<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number 1-6348
Howmet Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-2838093
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 Steamboat Road, Greenwich, CT 06836-1960
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code . . . . (203)-661-4600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No //
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at November 12, 1996
----- --------------------------------
<S> <C> <C>
Common stock, $1.00 par value 10
</TABLE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Howmet Corporation
Consolidated Condensed Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 20,712 $ 9,606
Accounts receivable, less allowance of $6,687 and $8,258 74,872 88,533
Inventories 134,655 150,288
Retained receivables 51,516 42,690
Other current assets 2,499 3,481
----------- -----------
Total current assets 284,254 294,598
Property, plant and equipment, net 287,860 301,563
Deferred income taxes 3,247 --
Goodwill, net 301,590 311,092
Acquisition intangibles and other assets, net 161,693 192,250
=========== ===========
$ 1,038,644 $ 1,099,503
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 63,322 $ 58,987
Accrued liabilities 152,989 154,957
Income taxes payable 15,298 6,064
Long-term debt due within one year 45,046 45,303
Deferred income taxes 36,705 28,382
----------- -----------
Total current liabilities 313,360 293,693
Accumulated postretirement benefit obligation 95,651 82,259
Other liabilities 37,388 22,419
Deferred income taxes -- 6,663
Long-term debt 301,980 418,186
----------- -----------
Total liabilities 748,379 823,220
Stockholders' equity:
Common stock, $1 par value; authorized - 1,000 shares;
issued and outstanding - 10 shares
Capital surplus 275,000 275,000
Retained earnings 17,168 160
Cumulative translation adjustment (1,903) 1,123
----------- -----------
Total stockholders' equity 290,265 276,283
----------- -----------
$ 1,038,644 $ 1,099,503
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
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Howmet Corporation
Consolidated Condensed Income Statements (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Successor Predecessor Successor Predecessor
Company Company Company Company
Consolidated Combined Consolidated Combined
------------ -------- ------------ --------
Thirteen Thirteen Thirty-nine Thirty-nine
weeks ended weeks ended weeks ended weeks ended
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 278,537 $ 233,535 $ 823,351 $ 706,729
Operating costs and expenses:
Cost of sales 201,908 173,584 600,658 531,188
Selling, general and administrative expense 27,449 26,759 84,450 79,809
Depreciation and amortization expense 14,723 8,784 45,003 25,530
Research and development expense 6,241 6,174 18,407 19,082
Reverse previous restructuring provision -- -- -- (1,000)
--------- --------- --------- ---------
250,321 215,301 748,518 654,609
--------- --------- --------- ---------
Earnings from operations 28,216 18,234 74,833 52,120
Interest income, affiliates -- 1,597 -- 8,183
Interest income, third party 242 183 1,203 210
Interest expense, affiliates -- (655) -- (1,328)
Interest expense, third party (8,759) (775) (31,024) (3,015)
Equity in loss of unconsolidated affiliates (353) (513) (2,431) (2,740)
Loss on sale of receivables (885) -- (3,297) --
Other, net 102 1,801 (221) 622
--------- --------- --------- ---------
Income before income taxes 18,563 19,872 39,063 54,052
Income taxes 8,995 9,543 22,055 25,176
========= ========= ========= =========
Net income $ 9,568 $ 10,329 $ 17,008 $ 28,876
========= ========= ========= =========
</TABLE>
See notes to consolidated condensed financial statements.
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Howmet Corporation
Consolidated Condensed Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
Consolidated Combined
------- -------
Thirty-nine Thirty-nine
weeks ended weeks ended
Sept. 29, 1996 Oct. 1, 1995
-------------- ------------
<S> <C> <C>
Operating activities
Net income $ 17,008 $ 28,876
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 47,466 25,530
Equity in loss of unconsolidated affiliates 2,431 2,740
Changes in assets and liabilities:
Accounts receivable 3,793 (29,162)
Inventory 14,627 (6,652)
Deferred taxes (627) 4,221
Accounts payable 4,831 (17,191)
Accrued liabilities 19,992 9,248
Income taxes payable 9,212 (8,370)
Collection of long-term customer receivables 21,138 --
Other - net 2,479 176
--------- ---------
Net cash provided by operating activities 142,350 9,416
Investing activities
Property, plant and equipment:
Purchases (17,988) (21,812)
Disposals 231 3,119
Acquisition of Turbine Components Corporation -- (9,050)
Settlement of December 13, 1995 acquisition price 3,634 --
--------- ---------
Net cash used in investing activities (14,123) (27,743)
Financing activities
Issuance of debt 100,400 7,645
Repayment of debt (217,354) (9,449)
Reduce advance to Parent -- 21,070
--------- ---------
Net cash used in financing activities (116,954) 19,266
Effect of exchange rate changes on cash (167) 164
--------- ---------
Increase in cash 11,106 1,103
Cash and cash equivalents at beginning of period 9,606 1,771
--------- ---------
Cash and cash equivalents at end of period $ 20,712 $ 2,874
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
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HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. The consolidated condensed balance sheet at December 31,
1995 has been derived from audited financial statements at that date. In the
opinion of management all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation have been included. Operating results for the
thirty-nine weeks ended September 29, 1996 are not necessarily indicative of the
results to be expected for the year ending December 31, 1996. The financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Registration Statement on
Form S-4 (registration no. 333-00200).
Successor Company
Blade Acquisition Corp. ("Blade") was formed in October 1995 to acquire Pechiney
Corporation from Pechiney International, S.A. and the Cercast group of companies
from Howmet Cercast S.A., a subsidiary of Pechiney International, S.A. The
Carlyle Group and certain of its affiliates ("The Carlyle Group") and Thiokol
Holding Company, a wholly-owned subsidiary of Thiokol Corporation ("Thiokol"),
own 51% and 49%, respectively, of Blade's common stock. The acquisition was
effected through a series of transactions, including the purchase of Pechiney
Corporation by Howmet Holdings Acquisition Corp. ("HHAC"), a wholly-owned
subsidiary of Blade; the purchase of the capital stock of certain Cercast
companies by Howmet Acquisition Corp. ("HAC"), a wholly-owned subsidiary of
HHAC; and the mergers of HHAC with and into Pechiney Corporation and of HAC with
and into Howmet Corporation ("Successor Company" or "Howmet"). After the
mergers, Pechiney Corporation's name was changed to Howmet Holdings Corporation
("Holdings"). Howmet is a wholly-owned subsidiary of Holdings, which is a
wholly-owned subsidiary of Blade. The acquisition was completed on December 13,
1995 for a total purchase price, including transaction fees and expenses, of
approximately $771.6 million (after agreed upon post-closing adjustments).
