(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. The 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 include nickel, titanium,
aluminum, and cobalt, are used worldwide in the aerospace (commercial and
defense), commercial transportation, and industrial and other markets.
Howmet is a global company operating in 20 countries. Based upon the country
where the point of shipment occurred, the United States and Europe generated 68%
and 22%, respectively, of Howmet's sales in 2021. In addition, Howmet has
operating activities in numerous countries and regions outside the United States
and Europe, including Canada, Mexico, China and Japan. Governmental policies,
laws and regulations, and other economic factors, including inflation and
fluctuations in foreign currency exchange rates and interest rates, affect the
results of operations in countries with such activities.
Management Review of 2021 and Outlook
In 2021, Sales decreased 5% over 2020 primarily as a result of lower sales
volumes in the commercial aerospace market driven by the impact of COVID-19 and
Boeing 787 production declines, and lower sales volumes in the defense aerospace
market, partially offset by growth in the commercial transportation and
industrial gas turbine markets as well as favorable product pricing of $97.
Price increases are in excess of material and inflationary pass through to our
customers.
Segment operating profit increased 6% from 2020 due to favorable sales volumes
in the commercial transportation and industrial gas turbine markets, cost
reductions, and favorable product pricing, partially offset by lower sales
volumes in the commercial aerospace market driven by the impact of COVID-19 and
Boeing 787 production declines and lower sales volumes in the defense aerospace
market.
Effective October 14, 2021, John C. Plant assumed the position of sole Chief
Executive Officer and continued in his role as Executive Chairman of the Board
of Directors. Tolga Oal, the Company's prior Co-Chief Executive Officer,
departed the Company and also stepped down from the Board, each effective as of
October 14, 2021. The Company has aligned its operations consistent with how the
Chief Executive Officer assesses operating performance and allocates capital,
which remain unchanged since the Arconic Inc. Separation Transaction (see   Note
C   to the Consolidated Financial Statements in   Part II, Item 8   of this Form
10-K).
Management continued its focus on liquidity and cash flows as well as improving
its operating performance through cost reductions, streamlined organizational
structures, margin enhancement, and profitable revenue generation. Management
has also continued its intensified focus on capital efficiency. Management's
focus and the related results enabled Howmet to end 2021 with a solid financial
position.
The following financial information reflects certain key highlights of Howmet's
2021 results:
•Sales of $4,972, a decrease of 5% from 2020, with significant reductions in
sales in commercial aerospace driven by COVID-19 and Boeing 787 production
declines;
•Net income from continuing operations of $258, or $0.59 per diluted share;
•Income from continuing operations before income taxes of $324, an increase of
$153, or 89%, from 2020;
•Total segment operating profit of $939, an increase of $49, or 6%, from
2020(1);
•Cash provided from operations of $449; cash used for financing activities of
$1,444; and cash provided from investing activities of $107;
•Purchased approximately 13 million shares of Common Stock under the Share
Repurchase Programs for approximately $430;
•Cash on hand and restricted cash at the end of the year of $722;
•Total debt of $4,232, a decrease of $843 from 2020, reflecting redemptions or
repurchases, as applicable, of $361, $476, $600, and $100 of the 5.400% Notes
due 2021 (the "5.400% Notes"), the 5.870% Notes due 2022 (the "5.870% Notes"),
the 6.875% Notes due 2025 (the "6.875% Notes"), and the 5.125% Notes due 2024
(the "5.125% Notes"), respectively, during 2021, partially offset by issuance of
$700 of the 3.000% Notes due 2029 during 2021; and
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•The Company's common stock had a closing price of $31.38 per share at December
31, 2021, an increase of $18.63 per share, or 141%, since the Arconic Inc.
Separation Transaction on April 1, 2020, compared to an increase of 93% and 51%
for the S&P 500® Index and S&P Aerospace & Defense Index, respectively, over the
same period.
(1) See below in Results of Operations for the reconciliation of Total segment
operating profit to Income from continuing operations before income taxes.
In 2022, management projects sales to increase as we expect robust growth in
most of the Company's key markets, and the Company's strong position in those
markets is expected to continue. The Company expects higher metal costs to also
contribute to increased sales in 2022. Earnings per share is expected to grow as
management continues to focus on operational performance. Cash provided from
operations is expected to increase for the full year in 2022 compared with 2021,
resulting from a continued focus on operating performance and on capital
efficiency. Capital expenditures are expected to be less than depreciation and
amortization.
Results of Operations
Earnings Summary
Sales. Sales for 2021 were $4,972 compared with $5,259 in 2020, a decrease of
$287, or 5%. The decrease was primarily due to lower sales volumes in the
commercial aerospace market driven by the impact of COVID-19 and Boeing 787
production declines and lower sales volumes in the defense aerospace market,
partially offset by growth in the commercial transportation and industrial gas
turbine markets as well as favorable product pricing of $97. Price increases are
in excess of material and inflationary pass through to our customers.
Sales for 2020 were $5,259 compared with $7,098 in 2019, a decrease of $1,839,
or 26%. The decrease was primarily a result of lower sales volumes in the
commercial aerospace and commercial transportation markets driven by the impacts
of COVID-19 and Boeing 737 MAX ("737 MAX") and Boeing 787 production declines
along with a decrease in sales of $116 due to the divestiture of the forgings
business in the U.K. in December 2019, all partially offset by growth in the
defense aerospace and industrial gas turbine markets and favorable product
pricing.
Cost of goods sold ("COGS"). COGS as a percentage of Sales was 72.3% in 2021
compared with 73.7% in 2020. The decrease was primarily due to structural cost
reductions and favorable product pricing. In 2019, the Company sustained a fire
at a Fastening Systems plant in France ("France Plant Fire"). Additionally, a
fire occurred at a Forged Wheels plant in Barberton, Ohio in mid-February 2020
("Barberton Plant Fire"). The Company submitted insurance claims related to
these plant fires and received partial settlements of $32 in 2021 compared to
$39 in 2020, which were in excess of the insurance deductible. In 2021, the
Company recorded charges of $28 related to plant fires compared to $41 in 2020.
The downtime in 2021 and 2020 reduced production levels and affected
productivity at the plants. The Company anticipates additional charges related
to these plant fires of approximately $5 to $15 in 2022.
COGS as a percentage of Sales was 73.7% in 2020 compared with 73.5% in 2019. The
increase was primarily due to the impact of COVID-19 and lower sales volumes,
partially offset by net cost savings, favorable product pricing, intentional
product exits, and the impairment of energy business assets of $10 in the second
quarter of 2019. The Company submitted insurance claims related to the France
Plant Fire and the Barberton Plant Fire, and received partial settlements of $39
in 2020 compared to $25 in 2019, which were in excess of the insurance
deductible. In 2020, the Company recorded charges of $41 related to the plant
fires compared to $26 in 2019. The downtime reduced production levels and
affected productivity at the plants.
Selling, general administrative, and other expenses ("SG&A"). SG&A expenses were
$251, or 5.0% of Sales, in 2021 compared with $277, or 5.3% of Sales, in 2020.
The decrease in SG&A of $26, or 9%, was primarily due to overhead cost
reductions in 2021 and costs incurred in 2020 associated with the Arconic Inc.
Separation Transaction.
SG&A expenses were $277, or 5.3% of Sales, in 2020 compared with $400, or 5.6%
of Sales, in 2019. The decrease in SG&A of $123, or 31%, was primarily due to
overhead cost reductions and lower net legal and other advisory costs related to
Grenfell Tower of $20, partially offset by higher costs associated with the
Arconic Inc. Separation Transaction through June 30, 2020 of $2.
Research and development expenses ("R&D"). R&D expenses were $17 in both 2021
and 2020.
R&D expenses were $17 in 2020 compared with $28 in 2019. The decrease of $11, or
39%, was primarily due to the consolidation of the Company's primary R&D
facility in conjunction with ongoing cost reduction efforts.
Provision for depreciation and amortization ("D&A"). The provision for D&A was
$270 in 2021 compared with $279 in 2020. The decrease of $9, or 3%, was
primarily driven by lower corporate software amortization and research center
depreciation as well as $1 of D&A related to the Barberton Plant Fire in 2021
compared to $6 in 2020.
The provision for D&A was $279 in 2020 compared with $295 in 2019. The decrease
of $16, or 5%, was primarily driven by asset impairments of the Disks long-lived
asset group during the second quarter of 2019 (see   Note O   and   Note P  

at

the

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Consolidated Financial Statements in   Part II, Item 8   (Financial Statements
and Supplementary Data) of this Form 10-K) and the impact of divestitures, as
well as lower corporate software amortization and research center depreciation,
which were partially offset by increased Forged Wheels D&A due to the capacity
expansion in Hungary, capacity expansions at two U.S. facilities and an
additional $6 of D&A related to the Barberton Plant Fire.
Restructuring and other charges. Restructuring and other charges were $90 in
2021 compared with $182 in 2020 and $582 in 2019.
Restructuring and other charges in 2021 consisted primarily of a $75 charge for
U.K. and U.S. pension plans' settlement accounting, a $15 charge for accelerated
depreciation primarily related to the closure of small U.S. manufacturing
facilities in Engine Products and Fastening Systems, a $7 charge for layoff
costs, a $4 charge for impairment of assets associated with an agreement to sell
a small manufacturing business in France, and a $4 charge for various other exit
costs. These charges were partially offset by a gain of $12 on the sale of
assets at a small U.S. manufacturing facility in Fastening Systems and a benefit
of $3 related to the reversal of a number of layoff reserves related to prior
periods. The Company has closed some small manufacturing facilities and may in
the future close additional small facilities in order to consolidate operations,
reduce fixed costs, and exit less profitable businesses.
Restructuring and other charges in 2020 consisted primarily of a $113 charge for
layoff costs, a $74 charge for U.K. and U.S. pension plans' settlement
accounting, a $5 post-closing adjustment related to the sale of the Company's
U.K. forgings business, a $5 charge for impairment of assets associated with an
agreement to sell an aerospace components business in the U.K, which ultimately
did not occur and the business was returned to held for use, a $5 charge related
to the impairment of a cost method investment, which were partially offset by a
benefit of $21 related to the reversal of a number of prior period programs.
Restructuring and other charges in 2019 consisted primarily of a $428 charge for
impairment of the Disks long-lived asset group, a $69 charge for layoff costs, a
$46 charge for impairment of assets associated with an agreement to sell the
U.K. forgings business, a $14 charge for impairment of properties, plants, and
equipment related to the Company's primary research and development facility, a
$13 loss on sale of assets primarily related to a small additive business, a $12
charge for other exit costs from lease terminations primarily related to the
exit of the corporate aircraft, a $9 settlement accounting charge for U.S.
pension plans, a $5 charge for impairment of a cost method investment, and a $7
charge for other exit costs, which were partially offset by a benefit of $16
related to the elimination of the life insurance benefit for U.S. salaried and
non-bargaining hourly retirees of the Company and its subsidiaries.
See   Note     E   to the Consolidated Financial Statements in   Part II, Item
8   (Financial Statements and Supplementary Data) of this Form 10-K.
Interest expense, net. Interest expense, net was $259 in 2021 compared with $317
in 2020. The decrease of $58, or 18%, was primarily due to a reduced average
level of debt for the year ended December 31, 2021 compared to the year ended
December 31, 2020. On an annual basis, the debt activity in 2021 will decrease
Interest expense, net by approximately $70.
Interest expense, net was $317 in 2020 compared with $338 in 2019. The decrease
of $21, or 6%, was primarily due to a reduced average level of debt for the year
ended December 31, 2020 compared to the year ended December 31, 2019.
See   Note R   to the Consolidated Financial Statements in   Part II, Item 8
(Financial Statements and Supplementary Data) of this Form 10-K.
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 $146 in 2021 compared with $64 in 2020. The increase of $82, or
128%, was primarily due to debt premiums paid in 2021 on the 6.875% Notes in
2021, partially offset by debt redemption or tender premiums, as applicable,
paid in 2020 on the 6.150% Notes due 2020 (the "6.150% Notes") and the 5.400%
Notes.
Loss on debt redemption was $64 in 2020 compared with none in 2019. The increase
of $64 was primarily due to debt redemption or tender premiums paid, as
applicable, on the 6.150% Notes, the 5.400% Notes, and the 5.870% Notes in 2020.
See   Note R   to the Consolidated Financial Statements in   Part II, Item 8
(Financial Statements and Supplementary Data) of this Form 10-K.
Other expense, net. Other expense, net was $19 in 2021 compared with $74 in
2020. The decrease in expense of $55 was primarily driven by the write-off of an
indemnification receivable of $53 related to a Spanish tax reserve, reflecting
Alcoa Corporation's 49% share and Arconic Corporation's 33.66% share, that
occurred in 2020 and did not occur in 2021 and lower non-service related net
periodic benefit costs related to defined benefit plans in 2021 of $17, which
were partially offset by unfavorable foreign currency movements of $13.
Non-service related net periodic benefit costs related to defined benefit plans
declined approximately 65% from 2020 to 2021.
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Other expense, net was $74 in 2020 compared with $31 in 2019. The increase in
expense of $43 was primarily driven by the write-off of an indemnification
receivable of $53 related to a Spanish tax reserve, reflecting Alcoa
Corporation's 49% share and Arconic Corporation's 33.66% share, and lower
interest income of $19, which were partially offset by lower deferred
compensation expense of $14 and favorable foreign currency movements of $16.
Income taxes. Howmet's effective tax rate was 20.4% (provision on pre-tax
income) in 2021 compared with the U.S. federal statutory rate of 21%. The
effective rate differs from the U.S. federal statutory rate primarily as a
result of a $32 benefit from the recognition of income tax credits related to
development incentives in Hungary, and a $9 benefit related to updated U.S.
regulatory guidance concerning the utilization of foreign tax credits in
connection with the one-time transition tax on the deemed repatriation of
previously non-taxed post-1986 earnings and profits of certain foreign
subsidiaries enacted as part of the U.S. Tax Cuts and Jobs Act of 2017 (the
"2017 Act"), partially offset by $9 of charges from the decision to no longer
permanently reinvest earnings in certain foreign subsidiaries, $7 of charges
from distributions of foreign earnings, $8 of charges to establish a valuation
allowance on certain net operating losses in Switzerland, $6 of charges related
to U.S. tax on foreign income, and other impacts related to nondeductible
expenses including foreign losses with no tax benefit. Howmet anticipates that
the effective tax rate in 2022 will be between 24.5% and 25.5%.
Howmet's effective tax rate was 23.4% (benefit on pre-tax income) in 2020
compared with the U.S. federal statutory rate of 21%. The effective rate differs
from the U.S. federal statutory rate primarily as a result of a $64 benefit
related to the release of an income tax reserve following a favorable Spanish
tax case decision, a $30 benefit related to the recognition of a previously
uncertain U.S. tax position, and a $30 benefit for a U.S. tax law change related
to the issuance of final regulations that provide for an exclusion of certain
high-taxed foreign earnings from the calculation of Global Intangible Low-Taxed
Income ("GILTI"), partially offset by U.S. tax on foreign earnings, $8 of
charges related to the remeasurement of deferred tax balances as a result of the
Arconic Inc. Separation Transaction, the tax impact of $49 of nondeductible loss
related to the reversal of indemnification receivables associated with the
favorable Spanish tax case decision, and the tax impact of other nondeductible
expenses.
Howmet's effective tax rate was 40.0% (provision on pre-tax income) in 2019
compared with the U.S. federal statutory rate of 21%. The effective rate differs
from the U.S. federal statutory rate primarily as a result of foreign income
taxed in higher rate jurisdictions and subject to U.S. taxes including GILTI,
foreign losses with no tax benefit, and other nondeductible expenses, partially
offset by a $24 benefit associated with the deduction of foreign taxes that were
previously claimed as a U.S. foreign tax credit, and a $12 benefit for a foreign
tax rate change.
Net income from continuing operations. Net income from continuing operations was
$258, or $0.59 per diluted share, for 2021 compared to $211, or $0.48 per
diluted share, in 2020. The increase in results of $47, or 22%, was primarily
due to cost reductions, a decrease of $92 in Restructuring and other charges,
and a decrease of $58 in Interest expense, net, partially offset by lower sales
volumes in the commercial aerospace and defense aerospace market, an increase in
the Provision for income taxes, and an increase in the Loss on debt redemption
of $82.
Net income from continuing operations was $211, or $0.48 per diluted share, for
2020 compared to $126, or $0.27 per diluted share, in 2019. The increase in
results of $85, or 67%, was primarily due to the non-recurring 2019 impact of
the $428 charge for impairment of the Disks long-lived asset group included in
Restructuring and other charges, a decrease of $123 due to lower SG&A costs,
favorable product pricing, and a net $10 related to the settlement of the
Spanish corporate income tax audit, partially offset by a decrease in sales
volumes in the commercial aerospace and commercial transportation markets, the
impact of COVID-19, and an increase in premiums paid on the early redemption of
debt of $59.
Net income. Net income was $258 for 2021, all of which was composed of $258 of
income from continuing operations, or $0.59 per diluted share.
Net income was $261 for 2020, composed of $211 of income from continuing
operations and $50 from discontinued operations, or $0.48 and $0.11 per diluted
share, respectively.
Net income was $470 for 2019, composed of $126 of income from continuing
operations and $344 from discontinued operations, or $0.27 and $0.76 per diluted
share, respectively.
See details of discontinued operations in   Note     C   to the Consolidated
Financial Statements in   Part II, Item 8   (Financial Statements and
Supplementary Data) of this Form 10-K.

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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 a
number of factors; however, the primary measure of performance is Segment
operating profit. Howmet's definition of Segment operating profit is Operating
income excluding Special items. Special items include Restructuring and other
charges and Impairment of Goodwill. Segment operating profit may not be
comparable to similarly titled measures of other companies. Differences between
the total segment and consolidated totals are in Corporate. The Company has
aligned its operations consistent with how the Chief Executive Officer assesses
operating performance and allocates capital, which remain unchanged since the
Arconic Inc. Separation Transaction (see   Note C   to the Consolidated
Financial Statements in   Part II, Item 8   of this Form 10-K for reference).
The Company produces aerospace engine parts and components and aerospace
fastening systems for 737 MAX airplanes. In late December 2019, Boeing announced
a temporary suspension of the production of 737 MAX airplanes. This decline in
production had a negative impact on sales and segment operating profit in the
Engine Products, Fastening Systems and Engineered Structures segments in 2020
and the first half of 2021. While regulatory authorities in the United States
and certain other jurisdictions lifted grounding orders beginning in late 2020,
our sales remained at lower levels through the first half of 2021 due to the
residual impacts of the 737 MAX grounding.
The Company also produces aerospace engine parts and components and aerospace
fastening systems for Boeing 787 airplanes. In 2020 and 2021, Boeing reduced
production rates of the 787 airplanes. Boeing paused deliveries of its 787
aircraft in May 2021. The significant decline in Boeing 787 production rates had
a negative impact on sales and segment operating profit in the Engine Products,
Fastening Systems, and Engineered Structures segments in 2021. We expect reduced
production rates to continue to have a negative impact on our sales and segment
operating profit into 2022.
Income from continuing operations before income taxes totaled $324 in 2021, $171
in 2020, and $210 in 2019. Segment operating profit for all reportable segments
totaled $939 in 2021, $890 in 2020, and $1,390 in 2019. See below for the
reconciliation of Income from continuing operations before income taxes to Total
segment operating profit.
The following information provides Sales and Segment operating profit for each
reportable segment for each of the three years in the period ended December 31,
2021.
Engine Products
                             2021         2020         2019
Third-party sales          $ 2,282      $ 2,406      $ 3,320
Segment operating profit       440          417          621


Engine Products produces investment castings, including airfoils, and seamless
rolled rings primarily for aircraft engines (aerospace commercial and defense)
and industrial gas turbines. 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 decreased $124, or 5%, in 2021
compared with 2020, primarily due to lower sales volumes in the commercial
aerospace market driven by the impact of COVID-19 and Boeing 787 production
declines and lower sales volumes in the defense aerospace market, partially
offset by higher sales volumes in the industrial gas turbine market.
Third-party sales for the Engine Products segment decreased $914, or 28%, in
2020 compared with 2019, primarily due to lower sales volumes in the commercial
aerospace market driven by the impact of COVID-19 and the suspension of 737 MAX
production, along with a decrease in sales of $116 from the divestiture of the
forgings business in the U.K. in December 2019 (see   Note     U   to the
Consolidated Financial Statements in   Part II    ,     Item 8   of this Form
10-K), partially offset by higher sales volumes in the defense aerospace and
industrial gas turbine markets as well as favorable product pricing.
Segment operating profit for the Engine Products segment increased $23, or 6%,
in 2021 compared with 2020, primarily due to cost reductions and favorable
product pricing, partially offset by lower sales volumes in the commercial
aerospace market driven by the impact of COVID-19 and Boeing 787 production
declines, and lower sales volumes in the defense aerospace market. The segment
added approximately 950 headcount since the first quarter of 2021 in
anticipation of revenue increases into 2022.
Segment operating profit for the Engine Products segment decreased $204, or 33%,
in 2020 compared with 2019, primarily due to lower commercial aerospace sales
volumes from the suspension of 737 MAX production and COVID-19 productivity
impacts, partially offset by cost reductions, favorable product pricing, and
favorable sales volumes in the defense aerospace and industrial gas turbine
markets.
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On December 1, 2019, the Company completed the divestiture of its forgings
business in the U.K. The forgings business primarily produced steel, titanium,
and nickel based forged components for aerospace, mining, and off-highway
markets. This business generated third-party sales of $116 in 2019 and had 540
employees at the time of the divestiture.
In 2022, as compared to 2021, demand in the commercial aerospace and industrial
gas turbine markets is expected to increase.
Fastening Systems
                             2021         2020         2019
Third-party sales          $ 1,044      $ 1,245      $ 1,561
Segment operating profit       190          247          396


Fastening Systems produces aerospace 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 automobiles, 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 decreased $201, or 16%, in
2021 compared with 2020, primarily due to lower sales volumes in the commercial
aerospace market, driven by the impact of COVID-19 and Boeing 787 production
declines, partially offset by higher sales volumes in the commercial
transportation and industrial markets.
Third-party sales for the Fastening Systems segment decreased $316, or 20%, in
2020 compared with 2019, primarily due to lower sales volumes in the commercial
aerospace market, driven by the impact of COVID-19 and the suspension of 737 MAX
production, as well as lower sales volumes in the commercial transportation
market which was also impacted by the effects of COVID-19, partially offset by
sales volume growth in the industrial market and favorable product pricing.
Segment operating profit for the Fastening Systems segment decreased $57, or
23%, in 2021 compared with 2020, primarily due to lower sales volumes in the
commercial aerospace market, driven by the impact of COVID-19 and Boeing 787
production declines, partially offset by cost reductions and favorable sales
volumes in the commercial transportation and industrial markets.
Segment operating profit for the Fastening Systems segment decreased $149, or
38%, in 2020 compared with 2019, primarily due to lower commercial aerospace and
commercial transportation sales volumes and COVID-19 productivity impacts,
partially offset by cost reductions and favorable product pricing.
In 2022, as compared to 2021, demand in the commercial aerospace and commercial
transportation markets is expected to increase.
Engineered Structures
                            2021       2020        2019

