, including the assumption of liabilities (including unforeseen liabilities) of acquired companies or businesses, increase cybersecurity issues or vulnerabilities or result in customer loss and business disruption (including, without limitation, difficulties in retaining or maintaining relationships with employees, customers or suppliers). Any of the foregoing may adversely affect Howmet’s business, financial condition, or results of operations.
Risks Related to Liquidity and Capital Resources
A decline in Howmet’s financial performance or outlook could negatively impact its credit profile, its access to capital markets and its borrowing costs.
A decline in the Company’s financial performance or outlook due to internal or external factors, such as macroeconomic conditions, a deterioration in the Company’s financial metrics or a contraction in the Company’s liquidity, could adversely affect the Company’s credit ratings and its access to the capital or credit markets on terms and conditions that the Company finds acceptable. Credit ratings may be revised or revoked at any time at the sole discretion of the credit rating organizations. A downgrade of Howmet’s credit ratings could result in negative consequences, including limiting its ability to obtain future financing on favorable terms, if at all, increasing borrowing costs and credit facility fees, triggering collateral postings, and adversely affecting the market price of Howmet securities. For information on our credit ratings, see “Liquidity and Capital Resources” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations). Limitations on Howmet’s ability to access global capital markets, a reduction in Howmet’s liquidity or an increase in borrowing costs could materially and adversely affect Howmet’s ability to maintain or grow its business, which in turn may adversely affect its financial condition, liquidity and results of operations.
An adversedecline in the liability discount rate, lower-than-expected investment return on pension assets, and other factors could adversely affect Howmet’s results of operations or amount of pension funding contributions in future periods.
Howmet’s results of operations may be negatively affected by the amount of expense Howmet records for its pension and other postretirement benefit plans, by reductions in the fair value of plan assets and by other factors. Howmet calculates income or expense for its plans using actuarial valuations in accordance with accounting principles generally accepted in the United States of America. These valuations reflect assumptions about financial market and other economic conditions, which may change due to changes in key economic indicators. The most significant year-end assumptions used by Howmet to estimate pension or other postretirement benefit income or expense for the following year are the discount rate applied to plan liabilities and the expected long-term rate of return on plan assets. In addition, Howmet is required to make an annual measurement of plan assets
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and liabilities, which may result in a significant charge to shareholders’ equity. For a discussion regarding how Howmet’s financial statements can be affected by pension and other postretirement benefits accounting policies, see “Critical Accounting Policies and Estimates—Pension and Other Postretirement Benefits” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and Note G to the Consolidated Financial Statements in Part II, Item 8 .
Adverse capital market conditions could result in reductions in the fair value of plan assets and increase the Company’s liabilities related to such plans. Additionally, unpredictable future declines in the discount rate or lower-than-expected investment returns on plan assets could lead to a decline in the plans’ funded status and result in higher than expected pension contributions. The foregoing factors may adversely affect the Company’s financial condition, liquidity, and results of operations.
Dividends and share repurchases fall within the discretion of our Board of Directors and depend on a number of factors.
Share repurchases and the declaration of dividends fall within the discretion of Howmet’s Board of Directors (the “Board”), and the Board’s decision regarding such matters depends on many factors, including Howmet’s financial condition, earnings, capital requirements, debt service obligations, covenants associated with certain of the Company’s debt obligations, industry practice, legal requirements, regulatory constraints, and other factors that the Board deems relevant. There can be no assurance that the Company will declare dividends or repurchase stock in the future in any particular amounts, or at all. The Company may modify, suspend, or cancel its share repurchase program or any dividend policy in any manner and at any time that it may deem necessary or appropriate.
Risks Related to Legal and Regulatory Matters
Howmet may be exposed to significant legal proceedings, investigations, or changes in U.S. federal, state, or foreign law, regulation, or policy.
The manufacture and sale of our products expose Howmet to potential product liability, personal injury, property damage, and related claims. In the event that a Howmet product fails to perform as expected, regardless of fault, or is used in an unexpected manner, and such failure or use results in, or is alleged to result in, bodily injury and/or property damage or other losses, Howmet may be subject to product liability lawsuits and other claims, or may participate in a recall or other corrective action involving such product. In addition, if a Howmet product is perceived to be defective or unsafe, Howmet’s sales could decrease, its reputation could be adversely impacted and Howmet could be exposed to government investigations or regulatory enforcement actions. Howmet is also subject to a variety of global legal and regulatory compliance risks in connection with its business and products. These risks include, among other things, potential claims, class action lawsuits or compliance issues, including those relating to securities laws, employment laws, intellectual property rights, cyber, security and privacy, insurance, commercial matters, antitrust and competition, human rights, third-party relationships, governance and sustainability (including climate-related/sustainability and other) rules and regulations, supply chain operations, and the manufacture and sale of products. In addition, laws and regulations focused on the development, use and provision of certain new technologies, such as AI (including generative AI) technologies, and the enforcement thereof are growing worldwide and may impose certain obligations on Howmet, may limit how we use these technologies and could result in reputational damage, monetary penalties or other regulatory actions to the extent Howmet uses such technologies and fails to comply with such obligations. Monitoring and responding to new and rapidly developing laws and regulations could be costly or have an adverse effect on our operations. An adverse outcome in one or more of proceedings or investigations, or unfavorable changes in laws, regulations or policies, or other contingencies that the Company cannot predict with certainty, could have a material adverse effect on the Company’s financial condition, results of operations, or cash flows, including reputational harm, loss of customers, and substantial monetary damages and/or non-monetary penalties. For additional information regarding the legal proceedings involving the Company, see Note U to the Consolidated Financial Statements in Part II, Item 8 .
Our business may be adversely affected if we fail to comply with government contracting regulations.
We derive a portion of our revenue from sales to U.S. and foreign governments and their respective agencies. Such contracts are subject to various procurement laws and regulations and contract provisions relating to their formation, administration, and performance. Compliance with new laws and regulations or changes to existing ones (including, but not limited to, those related to subcontracting, cybersecurity, and specialty metals) can increase our risks and/or costs. Failure to comply with these laws, regulations or provisions in our government contracts could result in the imposition of various civil and criminalpenalties, termination of contracts, forfeiture of profits, suspension of payments, increased pricing pressure, or suspension from future government contracting. If our government contracts are terminated, if we are suspended from government work, or if our ability to compete for new contracts is adversely affected, our financial condition and results of operation could be adversely affected.
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Howmet may face challenges to its intellectual property rights which could adversely affect the Company’s reputation, business, and competitive position.
Howmet owns important intellectual property, including patents, trademarks, copyrights, and trade secrets. The Company’s intellectual property plays an important role in maintaining Howmet’s competitive position in a number of the markets that the Company serves. Howmet’s competitors may develop technologies that are similar or superior to Howmet’s proprietary technologies, or design around the patents Howmet owns or licenses. Despite its controls and safeguards, Howmet’s technology may be misappropriated by its employees, its competitors or other third parties. Furthermore, unauthorized use, misuse or increased use of AI may increase the risk of a loss of intellectual property, including, for instance, if an employee inputs confidential information, such as trade secrets, into AI or machine learning technologies, resulting in such information becoming accessible by third parties, including competitors. The pursuit of remedies for any misappropriation of Howmet intellectual property is expensive and the ultimate remedies may be deemed insufficient. Further, in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of misappropriation of Howmet intellectual property increases, despite efforts the Company undertakes to protect it. Developments or assertions by or against Howmet relating to intellectual property rights, and any inability to protect or enforce Howmet’s rights sufficiently, could adversely affect Howmet’s business and competitive position.
Unanticipated changes in Howmet’s tax provisions or exposure to additional tax liabilities could affect Howmet’s future profitability.
Howmet is subject to income taxes in both the United States and various non-U.S. jurisdictions. Its domestic and international tax liabilities are dependent upon the distribution of income among these different jurisdictions. Changes in applicable domestic or foreign tax laws and regulations, including the Organization for Economic Cooperation and Development’s Pillar 2 framework and related safe harbors, or their interpretation and application, could affect the Company’s tax expense and profitability. Howmet’s tax expense includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions. The assumptions include assessments of future earnings of the Company that could impact the valuation of its deferred tax assets. The Company’s future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of the Company, changes in tax legislation and rates, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, the results of tax audits, and examinations of previously filed tax returns or related litigation and continuing assessments of its tax exposures.
Labor disputes and other employee relations issues could adversely affect Howmet’s business, financial condition, or results of operations.