Financing for the acquisition included (i) borrowing of $300 million under a
senior term loan facility, (ii) the sale of $125 million aggregate principal
amount of senior subordinated notes, (iii) $51.4 million of proceeds from a
special purpose receivables facility, (iv) $10.2 million in borrowings under a
$125 million revolving credit facility, (v) $10 million of borrowings through a
Canadian facility, and (vi) a $250 million cash equity investment from the
proceeds of the issuance of $200 million of Blade common stock and $50 million
of Blade pay-in-kind preferred stock. The acquisition financing also included a
$25 million pay-in-kind junior subordinated purchaser note issued to Pechiney
International, S.A. by HHAC, which amount was contributed to the Company's
capital. The Stock Purchase Agreement ("SPA") provides Blade with indemnities
for certain pre-closing tax, environmental and product liabilities.
5
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HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
The Successor Company Consolidated Condensed Financial Statements reflect the
applicable aforementioned acquisition financing debt and $275 million equity
contribution. The acquisition was accounted for in accordance with the purchase
method of accounting, and accordingly, such financial statements reflect the
allocation of the purchase price and related acquisition costs to the assets
acquired and liabilities assumed based on their fair values. Finalization of the
carrying values of certain assets and liabilities is subject to completion of
data collection, including costs to exit certain aspects of the business, and
the estimation process.
Predecessor Company
The combined financial statements have been prepared to present the combined
operations of Howmet Corporation and Howmet Cercast Group ("Cercast")
(collectively, the "Predecessor Company"), affiliated entities with common
ownership and management, on a historical cost basis prior to their acquisition
by Blade. All transactions between Howmet Corporation and Cercast have been
eliminated. The Predecessor Company had significant transactions with Pechiney
Corporation and Pechiney S.A., a French corporation and majority owner of
Pechiney International, S.A.
B. INVENTORIES
Inventories at September 29, 1996 are as follows:
<TABLE>
<S> <C>
Raw materials and supplies ....... $ 55,031
Work in process and finished goods 81,796
---------
FIFO inventory ................... 136,827
LIFO valuation adjustment ........ (2,172)
---------
$ 134,655
=========
</TABLE>
Inventories include $40.2 million that are valued using average cost.
In the 39 weeks ended September 29, 1996 the Successor Company increased the
LIFO valuation adjustment and thereby increased cost of sales by $2.2 million.
In the comparable 1995 period, the Predecessor Company increased its LIFO
valuation adjustment and thereby increased cost of sales by $6.4 million.
6
<PAGE> 7
HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
C. ACQUISITION
Effective April 30, 1995 the Company acquired Turbine Components Corporation
("TCC"), a refurbishment operation, in exchange for a payment of $9.1 million
and the assumption of certain liabilities. 1996 results include TCC sales of
$6.2 million and operating losses of $0.9 million in the first seventeen weeks
of 1996, with no comparable 1995 amounts for the seventeen weeks prior to the
April 30, 1995 acquisition date.
D. DEBT
In the first thirty-nine weeks of 1996, the Company repaid $117 million of debt,
including the entire $26 million of borrowings that were outstanding under its
revolving credit facility at December 31, 1995 and $91 million of its senior
term facility borrowings. The Company paid interest of $26.1 million and $3.7
million during the first thirty-nine weeks of 1996 and 1995, respectively.
E. INCOME TAXES
The 1996 effective rate is significantly higher than statutory rates due to the
effects of certain losses and expenses for which there were no associated tax
benefits, including goodwill amortization and equity in losses of unconsolidated
affiliates. Due primarily to higher estimates of annual income, the estimated
effective tax rate was reduced from 63.7% at June 29, 1996 to 56.5% at September
29, 1996. This change in estimate resulted in $1.5 million lower tax expense in
the thirteen week period ended September 29, 1996, due to the effect of the
lower effective rate when applied to pre-tax income for the first twenty-six
weeks of 1996. In the first thirty-nine weeks of 1996 and 1995, the Company made
income tax payments (net of refunds) of $14.5 million and $27.7 million,
respectively.
F. CONTINGENCIES
The Company and its subsidiaries are involved in litigation, administrative
proceedings and investigations of various types in several jurisdictions.
Additionally, liabilities arising for cleanup costs associated with hazardous
types of materials in several waste disposal facilities exist. In particular,
the Company has been or may be named a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act or similar
state laws at fourteen on-site and off-site locations. Estimated environmental
costs are not expected to materially impact the financial position or the
results of the Successor Company's operations in future periods. However,
environmental
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<PAGE> 8
HOWMET CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
clean-up periods are protracted in length and environmental costs in future
periods are subject to changes in environmental remediation regulations.
Accordingly, should any losses not indemnified be sustained in excess of
provided reserves, they will be charged to income in the future. Under the terms
of the SPA, Pechiney, S.A. and Pechiney International, S.A. agreed to indemnify
the Successor Company for environmental liabilities existing as of December 13,
1995 that exceed recorded reserves of $6.0 million.
At September 29, 1996, the Successor Company guaranteed certain indebtedness of
its 50% owned entities aggregating $11.7 million. As part of the December 13,
1995 acquisition, Pechiney S.A. has indemnified the Successor Company, through
its parent, Howmet Holdings Company, for a limited amount of these guarantees.
The indemnification is limited to $5.9 million and applies only to payments in
excess of $6.0 million.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis Of Financial Condition And
Results Of Operations.