Sales to third parties $725 $927 $1,255
Segment operating income 54 73 120


Engineered Structures produces titanium ingots and mill products for aerospace
and defense applications and is vertically integrated to produce titanium
forgings, extrusions forming and machining services for airframe, wing,
aero-engine, and landing gear components. Engineered Structures also produces
aluminum forgings, nickel forgings, and aluminum machined components, and
assemblies for aerospace and defense applications. 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 and British pound.
Third-party sales for the Engineered Structures segment decreased $202, or 22%,
in 2021 compared with 2020, primarily due to lower sales volumes in the
commercial aerospace market, driven by the impact of COVID-19 and Boeing 787
production declines, and lower sales volumes in the defense aerospace market,
including lower F-35 program volumes.
Third-party sales for the Engineered Structures segment decreased $328, or 26%,
in 2020 compared with 2019, primarily due to lower sales volumes in the
commercial aerospace market, driven by COVID-19 and Boeing 787 production
declines and the 737 MAX production suspension, partially offset by an increase
in defense aerospace sales volumes and favorable product pricing.
Segment operating profit for the Engineered Structures segment decreased $19, or
26%, in 2021 compared with 2020, primarily due to lower sales volumes in the
commercial aerospace market, driven by the impact of COVID-19 and Boeing 787
production declines, and lower sales volumes in the defense aerospace market,
including lower F-35 program volumes, partially offset by cost reductions.
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Segment operating profit for the Engineered Structures segment decreased $47, or
39%, in 2020 compared with 2019, primarily due to lower commercial aerospace
sales volumes and COVID-19 productivity impacts, partially offset by cost
reductions and favorable product pricing.
In 2022, as compared to 2021, demand in the commercial aerospace market is
expected to increase. However, demand in the defense aerospace market is
expected to be down.
Forged Wheels
                            2021       2020       2019
Third-party sales          $ 921      $ 679      $ 969
Segment operating profit     255        153        253


Forged Wheels produces forged aluminum wheels and related products for
heavy-duty trucks, trailers, and buses globally. 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 increased $242, or 36%, in 2021
compared with 2020, primarily due to higher sales volumes in the commercial
transportation market and higher metal prices.
Third-party sales for the Forged Wheels segment decreased $290, or 30%, in 2020
compared with 2019, primarily due to lower sales volumes in the commercial
transportation market driven by COVID-19 and production downtime related to the
Barberton Plant Fire (discussed below).
Segment operating profit for the Forged Wheels segment increased $102, or 67%,
in 2021 compared with 2020, primarily due to higher commercial transportation
sales volumes, fixed cost reductions, and maximizing production in low-cost
countries.
Segment operating profit for the Forged Wheels segment decreased $100, or 40%,
in 2020 compared with 2019, primarily due to lower commercial transportation
sales volumes and COVID-19 productivity impacts, partially offset by cost
reductions.
In mid-February 2020, a fire occurred at the Company's forged wheels plant
located in Barberton, Ohio. The downtime reduced production levels and affected
productivity at the plant. The Company has insurance with a deductible of $10.
In 2022, as compared to 2021, demand in the commercial transportation markets
served by Forged Wheels is expected to increase in most regions. An increase in
metal costs is expected to contribute to an increase in sales as the Company
generally passes through metal costs. However, sales in the Forged Wheels
segment could be negatively impacted by customer supply chain constraints.
Reconciliation of Total segment operating profit to Income from continuing
operations before income taxes
                                                          2021       2020   

2019

Profit from continuing operations before income tax $324 $171

   $   210
Loss on debt redemption                                    146         64            -
Interest expense, net                                      259        317          338
Other expense, net                                          19         74           31
Consolidated operating income                            $ 748      $ 626      $   579
Unallocated amounts:
Restructuring and other charges                             90        182   

582

Corporate expense                                          101         82   

229

Total segment operating profit                           $ 939      $ 890   

$1,390


Total segment operating profit is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because management reviews
the operating results of the segments of the Company excluding Corporate
results.
See Restructuring and other charges, Loss on debt redemption, Interest expense,
net and Other expense, net, discussions above under "Results of Operations" for
reference.
Corporate expense increased $19, or 23%, in 2021 compared with 2020 primarily
due to costs associated with closures, shutdowns, and other items of $32 and
legal and other advisory reimbursements received in 2020 that did not recur in
2021 aggregating to $8, partially offset by lower net costs related to the
Barberton Plant Fire and the France Plant Fire of $6 and lower costs driven by
overhead cost reductions, as well as costs incurred in 2020 associated with the
Arconic Inc. Separation Transaction of $7 that did not recur in 2021.
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Corporate expense decreased $147, or 64%, in 2020 compared with 2019, primarily
due to lower annual incentive compensation accruals and executive compensation
costs, lower costs driven by overhead cost reductions, lower contract services
and outsourcing costs; lower research and development expenses; and lower net
legal and other advisory costs along with costs incurred in 2019 that did not
recur in 2020, including the impacts of facility fires, net of insurance of $6,
and collective bargaining agreement negotiation costs of $9. Costs associated
with the Arconic Inc. Separation Transaction of $7 were an increase of $2
compared to 2019.
Environmental Matters
See the Environmental Matters section of   Note     V   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.
At December 31, 2021, cash and cash equivalents of Howmet were $720, of which
$199 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 additional material income tax consequences.
The cash flows related to Arconic Corporation have not been segregated and are
included in the Statement of Consolidated Cash Flows for all periods prior to
the Arconic Inc. Separation Transaction.
Operating Activities
Cash provided from operations in 2021 was $449 compared with $9 in 2020 and $461
in 2019.
The increase in cash provided from operations of $440, or 4,889%, between 2021
and 2020 was due to lower working capital of $357, lower pension contributions
of $161, and lower noncurrent liabilities of $12, partially offset by lower
operating results of $38 and the write-off of an indemnification receivable of
$53 related to a Spanish tax reserve that occurred in 2020 and did not occur in
2021. The components of the change in working capital included favorable changes
in accounts payable of $525, accrued expenses of $71, and prepaid expenses and
other current assets of $13, offset by taxes, including income taxes of $139,
receivables of $99 including employee retention credit receivables, and
inventories of $14.
The decrease in cash provided from operations of $452, or 98%, between 2020 and
2019 was primarily due to lower operating results of $874, partially offset by
lower working capital of $355, lower noncurrent assets of $46, lower noncurrent
liabilities of $10, and lower pension contributions of $11. The components of
the change in working capital included favorable changes in receivables of $739,
taxes, including income taxes of $100, and inventories of $77, offset by
accounts payable of $380, accrued expenses of $175 and prepaid expenses and
other current assets of $6.
Financing Activities
Cash used for financing activities was $1,444 in 2021 compared with $369 in 2020
and $1,568 in 2019.
The use of cash in 2021 was primarily related to the repayments on the aggregate
outstanding principal amount of long-term debt of approximately $1,537,
repurchase of common stock of $430, premiums paid on the redemption of debt of
$138, dividends paid to shareholders of $19, and debt issuance costs of $11.
These items were partially offset by long-term debt issuance of $700 and
proceeds from the exercise of employee stock options of $22. On an annual basis,
the debt activity in 2021 will decrease Interest expense, net by approximately
$70.
The use of cash in 2020 was primarily related to the repayments on borrowings
under certain revolving credit facilities (see below) and repayments on debt,
primarily the aggregate outstanding principal amount of the 6.150% Notes due
2020 of approximately $2,040, cash distributed to Arconic Corporation at the
Arconic Inc. Separation Transaction of $500, repurchase of common stock of $73,
debt issuance costs of $61, premiums paid on the redemption of debt of $59, and
dividends paid to shareholders of $11. These items were partially offset by
long-term debt issuance of $2,400 (of which $1,200 went with Arconic Corporation
at the Arconic Inc. Separation Transaction) and proceeds from the exercise of
employee stock options of $33.
The use of cash in 2019 was primarily related to the repurchase of $1,150 of
common stock, repayments on borrowings under certain revolving credit facilities
(see below) and repayments on debt, primarily the aggregate outstanding
principal amount of
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the 1.63% Convertible Notes of approximately $403, and dividends paid to
shareholders of $57. These items were partially offset by proceeds from the
exercise of employee stock options of $56.
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 under such
registration statement or otherwise in accordance with securities laws,
including but not limited to in order to refinance existing indebtedness.
For further details regarding the Company's debt and stock repurchases, see
  Note R   and   Note J  , respectively, to the Consolidated Financial
Statements in   Part II, Item 8   (Financial Statements and Supplementary Data)
of this Form 10-K.
The Company maintains a credit facility pursuant to its Five-Year Revolving
Credit Agreement (the "Credit Agreement") with a syndicate of lenders and
issuers named therein. In addition, the Company had other credit facilities that
terminated in 2020. See   Note R   to the Consolidated Financial Statements in
  Part II, Item 8   (Financial Statements and Supplementary Data) of this Form
10-K.
The Company may in the future repurchase additional portions of its debt or
equity securities from time to time, 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.
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- and long-term debt
ratings assigned to the Company by the major credit rating agencies.
The Company's credit ratings from the three major credit rating agencies are as
follows:
                                                    Issuer Rating                    Outlook                  Date of Last Update
S&P Ratings Service                                      BB+                          Stable                   December 3, 2021
Moody's Investors Service ("Moody's")                    Ba2                          Stable                    August 18, 2021
Fitch Investors Service ("Fitch")                        BBB-                         Stable                    August 18, 2021


On December 3, 2021, S&P affirmed Howmet's long-term debt rating at BB+ and
upgraded the current outlook from negative to stable, citing the Company's good
margins, positive free cash flow, and an anticipated recovery in aircraft
demand.
On August 18, 2021, Moody's affirmed the following ratings for Howmet: long-term
debt at Ba2 and the current outlook as stable.
On August 18, 2021, Fitch also affirmed the following ratings for Howmet:
long-term debt at BBB- and the current outlook as stable.
Investing Activities
Cash provided from investing activities was $107 in 2021 compared with $271 in
2020 and $528 in 2019.
The source of cash in 2021 was primarily cash receipts from sold receivables of
$267 and proceeds from the sale of a small manufacturing plant in France of $8
and the sale of assets at a small U.S. manufacturing facility in Fastening
Systems of $23, partially offset by capital expenditures of $199 primarily
related to capacity expansion investments in Hungary and Mexico in Forged Wheels
and various automation projects. As a result of accounts receivables
securitization program changes in 2021, there will be no additional activity
related to cash receipts from sold receivables within investing activities in
the Statement of Consolidated Cash Flows in future periods. The net cash funding
from the sale of accounts receivable was neither a use of cash nor a source of
cash during 2021.
The source of cash in 2020 was primarily cash receipts from sold receivables of
$422 and proceeds from the sale of a rolling mill business in Itapissuma, Brazil
of $50 and a hard alloy extrusions plant in South Korea of $62, both of which
were related to Arconic Corporation (see   Note     C   and   Note     U   to
the Consolidated Financial Statements in   Part II, Item 8   (Financial
Statements and Supplementary Data) of this Form 10-K), partially offset by
capital expenditures of $267.
The source of cash in 2019 was primarily cash receipts from sold receivables of
$995, proceeds from the sale of assets and businesses of $103, primarily from
the sale of a forgings business in the U.K. for $64 and the sale of inventories
and properties, plants, and equipment related to a small energy business for
$13, as well as contingent consideration of $20 related to the sale of the
Texarkana, Texas rolling mill (which was related to Arconic Corporation) (see

Note C and Note U to the consolidated financial statements

Part II, Item 8 (Financial Statements and Supplementary Data) of this Form 10-K), and the sale of fixed income securities of $73partially offset by capital expenditures of $641including the expansion of a wheel factory in Hungary,

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expansion of aerospace airfoils capacity in the United States, and transition of
the Tennessee plant to industrial production (which related to Arconic
Corporation).
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, 2021
(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 and to provide a basis for
comparison to historical information):
                                        Total             2022             2023-2024           2025-2026           Thereafter

Operating activities:

Commodity purchase obligations $393 $218 $

    173          $        2          $         -
Other purchase obligations                 13                11                   2                   -                    -
Operating leases                          134                38                  47                  22                   27
Interest related to total debt          1,637               225                 455                 275                  682
Estimated minimum required pension        134                44                  50                  40                    -
funding
Other postretirement benefit              111                12                  24                  22                   53
payments
Layoff and other restructuring             19                19                   -                   -                    -
payments

Uncertain tax positions                     2                 -                   -                   -                    2
Financing activities:
Total debt                              4,255                 5               1,150                 600                2,500

Investing activities:
Capital projects                          135               106                  29                   -                    -

Totals                               $  6,833          $    678          $    1,930          $      961          $     3,264



Obligations for Operating Activities
Raw material purchase obligations consist mostly of aluminum, 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 metal
costs in customer contracts with limited exceptions. As a result, the Company
expects higher metal costs to contribute to increased sales in 2022. 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.
Operating leases represent multi-year obligations for certain land and
buildings, plant equipment, vehicles, and computer equipment.
Interest related to total debt is based on interest rates in effect as of
December 31, 2021 and is calculated on debt with maturities that extend to 2042.
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 2026
and 2031, respectively.
Layoff and other restructuring payments to be paid within one year primarily
relate 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 amount in the
preceding table includes interest and penalties accrued related to such
positions as of December 31, 2021. The total amount of uncertain tax positions
is included in the "Thereafter" column as the Company is not
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able to reasonably estimate the timing of potential future payments. 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.
Obligations for Financing Activities
Howmet has historically paid quarterly dividends on its preferred and common
stock. The Company paid an aggregate of $19 in common stock and preferred stock
dividends to shareholders during 2021. 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. As of December 31, 2021,
there were 421,691,912 shares of outstanding common stock and 546,024 shares of
outstanding Class A preferred stock. In 2021, the preferred stock dividend was
$3.75 per share. A dividend of $0.04 per share on the Company's common stock was
paid in 2021 ($0.02 per share in each of the third and fourth quarters of 2021).
Fully diluted shares outstanding as of December 31, 2021 were 427,526,370.
Obligations for Investing Activities
Capital projects in the preceding table only include amounts approved by
management as of December 31, 2021. Funding levels may vary in future years
based on anticipated construction schedules of the projects. It is expected that
significant expansion projects will be funded through various sources, including
cash provided from operations. Total capital expenditures are anticipated to be
approximately 4% of sales in 2022.
Off-Balance Sheet Arrangements
At December 31, 2021, the Company had outstanding bank guarantees related to tax
matters, outstanding debt, workers' compensation, environmental obligations,
energy contracts, and customs duties, among others. The total amount committed
under these guarantees, which expire at various dates between 2022 and 2040, was
$15 at December 31, 2021.
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 had a combined fair value of $6
and $12 at December 31, 2021 and 2020, respectively, and were included in Other
noncurrent liabilities and deferred credits in the Consolidated Balance Sheet.
The remaining guarantee, for which the Company and Arconic Corporation are
secondarily liable in the event of a payment default by Alcoa Corporation,
relates to a long-term energy supply agreement that expires in 2047 at an Alcoa
Corporation facility. The Company currently views the risk of an Alcoa
Corporation payment default on its obligations under the contract to be remote.
The Company and Arconic Corporation are required to provide a guarantee up to an
estimated present value amount of approximately $1,406 and $1,398 at
December 31, 2021 and 2020, respectively, in the event of an Alcoa Corporation
payment default. In December 2021 and 2020, 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.
Howmet has outstanding letters of credit primarily related to workers'
compensation, environmental obligations, and leasing obligations. The total
amount committed under these letters of credit, which automatically renew or
expire at various dates, mostly in 2022, was $119 at December 31, 2021.
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 $53 (which are included in the $119
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 letter 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 environmental obligations and, as a result, the
Company has $17 of outstanding letters of credit relating to such liabilities
(which are included in the $119 in the above paragraph). Less than $1 of these
outstanding letters of credit are pending cancellation and will be deemed
cancelled once returned by the beneficiary. Arconic Corporation has issued
surety bonds to cover these environmental obligations. Arconic Corporation is
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.
Howmet has outstanding surety bonds primarily related to tax matters, contract
performance, workers' compensation, environmental-related matters, and customs
duties. The total amount committed under these annual surety bonds, which expire
and automatically renew at various dates, primarily in 2022 and 2023, was $47 at
December 31, 2021.
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 $25 (which are included in the $47 in the
above paragraph) that had previously been provided related to the Company,
Arconic Corporation and Alcoa Corporation workers' compensation claims paid that
occurred prior to the respective separation transactions of April 1, 2020 and
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November 1, 2016. Arconic Corporation and Alcoa Corporation workers'
compensation claims and surety bond fees paid by the Company are proportionally
billed to, and are reimbursed by Arconic Corporation and Alcoa Corporation.
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 the
impact of COVID-19. The impact of COVID-19 is rapidly changing and of unknown
duration and macroeconomic impact and as a result, these considerations remain
highly uncertain. Areas that require significant judgments, estimates, and
assumptions include the testing of goodwill, other intangible assets, and
properties, plants, and equipment for impairment; estimating fair value of
businesses acquired or divested; pension plans and other postretirement benefits
obligations; stock-based compensation; and income taxes.
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 flows, 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
impairment loss would be recognized when the carrying amount of the assets
(asset group) exceeds the estimated undiscounted net cash flows. The amount of
the impairment loss 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.
During the second quarter of 2019, the Company updated its five-year strategic
plan and determined that there was a decline in the forecasted financial
performance for the Disks asset group within the Engine Products and Forgings
segment at that time.  As such, the Company evaluated the recoverability of the
Disks asset group long-lived assets by comparing the carrying value to the
undiscounted cash flows of the Disks asset group. The carrying value exceeded
the undiscounted cash flows and therefore the Disks asset group long-lived
assets were deemed to be impaired. The impairment charge was measured as the
amount of carrying value in excess of fair value of the long-lived assets, with
fair value determined using a DCF model and a combination of sales comparison
and cost approach valuation methods, including an estimate for economic
obsolescence. The impairment charge of $428, of which $247 and $181 related to
the Engine Products and Engineered Structures segments, respectively, which was
recorded in the second quarter of 2019, impacted properties, plants, and
equipment; intangible assets; and certain other noncurrent assets by $198, $197,
and $33, respectively. The impairment charge was recorded in Restructuring and
other charges in the Statement of Consolidated Operations.
Discontinued Operations and Assets Held for Sale. The fair values of all
businesses to be divested are estimated using accepted valuation techniques such
as a DCF model, valuations performed by third parties, earnings multiples, or
indicative bids, when available. A number of significant estimates and
assumptions are involved in the application of these techniques, including the
forecasting of markets and market share, sales volumes and prices, costs and
expenses, and multiple other factors. Management considers historical experience
and all available information at the time the estimates are made; however, the
fair
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value that is ultimately realized upon the divestiture of a business may differ
from the estimated fair value reflected in the Consolidated Financial
Statements.
Pension and Other Postretirement Benefits. Liabilities and expenses for pension
and other postretirement benefits are determined using actuarial methodologies
and incorporate significant assumptions, including the interest rate used to
discount the future estimated liability, the expected long-term rate of return
on plan assets, and several assumptions relating to the employee workforce
(health care cost trend rates, retirement age, and mortality). The pension and
other postretirement benefits obligation was $2,461 and $2,928, with a funded
status of $(930) and $(1,204) at December 31, 2021 and 2020, respectively. The
total benefit obligation reduction of $467 was primarily driven by the purchases
of annuity contracts and changes in discount rate. The improvement in the funded
status of $274 was primarily driven by the purchase of annuity contracts,
changes in discount rates, and actual asset returns in excess of expected asset
returns. Excluding settlements and curtailments, net periodic benefit cost of
pension and other postretirement benefits is expected to be approximately $20 in
2022 compared to $16 and $35 in 2021 and 2020, respectively. Net periodic
benefit costs decreased by $19, or 54%, in 2021 compared to 2020 as a result of
actual asset returns in excess of expected asset returns, changes in discount
rates, and changes in plan administration of prescription drug benefits.
Employer contributions for pension benefits were $96 and $227 for the year ended
December 31, 2021 and 2020, respectively. Benefits paid for other postretirement
benefits were $17 for both years ended December 31, 2021 and 2020. Total pension
contributions and other postretirement benefits paid decreased by $131, or 54%,
in 2021 compared to 2020 primarily driven by the Arconic Inc. Separation
Transaction. Cash contributions in 2022 are expected to be $44 and represent
estimated minimum required pension funding. Howmet's funded status under ERISA
was approximately 76% as of January 1, 2021.
The interest rate used to discount future estimated liabilities for the U.S. 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 11 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 2021, 2020, and 2019, the discount rate used to determine
benefit obligations for pension and other postretirement benefit plans was
2.70%, 2.40%, and 3.00%, respectively. The impact on the liabilities of a change
in the discount rate of 1/4 of 1% would be approximately $70 and either a charge
or credit of less than $1 to earnings in the following year.
The expected long-term rate of return on plan assets is generally applied to a
five-year market-related value of plan assets (a fair value at the plan
measurement date is used for certain non-U.S. plans). 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.
For 2021, 2020, and 2019, management used 6.20%, 6.00%, and 5.60%, respectively,
as its 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. These rates were within the respective range of
the 20-year moving average of actual performance and the expected future return
developed by asset class. In the current year, the actual rate of return on plan
assets was 7.2%. The increase in expected long-term rate of return of plan
assets compared to prior years is due to an increased portion of plan assets
within U.S. plans and corresponding asset allocations. For 2022, management
anticipates that the expected long-term rate of return for the plan assets will
be approximately 6.00%. 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 $3 for 2022.
In 2021, net income of $181 (after-tax) was recorded in other comprehensive
loss, primarily due to the increase in the discount rate, plan asset performance
that was greater than expected, and amortization of actuarial losses. In 2020, a
net loss of $46 (after-tax) was recorded in other comprehensive loss, primarily
due to the decrease in the discount rate, partially offset by plan asset
performance that was greater than expected, and by amortization of actuarial
losses. After adjusting for the impact of Arconic Corporation's obligation, the
net pension and other postretirement benefit obligation decreased less than 2%
during 2020. In 2019, a net loss of $388 (after-tax) was recorded in other
comprehensive loss, primarily due to the decrease in the discount rate, which
was partially offset by plan asset performance that was greater than expected,
and by the amortization of actuarial losses.

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Stock-Based Compensation. Howmet recognizes compensation expense for employee
equity grants using the non-substantive vesting period approach, in which the
expense is recognized ratably over the requisite service period based on the
grant date fair value. Forfeitures are accounted for as they occur. The fair
value of new stock options is estimated on the date of grant using a
lattice-pricing model. The fair value of performance awards containing a market
condition is valued using a Monte Carlo valuation model. Determining the fair
value at the grant date requires judgment, including estimates for the average
risk-free interest rate, dividend yield, volatility, and exercise behavior.
These assumptions may differ significantly between grant dates because of
changes in the actual results of these inputs that occur over time.
Compensation expense recorded in 2021, 2020, and 2019 was $40 ($36 after-tax),
$46 ($42 after-tax), and $69 ($63 after-tax), respectively.
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 re-measured 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 their 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.
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.
Recently Adopted Accounting Guidance.
See the Recently Adopted 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.
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Recently Issued Accounting Guidance.
See the 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not material.
                                       36

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  Table of Contents
Item 8. Financial Statements and Supplementary Data.
                                                                                       Page
  Management's Reports to Howmet Shareholders                                              38
  Report of Independent Registered Public Accounting Firm   (PCAOB ID 238)                 39

Statement of consolidated operations for the years ended December 31, 20212020 and 2019

                                                                             41

Consolidated statement of comprehensive income for the years ended December 31, 20212020 and 2019

                                                                       42
  Consolidated Balance Sheet as of December 31, 2021 and 2020                              43

Consolidated statement of cash flows for the years ended December 31, 20212020 and 2019

                                                                             44

Consolidated statement of changes in equity for the years ended December 31, 20212020 and 2019

               45
  Notes to the Consolidated Financial Statements                                           46


                                       37

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Contents

                  Management's Reports to Howmet Shareholders
Management's Report on Financial Statements and Practices
The accompanying Consolidated Financial Statements of Howmet Aerospace Inc. and
its subsidiaries (the "Company") were prepared by management, which is
responsible for their integrity and objectivity. The statements were prepared in
accordance with accounting principles generally accepted in the United States of
America and include amounts that are based on management's best judgments and
estimates. The other financial information included in the annual report is
consistent with that in the financial statements.
Management also recognizes its responsibility for conducting the Company's
affairs according to the highest standards of personal and corporate conduct.
This responsibility is characterized and reflected in key policy statements
issued from time to time regarding, among other things, conduct of its business
activities within the laws of the host countries in which the Company operates
and potentially conflicting outside business interests of its employees. The
Company maintains a systematic program to assess compliance with these policies.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. In order to evaluate the
effectiveness of internal control over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment,
including testing, using the criteria in Internal Control-Integrated Framework
(2013), issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO"). The Company's system of internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The
Company's internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of
America, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company;
and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Based on the assessment, management has concluded that the Company maintained
effective internal control over financial reporting as of December 31, 2021,
based on criteria in Internal Control-Integrated Framework (2013) issued by the
COSO.
The effectiveness of the Company's internal control over financial reporting as
of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report, which
is included herein.