A significant portion of Howmet’s employees are represented by labor unions in the United States and other countries under various collective bargaining agreements, each with varying durations and expiration dates. For more information, see “Employees” in Part I, Item 1 (Business) of this report. Howmet may not be able to negotiate successor collective bargaining agreements upon expiration without a risk of labor disputes, including strikes or work stoppages, or we may be unable to renegotiate such contracts on favorable terms. Labor organizations may attempt to organize groups of additional employees from time to time, and potential changes in labor laws could make it easier for them to do so. Howmet may also be subject to general country strikes or work stoppages unrelated to its business or collective bargaining agreements. If we experience any extended interruption of operations at any of our facilities as a result of labor disputes, strikes, or other work stoppages, our business, financial condition, or results of operations could be adversely affected.
Howmet is exposed to environmental, health, and safety risks and is subject to a broad range of health, safety, and environmental laws and regulations which may result in substantial costs and liabilities.
Howmet and its worldwide operations, as well as its customers and suppliers, are subject to numerous complex and increasingly stringent health, safety, and environmental laws and regulations. The costs of complying with such laws and regulations, as well as participation in assessments and cleanups of sites, and internal voluntary programs, have been, and in the future could be, significant. Environmental matters for which Howmet may be liable may arise in the future at its present sites, at sites owned or operated by its predecessors or affiliates, at sites that it may acquire in the future, or at third-party sites used by Howmet, its predecessors or affiliates for material and waste handling and disposal. Compliance with health, safety, and environmental laws and regulations, including increased indirect costs resulting from our suppliers incurring additional compliance costs that are passed on to us, and remediation obligations, may impact Howmet’s results of operations or liquidity.
In addition, the industrial activities conducted at Howmet’s facilities present a significant risk of injury or death to our employees or third parties that may be on site. Our operations are subject to regulation by various federal, state, and local agencies in the United States, including the Occupational Safety and Health Administration, and regulation by foreign government entities abroad responsible for employee health and safety. Material liabilities relating to injury, death, or other workers’ compensation claims could have a material adverse effect on our results of operations and financial condition or result in negative publicity and/or significant reputational harm.
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Howmet may be affected by global climate change or by legal, regulatory, customer, or supplier responses to such change.
Increased concern over climate change has led to new and proposed legislative and regulatory initiatives, such as cap-and-trade systems and additional limits on emissions of greenhouse gases, which in turn may trigger customer decarbonization requirements. New or revised laws, regulations, and policies in this area and customer decarbonization requirements could directly and indirectly affect Howmet and its customers and suppliers, including by increasing the costs of production or impacting demand for certain products, which could result in an adverse effect on our financial condition, results of operations, and cash flows. Additionally, Howmet and its customers and suppliers utilize natural gas, electricity and other fuels to operate their facilities. Significant increased energy costs and/or costs to transition to renewable energy sources, as a result of new laws, such as carbon pricing or product energy efficiency requirements, or as a result of customer requirements, could be passed along to the Company and its suppliers. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by the Company or its customers or suppliers.
Physical risks associated with the climate, such as flooding, extreme winds, and extreme precipitation, expose us to risks of damage of Howmet locations or those of its suppliers or customers. Prolonged periods of drought may result in wildfires and/or restrictions on process water use. These climate-related impacts may have an adverse effect on the production capacity of Howmet sites or those of its suppliers or customers. Climate change may result in an increase of such risks and the impact they have on our business. These types of incidents could have a material adverse effect on our results of operations and financial condition.
With respect to the various transaction agreements that the Company entered into in connection with its separation transactions, if the counterparties fail to meet their obligations or if we have material indemnification obligations under such agreements, our business, results of operations, and financial condition may be materially adversely affected.
In connection with our separation transactions, we entered into various agreements with Arconic Corporation and Alcoa Corporation, including respective Separation and Distribution agreements pursuant to which Arconic Corporation and Alcoa Corporation agreed to indemnify us for certain liabilities, and we agreed to indemnify those parties for certain liabilities. We rely on these parties to satisfy their performance and payment obligations under these agreements. If either party is unable or unwilling to satisfy its obligations under its applicable agreements, we could incur operational difficulties and/or material losses. The indemnities that we are required to provide Alcoa Corporation and Arconic Corporation under these agreements are currently not material. If either Alcoa Corporation or Arconic Corporation is not able to fully satisfy its indemnification obligations to us, we may be required to bear such losses. Each of these risks could negatively affect our business, results of operations, and financial condition.
Recent Developments
On December 22, 2025, Howmet Aerospace entered into a transaction with Stanley Black & Decker, pursuant to which the Company has agreed to purchase CAM, for a cash purchase price of approximately $1.8 billion, subject to customary adjustments. The Proposed CAM Acquisition is expected to close in the first half of 2026, subject to customary closing conditions and regulatory approvals. 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. See “Business” in Part I, Item 1 and “Liquidity and Capital Resources” in Part II, Item 7 for more information.
Management Review of 2025 and Outlook
The Company derived approximately 70% of its revenue from products sold to the commercial and defense aerospace markets for the year ended December 31, 2025. 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.
In 2025, Sales increased 11% from 2024 primarily as a result of growth in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares, favorable product pricing, and cost pass through, partially offset by lower volumes in the commercial transportation market. Product price increases are in excess of material and inflationary cost pass through to our customers.
Income before income taxes increased 33% from 2024. Total Segment Adjusted EBITDA (1) increased 25% from 2024 primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets, and favorable product pricing, partially offset by lower volumes in the commercial transportation market.
Management continued its focus on liquidity and cash flows as well as improving its operating performance through profitable revenue, efficient operations, and margin enhancement. Management has also continued its intensified focus on capital efficiency. Management’s focus and the related results enabled Howmet to end 2025 with a solid financial position.
The following financial information reflects certain key highlights of Howmet’s 2025 results:
• Sales of $8,252, an increase of 11% from 2024, driven by growth in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares, partially offset by lower volumes in the commercial transportation market;
• Net income of $1,508, an increase of 31%, or $3.71 per diluted share, an increase of 32%, from 2024;
• Income before income taxes of $1,840, an increase of $457, or 33%, from 2024;
• Total Segment Adjusted EBITDA (1) of $2,507, an increase of $498, or 25%, from 2024;
• Cash on hand and restricted cash at the end of the year of $743;
• Cash provided from operations of $1,884; cash used for financing activities of $1,269; and cash used for investing activities of $438;
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• Repurchased the Company’s common stock of approximately 4.4 million shares under the Share Repurchase Program for approximately $700;
• Total debt of $3,050, a net decrease of $265 from 2024, reflecting the early redemption of the 5.900% Notes due February 2027 (the “2027 Notes”) of $625 and the early prepayment of its USD Term Loan Facility during various periods in 2025 of $140 , partially offset by the November 2025 issuance of $500 aggregate principal amount of the 4.550% Notes due 2032 (the “2032 Notes”); and
• The Company’s common stock had a closing price of $205.02 per share as of December 31, 2025, an increase of $191.82 per share, or 1453%, since the Arconic Inc. Separation Transaction on April 1, 2020, compared to an increase of 177% for the S&P 500 ® Index and 178% for the S&P 500 ® Aerospace & Defense Index over the same period.
(1) See below in Results of Operations for the reconciliation of Total Segment Adjusted EBITDA to Income before income taxes.
In 2026, management projects sales to increase as we expect solid growth in the commercial aerospace, defense aerospace, and gas turbines markets, and the Company’s strong position in those markets is expected to continue, including engine spares. Earnings per share is expected to grow as management continues to focus on revenue growth and operational performance. Cash provided from operations is expected to increase for the full year in 2026 compared with 2025, resulting from a continued focus on operating performance. Capital expenditures are expected to remain elevated with additional investments in capacity expansions to support aerospace and gas turbines market growth and share gains. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and fluctuations in foreign currency exchange rates and interest rates, may affect future results of operations and cash flow.
Results of Operations
Earnings Summary
Sales. Sales for 2025 were $8,252 compared with $7,430 in 2024, an increase of $822, or 11%. The increase was primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares, favorable product pricing, and cost pass through, partially offset by lower volumes in the commercial transportation market. Product price increases are in excess of material and inflationary cost pass through to our customers.
Sales for 2024 were $7,430 compared with $6,640 in 2023, an increase of $790, or 12%. The increase was primarily due to higher sales in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares, and favorable product pricing, partially offset by lower volumes in the commercial transportation market. Product price increases are in excess of inflationary cost pass through to our customers.
Cost of goods sold (“COGS”). COGS as a percentage of Sales was 65.8% in 2025 compared with 68.9% in 2024. The decrease was primarily due to higher volumes, favorable product pricing and productivity gains, partially offset by increased net headcount, primarily in the Engine Products segment, in support of expected revenue increases. The Company had no COGS net reimbursements in 2025 compared to total COGS net reimbursements of $18 in 2024 due to the final settlement of the insurance claim related to a mechanical failure that occurred in 2022 resulting in substantial heat and fire-related damage to equipment at the Forged Wheels’ cast house in Barberton, Ohio (the “Barberton Cast House Incident”) in the second quarter of 2024 and the final settlement of the insurance claim related to the fires that occurred in 2019 at a Fastening Systems plant in France (the “France Plant Fire”) in the fourth quarter of 2024.