Results of Operations
Thirteen Weeks Ended September 29, 1996, Compared to Thirteen Weeks Ended
October 1, 1995
Net sales increased by $45 million (19%) to $278.5 million for the thirteen week
period ended September 29, 1996 ("the 1996 thirteen week period") from $233.5
million for the thirteen week period ended October 1, 1995 ("the 1995 thirteen
week period"). The increase was primarily due to volume increases resulting from
increased demand for aerospace and industrial gas turbine airfoils, aluminum
castings and component repairs.
Gross profit increased by $16.6 million (28%) to $76.6 million for the 1996
thirteen week period from $60 million for the 1995 thirteen week period. The
principal reason for the improvement was the effect of volume increases,
partially offset by a $0.7 million higher adverse LIFO valuation adjustment in
the 1996 thirteen week period.
Selling, general and administrative expense increased by $0.7 million (3%) to
$27.5 million for the 1996 thirteen week period. The increase was due primarily
to performance-based incentive costs.
Depreciation and amortization expense increased by $5.9 million (67%) to $14.7
million for the 1996 thirteen week period from $8.8 million for the 1995
thirteen week period. The increase relates to the December 13, 1995 acquisition
asset additions and revaluations, including goodwill, patents, non-compete
agreement, and step-up of property, plant and equipment.
Other, net in the 1996 thirteen week period is $.1 million of income compared to
income of $1.8 million for the 1995 thirteen week period. The principal reason
for the change is the 1995 reversal of a bad debt provision.
Net interest expense (expense less interest income) amounted to $8.5 million for
the 1996 thirteen week period, and net interest income (income less interest
expense) amounted to $0.4 million for the 1995 thirteen week period. The expense
in 1996 resulted principally from acquisition financing-related debt (Note A of
Notes to Consolidated Condensed Financial Statements). In 1995 the Company
recorded interest income on loans to its former owner, which are no longer
outstanding.
The effective tax rate for the 1996 thirteen week period was 48.5%, compared to
an effective tax rate of 48% for the 1995 thirteen week period. The 1996
thirteen week period includes a $1.5 million benefit resulting from lowering the
1996 estimated annual tax rate (Note E of Notes to Consolidated Condensed
Financial Statements). Were it not for this $1.5 million benefit, the 1996 rate
would have been significantly higher than the 1995 rate because the 1996
thirteen week period reflects certain losses and expenses for which there were
no associated tax benefits, including goodwill amortization and equity in losses
of unconsolidated affiliates.
9
<PAGE> 10
As a result of the foregoing, net income was $9.6 million for the 1996 thirteen
week period compared to $10.3 million for the 1995 thirteen week period.
Thirty-nine Weeks Ended September 29, 1996, Compared to Thirty-nine Weeks Ended
October 1, 1995
Net sales increased by $116.7 million (17%) to $823.4 million for the
thirty-nine weeks ended September 29, 1996 ("the 1996 thirty-nine week period")
from $706.7 million for the thirty-nine weeks ended October 1, 1995 ("the 1995
thirty-nine week period"). The increase was primarily due to volume increases
resulting from increased demand for aerospace and industrial gas turbine
airfoils, aluminum castings and component repairs.
Gross profit increased by $47.2 million (27%) to $222.7 million for the 1996
thirty-nine week period from $175.5 million for the 1995 thirty-nine week
period. The principal reasons for such improvement were the effect of volume
increases and $4.2 million less adverse effect of LIFO valuation adjustments in
the 1996 thirty-nine week period.
Selling, general and administrative expenses increased by $4.6 million (6%) to
$84.5 million for the 1996 thirty-nine week period. The increase was due
primarily to performance-based incentive costs and other employee-related costs.
Depreciation and amortization expense increased by $19.5 million (76%) to $45
million for the 1996 thirty-nine week period from $25.5 million for the 1995
thirty-nine week period. $18.2 million of the increase relates to the December
13, 1995 acquisition asset additions and revaluations including goodwill,
patents, non-compete agreement, and step-up of property, plant and equipment.
The April 30, 1995 acquisition of TCC also contributed to the increase.
Research and development expense decreased $0.7 million (4%) to $18.4 million
for the 1996 thirty-nine week period from $19.1 million for the 1995 thirty-nine
week period. Although still very active, a slight decline in the level of new
part development work was the principal reason for the decreases in expense.
Net interest expense (expense less interest income) amounted to $29.8 million
for the 1996 thirty-nine week period, and net interest income (income less
interest expense) amounted to $4.1 million for the 1995 thirty-nine week period.
The expense in 1996 resulted principally from the December 13, 1995 acquisition
financing-related debt. In 1995, the Company recorded interest income on loans
to its former owner, which are no longer outstanding.
The effective tax rate for the 1996 thirty-nine week period was 56.5%, compared
to an effective tax rate of 46.6% for the 1995 thirty-nine week period. The
higher rate in the current period reflects certain losses and expenses for which
there were no associated tax benefits including goodwill amortization and equity
in losses of unconsolidated affiliates.
As a result of the foregoing, net income was $17.0 million for the 1996
thirty-nine week period compared to $28.9 million for the 1995 thirty-nine week
period.
10
<PAGE> 11
Liquidity and Capital Resources
Since the consummation of the December 13, 1995 acquisition, the Company's
principal sources of liquidity are cash flow from operations and borrowings
under its revolving credit facility. The Company's principal requirements for
cash are to provide working capital, service debt and finance capital
expenditures. Cash available after satisfaction of these requirements is
currently being used to voluntarily repay debt prior to mandatory due dates.
In the 1996 thirty-nine week period the Company generated $142.4 million in cash
from operating activities. This amount includes $7.0 million of second quarter
and $21.1 million of third quarter cash collections that resulted from cost
recoveries under, and modifications of, certain customer agreements.
In the thirty-nine week period, the Company repaid all $26 million of
outstanding borrowings under the revolving credit facility. This facility
provides $75 million of revolving credit borrowing and letter of credit
capacity. At the Company's option, in 1996 such capacity was reduced from $125
million. At November 12, 1996 there were no borrowings and $9.6 million of
standby letters of credit were outstanding.