/s/ John C. Plant
John C. Plant
Executive Chairman and Chief Executive Officer



/s/ Ken Giacobbe
Ken Giacobbe
Executive Vice President and Chief Financial Officer



                                       38

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Contents

            Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Howmet Aerospace Inc.
Opinions on the Financial Statements and Internal Control over Financial
Reporting
We have audited the accompanying consolidated balance sheets of Howmet Aerospace
Inc. and its subsidiaries (the "Company") as of December 31, 2021 and 2020, and
the related consolidated statements of operations, of comprehensive income, of
changes in equity and of cash flows for each of the three years in the period
ended December 31, 2021, including the related notes (collectively referred to
as the "consolidated financial statements"). We also have audited the Company's
internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2021 in conformity
with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control - Integrated Framework (2013) issued by
the COSO.
Change in Accounting Principle
As discussed in Note B to the consolidated financial statements, the Company
changed the manner in which it accounts for leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial
statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express opinions on the
Company's consolidated financial statements and on the Company's internal
control over financial reporting based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing
procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
                                       39

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  Table of Contents
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the
current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective,
or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Goodwill Impairment Assessment - Engineered Structures Reporting Unit
As described in Notes A and P to the consolidated financial statements, the
Company's consolidated goodwill balance was $4,067 million as of December 31,
2021, and the amount of the goodwill associated with the Engineered Structures
reporting unit was $304 million. Goodwill is reviewed for impairment annually
(in the fourth quarter) or more frequently if indicators of impairment exist.
Under the quantitative impairment test, the evaluation of impairment involves
comparing the current fair value of each reporting unit to its carrying value,
including goodwill. Fair value is estimated by management using a discounted
cash flow model. The determination of fair value using this technique requires
management to use significant estimates and assumptions related to forecasting
operating cash flows, including sales growth, production costs, capital
spending, and discount rate.
The principal considerations for our determination that performing procedures
relating to the goodwill impairment assessment of the Engineered Structures
reporting unit is a critical audit matter are the significant judgment by
management when determining the fair value of the reporting unit. This in turn
led to a high degree of auditor judgment, subjectivity, and effort in performing
procedures and evaluating management's significant assumptions related to sales
growth, production costs, and discount rate. In addition, the audit effort
involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit
evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included testing the effectiveness of
controls relating to management's goodwill impairment assessment, including
controls over the valuation of the Company's Engineered Structures reporting
unit. These procedures also included, among others (i) testing management's
process for determining the fair value of the reporting unit; (ii) evaluating
the appropriateness of the discounted cash flow model; (iii) testing the
completeness and accuracy of underlying data used in the model; and (iv)
evaluating the reasonableness of the significant assumptions used by management
related to sales growth, production costs, and discount rate. Evaluating
management's significant assumptions related to sales growth and production
costs involved evaluating whether the significant assumptions used by management
were reasonable by considering (i) the current and past performance of the
reporting unit; (ii) the consistency with relevant industry data; and (iii)
considering whether the assumptions were consistent with evidence obtained in
other areas of the audit. Professionals with specialized skill and knowledge
were used to assist in the evaluation of the discounted cash flow model and the
evaluation of the reasonableness of the discount rate significant assumption.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 14, 2022
We have served as the Company's auditor since 1950.
                                       40

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Contents

                     Howmet Aerospace Inc. and subsidiaries
                      Statement of Consolidated Operations
                    (in millions, except per-share amounts)
For the year ended December 31,                                2021              2020              2019
Sales (  D  )                                               $  4,972          $  5,259          $  7,098
Cost of goods sold (exclusive of expenses below)               3,596             3,878             5,214
Selling, general administrative, and other expenses              251               277               400
Research and development expenses                                 17                17                28
Provision for depreciation and amortization                      270               279               295

Restructuring and other charges (  E  )                           90               182               582
Operating income                                                 748               626               579
Loss on debt redemption (  R  )                                  146                64                 -
Interest expense, net (  F  )                                    259               317               338
Other expense, net (  G  )                                        19                74                31
Income before income taxes                                       324               171               210
Provision (benefit) for income taxes (  I  )                      66               (40)               84

Earnings from continuing operations after income taxes $258

   $    211          $    126
Income from discontinued operations after income taxes             -                50               344
(  C  )
Net income                                                  $    258          $    261          $    470

Amounts attributable to Howmet Aerospace Inc. Ordinary shareholders ( K ): Net profit

                                                  $    256          $    259          $    477
Earnings per share - basic
Continuing operations                                       $   0.60          $   0.48          $   0.28
Discontinued operations                                     $      -          $   0.11          $   0.77
Earnings per share - diluted
Continuing operations                                       $   0.59          $   0.48          $   0.27
Discontinued operations                                     $      -          $   0.11          $   0.76
Average Shares Outstanding (  J  ):
Average shares outstanding - basic                               430               435               446
Average shares outstanding - diluted                             435               439               463


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

                                  statements.
                                       41

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Contents

                     Howmet Aerospace Inc. and subsidiaries
                 Statement of Consolidated Comprehensive Income
                                 (in millions)
For the year ended December 31,                             2021               2020               2019
Net income                                              $     258          

$261 $470
Other comprehensive income, net of tax ( L ): change in unrecognized net actuarial loss and prior service cost (benefit) related to pension plans and other

           181                (46)              (388)
postretirement benefits
Foreign currency translation adjustments                      (96)                58                (13)
Net change in unrealized gains on debt securities               -                  -                  3

Net change in unrecognized gains (losses) on cash flows (5)

        4                 (3)

hedges

Total Other comprehensive income (loss), net of tax            80                 16               (401)
Comprehensive income                                    $     338          $     277          $      69

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

                                  statements.
                                       42

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  Table of Contents
                     Howmet Aerospace Inc. and subsidiaries
                           Consolidated Balance Sheet
                                 (in millions)

December 31,                                                          2021                2020
Assets
Current assets:
Cash and cash equivalents                                         $      720          $    1,610
Receivables from customers, less allowances of $- in 2021 and $1                             328
in 2020 (  M  )                                                          367
Other receivables (  M  )                                                 53                  29
Inventories (  N  )                                                    1,402               1,488
Prepaid expenses and other current assets                                195                 217

Total current assets                                                   2,737               3,672
Properties, plants, and equipment, net (  O  )                         2,467               2,592
Goodwill (  A   and   P  )                                             4,067               4,102
Deferred income taxes (  I  )                                            184                 272
Intangibles, net (  P  )                                                 549                 571
Other noncurrent assets (  A   and   Q  )                                215                 234

Total assets                                                      $   10,219          $   11,443
Liabilities
Current liabilities:
Accounts payable, trade                                           $      732          $      599
Accrued compensation and retirement costs                                198                 205
Taxes, including income taxes                                             61                 102
Accrued interest payable                                                  74                  89
Other current liabilities (  A   and   Q  )                              183                 289
Short-term debt (  R   and   S  )                                          5                 376

Total current liabilities                                              1,253               1,660

Long-term debt, less amount due within one year (R&S) 4,227

               4,699
Accrued pension benefits (  H  )                                         771                 985
Accrued other postretirement benefits (  H  )                            153                 198
Other noncurrent liabilities and deferred credits (  A   and                                 324
  Q  )                                                                   307

Total liabilities                                                      6,711               7,866
Contingencies and commitments (  V  )
Equity
Howmet Aerospace Inc. shareholders' equity:
Preferred stock (  J  )                                                   55                  55
Common stock (  J  )                                                     422                 433
Additional capital (  J  )                                             4,291               4,668
Retained earnings (  A  )                                                603                 364
Accumulated other comprehensive loss (  A   and   L  )                (1,863)             (1,943)
Total Howmet Aerospace Inc. shareholders' equity                       3,508               3,577
Noncontrolling interests                                                   -                   -
Total equity                                                           3,508               3,577
Total liabilities and equity                                      $   

10,219 $11,443

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

                                  statements.
                                       43

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Contents

                     Howmet Aerospace Inc. and subsidiaries
                      Statement of Consolidated Cash Flows
                                 (in millions)
For the year ended December 31,                                         2021              2020             2019
Operating activities
Net income                                                          $     258          $   261          $    470
Adjustments to reconcile net income to cash provided from
operations:
Depreciation and amortization                                             270              338               536
Deferred income taxes                                                      38                2               (19)

Restructuring and other charges                                            90              164               620
Net loss from investing activities-asset sales                              9                8                 7
Net periodic pension benefit cost (  H  )                                  18               51               115
Stock-based compensation                                                   41               45                60
Loss on debt redemption (  R  )                                           146               64                 -
Other                                                                      20               (5)               13

Changes in assets and liabilities, excluding effects of acquisitions, disposals and translation differences: Increase in receivables

                                                  (337)            (238)             (977)
Decrease (increase) in inventories                                         60               74                (3)

Decrease (increase) in prepaid expenses and other current assets 11

               (2)                4
Increase (decrease) in accounts payable, trade                            144             (381)               (1)
Decrease in accrued expenses                                             (146)            (217)              (42)
(Decrease) increase in taxes, including income taxes                      (41)              98                (2)
Pension contributions                                                     (96)            (257)             (268)
(Increase) decrease in noncurrent assets                                  (13)              39                (7)
Decrease in noncurrent liabilities                                        (23)             (35)              (45)
Cash provided from operations                                             449                9               461

Financing activities Net change in short-term borrowings (initial maturities of three (9)

             (15)                2

months or less) Additions to debt (original maturities greater than three months) 700

            2,400               400

( R ) Payments on debt (original maturities greater than three months) (1,538) (2,043)

             (806)
(  R  )
Debt issuance costs (  C   and   R  )                                     (11)             (61)                -
Premiums paid on early redemption of debt (  R  )                        (138)             (59)                -
Proceeds from exercise of employee stock options                           22               33                56
Dividends paid to shareholders (  J  )                                    (19)             (11)              (57)

Repurchase of common stock (  J  )                                       (430)             (73)           (1,150)
Net cash transferred to Arconic Corporation at separation                   -             (500)                -
Other                                                                     (21)             (40)              (13)
Cash used for financing activities                                     (1,444)            (369)           (1,568)
Investing Activities
Capital expenditures (  D   and   T  )                                   (199)            (267)             (641)

Proceeds from the sale of assets and businesses (  U  )                    32              114               103
Sales of investments                                                        6                -                73
Cash receipts from sold receivables (  M  )                               267              422               995
Other                                                                       1                2                (2)
Cash provided from investing activities                                   107              271               528

Effect of exchange rates on cash, cash equivalents and affected assets (1)

              (3)                -

cash

Net change in cash, cash equivalents and restricted cash                 (889)             (92)             (579)

Cash, cash equivalents and restricted cash at the beginning of the year 1,611

            1,703             2,282
Cash, cash equivalents and restricted cash at end of year           $     

722 $1,611 $1,703

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

                                  statements.
                                       44

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  Table of Contents
                     Howmet Aerospace Inc. and subsidiaries
                  Statement of Changes in Consolidated Equity
                    (in millions, except per-share amounts)
                                                                      Howmet Shareholders
                                                                                                                       Accumulated
                                                                                             Retained earnings            other
                                                  Preferred        Common      Additional       (Accumulated          comprehensive     Noncontrolling     Total
                                                    stock           stock       capital           deficit)                loss            interests        equity
Balance at December 31, 2018                    $       55       $    483    $     8,319    $            (374)      $       (2,926)   $            12    $ 5,569
Adoption of accounting standard (  B  )                  -              -              -                   75                   (2)                 -         73
Net income                                               -              -              -                  470                    -                  -        470
Other comprehensive loss (  L  )                         -              -              -                    -                 (401)                 -       (401)
Cash dividends declared:
Preferred-Class A @ $3.75 per share                      -              -              -                   (2)                   -                  -         (2)

Common @ $0.12 per share                                 -              -              -                  (56)                   -                  -        (56)
Repurchase and retirement of common stock                -            (55)        (1,095)                   -                    -                  -     (1,150)
(  J  )
Stock-based compensation (  J  )                         -              -             57                    -                    -                  -         57
Common stock issued: compensation plans (  J  )          -              5             36                    -                    -                  -         41

Other                                                    -              -              2                    -                    -                  2          4
Balance at December 31, 2019                    $       55       $    433    $     7,319    $             113       $       (3,329)   $            14    $ 4,605

Net income                                               -              -              -                  261                    -                  -        261
Other comprehensive income (  L  )                       -              -              -                    -                   16                  -   

16

Cash dividends declared:
Preferred-Class A @ $3.75 per share                      -              -              -                   (2)                   -                  -         (2)
Common @ $0.02 per share                                 -              -              -                   (8)                   -                  -         (8)
Repurchase and retirement of common stock                -             (3)           (70)                   -                    -                  -        (73)
(  J  )
Stock-based compensation (  J  )                         -              -             45                    -                    -                  -         45
Common stock issued: compensation plans (  J  )          -              3             (9)                   -                    -                  -   

(6)

Distributions to Arconic Corporation (  C  )             -              -         (2,617)                   -                1,370                (14) 

(1,261)

Balance at December 31, 2020                    $       55       $    433    $     4,668    $             364       $       (1,943)   $             -    $ 3,577

Net income                                               -              -              -                     258                 -                  -        258
Other comprehensive income (  L  )                       -              -              -                    -                   80                  -   

80

Cash dividends declared:
Preferred-Class A @ $3.75 per share                      -              -              -                   (2)                   -                  -         (2)
Common @ $0.04 per share                                 -              -              -                  (17)                   -                  -        (17)
Repurchase and retirement of common stock                -            (13)          (417)                   -                    -                  -       (430)
(  J  )
Stock-based compensation (  J  )                         -              -             40                    -                    -                  -         40
Common stock issued: compensation plans (  J  )          -              2              -                    -                    -                  -   

2

Balance at December 31, 2021                    $       55       $    422    $     4,291    $             603       $       (1,863)   $             -   

$3,508

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

                                  statements.
                                       45

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Contents

                     Howmet Aerospace Inc. and subsidiaries
                 Notes to the Consolidated Financial Statements
           (dollars in millions, except share and per-share amounts)
A. Summary of Significant Accounting Policies
Basis of Presentation. The Consolidated Financial Statements of Howmet Aerospace
Inc. (formerly known as Arconic Inc.) and subsidiaries ("Howmet" or the
"Company" or "we") are prepared in conformity with accounting principles
generally accepted in the United States of America ("GAAP") and require
management to make certain judgments, estimates, and assumptions. These
estimates are based on historical experience and, in some cases, assumptions
based on current and future market experience, including considerations relating
to the impact of the global COVID-19 pandemic. The impact of COVID-19 is rapidly
changing and of unknown duration and macroeconomic impact and as a result, these
considerations remain highly uncertain. We have made our best estimates using
all relevant information available at the time, but it is possible that our
estimates will differ from our actual results and affect the Consolidated
Financial Statements in future periods and potentially require adverse
adjustments to the recoverability of goodwill, intangible and long-lived assets,
the realizability of deferred tax assets, and other judgments and estimations
and assumptions. These may affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements. They also may affect the reported amounts of sales and
expenses during the reporting period. Actual results could differ from those
estimates upon subsequent resolution of identified matters. Certain amounts in
previously issued financial statements were reclassified to conform to the
current period presentation.
The separation of Arconic Inc. into two standalone, publicly-traded companies,
Howmet Aerospace Inc. and Arconic Corporation, (the "Arconic Inc. Separation
Transaction") occurred on April 1, 2020. The Engineered Products and Forgings
("EP&F") segment remained in the existing company which was renamed Howmet
Aerospace Inc. The Global Rolled Products ("GRP") segment was the Spin Co. and
was named Arconic Corporation. In the second quarter of 2020, in conjunction
with the Arconic Inc. Separation Transaction, the Company realigned its
operations by separating the former EP&F segment into four new segments: Engine
Products, Fastening Systems, Engineered Structures and Forged Wheels. See   Note
    D   for further details.
The financial results of Arconic Corporation for all periods prior to the
Arconic Inc. Separation Transaction have been retrospectively reflected in the
Statement of Consolidated Operations as discontinued operations and, as such,
have been excluded from continuing operations and segment results for all
periods presented. The cash flows, comprehensive income, and equity related to
Arconic Corporation have not been segregated and are included in the Statement
of Consolidated Cash Flows, Statement of Consolidated Comprehensive Income, and
Statement of Changes in Consolidated Equity, respectively, for all periods prior
to the Arconic Inc. Separation Transaction. See   Note     C   for additional
information related to the Arconic Inc. Separation Transaction and discontinued
operations.
The Company derived approximately 60%, 69%, and 71% of its revenue from products
sold to the aerospace market for the years ended December 31, 2021, 2020, and
2019. As a result of the global COVID-19 pandemic and its impact on the
aerospace industry to date, the possibility exists that there could be a
sustained impact to our operations and financial results. Since the start of the
pandemic, certain original equipment manufacturer ("OEM") customers have reduced
production or suspended manufacturing operations in North America and Europe on
a temporary basis. While the pandemic resulted in the temporary closure of a
small number of the Company's manufacturing facilities during 2020, all of our
manufacturing facilities are currently operating. Since the duration of the
pandemic is uncertain, management has taken a series of actions to address the
financial impact, including fixed and variable cost reductions, such as
headcount reductions in certain segments, and reducing the level of capital
expenditures to preserve cash and maintain liquidity.
Principles of Consolidation. The Consolidated Financial Statements include the
accounts of Howmet Aerospace Inc. and companies in which Howmet Aerospace Inc.
has a controlling interest. Intercompany transactions have been eliminated.
Investments in affiliates in which Howmet Aerospace Inc. cannot exercise
significant influence that do not have readily determinable fair values are
accounted for at cost less impairment, if any, plus or minus changes resulting
from observable price changes in orderly transactions for the identical or a
similar investment of the same issuer.
Management also evaluates whether a Howmet Aerospace Inc. entity or interest is
a variable interest entity and whether Howmet Aerospace Inc. is the primary
beneficiary. Consolidation is required if both of these criteria are met. Howmet
Aerospace Inc. does not have any variable interest entities requiring
consolidation.
Cash Equivalents. Cash equivalents are highly liquid investments purchased with
an original maturity of three months or less.
Inventory Valuation. Inventories are carried at the lower of cost or net
realizable value with the cost of inventories determined under a combination of
the first-in, first-out ("FIFO"), last-in, first-out ("LIFO"), and average-cost
methods. See   Note     N   for further details.
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Properties, Plants, and Equipment. Properties, plants, and equipment are
recorded at cost. Depreciation is recorded principally on the straight-line
method at rates based on the estimated useful lives of the assets.
The following table details the weighted-average useful lives of structures and
machinery and equipment by reporting segment (numbers in years):
                            Structures       Machinery and equipment
  Engine Products               30                      17
  Fastening Systems             27                      17
  Engineered Structures         28                      19
  Forged Wheels                 29                      18


Gains or losses from the sale of asset groups or properties are generally
recorded in Restructuring and other charges while the sale of individual assets
are recorded in Other expense, net (see policy below for assets classified as
held for sale and discontinued operations). Repairs and maintenance are charged
to expense as incurred. Interest related to the construction of qualifying
assets is capitalized as part of the construction costs.
Properties, plants, and equipment 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 impairment loss would be
recognized when the carrying amount of the assets (asset group) exceeds the
estimated undiscounted net cash flows. The amount of the impairment loss 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 discounted cash flow ("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. See   Note     O   for further details.
Goodwill. Goodwill is not amortized; instead, it is reviewed 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. A significant
amount of judgment is involved in determining if an indicator of impairment has
occurred. Such indicators may include deterioration in 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 flows, or a trend of negative or declining
cash flows over multiple periods, among others. The fair value that could be
realized in an actual transaction may differ from that used to evaluate the
impairment of goodwill.
Goodwill is allocated among and evaluated for impairment at the reporting unit
level, which is defined as an operating segment or one level below an operating
segment. Howmet has four reporting units composed of the Engine Products,
Fastening Systems, Engineered Structures, and Forged Wheels segments.
In reviewing goodwill for impairment, an entity has the option to first assess
qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not (greater
than 50%) that the estimated fair value of a reporting unit is less than its
carrying amount. If an entity elects to perform a qualitative assessment and
determines that an impairment is more likely than not, the entity is then
required to perform the quantitative impairment test (described below),
otherwise no further analysis is required. The qualitative evaluation is an
assessment of factors, including reporting unit-specific operating results as
well as industry, market, and general economic conditions. An entity also may
elect not to perform the qualitative assessment and, instead, proceed directly
to the quantitative impairment test. The ultimate outcome of the goodwill
impairment review for a reporting unit should be the same whether an entity
chooses to perform the qualitative assessment or proceeds directly to the
quantitative impairment test.
Howmet determines annually, based on facts and circumstances, which of its
reporting units will be subject to the qualitative assessment. Under the
qualitative assessment, various events and circumstances (or factors) that would
affect the estimated fair value of a reporting unit are identified (similar to
impairment indicators above). Furthermore, management considers the results of
the most recent quantitative impairment test completed for a reporting unit and
compares the weighted average cost of capital ("WACC") between the current and
prior years for each reporting unit. For those reporting units where a
qualitative assessment is either not performed or for which the conclusion is
that an impairment is more likely than not, a quantitative impairment test will
be performed. Howmet's policy is that a quantitative impairment test be
performed for each reporting unit at least once during every three-year period.