COGS as a percentage of Sales was 68.9% in 2024 compared with 71.9% in 2023. The decrease was primarily due to higher volumes and favorable product pricing, partially offset by increased net headcount, primarily in the Engine Products segment, in support of expected revenue increases. The Company had total COGS net reimbursements of $18 in 2024 due to the final settlement of the Barberton Cast House Incident in the second quarter of 2024 and the final settlement of the insurance claim related to the France Plant Fire in the fourth quarter of 2024, compared to total COGS insurance claims reimbursements of $19 in 2023, partially offset by charges of $7 in 2023, related to the France Plant Fire and Barberton Cast House Incident. All cash related to the completed insurance claims for the Barberton Cast House Incident and the France Plant Fire were collected as of January 2025.
Selling, general administrative, and other expenses (“SG&A”). SG&A expenses were $370, or 4.5% of Sales, in 2025 compared with $347, or 4.7% of Sales, in 2024. The increase in SG&A of $23, or 7%, was primarily due to higher employment costs, other administrative expenses, and acquisition costs.
SG&A expenses were $347, or 4.7% of Sales, in 2024 compared with $333, or 5.0% of Sales, in 2023. The increase in SG&A of $14, or 4%, was primarily due to higher employment costs.
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Research and development expenses (“R&D”). R&D expenses were $37 in 2025 compared with $33 in 2024. The increase of $4, or 12%, was primarily due to an increase in spending on technology projects related to the aerospace and gas turbines markets.
R&D expenses were $33 in 2024 compared with $36 in 2023. The decrease of $3, or 8%, was primarily due to the timing of spending on technology projects.
Provision for depreciation and amortization (“D&A”). The provision for D&A was $283 in 2025 compared with $277 in 2024. The increase of $6, or 2%, was primarily driven by higher depreciation from additional capital investments in capacity expansions within the Engine Products segment.
The provision for D&A was $277 in 2024 compared with $272 in 2023. The increase of $5, or 2%, was primarily driven by the disposal of unused assets in the Engine Products segment.
Restructuring and other charges. Restructuring and other charges were $84 in 2025 compared with $21 in 2024 and $23 in 2023.
Restructuring and other charges in 2025 consisted primarily of $89 charges for U.K. pension plan settlement accounting and a $3 charge for layoff costs partially offset by $5 in gains on the sales of assets at two small previously closed facilities.
Restructuring and other charges in 2024 consisted primarily of a $13 net loss on the sale of a small U.K. manufacturing facility in Engineered Structures and a $10 charge for layoff costs.
Restructuring and other charges in 2023 consisted primarily of a $12 charge for impairment of assets primarily related to decommissioned fixed assets in Engineered Structures, a $5 charge for U.S. and Canadian pension plans’ settlement accounting, a $3 charge for layoff costs, a $3 charge for various other exit related costs primarily for the closures of small manufacturing facilities, and a $2 charge for accelerated depreciation primarily related to the closure of a small Engineered Structures facility in the U.K.
The Company has closed or sold some small manufacturing facilities and may, in the future, close or sell additional small facilities in order to consolidate operations, reduce fixed costs, and exit less profitable businesses.
See Note D to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail.
Interest expense, net. Interest expense, net was $151 in 2025 compared with $182 in 2024. The decrease of $31, or 17%, was primarily due to the early redemption of the 2027 Notes and the early prepayments of its USD Term Loan Facility during various periods in 2025, partially offset by the November 2025 issuance of the 2032 Notes. Long-term debt, including long-term debt due within one year, has been reduced by $656 from December 31, 2023 to December 31, 2025. On an annual basis, the debt reduction and refinancing activities in 2025 will decrease Interest expense, net by approximately $22, excluding impacts of financing future acquisitions.
Interest expense, net was $182 in 2024 compared with $218 in 2023. The decrease of $36, or 17%, was primarily due to the early redemptions of the 6.875% Notes due May 2025 (the “2025 Notes”) during various periods in 2024, the early redemptions of the 5.125% Notes due October 2024 (the “ 2024 Notes ”) during various periods during 2023 and 2024, and the early partial prepayment of its USD term loan , partially offset by the August 2024 issuance of $500 aggregate principal amount of the 4.850% Notes due October 2031 (the “2031 Notes”), net of the cross-currency swap that synthetically converted the 2031 Notes into a lower fixed-interest-rate Euro liability.
See Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail related to the Company’s debt.
Loss on debt redemption. Debt redemption or tender premiums include the cost to redeem or repurchase certain of the Company’s notes at a price which may be equal to the greater of the principal amount or the sum of the present values of the remaining scheduled payments, discounted using a defined treasury rate plus a spread, or a price based on the market price of its notes.
Loss on debt redemption was $15 in 2025 compared with $6 in 2024. The increase of $9, or 150%, was primarily due to the debt redemption premiums paid in the fourth quarter of 2025 on the early redemption of the 2027 Notes.
Loss on debt redemption was $6 in 2024 compared with $2 in 2023. The increase of $4, or 200%, was primarily due to the debt premiums paid on the early redemption of the 2025 Notes in the third quarter of 2024.
See Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail related to the Company’s debt.
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Other expense, net. Other expense, net was $40 in 2025 compared with $62 in 2024. The decrease in expense of $22 was primarily due to an increase of foreign currency translation gains, net of $16. Non-service related net periodic benefit costs related to defined benefit plans and other postretirement benefit plans is expected to remain relatively flat from 2025 to 2026.
Other expense, net was $62 in 2024 compared with $8 in 2023. The increase in expense of $54 was primarily due to the reversal in the second quarter ended June 30, 2023 of $25, net of legal fees of $1, of the $65 pre-tax charge taken in the third quarter of 2022 related to the Lehman Brothers International (Europe) (“LBIE”) legal proceeding as a result of the final settlement of such proceeding in June 2023, increases in foreign currency losses, net of $15, and an increase in the impact of deferred compensation arrangements of $5.
See Note F to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail.
Income taxes. Howmet’s effective tax rate was 18.0% (provision on pre-tax income) in 2025 compared with the U.S. federal statutory rate of 21%. The effective tax rate differs from the U.S. federal statutory rate primarily due to a $38 benefit related to a U.S. deduction on Foreign Derived Intangible Income (“FDII”), a $23 benefit related to federal and state R&D credits and related impacts, an $18 excess benefit for stock compensation, a $17 benefit related to U.S. tax accounting method changes for the deduction of certain prior period transaction and other costs, a $16 benefit related to various other tax credits, an $8 benefit to release a valuation allowance related to U.S. foreign tax credits, and a $6 benefit to release a valuation allowance related to U.S. state tax losses and credits, partially offset by $24 of incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, $19 of U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, $14 of charges related to nondeductible expenses, a $10 charge related to the July 4, 2025 enactment of the One Big Beautiful Bill Act (“OBBB”), and an $8 net charge related to the expiration of the 2024 tax holiday in China which was reinstated for the 2025 year.
Howmet anticipates that the effective tax rate in 2026 will be between 20.5% and 21.5%. However, changes in the current economic environment, tax legislation or rate changes, currency fluctuations, ability to realize deferred tax assets, movements in stock price impacting tax benefits or deficiencies on stock-based payment awards, and the results of operations in certain taxing jurisdictions may cause this estimated rate to fluctuate.
Howmet’s effective tax rate was 16.5% (provision on pre-tax income) in 2024 compared with the U.S. federal statutory rate of 21%. The effective tax rate differs from the U.S. federal statutory rate primarily due to the completion of an R&D study which resulted in a $44 net benefit related to prior years of U.S. federal and state R&D credits and related impacts, a $15 net benefit related to current year U.S. federal and state R&D credits and related impacts, a $25 benefit related to a U.S. deduction on Foreign Derived Intangible Income, an $11 net benefit related to various other credits, a $10 excess benefit for stock compensation, a $6 benefit to release a valuation allowance related to U.S. state tax losses and credits, and a $4 benefit to release a valuation allowance related to U.S. foreign tax credits, partially offset by $12 of U.S. tax on GILTI and other foreign earnings, $15 of incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, $11 of charges related to nondeductible expenses, and $8 of net foreign tax cost related to foreign earnings subject to withholding tax and local tax in high tax rate jurisdictions. The Organization for Economic Cooperation and Development (“OECD”) released Pillar Two model rules in 2021 introducing a 15% global minimum tax under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. The Pillar Two directive, including various safe harbors, has been implemented through domestic legislation in multiple countries where the Company operates effective January 1, 2024 and has not had a material impact on the Company’s effective tax rate.