In addition to revolving credit facility borrowing repayments, the Company
repaid $91 million of senior term facility borrowings by September 29, 1996 and
an additional $11 million in October 1996.
Capital expenditures for the first thirty-nine months of 1996 were $18 million.
The Company anticipates full year 1996 capital expenditures to be approximately
$35 million. The accelerated spending in the fourth quarter of the year is
principally due to capacity expansion resulting from increased demand.
As part of the December 13, 1995 acquisition purchase price allocation, a $21.0
million restructuring reserve was established for Howmet S.A. Although the
evaluation and estimation process is not yet complete, the extent of the
restructuring is expected to be less than initially anticipated. Consequently,
at this stage the estimate of cost is $8 million. The cash impact of this
restructuring is expected to occur predominately in 1997 and is expected to be
paid out of operating cash flow and/or revolving credit facility borrowings.
Earlier in the year, the Company initiated a process that could have resulted in
the sale of its refurbishment business. In the third quarter this initiative was
discontinued. However, it is the Company's intention to re-evaluate such sale
when conditions are more favorable. Apart from the benefits of sale proceeds, if
the business is sold, the impact of the sale will not have a material effect on
liquidity. Net sales of the refurbishment business that may be sold were $63.0
million for the full year 1995 and $57.7 million for the 1996 thirty-nine week
period. Earnings from operations of this business were immaterial in both
periods.
Based upon the current level of operations, management believes that cash flow
from operations, together with available borrowings under the revolving credit
facility, will be adequate to meet the Company's anticipated requirements for
working capital, capital expenditures, interest
11
<PAGE> 12
payments and scheduled principal payments under the senior credit facilities
prior to final maturity.
The Company guarantees certain indebtedness of its two joint ventures. As of
September 29, 1996 these joint ventures had outstanding indebtedness of
approximately $23.3 million, of which the Company has guaranteed approximately
$11.7 million. It is anticipated that such joint ventures may continue to incur
indebtedness to fund their operations and that the Company will guarantee its
share of such indebtedness. As part of the December 13, 1995 acquisition,
Pechiney S.A. has indemnified the Company, through its parent, Howmet Holdings
Company, for a limited amount of these guarantees. The indemnification is
limited to $5.9 million and applies only to payments in excess of $6.0 million.
Environmental Matters
The Company's capital expenditures for environmental compliance have not been
material in the periods presented. The Company is currently remediating known
environmental contamination (including soil and groundwater contamination) at
six present or formerly owned domestic facilities. Also, as a result of off-site
waste disposal prior to the December 13, 1995 acquisition, the Company may be
subject to liability for, and is currently involved in, certain matters relating
to the investigation and/or remediation of environmental contamination at
certain properties not owned or operated by the Company. In total, the Company
has been or may be named a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act and similar state
statutes, at fourteen on-site and off-site locations.
In addition, the Company is remediating similar environmental contamination at
five European facilities. The Company has conducted an assessment and estimates
actual expenditures at these properties to be not more than $1.3 million.
The amount and timing of payments the Company may be required to make with
respect to environmental matters are uncertain at this time. However, based on
management's best current estimates of potential liability, management believes
that the Company's reserves (approximately $9.0 million at September 29, 1996)
are adequate under current laws and regulations. In addition, as part of the
December 13, 1995 acquisition, Howmet Cercast S.A., Pechiney International, S.A.
and Pechiney S.A. indemnified Blade Acquisition Corp., and Blade Acquisition
Corp. assigned such indemnification rights to the Company, for any environmental
liabilities originating prior to December 13, 1995 (the acquisition closing
date), which exceed the Company's reserves of $6.0 million as of June 30, 1995.
The Company has recorded a $3.0 million long-term receivable related to this
indemnification
***********
The statements made herein that are not historical facts may be forward looking
statements. In connection with the "Safe Harbor" provision of the Private
Securities Litigation Reform Act of 1995, the Company hereby cautions readers
that the forward looking statements are subject to certain risks and
uncertainties, including without limitation those identified in Item 5 of ths
report on Form 10-Q, which could cause actual results to differ materiallly
from historical results or those anticipated, and urges readers to review Item
5 carefully. Factors discussed in Item 5 include, among others, substantial
leverage and debt service, the effects of aerospace industry economic
conditions and cyclicality, reduced government sales, concentrated customer
base, competition, concentration of ownership, and enviornmental matters.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 5. Other Events
CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE
HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
The Company wishes to inform its investors of the following important
factors that in some cases have affected, and in the future could affect, the
Company's results of operations and that could cause such future results of
operations to differ materially from those expressed in any forward looking
statements made by or on behalf of the Company. Disclosure of these factors is
intended to permit the Company to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. Many of these factors
have been discussed in prior SEC filings by the Company.
Although the Company has attempted to list comprehensively these
important cautionary factors, the Company wishes to caution investors that other
factors may in the future prove to be important in affecting the Company's
results of operations. The Company undertakes no obligation to publicly update
or revise any forward looking statements, whether as a result of new
information, future events or otherwise.
Limitations and Risks due to Substantial Leverage and Debt Service
The Company incurred significant indebtedness in connection with the
acquisition by Blade Acquisition Corp. ("Blade") of the Company's parent company
and the Cercast group of companies from affiliates of Pechiney S.A. on December
13, 1995 (the "Acquisition"). At September 29, 1996 the Company's consolidated
total indebtedness and total stockholders' equity was $368.3 million and $290.3
million respectively. The Company's indebtedness (the "Senior Indebtedness")
under senior credit facilities provided by the Credit Agreement dated December
13, 1995 among Blade, Howmet Holdings Acquisition Corp. ("HHAC"), Howmet
Acquisition Corp., The First National Bank of Chicago as Administrative Agent
and one of the Managing Agents, and other banks (the "Senior Credit Facilities")
is secured by guarantees of the Company's domestic subsidiaries and by Blade and
Howmet Holdings Corporation ("Holdings"), and the stock of Holdings and the
Company is pledged to secure the Blade and Holdings guarantees, respectively.