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Other Intangible Assets. Intangible assets with indefinite useful lives are not
amortized while intangible assets with finite useful lives are amortized
generally on a straight-line basis over the periods benefited.
The following table details the weighted-average useful lives of software and
other intangible assets by reporting segment (numbers in years):
                           Software       Other intangible assets
  Engine Products              9                     34
  Fastening Systems            6                     23
  Engineered Structures        4                     10
  Forged Wheels                4                     24


Leases. The Company determines whether a contract contains a lease at inception.
The Company leases land and buildings, plant equipment, vehicles, and computer
equipment which have been classified as operating leases. Certain real estate
leases include one or more options to renew; the exercise of lease renewal
options is at the Company's discretion. The Company includes renewal option
periods in the lease term when it is determined that the options are reasonably
certain to be exercised. Certain of Howmet's real estate lease agreements
include rental payments that either have fixed contractual increases over time
or adjust periodically for inflation. Certain of the Company's lease agreements
include variable lease payments. The variable portion of payments is not
included in the initial measurement of the right-of-use asset or lease liability
due to the uncertainty of the payment amount and is recorded as lease cost in
the period incurred. The Company also rents or subleases certain real estate to
third parties, which is not material to the consolidated financial statements.
Operating lease right-of-use assets and lease liabilities with an initial term
greater than 12 months are recorded on the balance sheet at the present value of
the future minimum lease payments over the lease term at the lease commencement
date and are recognized as lease expense on a straight-line basis over the lease
term. The Company uses an incremental collateralized borrowing rate based on the
information available at the lease commencement date in determining the present
value of future payments, as most of its leases do not provide an implicit rate.
The operating lease right-of-use assets also include any lease prepayments made
and are reduced by lease incentives and accrued exit costs.
Environmental Matters. Expenditures for current operations are expensed or
capitalized, as appropriate. Expenditures relating to existing conditions caused
by past operations, which will not contribute to future sales, are expensed.
Liabilities are recorded when remediation costs are probable and can be
reasonably estimated. The liability may include costs such as site
investigations, consultant fees, feasibility studies, outside contractors, and
monitoring expenses. Estimates are generally not discounted or reduced by
potential claims for recovery. Claims for recovery are recognized when probable
and as agreements are reached with third parties. The estimates also include
costs related to other potentially responsible parties to the extent that Howmet
has reason to believe such parties will not fully pay their proportionate share.
The liability is continuously reviewed and adjusted to reflect current
remediation progress, prospective estimates of required activity, and other
factors that may be relevant, including changes in technology or regulations.
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.
Revenue Recognition. The Company's contracts with customers are comprised of
acknowledged purchase orders incorporating the Company's standard terms and
conditions, or for larger customers, may also generally include terms under
negotiated multi-year agreements. These contracts with customers typically
consist of the manufacture of products which represent single performance
obligations that are satisfied upon transfer of control of the product to the
customer. The Company produces fastening systems; seamless rolled rings;
investment castings, including airfoils; extruded, machined and formed aircraft
parts; and forged aluminum commercial vehicle wheels. Transfer of control is
assessed based on alternative use of the products we produce and our enforceable
right to payment for performance to date under the contract terms. Transfer of
control and revenue recognition generally occur upon shipment or delivery of the
product, which is when title, ownership and risk of loss pass to the customer
and is based on the applicable shipping terms. The shipping terms vary across
all businesses and depend on the product, the country of origin, and the type of
transportation (truck, train, or vessel). An invoice for payment is issued at
time of
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shipment. Our segments set commercial terms on which Howmet sells products to
its customers. These terms are influenced by industry custom, market conditions,
product line (specialty versus commodity products), and other considerations.
In certain circumstances, Howmet receives advanced payments from its customers
for product to be delivered in future periods. These advanced payments are
recorded as deferred revenue until the product is delivered and title and risk
of loss have passed to the customer in accordance with the terms of the
contract. Deferred revenue is included in Other current liabilities and Other
noncurrent liabilities and deferred credits in the Consolidated Balance Sheet.
Advanced payments were $46 and $85 at December 31, 2021 and 2020, respectively.
Income Taxes. The provision for income taxes is determined using the asset and
liability approach of accounting for income taxes. Under this approach, the
provision for income taxes represents income taxes paid or payable (or received
or receivable) for the current year 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 (greater than 50%) 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 carryback
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 Global
Intangible Low-Taxed Income ("GILTI") income 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 their 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.
Stock-Based Compensation. Howmet recognizes compensation expense for employee
equity grants using the non-substantive vesting period approach, in which the
expense is recognized ratably over the requisite service period based on the
grant date fair value. Forfeitures are accounted for as they occur. The fair
value of new stock options is estimated on the date of grant using a
lattice-pricing model. The fair value of performance awards containing a market
condition is valued using a Monte Carlo valuation model. Determining the fair
value at the grant date requires judgment, including estimates for the average
risk-free interest rate, dividend yield, volatility, and exercise behavior.
These assumptions may differ significantly between grant dates because of
changes in the actual results of these inputs that occur over time.
Foreign Currency. The local currency is the functional currency for Howmet's
significant operations outside the United States ("U.S."), except for certain
operations in Canada, the United Kingdom, and France, where the U.S. dollar is
used as the functional currency. The determination of the functional currency
for Howmet's operations is made based on the appropriate economic and management
indicators.
Acquisitions. Howmet's business acquisitions are accounted for using the
acquisition method. The purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values. Any excess purchase
price over the fair value of the net assets acquired is recorded as goodwill.
For all acquisitions, operating results are included in the Statement of
Consolidated Operations from the date of the acquisition.
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Discontinued Operations and Assets Held for Sale. For those businesses where
management has committed to a plan to divest, each business is valued at the
lower of its carrying amount or estimated fair value less cost to sell. If the
carrying amount of the business exceeds its estimated fair value, an impairment
loss is recognized. Fair value is estimated using accepted valuation techniques
such as a DCF model, valuations performed by third parties, earnings multiples,
or indicative bids, when available. A number of significant estimates and
assumptions are involved in the application of these techniques, including the
forecasting of markets and market share, sales volumes and prices, costs and
expenses, and multiple other factors. Management considers historical experience
and all available information at the time the estimates are made; however, the
fair value that is ultimately realized upon the divestiture of a business may
differ from the estimated fair value reflected in the Consolidated Financial
Statements. Depreciation and amortization expense is not recorded on assets of a
business to be divested once they are classified as held for sale. Businesses to
be divested are generally classified in the Consolidated Financial Statements as
either discontinued operations or held for sale.
For businesses classified as discontinued operations, the balance sheet amounts
and results of operations are reclassified from their historical presentation to
assets and liabilities of discontinued operations on the Consolidated Balance
Sheet and to discontinued operations on the Statement of Consolidated
Operations, respectively, for all periods presented. The gains or losses
associated with these divested businesses are recorded in discontinued
operations on the Statement of Consolidated Operations. The Statement of
Consolidated Cash Flows is not required to be reclassified for discontinued
operations for any period. Segment information does not include the assets or
operating results of businesses classified as discontinued operations for all
periods presented. These businesses are expected to be disposed of within one
year.
For businesses classified as held for sale that do not qualify for discontinued
operations treatment, the balance sheet and cash flow amounts are reclassified
from their historical presentation to assets and liabilities of operations held
for sale for all periods presented. The results of operations continue to be
reported in continuing operations. The gains or losses associated with these
divested businesses are recorded in Restructuring and other charges on the
Statement of Consolidated Operations. The segment information includes the
assets and operating results of businesses classified as held for sale for all
periods presented.

B. Recently Adopted and Recently Issued Accounting Guidance
Recently Adopted Accounting Guidance.
On January 1, 2021, the Company adopted changes issued by the Financial
Accounting Standards Board ("FASB") that were intended to simplify various
aspects of accounting for income taxes by eliminating certain exceptions
contained in existing guidance and amending other guidance to simplify several
other income tax accounting matters. The adoption of this new guidance did not
have a material impact on the Consolidated Financial Statements.
On January 1, 2020, the Company adopted changes issued by the FASB related to
the impairment model for expected credit losses. The new impairment model (known
as the current expected credit loss ("CECL") model) is based on expected losses
rather than incurred losses. The Company recognizes as an allowance its estimate
of expected credit losses. The CECL model applies to most debt instruments,
trade receivables, lease receivables, financial guarantee contracts, and other
loan commitments and requires the measurement of expected credit losses on
assets including those that have a low risk of loss. The adoption of this new
guidance did not have a material impact on the Consolidated Financial
Statements.
In August 2018, the FASB issued guidance that impacts disclosures for defined
benefit pension plans and other postretirement benefit plans. These changes
became effective for Howmet's annual report for the year ended December 31, 2020
which did not have a material impact on its Consolidated Financial Statements.
In February 2016, the FASB issued changes to the accounting and presentation of
leases. These changes required lessees to recognize a right-of-use asset and
lease liability on the balance sheet, initially measured at the present value of
lease payments for all operating leases with a term greater than 12 months.
These changes became effective for the Company on January 1, 2019 and have been
applied using the modified retrospective approach as of the date of adoption,
under which leases existing at, or entered into after, January 1, 2019 were
required to be recognized and measured. Prior period amounts have not been
adjusted and continue to be reflected in accordance with the Company's
historical accounting. The Company elected the package of practical expedients
permitted under the transition guidance within the new standard, which among
other things, allowed the Company to carry forward the historical lease
classification. The Company also elected to separate lease components from
non-lease components for all classes of assets.
The adoption of this new lease standard resulted in the Company recording
operating lease right-of-use assets and lease liabilities of approximately $320
on the Consolidated Balance Sheet as of January 1, 2019. The adoption of the new
lease standard had no impact on the Statement of Consolidated Operations or
Statement of Consolidated Cash Flows. As a result of the new standard, a gain of
$73 (net of tax) on a 2018 sale leaseback transaction was no longer required to
be deferred and the accumulated deficit within the Consolidated Balance Sheet
and Statement of Changes in Consolidated Equity were increased accordingly.
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In August 2017, the FASB issued guidance that made more financial and
nonfinancial hedging strategies eligible for hedge accounting. It also amended
the presentation and disclosure requirements and changed how companies assess
effectiveness. It is intended to more closely align hedge accounting with
companies' risk management strategies, simplify the application of hedge
accounting, and increase transparency as to the scope and results of hedging
programs. These changes became effective for the Company on January 1, 2019. For
cash flow hedges, Howmet recorded a cumulative effect adjustment of $2 related
to eliminating the separate measurement of ineffectiveness by decreasing
Accumulated other comprehensive loss and increasing Retained earnings on its
Consolidated Balance Sheet and Statement of Changes in Consolidated Equity. The
amendments to presentation and disclosure are required prospectively. Howmet has
determined that under the new accounting guidance it is able to more broadly use
cash flow hedge accounting for its variable priced inventory purchases and
customer sales.
Recently Issued Accounting Guidance.
In March 2020, the FASB issued amendments that provide optional expedients and
exceptions for applying GAAP to contracts, hedging relationships, and other
transactions affected by reference rate reform, if certain criteria are met. The
amendments apply only to contracts and hedging relationships that reference
London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to
be discontinued due to reference rate reform. These amendments are effective
immediately and may be applied prospectively to contract modifications made and
hedging relationships entered into or evaluated on or before December 31, 2022.
Management does not believe the impact of these changes will have a material
impact on the Consolidated Financial Statements.
C. Arconic Inc. Separation Transaction and Discontinued Operations
On April 1, 2020, the Company completed the separation of its business into two
independent, publicly-traded companies, which was effected by the distribution
(the "Distribution") by the Company of all of the outstanding common stock of
Arconic Corporation to the Company's stockholders. Following the Arconic Inc.
Separation Transaction, Arconic Corporation held the Global Rolled Products
businesses (global rolled products, aluminum extrusions, and building and
construction systems) previously held by the Company. The Company retained the
Engineered Products and Forgings businesses (engine products, fastening systems,
engineered structures, and forged wheels).
In connection with the Arconic Inc. Separation Transaction, the Company entered
into several agreements with Arconic Corporation, including the following: a
Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters
Agreement, certain Patent, Know-How, Trade Secret License and Trademark License
Agreements, and Raw Material Supply Agreements.
On February 7, 2020, Arconic Corporation completed an offering of $600 aggregate
principal amount of 6.125% senior secured second-lien notes due 2028. On March
25, 2020, Arconic Corporation entered into a credit agreement which provided for
a $600 aggregate principal amount seven-year senior secured first-lien loan B
facility and a revolving credit facility which is guaranteed by certain of
Arconic Corporation's wholly-owned domestic subsidiaries and secured on a
first-priority basis by liens on substantially all assets of Arconic Corporation
and subsidiary guarantors. Arconic Corporation used the proceeds to make payment
to the Company to fund the transfer of certain assets to Arconic Corporation
relating to the Arconic Inc. Separation Transaction and for general corporate
purposes. The Company incurred debt issuance costs of $45 associated with these
issuances for the first quarter of 2020 and year ended December 31, 2020.
On February 1, 2020, the Company completed the sale of its rolling mill in
Itapissuma, Brazil for $50 in cash, which resulted in a loss of $59, of which
$53 was recognized in Restructuring and other charges within discontinued
operations in the second half of 2019 and $6 in the first quarter of 2020 and
year ended December 31, 2020. On March 1, 2020, the Company sold its hard alloy
extrusions plant in South Korea for $62 in cash, which resulted in a gain that
was recognized in Restructuring and other charges within discontinued operations
in the first quarter of 2020 and year ended December 31, 2020.
On October 31, 2018, the Company sold its Texarkana, Texas rolling mill and cast
house, which included contingent consideration of up to $50. The contingent
consideration related to the achievement of various milestones within 36 months
of the transaction closing date associated with operationalizing the rolling
mill equipment. In 2019, the Company received additional contingent
consideration of $20 and recorded a gain. These amounts were recorded in
discontinued operations in the Statement of Consolidated Operations.
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Discontinued Operations
The results of operations of Arconic Corporation are presented as Income from
discontinued operations after income taxes in the Statement of Consolidated
Operations as summarized below:
                                                                         Year ended December 31,
                                                                        2020                 2019
Sales                                                              $      1,575          $    7,094
Cost of goods sold                                                        1,293               6,013

Selling, general administration, research and development and other expenses

                                                              106                 346
Provision for depreciation and amortization                                  58                 241
Restructuring and other (credits) charges                                   (18)                 38
Operating income from discontinued operations                               136                 456
Interest expense, net                                                         7                   -
Other expense, net                                                           41                  91
Income from discontinued operations                                          88                 365
Provision for income taxes                                                   38                  21
Income from discontinued operations after income taxes             $        

50 $344



The following table presents purchases of properties, plants, and equipment,
proceeds from the sale of businesses, and the provision for depreciation and
amortization of discontinued operations related to Arconic Corporation:
                                                      Year ended December 31,
                                                          2020                 2019
Capital expenditures                          $          72                   $ 210
Proceeds from the sales of businesses         $         112                   $  20
Provision for depreciation and amortization   $          58                 

$241



On April 1, 2020, management evaluated the net assets of Arconic Corporation for
potential impairment and determined that no impairment charge was required.
The cash flows and equity related to Arconic Corporation have not been
segregated and are included in the Statement of Consolidated Cash Flows or
Statement of Comprehensive Income for all periods presented prior to the Arconic
Inc. Separation Transaction.

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The carrying amount of the major classes of assets and liabilities related to
Arconic Corporation were classified as assets and liabilities of discontinued
operations in the 2019 Consolidated Balance Sheet consisted of the following:
                                                         December 31, 2019
Total assets of discontinued operations
Cash and cash equivalents                               $               71
Receivables from customers                                             385
Other receivables                                                      135
Inventories                                                            822
Prepaid expenses and other current assets                               29
Current assets of discontinued operations                            1,442
Properties, plants, and equipment, net                               2,834
Goodwill                                                               426
Intangibles, net                                                        60
Deferred income taxes                                                  383
Other noncurrent assets                                                196
Noncurrent assets of discontinued operations                         3,899
Total assets of discontinued operations                 $            5,341

Total liabilities of discontinued operations:
Accounts payable, trade                                 $            1,067
Accrued compensation and retirement costs                              147
Taxes, including income taxes                                           22
Other current liabilities                                              188
Current liabilities of discontinued operations                       1,424
Accrued pension benefits                                             1,429
Accrued other postretirement benefits                                  514
Other noncurrent liabilities and deferred credits                      315
Noncurrent liabilities of discontinued operations                    2,258
Total liabilities of discontinued operations            $            3,682


D. Segment and Geographic Area Information
Howmet is a global leader in lightweight metals engineering and manufacturing.
Howmet's innovative, multi-material products, which include nickel, titanium,
aluminum, and cobalt, are used worldwide in the aerospace (commercial and
defense), commercial transportation, and industrial and other markets. Segment
performance under Howmet's management reporting system is evaluated based on a
number of factors; however, the primary measure of performance is Segment
operating profit. Howmet's definition of Segment operating profit is Operating
income excluding Special items. Special items include Restructuring and other
charges and Impairment of Goodwill. Segment operating profit may not be
comparable to similarly titled measures of other companies. Differences between
the total segment and consolidated totals are in Corporate.
Following the Arconic Inc. Separation Transaction, Howmet's operations consist
of four worldwide reportable segments as follows:
Engine Products
Engine Products produces investment castings, including airfoils, and seamless
rolled rings primarily for aircraft engines and industrial gas turbines. Engine
Products produces rotating parts as well as structural parts.
Fastening Systems
Fastening Systems produces aerospace fastening systems, as well as commercial
transportation, industrial and other fasteners. The business's high-tech,
multi-material fastening systems are found nose to tail on aircraft and aero
engines. The business's products are also critical components of commercial
transportation vehicles, automobiles, construction and industrial equipment, and
renewable energy sector.

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Engineered Structures
Engineered Structures produces titanium ingots and mill products for aerospace
and defense applications and is vertically integrated to produce titanium
forgings, extrusions, forming and machining services for airframe, wing,
aero-engine, and landing gear components. Engineered Structures also produces
aluminum forgings, nickel forgings, and aluminum machined components and
assemblies for aerospace and defense applications.
Forged Wheels
Forged Wheels provides forged aluminum wheels and related products for
heavy-duty trucks and the commercial transportation markets.
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The operating results and assets of the Company's reportable segments were as
follows:
             Year ended                 Engine             Fastening            Engineered                                     Total
                                       Products             Systems             Structures            Forged Wheels           Segment
2021
Sales:
Third-party sales                    $    2,282          $     1,044          $        725          $          921          $  4,972
Inter-segment sales                           4                    -                     6                       -                10
Total sales                          $    2,286          $     1,044          $        731          $          921          $  4,982
Profit and loss:
Segment operating profit             $      440          $       190        

$54 $255 $939
Restructuring and other costs

              74                    -                    16                       -                90
Provision for depreciation and
amortization                                124                   49                    49                      39               261
Other:
Capital expenditures                 $       74          $        42          $         21          $           45          $    182
Total Assets                              4,663                2,635                 1,280                     684             9,262

2020
Sales:
Third-party sales                    $    2,406          $     1,245          $        927          $          679          $  5,257
Inter-segment sales                           5                    -                     7                       -                12
Total sales                          $    2,411          $     1,245          $        934          $          679          $  5,269
Profit and loss:
Segment operating profit             $      417          $       247       

$73 $153 $890
Restructuring and other costs

              36                   39                    28                       3               106
Provision for depreciation and
amortization                                123                   48                    52                      39               262
Other:
Capital expenditures                 $       77          $        39          $         19          $           23          $    158
Total Assets                              4,756                2,707                 1,444                     628             9,535

2019
Sales:
Third-party sales                    $    3,320          $     1,561          $      1,255          $          969          $  7,105
Inter-segment sales                          11                    -                    13                       -                24
Total sales                          $    3,331          $     1,561          $      1,268          $          969          $  7,129
Profit and loss:
Segment operating profit             $      621          $       396       

$120 $253 $1,390
Restructuring and other charges

             297                    6                   199                       4               506
Provision for depreciation and
amortization                                131                   48                    58                      32               269
Other:
Capital expenditures                 $      211          $        36          $         27          $           70          $    344
Total Assets                              5,445                2,810                 1,151                     629            10,035



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The following table reconciles Total segment capital expenditures, which are
presented on an accrual basis, with Capital expenditures as presented on the
Statement of Consolidated Cash Flows. Differences between the total segment and
consolidated totals are in Corporate and discontinued operations, including the
impact of changes in accrued capital expenditures during the period.
For the year ended December 31,          2021       2020       2019
Total segment capital expenditures      $ 182      $ 158      $ 344
Corporate and discontinued operations      17        109        297
Capital expenditures                    $ 199      $ 267      $ 641



The following tables reconcile certain segment information to consolidated
totals:
For the year ended December 31,        2021         2020         2019
Sales:
Total segment sales                  $ 4,982      $ 5,269      $ 7,129
Elimination of inter-segment sales       (10)         (12)         (24)
Corporate                                  -            2           (7)
Consolidated sales                   $ 4,972      $ 5,259      $ 7,098



For the year ended December 31,                           2021       2020   

2019

Total segment operating profit                           $ 939      $ 890      $ 1,390
Unallocated amounts:
Restructuring and other charges                            (90)      (182)        (582)
Corporate expense                                         (101)       (82)        (229)
Consolidated operating income                            $ 748      $ 626      $   579
Loss on debt redemption                                   (146)       (64)           -
Interest expense, net                                     (259)      (317)        (338)
Other expense, net                                         (19)       (74)         (31)

Profit from continuing operations before income tax $324 $171

   $   210



December 31,                             2021          2020
Assets:
Total segment assets                  $  9,262      $  9,535
Unallocated amounts:
Cash and cash equivalents                  720         1,610
Deferred income taxes                      184           272
Corporate fixed assets, net                133           140
Fair value of derivative contracts           2             5

Accounts receivable securitization        (239)         (241)
Other                                      157           122

Consolidated assets                   $ 10,219      $ 11,443


Segment assets include third-party receivables while the accounts receivable
securitization item includes the impact of sold receivables under the Company's
Accounts Receivable securitization programs. (See   Note     M  )
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Geographic information for sales was as follows (based upon the destination of
the sale):
For the year ended December 31,       2021         2020         2019
Sales:
United States                       $ 2,542      $ 2,782      $ 3,534
France                                  330          327          546
Japan                                   319          388          480
Germany                                 257          309          385
Mexico                                  225          185          277
United Kingdom                          213          231          420
Italy                                   181          181          195
Canada                                  127          119          179
Poland                                   77           76          131
China                                    71           75          168
Other                                   630          586          783
                                    $ 4,972      $ 5,259      $ 7,098


Geographic information for long-lived tangible assets was as follows (based upon
the physical location of the assets):
December 31,           2021         2020
Long-lived assets:
United States        $ 1,868      $ 1,967
Hungary                  205          213
France                   127          150
United Kingdom           116          109
Germany                   66           78
Mexico                    61           62
China                     53           59
Canada                    39           44
Japan                     25           25

Other                     15           16
                     $ 2,575      $ 2,723


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————————————————– ——————————

Table of Contents The following table breaks down segment revenues by primary market served. Differences between segment totals and consolidated totals can be found in Corporate.

                                           Engine             Fastening            Engineered                                     Total
                                          Products             Systems             Structures            Forged Wheels           Segment
Year ended December 31, 2021
Aerospace - Commercial                  $    1,105          $       537          $        387          $            -          $  2,029
Aerospace - Defense                            523                  158                   270                       -               951
Commercial Transportation                        -                  208                     -                     921             1,129
Industrial and Other                           654                  141                    68                       -               863
Total end-market revenue                $    2,282          $     1,044          $        725          $          921          $  4,972

Year ended December 31, 2020
Aerospace - Commercial                  $    1,247          $       808          $        542          $            -          $  2,597
Aerospace - Defense                            557                  156                   303                       -             1,016
Commercial Transportation                        -                  155                     -                     679               834
Industrial and Other                           602                  126                    82                       -               810
Total end-market revenue                $    2,406          $     1,245          $        927          $          679          $  5,257

Year ended December 31, 2019
Aerospace - Commercial                  $    2,229          $     1,060          $        897          $            -          $  4,186
Aerospace - Defense                            475                  158                   256                       -               889
Commercial Transportation                       20                  227                     -                     970             1,217
Industrial and Other                           596                  116                   102                      (1)              813
Total end-market revenue                $    3,320          $     1,561          $      1,255          $          969          $  7,105


The Company realized 60%, 69% and 71% of its turnover for the financial year ended
December 31, 20212020 and 2019, respectively, Aerospace Markets.