Howmet’s effective tax rate was 21.5% (provision on pre-tax income) in 2023 compared with the U.S. federal statutory rate of 21%. The effective tax rate differs from the U.S. federal statutory rate primarily as a result of a $21 charge for a tax reserve established in France, $10 of incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, and $8 of charges related to nondeductible expenses, partially offset by a $14 benefit to release a valuation allowance related to U.S. foreign tax credits, a $9 excess benefit for stock compensation, $7 of benefits related to tax credits, a $2 benefit to release a valuation allowance related to U.S. state tax losses and credits, and a $2 benefit to revalue deferred taxes for changes to apportioned U.S. state tax rates.
See Note H to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for additional detail.
Net income. Net income was $1,508, or $3.71 per diluted share, for 2025 compared to $1,155, or $2.81 per diluted share, in 2024. The increase in results of $353, or 31%, was primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares, favorable product pricing, a reduction in interest expense due to lower long-term debt levels, and an increase of foreign currency translation gains, partially offset by lower volumes in the commercial transportation market.
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Net income was $1,155, or $2.81 per diluted share, for 2024 compared to $765, or $1.83 per diluted share, in 2023. The increase in results of $390, or 51%, was primarily due to higher volumes in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares, favorable product pricing, a reduction in interest expense due to lower long-term debt levels, and a lower tax rate due to the completion of an R&D study, partially offset by lower volumes in the commercial transportation market and net impacts of foreign currency.
Segment Information
The Company’s operations consist of four worldwide reportable segments: Engine Products, Fastening Systems, Engineered Structures and Forged Wheels. 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. (See Note C to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K).
The Company has aligned its operations consistent with how the CEO assesses operating performance and allocates capital.
Income before income taxes totaled $1,840 in 2025, $1,383 in 2024, and $975 in 2023. Segment Adjusted EBITDA for all reportable segments totaled $2,507 in 2025, $2,009 in 2024, and $1,587 in 2023. See below for the reconciliation of Total Segment Adjusted EBITDA to Income before income taxes.
The following information provides Sales, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each reportable segment for each of the three years in the period ended December 31, 2025.
Engine Products
Third-party sales
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
Engine Products produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines (aerospace commercial and defense) and gas turbine applications. Engine Products produces rotating parts as well as structural parts, which are sold directly to customers. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are mostly the U.S. dollar, British pound, euro, and Japanese yen.
Third-party sales for the Engine Products segment increased $585, or 16%, in 2025 compared with 2024, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares growth.
Third-party sales for the Engine Products segment increased $469, or 14%, in 2024 compared with 2023, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets, including engine spares growth.
Segment Adjusted EBITDA for the Engine Products segment increased $288, or 25%, in 2025 compared with 2024, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets. The segment absorbed approximately 1,445 net headcount throughout the year in support of expected revenue increases, resulting in unfavorable near-term recruiting, training, and operational costs.
Segment Adjusted EBITDA for the Engine Products segment increased $263, or 30%, in 2024 compared with 2023, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets. The segment absorbed approximately 1,205 net headcount throughout the year in support of expected revenue increases, resulting in unfavorable near-term recruiting, training, and operational costs.
Segment Adjusted EBITDA Margin for the Engine Products segment increased approximately 250 basis points in 2025 compared with 2024, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets.
Segment Adjusted EBITDA Margin for the Engine Products segment increased approximately 360 basis points in 2024 compared with 2023, primarily due to growth in the commercial aerospace, defense aerospace, and gas turbines markets.
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In 2026, as compared to 2025, demand in the commercial aerospace, defense aerospace, and gas turbines markets is expected to increase, including engine spares growth in commercial aerospace, defense aerospace and gas turbines. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and fluctuations in foreign currency exchange rates and interest rates, may affect future results of operations and cash flow. Capital expenditures are expected to remain elevated with additional investments in capacity expansions to support aerospace and gas turbines market growth and share gains. The timing, extent, application, and level of tariffs by various governments and our ability to recover tariffs are subject to changes and uncertainties.
Fastening Systems
Third-party sales
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
Fastening Systems produces aerospace and industrial fastening systems, as well as commercial transportation 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 commercial transportation vehicles and construction and industrial equipment. Fastening Systems are sold directly to customers and through distributors. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are mostly the U.S. dollar, British pound, and euro.
Third-party sales for the Fastening Systems segment increased $169, or 11%, in 2025 compared with 2024, primarily due to growth in the commercial aerospace market, partially offset by lower volumes in the commercial transportation market.
Third-party sales for the Fastening Systems segment increased $227, or 17%, in 2024 compared with 2023, primarily due to growth in the commercial aerospace market, including wide body recovery.
Segment Adjusted EBITDA for the Fastening Systems segment increased $124, or 31%, in 2025 compared with 2024, primarily due to growth in the commercial aerospace market and productivity gains partially offset by lower volumes in the commercial transportation market.
Segment Adjusted EBITDA for the Fastening Systems segment increased $128, or 46%, in 2024 compared with 2023, primarily due to growth in the commercial aerospace market, productivity gains which included reduced net headcount of approximately 135, and impacts of foreign currency.
Segment Adjusted EBITDA Margin for the Fastening Systems segment increased approximately 460 basis points in 2025 compared with 2024, primarily due to growth in the commercial aerospace market and productivity gains, partially offset by lower volumes in the commercial transportation market.
Segment Adjusted EBITDA Margin for the Fastening Systems segment increased approximately 520 basis points in 2024 compared with 2023, primarily due to growth in the commercial aerospace market as well as productivity gains.
In 2026, as compared to 2025, demand in the commercial aerospace market is expected to increase. Demand in the commercial transportation market is expected to remain low with recovery beginning in the second half of 2026, given tariff-related, economic, and regulatory uncertainty in North America. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and fluctuations in foreign currency exchange rates and interest rates, may affect future results of operations and cash flow. The timing, extent, application, and level of tariffs by various governments and our ability to recover tariffs are subject to changes and uncertainties.
The Brunner acquisition will be included in the operations of the Fastening Systems segment after February 6, 2026. Upon completion of the announced Proposed CAM Acquisition, CAM operations are expected to be included in our Fastening Systems segment.
Engineered Structures
Third-party sales
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
Engineered Structures produces titanium ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, titanium extrusions, and machining services for airframe, wing, aero-engine, and landing gear components. Engineered Structures also produces aluminum forgings, nickel forgings, and aluminum machined
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components, and assemblies for aerospace and defense applications. The segment’s products are sold directly to customers and through distributors, and sales and costs and expenses of this segment are generally transacted in the local currency of the respective operations, which are mostly the U.S. dollar.
Third-party sales for the Engineered Structures segment increased $83, or 8%, in 2025 compared with 2024, primarily due to growth in the defense aerospace market. The Engineered Structures segment is focusing on the optimization of its manufacturing footprint and rationalization of product mix in order to maximize profitability.
Third-party sales for the Engineered Structures segment increased $187, or 21%, in 2024 compared with 2023, primarily due to growth in the commercial aerospace and defense aerospace markets.
Segment Adjusted EBITDA for the Engineered Structures segment increased $77, or 46%, in 2025 compared with 2024, primarily due to growth in the defense aerospace market. The Engineered Structures segment is focusing on the optimization of its manufacturing footprint and rationalization of product mix in order to maximize profitability.
Segment Adjusted EBITDA for the Engineered Structures segment increased $53, or 47%, in 2024 compared with 2023, primarily due to growth in the commercial aerospace and defense aerospace markets.
Segment Adjusted EBITDA Margin for the Engineered Structures segment increased approximately 560 basis points in 2025 compared with 2024, primarily due to growth in the defense aerospace market. The Engineered Structures segment is focusing on the optimization of its manufacturing footprint and rationalization of product mix in order to maximize profitability.
Segment Adjusted EBITDA Margin for the Engineered Structures segment increased approximately 270 basis points in 2024 compared with 2023, primarily due to growth in the commercial aerospace and defense aerospace markets.
In 2026, as compared to 2025, demand in the commercial aerospace market is expected to increase. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and fluctuations in foreign currency exchange rates and interest rates, may affect future results of operations and cash flow. The timing, extent, application, and level of tariffs by various governments and our ability to recover tariffs are subject to changes and uncertainties.
Forged Wheels
Third-party sales
Segment Adjusted EBITDA
Segment Adjusted EBITDA Margin
Forged Wheels produces forged aluminum wheels and related products globally for heavy-duty trucks, trailers, and buses. Forged Wheels’ products are sold directly to OEMs and through distributors. Generally, the sales and costs and expenses of this segment are transacted in the local currency of the respective operations, which are mostly the U.S. dollar and euro.
Third-party sales for the Forged Wheels segment decreased $15, or 1%, in 2025 compared with 2024, primarily due to lower volumes in the commercial transportation market, partially offset by an increase in aluminum cost pass through.