The Company's earnings for the first thirty-nine weeks of 1996 were more than
adequate to cover fixed charges. However, on a pro forma basis, for the
Acquisition, the Company's earnings for the year ended December 31, 1995 would
have been inadequate to cover fixed charges by $25.0 million. In addition, upon
consummation of the Acquisition, the Company entered into the receivables
financing program (the "Receivables Facility") now covered by the Amended and
Restated Receivables Purchase Agreement dated as of April 18,
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<PAGE> 14
1996 between the Company, certain of its subsidiaries and Blade Receivables
Corporation (the "Receivables Subsidiary") and the related Blade Receivables
Master Trust Amended and Restated Pooling and Services Agreement dated as of
April 18, 1996 among the Receivables Subsidiary, the Company, and Manufacturers
and Traders Trust Company, as Trustee, pursuant to which the Company sold
certain accounts receivable to a special purpose trust for aggregate cash
proceeds of $51.4 million. The Company intends to continue such sales of
eligible accounts receivable in the future. The Indenture dated as of December
7, 1995 between Howmet Acquisition Corp. and Marine Midland Bank, as Trustee
(the "Indenture") does not contain significant restrictions on the Company's
ability to sell its accounts receivable pursuant to any such facility or with
respect to the use of proceeds thereof. The Company's ability to make any
scheduled payments of the principal of, or interest on, its indebtedness
(including the 10% Senior Subordinated Notes due 2003 (the "Notes")), or to
refinance its indebtedness, depends on its future performance, which to a
certain extent is subject to economic, financial, competitive and other factors
beyond its control, and there can be no assurance that the foregoing payments
will be made. If the Company is unable to generate sufficient cash flow from
operations in the future to service its debt and make necessary capital
expenditures, the Company may be required to refinance all or a portion of its
existing debt, including the Notes, to sell assets or to obtain additional
financing. There can be no assurance that any such refinancing or refinancing of
the Senior Credit Facilities at maturity would be possible, on reasonable terms
if at all, or that any such sales of assets or additional financing could be
achieved.
The Company's high level of debt will have several important effects on
its future operations, including the following: (a) the Company will have
significant cash requirements to service debt, reducing funds available for
operations, for capital expenditures and research and development (which are
important factors in the Company's technological leadership role), and for
acquisitions and future business opportunities, thus possibly increasing the
Company's vulnerability to adverse general economic and industry conditions,
which could be exacerbated by the cyclical nature of certain of the Company's
businesses (see "Effects of Aerospace Industry Economic Conditions and
Cyclicality," below) and greater capital resources of its principal competitor
after giving effect to the Acquisition, and (b) the financial covenants and
other restrictions contained in the Senior Credit Facilities and other
agreements relating to the Senior Indebtedness and the Indenture will require
the Company to meet certain financial tests and will restrict its ability to
borrow additional funds, to dispose of assets or to pay cash dividends.
Effects of Aerospace Industry Economic Conditions and Cyclicality
The commercial aerospace industry is a cyclical business, and the
demand by commercial airlines for new aircraft historically has been highly
related to the stability and health of the United States and world economies.
Aircraft delivery trends vary in direct relation to the general economic cycle,
with an approximate two year lag. Aircraft are delivered when completed,
regardless of economic conditions at that time, because substantial deposits are
required at the time of the orders. Although the United States economy entered a
period of slow growth and recession in 1989 and 1990, the aerospace industry
made record deliveries of large commercial aircraft during these years. In fact,
aircraft deliveries continued to increase through 1991 even though the world
airline industry reported record operating losses in the early 1990s.
14
<PAGE> 15
The large number of aircraft delivered in the early 1990s and the
industry's widespread losses created excess capacity in the air carrier system,
evidenced by a substantial number of inactive new and used aircraft. Operating
losses and excess capacity, combined with the high cost of new aircraft, placed
economic stress on the airlines and aircraft leasing companies. During this
period, airlines and leasing companies deferred existing new aircraft orders
and, to a lesser degree, canceled orders. These deferrals and cancellations had
a negative impact on the volume and price of orders placed with the
manufacturers of commercial aircraft components, including the Company. Although
the United States airline industry as a whole has reported a return to
profitability in 1995 and 1996 and excess capacity has been reduced, there can
be no assurance that the improved operating performance of the commercial
airlines will continue or that deliveries of engines for large commercial
aircraft will not decline in the future. Any developments in the commercial
aerospace market resulting in a reduction in the rate of aircraft engine
deliveries in the future, including future cancellations and deferrals of
scheduled deliveries, could materially adversely affect the Company's financial
condition and results of operations.
Reduced Government Sales
Military and defense contractor sales comprised approximately 16% of
the Company's 1995 sales. United States defense spending in markets served by
the Company has been declining since the 1980s, and continued reductions in
defense budgets or military aircraft procurement could adversely affect the
Company's financial condition and results of operations.
Concentrated Customer Base; Competition
A substantial portion of the Company's business is conducted with a
relatively small number of large aerospace and industrial gas turbine customers,
including General Electric Aircraft Engines ("GEAE"), General Electric Power
Systems ("GEPS") and Pratt & Whitney Aircraft Division of United Technologies
Corporation ("PWA"). The current three year contract with PWA is scheduled to
expire in 1997 consistent with industry practice regarding contract lifecycles.
The Company's top ten customers accounted in the aggregate for approximately 65%
of 1995 net sales. Approximately half of Howmet's business is based on
multi-year contracts with its customers, usually for a three-year period, that
generally give the Company the right and obligation to fill a specified
percentage of the customer's requirements but generally do not provide the
Company with any minimum order commitments. The Company typically renegotiates
these contracts during the last year of the contract period and, during the
process, customers frequently solicit bids from the Company's competitors,
principally from its strongest competitor, Precision Castparts Corporation
("PCC"). Most of such contracts include provisions requiring specified price
reductions over the term of the contract based on lower production costs as
programs mature, shared benefits from other cost reductions resulting from joint
production decisions, and negotiated reductions. The Company has made
significant price concessions to customers in recent years, and management
expects customer pressure for such pricing concessions to continue.