General Electric Company represented approximately 13% of the Company's
third-party sales for the year ended December 31, 2021, primarily from the
Engine Products segment.
E. Restructuring and Other Charges
Restructuring and other charges were comprised of the following:
For the year ended December 31,                             2021               2020               2019
Layoff costs                                            $       7          $     113          $      69
Net reversals of previously recorded layoff reserves           (3)               (21)                (6)
Pension, Other post-retirement benefits (costs) and            75                 69                 (7)

deferred compensation – net settlement and curtailments Impairment of non-monetary assets and accelerated amortizations 15

                  5                442
(  O  )
Net (gain) loss related to divestitures of assets and          (8)                 8                 63
businesses (  U  )
Other                                                           4                  8                 21
Restructuring and other charges                         $      90          

$182 $582


Layoff costs were recorded based on approved detailed action plans submitted by
the operating locations that specified positions to be eliminated, benefits to
be paid under existing severance plans, union contracts or statutory
requirements and the expected timetable for completion of the plans.
2021 Actions. In 2021, Howmet recorded Restructuring and other charges of $90,
which included a $75 charge for U.K. and U.S. pension plans' settlement
accounting; a $15 charge for accelerated depreciation primarily related to the
closure of small U.S. manufacturing facilities in Engine Products and Fastening
Systems; a $7 charge for layoff costs, including the separation of 253 employees
(171 in Engineered Structures, 75 in Engine Products, 6 in Fastening Systems and
1 in Corporate); a $4 charge for impairment of assets associated with an
agreement to sell a small manufacturing business in France, and a $4 charge
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for various other exit costs. These charges were partially offset by a gain of
$12 on the sale of assets at a small U.S. manufacturing facility in Fastening
Systems and a benefit of $3 related to the reversal of a number of layoff
reserves related to prior periods.
As of December 31, 2021, 66 of the 253 employees were separated. The remaining
separations for the 2021 restructuring programs are expected to be completed in
2022.
2020 Actions. In 2020, Howmet recorded Restructuring and other charges of $182,
which included a $113 charge for layoff costs, including the separation of 4,301
employees (1,706 in Engine Products, 1,675 in Fastening Systems, 805 in
Engineered Structures, 92 in Forged Wheels and 23 in Corporate); a $69 net
charge for Pension, Other postretirement benefits and deferred compensation -
net settlement and curtailments, composed of a $74 charge for U.K. and U.S.
pension plans' settlement accounting offset by a $3 benefit from the termination
of a deferred compensation plan and a $2 curtailment benefit related to a
postretirement plan; a $5 post-closing adjustment related to the sale of the
Company's U.K. forgings business (which was formerly part of the Engine Products
segment); a $5 charge for impairment of assets associated with an agreement to
sell an aerospace components business in the U.K. (within the Engineered
Structures segment), which ultimately did not occur and the business was
returned to held for use; $5 charge related to the impairment of a cost method
investment; a $2 charge for accelerated depreciation; a $1 charge for impairment
of assets due to a facility sale, and a $6 charge for various other exit costs.
These charges were partially offset by a benefit of $21 related to the reversal
of a number of prior period programs and a gain of $3 on the sale of assets.
As of December 31, 2021, the employee separations associated with the 2020
restructuring programs were essentially complete.
2019 Actions. In 2019, Howmet recorded Restructuring and other charges of $582,
which included a $428 charge for impairment of the Disks long-lived asset group;
a $69 charge for layoff costs, including the separation of 917 employees (103 in
Engine Products, 128 in Engineered Structures, 132 in Fastening Systems, 60 in
Forged Wheels and 494 in Corporate); a $46 charge for impairment of assets
associated with an agreement to sell the UK forging business; a $14 charge for
impairment of properties, plants, and equipment related to the Company's primary
research and development facility; a $13 loss on sale of assets primarily
related to a small additive business; a $12 charge for other exit costs from
lease terminations primarily related to the exit of the corporate aircraft; a $9
settlement accounting charge for U.S. pension plans; a $5 charge for impairment
of a cost method investment; a $2 net charge for executive severance net of the
benefit of forfeited executive stock compensation and a $7 charge for other exit
costs; partially offset by a benefit of $16 related to the elimination of the
life insurance benefit for U.S. salaried and non-bargaining hourly retirees of
the Company and its subsidiaries; a benefit of $6 for the reversal of a number
of layoff reserves related to prior periods, and a net gain of $1 on the sales
of assets.
In 2019, the Company recorded an impairment charge of $428 related to the Disks
long-lived asset group, of which $247 and $181 was related to the Engine
Products and Engineered Structures segments, respectively, as the carrying value
exceeded the forecasted undiscounted cash flows composed of a write-down of
properties, plants, and equipment, intangible assets and certain other
noncurrent assets. See   Note     O   for additional details.
As of December 31, 2021, the employee separations associated with the 2019
restructuring programs were complete.
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Activity and reserve balances for restructuring charges were as follows:
                                           Layoff         Other
                                           costs       exit costs       

Total

Reserve balances at December 31, 2018     $   13      $         9      $  22
2019 Activity
Cash payments                                (63)               -        

(63)

Restructuring and other charges               58              524        

582

Other(1)                                       5             (533)      

(528)

Reserve balances at December 31, 2019     $   13      $         -      $  13
2020 Activity
Cash payments                             $  (51)     $         -      $ 

(51)

Restructuring and other charges              161               21        

182

Other(2)                                     (69)             (21)       

(90)

Reserve balances at December 31, 2020     $   54      $         -      $  54
2021 Activity
Cash payments                             $  (41)     $        (2)     $ 

(43)

Restructuring and other charges               79               11         

90

Other(3)                                     (75)              (7)       

(82)

Reserve balances at December 31, 2021 $17 $2 $19


(1)In 2019, Other for layoff costs included reclassifications of a $16 credit
for elimination of life insurance benefits for U.S. salaried and non-bargaining
hourly retirees, a charge of $9 for pension plan settlement accounting, as the
impacts were reflected in the Company's separate liabilities for Accrued pension
benefits and Accrued other postretirement benefits; a $2 net charge for
executive severance net of the benefit of forfeited executive stock
compensation. In 2019, Other exit costs included a charge of $428 for impairment
of the Disks long-lived asset group; a charge of $59 for impairment of assets
associated with agreement to sell the U.K. forgings business, and a small
additive business; a charge of $14 for impairment of properties, plants, and
equipment related to the Company's primary research and development facility; a
charge of $12 for lease terminations; a $5 charge for impairment of a cost
method investment, a charge of $7 related to other miscellaneous items and a $9
reclassification of lease exit costs to reduce right of use assets in Other
noncurrent assets in accordance with the adoption of the new lease accounting
standard; partially offset by a gain of $1 on the sales of assets.
(2)In 2020, Other for layoff costs included $74 in settlement accounting charges
related to U.K. and U.S. pension plans, offset by a $3 benefit from the
termination of a deferred compensation plan and a $2 curtailment benefit related
to a postretirement plan; while Other exit costs included a charge of $5 for
impairment of assets; a $5 post-closing adjustment related to the sale of a
business; a $5 charge related to the impairment of a cost method investment; a
$2 charge for accelerated depreciation; a $1 charge for impairment of assets due
to a facility closure and a $6 charge for various other exit costs, which were
offset by a gain of $3 on the sale of assets.
(3)In 2021, Other for layoff costs included $75 in settlement accounting charges
related to U.K. and U.S. pension plans; while Other exit costs included a charge
of $15 for accelerated depreciation and a $4 charge for various other exit
costs, which were offset by a gain of $12 on the sale of assets.
The remaining reserves at December 31, 2021 are expected to be paid in cash
during 2022.
F. Interest Cost Components
For the year ended December 31,            2021       2020       2019
Amount charged to interest expense, net   $ 259      $ 317      $ 338
Loss on debt redemption                     146         64          -
Amount capitalized                            8         11         33
 Total                                    $ 413      $ 392      $ 371


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G. Other Expense, Net
For the year ended December 31,                           2021      2020    

2019

Net cost of periodic non-service benefits (H) $9 $26

  $ 17
Interest income                                            (2)       (5)    

(24)

Foreign currency losses (gains), net                        2       (11)        5
Net loss from asset sales                                   9         8        10
Deferred compensation                                       8        10        24
Other, net(1)                                              (7)       46        (1)
Total                                                    $ 19      $ 74      $ 31


(1)In 2020, Other, net included a charge from the write-off of a tax
indemnification receivable of $53 reflecting the aggregate of Alcoa
Corporation's 49% share and Arconic Corporation's 33.66% share of a Spanish tax
reserve (see   Note     V  ).
H. Pension and Other Postretirement Benefits
Howmet maintains pension plans covering most U.S. employees and certain
employees in foreign locations. Pension benefits generally depend on length of
service and job grade. Substantially all benefits are paid through pension
trusts that are sufficiently funded to ensure that all plans can pay benefits to
retirees as they become due. Most salaried and non-bargaining hourly U.S.
employees hired after March 1, 2006, participate in a defined contribution plan
instead of a defined benefit plan.
Howmet also maintains health care and life insurance postretirement benefit
plans covering eligible U.S. retired employees. Generally, the medical plans are
unfunded and pay a percentage of medical expenses, reduced by deductibles and
other coverage. Life benefits are generally provided by insurance contracts.
Howmet retains the right, subject to existing agreements, to change or eliminate
these benefits. All salaried and certain non-bargaining hourly U.S. employees
hired after January 1, 2002 and certain bargaining hourly U.S. employees hired
after July 1, 2010, are not eligible for postretirement health care benefits.
All salaried and certain hourly U.S. employees that retire on or after April 1,
2008 are not eligible for postretirement life insurance benefits. Effective May
1, 2019, salaried employees and retirees are not eligible for postretirement
life insurance benefits.
Effective January 1, 2015, Howmet no longer offers postretirement health care
benefits to Medicare-eligible, primarily non-bargaining, U.S. retirees through
Company-sponsored plans. Qualifying retirees may access these benefits in the
marketplace by purchasing coverage directly from insurance carriers. Subsidies
to these retirees ceased effective December 31, 2021. Some of these retirees
remain eligible for Medicare Part B reimbursement.
In 2019, the Company communicated to plan participants that for its U.S.
salaried and non-bargained hourly retirees of the Company and its subsidiaries,
it would eliminate the life insurance benefit effective May 1, 2019, and certain
health care subsidies effective December 31, 2019. As a result of these changes
in 2019, the Company recorded a decrease to the Accrued other postretirement
benefits liability of $75, which was offset by a curtailment benefit of $58 (of
which $16 was recorded in Restructuring and other charges and $42 related to
Arconic Corporation in Discontinued Operations) and $17 in Accumulated other
comprehensive loss.
In June 2019, the Company and the United Steelworkers ("USW") reached a
tentative three-year labor agreement that was ratified on July 11, 2019 covering
approximately 3,400 employees at four U.S. locations of Arconic Corporation; the
previous labor agreement expired on May 15, 2019. In 2019, the Company
recognized $9 in Discontinued operations in the Statement of Consolidated
Operations primarily for a one-time signing bonus for employees. Additionally,
on July 25, 2019, the USW ratified a new four-year labor agreement covering
approximately 560 employees at the Company's Niles, Ohio facility. The prior
labor agreement expired on June 30, 2018.
In 2021, 2020, and 2019, the Company applied settlement accounting to U.S.
pension plans due to lump sum payments to participants, which resulted in
settlement charges of $12, $8, and $9, respectively, that were recorded in
Restructuring and other charges.
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In 2021 and 2020, the Company undertook a number of actions to reduce pension
obligations in the U.K. by offering lump sum payments to certain plan
participants and entering into group annuity contracts with a third-party
carrier to pay and administer future annuity payments. The Company applied
settlement accounting to these U.K. pension plans, which resulted in settlement
charges of $23 and $66, respectively, that were recorded in Restructuring and
other charges in the Statement of Consolidated Operations. These actions reduced
the number of pension plan participants in the U.K. by approximately 70%.
In 2020, the Company communicated to plan participants that for its U.S.
salaried and non-bargained hourly retirees of the Company and its subsidiaries,
it would eliminate certain health care subsidies effective December 31, 2021,
and that for certain bargained retirees of the Company, it would eliminate
certain health care subsidies effective December 31, 2021 and the life insurance
benefit effective August 1, 2020. As a result of these amendments, the Company
recorded a decrease to the Accrued other postretirement benefits liability of $6
in 2020, which was offset in Accumulated other comprehensive loss.
In the first quarter of 2021, the Company announced a plan administration change
of certain of its Medicare-eligible prescription drug benefits to an Employer
Group Waiver Plan with a wrap-around secondary plan effective July 1, 2021. The
administration change is expected to reduce costs to the Company through the
usage of Medicare Part D and drug manufacturer subsidies. Due to this amendment,
along with the associated plan remeasurements, the Company recorded a decrease
to its Accrued other postretirement benefits liability of $39, which was offset
in Accumulated other comprehensive loss in the Consolidated Balance Sheet.
On March 11, 2021, the American Rescue Plan Act of 2021 ("ARPA 2021") was signed
into law in the United States. ARPA 2021, in part, provides temporary relief for
employers who sponsor defined benefit pension plans related to funding
contributions under the Employee Retirement Income Security Act of 1974.
Considering the impact of ARPA 2021, Howmet's pension contributions and other
postretirement benefit payments in 2021 were approximately $110.
In October 2021, the Company undertook additional actions to reduce gross
pension obligations by $125 by purchasing group annuity contracts with a
third-party carrier to pay and administer future annuity payments. These actions
resulted in a settlement charge of $34 and were recorded in Restructuring and
other charges in the fourth quarter ended December 31, 2021 in the Statement of
Consolidated Operations. The funded status of the plans have not been
significantly impacted.
The funded status of all of Howmet's pension plans are measured as of
December 31 each calendar year. Howmet's funded status under the Employee
Retirement Income Security Act of 1974 ("ERISA") was approximately 76% as of
January 1, 2021.
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Obligations and Funded Status
                                                                                                            Other
                                                          Pension benefits                         postretirement benefits
December 31,                                          2021                2020                     2021                      2020
Change in benefit obligation
Benefit obligation at beginning of year           $    2,713          $   7,249          $        215                    $     786
Transfer to Arconic Corporation                            -             (4,355)                    -                         (569)
Service cost                                               4                  6                     2                            2
Interest cost                                             47                 71                     5                            7
Amendments                                                 3                  6                   (31)                         (11)
Actuarial (gains) losses(1)                              (55)               313                   (10)                          14
Settlements                                             (275)              (398)                    -                            -

Benefits paid                                           (140)              (153)                  (17)                         (17)
Medicare Part D subsidy receipts                           -                  -                     1                            3
Foreign currency translation impact                       (1)               (26)                    -                            -
Benefit obligation at end of year(2)              $    2,296          $   2,713          $        165                    $     215

Change in plan assets(2) Fair value of plan assets at opening $1,724 $4,868 $-

                    $       -
Transfer to Arconic Corporation                            -             (2,982)                    -                            -
Actual return on plan assets                             124                203                     -                            -
Employer contributions                                    96                227                     -                            -

Benefits paid                                           (123)              (136)                    -                            -
Administrative expenses                                  (12)               (12)                    -                            -

Settlement payments                                     (277)              (413)                    -                            -
Foreign currency translation impact                       (1)               (31)                    -                            -

Fair value of plan assets at end of year(2) $1,531 $1,724 $-

                    $       -
Funded status                                     $     (765)         $    (989)         $       (165)                   $    (215)

Amounts recognized in the Consolidated Balance
Sheet consist of:
Noncurrent assets                                 $       22          $      12          $          -                    $       -

Current liabilities                                      (16)               (16)                  (12)                         (17)

Noncurrent liabilities                                  (771)              (985)                 (153)                        (198)

Net amount recognized                             $     (765)         $    (989)         $       (165)                   $    (215)
Amounts recognized in Accumulated Other
Comprehensive Loss consist of:
Net actuarial loss                                $    1,067          $   1,274          $         11                    $      22
Prior service cost (benefit)                               3                  6                   (49)                         (28)

Net amount recognised, before tax effect $1,070 $1,280 $ (38)

                   $      (6)
Other changes in plan assets and benefit
obligations recognized in Other Comprehensive
Loss consist of:
Net actuarial (benefit) loss                      $      (81)         $     166          $        (10)                   $      14
Amortization of accumulated net actuarial (loss)        (125)              (123)                    -                            1

Gain

Loss transferred to Arconic Corporation                    -             (2,144)                    -                         (170)
Prior service cost (benefit)                               3                  5                   (31)                         (11)
Amortization of prior service benefit                     (7)                 -                     9                            5

Prior service credit transferred to Arconic                -                  -                     -                           13

company

Net amount recognized, before tax effect          $     (210)         $  (2,096)         $        (32)                   $    (148)


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(1)At December 31, 2021, the actuarial gains impacting the benefit obligation
were due to changes in discount rate, alternative interest cost method, actual
asset returns in excess of expected returns and other changes including census
data.
(2)At December 31, 2021, the benefit obligation, fair value of plan assets, and
funded status for U.S. pension plans were $2,039, $1,278, and $(761),
respectively. At December 31, 2020, the benefit obligation, fair value of plan
assets, and funded status for U.S. pension plans were $2,327, $1,361, and
$(966), respectively.
Pension Plan Benefit Obligations
                                                                            

Retirement benefits

                                                                          2021                2020

The projected benefit obligation and accrued benefit obligation for all defined benefit pension plans were as follows: Projected benefit obligation

                                         $     2,296          $    2,713
Accumulated benefit obligation                                             2,293               2,707

The aggregate projected benefit obligation and fair value of plan assets for pension plans whose projected benefit obligations exceed plan assets were as follows: Projected benefit obligation

                                               1,982               2,364
Fair value of plan assets                                                  1,193               1,364

The accrued benefit obligation and the aggregate fair value of the pension plan assets for which the accrued benefit obligations exceed the plan assets were as follows: Accrued benefit obligation

1,981               2,359
Fair value of plan assets                                                  1,193               1,364


Components of the net cost of periodic benefits

                                                        Pension benefits(1)                                      Other postretirement benefits(2)
For the year ended December 31,                 2021              2020            2019                        2021                         2020            2019
Service cost                               $     4              $   12          $   25          $         2                             $     3          $    7
Interest cost                                   47                  97             235                    5                                  10              28
Expected return on plan assets                 (90)               (136)           (286)                   -                                   -        

Recognized net actuarial loss                   56                  78             139                    -                                   3         

4

Amortization of prior service cost               1                   -               2                   (9)                                 (6)             (6)
(benefit)
Settlements(3)                                  69                  76               9                    -                                   -               -
Curtailments(4)                                  6                   -               -                    -                                  (2)            (58)

Net periodic benefit cost(5)               $    93              $  127          $  124          $        (2)                            $     8          $  (25)
Discontinued operations                          -                  20              95                    -                                   6             (15)
Net amount recognized in Statement of      $    93              $  107          $   29          $        (2)                            $     2          $  (10)
Consolidated Operations


(1)In 2021, 2020, and 2019, net periodic benefit cost for U.S. pension plans was
$61, $58, and $127, respectively.
(2)In 2021, 2020, and 2019, net periodic benefit cost for other postretirement
benefits reflects a reduction of less than $1, $1, and $11, respectively,
related to the recognition of the federal subsidy awarded under Medicare Part D.
(3)In 2021, settlements were related to U.S. and U.K. actions including the
purchase of group annuity contracts and lump sum benefit payments. In 2020,
settlements were related to U.K. actions including lump sum benefit payments and
the purchase of group annuity contracts as well as U.S. lump sum benefit
payments. In 2019, settlements were due to workforce reductions and the payment
of lump sum benefits. (See   Note     E  )
(4)In 2021, the curtailment was due to plan termination. In 2020, the
curtailment was due to workforce reductions. In 2019, curtailments were due to a
reduction of future benefits, resulting in the recognition of favorable and
unfavorable plan amendments.
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(5)Service cost was included within Cost of goods sold, Selling, general
administrative, and other expenses, and Research and development expenses;
curtailments and settlements were included in Restructuring and other charges;
and all other cost components were recorded in Other expense, net in the
Statement of Consolidated Operations.
Assumptions
Weighted average assumptions used to determine benefit obligations for pension
and other postretirement benefit plans were as follows:
December 31,                                   2021        2020
Discount rate                                 2.70  %     2.40  %

Cash balance plan interest credit rate 3.00% 3.00%


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 internally by their 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 11 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.
Benefit accruals for future compensation under the Company's major salaried and
non-bargained hourly defined benefit pension plans have ceased. The rate of
compensation increase no longer impacts the determination of the benefit
obligation.
Weighted average assumptions used to determine net periodic benefit cost for
pension and other postretirement benefit plans were as follows:
                                                      2021        2020      

2019

Discount rate to calculate service cost(1)           2.80  %     3.30  %     4.30  %
Discount rate to calculate interest cost(1)          2.10  %     2.70  %     3.90  %
Expected long-term rate of return on plan assets     6.20  %     6.00  %     5.60  %
Rate of compensation increase(2)                        -  %        -  %     3.50  %
Cash balance plan interest crediting rate            3.00  %     3.00  %    

3.00%


(1)In all periods presented, the respective global discount rates were used to
determine net periodic benefit cost for most pension plans for the full annual
period. However, the discount rates for a limited number of plans were updated
during 2021, 2020, and 2019 to reflect the remeasurement of these plans due to
new union labor agreements, settlements, and/or curtailments. The updated
discount rates used were not significantly different from the discount rates
presented.
(2)Benefit accruals for future compensation under the Company's major salaried
and non-bargained hourly defined benefit pension plans have ceased. The rate of
compensation increase no longer impacts the determination of the benefit
obligation.
The expected long-term rate of return on plan assets ("EROA") is generally
applied to a five-year market-related value of plan assets (a fair value at the
plan measurement date is used for certain non-U.S. plans). 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.
For 2021, 2020, and 2019, the U.S. expected long-term rate of return used by
management was based on the prevailing and planned strategic asset allocations,
as well as estimates of future returns by asset class. These 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 2022, management
anticipates that 7.00% will continue to be the expected long-term rate of return
for the U.S. Pension plans. EROA assumptions are developed by country. Annual
changes in the weighted average EROA are impacted by the relative size of the
assets by country.
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Assumed health care cost trend rates for U.S. other postretirement benefit plans
were as follows:
                                                         2021                   2020                   2019
Health care cost trend rate assumed for next year           5.50  %                5.50  %                5.50  %
Rate to which the cost trend rate gradually                 4.50  %                4.50  %                4.50  %

declines

Year that the rate reaches the rate at which it is       2024                   2023                   2023

supposed to stay


The assumed health care cost trend rate is used to measure the expected cost of
gross eligible charges covered by Howmet's other postretirement benefit plans.
For 2022, a 5.50% trend rate will be used, reflecting management's best estimate
of the change in future health care costs covered by the plans. The plans'
actual annual health care cost trend experience over the past three years has
ranged from 2.20% to 5.70%. Management does not believe this three-year range is
indicative of expected increases for future health care costs over the
long-term.
Plan Assets
Howmet's pension plans' investment policy at December 31, 2021 by asset class,
were as follows:

Asset class          Policy range(1)
Equities                       20-55%
Fixed income                   25-55%
Other investments              15-35%