Third-party sales for the Forged Wheels segment decreased $93, or 8%, in 2024 compared with 2023, primarily due to lower volumes in the commercial transportation market as well as a decrease in aluminum and other inflationary cost pass through.
Segment Adjusted EBITDA for the Forged Wheels segment increased $9, or 3%, in 2025 compared with 2024, primarily due to cost reductions, including lower net headcount, in response to lower volumes in the commercial transportation market, as well as favorable foreign currency exchange rates.
Segment Adjusted EBITDA for the Forged Wheels segment decreased $22, or 7%, in 2024 compared with 2023, primarily due to lower volumes in the commercial transportation market. The segment reduced approximately 160 net headcount throughout the year as a result of lower production.
Segment Adjusted EBITDA Margin for the Forged Wheels segment increased approximately 130 basis points in 2025 compared with 2024, primarily due to cost reductions, including lower net headcount, in response to lower volumes in the commercial transportation market, as well as favorable foreign currency exchange rates, partially offset by higher aluminum cost pass through.
Segment Adjusted EBITDA Margin for the Forged Wheels segment increased approximately 30 basis points in 2024 compared with 2023, primarily due to lower aluminum and other inflationary cost pass through, partially offset by lower volumes in the commercial transportation market.
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In 2026, as compared to 2025, demand in the commercial transportation markets served by Forged Wheels is expected to remain low with recovery beginning in the second half of 2026. Governmental policies, laws and regulations, and other economic factors, including inflation, customer requirements, tariffs, and fluctuations in foreign currency exchange rates and interest rates, may affect future results of operations and cash flow. The timing, extent, application, and level of tariffs by various governments and our ability to recover tariffs are subject to changes and uncertainties.
Reconciliation of Total Segment Adjusted EBITDA to Income before income taxes
Income before income taxes
Loss on debt redemption
Interest expense, net
Other expense, net (1)
Operating income
Segment provision for depreciation and amortization
Unallocated amounts:
Restructuring and other charges
Corporate expense (2)
Total Segment Adjusted EBITDA
(1) See Note F to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
(2) Corporate expense includes selling, general administrative and other expenses, costs of corporate headquarters, plant fire reimbursements, acquisition costs, costs associated with closures, supply chain disruptions, and other items.
Total Segment Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because it provides additional information with respect to the Company’s operating performance and the Company’s ability to meet its financial obligations. Differences between the total segment and consolidated totals are in Corporate.
See Restructuring and other charges, D&A, Loss on debt redemption, Interest expense, net, and Other expense, net discussions above under “Results of Operations” for reference.
Corporate expense increased $15, or 18%, in 2025 compared with 2024, primarily due to a decrease in net plant fire reimbursements from the France Plant Fire and Barberton Cast House Incident of $18, partially offset by acquisition costs of $2.
Corporate expense decreased $14, or 14%, in 2024 compared with 2023, primarily due to lower costs associated with closures, supply chain disruptions, and other items of $13, lower costs related to the collective bargaining agreement negotiations of $8, and higher net reimbursements related to the France Plant Fire and the Barberton Cast House Incident of $6, partially offset by higher employment costs in 2024.
Environmental Matters
See the Environmental Matters section of Note U to the Consolidated Financial Statements in Part II, Item 8 of this Form 10-K.
Liquidity and Capital Resources
Howmet maintains a disciplined approach to cash management and the strengthening of its balance sheet. Management continued to focus on actions to improve Howmet’s cost structure and liquidity, providing the Company with the ability to operate effectively. Such actions included procurement efficiencies and overhead rationalization to reduce costs, working capital initiatives, and maintaining a sustainable level of capital expenditures.
Cash provided from operations and financing activities is expected to be adequate to cover Howmet’s operational and business needs over the next 12 months. For an analysis of long-term liquidity, see “Contractual Obligations and Off-Balance Sheet Arrangements” below.
As of December 31, 2025, cash and cash equivalents of Howmet were $742, of which $462 was held by Howmet’s non-U.S. subsidiaries. If the cash held by non-U.S. subsidiaries were to be repatriated to the U.S., the Company does not expect there to be material income tax consequences.
See “Planned Financing for the Proposed CAM Acquisition” below for information with respect to the proposed financing of the Proposed CAM Acquisition.
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Operating Activities
Cash provided from operations in 2025 was $1,884 compared with $1,298 in 2024 and $901 in 2023.
The increase in cash provided from operations of $586, or 45%, between 2025 and 2024 was due to higher operating results of $409, lower working capital of $83, higher noncurrent liabilities of $96 including long-term deferred revenue, and lower pension contributions of $9, partially offset by higher noncurrent assets of $11. The components of the change in working capital included favorable changes in deferred revenue and other accrued expenses of $91, inventories of $56, taxes, including income taxes, of $8, and prepaid expenses and other current assets of $4, partially offset by receivables of $52, and accounts payable of $24.
The increase in cash provided from operations of $397, or 44%, between 2024 and 2023 was due to higher operating results of $361, lower working capital of $72, partially offset by higher pension contributions of $43. The components of the change in working capital included favorable changes in receivables of $107, inventories of $36, prepaid expenses and other current assets of $10, partially offset by accounts payable of $42, compensation related payments and other accrued expenses of $32 and taxes, including income taxes, of $7.
Financing Activities
Cash used for financing activities was $1,269 in 2025 compared with $1,026 in 2024 and $868 in 2023.
The use of cash in 2025 was primarily related to repayments on the aggregate outstanding principal amount of long-term debt of approximately $765, repurchases of common stock of $700, dividends paid to shareholders of $181, redemption of preferred stock of $55, taxes paid for net share settlement of equity awards of $46, premiums paid on the early redemption of debt of $15, and debt issuance costs for the 2032 Notes of $5, partially offset by proceeds from the 2032 Notes debt issuance of $500 and the exercise of employee stock options of $1. On an annual basis, the 2025 debt reduction and refinancing activities will decrease Interest expense, net by approximately $22.
The use of cash in 2024 was primarily related to the cost of the repayments on the aggregate outstanding principal amount of long-term debt and premiums paid of approximately $870, the repurchase of common stock of $500, dividends paid to shareholders of $109, taxes paid for net share settlement of equity awards of $49, and debt issuance costs for the 2031 Notes of $5, partially offset by proceeds from the 2031 Notes debt issuance of $500 and the exercise of employee stock options of $8.
The use of cash in 2023 was primarily related to the repayments on the aggregate outstanding principal amount of long-term debt of approximately $876, the repurchase of common stock of $250, taxes paid for net share settlement of equity awards of $77, and dividends paid to shareholders of $73. These items were partially offset by proceeds from term loan facilities of $400 and the exercise of employee stock options of $11.
For further details regarding the Company’s debt reduction and refinancing activities and stock repurchases, see Note Q and Note I , respectively, to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K.
On January 20, 2026, the Board of Directors of Howmet declared a dividend of $0.12 per share on its common stock to be paid on February 25, 2026 to holders of record as of the close of business on February 6, 2026. The declaration of future common stock dividends is subject to the discretion and approval of the Board of Directors after the Board’s consideration of all factors it deems relevant and subject to applicable law. The Company may modify, suspend, or cancel the declaration of dividends or any dividend policy in any manner and at any time that it may deem necessary or appropriate.
Credit Facilities
On February 9, 2026 , the Company entered into (i) the Third Amended and Restated Five-Year Revolving Credit Agreement (as so amended and restated, the “5-Year Revolving Credit Agreement”) by and among the Company, a syndicate of lenders and issuers named therein, Citibank, N.A., as administrative agent for the lenders and issuers, and JPMorgan Chase Bank, N.A., as syndication agent, which amended and restated the Company’s Second Amended and Restated Five-Year Revolving Credit Agreement (the "Second Amended 5-Year Revolving Credit Agreement"), dated as of July 27, 2023, and (ii) the 364-Day Revolving Credit Agreement (the “364-Day Revolving Credit Agreement”) by and among the Company, a syndicate of lenders named therein, Citibank, N.A., as administrative agent for the lenders and issuers, and JPMorgan Chase Bank, N.A., as syndication agent. The 364-Day Revolving Credit Agreement and the 5-Year Revolving Credit Agreement are jointly referred to as the “Revolving Credit Agreements” and are each individually referred to as a “Revolving Credit Agreement.”
