Howmet Aerospace Inc.

Good morning, ladies and gentlemen, and welcome to the HowMed Aerospace Fourth Quarter and Full Year 2021 Results Conference Call. My name is Natalia, and I will be your operator for today. As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Paul Luther, Vice President of Investor Relations. Please proceed. Thank you.

Thank you, Natalia. Good morning and welcome to the HowMed Aerospace fourth quarter and full year 2021 results conference call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer, and Ken Giacobi, Executive Vice President and Chief Financial Officer. After comments by John and Ken, we will have a question and answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings. In addition, we've included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix in today's presentation. With that, I'd like to turn the call over to John.

Thanks, PT, and good morning, everyone. Let's move to slide four. First, let me frame the quarter for you. The environment was challenging with the new variant of Omicron emerging today after Thanksgiving. Fortunately, once we take time to understanding the changing nature of the pandemic, we find that the virus appears to be weakening, albeit it's quite transmissible. Boeing also continued to test us with reduced build or zero build of the 787 wide-body aircraft as recertification is once again delayed and unclear. Despite these impacts, Hammett performed well with revenues at $1.285 billion, improving well above last year and in line with Q3. Adjusted EBITDA improved both over last year and sequentially, and was $296 million, with an EBITDA margin at 23%. We were pleased with the margin exit rate for both the Q4 and the second half of 2021. The sales picture is one of strength in commercial aerospace narrow-body production, healthy defense and IGT sales, combined with constrained sales of a high-performance wheel segment due to the supply chain constraints at our customers in the commercial truck manufacturing business. Clearly, both Delta and Omicron variants of the virus impacted production operations, but nevertheless, we were able to bring through a good level of efficiency. Turning to the balance sheet now and the cash flow of the company, adjusted free cash flow was a record at $517 million for the year and well ahead of both last year and guidance with a conversion rate of 117% of net income. We also made incremental voluntary pension contributions in the quarter, and if we excluded these contributions, adjusted free cash flow would have been 123% conversion of net income. For your information, the free cash flow conversion has continued in the last three years at a level well in excess of our long-term guide of 90%. The year-end cash balance was $722 million and reflects both the good cash flow conversion and the fact that in the fourth quarter, Hammett repurchased $205 million of shares at an average price of $30.32. The fourth quarter average diluted share count reduced to $431 million, and the year-end diluted shares stood at $428 million. The repurchase of shares continued in early 2022, with a further 3 million shares purchased for $100 million during the month of January. As of the end of January, the diluted share count has been reduced to approximately 425 million shares. And finally, the 2021 tax rate was reduced by the work we've done, and the effect was one cent on earnings in the fourth quarter. We look forward to 2022 and I'll provide commentary when we get to the outlook section of our presentation. Meanwhile, I'll hand the call over to Ken Giacobe.