(1)Policy range is for U.S. plan assets only, as both the U.K. and Canadian
asset investment allocations are controlled by a third-party trustee with input
from Howmet.
The principal objectives underlying the investment of the pension plans' assets
are to ensure that Howmet can properly fund benefit obligations as they become
due under a broad range of potential economic and financial scenarios, maximize
the long-term investment return with an acceptable level of risk based on such
obligations, and broadly diversify investments across and within various asset
classes to protect asset values against adverse movements. Specific objectives
for long-term investment strategy include reducing the volatility of pension
assets relative to pension liabilities, and attaining and maintaining a
sufficiently funded status. The use of derivative instruments is permitted where
appropriate and necessary for achieving overall investment policy objectives.
The investment strategy uses long duration cash bonds and derivative instruments
to offset a portion of the interest rate sensitivity of U.S. pension
liabilities. Exposure to broad equity risk is decreased and diversified through
investments in hedge funds, private equity, private credit, private real estate,
high-yield bonds, global and emerging market debt, and global and emerging
market equities. Investments are further diversified by strategy, asset class,
geography, and sector to enhance returns and mitigate downside risk. A large
number of external investment managers are used to gain broad exposure to the
financial markets and to mitigate manager-concentration risk.
Investment practices comply with the requirements of ERISA and other applicable
laws and regulations.
The following section describes the valuation methodologies used to measure the
fair value of pension plan assets, including an indication of the level in the
fair value hierarchy in which each type of asset is generally classified (see
  Note     S   for the definition of fair value and a description of the fair
value hierarchy).
Equities. These securities consist of: (i) direct investments in the stock of
publicly traded U.S. and non-U.S. companies, and equity derivatives, that are
valued based on the closing price reported in an active market on which the
individual securities are traded (generally classified in Level 1); (ii) the
plans' share of commingled funds that are invested in the stock of publicly
traded companies and are valued at the net asset value of shares held at
December 31 (included in Level 1 and Level 2); and (iii) direct investments in
long/short equity hedge funds and private equity (limited partnerships and
venture capital partnerships) that are valued at net asset value.
Fixed income. These securities consist of: (i) U.S. government debt that are
generally valued using quoted prices (included in Level 1); (ii) cash and cash
equivalents invested in publicly-traded funds and are valued based on the
closing price reported in an active market on which the individual securities
are traded (generally classified in Level 1); (iii) publicly traded U.S. and
non-U.S. fixed interest obligations (principally corporate bonds and debentures)
and are valued through consultation and evaluation with brokers in the
institutional market using quoted prices and other observable market data
(included in Level 2); (iv) fixed income derivatives that are generally valued
using industry standard models with market-based observable inputs (included in
Level 2); and (v) cash and cash equivalents invested in institutional funds and
are valued at net asset value.
Other investments. These investments include, among others: (i) exchange traded
funds, such as gold, and real estate investment trusts and are valued based on
the closing price reported in an active market on which the investments are
traded (included in Level 1) and (ii) direct investments of discretionary and
systematic macro hedge funds and private real estate (includes limited
partnerships) and are valued at net asset value.
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The fair value methods described above may not be indicative of net realizable
value or reflective of future fair values. Additionally, while Howmet believes
the valuation methods used by the plans' trustees are appropriate and consistent
with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial instruments could
result in a different fair value measurement at the reporting date.
The following table presents the fair value of pension plan assets classified
under the appropriate level of the fair value hierarchy or net asset value:
December 31, 2021                               Level 1             Level 2           Net Asset Value            Total
Equities:
Equity securities                            $        2          $      197          $           409          $     608
Long/short equity hedge funds                         -                   -                       60                 60
Private equity                                        -                   -                      126                126
                                             $        2          $      197          $           595          $     794
Fixed income:
Intermediate and long duration               $      124          $      328          $             -          $     452
government/credit
Other                                                15                 119                        -                134
                                             $      139          $      447          $             -          $     586
Other investments:
Real estate                                  $        -          $        -          $            64          $      64
Discretionary and systematic macro hedge              -                   -                       47                 47
funds
Other                                                 -                   -                       23                 23
                                             $        -          $        -          $           134          $     134
Net plan assets(1)                           $      141          $      644          $           729          $   1,514


December 31, 2020                               Level 1             Level 2           Net Asset Value            Total
Equities:
Equity securities                            $      274          $       89          $            68          $     431
Long/short equity hedge funds                         -                   -                       77                 77
Private equity                                        -                   -                       87                 87
                                             $      274          $       89          $           232          $     595
Fixed income:
Intermediate and long duration               $       78          $      579          $            31          $     688
government/credit
Other                                                63                 254                        -                317
                                             $      141          $      833          $            31          $   1,005
Other investments:
Real estate                                  $       31          $        -          $            52          $      83
Discretionary and systematic macro hedge              -                   -                       94                 94
funds
Other                                                 -                   -                       23                 23
                                             $       31          $        -          $           169          $     200
Net plan assets(2)                           $      446          $      922          $           432          $   1,800


(1)As of December 31, 2021, the total fair value of pension plans' assets
excludes a net receivable of $17, which represents securities purchased and sold
but not yet settled plus interest and dividends earned on various investments.
(2)As of December 31, 2020, the total fair value of pension plans' assets
excludes a net payable of $76, which represents securities purchased and sold
but not yet settled plus interest and dividends earned on various investments.
Funding and Cash Flows
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. In 2021 and 2020, cash contributions to Howmet's pension
plans were $96 and $227, respectively, which includes $12 and $25, respectively,
contributed to the Company's U.S. plans that was in excess of the minimum
required under ERISA.
The contributions to the Company's pension plans in 2022 are estimated to be $44
(of which $35 is for U.S. plans), all of which are minimum required
contributions.
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During the third quarter of 2016, the Pension Benefit Guaranty Corporation
approved management's plan to separate the Alcoa Inc. pension plans between the
Company and Alcoa Corporation. The plan stipulated that the Company make cash
contributions of $150 over a period of 30 months (from November 1, 2016) to its
two largest pension plans. The Company satisfied the requirements of the plan by
making payments of $34, $66, and $50 in April 2019, March 2018, and April 2017,
respectively.
Due to the plan administration change of certain Medicare-eligible prescription
drug benefits to an Employer Group Waiver Plan with a wrap-around secondary
plan, there will be no direct Medicare Part D subsidy receipts going forward.
Benefit payments expected to be paid to pension and other postretirement benefit
plans' participants are as follows utilizing the current assumptions outlined
above:
                                                                     Other post-
                                        Pension                       retirement
For the year ended December 31,      benefits paid                     benefits
2022                                $          152                  $         12
2023                                           149                            12
2024                                           145                            12
2025                                           145                            11
2026                                           141                            11
2027 - 2031                                    671                            53
                                    $        1,403                  $        111


Defined Contribution Plans
Howmet sponsors savings and investment plans in various countries, primarily in
the U.S. Howmet's contributions and expenses related to these plans were $66,
$73, and $87 in 2021, 2020, and 2019, respectively. U.S. employees may
contribute a portion of their compensation to the plans, and Howmet matches a
portion of these contributions in equivalent form of the investments elected by
the employee.
I. Income Taxes
The components of income from continuing operations before income taxes were as
follows:
For the year ended December 31,      2021       2020       2019
United States                       $  28      $  84      $ 128
Foreign                               296         87         82
 Total                              $ 324      $ 171      $ 210


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The provision for income taxes consisted of the following:
For the year ended December 31,      2021      2020       2019
Current:
Federal(1)                          $ (9)     $  (2)     $  -
Foreign                               39          2        86
State and local                       (2)        (2)        -
                                      28         (2)       86
Deferred:
Federal                               22        (67)       33
Foreign                               11         11       (41)
State and local                        5         18         6
                                      38        (38)       (2)
Total                               $ 66      $ (40)     $ 84


(1)Includes U.S. taxes related to foreign income.
A reconciliation of the U.S. federal statutory rate to Howmet's effective tax
rate was as follows (the effective tax rate for 2021 and 2019 was a provision on
income and 2020 was a benefit on income):
For the year ended December 31,                              2021                     2020                    2019
U.S. federal statutory rate                                      21.0  %                  21.0  %                 21.0  %
Foreign tax rate differential                                    (0.7)                    (1.2)                   10.9
U.S. and residual tax on foreign earnings(1)                      6.5                      5.6                    15.3
U.S. State and local taxes                                        1.0                      2.2                     0.8
Federal (cost) benefit of state tax                              (0.3)                    (2.0)                    1.2
Permanent differences related to asset disposals and             (0.3)                     6.8                    (1.3)

items included in restructuring and other charges

Non-deductible officer compensation                               1.6                      3.5                     4.9
Statutory tax rate and law changes(2)                             1.0                    (15.9)                   (0.6)
Tax holidays                                                     (0.4)                    (0.4)                   (8.2)
Tax credits(3)                                                  (10.4)                    (0.4)                   (1.3)
Changes in valuation allowances(4)                                5.1                     74.8                   (52.2)

Changes in uncertain tax positions(5)                               -                   (116.9)                    0.3
Prior year tax adjustments(6)                                    (3.7)                    (1.7)                   44.3
Other                                                               -                      1.2                     4.9
Effective tax rate                                               20.4  %                 (23.4) %                 40.0  %


(1)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.
(2)In 2020, final regulations were issued that provided an election to exclude
from GILTI any foreign earnings subject to a local country tax rate of at least
90% of the U.S. tax rate. The Company recorded a $30 benefit related to this tax
law change.
(3)In 2021, a $32 benefit for income tax credits related to development
incentives in Hungary was recognized.
(4)In 2020, a $104 valuation allowance was recorded related to deferred tax
assets that were previously subject to a reserve that was otherwise released in
2020 as a result of a favorable Spanish tax case decision. In 2019, the Company
released a $112 valuation allowance related to 2015 and 2016 foreign tax
credits, subsequent to filing U.S. amended tax returns to deduct, rather than
credit, foreign taxes.
(5)In 2020, the Company released a $64 reserve liability and a $104 reserve
recorded as a contra balance against deferred tax assets as a result of a
favorable Spanish tax case decision. A $30 benefit related to a previously
uncertain U.S. tax position was also recognized in 2020.
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(6)In 2019, the Company filed U.S. amended tax returns to deduct, rather than
credit, 2015 and 2016 foreign taxes resulting in a $112 tax cost associated with
the write-off of the deferred tax asset for the credit, partially offset by a
$24 tax benefit for the deduction.

The components of net deferred tax assets and liabilities are as follows:

                                       2021                            2020
                            Deferred        Deferred        Deferred        Deferred
                              tax             tax             tax             tax
December 31,                 assets       liabilities        assets       liabilities
Depreciation               $      8      $        538      $     21      $        506
Employee benefits               300                 3           364                 -
Loss provisions                  20                 1            24                 1
Deferred income/expense          50             1,098            41             1,033
Interest                        105                 -             3                 -
Tax loss carryforwards        3,226                 -         3,267                 -
Tax credit carryforwards        358                 -           378                 -
Other                            10                 7             7                13
                           $  4,077      $      1,647      $  4,105      $      1,553
Valuation allowance          (2,279)                -        (2,307)                -
                           $  1,798      $      1,647      $  1,798      $      1,553



The following table details the expiration periods of the deferred tax assets
presented above:
                             Expires         Expires
                             within           within               No
December 31, 2021           10 years       11-20 years       Expiration(1)       Other(2)       Total
Tax loss carryforwards     $     422      $        580      $        2,224      $      -      $ 3,226
Tax credit carryforwards         278                66                  14             -          358
Other(3)                           -                 -                 424            69          493
Valuation allowance             (637)             (293)             (1,329)          (20)      (2,279)
                           $      63      $        353      $        1,333      $     49      $ 1,798


(1)Deferred tax assets with no expiration may still have annual limitations on
utilization.
(2)Other represents deferred tax assets whose expiration is dependent upon the
reversal of the underlying temporary difference.
(3)A substantial amount of Other deferred tax assets relates to employee
benefits that will become deductible for tax purposes in jurisdictions with
unlimited expiration over an extended period of time as contributions are made
to employee benefit plans and payments are made to retirees.
The total deferred tax asset (net of valuation allowance) is supported by
projections of future taxable income exclusive of reversing temporary
differences (10%), and taxable temporary differences that reverse within the
carryforward period (90%).
Valuation allowances are recorded to reduce deferred tax assets when it is more
likely than not (greater than 50%) 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 carryback
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,
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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
income 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.
Howmet's foreign tax credits in the United States have a 10-year carryforward
period with expirations ranging from 2022 to 2027 (as of December 31, 2021).
Valuation allowances were initially established in prior years on a portion of
the foreign tax credit carryforwards, primarily due to insufficient foreign
source income to allow for full utilization of the credits within the expiration
period. Foreign tax credits of $22 and $88 expired at the end of 2021 and 2019,
respectively, resulting in a corresponding decrease to the valuation allowance.
The valuation allowance was also reduced in 2021 by $9 as a result of updated
U.S. regulatory guidance concerning the utilization of foreign tax credits in
connection with the one-time transition tax on the deemed repatriation of
previously non-taxed post-1986 earnings and profits of certain foreign
subsidiaries enacted as part of the 2017 Act, and by $4 as a result of a
corresponding reduction in the deferred tax asset related to suspended foreign
tax credits. The valuation allowance was also reduced by $113 in 2019 as a
result of the Company filing amended tax returns to deduct foreign taxes that
were previously claimed as a U.S. foreign tax credit. At December 31, 2021, the
cumulative amount of the valuation allowance was $180. The need for this
valuation allowance will be reassessed on a continuous basis in future periods
and, as a result, the allowance may increase or decrease based on changes in
facts and circumstances.
During 2021, the Company concluded that it would not pursue a deduction related
to a capital investment for which a deferred tax asset of $9 and offsetting
valuation allowance had previously been recorded. As such, both the deferred tax
asset and the valuation allowance were eliminated. The need for valuation
allowances against other capital investments will be reassessed on a continuing
basis. As of December 31, 2021, there is no valuation allowance recorded related
to capital investments.
The Company recorded a net $3 increase, $20 increase, and $11 decrease to U.S.
state valuation allowances in 2021, 2020 and 2019, respectively. After weighing
all available positive and negative evidence, the Company determined the
adjustments based on the underlying net deferred tax assets that were more
likely than not realizable based on projected taxable income. Changes in fully
reserved U.S. state tax losses, credits and other deferred tax assets resulting
from expirations, audit adjustments, tax rate, and tax law changes also resulted
in a corresponding net $20 increase, $58 decrease, and $5 increase in the
valuation allowance in 2021, 2020, and 2019, respectively. Valuation allowances
of $632 remain against state deferred tax assets expected to expire before
utilization. The need for valuation allowances against state deferred tax assets
will be reassessed on a continuous basis in future periods and, as a result, the
allowance may increase or decrease based on changes in facts and circumstances.
In 2021, after weighing all available evidence, the Company recognized a
discrete income tax cost to establish a valuation allowance of $8 in
Switzerland. In 2020, the Company increased a valuation allowance by $104 as a
result of releasing a tax reserve following a favorable Spanish tax case
decision. The need for valuation allowances will be reassessed by entity and by
jurisdiction on a continuous basis in future periods and, as a result, the
allowances may increase or decrease based on changes in facts and circumstances.
The following table details the changes in the valuation allowance:
December 31,                                         2021         2020         2019
Balance at beginning of year                       $ 2,307      $ 2,121      $ 2,357
Increase to allowance                                  113          136           19
Release of allowance                                   (94)         (50)        (211)
Acquisitions and divestitures                            -            -           (2)

Tax allocation, tax rates and changes in tax legislation 63 (23)

     (13)
Foreign currency translation                          (110)         123          (29)
Balance at end of year                             $ 2,279      $ 2,307      $ 2,121


Foreign U.S. GAAP earnings that have not otherwise been subject to U.S. tax,
will generally be exempt from future U.S. tax under the 2017 Act when
distributed. Such distributions, as well as distributions of previously taxed
foreign earnings, could potentially be subject to U.S. state tax in certain
states, and foreign withholding taxes. Foreign currency gains/losses related to
the translation of previously taxed earnings from functional currency to U.S.
dollars could also be subject to U.S. tax when distributed. The Company has made
the determination to no longer permanently reinvest earnings in certain
subsidiaries and has consequently recognized $9 of tax charges related to
withholding tax and capital gains on amounts distributable in those entities in
excess of tax basis. To the extent that additional earnings are distributed from
other foreign subsidiaries, Howmet
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would expect the potential withholding tax, U.S. state tax, and U.S. capital
gains tax impacts to be immaterial and the potential deferred tax liability
associated with future currency gains to be impracticable to determine.
Howmet and its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various states and foreign jurisdictions. With a few minor
exceptions, Howmet is no longer subject to income tax examinations by tax
authorities for years prior to 2014. All U.S. tax years prior to 2021 have been
audited by the Internal Revenue Service. Various state and foreign jurisdiction
tax authorities are in the process of examining the Company's income tax returns
for various tax years through 2020. The Company had net cash income tax payments
of $53 and $122 in 2021 and 2019, respectively, and net cash refunds of $33 in
2020.
A reconciliation of the beginning and ending amount of unrecognized tax benefits
(excluding interest and penalties) was as follows:
December 31,                                        2021      2020       

2019

Balance at beginning of year                       $  2      $ 176      $ 

148

Allocations for tax positions of the current year – – 34 Allocations for tax positions of previous years

            -          -          -
Reductions for tax positions of prior years           -       (182)        

(1)

Settlements with tax authorities                      -         (1)         -
Expiration of the statute of limitations              -          -         (2)
Foreign currency translation                          -          9         (3)
Balance at end of year                             $  2      $   2      $ 176


For all periods presented, a portion of the balance pertains to state tax
liabilities, which are presented before any offset for federal tax benefits. The
effect of unrecognized tax benefits, if recorded, that would impact the annual
effective tax rate for 2021, 2020, and 2019 would be approximately 1%, 1%, and
36%, respectively, of pre-tax book income. Howmet does not anticipate that
changes in its unrecognized tax benefits will have a material impact on the
Statement of Consolidated Operations during 2022.
It is Howmet's policy to recognize interest and penalties related to income
taxes as a component of the Provision for income taxes in the Statement of
Consolidated Operations. Howmet recognized interest of less than $1, $2, and $6
in 2021, 2020, and 2019, respectively. Due to the expiration of the statute of
limitations, settlements with tax authorities, reductions in prior accruals, and
refunded overpayments, Howmet recognized interest income of $3, $25, and less
than $1 in 2021, 2020, and 2019, respectively. As of December 31, 2021, 2020,
and 2019, the amount accrued for the payment of interest and penalties was less
than $1, $2, and $23, respectively.
J. Preferred and Common Stock
Preferred Stock. Howmet has two classes of preferred stock: $3.75 Cumulative
Preferred Stock ("Class A Preferred Stock") and Class B Serial Preferred Stock.
Class A Preferred Stock has 660,000 shares authorized at a par value of $100 per
share with an annual $3.75 cumulative dividend preference per share. There were
546,024 shares of Class A Preferred Stock outstanding at December 31, 2021 and
2020. Class B Serial Preferred Stock has 10,000,000 shares authorized as a par
value of $1 per share. There were no shares of Class B Serial Preferred Stock
outstanding at December 31, 2021 and 2020.
Common Stock. At December 31, 2021, there were 600,000,000 shares authorized and
421,691,912 shares issued and outstanding. Dividends paid were $0.04 per share
in 2021 ($0.02 per share in each of the third and fourth quarters of 2021),
$0.02 per share in 2020 (all in the first quarter of 2020), and $0.12 per share
in 2019 ($0.06 per share in the first quarter of 2019 and $0.02 per share in
each of the second, third, and fourth quarters of 2019).
As of December 31, 2021, 47 million shares of common stock were reserved for
issuance under Howmet's stock-based compensation plans. As of December 31, 2021,
31 million shares remain available for issuance. Howmet issues new shares to
satisfy the exercise of stock options and the conversion of stock awards.
In July 2015, through the acquisition of RTI International Metals Inc. ("RTI"),
the Company assumed the obligation to repay two tranches of convertible debt;
one tranche was due and settled in cash on December 1, 2015 (principal amount of
$115) and the other tranche was due and settled in cash on October 15, 2019
(principal amount of $403). No shares of the Company's common stock were issued
in connection with the maturity or final conversion of this convertible debt.

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Table of Contents Common Shares Outstanding and Share Activity (Number of Shares) Balance as at December 31, 2018

                        483,270,717
Issued for stock-based compensation plans             4,436,830
Repurchase and retirement of common stock           (54,852,364)
Balance at December 31, 2019                        432,855,183
Issued for stock-based compensation plans             3,896,119
Repurchase and retirement of common stock            (3,844,925)
Balance at December 31, 2020                        432,906,377
Issued for stock-based compensation plans             2,195,681
Repurchase and retirement of common stock           (13,410,146)
Balance at December 31, 2021                        421,691,912


The following table provides details for share repurchases during 2021, 2020,
and 2019:
                                                                                   Average price per
                                                       Number of shares                 share(1)                Total

May 2021/June 2021 accelerated share repurchase            5,878,791                     $34.02                  $200

(“ASR”) total

August 2021 open market repurchase                           769,274                     $32.50                  $25

October 2021 open market repurchase                          879,307                     $30.71                  $27

November 2021 open market repurchase                       2,336,733                     $30.79                  $72

December 2021 open market repurchase                       3,546,041                     $29.91                  $106

2021 Share repurchase total                               13,410,146                     $32.07                  $430

August/September 2020 open market repurchase               2,907,094                     $17.36                  $51

November 2020 open market repurchase                         937,831                     $23.99                  $22

2020 Share repurchase total                                3,844,925                     $18.98                  $73

February 2019 ASR total                                   36,434,423                     $19.21                  $700

May 2019 ASR total                                         9,016,981                     $22.18                  $200

August 2019 ASR total                                      7,774,279                     $25.73                  $200

November 2019 open market repurchase                       1,626,681                     $30.74                  $50

2019 Share repurchase total                               54,852,364                     $20.97                 $1,150


(1)Excludes commissions cost.
The total value of shares repurchased during 2021, 2020, and 2019 were $430,
$73, and $1,150, respectively. All of the shares repurchased during 2021, 2020,
and 2019 were immediately retired. After giving effect to the share repurchases
made through December 31, 2021, approximately $1,347 remained available for
share repurchases as of January 1, 2022 under the prior authorizations by the
Board. Under the Company's share repurchase programs (the "Share Repurchase
Programs"), the Company may repurchase shares by means of trading plans
established from time to time in accordance with Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended, block trades, private transactions,
open market repurchases and/or accelerated share repurchase agreements or other
derivative transactions. There is no stated expiration for the Share Repurchase
Programs. Under its Share Repurchase Programs, the Company may repurchase shares
from time to time, in amounts, at prices, and at such times as the Company deems
appropriate, subject to market conditions, legal requirements and other
considerations, including limits under the Company's Five-Year Revolving Credit
Agreement (see   Note R  ). The Company is not obligated to repurchase any
specific number of shares or to do so at any particular time, and the Share
Repurchase Programs may be suspended, modified or terminated at any time without
prior notice.
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In January 2022, the Company repurchased approximately 3 million shares of its
common stock under the Share Repurchase Programs at an average price of $33.81
per share (excluding commissions cost) for approximately $100 in cash. After the
share repurchases made through January 31, 2022, approximately $1,247 remains
authorized for common stock share repurchases. Fully diluted shares outstanding
as of January 31, 2022 were approximately 425 million.
Stock-Based Compensation
Howmet has a stock-based compensation plan under which stock options and/or
restricted stock unit awards are granted, generally, in the first half of each
year to eligible employees. Stock options are granted at the closing market
price of Howmet's common stock on the date of grant and typically vest over a
three-year service period (1/3 each year) with a ten-year contractual term.
Restricted stock unit awards typically vest over a three-year service period
from the date of grant. As part of Howmet's stock-based compensation plan
design, individuals who are retirement-eligible have a six-month requisite
service period in the year of grant. Certain of the restricted stock unit awards
include performance and market conditions and are granted to certain eligible
employees. In 2020 and 2019, performance stock awards were granted to a senior
executive that vest either based on achievement of the Arconic Inc. Separation
Transaction (see   Note     C   for further details) or the achievement of
certain stock price thresholds. For performance stock awards granted in 2021 and
for annual performance awards granted in 2020, the final number of shares earned
will be based on Howmet's achievement of profitability targets over the
respective performance periods and will be earned at the end of the third year.
Performance stock awards granted in the first quarter of 2019 were converted to
restricted stock unit awards (at target), in order to address the pending
Arconic Inc. Separation Transaction. For performance stock awards granted in
2018, in order to address the pending Arconic Inc. Separation Transaction, the
final number of shares earned was based on Howmet's achievement of sales and
profitability targets over performance periods in 2018 and 2019. Additionally,
the annual 2021 and 2020 performance stock awards will be scaled by a total
shareholder return ("TSR") multiplier, which depends upon relative performance
against the TSRs of a group of peer companies.
In conjunction with their employment agreements, certain current and former
executives were granted cash bonus awards based on the achievement of certain
stock price thresholds. These awards are liability classified and were
marked-to-market each quarter using a Monte Carlo simulation. The stock price
thresholds were fully reached. The cash payment of $23 occurred in 2021 in
accordance with the terms of the agreements.
In 2021, 2020, and 2019, Howmet recognized stock-based compensation expense of
$40 ($36 after-tax), $46 ($42 after-tax), and $69 ($63 after-tax), respectively.
Senior executive performance awards granted in April 2020 were modified in June
2020, resulting in incremental compensation expense of $12, which is amortized
over the remaining service period ending April 1, 2023. Additionally, the effect
of the Arconic Inc. Separation Transaction was a modification of the original
stock options and restricted stock award units. The modifications were designed
with the intention that the intrinsic value of the stock option or stock award
were the same both previous to and after the adjustments. An immaterial charge
was recorded to Restructuring and other charges related to the modification.
Substantially all compensation expense recorded in 2021 relates to restricted
stock unit awards. Cash bonus awards of $2 and $21 were recorded in 2020, and
2019, respectively. Of the remaining stock-based compensation expense in 2020
and 2019, more than 95% relates to restricted stock unit awards. No stock-based
compensation expense was capitalized in any of those years. Stock-based
compensation expense was reduced by $2 in 2021 and $3 in 2019 for certain
executive pre-vest cancellations, which were recorded in Restructuring and other
charges within the Statement of Consolidated Operations. At December 31, 2021,
there was $68 (pre-tax) of unrecognized compensation expense related to
non-vested restricted stock unit award grants. This expense is expected to be
recognized over a weighted average period of 1.8 years.
Stock-based compensation expense is based on the grant date fair value of the
applicable equity grant. For restricted stock unit awards, the fair value is
equivalent to the closing market price of Howmet's common stock on the date of
grant. The weighted average grant date fair value per share of the 2021 and 2020
performance stock awards with a market condition scaled by a TSR multiplier is
$43.41 and $21.33, respectively. The weighted average grant date fair value per
share of the April 2020 senior executive performance stock awards with a market
condition (achievement of certain stock price thresholds) is $2.57. The weighted
average grant date fair value per share of the 2019 performance stock awards
with a market condition (achievement of certain stock price thresholds) is
$11.93. The 2021, 2020, and 2019 performance awards were valued using a Monte
Carlo model. A Monte Carlo simulation uses assumptions of stock price behavior
to estimate the probability of satisfying market conditions and the resulting
fair value of the award. The risk-free interest rate (0.2% in 2021, 0.3% in
2020, and in 1.6% in 2019) was based on a yield curve of interest rates at the
time of the grant based on the remaining performance period. In 2021 and 2020,
volatility of 56.0% and 48.3%, respectively, was estimated using a blended rate
of Howmet's historical volatility and a peer-based volatility due to the Arconic
Inc. Separation Transaction and the related changes in the nature of the
business. In 2019, volatility of 33.4% was estimated using implied and
historical volatility. There were no stock options issued in 2021, 2020, and
2019.
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Table of Contents Stock option and equity award activity in 2021 was as follows (options and awards in millions):