The 5-Year Revolving Credit Agreement provides a $1,000 million senior unsecured revolving credit facility (the “5-Year Revolving Credit Facility”) that matures on February 9, 2031, unless extended or earlier terminated in accordance with the provisions of the 5-Year Revolving Credit Agreement. The Company may make two one-year extension requests during the term of the 5-Year Revolving Credit Facility, with any extension being subject to the lender consent requirements set forth in the 5-Year Revolving Credit Agreement . Subject to the terms and conditions of the 5-Year Revolving Credit Agreement, the
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Company may from time to time request increases in commitments under the 5-Year Revolving Credit Facility, not to exceed $500 million in aggregate principal amount, and may also request the issuance of letters of credit, subject to a letter of credit sublimit of $500 million of the 5-Year Revolving Credit Facility. Under the provisions of the 5-Year Revolving Credit Agreement, based on Howmet’s current long-term debt ratings, Howmet pays an annual fee of 0.090% of the total commitment to maintain the 5-Year Revolving Credit Facility and an annual fee of 0.070% of the total commitment to maintain the 364-Day Revolving Credit Facility. The 364-Day Revolving Credit Agreement provides a $600 million senior unsecured revolving credit facility (the “364-Day Revolving Credit Facility” and, together with the 5-Year Revolving Credit Facility, the “Revolving Credit Facilities” and each, individually, a “Revolving Credit Facility”) that matures on February 8, 2027, unless extended or earlier terminated in accordance with the provisions of the 364-Day Revolving Credit Agreement.
The 5-Year Revolving Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured, unsubordinated indebtedness of the Company. Borrowings under the 5-Year Revolving Credit Facility may be denominated in U.S. dollars or euros. Loans will bear interest at a base rate or, in the case of U.S. dollar-denominated loans, a rate equal to the Term Secured Overnight Financing Rate (“SOFR”) plus adjustment or, in the case of euro-denominated loans, the Euro inter-bank offered rate (“EURIBOR”), plus, in each case, an applicable margin based on the credit ratings of the Company’s outstanding senior unsecured long-term debt. Based on Howmet’s current long-term debt ratings, there would be no applicable margin on base rate loans and the applicable margin on Term SOFR loans and EURIBOR loans would be 0.910% per annum. The applicable margin is subject to change based on the Company’s long-term debt ratings. Loans may be prepaid without premium or penalty, subject to customary breakage costs.
The 364-Day Revolving Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured, unsubordinated indebtedness of the Company. Borrowings under the 364-Day Revolving Credit Facility may be denominated in U.S. dollars or euros. Loans will bear interest at a base rate or, SOFR or the EURIBOR plus, in each case, an applicable margin based on the credit ratings of the Company’s outstanding senior unsecured long-term debt. Based on the Company’s current long-term debt ratings, there would be no applicable margin on base rate loans and the applicable margin on Term SOFR loans and EURIBOR loans would be 0.930% per annum. The applicable margin is subject to change based on the Company’s long-term debt ratings. Loans may be prepaid without premium or penalty, subject to customary breakage costs.
The obligation of the Company to pay amounts outstanding under the Revolving Credit Facilities may be accelerated upon the occurrence of an “Event of Default” as defined in the applicable Revolving Credit Agreement. Such Events of Default include, among others, (a) non-payment of obligations; (b) breach of any representation or warranty in any material respect; (c) non-performance of covenants and obligations; (d) with respect to other indebtedness in a principal amount in excess of $100 million, a default thereunder that causes such indebtedness to become due prior to its stated maturity or a default in the payment at maturity of any principal of such indebtedness; (e) the bankruptcy or insolvency of Howmet; and (f) a change in control of the Company.
The Revolving Credit Agreements contain covenants, including, among others, (a) limitations on the Company’s ability to incur liens securing indebtedness for borrowed money; (b) limitations on the Company’s ability to consummate a consolidation, merger or sale of all or substantially all of its assets; (c) limitations on the Company’s ability to change the nature of its business; and (d) a limitation requiring the ratio of Consolidated Net Debt to Consolidated EBITDA (each as defined in the Revolving Credit Agreements, as applicable) as of the end of each fiscal quarter for the period of the four fiscal quarters most recently ended, to be less than or equal to 3.75 to 1.00, which may be increased to 4.25 to 1.00, at Howmet’s option, upon the occurrence of a material acquisition for the four consecutive fiscal quarters following the consummation thereof.
For more information about the Company’s Second Amended 5-Year Revolving Credit Agreement as in effect as of December 31, 2025 and 2024, see Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for reference. There were no amounts outstanding under the Credit Agreement as of December 31, 2025 or December 31, 2024, and no amounts were borrowed during 2025 or 2024 under the Credit Agreement.
Term Loan Facility
On November 22, 2023, the Company entered into a Japanese Yen Term Loan Agreement, due 2026 (the “JPY Term Loan Agreement”). For more information about the JPY Term Loan Agreement, see Note Q to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for reference).
Commercial Paper, Shelf Registration Statement, Debt and Equity Securities
The Company has a commercial paper program under which the Company may issue unsecured commercial paper from time to time up to a maximum aggregate face amount of $1,000 . The Company’s commercial paper will be sold on customary terms in the U.S. commercial paper market on a private placement basis. The proceeds of the commercial paper will be used for general corporate purposes, which may include, as described below, for financing the Proposed CAM Acquisition. In conjunction with the commercial paper program, the Company was assigned short-term credit ratings by Moody’s Investors Service, Inc., S&P Global Ratings, and Fitch Ratings, Inc.
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The Company has an effective shelf registration statement on Form S-3, filed with the SEC, which allows for offerings of debt securities from time to time. The Company may opportunistically issue new debt securities in accordance with securities laws or utilize commercial paper in order to, but not limited to, refinance existing indebtedness and, as described below, to finance the Proposed CAM Acquisition. The Company continues to evaluate whether, when, and to what extent it may access capital markets, including any plans to refinance the JPY Term Loan Facility due November 2026. Our ability to refinance our indebtedness or enter into alternative financings in adequate amounts on commercially reasonable terms, or terms acceptable to us, may be affected by circumstances and economic events outside of our control. In the event that a refinancing does not occur before the November 2026 maturity date of the JPY Term Loan Facility, the Company believes that its projected cash from operations, cash on hand and availability under the Revolving Credit Facilities and its commercial paper program will enable the Company to repay the JPY Term Loan Facility.
In the future, the Company may, from time to time, redeem portions of its debt securities or repurchase portions of its debt or equity securities 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.
Ratings
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-term and long-term debt ratings assigned to the Company by the major credit rating agencies. The Company believes that its cash on hand, cash provided from operations and availability of its Revolving Credit Facilities, its commercial paper program, and its accounts receivables securitization program will continue to be sufficient to fund our operating and capital allocation activities.
The three major credit rating agencies have rated Howmet’s debt with investment grade ratings. The Company’s most recent short-term and long-term credit ratings, as well as the current outlook from the three major credit rating agencies are as follows:
Short-Term
Long-Term
Outlook
S&P Global Ratings (“S&P”)
BBB+
Stable
Moody’s Investors Service (“Moody’s”)
Baa1
Stable
Fitch Investors Service (“Fitch”)
BBB+
Stable
On September 8, 2025, S&P upgraded Howmet’s long-term debt rating from BBB to BBB+, and affirmed the current short-term debt rating and outlook at A-2 and stable, respectively, citing strong demand for commercial aerospace components, margin gains, and debt reduction.
On March 31, 2025, Fitch upgraded Howmet’s short-term debt rating from F2 to F1 and long-term debt rating from BBB to BBB+, and updated the current outlook from positive to stable, citing deleveraging actions, conservative capital allocation, and strong free cash flow generation.
On August 6, 2024, Moody’s upgraded Howmet’s short-term debt rating from P-3 to P-2, further upgraded Howmet’s long-term debt rating two notches from Baa3 to Baa1 citing demand in the markets served by Howmet along with the Company’s improved financial leverage, and updated the current outlook from positive to stable.
Planned Financing for the Proposed CAM Acquisition
The Company 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. The foregoing financing plans are subject to market and other conditions, and no assurance can be given that the Company will obtain the intended financing for the Proposed CAM Acquisition on commercially reasonable terms, or terms acceptable to us.
Investing Activities
Cash used for investing activities was $438, $316, and $215 in 2025, 2024, and 2023, respectively.
The use of cash in 2025 was capital expenditures of $453 primarily related to Engine Products capacity expansion, various automation projects, and sustaining and return seeking capital projects across all segments, and additions to investments of $9, partially offset by proceeds from the sale of assets and investments of $24.
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The use of cash in 2024 was capital expenditures of $321 primarily related to Engine Products capacity expansion, various automation projects, and sustaining and return seeking capital projects across all segments and an acquisition in Engine Products, net of cash acquired of $5, partially offset by proceeds from the sale of assets in Engine Products and a business in Engineered Structures of $9.
The use of cash in 2023 was capital expenditures of $219 primarily related to various automation projects, information technology upgrades, and sustaining and return seeking capital projects across all segments, partially offset by proceeds from the sale of assets and investments of $4
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
Howmet is required to make future payments under various contracts, including long-term purchase obligations, financing arrangements, and lease agreements. Howmet also has commitments to fund its pension plans, provide payments for other postretirement benefit plans, and fund capital projects.