One of Howmet's largest customers, GEPS, in connection with its
corporate-level policy decision to reduce sole sourcing, has exercised its right
to terminate its long-term sole source
15
<PAGE> 16
contract with Howmet effective in early 1997, and has placed orders for certain
components with the Company's principal competitor, PCC.
The Company's financial condition and results of operations could be
materially adversely affected if one or more of the Company's key customers
shifted a material amount of its work from the Company. In addition, the Company
could also be materially adversely affected by any substantial work stoppage or
interruption of production at any of its major customers or at any of the major
aircraft manufacturers, and could be materially adversely affected if one or
more key customers reduce or cease conducting operations. Furthermore,
competition is based to a significant extent on technological capabilities and
innovations, and there can be no assurance that one or more of the Company's
competitors will not develop products and/or processes that would give them
competitive advantages in the Company's markets.
Concentration of Ownership
The Carlyle Group ("Carlyle") and Thiokol Corporation ("Thiokol")
through affiliates, have beneficial ownership of 51% and 49%, respectively, of
the voting capital stock of Blade. Pursuant to a stockholders agreement (the
"Stockholders Agreement"), Blade has a board of directors consisting of seven
members, and Carlyle and Thiokol each appoint three directors to the board.
Under the Stockholders Agreement, Blade and its subsidiaries, including the
Company, may not take certain actions, including, but not limited to, certain
mergers, sale transactions, transactions with affiliates, issuances of capital
stock, incurrence of debt, and payments of dividends on or repurchases of
capital stock, without the approval of a supermajority of the board of
directors. The Stockholders Agreement provides that Thiokol may purchase all of
Carlyle's interest in Blade, during the period from the third anniversary
through the sixth anniversary after the closing of the Acquisition on December
13, 1995 (the "Closing Date"). Thiokol has publicly indicated that, subject to
favorable financial and operating performance by the Company and favorable
conditions in the financial markets, it expects to exercise its option to
acquire Carlyle's interest in Blade and thereafter, to cause the Company to
redeem the Notes. As a result of the ownership structure of Blade and the
contractual rights described above, the voting and management control of Blade,
which indirectly controls the Company, is highly concentrated. Carlyle, acting
with the consent of Thiokol, has the ability to direct the actions of Blade with
respect to matters such as the payment of dividends, material acquisitions,
dispositions and certain other corporate transactions. Thiokol and Carlyle are
in a position to exercise control over Blade and ultimately over the Company, to
determine the outcome of all matters required to be submitted to stockholders
for approval, and to otherwise direct and control the operations of Blade and,
indirectly, the Company. Carlyle and Thiokol are also parties to management
agreements with the Company, pursuant to which Carlyle and Thiokol render
certain management and advisory services to the Company and receive fees for
such services. Carlyle and Thiokol also received certain fees in connection with
the consummation of the Acquisition.
Environmental Matters
16
<PAGE> 17
The Company is subject to comprehensive and changing international,
federal, state and local laws, regulations and ordinances that (i) govern
activities or operations that may have adverse environmental effects, such as
discharges to air and water, as well as handling and disposal practices for
solid and hazardous wastes, and (ii) impose liability for the costs of cleaning
up, and certain damages resulting from, sites of past spills, disposals or other
releases of hazardous substances and materials (together, "Environmental Laws").
Management believes that the Company's current operations are in substantial
compliance with such Environmental Laws. However, due to the nature of the
Company's operations, the Company is involved from time to time in legal
proceedings involving remediation of environmental contamination from past or
present operations, as well as compliance with environmental requirements
applicable to ongoing operations. There can be no assurance that material costs
or liabilities will not be incurred in connection with any such proceedings or
claims or to meet such compliance requirements or in connection with currently
unknown environmental liabilities.
If it is determined that the Company is not in compliance with current
Environmental Laws, the Company could be subject to penalties. The amount of any
such penalties could be material. In addition, the Company uses solvents, waxes,
metals, caustics, acids, oils and other hazardous substances, and as is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties the Company may be held liable and may be required
to pay the cost of remedying the condition. The amount of any such liability
could be material.
The Company's facilities have made, and will continue to make,
expenditures to comply with current and future environmental laws. The Company
anticipates that it will incur additional capital and operating costs in the
future to comply with existing environmental laws and new requirements arising
from new or amended statutes and regulations. In addition, because the
applicable regulatory agencies have not yet promulgated final standards for some
existing environmental programs, the Company cannot at this time reasonably
estimate the cost for compliance with these additional requirements. The amount
of any such compliance costs could be material.
The amount and timing of payments the Company may be required to make
with respect to environmental matters are uncertain at this time. However, based
on management's best current estimates of potential liability, management
believes that the Company's reserves (approximately $9.0 million at September
29, 1996) are adequate to satisfy substantially all of its currently known
environmental liabilities under current laws and regulations. In addition, in
connection with the Acquisition, Howmet Cercast S.A., Pechiney International and
Pechiney S.A. are required to indemnify Blade for environmental liabilities and
obligations stemming from events occurring or conditions existing prior to the
closing of the Acquisition to the extent such liabilities exceed the Company's
reserves of $6.0 million at June 30, 1995. Blade assigned its rights to the
Company with respect to any such indemnification upon consummation of the
Acquisition. The Company has recorded a $3.0 million long-term receivable
related to this indemnification. There can be no assurance, however, that Howmet
Cercast S.A., Pechiney International and Pechiney S.A. will indemnify the
Company for all such environmental matters set forth above when demanded by the
Company. If Howmet Cercast S.A., Pechiney
17
<PAGE> 18
International and Pechiney S.A. do not honor their indemnification obligations,
the Company likely would be responsible for such matters and the cost of
addressing such matters could be material.