                                                               Stock options                                 Stock awards
                                                                            Weighted
                                                                             average                                      Weighted
                                                    Number of          exercise price per           Number of            average FMV
                                                     options                 option                  awards               per award
Outstanding, December 31, 2020                            3            $          24.47                   9            $      13.68
Granted                                                   -                           -                   2                   32.15
Exercised                                                (1)                      21.70                   -                       -
Converted                                                 -                           -                  (2)                  19.52
Expired or forfeited                                      -                       34.68                  (1)                  20.94

Outstanding, December 31, 2021                            2            $          23.64                   8            $      16.19



As of December 31, 2021, the stock options outstanding had a weighted average
remaining contractual life of 2.6 years and a total intrinsic value of $15. All
of the stock options outstanding were fully vested and exercisable. In 2021,
2020, and 2019, the cash received from stock option exercises was $22, $33, and
$56 and the total tax benefit realized from these exercises was $2, $3, and $4,
respectively. The total intrinsic value of stock options exercised during 2021,
2020, and 2019 was $10, $14, and $17, respectively. The total intrinsic value of
stock awards converted during 2021, 2020, and 2019 was $55, $104, and $48,
respectively.
K. Earnings Per Share
Basic earnings per share ("EPS") amounts are computed by dividing earnings,
after the deduction of preferred stock dividends declared, by the average number
of common shares outstanding. Diluted EPS amounts assume the issuance of common
stock for all potentially dilutive share equivalents outstanding.
The information used to compute basic and diluted EPS attributable to Howmet
common shareholders was as follows (shares in millions):
For the year ended December 31,                            2021              2020              2019
Net income from continuing operations                   $    258          $    211          $    126
Less: preferred stock dividends declared                       2                 2                 2
Net income from continuing operations attributable to        256               209               124
common shareholders
Income from discontinued operations                            -                50               344
Net income attributable to common shareholders - basic       256               259               468
Add: interest expense related to convertible notes             -                 -                 9

Net profit attributable to common shareholders – $256 $

    259          $    477
diluted

Average shares outstanding - basic                           430               435               446
Effect of dilutive securities:
Stock options                                                  -                 -                 1
Stock and performance awards                                   5                 4                 5
Convertible notes(1)                                           -                 -                11
Average shares outstanding - diluted                         435               439               463


(1)The convertible notes matured on October 15, 2019 (see   Note     R  ). No
shares of the Company's common stock were issued in connection with the maturity
or the final conversion of the convertible notes. As of October 15, 2019, the
calculation of average diluted shares outstanding ceased to include the
approximately 15 million shares of common stock and the corresponding interest
expense previously attributable to the convertible notes.
Common stock outstanding at December 31, 2021 and 2020 was approximately 422
million and 433 million, respectively.
The 5 million decrease in average shares outstanding (basic) for the year ended
December 31, 2021 compared to the year ended December 31, 2020 was primarily due
to the 13 million shares repurchased during 2021. As average shares outstanding
are used in the calculation for both basic and diluted EPS, the full impact of
share repurchases was not realized in EPS for the year ended December 31, 2021
as share repurchases occurred at varying points during the year ended
December 31, 2021.
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The following shares were excluded from the calculation of average shares
outstanding - diluted as their effect was anti-dilutive (shares in millions).
For the year ended December 31,      2021      2020      2019

Stock options                          -         1         1


(1)
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L. Accumulated Other Comprehensive Loss
The following table details the activity of the four components that comprise
Accumulated other comprehensive loss:
                                                                           2021              2020              2019
Pension and other postretirement benefits (  H  )
Balance at beginning of period                                          $   

(980) $ (2,732) $ (2,344) $

Other comprehensive income (loss):
Unrecognized net actuarial gain (loss) and prior service cost/benefit        111              (211)             (587)
Tax (expense) benefit                                                        (26)               48               129

Total other comprehensive income before reclassifications, net

   85              (163)             (458)
of tax
Amortization of net actuarial loss and prior service cost(1)                 123               149                90
Tax expense(2)                                                               (27)              (32)              (20)

Total amount reclassified from Accumulated other comprehensive income,

   96               117                70
net of tax(3)
Total Other comprehensive income (loss)                                      181               (46)             (388)
Transfer to Arconic Corporation                                                -             1,798                 -
Balance at end of period                                                $   (799)         $   (980)         $ (2,732)
Foreign currency translation
Balance at beginning of period                                          $   

(966) $ (596) $ (583)

Other comprehensive (loss) income(4)                                         (96)               58               (13)
Transfer to Arconic Corporation                                                -              (428)                -
Balance at end of period                                                $ (1,062)         $   (966)         $   (596)
Debt securities
Balance at beginning of period                                          $      -          $      -          $     (3)
Other comprehensive income(5)                                                  -                 -                 3
Balance at end of period                                                $      -          $      -          $      -
Cash flow hedges
Balance at beginning of period                                          $      3          $     (1)         $      4
Adoption of accounting standard(6)                                             -                 -                (2)
Other comprehensive income (loss):
Net change from periodic revaluations                                         20                 -                (9)
Tax benefit                                                                   (4)                -                 3

Total other comprehensive income before reclassifications, net

   16                 -                (6)
of tax
Net amount reclassified to earnings                                          (26)                6                 4

Tax benefit (expense)(2)                                                       5                (2)               (1)

Total amount reclassified from Accumulated other comprehensive (losses)

  (21)                4                 3
income, net of tax(3)
Total Other comprehensive (loss) income                                       (5)                4                (3)
Balance at end of period                                                $   

(2) $ $3 (1)

Accumulated other comprehensive loss balance at end of period           $ 

(1,863) $ (1,943) $ (3,329) $


(1)These amounts were recorded in Other expense, net (see   Note     G  ) and
Restructuring and other charges (see   Note E  ) in the Statement of
Consolidated Operations.
(2)These amounts were included in Provision (benefit) for income taxes (see

Note I ) in the consolidated statement of income. (3) A positive amount indicates a corresponding revenue charge and a negative amount indicates a corresponding revenue benefit. (4) In all the periods presented, no amount has been reclassified to profit or loss. (5) Realized gains and losses have been included in other expenses, net, in the Consolidated Statement of Income.

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(6)Adjustment was related to eliminating the separate measurement of hedge
ineffectiveness as part of the adoption of new hedge accounting guidance.
M. Receivables
Sale of Receivables Programs
The Company has historically maintained two accounts receivables securitization
arrangements. The net cash funding from the sale of accounts receivable was
neither a use of cash nor a source of cash during 2021.
The first was an arrangement with financial institutions to sell certain
customer receivables without recourse on a revolving basis (the "Receivables
Sale Program") and was terminated on August 30, 2021. This arrangement
historically provided up to a maximum funding of $300 for receivables sold. The
Company maintained a beneficial interest, or a right to collect cash, on the
sold receivables that have not been funded (deferred purchase program
receivable). In connection with the termination, the Company repurchased the
remaining $211 of unpaid receivables, paying $160 in cash and reducing the $51
deferred purchase program receivable to zero (in a non-cash transaction).
The Company had net cash repayments totaling $44 ($41 in draws and $85 in
repayments) in 2021 and net cash repayments totaling $146 ($207 in draws and
$353 in repayments) in 2020.
As of December 31, 2021, there was no deferred purchase program receivable
included in Other receivables in the Consolidated Balance Sheet. As of
December 31, 2020, the deferred purchase program receivable was $12, which was
included in Other receivables in the Consolidated Balance Sheet. The deferred
purchase program receivable was reduced as collections of the underlying
receivables occurred.
Cash receipts from customer payments on sold receivables (which were cash
receipts on the underlying trade receivables that had been previously sold) as
well as cash receipts and cash disbursements from draws and repayments under the
program were presented as cash receipts from sold receivables within investing
activities in the Statement of Consolidated Cash Flows through the termination
of the Receivables Sale Program on August 30, 2021. As a result of the
termination, there were no additional changes related to cash receipts from sold
receivables within investing activities in the Statement of Consolidated Cash
Flows in the fourth quarter of 2021.
The second accounts receivables securitization arrangement is one in which the
Company, through a wholly-owned special purpose entity ("SPE"), has a
receivables purchase agreement (the "Receivables Purchase Agreement") such that
the SPE may sell certain receivables to financial institutions until the earlier
of August 30, 2024 or a termination event. The Receivables Purchase Agreement
also contains customary representations and warranties, as well as affirmative
and negative covenants. Pursuant to the Receivables Purchase Agreement, the
Company does not maintain effective control over the transferred receivables,
and therefore accounts for these transfers as sales of receivables.
Cash received from collections of sold receivables is used by the SPE to fund
additional purchases of receivables on a revolving basis. This arrangement
historically provided up to a maximum funding of $125 for receivables sold. On
August 30, 2021, the Company entered into an amendment to add the subsidiaries
that were previously part of the terminated Receivables Sale Program and, as a
result, the maximum funding limit was increased by $200 to $325. The SPE sold
the $211 of receivables, which were repurchased as a result of the termination
of the Receivables Sale Program, in exchange for cash.
The Company sold $1,057 of its receivables without recourse and received cash
funding under this program during 2021, resulting in derecognition of the
receivables from the Company's Consolidated Balance Sheet. As of December 31,
2021 and December 31, 2020, $250 and $46, respectively, remained outstanding
from the customer. As collateral against the sold receivables, the SPE maintains
a certain level of unsold receivables, which was $79 and $33 at December 31,
2021 and December 31, 2020, respectively. Costs associated with the sales of
receivables are reflected in the Company's Consolidated Statements of Operations
for the periods in which the sales occur. Cash receipts from sold receivables
under the Receivables Purchase Agreement, excluding the receipts associated with
the August 30, 2021 termination of the Receivables Sale Program, are presented
within operating activities in the Statement of Consolidated Cash Flows.
The Company had accounts receivable securitization arrangements totaling $325 at
December 31, 2021, of which $250 was drawn. The Company had accounts receivable
securitization arrangements totaling $425 at December 31, 2020, of which $250
was drawn.
Other Customer Receivable Sales
In 2021, the Company sold $368 of certain customer's receivables in exchange for
cash (of which $109 remained outstanding from the customer at December 31,
2021), the proceeds from which are presented in changes in receivables within
operating activities in the Statement of Consolidated Cash Flows.
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In 2020, the Company sold $181 of certain customers' receivables in exchange for
cash (of which $50 remained outstanding from the customer at December 31, 2020),
the proceeds from which are presented in changes in receivables within operating
activities in the Statement of Consolidated Cash Flows.
N. Inventories
December 31,                  2021         2020
Finished goods              $   478      $   528
Work-in-process                 631          629
Purchased raw materials         256          292
Operating supplies               37           39
Total inventories           $ 1,402      $ 1,488


At December 31, 2021 and 2020, the portion of inventories valued on a LIFO basis
was $523 and $458, respectively. These amounts exclude the effects of LIFO
valuation reductions, which were $192 and $131 at December 31, 2021 and 2020,
respectively.
O. Properties, Plants, and Equipment, Net
                                                                  December 31, 2021           December 31, 2020
Land and land rights                                            $               91          $               98
Structures                                                                   1,034                       1,033
Machinery and equipment                                                      3,932                       3,879
                                                                             5,057                       5,010
Less: accumulated depreciation and amortization                              2,772                       2,626
                                                                             2,285                       2,384
Construction work-in-progress                                                  182                         208
Properties, plants, and equipment, net                          $            2,467          $            2,592


During the second quarter of 2019, the Company updated its five-year strategic
plan and determined that there was a decline in the forecasted financial
performance for the Disks asset group within the Engineered Products and
Forgings segment at that time. As such, the Company evaluated the recoverability
of the Disks asset group long-lived assets by comparing the carrying value to
the undiscounted cash flows of the Disks asset group. The carrying value
exceeded the undiscounted cash flows and therefore the Disks asset group
long-lived assets were deemed to be impaired. The impairment charge was measured
as the amount of carrying value in excess of fair value of the long-lived
assets, with fair value determined using a DCF model and a combination of sales
comparison and cost approach valuation methods, including an estimate for
economic obsolescence. The impairment charge of $428, of which $247 and $181
related to the Engine Products and Engineered Structures segments, respectively,
recorded in the second quarter of 2019 impacted properties, plants, and
equipment; intangible assets; and certain other noncurrent assets by $198, $197,
and $33, respectively. The impairment charge was recorded in Restructuring and
other charges in the Statement of Consolidated Operations in 2019.
Depreciation expense related to Properties, plants, and equipment recorded in
Provision for depreciation and amortization in the Statement of Consolidated
Operations was $232, $236, and $234 for the years ended December 31, 2021, 2020,
and 2019, respectively.

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P. Goodwill and Other Intangible Assets
The following table details the changes in the carrying amount of goodwill:
                                         Engine             Fastening       

Designed

                                        Products             Systems              Structures            Forged Wheels            Total
Balances at December 31, 2019
Goodwill                              $    2,883          $     1,607          $         289          $            7          $  4,786
Accumulated impairment losses               (719)                   -                      -                       -              (719)
Goodwill, net                              2,164                1,607                    289                       7             4,067
Impairment (See   Note     U  )                -                    -                     (2)                      -                (2)
Translation and other                         24                   13                      -                       -                37
Transfer from Engine Products to             (17)                   -                     17                       -                 -

Works of art(1)

Balances at December 31, 2020
Goodwill                                   2,890                1,620                    306                       7             4,823
Accumulated impairment losses               (719)                   -                     (2)                      -              (721)
Goodwill, net                              2,171                1,620                    304                       7             4,102

Impairment (See   Note     U  )                -                   (4)                     -                       -                (4)
Translation and other                        (22)                  (9)                     -                       -               (31)

Balances at December 31, 2021
Goodwill                                   2,868                1,611                    306                       7             4,792
Accumulated impairment losses               (719)                  (4)                    (2)                      -              (725)
Goodwill, net                         $    2,149          $     1,607          $         304          $            7          $  4,067


(1)In the first quarter of 2020, the Savannah operations was transferred from
the Engine Products segment to the Engineered Structures segment and, as a
result, goodwill of $17 was reallocated.
During the 2021 annual review of goodwill in the fourth quarter, management
elected to perform qualitative assessments on the Engine Products and Forged
Wheels reporting units and performed quantitative impairment tests on the
Engineered Structures and Fastening Systems reporting units. The estimated fair
values for the Engineered Structures and Fastening Systems reporting units
exceeded their respective carrying values by approximately 30% and 50%,
respectively; thus, there were no goodwill impairments. Under the quantitative
impairment test, the evaluation of impairment involves comparing the current
fair value of each reporting unit to its carrying value, including goodwill.
Howmet uses a discounted cash flow ("DCF") model to estimate the current fair
value of its reporting units when testing for impairment, as management believes
forecasted cash flows are the best indicator of such fair value. A number of
significant assumptions and estimates are involved in the application of the DCF
model to forecast operating cash flows, including sales growth, production
costs, capital spending, and discount rate. Assumptions can vary among the
reporting units. Cash flow forecasts are generally based on approved business
unit operating plans for the early years and historical relationships in later
years. The WACC rate for the individual reporting units is estimated with the
assistance of valuation experts. The annual goodwill impairment tests in the
fourth quarter of 2021, 2020, and 2019 indicated that goodwill was not impaired
for any of the Company's reporting units. If actual results or external market
factors decline significantly from management's estimates, future goodwill
impairment charges (or the amount by which the carrying amount exceeds the
reporting unit's fair value without exceeding the total amount of goodwill
allocated to that reporting unit) may be necessary and could be material.
During the first quarter of 2020, Howmet's market capitalization declined
significantly compared to the fourth quarter of 2019. Over the same period, the
equity value of our peer group companies and the overall U.S. stock market also
declined significantly amid market volatility. In addition, as a result of the
COVID-19 pandemic and measures designed to contain the spread, global sales to
customers in the aerospace and commercial transportation industries impacted by
COVID-19 had been and were expected to be negatively impacted, compared to 2019,
as a result of disruption in demand. As a result of these macroeconomic factors,
we performed a qualitative impairment test to evaluate whether it is more likely
than not that the fair value of any of our reporting units is less than its
carrying value. As a result of this assessment, the Company performed a
quantitative impairment test in the first quarter of 2020 for the Engineered
Structures reporting unit and concluded that although the margin between the
fair value of the reporting unit and carrying value had declined from
approximately 60% to approximately 15%, it was not impaired. Since the first
quarter of 2020, there have been no indicators of impairment identified for the
Engineered Structures reporting unit or any other reporting units or
indefinite-lived intangible assets.
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On January 1, 2020, management performed a quantitative impairment test of the
Engines Products and Engineered Structures segments in connection with the
Savannah business transfer. The estimated fair value of each of these reporting
units substantially exceeded their carrying value; thus, there was no goodwill
impairment at the date the business was transferred.
In the second quarter of 2019, the Company performed an interim impairment
evaluation of goodwill for Engine Products in connection with the impairment of
the long-lived assets of the Disks asset group. The estimated fair value of the
Engine Products reporting unit was substantially in excess of its carrying
value; thus, there was no impairment of goodwill.
Other intangible assets were as follows:
                                                   Gross carrying           Accumulated
December 31, 2021                                      amount              amortization           Intangibles, net
Computer software                                $           206          $       (175)         $              31
Patents and licenses                                          67                   (65)                         2
Other intangibles                                            686                  (202)                       484
Total amortizable intangible assets                          959                  (442)                       517
Indefinite-lived trade names and trademarks                   32                     -                         32
Total intangible assets, net                     $           991          $       (442)         $             549


                                                   Gross carrying           Accumulated
December 31, 2020                                      amount              amortization           Intangibles, net
Computer software                                $           194          $       (169)         $              25
Patents and licenses                                          67                   (65)                         2
Other intangibles                                            700                  (188)                       512
Total amortizable intangible assets                          961                  (422)                       539
Indefinite-lived trade names and trademarks                   32                     -                         32
Total intangible assets, net                     $           993          $       (422)         $             571



During the second quarter of 2019, the Company recorded a charge of $197 for
intangible asset impairments associated with the Disks long-lived asset group
which was recorded in Restructuring and other charges in the Statement of
Consolidated Operations. See   Note     O   for additional details.
Computer software consists primarily of software costs associated with
enterprise business solutions across Howmet's businesses.
Amortization expense related to the intangible assets recorded in Provision for
depreciation and amortization in the Statement of Consolidated Operations was
$36, $40, and $58 for the years ended December 31, 2021, 2020, and 2019,
respectively, and is expected to be in the range of approximately $34 to $39
annually from 2022 to 2026.
Q. Leases
Operating lease cost, which included short-term leases and variable lease
payments and approximated cash paid, was $63, $67, and $84 in 2021, 2020, and
2019, respectively.
Operating lease right-of-use assets and lease liabilities in the Consolidated
Balance Sheet were as follows:
December 31,                                                           2021               2020

Right-of-use assets classified as other non-current assets $108 $131

Current portion of rental debts classified as Other current liabilities

                                                        $      

$33 38 Long-term portion of lease liabilities classified as Other non-current liabilities and deferred credits

81                100
Total lease liabilities                                            $     114          $     138


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Future minimum contractual operating lease obligations were as follows at
December 31, 2021:
2022                                 $  38
2023                                    28
2024                                    19
2025                                    12
2026                                    10
Thereafter                              27
Total lease payments                 $ 134
Less: Imputed interest                 (20)

Present value of lease liabilities $114


December 31,                                               2021               2020               2019

Right-of-use assets obtained in exchange for operating lease obligations

                                      $      16          $      35          $      26
Weighted-average remaining lease term in years                    6                  6                  6
Weighted-average discount rate                               5.4  %             5.6  %             5.9  %


R. Debt
Debt.
December 31,                                      2021         2020

5.400% Notes, due 2021(1)                       $     -      $   361
5.870% Notes, due 2022(2)                             -          476
5.125% Notes, due 2024                            1,150        1,250
6.875% Notes, due 2025                              600        1,200
5.900% Notes, due 2027                              625          625
6.750% Bonds, due 2028                              300          300
3.000% Notes due 2029                               700            -
5.950% Notes, due 2037                              625          625

4.750% Iowa Finance Authority Loan, maturity 2042 250 250 Other(3)

                                            (18)         (12)
                                                  4,232        5,075
Less: amount due within one year                      5          376
 Total long-term debt                           $ 4,227      $ 4,699