In order to better understand Howmet’s outstanding contractual obligations, the table below represents a summary of these commitments as of December 31, 2025 (these contractual obligations are grouped in the same manner as they are classified in the Statement of Consolidated Cash Flows in order to provide a better understanding of the nature of the obligations, timing of cash payment, and to provide a basis for comparison to historical information):
Total
Thereafter
Operating activities:
Raw material purchase obligations
Purchase and other payment obligations
Operating leases
Interest related to total debt
Pension contributions
Other postretirement benefit payments
Layoff and other restructuring payments
Uncertain tax positions
Financing activities:
Debt repayments
Dividends to shareholders
Investing activities:
Capital projects
Totals
Obligations for Operating Activities
Raw material purchase obligations consist mostly of aluminum, titanium, cobalt, nickel, and various other metals with expiration dates ranging from less than one year to five years. Many of these purchase obligations contain variable pricing components, and, as a result, actual cash payments may differ from the estimates provided in the preceding table. The Company generally passes through material costs in customer contracts with limited exceptions. 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 separation, including raw material supply agreements.
Purchase and other payment obligations include public utility purchase obligations, and future payments of tax-related interest and penalties.
Operating leases represent multi-year obligations for certain land and buildings, plant equipment, vehicles, and computer equipment.
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Deferred revenue arrangements require Howmet to deliver product to certain customers over a specified contract period, which is expected to be within one and five years. While these obligations are not expected to result in cash payments and are not included in the table above, they represent contractual obligations for which the Company would be obligated if the specified product deliveries could not be made. In certain circumstances, Howmet receives payments from its customers, primarily in the gas turbines and commercial aerospace markets, for product to be delivered in future periods and for funding future growth in volumes. This deferred revenue is recorded on the Consolidated Balance Sheet until the product is delivered and title and risk of loss have passed to the customer in accordance with the terms of the contract. Total deferred revenue was $253 as of December 31, 2025 ($147 in Deferred revenue and $106 in Other noncurrent liabilities).
Interest related to total debt with maturities that extend to 2042, including cross-currency and interest rate swaps, is based on fixed rates as of December 31, 2025.
Estimated minimum required pension funding and other postretirement benefit payments are based on actuarial estimates using current assumptions for discount rates, long-term rate of return on plan assets, and health care cost trend rates, among others. It is Howmet’s policy to fund amounts for pension plans sufficient to meet the minimum requirements set forth in the benefits laws and tax laws of the applicable country. Periodically, Howmet contributes additional amounts as deemed appropriate. Howmet has determined that it is not practicable to present pension funding and other postretirement benefit payments beyond 2030 and 2035, respectively.
Layoff and other restructuring payments relate primarily to severance costs.
Uncertain tax positions taken or expected to be taken on an income tax return may result in additional payments to tax authorities. The amounts in the preceding table include interest and penalties accrued related to such positions as of December 31, 2025. Amounts for uncertain tax positions in which the timing of future potential payments are not reasonably estimable are included in the “Thereafter” column. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary. Tax assessments received may also result in payments to be made in order to preserve our right to appeal any tax positions challenged by tax authorities for which we have concluded that we are more likely than not to prevail. See Note U to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for further discussion on tax payments made.
Contingencies such as ongoing legal proceedings and environmental matters may also result in additional cash payments. The timing of these payments, if necessary, depends on several factors, including the timing of litigation and settlements of liability claims. Accordingly, such amounts have not been included in the preceding table. Amounts for settled legal proceedings and other such payables are included within Purchase and other payment obligations in the preceding table. See Note U to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K for further discussion.
Obligations for Financing Activities
Howmet has historically paid quarterly dividends on its preferred and common stock. The Company paid an aggregate of $181 in common stock and preferred stock dividends to shareholders during 2025. Because all dividends are subject to approval by Howmet’s Board of Directors, amounts are not included in the preceding table unless such authorization has occurred. On December 17, 2025, Howmet redeemed (the “Redemption”) all 546,024 of the outstanding shares of Class A preferred stock at a redemption price of $100 per share plus dividends which had accrued and not been paid or declared. As of December 31, 2025, there were 401,620,565 shares of outstanding common stock and no shares of outstanding Class A preferred stock. In 2025, the preferred stock dividend was $2.81 per share plus accrued but not paid dividend of $0.8125 per share that was paid in connection with the Redemption. A dividend of $0.44 per share on the Company’s common stock was paid in 2025 ($0.10 per share in each of the first and second quarters of 2024 and $0.12 in the third and fourth quarters of 2025). Fully diluted shares outstanding as of December 31, 2025 were 404 million.
The Company has a share repurchase program (the “Share Repurchase Program”) that, after giving effect to the additional $150 share repurchases made in January and February 2026 at an average price per share of $215.28, retiring approximately 0.7 million shares, has approximately $1,347 in Board authorization remaining available as of February 6, 2026. The current Share Repurchase Program was authorized by the Company’s Board of Directors on August 18, 2021 at $1,500, which was increased by the Board by $2,000 on July 30, 2024 to a total authorization of $3,500. There is no stated expiration for the Share Repurchase Program. Accordingly, amounts have not been included in the preceding table. See “Liquidity and Capital Resources” for additional information.
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Obligations for Investing Activities
Capital projects in the preceding table only include amounts approved by management as of December 31, 2025. Funding levels may vary in future years based on the anticipated construction schedules of the projects. It is expected that significant expansion projects will be funded through various sources, including cash provided from operations and grants. Total capital expenditures are anticipated to be approximately 5% of sales in 2026 and include capital expenditures related to capacity expansions for aerospace and gas turbines.
Off-Balance Sheet Arrangements
As of December 31, 2025, Howmet had outstanding bank guarantees related to customs duties, plant expansion, rental, and environmental obligations. The total amount committed under these guarantees, which expire at various dates between 2026 and 2028, was $4 as of December 31, 2025.
Pursuant to the Separation and Distribution Agreement, dated as of October 31, 2016, between Howmet and Alcoa Corporation, Howmet was required to provide certain guarantees for Alcoa Corporation, which were included in Other noncurrent liabilities and deferred credits in the Consolidated Balance Sheet. The remaining guarantee, which had a fair value of $5 and $6 as of December 31, 2025 and 2024, respectively, relates to a long-term energy supply agreement that expires in 2047 at an Alcoa Corporation f acility, for which the Company is secondarily liable in the event of a payment default by Alcoa Corporation. If the Company incurs any liability under this guarantee, Arconic Corporation is obligated to indemnify the Company for 50% of such liability . The Company currently views the risk of an Alcoa Corporation payment default on its obligations under the contract to be remote. The Company is required to provide a guarantee up to an estimated present value amount of approximately $1,141 and $1,121 as of December 31, 2025 and 2024, respectively, in the event of an Alcoa Corporation default. In the fourth quarter of 2025, 2024, and 2023, a surety bond with a limit of $80 relating to this guarantee was obtained by Alcoa Corporation to protect Howmet's obligation. This surety bond is expected to be renewed on an annual basis by Alcoa Corporation.
The Company has outstanding letters of credit, primarily related to workers’ compensation, environmental obligations, tax matters, and insurance obligations. The total amount committed under these letters of credit, which automatically renew or expire at various dates, primarily in 2026, was $76 as of December 31, 2025 .
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 retain letters of credit of $43 (which are included in the $76 in the above paragraph) that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims that 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 proportionally billed to, and are reimbursed by, Arconic Corporation and Alcoa Corporation, respectively. Also, the Company was required to provide letters of credit for certain Arconic Corporation and Alcoa Corporation environmental obligations and, as a result, the Company has $9 of outstanding letters of credit relating to such liabilities (which are also included in the $76 in the above paragraph). Arconic Corporation and Alcoa Corporation are 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.
The Company has outstanding surety bonds primarily related to customs duties, workers’ compensation, environmental-related matters, and contract performance. The total amount committed under these annual surety bonds, which automatically renew or expire at various dates, in 2026 and 2027, was $44 as of December 31, 2025.
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 $19, which are included in the $44 in the above paragraph, that had previously been provided related to the Company, Arconic Corporation, and Alcoa Corporation workers’ compensation claims that 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 proportionately billed to, and are reimbursed by, Arconic Corporation and Alcoa Corporation, respectively.
Critical Accounting Policies and Estimates
The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain judgments, estimates, and assumptions regarding uncertainties that affect the amounts reported in the Consolidated Financial Statements and disclosed in the accompanying Notes. These estimates are based on historical experience and, in some cases, assumptions based on current and future market experience, including considerations relating to changes in the aerospace industry. Areas that require significant judgments, estimates, and assumptions include the testing of goodwill, properties, plants, and equipment, and other intangible assets for impairment; pension plans and other postretirement benefits obligations; income taxes; and litigation and contingent liabilities.