The Company is subject to liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") (the
federal "Superfund" statute), and similar state statutes for the investigation
and remediation of environmental contamination at properties owned and/or
operated by it and at off-site locations where it has arranged for the disposal
of hazardous substances. Courts have determined that liability under CERCLA is,
in most cases, joint and several, meaning that any responsible party could be
held liable for all costs necessary for investigating and remediating a release
or threatened release of hazardous substances. As a practical matter, liability
at most CERCLA (and similar) sites is shared among all the solvent Potentially
Responsible Parties ("PRPs"). The most relevant factors in determining the
probable liability of a PRP at a CERCLA site usually are the cost of the
investigation and remediation, the relative amount of hazardous substances
contributed by the PRP to the site, and the number of solvent PRPs. The Company
has been or may be named a PRP under CERCLA and similar state statutes at
fourteen present or former on-site and off-site locations. The Company also is
currently remediating known contamination at five European sites, as is
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operation."
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company (incorporated herein by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-4 filed January 9, 1996 (registration no. 333-00200)).
3.2 By-laws of the Company (incorporated herein by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-4 filed
January 9, 1996 (registration no. 333-00200)).
4.1 Registration Rights Agreement dated as of December 7, 1995, among
the Company, BT Securities Corporation, and Lehman Brothers, Inc.
(incorporated herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-4 filed January 9, 1996
(registration no. 333-00200)).
4.2(a) Indenture dated as of December 7, 1995 between the Company and
Marine Midland Bank, as Trustee (incorporated herein by reference to
Exhibit 4.2(a) to the Company's Registration Statement on Form S-4
filed January 9, 1996 (registration no. 333-00200)).
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<PAGE> 19
4.2(b) Supplemental Indenture dated as of December 13, 1995 between the
Company and Marine Midland Bank, as Trustee (incorporated herein by
reference to Exhibit 4.2 to Amendment no. 2 to the Company's
Registration Statement on Form S-4 filed April 1, 1996 (registration
no. 333-00200)).
4.3 Credit Agreement dated as of December 13, 1995 among Blade
Acquisition Corp., Howmet Holdings Acquisition Corp., Howmet
Acquisition Corp., Bankers Trust Company, various banks, Citicorp
USA, Inc., and The First National Bank of Chicago as Managing
Agents, Bankers Trust Company as Syndication Agent, Citicorp USA,
Inc. as Documentation Agent and The First National Bank of Chicago,
as Administrative Agent, together with certain collateral documents
attached thereto as exhibits, including the Subsidiary Guaranty,
Pledge Agreement and Security Agreement among Blade Acquisition
Corp., Pechiney Corporation, Howmet Corporation, certain
subsidiaries and affiliates of Howmet Corporation and the First
National Bank of Chicago (incorporated herein by reference to
Exhibit 4.3 to Amendment no. 2 to the Company's Registration
Statement on Form S-4 filed April 1, 1996 (registration no.
333-00200)).
4.4 Copies of the executed original 10% Senior Subordinated Notes due 2003
of the Company (the "Original Notes"), authenticated and delivered
by Marine Midland Bank as Trustee on December 7, 1995 (incorporated
herein by reference to Exhibit 4.4 to the Company's Registration
Statement on Form S-4 filed January 9, 1996 (registration no.
333-00200)).
4.5 Form of 10% Senior Subordinated Notes due 2003 of the Company
offered in exchange for the Original Notes (included in Exhibit
4.2).
10.1 Howmet Corporation Annual Bonus Plan (incorporated herein by
reference to Exhibit 10.1 to Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.2 Howmet Restructuring Cash Incentive Plan (incorporated herein by
reference to Exhibit 10.2 to Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.3 Howmet Corporation Excess Benefit Plan (incorporated herein by
reference to Exhibit 10.4 to Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.4 Howmet Corporation Transaction Incentive Payments Plan (incorporated
herein by reference to Exhibit 10.5 to Amendment No. 1 to the
Company's Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.5 Howmet Corporation Enhanced Bonus Program for Employees Grade 22 and
Above (incorporated herein by reference to Exhibit 10.6 to Amendment
No. 1 to the Company's Registration Statement on Form S-4 filed
January 17, 1996 (registration no. 333-00200)).
19
<PAGE> 20
10.6 1986 Howmet Corporation Deferred Compensation Plan (incorporated
herein by reference to Exhibit 10.7 to Amendment No. 1 to the
Company's Registration Statement on Form S-4 filed January 17, 1996
(registration no. 333-00200)).
10.7 Howmet Corporation 1995 Executive Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10.8 to Amendment No. 1
to the Company's Registration Statement on Form S-4 filed January
17, 1996 (registration no. 333-00200)).
10.8 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Henri Fine (incorporated herein by reference to
Exhibit 10.9 to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.9 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Jack Lambert (incorporated herein by reference to
Exhibit 10.10 to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.10 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Mark Lasker (incorporated herein by reference to
Exhibit 10.11 to the Company's Registration Statement on Form S-4
filed January 9, 1996 (registration no. 333-00200)).
10.11 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Neil Paton (incorporated herein by reference to
Exhibit 10.12 to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.12 Employment Agreement dated October 4, 1995, between Howmet
Corporation and James Stanley (incorporated herein by reference to
Exhibit 10.13 to the Company's Registration Statement on Form S-4
filed January 9, 1996 (registration no. 333-00200)).
10.13 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Paul Wilson (incorporated herein by reference to
Exhibit 10.14 to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.14 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Ronald Wood (incorporated herein by reference to
Exhibit 10.15 to the Company's Registration Statement on Form S-4
filed January 9, 1996 (registration no. 333-00200)).
10.15 Employment Agreement dated October 4, 1995, between Howmet
Corporation and Roland Paul (incorporated herein by reference to
Exhibit 10.16 to Amendment
20
<PAGE> 21
No. 1 to the Company's Registration Statement on Form S-4 filed
January 17, 1996 (registration no. 333-00200)).
10.16 Employment Agreement dated October 4, 1995, between Howmet
Corporation and David Squier (incorporated herein by reference to
Exhibit 10.17 to the Company's Registration Statement on Form S-4
filed January 9, 1996 (registration no. 333-00200)).