(1)Redeemed on January 15, 2021.
(2)Redeemed on May 3, 2021.
(3)Includes various financing arrangements related to subsidiaries, unamortized
debt discounts and unamortized debt issuance costs related to outstanding notes
and bonds listed in the table above.
The principal amount of long-term debt maturing in each of the next five years
is $1,150 in 2024, $600 in 2025, and no long-term debt maturities in each of
2022, 2023, and 2026.
Public Debt. In the third and fourth quarters of 2021, the Company repurchased
an additional $100 aggregate principal amount of its 5.125% Notes due 2024 in
the open market and paid approximately $111, including an early termination
premium and accrued interest of approximately $10 and $1, respectively, which
were recorded in Loss on debt redemption and Interest expense, net,
respectively, in the Statement of Consolidated Operations.
On September 2, 2021, the Company completed a cash tender offer and repurchased
approximately $600 aggregate principal amount of its 6.875% Notes due 2025 (the
"6.875% Notes"). The amount of tender premium and accrued interest associated
with the notes accepted for settlement were $105 and $14, respectively, which
were recorded in Loss on debt redemption and Interest expense, net,
respectively, in the Statement of Consolidated Operations.
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On September 1, 2021, the Company completed an offering of $700 aggregate
principal amount of 3.000% Notes due 2029, the proceeds of which were used to
fund the cash tender offer noted above and to pay related transaction fees,
including applicable premiums and expenses.
On May 3, 2021, the Company completed the early redemption of all the remaining
$476 aggregate principal amount of its 5.870% Notes due 2022 (the "5.870%
Notes") and paid an aggregate of $503, including $5 of accrued interest. The
Company also incurred an early termination premium and other costs of $23, which
was recorded in Loss on debt redemption in the Statement of Consolidated
Operations.
On January 15, 2021 the Company completed the early redemption of all the
remaining $361 of its 5.400% Notes due 2021 (the "5.400% Notes") at par and paid
$5 in accrued interest.
On May 21, 2020, the Company completed a cash tender offer and repurchased $589
and $151 of principal amount of the 5.400% Notes and its 5.870% Notes,
respectively. The amount of early tender premium and accrued interest associated
with the notes accepted for early settlement were $24 and $4, respectively,
which were recorded in Loss on debt redemption and Interest expense, net,
respectively, in the Statement of Consolidated Operations.
On April 24, 2020, the Company completed an offering of $1,200 aggregate
principal amount of 6.875% Notes, the proceeds of which have been used to fund
the May 2020 cash tender offers noted above and to pay related transaction fees,
including applicable premiums and expenses, with the remaining amount to be used
for general corporate purposes. The Company incurred deferred financing costs of
$14 associated with the issuance in the second quarter of 2020.
On April 6, 2020, the Company completed the early redemption of all $1,000 of
its 6.150% Notes due 2020 (the "6.150% Notes") and the early partial redemption
of $300 of its 5.400% Notes. Holders of the 6.150% Notes were paid an aggregate
of $1,020 and holders of the 5.400% Notes were paid an aggregate of $315, plus
accrued and unpaid interest up to, but not including, the redemption date. The
Company incurred early termination premium and accrued interest of $35 and $17,
respectively, which were recorded in Loss on debt redemption and Interest
expense, net, respectively, in the Statement of Consolidated Operations.
The Company has the option to redeem certain of its notes and bonds in whole or
part, at any time at a redemption price equal to the greater of principal amount
or the sum of the present values of the remaining scheduled payments, discounted
using a defined treasury rate plus a spread, plus in either case accrued and
unpaid interest to the redemption date.
Credit Facility. On September 28, 2021, the Company amended and restated its
Five-Year Revolving Credit Agreement (as so amended and restated, the "Credit
Agreement"). Capitalized terms used in this "Credit Facility" section but not
otherwise defined shall have the meanings given to such terms in the Credit
Agreement.
The Credit Agreement provides a $1,000 senior unsecured revolving credit
facility (the "Credit Facility") that matures on September 28, 2026, unless
extended or earlier terminated in accordance with the provisions of the Credit
Agreement. Howmet may make two one-year extension requests during the term of
the Credit Facility, subject to the lender consent requirements set forth in the
Credit Agreement. Subject to the terms and conditions of the Credit Agreement,
the Company may from time to time request increases in lender commitments under
the Credit Facility, not to exceed $500 in aggregate principal amount, and may
also request the issuance of letters of credit, subject to a letter of credit
sublimit of $500 of the Credit Facility. Under the provisions of the Credit
Agreement, based on Howmet's current long-term debt ratings, Howmet pays an
annual fee of 0.23% of the total commitment to maintain the Credit Facility.
The Credit Facility is unsecured and amounts payable under it will rank pari
passu with all other unsecured, unsubordinated indebtedness of Howmet.
Borrowings under the Credit Facility may be denominated in U.S. dollars or
euros. Loans will bear interest at a base rate or a rate equal to LIBOR (subject
to the Replacement Benchmark in accordance with the terms of the Credit
Agreement), plus, in each case, an applicable margin based on the credit ratings
of Howmet's outstanding senior unsecured long-term debt. Based on Howmet's
current long-term debt ratings, the applicable margin on base rate loans and
LIBOR loans would be 0.40% and 1.40% 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 Howmet to pay amounts outstanding under the Credit Facility
may be accelerated upon the occurrence of an "Event of Default" as defined in
the 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, 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 Howmet.

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Under the Credit Agreement, the Company's ratio of Consolidated Net Debt to
Consolidated EBITDA as of the end of each fiscal quarter for the period of the
four fiscal quarters of the Company most recently ended, is required to be no
greater than 3.50 to 1.00; provided, however, that during the Covenant Relief
Period through December 31, 2022 (unless the Company elects to terminate the
Covenant Relief Period earlier in accordance with the Credit Agreement), the
Company's Consolidated Net Debt to Consolidated EBITDA ratio cannot exceed the
levels set forth below:
                                                  No greater than

(i) for the quarter ending December 31, 2021 4.75 to 1.00 (ii) for the quarter ending March 31, 2022 4.50 to 1.00 (iii) for the quarter ending June 30, 2022 4.50 to 1.00 (iv) for the quarter ending September 30 December 2022 4.25 to 1.00 (v) for the quarter ending December 31, 2022 3.75 to 1.00


During the Covenant Relief Period, common stock dividends and share repurchases
(see   Note     J  ) are permitted only if no loans under the Credit Agreement
are outstanding at the time and were limited to an aggregate amount not to
exceed $450 during the year ended December 31, 2021 and are limited to an
aggregate amount not to exceed $500 during the year ending December 31, 2022.
The Credit Agreement includes additional covenants, including, among others, (a)
limitations on Howmet's ability to incur liens securing indebtedness for
borrowed money, (b) limitations on Howmet's ability to consummate a merger,
consolidation or sale of all or substantially all of its assets, and (c)
limitations on Howmet's ability to change the nature of its business.
There were no amounts outstanding under the Credit Agreement at December 31,
2021 and 2020, and no amounts were borrowed during 2021, 2020, or 2019 under the
Credit Agreement.
In addition to the Credit Agreement, the Company had several other credit
agreements that provided a borrowing capacity of $640 as of December 31, 2019,
and all of which expired in 2020. In 2020, nothing was borrowed or repaid under
these arrangements. In 2019, Howmet borrowed and repaid $400 under the
respective credit arrangements. The weighted-average interest rate and
weighted-average days outstanding of the respective borrowings during 2019 was
3.7% and 49 days, respectively. The purpose of any borrowings under these credit
arrangements was to provide for working capital requirements and for other
general corporate purposes.
Short-Term Debt. At December 31, 2021 and 2020, short-term debt was $5 and $14,
respectively, substantially all of which related to accounts payable settlement
arrangements with certain vendors and third-party intermediaries. These
arrangements provide that, at the vendor's request, the third-party intermediary
advances the amount of the scheduled payment to the vendor, less an appropriate
discount, before the scheduled payment date, and Howmet makes payment to the
third-party intermediary on the date stipulated in accordance with the
commercial terms negotiated with its vendors. Howmet records imputed interest
related to these arrangements in Interest expense, net in the Statement of
Consolidated Operations.
S. Other Financial Instruments
Fair Value. Fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value hierarchy distinguishes
between (i) market participant assumptions developed based on market data
obtained from independent sources (observable inputs) and (ii) an entity's own
assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs). The fair value
hierarchy consists of three broad levels, which gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three
levels of the fair value hierarchy are described below:
•Level 1 - Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities.
•Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly, including
quoted prices for similar assets or liabilities in active markets; quoted prices
for identical or similar assets or liabilities in markets that are not active;
inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates); and inputs that are derived principally from or
corroborated by observable market data by correlation or other means.
•Level 3 - Inputs that are both significant to the fair value measurement and
unobservable.
The carrying values of Cash and cash equivalents, restricted cash, derivatives,
noncurrent receivables, and Short-term debt included in the Consolidated Balance
Sheet approximate their fair value. The Company holds exchange-traded fixed
income securities which are considered available-for-sale securities that are
carried at fair value which is based on quoted market prices
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which are classified in Level 1 of the fair value hierarchy and are included in
Prepaid expenses and other current assets in the Consolidated Balance Sheet. The
fair value of Long-term debt, less amounts due within one year was based on
quoted market prices for public debt and on interest rates that are currently
available to Howmet for issuance of debt with similar terms and maturities for
non-public debt. The fair value amounts for all Long-term debt were classified
in Level 2 of the fair value hierarchy.
                                                            2021                       2020
                                                    Carrying       Fair        Carrying       Fair
December 31,                                         value         value        value         value
Long-term debt, less amounts due within one year   $  4,227      $ 4,707    

$4,699 $5,426



Restricted cash was $2, $1, and $55 (see   Note     U  ) in 2021, 2020, and
2019, respectively, and was recorded in Prepaid expenses and other current
assets on the Consolidated Balance Sheet.
T. Cash Flow Information
Cash paid for interest and income taxes for both continuing and discontinued
operations was as follows:
                                         2021       2020       2019

Interest, net of amounts capitalized $267 $401 $340 Income taxes, net of amounts repaid $53 $(33) $122


The Company incurred capital expenditures that remain unpaid at December 31,
2021, 2020, and 2019 of $49, $50, and $133 respectively, which result in cash
outflows for investing activities in subsequent periods.
U. Acquisitions and Divestitures
2021 Divestitures
On June 1, 2021, the Company completed the sale of a small manufacturing plant
in France within the Fastening Systems segment for $10 (of which $8 of cash was
received in the second quarter of 2021). An agreement to sell was reached on
March 15, 2021, which resulted in a charge of $4 related to the non-cash
impairment of the net book value of the business, primarily goodwill, in the
first quarter of 2021 which was recorded in Restructuring and other charges in
the Statement of Consolidated Operations.
2020 Divestiture
On January 31, 2020, the Company reached an agreement to sell a small
manufacturing plant in the U.K. within the Engineered Structures segment for $12
in cash, and therefore was classified as held for sale. As a result of entering
into the agreement, a charge of $12 was recognized related to a non-cash
impairment of the net book value of the business, primarily properties, plants,
and equipment in the first quarter of 2020, which was recorded in Restructuring
and other charges in the Statement of Consolidated Operations. As the sale did
not close, the Company changed the classification from held for sale to held for
use in the second quarter of 2020 and recorded these assets at their lower of
carrying value (assuming no initial reclassification for held for sale was made)
or fair value. The result was a reversal of $7 related to a non-cash impairment
in the second quarter of 2020. These charges were recorded in Restructuring and
other charges in the Statement of Consolidated Operations.
2019 Divestitures
On May 31, 2019, the Company sold a small additive manufacturing facility within
the Engineered Structures segment for $1 in cash, which resulted in a loss of
$13 recorded in Restructuring and other charges in the Statement of Consolidated
Operations in 2019.
On August 15, 2019, the Company sold inventories and properties, plants, and
equipment related to a small energy business within the Engineered Structures
segment for $13 in cash. The Company recognized a charge of $10 related to
inventory impairment and recorded the charge in Cost of goods sold in the
Statement of Consolidated Operations in 2019.
On December 1, 2019, the Company completed the sale of its forgings business in
the United Kingdom (U.K.) for $64 in cash, which resulted in a loss on sale of
$46 which was recorded in Restructuring and other charges in the Statement of
Consolidated Operations in 2019. The Company settled certain post-closing
adjustments which resulted in a $5 reduction in the purchase price and an
additional loss of sale which was recorded in Restructuring and other charges in
the Statement of Consolidated Operations in 2020. The sale was subject to
certain tax post-closing adjustments. Of the cash proceeds received, $53 was
recorded as Restricted cash within Prepaid expenses and other current assets on
the Consolidated Balance Sheet at December 31, 2019 as its use is subject to
restriction by the U.K. pension authority until certain U.K. pension plan
changes have been
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made and approved. The restriction on these proceeds was removed in the second
quarter of 2020. The forgings business primarily produces steel, titanium, and
nickel based forged components for aerospace, mining, and off-highway markets
and its operating results and assets and liabilities were included in the Engine
Products segment. This business generated third party sales of $116 in 2019 and
had 540 employees at the time of divestiture.
V. Contingencies and Commitments
Contingencies
Environmental Matters. Howmet participates in environmental assessments and
cleanups at more than 30 locations. These include owned or operating facilities
and adjoining properties, previously owned or operated facilities and adjoining
properties, and waste sites, including Superfund (Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA")) sites.
A liability is recorded for environmental remediation when a cleanup program
becomes probable and the costs can be reasonably estimated. As assessments and
cleanups proceed, the liability is adjusted based on progress made in
determining the extent of remedial actions and related costs. The liability can
change substantially due to factors such as the nature and extent of
contamination, changes in remedial requirements, and technological changes,
among others.
The Company's remediation reserve balance was $15 and $10 at December 31, 2021
and 2020, respectively, recorded in Other noncurrent liabilities and deferred
credits in the Consolidated Balance Sheet (of which $6 and $5, respectively,
were classified as a current liability), and reflects the most probable costs to
remediate identified environmental conditions for which costs can be reasonably
estimated. The increase in 2021 is primarily associated with site monitoring
costs at previously owned properties in California, which will determine if any
additional remediation is required. Payments related to remediation expenses
applied against the reserve were $2 in each of 2021 and 2020, and included
expenditures currently mandated, as well as those not required by any regulatory
authority or third party.
Included in annual operating expenses are the recurring costs of managing
hazardous substances and environmental programs. These costs are estimated to be
less than 1% of Cost of goods sold.
Tax. As previously reported, in July 2013, following a Spanish corporate income
tax audit covering the 2006 through 2009 tax years, an assessment was received
mainly disallowing certain interest deductions claimed by a Spanish consolidated
tax group owned by the Company. The Company appealed this assessment to Spain's
Central Tax Administrative Court, and subsequently to Spain's National Court,
each of which was denied.
The Company then appealed the decision to the Supreme Court of Spain. In
November 2020, the Supreme Court of Spain rendered a decision in favor of the
taxpayer, removing the assessment in its entirety. The decision is final and
cannot be further appealed.
As a result of the favorable decision, in the fourth quarter of 2020, the
Company released an income tax reserve, including interest, of $64 (€54), which
was recorded in Provision (benefit) for income taxes in the Consolidated
Statement of Operations, that was previously established in the third quarter of
2018. In addition, the Company reversed a combined indemnification receivable of
$53 (€45) for Alcoa Corporation's 49% share and Arconic Corporation's 33.66%
share of the total reserve, which was recorded in Other expense, net in the
Consolidated Statement of Operations, that were previously established pursuant
to the October 31, 2016 and March 31, 2020 Tax Matters Agreements, respectively.
As of the end of 2020, the Company no longer has a balance recorded for this
matter.
Indemnified Matters. The Separation and Distribution Agreement, dated October
31, 2016, entered into between the Company and Alcoa Corporation in connection
with the Alcoa Inc. Separation Transaction, provides for cross-indemnities
between the Company and Alcoa Corporation for claims subject to indemnification.
The Separation and Distribution Agreement, dated March 31, 2020, entered into
between the Company and Arconic Corporation in connection with the Arconic Inc.
Separation Transaction, provides for cross-indemnities between the Company and
Arconic Corporation for claims subject to indemnification. Among other claims
that are covered by these indemnities, Arconic Corporation indemnifies the
Company (f/k/a Arconic Inc. and f/k/a Alcoa Inc.) for all potential liabilities
associated with the fire that occurred at the Grenfell Tower in London, U.K. on
June 14, 2017 ("Grenfell Fire"), including the following:
(i) Regulatory Investigations. Arconic Architectural Products SAS ("AAP SAS")
(now a subsidiary of Arconic Corporation) supplied Reynobond PE to its customer
who used the product as one component of the overall cladding system on Grenfell
Tower. Regulatory Investigations into the overall Grenfell Fire are being
conducted, including a criminal investigation by the London Metropolitan Police
Service and a Public Inquiry by the British government (regarding which AAP SAS
is a participant). (ii) United Kingdom Litigation. On December 23, 2020,
survivors and estates of decedents of the Grenfell Fire filed suit against 23
defendants, including the Company. No substantive allegations or requests for
relief have been provided. The suits are stayed with a conference to be held
after April 4, 2022. (iii) Behrens et al. v. Arconic Inc. et al. (United States
District Court for the Eastern District of Pennsylvania). On June 6, 2019, 247
survivors and estates of decedents of the Grenfell
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Fire filed a complaint against Arconic Inc., Alcoa Inc. and Arconic
Architectural Products, LLC (now a subsidiary of Arconic Corporation), among
others, for product liability and wrongful death. Plaintiffs seek monetary
damages exceeding $75,000 (amount not in millions) for each plaintiff. On
September 16, 2020, the court dismissed the U.S. case, determining that the U.K.
is the appropriate jurisdiction for the case. Plaintiffs are appealing. (iv)
Howard v. Arconic Inc. et al. (United States District Court for the Western
District of Pennsylvania). In 2017, two purported class actions were filed
against Arconic Inc., Klaus Kleinfeld and other former Arconic Inc. executives
and directors, and certain banks. The actions, which later were consolidated,
allege violations of the federal securities laws relating to the Grenfell Fire.
On June 23, 2021, the court ruled that certain claims related to a particular
registration statement, other SEC filings, product brochures and websites can
proceed and dismissed all other claims with prejudice. A status conference was
held before the court on January 11, 2022 during which the court heard argument
from both parties on the pending motion for certification of an interlocutory
appeal. The motion remains pending. (v) Raul v. Albaugh, et al. (United States
District Court for the District of Delaware). On June 22, 2018, a derivative
complaint was filed nominally on behalf of Arconic Inc. by a purported Arconic
Inc. stockholder against the then members of Arconic Inc.'s Board of Directors,
Klaus Kleinfeld and Ken Giacobbe, naming Arconic Inc. as a nominal defendant.
The complaint asserts claims under federal securities laws, most of which are
similar to those in Howard, claims under Delaware state law for breaches of
fiduciary duty, gross mismanagement and abuse of control, as well as allegations
that the defendants improperly authorized the sale of Reynobond PE for unsafe
uses. The case has been stayed until the final resolution of the Howard case and
the Regulatory Investigations. (vi) Stockholder Demands. Following the Grenfell
Fire, the then Arconic Inc. Board of Directors (the "Board") received letters,
purportedly sent on behalf of stockholders, reciting allegations similar to the
Howard and Raul cases and demanding that the Board authorize Arconic Inc. to
initiate litigation against members of management, the Board and others. On May
28, 2019, the Board adopted the findings and recommendations of its Special
Litigation Committee and rejected the stockholders' demands. On June 28, 2021,
one of the stockholders whose demand was rejected asked the current Howmet Board
of Directors to reconsider the decision of the Board, which was declined. On
August 4, 2021, another stockholder whose demand was rejected requested books
and records relating to, among other things, the Board's decision to reject his
initial demand, which the Company declined. There has been no further
correspondence with either stockholder.
Legal Proceedings. Lehman Brothers International (Europe) ("LBIE") Proceeding.
On June 26, 2020, LBIE filed formal proceedings against two Firth Rixson
entities ("Firth") in the High Court of Justice, Business and Property Courts of
England and Wales. The proceedings relate to interest rate swap transactions
that Firth entered into with LBIE in 2007 to 2008. In 2008, LBIE commenced
insolvency proceedings, an event of default under the agreements, rendering LBIE
unable to meet its obligations under the swaps and suspending Firth's payment
obligations. In the court proceedings, LBIE seeks a declaration that Firth has a
contractual obligation to pay the amounts owing to LBIE under the agreements
upon its emergence from insolvency proceedings which is expected to occur by
2023, which LBIE claims to be approximately $64, plus applicable interest. Firth
will continue to maintain its position that multiple events of default under the
agreements related to LBIE's insolvency proceeding cannot be cured or continue
indefinitely, which the Company believes are meritorious defenses. A virtual
hearing in this matter occurred on January 13 and 14, 2021 in London, England,
and a ruling has yet to be issued to date. Given the importance of the case for
LBIE and Firth, it is expected that irrespective of the outcome of the most
recent hearing, the case will be appealed and any requirement for the parties to
pay amounts under the agreements will be stayed. An appeal of the case could
continue into 2023. The Company intends to vigorously defend against these
claims.
Other. In addition to the matters discussed above, various other lawsuits,
claims, and proceedings have been or may be instituted or asserted against the
Company, including those pertaining to environmental, product liability, safety
and health, employment, tax and antitrust matters. While the amounts claimed in
these other matters may be substantial, the ultimate liability cannot currently
be determined because of the considerable uncertainties that exist. Therefore,
it is possible that the Company's liquidity or results of operations in a period
could be materially affected by one or more of these other matters. However,
based on facts currently available, management believes that the disposition of
these other matters that are pending or asserted will not have a material
adverse effect, individually or in the aggregate, on the results of operations,
financial position or cash flows of the Company.
Commitments
Purchase Obligations. Howmet has entered into purchase commitments for raw
materials, energy and other goods and services, which total $229 in 2022, $95 in
2023, $80 in 2024, $2 in 2025, and none in 2026 and thereafter.
Operating Leases. See   Note     Q   for the operating lease future minimum
contractual obligations.
Guarantees. At December 31, 2021, Howmet had outstanding bank guarantees related
to tax matters, outstanding debt, workers' compensation, environmental
obligations, energy contracts, and customs duties, among others. The total
amount committed under these guarantees, which expire at various dates between
2022 and 2040, was $15 at December 31, 2021.
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 had a fair value of $6 and $12
at December 31, 2021 and 2020, respectively, and were included in Other
noncurrent liabilities and deferred credits in the
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Consolidated Balance Sheet. The remaining guarantee, for which the Company and
Arconic Corporation are secondarily liable in the event of a payment default by
Alcoa Corporation, relates to a long-term energy supply agreement that expires
in 2047 at an Alcoa Corporation facility. The Company currently views the risk
of an Alcoa Corporation payment default on its obligations under the contract to
be remote. The Company and Arconic Corporation are required to provide a
guarantee up to an estimated present value amount of approximately $1,406 and
$1,398 at December 31, 2021 and 2020, respectively, in the event of an Alcoa
Corporation payment default. In December 2020 and again in December 2021, 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 will be renewed on
an annual basis by Alcoa Corporation.
Letters of Credit. The Company has outstanding letters of credit, primarily
related to workers' compensation, environmental obligations, and leasing
obligations. The total amount committed under these letters of credit, which
automatically renew or expire at various dates, mostly in 2022, was $119 at
December 31, 2021.
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 $53 (which are included in the $119
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 environmental obligations and, as a result, the
Company has $17 of outstanding letters of credit relating to such liabilities
(which are included in the $119 in the above paragraph). Less than $1 of these
outstanding letters of credit are pending cancellation and will be deemed
cancelled once returned by the beneficiary. Arconic Corporation has issued
surety bonds to cover these environmental obligations. Arconic Corporation is
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.
Surety Bonds. The Company has outstanding surety bonds primarily related to tax
matters, contract performance, workers' compensation, environmental-related
matters, and customs duties. The total amount committed under these annual
surety bonds, which expire and automatically renew at various dates, primarily
in 2022 and 2023, was $47 at December 31, 2021.
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 $25 (which are included in the $47 in the
above paragraph) that had previously been provided related to the Company,
Arconic Corporation, and Alcoa Corporation workers' compensation claims paid
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.
W. Subsequent Events
Management evaluated all activity of Howmet and concluded that no subsequent
events have occurred that would require recognition in the Consolidated
Financial Statements or disclosure in the Notes to the Consolidated Financial
Statements, except as noted below:
See   Note J   for the common stock repurchases made subsequent to the fourth
quarter of 2021.

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