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Management uses historical experience and all available information to make these judgments, estimates, and assumptions, and actual results may differ from those used to prepare the Company’s Consolidated Financial Statements at any given time. Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes provide a meaningful and fair perspective of the Company.
A summary of the Company’s significant accounting policies is included in Note A to the Consolidated Financial Statements of this Form 10-K. Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the Consolidated Financial Statements with useful and reliable information about the Company’s operating results and financial condition.
Goodwill. Howmet reviews goodwill 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. The Company has the option to assess impairment through qualitative assessment, which includes factors such as 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 flow, or a trend of negative or declining cash flows over multiple periods, among others. Howmet can also assess goodwill impairment through a quantitative analysis, using a discounted cash flow (“DCF”) model to estimate a reporting unit’s fair value. Assumptions and estimates utilized in the DCF model include weighted average cost of capital (“WACC”) rates, revenue, future profitability, working capital, cash flows, and a number of other items. For more information on these matters, see Note A to the Consolidated Financial Statements of this Form 10-K.
Properties, Plants, and Equipment and Other Intangible Assets. Properties, plants, and equipment and Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (asset group) may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted net cash flows of the operations related to the assets (asset group) to their carrying amount. An impairmentloss would be recognized when the carrying amount of the assets (asset group) exceeds the estimated undiscounted net cash flows. The amount of the impairmentloss to be recorded is measured as the excess of the carrying value of the assets (asset group) over their fair value, with fair value determined using the best information available, which generally is a DCF model. The determination of what constitutes an asset group, the associated estimated undiscounted net cash flows, and the estimated useful lives of the assets also require significant judgments.
Pension and Other Postretirement Benefits. Liabilities and expenses for pension benefits are determined using actuarial methodologies and incorporate significant assumptions, including the discount rate, the expected long-term rate of return on plan assets (“EROA”), and several assumptions relating to the employee workforce (rates of retirement, termination, and mortality by age). Liabilities and expenses for other postretirement benefits are determined using similar actuarial methodologies and assumptions, including discount rate and several assumptions relating to the employee workforce (rates of retirement, mortality by age, and health care cost trend rates). The pension and other postretirement benefits obligation was $1,413 and $1,556, with a funded status of $(588) and $(670) as of December 31, 2025 and 2024, respectively. The total benefit obligation reduction of $143 was primarily driven by the settlement of U.K. pension plan obligations and benefit payments, partially offset by interest costs. The improvement in the funded status of $82 was primarily driven by actual asset return exceeding the expected rate of return assumption and plan contributions. Excluding settlements and curtailments, net periodic benefit cost of pension and other postretirement benefits is expected to be approximately $35 in 2026 compared to $29 and $33 in 2025 and 2024, respectively.
Employer contributions for pension benefits were $70 and $79 for the years ended December 31, 2025 and 2024, respectively. Benefits paid for other postretirement benefits were $10 and $11 for the years ended December 31, 2025 and 2024, respectively. Total pension contributions and other postretirement benefits paid decreased by $10, or 11%, in 2025 compared to 2024 primarily driven by fewer discretionary contributions. Cash pension contributions in 2026 are expected to be approximately $60. Howmet’s estimated funded status under the Employee Retirement Income Security Act was approximately 63% as of January 1, 2025.
The U.S. discount rate is determined using a Company-specific yield curve model (above-median) developed with the assistance of an external actuary, while both the U.K. and Canada utilize models developed by the respective actuary. The cash flows of the plans’ projected benefit obligations are discounted using a single equivalent rate derived from yields on high quality corporate bonds, which represent a broad diversification of issuers in various sectors, including finance and banking, industrials, transportation, and utilities, among others. The yield curve models parallel the plans’ projected cash flows, which have a global average duration of 9 years. The underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company’s plans’ obligations multiple times. In 2025, 2024, and 2023, the discount rate used to determine benefit obligations for pension and other postretirement benefit plans was 5.30%, 5.60%, and 5.10%, respectively. The impact on the liabilities of a change in the discount rate of 1/4 of 1% would be approximately $32 and either a charge or credit of less than $1 to earnings in the following year.
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The expected long-term rate of return on plan assets is generally applied to a five-year market-related value of plan assets. The process used by management to develop this assumption is one that relies on a combination of historical asset return information and forward-looking returns by asset class. As it relates to historical asset return information, management focuses on various historical moving averages when developing this assumption. While consideration is given to recent performance and historical returns, the assumption represents a long-term, prospective return. Management also incorporates expected future returns on current and planned asset allocations using information from various external investment managers and consultants, as well as management’s own judgment.
Management used 7.00% for 2025 and 6.70% for both 2024 and 2023 as its weighted-average global expected long-term rate of return on plan assets, which was based on the prevailing and planned strategic asset allocations, as well as estimates of future returns by asset class for each plan. T hese rates were within the respective range of the 20-year moving average of actual performance and the expected future return developed by asset class for each plan. For 2026, management anticipates that the expected long-term rate of return for global plan assets will remain at approximately 7%. A change in the assumption for the expected long-term rate of return on plan assets of 1/4 of 1% would impact earnings by approximately $2 for 2026 .
Mortality rate assumptions are based on mortality tables and future improvement scales published by third parties, such as the Society of Actuaries, and consider other available information including historical data as well as studies and publications from reputable sources.
In 2025 , net income of $80 (after-tax) was recorded in other comprehensive loss, primarily due to the recognition of actuarial losses driven by the settlement of the U.K. pension plan’s obligations and plan asset returns that were higher than expected, partially offset by the decrease in the discount rate. In 2024 , net income of $17 (after-tax) was recorded in other comprehensive loss, primarily due to the increase in the discount rate, partially offset by plan asset returns that were less than expected. In 2023 , net loss of $36 (after-tax) was recorded in other comprehensive loss, primarily due to the decrease in the discount rate. For more information on these matters, see Note G to the Consolidated Financial Statements of this Form 10-K.
Income Taxes. The provision (benefit) for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, the provision (benefit) for income taxes represents income taxes paid or payable (or received or receivable) based on current year pre-tax income plus the change in deferred taxes during the year. Deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid, and result from differences between the financial and tax bases of Howmet’s assets and liabilities and are adjusted for changes in tax rates and tax laws when enacted.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carry-back periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies, as well as all available positive and negative evidence. Positive evidence includes factors such as a history of profitable operations, projections of future profitability within the carryforward period, including from tax planning strategies, and Howmet’s experience with similar operations. Existing favorable contracts and the ability to sell products into established markets are additional positive evidence. Negative evidence includes items such as cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a deferred tax asset based on existing projections of income. Deferred tax assets for which no valuation allowance is recorded may not be realized upon changes in facts and circumstances, resulting in a future charge to establish a valuation allowance. Existing valuation allowances are re-examined under the same standards of positive and negative evidence. If it is determined that it is more likely than not that a deferred tax asset will be realized, the appropriate amount of the valuation allowance, if any, is released. Deferred tax assets and liabilities are also remeasured to reflect changes in underlying tax rates due to law changes and the granting and lapse of tax holidays.
It is Howmet’s policy to apply a tax law ordering approach when considering the need for a valuation allowance on net operating losses expected to offset GILTI inclusions. Under this approach, reductions in cash tax savings are not considered as part of the valuation allowance assessment. Instead, future GILTI inclusions are considered a source of taxable income that support the realizability of deferred tax assets.
It is Howmet’s policy to treat taxes due from future inclusions in U.S. taxable income related to GILTI as a current period expense when incurred.
Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitations has expired or the appropriate taxing authority has completed its examination even though the statute of limitations remains open. Interest and penalties related to uncertain tax positions are recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized.
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Litigation and Contingent Liabilities. From time to time, we are involved in various lawsuits, claims, investigations, and proceedings. These matters may include speculative claims for substantial or indeterminate amounts of damages. Management determines the likelihood of an unfavorable outcome based on many factors, such as the nature of the matter, available defenses and case strategy, progress of the matter, views and opinions of legal counsel and other advisors, applicability and success of appeals processes, and the outcome of similar historical matters, among others. If an unfavorable outcome is deemed probable and the amount of the potential loss can be estimated, the most reasonable loss estimate is recorded. If an unfavorable outcome of a matter is deemed probable but the loss is not reasonably estimable, or if an unfavorable outcome is deemed reasonably possible, then the matter is disclosed but no liability is recorded. Legal matters are reviewed on a continuous basis to determine if there has been a change in management’s judgment regarding the likelihood of an unfavorable outcome or the estimate of a potential loss. For more information on these matters, see Note U to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K.
Recently Adopted and Recently Issued Accounting Guidance.
See the Recently Adopted and Recently Issued Accounting Guidance section of Note B to the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K.