10.17 Employment Agreement dated October 4, 1995, between Howmet Turbine
Components Corporation and B. Dennis Albrechtsen (incorporated
herein by reference to Exhibit 10.18 to the Company's Registration
Statement on Form S-4 filed January 9, 1996 (registration
no. 333-00200)).
10.18 Letter Agreement regarding payment of life insurance between Howmet
Corporation and David L. Squier (incorporated herein by reference to
Exhibit 10.19 to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.19(a)Tax Sharing Agreement among Howmet Corporation, Howmet Management
Services, Inc., Howmet-Tempcraft, Inc., Howmet Thermatech Canada,
Inc., Howmet Transport Services, Inc., Howmet Sales, Inc., Howmet
Refurbishment, Inc., Turbine Components Corporation, Blade
Receivables Corporation, a Nevada corporation, and Howmet Cercast
(USA), Inc., dated as of December 13, 1995 (incorporated herein by
reference to Exhibit 10.20(a) to the Company's Registration
Statement on Form S-4 filed January 9, 1996 (registration
no. 333-00200)).
10.19(b)Tax Sharing Agreement among Blade Acquisition Corp., Pechiney
Corporation, Howmet Insurance Co., Inc., Howmet Corporation and all
of its directly and indirectly owned subsidiaries, dated as of
December 13, 1995 (incorporated herein by reference to Exhibit
10.20(b) to the Company's Registration Statement on Form S-4 filed
January 9, 1996 (registration no. 333-00200)).
10.20 Management Agreement between Howmet Corporation and Thiokol Holding
Company dated as of December 13, 1995 (incorporated herein by
reference to Exhibit 10.21 to the Company's Registration Statement
on Form S-4 filed January 9, 1996 (registration no. 333-00200)).
10.21 Management Agreement between Howmet Corporation and TCG Holdings,
L.L.C., dated as of December 13, 1995 (incorporated herein by
reference to Exhibit 10.22 the Company's Registration Statement on
Form S-4 filed January 9, 1996 (registration no. 333-00200)).
10.22 Assignment and Assumption Agreement between Howmet Holdings
Acquisition Corp. and Howmet Acquisition Corp., dated as of December
6, 1995 and Indemnification Provisions of the Stock Purchase
Agreement among Pechiney, Pechiney International S.A., Howmet
Cercast S.A. and Blade Acquisition Corp.,
21
<PAGE> 22
dated as of October 12, 1995 (incorporated herein by reference to
Exhibit 10.23 to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed January 17, 1996 (registration
no. 333-00200)).
10.23 Revised Employment Letter dated February 13, 1996, between Howmet
Corporation and John C. Ritter (incorporated herein by reference to
Exhibit 10.24 to Amendment No. 3 to the Company's Registration
Statement on Form S-4 filed June 11, 1996 (registration
no. 333-00200)).
10.24 Stock Appreciation Right Agreement between Howmet Corporation and
David L.Squier dated May 17, 1996 (incorporated herein by reference
to Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996.)
10.25 Stock Appreciation Right Agreement between Howmet Corporation and
James Stanley dated May 17, 1996 (incorporated herein by reference
to Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996.)
10.26 Stock Appreciation Right Agreement between Howmet Corporation and
Mark Lasker dated May 17, 1996 (incorporated herein by reference to
Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 29, 1996, filed August 28, 1996.)
10.27 Stock Appreciation Right Agreement between Howmet Corporation and
John C. Ritter dated May 17, 1996 (incorporated herein by reference
to Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996).
10.28 Stock Appreciation Right Agreement between Howmet Corporation and
Allan Bergquist dated May 17, 1996 (incorporated herein by reference
to Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1996, filed August 28, 1996).
10.29 Stock Appreciation Right Agreement between Howmet Corporation and B.
Denis Albrechtsen dated May 17, 1996 (incorporated herein by
reference to Exhibit 10.29 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 29, 1996, filed August 28, 1996).
10.30 Howmet Corporation Amended and Restated Special 1995 Executive
Deferred Compensation Plan effective as of November 1, 1995
(incorporated herein by reference to Exhibit 10.30 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 29, 1996,
filed August 28, 1996).
10.31 The Howmet Corporation Nonqualified Deferred Compensation Trust
dated April 29, 1996 (incorporated herein by reference to Exhibit
10.31 to the Company's
22
<PAGE> 23
Quarterly Report on Form 10-Q for the quarter ended June 29, 1996,
filed August 28, 1996).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 29, 1996, the Company filed
no Current Reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: November 12, 1996
HOWMET CORPORATION
By:/s/ John C. Ritter
--------------------------
Vice President and
Chief Financial Officer
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
CONDENSED BALANCE SHEET AT SEPTEMBER 29, 1996 AND THE CONSOLIDATED CONDENSED
INCOME STATEMENTS FOR THE THIRTY-NINE WEEK PERIODS ENDED SEPTEMBER 29, 1996
AND OCTOBER 1,1995 AS REPORTED ON FORM 10Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-Q.
</LEGEND>
<CIK> 0000048848
<NAME> HOWMET CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-29-1996 OCT-01-1995
<CASH> 20,712 0
<SECURITIES> 0 0
<RECEIVABLES> 133,075 0
<ALLOWANCES> 6,687 0
<INVENTORY> 134,655 0
<CURRENT-ASSETS> 284,254 0
<PP&E> 319,946 0
<DEPRECIATION> 32,086 0
<TOTAL-ASSETS> 1,038,644 0
<CURRENT-LIABILITIES> 313,360 0
<BONDS> 301,980 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 290,265 0
<TOTAL-LIABILITY-AND-EQUITY> 1,038,644 0
<SALES> 823,351 706,729
<TOTAL-REVENUES> 823,351 706,729
<CGS> 600,658 531,188
<TOTAL-COSTS> 645,661 556,718
<OTHER-EXPENSES> 18,407 18,082
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 31,024 4,343
<INCOME-PRETAX> 39,063 54,052
<INCOME-TAX> 22,055 25,176
<INCOME-CONTINUING> 17,008 28,876
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